St. Raphael Montessori v. Bank of the Philippine Islands
REITERATIONFacts
The Antecedents: Spouses Rolando and Josefina Andaya, President and Vice-President of St. Raphael Montessori, Inc. (St. Raphael), obtained loans for themselves and on behalf of St. Raphael from Far East Bank and Trust Company (now BPI). They executed real estate mortgages over a parcel of land covered by TCT No. T-45006 as security. Upon default, BPI extrajudicially foreclosed the mortgaged property, issued a Certificate of Sale, and subsequently an Affidavit of Consolidation, leading to the issuance of TCT No. T-175740 in BPI's name. Procedural History: BPI petitioned for a Writ of Possession, which was issued by the court a quo. The Spouses Andaya requested deferment and executed an Undertaking, acknowledging BPI's ownership and promising to vacate by September 23, 2005. BPI deferred the writ's implementation. However, the Spouses Andaya failed to vacate. St. Raphael filed a Motion to Quash the Writ of Possession, claiming it was not a party to the mortgage and that its building on the property was not included. An Affidavit of Third-Party Claim was filed by Teresita Badiola, claiming ownership of the building based on a Lease to Own Agreement. BPI requested the sheriff to implement the writ. The court a quo initially dismissed the contempt motion but ordered BPI to withdraw security guards and restore possession to St. Raphael, deeming it prudent to maintain the status quo. BPI filed a Partial Motion for Reconsideration. The court a quo granted St. Raphael's motion for immediate implementation of its order and denied BPI's motion, ruling that the writ could not be enforced pending resolution of the motion to quash, and that St. Raphael was a third-party claimant. The court a quo later granted the Motion to Quash Writ of Possession, declaring the writ null and void and modifying the earlier order to exclude the building owned by St. Raphael. BPI filed a petition for certiorari before the Court of Appeals (CA), alleging grave abuse of discretion. The CA reversed the court a quo, denying St. Raphael's motion to quash and declaring the writ of possession valid and enforceable, entitling BPI to possession of the property, including the building. The Petition: St. Raphael filed a Petition for Review on Certiorari seeking to reverse the CA's decision, raising the issue of whether a writ of possession issued ex-parte after foreclosure can be enforced to oust St. Raphael from its building on the foreclosed property.
Issue(s)
Whether the ex-parte writ of possession issued to BPI following the foreclosure of mortgages executed by Spouses Andaya on the subject property can be enforced to oust St. Raphael from its school buildings built on the same property, considering St. Raphael's claim as a third-party owner of the improvements.
Ruling
The Supreme Court denied the petition for lack of merit and affirmed the Decision and Resolution of the Court of Appeals in toto.
Ratio Decidendi
On the enforceability of the writ of possession and the inclusion of improvements: The Court reiterated that the issuance of a writ of possession to a purchaser in a public auction is a ministerial function, which cannot be enjoined. Once title is consolidated in the buyer's name upon failure to redeem, the writ becomes a matter of right. This right to possession is an incident of ownership. Under Article 2127 of the Civil Code, a mortgage extends to all improvements when the secured obligation becomes due; foreclosure covers both the property and its accessions. St. Raphael's claim as a third-party owner was not given weight due to lack of proof of adverse title and the fact that the Spouses Andaya were also the incorporators and trustees of St. Raphael. The mortgage agreements explicitly included buildings and improvements, and the failure to annotate any lease agreement meant BPI had no knowledge of, and was not bound by, such a contract.
Main Doctrine
The issuance of a writ of possession to a purchaser in an extrajudicial foreclosure sale is a ministerial function of the court, which becomes a matter of right upon consolidation of ownership in the buyer's name. Improvements on the mortgaged property are generally included in the foreclosure proceedings.