Royal Savings Bank v. Asia
REITERATIONFacts
1. The Antecedents: In 1974 and 1975, Paciencia Salita and Franco Valenderia obtained loans totaling P45,000 from Royal Savings Bank (petitioner). To secure these loans, Salita executed a Real Estate Mortgage over her property. Despite demands, the loans remained unpaid. Consequently, the petitioner initiated an extra-judicial foreclosure proceeding, and the mortgaged property was sold at public auction on October 16, 1979, with the petitioner as the highest bidder. The redemption period expired on April 23, 1983, without the property being redeemed. A new title, TCT No. 299440, was subsequently issued in the petitioner's name. Salita later filed a case for Reconveyance, Annulment of Title, and Damages, which was initially granted by the RTC but later reversed by the Court of Appeals. This reversal became final and executory. 2. Procedural History: Following the finality of the Court of Appeals' decision, the petitioner filed an Ex-Parte Petition for the Issuance of a Writ of Possession with the Regional Trial Court (RTC) of Quezon City, Branch 222, pursuant to Section 7 of Act 3135. The RTC, after requiring the petitioner to present evidence, issued a Decision on May 28, 2007, in favor of the petitioner, ordering the issuance of the Writ of Possession. However, respondents Fernando Asia, et al., who claimed to have been in open, continuous, exclusive, and notorious possession of the land for 40 years and had no prior knowledge of the proceedings, filed an Urgent Motion to Quash the Writ of Possession and Writ of Execution. The RTC granted this motion in an Order dated October 4, 2007. The petitioner's Motion for Reconsideration was subsequently denied by the RTC through an Order dated June 25, 2008. 3. The Petition: The petitioner filed a Petition for Review under Rule 45 of the Rules of Civil Procedure directly with the Supreme Court, asserting that no factual issues were raised. The petitioner contends that as a government-owned financial institution, the general rules on real estate mortgage under Act 3135 should not apply, and instead, Presidential Decree (P.D.) No. 385, which specifically governs mortgage foreclosures by government-owned financial institutions, should be applied. The petitioner argues that the RTC's quashing of the Writ of Possession violated Section 2 of P.D. 385, which prohibits restraining orders or injunctions against government financial institutions without due hearing and proof of payment of 20% of outstanding arrearages. The petitioner seeks a ruling that it cannot be enjoined from foreclosing its delinquent accounts in observance of P.D. 385.
Issue(s)
Whether the RTC committed an error in granting respondents' Urgent Motion to Quash the Writ of Possession. Whether Presidential Decree No. 385, which governs mortgage foreclosures by government-owned financial institutions, should be applied to the exclusion of general rules on real estate mortgage found in Act 3135. Whether the RTC, acting through a pairing judge, violated the hierarchy of courts when it quashed a writ of possession issued by the then presiding judge of the same RTC branch.
Ruling
The Supreme Court denied the petition and affirmed the Orders dated October 4, 2007, and June 25, 2008, issued by the Regional Trial Court of Quezon City, Branch 222.
Ratio Decidendi
On the issue of whether the RTC committed an error in granting respondents' Urgent Motion to Quash the Writ of Possession: The Court ruled that the RTC committed no error. While P.D. 385 generally mandates the issuance of a writ of possession in favor of a government financial institution (GFI) after foreclosure, this rule is not absolute. The Court reiterated the principle that if a parcel of land is occupied by a party other than the judgment debtor, the proper procedure is for the court to order a hearing to determine the nature of said adverse possession before issuing a writ of possession. This is to protect the rights of third parties who are not privy to the debtor and to afford them due process. The respondents' claim of 40 years of open, continuous, exclusive, and notorious possession in the concept of owners, and their assertion that their claim is adverse to the mortgagor, Salita, necessitates such a hearing. The Court cited Article 433 of the Civil Code, which protects actual possession under a claim of ownership and requires the true owner to resort to judicial process for recovery. On the applicability of Presidential Decree No. 385: The Court acknowledged petitioner's argument that as a GFI, P.D. 385 should apply. However, the Court clarified that even assuming petitioner is a GFI protected under P.D. 385, the RTC's action was still justified. The purpose of P.D. 385 is to allow foreclosure proceedings to continue without restraint, but this does not negate the procedural safeguards for third parties in possession. The Court distinguished the situation from cases where the GFI's possession is undisputed or where the occupant is the judgment debtor. In cases involving third-party adverse possession, a hearing is indispensable. On the alleged violation of the hierarchy of courts: The Court found no violation. Respondents correctly pointed out that it was the same trial court, Branch 222 of the RTC Quezon City, that issued both the writ of possession and the order quashing it. The pairing judge who issued the order quashing the writ did so in her capacity as the judge of that specific branch, not as a judge from a co-equal court interfering with another court's order. Therefore, the principle that no court can interfere with the writ of possession issued by another court of concurrent jurisdiction was not violated.
Main Doctrine
While Presidential Decree No. 385 mandates that courts should not issue restraining orders or injunctions against government financial institutions in foreclosure proceedings, this rule is not absolute. If a parcel of land is occupied by a third party who claims possession adversely to the judgment debtor, the court must conduct a hearing to determine the nature of the adverse possession before issuing a writ of possession, thereby respecting the third party's right to due process.