Top Art Shirt Manufacturing v. Metropolitan Bank
REITERATIONFacts
The Antecedents: Metropolitan Bank and Trust Company (Metrobank) filed a Petition for Issuance of a Writ of Possession over a property mortgaged by Spouses Maximo Arejola and Tan Siu Kheng (Spouses Arejola) to secure loans obtained by Top Art Shirt Manufacturing, Inc. (Top Art). The property was foreclosed, sold at public auction to Metrobank, and title was consolidated in Metrobank's name after the redemption period expired without redemption. Procedural History: The Regional Trial Court (RTC) initially granted Metrobank's petition and issued a writ of possession. However, upon motion by Top Art, the RTC recalled the writ, ordering the restoration of possession to Top Art or Walter Santillan, alleging Metrobank's failure to disclose a pending civil case involving a lease over the property and the invalidity of the writ due to failure to post a bond. Metrobank's motion for reconsideration was denied. Metrobank then filed a Petition for Certiorari with the Court of Appeals (CA), which annulled and set aside the RTC's orders, reinstating the writ of possession. The CA ruled that Top Art lacked legal standing to move for the quashal of the writ and that the RTC gravely abused its discretion. The CA denied the motion for reconsideration filed by Top Art and the Spouses Arejola. The Petition: Top Art and the Spouses Arejola filed a Petition for Review on Certiorari with the Supreme Court, assailing the CA's decision, arguing that Top Art had legal standing to quash the writ, that Metrobank had prior knowledge of a subsisting lease, and that the CA misapplied certain doctrines.
Issue(s)
Whether Top Art Shirt Manufacturing, Inc. has the legal standing to quash the writ of possession. Whether the Regional Trial Court erred in recalling the writ of possession considering Metrobank's alleged prior knowledge of a subsisting lease over the mortgaged property. Whether the Court of Appeals erred in ruling that the trial court misapplied the doctrines in Ibasco v. Caguioa and Castro, Jr. v. Court of Appeals.
Ruling
The Supreme Court denied the petition, affirming the decision of the Court of Appeals. The Court held that the issuance of a writ of possession in cases of extrajudicial foreclosure is a ministerial duty of the court, which can only be stayed if the property is in the actual possession of a third party holding adversely to the judgment debtor. The Court found that Top Art was not a third party holding adversely, as it was a principal party to the loan transactions leading to the foreclosure. Furthermore, the alleged possession by Walter Santillan was not adequately proven, and Santillan himself did not intervene in the proceedings. Therefore, the general rule applied, and the RTC had a mandatory and ministerial duty to grant the ex parte petition of Metrobank.
Ratio Decidendi
On the legal standing of Top Art Shirt Manufacturing, Inc. to quash the writ of possession: The Court ruled that Top Art lacked the legal standing to quash the writ of possession. Section 8 of Act No. 3135, as amended, provides that a writ of possession may be set aside only through a petition or complaint, not a mere motion. Moreover, the exception to the general rule, which allows for the quashal of a writ of possession, applies only when the property is in the actual possession of a third party holding adversely to the judgment debtor. Top Art, being a principal party to the loan transactions that led to the foreclosure, could not be considered a third party. Its claim of leasing the property was also found to be belated and contradictory. On Metrobank's alleged prior knowledge of a subsisting lease and the RTC's recall of the writ: The Court found no error in the Court of Appeals' ruling that the RTC gravely abused its discretion in recalling the writ. The RTC's reliance on Metrobank's alleged failure to disclose a pending civil case involving a lease was misplaced, as Metrobank could not have stated the pendency of a case filed after its own petition. Furthermore, the issue of Metrobank's knowledge of the lease was a matter to be resolved in the separate civil case, not in the ex parte proceeding for a writ of possession. The Court reiterated that possession issues involving third parties holding adversely are exceptions to the general rule and require proper substantiation, which was lacking in this instance. On the alleged misapplication of doctrines in Ibasco v. Caguioa and Castro, Jr. v. Court of Appeals: The Court found no misapplication of the cited doctrines. The Court clarified that the general rule is that a writ of possession issues as a matter of course upon consolidation of title, and it becomes a ministerial duty of the court to issue it. The exception, as provided in Section 35 of Rule 39 of the Revised Rules of Court (now Section 33), applies only when a third party is actually holding the property adversely to the judgment debtor. In this case, Top Art did not qualify as such a third party, and the alleged possession by Santillan was not adequately proven. Therefore, the RTC's duty to issue the writ was ministerial, and its recall constituted grave abuse of discretion.
Main Doctrine
In extrajudicial foreclosure of real property, the issuance of a writ of possession to the purchaser is a ministerial duty of the court, even after consolidation of title, unless the property is actually held by a third party adversely to the judgment debtor. A party who is not a third party holding adversely, or whose possession is not adequately proven, cannot prevent the issuance of the writ.