Equitable PCI Bank, Inc. v. DNG Realty and Development Corporation
REITERATIONFacts
The Antecedents: Respondent DNG Realty and Development Corporation (DNG) obtained a loan from Equitable PCI Bank, Inc. (EPCIB) secured by a real estate mortgage over DNG's land. Due to financial difficulties, DNG defaulted on its loan payments. Consequently, EPCIB initiated extrajudicial foreclosure proceedings, and the mortgaged property was sold at public auction, with EPCIB emerging as the highest bidder and receiving a Certificate of Sale. Subsequently, EPCIB consolidated its ownership and obtained a new Transfer Certificate of Title (TCT) in its name, prompting it to file an ex-parte petition for a writ of possession to gain physical control of the property. Procedural History: Following the extrajudicial foreclosure and sale, DNG filed a petition for rehabilitation under the Interim Rules of Procedure on Corporate Rehabilitation, leading to the issuance of a Stay Order by the Regional Trial Court (RTC). Despite this, EPCIB proceeded with consolidating its ownership, obtaining a new TCT, and filing for a writ of possession. DNG then filed a petition for certiorari, prohibition, and mandamus with the Court of Appeals (CA) seeking to nullify the consolidation of ownership, the new TCT, the writ of possession, and the notice to vacate. The CA granted DNG's petition, reversing the RTC's orders and cancelling EPCIB's TCT. EPCIB then filed the present petition for review on certiorari with the Supreme Court. The Petition: Petitioner Equitable PCI Bank, Inc. seeks to set aside the Court of Appeals' decision, arguing that the CA erred in taking cognizance of DNG's petition for certiorari, prohibition, and mandamus. EPCIB contends that the issuance of a writ of possession after consolidation of ownership is a ministerial act and that DNG had a specific remedy under Act 3135 to question the sale and writ. Furthermore, EPCIB argues that the foreclosure sale and issuance of the certificate of sale occurred prior to the issuance of the Stay Order in DNG's rehabilitation proceedings, thus the subsequent actions were not stayed. EPCIB relies on jurisprudence that supports the right of a purchaser in an extrajudicial foreclosure to obtain possession as a matter of right once ownership is consolidated, even if a rehabilitation proceeding is pending, provided the foreclosure itself predates the stay order.
Issue(s)
Whether the Court of Appeals erred in taking cognizance of an original petition for certiorari, prohibition, and mandamus against the ministerial implementation of a writ of possession. Whether the Court of Appeals correctly held that all subsequent actions pertaining to the foreclosed property should have been held in abeyance after the issuance of the Stay Order by the rehabilitation court.
Ruling
The Supreme Court granted the petition, reversed the Court of Appeals' decision, and set aside its ruling. The Court held that the CA erred in taking cognizance of the petition for certiorari, prohibition, and mandamus and that the subsequent actions concerning the foreclosed property were not stayed by the rehabilitation proceedings.
Ratio Decidendi
On the propriety of the CA taking cognizance of the petition for certiorari, prohibition, and mandamus: The Supreme Court ruled that the CA erred in taking cognizance of DNG's petition for certiorari, prohibition, and mandamus. A writ of possession issued after the consolidation of ownership in an extrajudicial foreclosure sale, where the mortgagor failed to redeem the property, is a matter of right and its issuance is a ministerial function of the court. Such an act cannot be charged with grave abuse of discretion unless it is shown to be capricious, whimsical, arbitrary, or despotic. Furthermore, Act 3135, as amended, provides a specific remedy for aggrieved parties under Section 8, allowing them to petition to set aside the sale and cancel the writ of possession within thirty days after the purchaser is given possession. DNG failed to avail itself of this remedy and instead resorted to a special civil action for certiorari, which was inappropriate. The Court emphasized that even if an appeal is interposed from an order granting a writ of possession, the order of possession continues to be in effect during the pendency of the appeal, as provided by Section 8 of Act 3135. On whether subsequent actions were stayed by the rehabilitation Stay Order: The Supreme Court held that the CA erred in ruling that all subsequent actions pertaining to the foreclosed property should have been held in abeyance after the issuance of the Stay Order. The Court distinguished the present case from Bank of the Philippine Islands v. Court of Appeals (BPI v. CA), where the foreclosure proceedings were still pending when the stay order was issued. In this case, the extrajudicial foreclosure sale and the issuance of the Certificate of Sale occurred on September 4, 2003, which was prior to the issuance of the Stay Order on October 27, 2003. The Court applied the principle laid down in Rizal Commercial Banking Corporation v. Intermediate Appellate Court (RCBC v. IAC), which held that the suspension of claims against a debtor under rehabilitation commences only from the time a management committee or receiver is appointed. Since the foreclosure sale was consummated before the appointment of a Rehabilitation Receiver and the issuance of the Stay Order, the subsequent actions, including the consolidation of ownership and the issuance of a new title, were not affected by the Stay Order. Consequently, EPCIB, as the absolute owner after the expiration of the redemption period, was entitled to possession.
Main Doctrine
A writ of possession issued after the consolidation of ownership in an extrajudicial foreclosure sale, where the mortgagor failed to redeem the property, is a ministerial act and cannot be stayed by a subsequent rehabilitation stay order if the foreclosure sale itself occurred prior to the issuance of the stay order.