Philippine Veterans Bank vs. Sabado

An assignee of rights under a contract to sell who acquires the power to cancel the contract and recover possession upon the buyer's default is a real party in interest to institute an unlawful detainer suit, and the assignor who retains bare legal title is not an indispensable party thereto, provided the assignor's interest in the controversy is separable from the issue of physical possession and complete relief can be had without its participation.

Haus Talk Project Managers, Inc. (HTPMI) entered into a Contract to Sell with spouses Ramon and Annabelle Sabado for a residential lot located at Lot 26, Block 1, Eastview Homes, Barangay Balimbing, Antipolo City. The purchase price of P869,400.00 was payable through a P174,400.00 downpayment and the balance in 120 monthly installments. The contract provided that failure to pay any installment within the stipulated period would result in the forfeiture of payments and the cancellation and rescission of the contract. Subsequently, HTPMI executed a Deed of Assignment in favor of Philippine Veterans Bank, transferring its rights to collect payments and enforce the contract, while expressly retaining legal title to the property and the obligations of a builder.

• The Contract to Sell: On May 3, 2007, HTPMI and respondents entered into a Contract to Sell whereby HTPMI agreed to sell a real property located in Eastview Homes, Antipolo City to respondents for P869,400.00, consisting of a P174,400.00 downpayment and the balance payable in 120 equal monthly installments. The parties stipulated that respondents' failure to pay any amount within the stipulated period would result in the forfeiture of the downpayment and any other payments made, as well as the cancellation and rescission of the contract.
• The Deed of Assignment: On August 16, 2007, HTPMI executed a Deed of Assignment in favor of petitioner, assigning its rights and interests as seller under the Contract to Sell, including the right to collect payments and execute any act necessary to enforce compliance. The Deed expressly provided that notwithstanding the assignment, legal title to the property and the obligations of the ASSIGNOR under the Contracts to Sell, including the obligation to complete development and the warranties of a builder, shall remain with HTPMI.
• Cancellation and Demand: On October 14, 2009, petitioner, through a Notice of Cancellation by Notarial Act, cancelled or rescinded the Contract to Sell due to respondents' failure to pay outstanding obligations. Petitioner subsequently demanded that respondents vacate the subject property, but respondents refused.
• Ejectment Suit: On August 20, 2010, petitioner filed a Complaint for unlawful detainer against respondents before the MTCC, seeking recovery of possession and payment of rent arrears, attorney's fees, and costs.
• Defense: Respondents argued that petitioner was not the real party in interest because ownership and the right to possession remained with HTPMI; the Deed of Assignment transferred only the right to collect receivables, not the right to possess or eject.

• Real Party in Interest and Standing: Petitioner maintained that by virtue of the Deed of Assignment, it acquired all rights of HTPMI under the Contract to Sell and under the law, including the right to endorse the contract terms and the right to collect amounts due; consequently, it was subrogated to the position of seller with the independent authority to cancel the contract and recover possession upon respondents' default, thereby constituting the real party in interest to institute the ejectment suit.
• Separability of Assignor's Interest: Petitioner argued that HTPMI was not an indispensable party because the assignor's retention of bare legal title created an interest completely separable from the issue of physical possession de facto, which is the sole issue in an unlawful detainer action; complete relief could be afforded between the immediate litigants without affecting HTPMI's title.

• Lack of Title and Standing: Respondents countered that petitioner was not the real party in interest because the Deed of Assignment transferred only the right to collect receivables, not ownership or the right to possession of the subject property, which remained with HTPMI.
• Indispensable Party: Respondents argued that HTPMI was an indispensable party because it retained legal title to the subject property; thus, no final determination regarding possession could be made without affecting the rights of the legal owner, and its absence would render any judgment ineffective or incomplete.

• Indispensable Party: Whether HTPMI is an indispensable party to petitioner's unlawful detainer suit against respondents such that it must be impleaded pursuant to Section 7, Rule 3 of the Rules of Court.

• Indispensable Party: HTPMI is not an indispensable party. Under Section 7, Rule 3 of the Rules of Court, an indispensable party is one whose interest in the subject matter is so inseparable from the interests of the other parties that a final adjudication cannot be made without affecting that interest, or without leaving the controversy in a condition inconsistent with equity and good conscience. Here, the Deed of Assignment transferred to petitioner all rights under the Contract to Sell, including the right to cancel or rescind the contract and recover possession upon default. While HTPMI retained legal title, this interest is separable from the issue of physical possession, which is the sole issue in an unlawful detainer action. Complete relief can be afforded between petitioner and respondents regarding who has the better right to possess de facto without impleading HTPMI, as any adjudication of possession does not prejudice the assignor's retained title or expose it to multiple litigation.

• Test for Indispensable Parties — An indispensable party is one who has such an interest in the controversy or subject matter that a final adjudication cannot be made, in his absence, without injuring or affecting that interest; a party who has not only an interest in the subject matter, but also an interest of such nature that a final decree cannot be made without affecting his interest or leaving the controversy in such a condition that its final determination may be wholly inconsistent with equity and good conscience. A person is not an indispensable party if his interest in the controversy or subject matter is separable from the interest of the other parties, so that it will not necessarily be directly or injuriously affected by a decree which does complete justice between them.
• Nature of Unlawful Detainer — Unlawful detainer is an action to recover possession of real property from one who unlawfully withholds possession after the expiration or termination of his right to hold possession under any contract. The only issue to be resolved is the physical or material possession of the property involved, independent of any claim of ownership by any of the parties.
• Rights of Assignee under Contract to Sell — An assignee of rights under a contract to sell acquires not merely the right to collect payments but also the right to enforce all terms and conditions of the contract, including the right to cancel or rescind the contract upon default and the consequent right to recover possession, even where the assignor retains legal title to the property and the obligations of a builder.

• "An indispensable party is one who has x x x an interest in the controversy or subject matter that a final adjudication cannot be made, in his absence, without injuring or affecting that interest, a party who has not only an interest in the subject matter of the controversy, but also has an interest of such a nature that a final decree cannot be made without affecting his interest or leaving the controversy in such a condition that its final determination may be wholly inconsistent with equity and good conscience."
• "A person is not an indispensable party, however, if his interest in the controversy or subject matter is separable from the interest of the other parties, so that it will not necessarily be directly or injuriously affected by a decree which does complete justice between them."
• "Unlawful detainer is an action to recover possession of real property from one who unlawfully withholds possession thereof after the expiration or termination of his right to hold possession under any contract, express or implied. The possession of the defendant in unlawful detainer is originally legal but became illegal due to the expiration or termination of the right to possess. The only issue to be resolved in an unlawful detainer case is the physical or material possession of the property involved, independent of any claim of ownership by any of the parties."

• Regner v. Logarta, 362 Phil. 862 (2007) — Controlling precedent defining the parameters for determining indispensable parties; followed in applying the test of whether the party's interest is inseparable from the controversy.
• Land Bank of the Philippines v. Cacayuran, 759 Phil. 145 (2015) — Cited for the definition of indispensable parties and the consequence that the absence of an indispensable party renders all subsequent actions of the court null and void.
• Piedad v. Spouses Gurieza, G.R. No. 207525, June 18, 2014 — Cited for the definition and limited scope of unlawful detainer actions, emphasizing that the only issue is physical possession independent of ownership claims.

• Section 7, Rule 3, Rules of Court — Mandates the compulsory joinder of indispensable parties, defined as parties in interest without whom no final determination can be had of an action.

Carpio (Chairperson), Peralta, Caguioa, and Reyes, Jr., JJ.