AQA Global Construction, Inc. v. Planters Development Bank
REITERATIONFacts
The Antecedents: Planters Development Bank (Plantersbank) was the mortgagee of nineteen (19) parcels of land owned by Kwong-on Trading Corporation (KTC). KTC defaulted on its loan, leading Plantersbank to extrajudicially foreclose the mortgaged properties. Plantersbank emerged as the highest bidder, and after KTC failed to redeem the properties, new titles were issued in Plantersbank's name. Plantersbank applied for and was granted a writ of possession by the Regional Trial Court (RTC). The writ was served to petitioner AQA Global Construction Inc. (AQA), which occupied the properties. Procedural History: AQA sought to intervene and be excluded from the writ of possession, claiming its possession was adverse to KTC and stemmed from a lease with petitioner Je-an Supreme Builders and Sales Corporation (Je-An). Je-An also filed a third-party claim, asserting its right to possess derived from a Contract to Sell with Little Giant Realty Corporation (Little Giant), the alleged registered owner. Plantersbank opposed, arguing AQA and Je-An were privy to KTC and that the lease was unregistered. The RTC excluded AQA and Je-An from the writ, stating they were third parties whose possession did not derive from KTC and that Plantersbank should file a separate action. Plantersbank's motion for reconsideration was denied. The Court of Appeals (CA) set aside the RTC orders, finding grave abuse of discretion and holding that third parties cannot intervene in an ex parte petition for a writ of possession and must avail of terceria or a separate action. AQA and Je-An's motions for reconsideration were denied. The Petition: Petitioners AQA and Je-An sought review of the CA decision, arguing the CA erred in finding that the RTC gravely abused its discretion in staying the implementation of the writ of possession.
Issue(s)
Whether the Court of Appeals erred in finding that the Regional Trial Court gravely abused its discretion in staying the implementation of the writ of possession against AQA and Je-An. Whether AQA and Je-An are considered third parties holding the subject properties adversely to the judgment obligor, KTC.
Ruling
The petitions are denied. The Decision and Resolution of the Court of Appeals are affirmed.
Ratio Decidendi
On the issue of whether the Court of Appeals erred in finding that the Regional Trial Court gravely abused its discretion in staying the implementation of the writ of possession against AQA and Je-An: The Court held that the CA did not err in finding grave abuse of discretion on the part of the RTC. While the RTC has supervisory control over the execution process, its authority to determine the nature of possession is limited to ascertaining whether the claimant holds the property adversely to the judgment obligor. In this case, the claims of AQA and Je-An did not meet the criteria for adverse possession. Je-An's claim was based on an inchoate right from a Contract to Sell, which was insufficient to transfer title. Furthermore, Je-An was privy to the subsequent Deed of Assignment from Little Giant to KTC, undermining its claim of adverse possession. AQA's possession, derived from an unregistered lease with Je-An, was also not adverse to KTC. Therefore, the RTC should not have stayed the implementation of the writ of possession. On the issue of whether AQA and Je-An are considered third parties holding the subject properties adversely to the judgment obligor, KTC: The Court ruled that AQA and Je-An could not be considered third parties holding the subject properties adversely to KTC. Je-An's claim of ownership was based on a Contract to Sell, which only afforded it an inchoate right and was legally insufficient to transfer title without a deed of conveyance. Moreover, Je-An's representative, Achurra, was privy to the Deed of Assignment executed by Little Giant in favor of KTC, contradicting its claim of adverse possession. The titles were in KTC's name without annotation of Je-An's contract when KTC mortgaged the properties, and no adverse claim was registered by Je-An. Consequently, AQA, as a lessee from Je-An under an unregistered lease, could not claim adverse possession. The Court reiterated that for a third party's possession to be considered adverse, they must possess the property in their own right, not merely as a successor or transferee privy to the judgment obligor. Unregistered civil law leases, like AQA's, are not binding on the mortgagee-purchaser.
Main Doctrine
A third party claiming possession adverse to the judgment obligor in an extrajudicial foreclosure sale must possess the property in their own right and not merely as a successor or transferee privy to the judgment obligor; unregistered civil law leases do not bind the mortgagee-purchaser.