A.G. Development Corporation vs. Court of Appeals

The issuance of a writ of possession in an extra-judicial foreclosure proceeding is not a judgment on the merits and cannot bar a subsequent action to annul the mortgage and foreclosure sale under the doctrine of res judicata. A writ of possession is a ministerial function of the court, summary in nature, and does not involve the exercise of official discretion or judgment; hence, it does not constitute a final determination of the rights of the parties.

Petitioner A.G. Development Corporation (AGDC) and public respondent National Housing Authority (NHA) entered into a Memorandum of Agreement on November 4, 1981, whereby AGDC agreed to construct a dormitory-apartment-commercial building on its lot for NHA at a total cost of ₱11,452,989.00. To secure its obligation, AGDC executed a promissory note and a real estate mortgage over the land in favor of NHA. NHA made an initial payment of ₱3,308,440.00 to cover a portion of the contract price.

On November 4, 1981, petitioner A.G. Development Corporation (AGDC) and public respondent National Housing Authority (NHA) entered into a Memorandum of Agreement wherein AGDC agreed to construct on its lot a dormitory-apartment-commercial building for NHA at a total cost of ₱11,452,989.00. Pursuant to the agreement, AGDC executed in favor of NHA a promissory note and a real estate mortgage over the land as security for the obligation. NHA thereafter made an initial payment of ₱3,308,440.00 to AGDC to cover a portion of the contract price.

On August 30, 1983, NHA rescinded the agreement and demanded the immediate return of the initial amount paid, on the ground that AGDC was not able to complete the project on time. The demand was refused, and as a result, the real estate mortgage was extra-judicially foreclosed and the property sold to NHA as the highest bidder. After the one-year redemption period expired, a new Transfer Certificate of Title was issued in favor of NHA, and a writ of possession was thereafter applied for and granted by the Regional Trial Court of Quezon City, docketed as LRC Case No. 3067 (85).

On December 3, 1986, AGDC filed a complaint against NHA before the Makati RTC, docketed as Civil Case No. 15495, for breach of contract, declaration of nullity of the promissory note and real estate mortgage, and annulment of foreclosure sale and reversion of possession and title. NHA filed a motion to dismiss on the ground of litis pendentia, which was denied by the trial court. While the case was pending, private respondent A. Francisco Realty and Development Corporation (AFRDC) filed a motion to intervene, claiming that it was an innocent purchaser for value of the subject property since it had already bought the foreclosed property from NHA. Consequently, AFRDC filed a motion to dismiss before the Makati RTC, reasoning that the said court had no jurisdiction to entertain the complaint and annul the writ issued by the Quezon City RTC since both are co-equal or coordinate courts. The Makati RTC ruled in favor of AFRDC and dismissed AGDC's complaint. Recourse to the Court of Appeals proved futile, hence the petition before the Supreme Court.

• Res Judicata Not Applicable: Petitioner argued that the issuance of the writ of possession by the Quezon City RTC did not constitute res judicata that would bar its complaint, as the writ of possession was not a judgment on the merits.

• Res Judicata Bar: Respondents argued that the issuance of the writ of possession had the effect of confirming NHA's title over the property, and that the grant of said writ constituted an absolute bar to a subsequent action, being final as to the claim of nullity of the promissory note, real estate mortgage, and the resultant extra-judicial foreclosure sale.
• Lack of Jurisdiction: AFRDC argued that the Makati RTC had no jurisdiction to entertain the complaint and annul the writ issued by the Quezon City RTC since both are co-equal or coordinate courts.

• Res Judicata Effect of Writ of Possession: Whether the issuance of a writ of possession by the Quezon City RTC constitutes res judicata so as to bar the complaint filed by AGDC.

• Res Judicata Effect of Writ of Possession: No. The issuance of a writ of possession is not a judgment on the merits; it is a ministerial function, summary in nature, and does not involve the exercise of official discretion or judgment. Therefore, the doctrine of res judicata cannot be applied to bar AGDC's complaint.

