BPI Family Savings Bank, Inc. vs. Golden Power Diesel Sales Center, Inc. and Renato C. Tan

A third party who acquires possession of a foreclosed property from the mortgagor/judgment obligor is a successor-in-interest, not a person holding adversely to the judgment obligor, and therefore the issuance of a writ of possession remains a ministerial duty of the court; the pendency of an action for annulment of the mortgage or foreclosure sale does not stay the implementation of the writ.

CEDEC Transport, Inc., obtained three loans from BPI Family Savings Bank between October 1994 and November 1995, secured by real estate mortgage over two parcels of land in Pasay City covered by TCT Nos. 134327 and 134328. All mortgages were duly annotated. CEDEC defaulted despite demand. On 10 December 1998, after proper notice and publication, the properties were sold at public auction, with BPI Family as the highest bidder. BPI Family acquired title upon expiration of the one-year redemption period on 15 May 1999 without redemption. New certificates of title (TCT Nos. 142935 and 142936) were issued in its name on 13 September 2000. CEDEC refused to vacate the properties despite demands, prompting BPI Family to petition for a writ of possession.

• The Mortgage and Foreclosure: CEDEC Transport, Inc. mortgaged two registered parcels of land in Pasay City (TCT Nos. 134327 and 134328) to BPI Family Savings Bank, Inc. to secure loans totalling ₱9,870,000. The mortgages were duly annotated. CEDEC defaulted; BPI Family filed a verified petition for extrajudicial foreclosure under Act No. 3135. At the public auction on 10 December 1998, BPI Family was the highest bidder for ₱13,793,705.31. The Certificate of Sheriff’s Sale was annotated on the titles on 14 May 1999.

• Consolidation of Title and Demand for Possession: The one-year redemption period expired on 15 May 1999 without CEDEC redeeming. Ownership was consolidated in BPI Family’s name, and new titles (TCT Nos. 142935 and 142936) were issued on 13 September 2000. Despite repeated demand letters, CEDEC refused to vacate and surrender possession.

• The Writ of Possession and Respondents’ Intervention: BPI Family’s ex-parte petition for a writ of possession was granted and a writ issued on 12 July 2002. Respondents Golden Power Diesel Sales Center, Inc. and Renato C. Tan (its president) opposed implementation by filing a Motion to Hold Implementation. They alleged they were in actual possession of the properties pursuant to a Deed of Absolute Sale with Assumption of Mortgage executed on 10 September 1998, by which CEDEC sold the properties to them for ₱15,000,000, free from liens except the existing BPI Family mortgage, and respondents assumed the unpaid mortgage balance of ₱7,889,472.48 as of 31 July 1998. Respondents also disclosed that they had filed Civil Case No. 99-0360 before RTC Branch 111, Pasay City, seeking cancellation of the Sheriff’s Certificate of Sale and an order directing BPI Family to honor the Deed of Sale.

• Suspension of the Writ: The trial court initially denied respondents’ motion and issued an alias writ. However, after Renato Tan submitted an Affidavit of Third Party Claim, the sheriff referred the matter to the court. On 7 March 2003, the RTC suspended implementation, reasoning that the writ should not affect third persons holding adverse rights, that respondents were in actual possession and had been updating loan payments, and that the pending annulment case warranted suspension. BPI Family’s motion for reconsideration was denied on 20 June 2003.

• Appellate Proceedings: The Court of Appeals affirmed the trial court, holding that the trial court did not gravely abuse its discretion because the obligation to issue an ex-parte writ ceases to be ministerial once a third party in possession claims a right adverse to the judgment obligor.

• Nature of Respondents’ Possession: Petitioner argued that respondents, as vendees under the Deed of Absolute Sale, merely stepped into the shoes of CEDEC, the vendor and judgment obligor; they are successors-in-interest, not third parties holding the properties adversely to CEDEC. Thus, the exception under Section 33, Rule 39 of the Rules of Court did not apply, and the issuance of the writ remained a ministerial duty.

• Pendency of the Annulment Case: Petitioner maintained that the pendency of an action questioning the validity of the mortgage or foreclosure sale cannot be a ground to oppose or suspend the implementation of a writ of possession. The purchaser is entitled to possession without prejudice to the outcome of that separate case.

• Adverse Third-Party Possession: Respondents contended they are third persons who claim rights over the properties adverse to CEDEC, having acquired them from CEDEC prior to foreclosure and having taken actual possession while updating loan obligations. They argued that the obligation to issue an ex-parte writ of possession ceases to be ministerial once a third party in possession claims a right adverse to the judgment obligor.

• Pending Annulment Case: Respondents invoked the pending complaint in Civil Case No. 99-0360 for cancellation of the Sheriff’s Certificate of Sale and to compel BPI Family to honor the Deed of Sale as a ground to suspend implementation of the writ until that case is resolved.

• Nature of Possession: Whether respondents, who acquired the properties from the mortgagor CEDEC under a Deed of Absolute Sale with Assumption of Mortgage, are “third parties actually holding the property adversely to the judgment obligor” under Section 33, Rule 39 of the Rules of Court, such that the issuance of a writ of possession ceases to be a ministerial duty.

• Effect of Pending Annulment Case: Whether the pendency of a separate civil action questioning the validity of the mortgage or foreclosure sale justifies the suspension of the implementation of a writ of possession.

