Rayo v. Metropolitan Bank
REITERATIONFacts
1. The Antecedents: Midas Diversified Export Corp., through its president Samuel U. Lee, obtained several loans from Metropolitan Bank and Trust Company (Metrobank). To secure an P8,000,000 loan, Louisville Realty & Development Corporation, also represented by Samuel U. Lee, executed a real estate mortgage over three parcels of land in Quezon City. Upon default, Metrobank extra-judicially foreclosed the mortgage and was the highest bidder at the subsequent auction. When Louisville failed to surrender the properties, Metrobank filed an ex parte petition for a writ of possession. 2. Procedural History: The Regional Trial Court (RTC), Branch 223, Quezon City, granted Metrobank's ex parte petition for a writ of possession upon posting of a bond. The writ was subsequently implemented, with Metrobank taking possession of the properties. Meanwhile, petitioner Eduardo L. Rayo filed a separate civil case against Metrobank seeking the nullification of the real estate mortgage and the extrajudicial foreclosure sale. Subsequently, Rayo filed a Petition for Annulment of Judgment with the Court of Appeals, arguing lack of due process and the unconstitutionality of Section 7 of Act No. 3135. The Court of Appeals denied this petition, ruling that Rayo was not a real party-in-interest and that challenging the constitutionality of the law constituted a collateral attack. 3. The Petition: Petitioner Eduardo L. Rayo seeks review of the Court of Appeals' resolutions denying his petition for annulment of judgment. He argues that Section 7 of Act No. 3135 is unconstitutional as it violates due process by allowing ex parte proceedings for possession. Rayo also contends he has legal personality to seek annulment and that Metrobank engaged in forum-shopping. The petition raises the constitutionality of Section 7 of Act No. 3135, petitioner's legal personality, and Metrobank's alleged forum-shopping as key issues.
Issue(s)
Whether or not petitioner has the legal personality to seek the annulment of judgment. Whether or not Section 7 of Act No. 3135 is unconstitutional for violating due process. Whether or not private respondent is guilty of forum-shopping.
Ruling
The petition is denied for lack of merit. The assailed Resolutions of the Court of Appeals are affirmed.
Ratio Decidendi
On the petitioner's legal personality: The Court held that petitioner Rayo is not a real party-in-interest. While he was a co-assignee of the properties, the deed of assignment was executed after Metrobank had already extra-judicially foreclosed the properties. Therefore, Rayo had no present substantial interest to institute the annulment proceedings. His acknowledgment of the prior foreclosure sale to Metrobank further weakened his claim. The Court reiterated that a real party-in-interest must have a "present substantial interest" that entitles them to recover under substantive law. On the constitutionality of Section 7 of Act No. 3135: The Court affirmed the Court of Appeals' ruling that the challenge to the constitutionality of Section 7 of Act No. 3135 constitutes a collateral attack, which is not allowed for reasons of public policy. The issuance of a writ of possession under this section is a ministerial duty of the court, and the ex parte petition is a non-litigious proceeding for the enforcement of the purchaser's right of possession, not requiring notice to adverse parties. The Court emphasized that this is not an ordinary suit where parties are heard. On the issue of forum-shopping: The Court found Metrobank not guilty of forum-shopping. It explained that forum-shopping involves the filing of multiple suits for the same cause of action to obtain a favorable judgment. However, the issuance of a writ of possession is a ministerial and summary function, not a judgment on the merits, and thus, a separate case for annulment of mortgage and foreclosure sale cannot be barred by litis pendentia or res judicata. Therefore, filing the annulment case did not constitute forum-shopping in relation to the ex parte petition for the writ of possession.
Main Doctrine
The issuance of a writ of possession in favor of the purchaser in a foreclosure sale under Section 7 of Act No. 3135 is a ministerial duty of the court, and an ex parte petition for such writ is not a judicial process requiring notice to adverse parties. Furthermore, the constitutionality of a law cannot be attacked collaterally.