Town and Country Enterprises, Inc. v. Quisumbing
REITERATIONFacts
The Antecedents: Petitioner Town & Country Enterprises, Inc. (TCEI) obtained loans from respondent Metropolitan Bank & Trust Co. (Metrobank) totaling ₱12,000,000.00, secured by a thrice-amended Deed of Real Estate Mortgage over twenty parcels of land. Due to TCEI's failure to pay, Metrobank extrajudicially foreclosed the mortgaged properties on November 7, 2001, and emerged as the highest bidder. Metrobank registered the Certificate of Sale on April 10, 2002. Procedural History: Metrobank filed an Ex-Parte Petition for Writ of Possession on September 23, 2002, invoking Section 7 of Act No. 3135. Subsequently, TCEI filed a petition for declaration of a state of suspension of payments and rehabilitation plan on October 1, 2002 (SEC Case No. 023-02). A Stay Order was issued on October 8, 2002. TCEI moved to suspend proceedings in the writ of possession case, which was granted by the RTC on December 2, 2002. The Court of Appeals (CA) later directed the RTC to continue with the proceedings for the writ of possession on January 30, 2004. Meanwhile, the Rehabilitation Court approved TCEI's rehabilitation plan on March 29, 2004, granting a five-year moratorium on payments with modified interest rates. On January 11, 2005, the RTC granted Metrobank's petition for a writ of possession. TCEI appealed, arguing denial of due process and conflict with corporate rehabilitation rules. The CA affirmed the RTC's order on November 30, 2005. Separately, TCEI discovered its titles were cancelled and new titles issued to Metrobank on June 26, 2003. TCEI filed a motion to direct the Register of Deeds to revert the titles, arguing Metrobank's actions were contemptuous and violated the Stay Order. This motion was denied on June 2, 2005. TCEI appealed this denial, arguing the transfers were invalid due to the Stay Order and the in rem nature of rehabilitation proceedings. The CA dismissed this petition on May 24, 2006, holding Metrobank already owned the properties before the Stay Order, and the prior CA decision on the writ of possession had attained finality, making TCEI's petition an instance of forum shopping. The Petition: TCEI and Spouses Campos filed petitions for review on certiorari assailing the CA's decisions, arguing that the writ of possession was invalid due to the rehabilitation proceedings and the Stay Order, and that the transfer of titles was likewise invalid. They contended that the rehabilitation receiver's possession was adverse to Metrobank and that Act 3135, not Section 47 of RA 8791, should govern.
Issue(s)
Whether the RTC gravely abused its discretion in issuing the writ of possession in favor of Metrobank despite the existence of a Stay Order and an approved rehabilitation plan. Whether the transfer of titles to Metrobank was valid despite the existence of the Stay Order and the rehabilitation proceedings. Whether the redemption period under Act No. 3135 should prevail over Section 47 of Republic Act No. 8791 in cases involving juridical persons.
Ruling
The Supreme Court denied both petitions for review on certiorari for lack of merit.
Ratio Decidendi
On the validity of the writ of possession and the effect of the Stay Order and corporate rehabilitation: The Court held that Metrobank had already acquired ownership over the subject realties when TCEI commenced its petition for corporate rehabilitation. Metrobank purchased the properties at public auction on November 7, 2001. Under Section 47 of Republic Act (RA) No. 8791, TCEI's right of redemption expired three months after the foreclosure sale, which was on February 6, 2002. Therefore, Metrobank became the absolute owner of the properties by February 6, 2002, well before the Stay Order was issued on October 8, 2002, and the rehabilitation plan was approved on March 29, 2004. The Court reiterated that the right of a purchaser to a writ of possession becomes absolute after the expiration of the redemption period without redemption being effected. The issuance of a writ of possession is a ministerial function of the court, and it cannot be hindered by an injunction or an action for annulment of the mortgage or foreclosure, especially when ownership has already vested in the purchaser. The Court also noted that the CA's earlier decision in CA-G.R. SP No. 76147, which directed the RTC to proceed with the issuance of the writ of possession, had already attained finality, establishing res judicata on the matter of Metrobank's right to possession. While acknowledging the principal feature of a Stay Order in corporate rehabilitation, which defers all actions or claims against the corporation, the Court emphasized that this suspension applies to claims that arise after the issuance of the Stay Order or that are still pending enforcement. In this case, Metrobank's right to foreclose and its subsequent acquisition of ownership predated the Stay Order. The Court cited Equitable PCI Bank, Inc. v. DNG Realty and Development Corporation to support the principle that actions taken with respect to foreclosed mortgage properties prior to the appointment of a Rehabilitation Receiver and the issuance of a Stay Order are not affected by the Stay Order. Therefore, Metrobank's consolidation of ownership and the subsequent issuance of new titles were valid actions taken pursuant to its vested ownership rights, not in violation of the Stay Order. On the validity of the transfer of titles: Metrobank's consolidation of ownership and the subsequent issuance of new titles were valid actions taken pursuant to its vested ownership rights, not in violation of the Stay Order. On the redemption period: The Court clarified that even if the longer redemption period under Act No. 3135 were to be considered, Metrobank's acquisition of ownership would still be valid. Metrobank purchased the properties on November 7, 2001, and registered the certificate of sale on April 10, 2002. It executed an affidavit of consolidation of ownership on April 25, 2003, which was after the lapse of the one-year redemption period provided under Act No. 3135. Since TCEI failed to exercise its right of redemption within the intervening period, its titles were validly cancelled, and new titles were issued to Metrobank. The Court reiterated that after the purchaser's consolidation of title over foreclosed property, the issuance of a certificate of title in his favor is ministerial upon the Register of Deeds.
Main Doctrine
The right of a purchaser to a writ of possession over foreclosed properties becomes absolute after the expiration of the redemption period, and this right is not divested by a subsequent Stay Order issued in corporate rehabilitation proceedings, especially when ownership had already vested in the purchaser prior to the issuance of the Stay Order.