• Nature of Possession: Respondents are successors-in-interest of the mortgagor CEDEC, not third parties holding adversely to it. The Deed of Absolute Sale with Assumption of Mortgage transferred to respondents whatever rights CEDEC had over the properties; they stepped into CEDEC’s shoes and derived their right to possession solely from CEDEC. Consequently, their occupancy cannot be considered adverse to CEDEC. The exception under Section 33, Rule 39 contemplates a third party holding by an adverse title or right independent of the judgment obligor, such as a co-owner, agricultural tenant, or usufructuary—not a mere transferee. Because respondents did not hold adversely, the issuance of the writ remained a ministerial duty, and the trial court should not have suspended its implementation.

• Effect of Pending Annulment Case: The pendency of an action for annulment of the mortgage or foreclosure sale does not stay the issuance or implementation of a writ of possession. The court where the writ is sought need not inquire into the validity of the mortgage or the manner of its foreclosure. The purchaser is entitled to a writ without prejudice to the outcome of the pending annulment case. The trial court therefore erred in ordering suspension based on the pendency of Civil Case No. 99-0360.

• Ministerial Duty to Issue Writ of Possession in Extrajudicial Foreclosure — After the redemption period in an extrajudicial foreclosure of real property has expired without redemption, the purchaser is the absolute owner and is entitled to possession as a matter of right. Upon proper application and proof of title, the issuance of a writ of possession becomes a ministerial duty of the court. No bond is required after the redemption period. The buyer may demand possession even during the redemption period but must then post a bond under Section 7 of Act No. 3135, as amended.

• Exception for Third-Party Adverse Possession — Under Section 33, Rule 39 of the Rules of Court, possession must be given to the purchaser “unless a third party is actually holding the property adversely to the judgment obligor.” In such a case, the ministerial character of the writ ceases; the court must conduct a hearing to determine the nature of the adverse possession. However, this exception applies only to third parties who possess by an independent title or right—such as co-owners, agricultural tenants, or usufructuaries—and not to mere transferees or successors-in-interest of the judgment obligor, because a transferee merely steps into the shoes of the obligor and holds no right adverse to him.

• Pendency of Annulment Case Irrelevant to Writ of Possession — A pending action for annulment of the mortgage or foreclosure sale does not bar or stay the issuance of a writ of possession. The writ is issued without prejudice to the outcome of the annulment case, and the court need not examine the validity of the mortgage or the foreclosure proceedings.

• “Possession of the land then becomes an absolute right of the purchaser as confirmed owner. Upon proper application and proof of title, the issuance of the writ of possession becomes a ministerial duty of the court.” (quoting China Banking Corporation v. Lozada) — This passage underscores the non-discretionary nature of the writ after consolidation of title.

• “The exception provided under Section 33 of Rule 39 of the Revised Rules of Court contemplates a situation in which a third party holds the property by adverse title or right, such as that of a co-owner, tenant or usufructuary. The co-owner, agricultural tenant, and usufructuary possess the property in their own right, and they are not merely the successor or transferee of the right of possession of another co-owner or the owner of the property.” — The Court delineates the limited scope of the exception and excludes ordinary transferees.

• “As transferee, he steps into the latter’s shoes. … Roxas’ occupancy of the property cannot be considered adverse to Valentin.” (quoting Roxas v. Buan) — A statement of the principle that a successor-in-interest possesses derivatively and not adversely.

• “[I]t is settled that a pending action for annulment of mortgage or foreclosure sale does not stay the issuance of the writ of possession. The trial court … does not need to look into the validity of the mortgage or the manner of its foreclosure. The purchaser is entitled to a writ of possession without prejudice to the outcome of the pending annulment case.” — Affirming the independence of the writ from collateral litigation.

• China Banking Corporation v. Lozada, G.R. No. 164919, 4 July 2008, 557 SCRA 177 — Followed as controlling authority for the rule that the issuance of a writ of possession after expiration of the redemption period is a ministerial duty, and for the definition of adverse third-party possession under Section 33, Rule 39.

• Roxas v. Buan, 249 Phil. 41 (1988) — Followed; established the principle that a vendee/transferee of the mortgagor steps into the shoes of the vendor and cannot be regarded as a possessor adverse to the vendor.

• Philippine National Bank v. Court of Appeals, 424 Phil. 757 (2002) — Cited for the general rule that the presence of a third party holding adversely renders the issuance of a writ of possession non-ministerial.

• Spouses Paderes v. Court of Appeals, 502 Phil. 76 (2005) — Cited for the corollary rule that a transferee is bound to acknowledge and respect the mortgage earlier executed by the transferor.

• Fernandez v. Espinoza, G.R. No. 156421, 14 April 2008, 551 SCRA 136; Idolor v. Court of Appeals, 490 Phil. 808 (2005); Samson v. Rivera, G.R. No. 154355, 20 May 2004, 428 SCRA 759; Spouses Ong v. Court of Appeals, 388 Phil. 857 (2000) — All cited as consistent authority that a pending action questioning the validity of the mortgage or foreclosure sale does not bar the issuance of a writ of possession.

• Section 7, Act No. 3135, as amended — Governs the issuance of a writ of possession in extrajudicial foreclosure of real estate mortgage. Allows the purchaser to petition for possession during the redemption period upon posting bond, and recognizes that the same procedure is available to the purchaser after the redemption period without bond. Applied here to confirm BPI Family’s right to a writ after consolidation of ownership.

• Section 33, Rule 39, Rules of Court — Directs that, upon expiration of the redemption period, possession shall be given to the purchaser “unless a third party is actually holding the property adversely to the judgment obligor.” This was the pivot of the dispute; interpreted to exclude mere successors-in-interest from the exception.

Associate Justice Antonio Eduardo B. Nachura, Associate Justice Diosdado M. Peralta, Associate Justice Roberto A. Abad, Associate Justice Jose C. Mendoza. (Associate Justice Antonio T. Carpio chaired the Division and wrote the opinion.)