Gallent v. Velasquez
REITERATIONFacts
The Antecedents: Spouses George and Mercedes Gallent mortgaged their residential property to Allied Banking Corporation (Allied Bank) to secure a loan. Upon default, Allied Bank extrajudicially foreclosed the property and emerged as the highest bidder. After the redemption period expired, Allied Bank consolidated ownership. Subsequently, Allied Bank agreed to sell the property back to the Spouses Gallent. Due to financial difficulties, the Spouses Gallent sought assistance from Juan Velasquez, agreeing to assign their rights under the agreement to sell to him in exchange for his settlement of the remaining balance. Velasquez then paid the balance to Allied Bank and a deed of absolute sale was executed in his favor, leading to the issuance of a new title in his name. After several years, Velasquez demanded that the Spouses Gallent vacate the property, which they refused, leading to a petition for a writ of possession. Procedural History: Juan Velasquez filed an ex parte petition for a writ of possession in the Regional Trial Court (RTC) of Muntinlupa City. The Spouses Gallent sought to intervene and dismiss the petition, arguing that Velasquez was not a direct purchaser from a foreclosure sale and that their agreement constituted an equitable mortgage. The RTC denied their motions, treating their intervention as an opposition and stating that issuing a writ of possession was a ministerial duty. The RTC subsequently granted the writ. The Spouses Gallent filed a petition for certiorari with the Court of Appeals (CA) challenging the RTC orders. Separately, they also filed another petition for certiorari alleging forgery in the deed of sale to Velasquez. The CA, in one division, ruled that Velasquez, as a transferee of the bank, could petition for a writ of possession. However, another division of the CA ruled that an ex parte writ of possession could not issue against the Spouses Gallent because they were adverse claimants in possession, relying on the principle that such a writ ceases to be ministerial when a third party claims ownership adversely. The Petition: Two petitions for review on certiorari were filed before the Supreme Court. In G.R. No. 203949, the Spouses Gallent sought to set aside the CA decision that allowed the issuance of the writ of possession, arguing that their assignment to Velasquez was an equitable mortgage and that they were adverse possessors. In G.R. No. 205071, Velasquez sought to affirm the CA decision that granted the writ of possession, contending that his right to possession was a ministerial duty of the court. The Supreme Court considered the Spouses Gallent's claim of equitable mortgage and their continued possession as constituting adverse possession, thus making the issuance of the writ of possession non-ministerial. The Court granted the petition of the Spouses Gallent and denied the petition of Velasquez.
Issue(s)
Whether the Regional Trial Court (RTC) may validly issue an ex parte writ of possession to the transferee of the winning bidder at an extrajudicial foreclosure sale. Whether the Spouses Gallent, by virtue of their substantial payments and claim of equitable mortgage, are adverse claimants whose possession prevents the issuance of an ex parte writ of possession. Whether the Deed of Assignment of Rights executed by the Spouses Gallent in favor of Velasquez constitutes an equitable mortgage.
Ruling
The Supreme Court granted the petition in G.R. No. 203949 (Spouses Gallent) and denied the petition in G.R. No. 205071 (Velasquez). It set aside the decision of the CA in CA-G.R. SP No. 116097 and affirmed the decision of the CA in CA-G.R. SP No. 114527.
Ratio Decidendi
On the issuance of an ex parte writ of possession to a transferee: The Court reiterated the general rule that after consolidation of title in the buyer's name in an extrajudicial foreclosure, the issuance of a writ of possession is a ministerial duty of the court upon an ex parte petition by the new owner as a matter of right. This right extends to a transferee of the property, as they merely step into the shoes of the original mortgagee-purchaser. The purchaser's right to possession is absolute and is a fundamental aspect of ownership, allowing them to demand possession as a matter of right. Section 7 of Act No. 3135 mandates the RTC to issue such a writ upon a mere ex parte motion, as it is a non-litigious and summary proceeding. The Court emphasized that even a pending action to annul the mortgage or foreclosure sale does not stay the issuance of the writ, as the trial court need not look into the validity of the mortgage or foreclosure proceedings at that stage. On adverse possession preventing the issuance of an ex parte writ: The Court clarified that the ministerial duty to issue an ex parte writ of possession ceases when it appears that a third party, not the debtor-mortgagor, is in possession of the property under a claim of title adverse to that of the applicant. This exception is rooted in Section 33 of Rule 39 of the Rules of Court, extended to extrajudicial foreclosure sales. For this exception to apply, the third party must hold the property adversely to the debtor/mortgagor, not merely as a successor or transferee of the debtor. The third party possessor must have done so in their own right, such as a co-owner, tenant, or usufructuary. In such cases, the court must order a hearing to determine the nature of the adverse possession, as due process requires that the contending parties' ownership claims be heard and adjudicated in an appropriate judicial action, such as an ejectment suit or reinvindicatory action. On the Spouses Gallent's claim of equitable mortgage: The Court found that the Spouses Gallent's substantial payment of the repurchase price (P3,790,500.00 out of P4 Million) coupled with their continued possession of the property, even after assigning their rights to Velasquez, entitled them to the legal presumption that their assignment constituted an equitable mortgage under Article 1602 of the Civil Code. The Court noted that a contract where the vendor remains in physical possession as lessee or otherwise, or where the price is unusually inadequate, is deemed an equitable mortgage. The Court reasoned that the Spouses Gallent's continued possession, despite the assignment and subsequent transfer of title to Velasquez, indicated their intent to retain ownership, with Velasquez merely holding title as security for the amount he advanced. Therefore, the Spouses Gallent were considered adverse possessors in their own right, not merely successors of the debtor, thus preventing the issuance of an ex parte writ of possession against them.
Main Doctrine
The ministerial duty of a court to issue an ex parte writ of possession in extrajudicial foreclosure ceases when a third party is in possession of the property under a claim of title adverse to the applicant, such as when the transaction is deemed an equitable mortgage.