G.R. No. L-14058 - IN RE: Gue vs. Republic

Petitioner: Union Bank of the Philippines, owner of two parcels of land (subject property) with improvements in Poblacion, Alaminos, Pangasinan, covered by Transfer Certificates of Title Nos. 21895 and 21896.
Respondent: Philippine Rabbit Bus Lines, Inc., former owner of the subject property, which it lost to foreclosure yet continued to occupy.

On November 8, 2001, petitioner and respondent executed a Contract to Sell for a purchase price of P12,208,633.57, with payment to be made in quarterly installments over seven years.
The contract stipulated that all installment payments were to be made without need of notice or demand and provided that, upon failure to comply, the installments would be forfeited by way of penalty and liquidated damages and applied as rentals.
Respondent's failure to fully pay the agreed price constituted a breach that led to the rescission of the contract.

December 10, 2003: Petitioner sent a notarized demand letter titled “Demand to Pay with Rescission of Three (3) Contracts to Sell dated November 8, 2001” requiring respondent to pay past-due installments (totaling P9,940,197.36) within thirty (30) days, failing which the contracts would be automatically rescinded.
May 24, 2004: Petitioner issued a second written demand directing respondent to vacate the subject property within fifteen (15) days, citing respondent’s insufficient payment (only one postdated check of P500,000.00 had cleared) and refusal to settle the outstanding amounts, despite a proposal by respondent to repurchase the property.

On May 26, 2005, petitioner filed an ejectment case before the Municipal Trial Court in Cities (MTCC) of Alaminos, Pangasinan, docketed as Civil Case No. 2171.
The complaint sought not only ejectment but also the payment of rental arrears (P1.5 million, with a monthly rent of P125,000.00 from May 27, 2004 until possession was surrendered), attorney’s fees, and costs.

MTCC Decision (October 25, 2006): Dismissed the case for lack of jurisdiction, holding that the matter was one for rescission and enforcement of the contract’s stipulations, not merely ejectment; noted that no definite termination of respondent’s right to possess had been established.
Regional Trial Court (RTC) Decision (August 6, 2007): Affirmed the dismissal by ruling that the demand letter did not satisfy Section 2 of Rule 70, as it only demanded vacating and did not combine a demand to pay as required for jurisdiction in an ejectment suit.
Motion for Reconsideration: Petitioner argued that the ejectment action was based on the rescission of the contract to sell, not on non-payment of rent; however, the RTC denied the motion on November 29, 2007.
Court of Appeals (CA) Decision (July 31, 2012): Upheld the dismissals, emphasizing that without a valid and complete demand prior to filing (i.e., both a demand to pay and to vacate), the lower court lacked jurisdiction under Rule 70.

Petition for Review: Filed by petitioner challenging the CA decision on the grounds that, given the rescission of the contract to sell, a separate demand to pay was not mandatory.
Arguments centered on the proposition that an ejectment case based on a rescinded contract to sell does not require the dual demand (to pay and to vacate) when non-payment renders the contract ineffective and possession unlawful.
Final Order: The Supreme Court reversed the CA decision, clarifying that ejectment is available in cases where possession continues unlawfully after the termination of the right to hold possession under any express or implied contract.

Whether, in an ejectment case based on a rescinded contract to sell, it is mandatory for petitioner to issue a separate demand to pay prior to initiating the case.

Does the rescission of the contract due to non-payment obviate the need for such a demand?

Whether the lower courts erred in dismissing the ejectment case on the ground that the petitioner’s demand letter did not comply with Section 2 of Rule 70 (i.e., failing to include an alternative demand to pay concurrently with the demand to vacate).
Whether issues not raised during the pre-trial conference or in the pleadings should be considered by the court, particularly concerning the sufficiency of the demand made.
Whether it is proper for the court to revisit and overturn earlier precedential decisions by the CA regarding jurisdiction over ejectment actions in the context of a rescinded contract to sell.