When a Deed of Absolute Sale Governs: Ejectment, Ownership, and the Kasunduan

The Supreme Court, in Boy v. Court of Appeals (G.R. No. 125088, April 14, 2004), settled a dispute over a house and lot in Manila that began with a loan, a mortgage, and a deed of absolute sale. The case clarifies how courts handle ejectment suits when the seller later claims the sale was not fully paid, and when a separate agreement (a Kasunduan) might affect the buyer's right to possess the property.

The Facts of the Case

In September 1984, Lagrimas Boy borrowed P15,000 from spouses Isagani and Erlinda Ramos to cover her brother's placement fee for work abroad. The spouses asked for Boy's property as collateral. In March 1985, Boy executed a real estate mortgage over the property to secure a loan of P26,200, payable within three months.

A year later, on June 4, 1986, Boy executed a Deed of Absolute Sale selling the same property to the spouses for P31,000. The deed was notarized, and its execution was not disputed. Boy, however, asked for time to vacate, and the spouses agreed since they did not need the property immediately.

In May 1988, Erlinda Ramos and Boy executed a Kasunduan acknowledging that the property had been sold for P31,000, that P22,500 had been paid, and that the balance of P8,500 would be paid by the last week of August 1988. The Kasunduan also stated that possession would transfer only upon full payment.

The Kasunduan was never notarized. Erlinda Ramos claimed she signed it without reading, believing it was for an additional amount, and that she refused to give her residence certificate to the notary public.

When the spouses later needed the property, they demanded Boy vacate. Boy refused, and the spouses filed an ejectment case.

The Issue: Who Has the Right to Possession?

The central issue was whether the spouses Ramos had a right to physical possession of the property, or whether the Kasunduan showed that ownership and possession should remain with Boy until full payment.

Boy argued that the Kasunduan superseded the Deed of Absolute Sale and that the deed was actually a contract to sell. She also argued that the ejectment court should have dismissed the case because the issue of ownership was intertwined with possession.

The Ruling: The Deed of Absolute Sale Governs

The Supreme Court affirmed the Court of Appeals' ruling in favor of the spouses Ramos. The Court held that the Kasunduan was not binding on the parties, giving weight to Erlinda Ramos's account that she was tricked into signing a document she did not read.

The Court noted that Boy had borrowed P26,200, which was covered by a real estate mortgage. The subsequent sale for P31,000 was consistent with the spouses' version that the loan was not paid. The Kasunduan's statement that only P22,500 was paid did not square with the fact that the debt already reached P26,200.

Ejectment Courts Can Resolve Ownership Provisionally

The Court also rejected Boy's argument on jurisdiction. Under Section 33(2) of Batas Pambansa Blg. 129 and Section 16, Rule 70 of the Rules of Court, a Metropolitan Trial Court may resolve the issue of ownership in an ejectment case, but only to determine the issue of possession. The court does not make a final determination of ownership — it decides who has the better right to possess the property.

Ownership Passes Upon Execution of a Public Instrument

The Court applied Articles 1477 and 1498 of the Civil Code. Under Article 1477, ownership of a thing sold transfers to the vendee upon actual or constructive delivery. Under Article 1498, when a sale is made through a public instrument, its execution is equivalent to delivery of the thing, unless the deed states otherwise.

Since the Deed of Absolute Sale contained no provision reserving title to Boy until full payment, the Court held that ownership passed to the spouses upon execution of the deed. The deed supported the spouses' right to material possession.

Occupation by Tolerance

The Court also held that Boy's continued occupation of the property after the sale, without paying rent, was by mere tolerance. A person who occupies another's land by tolerance is bound by an implied promise to vacate upon demand. When Boy refused to vacate after demand, a summary action for ejectment was the proper remedy.

Practical Takeaways

• A notarized Deed of Absolute Sale is strong evidence of ownership and the right to possession. Courts will generally give it effect unless there is clear and convincing proof of a contrary agreement.
• An un-notarized Kasunduan that contradicts a notarized deed may not be given binding effect, especially if its execution is disputed and its terms are inconsistent with the surrounding facts.
• In ejectment cases, the court can provisionally resolve issues of ownership, but only to determine who has the right to physical possession. The decision does not finally settle ownership.
• Under the Civil Code, ownership of property sold through a public instrument passes to the buyer upon execution of the deed, unless the deed expressly reserves title to the seller.
• A seller who remains in possession after a sale occupies the property by mere tolerance and must vacate upon demand; refusal to do so can lead to a summary ejectment case.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.