• Res Judicata Effect of Writ of Possession: The Court ruled that for res judicata to apply, the following requisites must concur: (a) the former judgment must be final; (b) the court which rendered it had jurisdiction over the subject matter and the parties; (c) the judgment must be on the merits; and (d) there must be between the first and second actions identity of parties, subject matter and causes of action. A basic requisite for res judicata to apply is that there are two cases which have been decided on the merits. The Court disagreed with the Court of Appeals' ruling that the action to annul both the real estate mortgage and the foreclosure sale is barred by res judicata. The issuance of a writ of possession is not a judgment on the merits. A writ of possession is generally understood to be an order whereby the sheriff is commanded to place a person in possession of a real or personal property, such as when a property is extra-judicially foreclosed. The issuance of a writ of possession to a purchaser in an extra-judicial foreclosure is merely a ministerial function, and the Court neither exercises its official discretion nor judgment. The issuance of the writ of possession is summary in nature, hence it cannot be considered a judgment on the merits, which is defined as one rendered after a determination of which party is right, as distinguished from a judgment rendered upon some preliminary or formal technical point. Furthermore, the doctrine of res judicata applies only to judicial or quasi-judicial proceedings and not to the exercise of administrative powers or to legislative, executive or ministerial determination. Cases disposed of on technical grounds do not fall within the doctrine of res judicata. The Court also noted that LRC Case No. 3067 (85) is not an action as defined by law, since in the procedure for the issuance of a writ of possession, no complaint is necessary, the filing of an ex parte motion being enough. The term "action" does not include non-judicial proceedings, although they are before a court, as in cases where the court does not act in a judicial capacity. A proceeding to foreclose a mortgage by advertisement is not an action. In the absence of the necessary elements, the doctrine of res judicata cannot be applied.

• Res Judicata — For res judicata to apply, the following requisites must concur: (a) the former judgment must be final; (b) the court which rendered it had jurisdiction over the subject matter and the parties; (c) the judgment must be on the merits; and (d) there must be between the first and second actions identity of parties, subject matter and causes of action. A basic requisite is that there are two cases which have been decided on the merits. In this case, the Court held that the issuance of a writ of possession is not a judgment on the merits, and therefore res judicata cannot bar a subsequent action to annul the mortgage and foreclosure sale.
• Writ of Possession as a Ministerial Function — The issuance of a writ of possession to a purchaser in an extra-judicial foreclosure is merely a ministerial function; the court neither exercises its official discretion nor judgment. The issuance is summary in nature and cannot be considered a judgment on the merits, which is defined as one rendered after a determination of which party is right, as distinguished from a judgment rendered upon some preliminary or formal technical point.
• Action Distinguished from Non-Judicial Proceedings — An action is an act by which one sues another in a court of justice for the enforcement or protection of a right or the prevention or redress of a wrong, and such is commenced by filing a complaint with the court. The term "action" does not include non-judicial proceedings, although they are before a court, as in cases where the court does not act in a judicial capacity. A proceeding to foreclose a mortgage by advertisement is not an action.

• "The issuance of a writ of possession is not a judgment on the merits. A writ of possession is generally understood to be an order whereby the sheriff is commanded to place a person in possession of a real or personal property, such as when a property is extra-judicially foreclosed." — This passage establishes the core ratio decidendi: the writ of possession is a ministerial order, not a judicial determination of rights, and therefore cannot trigger res judicata.
• "In this regard, the issuance of a writ of possession to a purchaser in an extra-judicial foreclosure is merely a ministerial function. As such, the Court neither exercises its official discretion nor judgment." — This defines the nature of the writ of possession as a ministerial act, supporting the conclusion that it is not a judgment on the merits.
• "In the absence of the necessary elements, the doctrine of res judicata cannot be applied in the instant petition." — This states the final conclusion of the Court, applying the requisites of res judicata to the facts and finding them unsatisfied.

• Mangoma vs. Court of Appeals, 241 SCRA 21 (1995) — Cited as authority for the requisites of res judicata.
• Guevarra vs. Benito, 247 SCRA 570 (1995) — Cited as authority for the requisites of res judicata.
• Cokaliong Shipping Lines, Inc. vs. Amin, 260 SCRA 122 (1996) — Cited as authority for the requisites of res judicata.
• Vaca vs. Court of Appeals, 234 SCRA 146 (1994) — Cited for the proposition that the issuance of a writ of possession is a ministerial function.
• F. David Enterprises vs. Insular Bank of America, 191 SCRA 516 (1990) — Cited for the proposition that the issuance of a writ of possession is a ministerial function.
• Lamb vs. Philipps, 22 Phil 456 (1912) — Cited for the proposition that the court neither exercises its official discretion nor judgment in issuing a writ of possession.
• Santos vs. IAC, 145 SCRA 238 (1986) — Cited for the definition of a judgment on the merits.
• Hagans vs. Wislenzenus, 42 Phil. 880 (1922) — Cited for the definition of an action.
• Golcher vs. Brisbin, 20 Minn. 453 — Cited for the proposition that a proceeding to foreclose a mortgage by advertisement is not an action.

• Section 7, Act 3135, as amended — Governs the issuance of a writ of possession in extra-judicial foreclosure proceedings; the Court noted that the filing of an ex parte motion is sufficient, and no complaint is necessary.
• Section 3, Act 3135, as amended — Governs the posting and publication of notices required for extra-judicial foreclosure.
• Section 5, Rule 1, 1997 Rules on Civil Procedure — Defines an action as commenced by filing a complaint with the court; the Court used this to distinguish an action from the summary procedure for obtaining a writ of possession.

Melo, Francisco, and Panganiban, JJ., concurred. Narvasa, C.J., was on leave.