Fei Hua Finance and Leasing Service v. Castañeda
REITERATIONFacts
1. The Antecedents: Fei Hua Finance and Leasing Service (Fei Hua) extended a credit facility to Goldland Properties and Development Corporation (Goldland) for PHP 9,900,000.00, secured by a real estate mortgage over 60 parking spaces. Goldland defaulted on its loan, with the outstanding balance reaching PHP 23,700,000.00. Fei Hua initiated extrajudicial foreclosure proceedings, emerged as the highest bidder at the auction, and subsequently consolidated ownership of the mortgaged properties, including the parking space covered by CCT No. 004-2011006807, which was re-issued in Fei Hua's name. 2. Procedural History: Fei Hua filed an ex-parte petition for a writ of possession, which the Regional Trial Court (RTC) granted. The writ became final and was implemented. Subsequently, Edilberto Castañeda filed a motion to recall the writ, asserting ownership of the subject parking space, which he claimed to have purchased from Goldland in 2013, prior to the mortgage to Fei Hua. The RTC denied Castañeda's motion, deeming it moot and academic due to the writ's prior implementation. Castañeda then filed a petition for certiorari with the Court of Appeals (CA), which reversed the RTC's decision, ordering that the parking space possessed by Castañeda be excluded from the writ of possession. Fei Hua's motion for reconsideration was denied, leading to the present petition. 3. The Petition: Fei Hua seeks review of the CA's decision, arguing that Castañeda availed of the wrong remedy by filing a petition for certiorari instead of an ordinary appeal, and that the CA erred in holding that the writ of possession was not a ministerial function and that Castañeda's possession was adverse. Fei Hua also contends that Castañeda's motion to recall the writ was moot and academic because the writ had already been satisfied and implemented. The petition raises the issue of whether the CA erred in its ruling regarding the writ of possession and Castañeda's claim of adverse possession.
Issue(s)
Whether the Court of Appeals erred in holding that the execution or implementation of the subject writ of possession did not render Castañeda's motion to recall the same moot and academic. Whether Castañeda, as a purchaser of a condominium parking space from the mortgagor prior to the mortgage and in actual possession, is considered a third-party adverse possessor whose possession should be excluded from the writ of possession.
Ruling
The Supreme Court denied the petition and affirmed the Court of Appeals' Decision and Resolution. The Court held that Castañeda availed of the correct remedy by filing a Petition for Certiorari under Rule 65, as orders denying a motion to recall a writ of possession are interlocutory and not appealable under Rule 41. The Court reiterated that while the issuance of a writ of possession in extrajudicial foreclosures is generally a ministerial function, there is a narrow exception when a third party claims a right adverse to the mortgagor/debtor. This exception was expanded in Spouses Rosario v. GSIS to include individual buyers of condominium units or subdivision lots who are in actual possession, even if they have privity with the developer-mortgagor. The Court found that Castañeda, having purchased the parking space before the mortgage, paid in full, and been in actual possession since 2017, established himself as a third-party adverse possessor. Furthermore, the Court ruled that the writ of possession was void as Castañeda was denied due process, having been unaware of the proceedings until after the writ was issued and implemented. A void writ and actions taken pursuant to it have no legal effect, thus, the implementation did not render the motion to recall moot and academic.
Ratio Decidendi
On the issue of whether the CA erred in holding that the execution or implementation of the subject writ of possession did not render Castañeda's motion to recall the same moot and academic: The Court held that the argument that the motion to recall is moot and academic because the writ had already been satisfied and implemented is untenable. Citing Carpio v. Court of Appeals, the Court stressed that the execution of an invalid writ pending appeal does not render the appealed case moot and academic. The Court further emphasized in Spouses Rosario that a third-party adverse possessor cannot be summarily dispossessed based on a mere ex-parte possessory writ, as this would violate due process. Since Castañeda was denied due process, having been unaware of the proceedings until after the writ was issued and implemented, the writ of possession was void ab initio. Consequently, all actions taken pursuant to this void writ, including its full implementation and satisfaction, were also void and of no legal effect. The satisfaction of a void writ does not clothe it with validity. On the issue of whether Castañeda, as a purchaser of a condominium parking space from the mortgagor prior to the mortgage and in actual possession, is considered a third-party adverse possessor whose possession should be excluded from the writ of possession: The Court affirmed the CA's ruling that Castañeda is a third-party adverse possessor. While the general rule is that the issuance of a writ of possession is a ministerial function, an exception exists when a third party claims a right adverse to the mortgagor/debtor. The Court clarified that to be considered in adverse possession, the third-party possessor must hold the property in their own right, not merely as a successor or transferee of the debtor. However, this rule was modified in Spouses Rosario v. GSIS, which held that individual buyers of condominium units or subdivision lots, despite privity with developer-mortgagors, should be excluded from the issuance or implementation of a writ of possession if they are in actual possession. The Court reasoned that these buyers are entitled to protection from summary ejectment. In this case, Castañeda established that he purchased the parking lot from Goldland in 2013, before the mortgage to Fei Hua in 2016, paid in full, and had been in actual possession since August 12, 2017. Fei Hua did not dispute these facts. Furthermore, a prior HSAC decision declared the mortgage and foreclosure void, reinforcing Castañeda's claim. Therefore, Castañeda is considered a third-party adverse possessor, excluded from the writ of possession pursuant to Rule 39, Section 33 of the Rules of Court and the doctrine in Spouses Rosario.
Main Doctrine
The issuance of a writ of possession ceases to be ministerial when a third-party buyer of a condominium unit or subdivision lot intervenes, claiming a right adverse to the mortgagor/debtor, especially if such purchase predates the mortgage and the buyer is in actual possession. Such a situation requires a hearing to determine the nature of the buyer's right, and the writ should exclude such bona fide buyers without prejudice to the outcome of other cases concerning the mortgage's validity.