China Banking Corp. v. Lozada
REITERATIONFacts
The Antecedents: Respondents, Spouses Tobias L. Lozada and Erlina P. Lozada, entered into a Contract to Sell with Primetown Property Group, Inc. (PPGI) for a condominium unit. PPGI subsequently executed two Deeds of Real Estate Mortgage in favor of petitioner China Banking Corporation (CBC) to secure credit facilities, which included the unit in question. PPGI defaulted on its loan, leading CBC to extrajudicially foreclose the mortgaged properties. CBC emerged as the highest bidder at the auction sale and subsequently consolidated its ownership over the unit after the redemption period expired without redemption. Procedural History: Following the consolidation of title, CBC filed an ex parte Petition for Issuance of a Writ of Possession with the Regional Trial Court (RTC) of Makati City. The RTC granted the petition and issued a Writ of Possession, directing the Sheriff to place CBC in possession of the unit and eject its occupants. The Sheriff issued Notices to Vacate to PPGI and the Spouses Lozada. Meanwhile, the Spouses Lozada had filed a separate complaint with the Housing and Land Use Regulatory Board (HLURB) seeking the annulment of the mortgage and foreclosure. The Spouses Lozada also filed a Petition for Certiorari and Prohibition with the Court of Appeals, assailing the RTC's Order and Writ of Possession. The Court of Appeals annulled and set aside the RTC's Order, Writ of Possession, and Notices to Vacate, ruling that the RTC committed grave abuse of discretion. The Petition: Petitioner China Banking Corporation filed this Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, seeking to reverse the Court of Appeals' decision. CBC argues that the Court of Appeals erred in taking cognizance of the petition, stopping the implementation of the writ of possession, and annulling it. CBC contends that the Spouses Lozada were not third parties holding the property adversely to the judgment debtor, but rather successors-in-interest of PPGI, and therefore, the issuance of the writ of possession was ministerial and proper. CBC also asserts that the Spouses Lozada ignored advice to pay installments directly to CBC, thus placing themselves outside the protection of PD 957. The core issue presented to this Court is whether the RTC could validly issue the writ of possession ex parte without notice to other parties, given the circumstances.
Issue(s)
Whether the Court of Appeals erred in taking cognizance of the petition and annulling the writ of possession. Whether the spouses Lozada were holding the subject property adversely to the judgment debtor, thereby making the issuance of the writ of possession improper and unwarranted. Whether the spouses Lozada, by ignoring the advice to pay CBC directly, placed themselves beyond the protection of P.D. 957.
Ruling
The Supreme Court granted the petition, reversed the Court of Appeals' decision, and reinstated the RTC's order and writ of possession. The Court held that the issuance of a writ of possession is a ministerial duty of the court in extrajudicial foreclosure proceedings, unless the property is in the possession of a third party holding it adversely to the judgment debtor. The spouses Lozada were deemed successors-in-interest of PPGI, not adverse third parties, and therefore, the writ of possession was properly issued ex parte.
Ratio Decidendi
On the issue of whether the Court of Appeals erred in annulling the writ of possession: The Court ruled that the Court of Appeals erred. The issuance of a writ of possession in extrajudicial foreclosure proceedings is governed by Section 7 of Act No. 3135, as amended, which allows for an ex parte petition. The law expressly authorizes the purchaser to petition for a writ of possession by filing an ex parte motion under oath. Upon filing the motion and approval of the bond, the court is directed to issue the order for a writ of possession as a matter of course, with no discretion left to the court. Any question regarding the regularity and validity of the sale is left to be determined in a subsequent proceeding. The Court reiterated that if a writ of possession can be issued during the redemption period on an ex parte application, the same power exists after the expiration of the redemption period, especially when a new title has been issued to the purchaser. Therefore, the RTC's action was ministerial and not a grave abuse of discretion. On the issue of whether the spouses Lozada were holding the subject property adversely to the judgment debtor: The Court held that the spouses Lozada were not holding the property adversely. Their possession was derived from PPGI under a Contract to Sell, making them successors-in-interest. The exception to the ex parte issuance of a writ of possession applies only when a third party is actually holding the property adversely to the judgment debtor. The spouses Lozada's right to possess the property stemmed from PPGI, and they could not claim this right as adverse to PPGI. Their possession was not independent but derived from the mortgagor, PPGI. Therefore, they stepped into the shoes of PPGI and their occupancy could not be considered adverse. On the issue of whether the spouses Lozada placed themselves beyond the protection of P.D. 957: The Court noted that while the spouses Lozada persistently alleged non-compliance by PPGI with Section 18 of P.D. 957 regarding mortgages, this issue was not determinative of the present case. The core issue was procedural: whether the writ of possession could be issued ex parte. The Court found that the spouses Lozada's possession was as successors of PPGI, regardless of the validity of the mortgage. The annulment of the mortgage would not change the nature of their possession as successors. Furthermore, the issue of the mortgage's validity was already pending before the Housing and Land Use Regulatory Board (HLURB), and the Supreme Court deferred to the HLURB's primary jurisdiction on that matter. The Court also clarified that a status quo order from the HLURB could not stay the execution of a writ of possession issued by a court of concurrent jurisdiction.
Main Doctrine
The issuance of a writ of possession in extrajudicial foreclosure is ministerial and may be granted ex parte, unless the property is in the actual possession of a third party holding the same adversely to the judgment debtor. A party whose possession is derived from the judgment debtor under a contract to sell is considered a successor-in-interest, not an adverse third party, and thus cannot prevent the ex parte issuance of the writ.