Chavez v. Maybank Philippines
REITERATIONFacts
1. The Antecedents: In December 1999, Consolacion and Cresente Chavez obtained a loan from Maybank Philippines, Inc. for the construction of a commercial building. As collateral, they mortgaged a parcel of land. The Spouses Chavez defaulted on their loan, leading Maybank to extrajudicially foreclose the mortgage. Maybank emerged as the highest bidder at the auction. Subsequently, the Spouses Chavez filed an action to nullify the foreclosure proceedings. 2. Procedural History: During the pendency of the nullification case, the parties entered into a Compromise Agreement, allowing the Chavez family to buy back the property for P40,000,000.00. The case was dismissed with prejudice. However, the petitioners defaulted on their payments under the Compromise Agreement. Maybank then entered into a Deed of Promise to Sell with J.E. TICO Realty Corporation and filed a Petition for Issuance of a Writ of Possession. The Regional Trial Court (RTC) denied the petition, finding it necessary to first determine the nature of the petitioners' interest and the Compromise Agreement. Maybank's motion for reconsideration was denied, prompting a petition for certiorari before the Court of Appeals (CA). 3. The Petition: The Court of Appeals set aside the RTC's orders and directed the issuance of a Writ of Possession in favor of Maybank, holding that the RTC gravely abused its discretion. The CA ruled that the issuance of the writ was a ministerial function and that no exception applied, as the petitioners could not claim adverse possession against themselves. The CA also found the consolidation of cases improper. The petitioners are now before the Supreme Court via a petition for review on certiorari, arguing that the CA erred in directing the issuance of the writ of possession, contending that the Compromise Agreement constituted a new contract of sale, thereby altering the legal relationship between the parties.
Issue(s)
Whether the Court of Appeals erred in directing the issuance of an ex-parte Writ of Possession in favor of respondent, considering the nature of the Compromise Agreement. Whether the Compromise Agreement constituted a new contract of sale, thereby altering the mortgagor-mortgagee relationship and precluding the ministerial issuance of a writ of possession.
Ruling
The petition is DENIED. The Decision dated February 20, 2018 and the Resolution dated October 10, 2018 of the Court of Appeals in CA-G.R. CEB-SP No. 10333 are AFFIRMED.
Ratio Decidendi
On the nature of the Compromise Agreement and the issuance of the writ of possession: The Court affirmed the CA's ruling that the writ of possession must issue as a matter of course. Article 2028 of the Civil Code defines a compromise agreement as a contract to avoid or end litigation through reciprocal concessions. Once judicially approved, it has the force and effect of a judgment. The Compromise Agreement in this case, entered into after the extrajudicial foreclosure and during the pendency of the nullification case, allowed petitioners to "buy back" the property despite the lapse of the redemption period. Crucially, petitioners defaulted in their obligations under this agreement, an allegation they did not deny. The terms of the agreement, particularly paragraphs (5) and (6), explicitly granted Maybank the right to rescind the agreement and immediately secure a writ of possession upon default. This right is supported by Article 2041 of the Civil Code, which allows an aggrieved party to either enforce the compromise or regard it as rescinded and insist upon their original demand. The Court rejected the petitioners' argument that the "buy back" constituted a sale, distinguishing it from cases where a clear Deed of Conditional Sale was executed. The mortgagor-mortgagee relationship was not extinguished, as evidenced by Maybank's reserved right to possess the property upon default. On the ministerial issuance of a writ of possession: The Court reiterated that under Act No. 3135, as amended, an order for a writ of possession in extrajudicial foreclosure proceedings issues as a matter of course after the redemption period expires without redemption, or even during the redemption period with a bond. This is because the right to possession is founded on ownership acquired by the foreclosure buyer. Once title consolidates, the writ becomes a matter of right, and its issuance is a ministerial function. The Court acknowledged exceptions, such as gross inadequacy of price, a third party claiming adverse right to the mortgagor, or failure to return surplus proceeds. However, none of these exceptions apply here. Petitioners, as original mortgagors or their successors, cannot claim possession adverse to themselves. Therefore, the writ of possession must issue ministerially in favor of Maybank as the confirmed absolute owner.
Main Doctrine
In extrajudicial foreclosure proceedings, a writ of possession issues as a matter of course after the redemption period expires without redemption, or even during the redemption period if a bond is posted. This ministerial function is only stayed by specific exceptions, such as when a third party claims possession adversely to the mortgagor, which exception does not apply when the party in possession is the mortgagor or their successor, or when a compromise agreement, upon default, allows the mortgagee to seek immediate possession.