Dayot vs. Shell Chemical Company (Phils.), Inc.

A purchaser in an extra-judicial foreclosure sale cannot obtain a ministerial ex-parte writ of possession to eject a third party who is in actual possession of the property under a claim of ownership adverse to the mortgagor and who was not a party to the foreclosure proceedings; the third party must be proceeded against through an ordinary judicial action for recovery of possession.

Panay Railways, Inc. (PRI) executed a real estate mortgage over six parcels of land in Lapuz District, Iloilo City in favor of Traders Royal Bank (TRB) to secure loan obligations. The mortgage contract expressly excluded areas already sold to Shell Chemical Company, Inc., totaling 14,920 square meters identified as Lot No. 6153-B and a portion of Lot No. 5. Shell had purchased its portion from the Development Bank of the Philippines (DBP) on June 30, 1975, obtained TCT No. T-47484 on July 28, 1977, and maintained bulk plant and fuel storage facilities on the property. PRI defaulted on its loan; the mortgaged properties were foreclosed and sold at public auction to TRB as highest bidder. After PRI failed to redeem, TRB consolidated ownership and obtained new certificates of title. TRB then sold portions of the foreclosed lots to spouses Edmundo and Candelaria Dayot by deed of absolute sale dated November 20, 1990.

On April 20, 1982, Panay Railways, Inc. (PRI) executed a real estate mortgage over six parcels of land in Lapuz District, Iloilo City in favor of Traders Royal Bank (TRB) to secure PRI's loan obligations. The mortgaged properties were Lot No. 3834 (TCT No. T-45727), Lot No. 1-A (TCT No. T-45728), and Lot Nos. 6153, 6156, 6158, and 6159 (all under TCT No. T-58200). The Additional Stipulations of the mortgage expressly excluded "those areas already sold to Shell Co., Inc. with total area of 14,920 sq. meters, known as Lot No. 6153-B and portion of Lot No. 5." PRI defaulted on the loan. The mortgaged properties were foreclosed and sold at public auction to TRB as highest bidder. After PRI failed to redeem, TRB consolidated ownership and obtained new certificates of title canceling the prior ones.

TRB then filed a Petition for Writ of Possession with the RTC of Iloilo City, docketed as LRC CAD. REC. NOS. 1 and 9616. The trial court granted the petition on October 22, 1990, and ordered issuance of a writ of possession in favor of TRB, but the writ was not fully implemented. On November 20, 1990, TRB sold to spouses Edmundo and Candelaria Dayot five parcels of land constituting portions of Lots 3834, 1-A, and 6153. Petitioner Candelaria Dayot filed a Supplemental Pleading on February 5, 1991, praying that she be substituted as petitioner in the writ-of-possession proceedings. The trial court granted this on March 12, 1991, and issued an Alias Writ of Possession in her favor on April 1, 1991.

Meanwhile, Shell Chemical Company (Philippines), Inc. had been in possession of a portion of Lot No. 6153 since 1975, having purchased the property from the Development Bank of the Philippines (DBP) under a Deed of Absolute Sale dated June 30, 1975. Shell obtained TCT No. T-47484 on July 28, 1977 and maintained bulk plant and fuel storage facilities on the premises. On August 24, 1994, the spouses Dayot filed Civil Case No. 21957 for Recovery of Ownership and Possession, Annulment of Documents, Cancellation of Titles, Reconveyance and Damages against TRB, Petron Corporation, and Shell, praying that Shell be directed to vacate the portion of Lot No. 6153 it occupied and that both Petron and Shell surrender ownership and possession of portions of land covered by their respective titles.

While Civil Case No. 21957 was pending, petitioner filed on August 21, 1997 an Amended Supplemental Motion in LRC CAD. REC. NOS. 1 and 9616, praying that Shell be ejected from the portion of Lot 6153 it possessed. Shell opposed, arguing forum shopping and that the parcels sold to petitioner did not include the portion possessed by Shell. On May 7, 1999, RTC Branch 30 denied the motion insofar as Shell was concerned. Despite this, petitioner filed two successive motions for an alias writ of possession. The case was re-raffled to Branch 29 after the Branch 30 judge inhibited himself. On January 8, 2002, Branch 29 issued an Amended Order directing the issuance of an Alias Writ of Possession over 14,940 square meters occupied by Shell and 17,000 square meters occupied by Petron. On January 10, 2002, the Alias Writ was issued and a Notice to Vacate was served on Shell. The RTC denied Shell's motion for reconsideration on April 12, 2002. Shell then filed a petition for certiorari and prohibition with the Court of Appeals, which granted the petition on July 30, 2002, nullifying the four assailed RTC rulings, and denied reconsideration on December 23, 2002.

• Certiorari as Improper Substitute for Lost Appeal: Petitioner argued that respondent should have been barred from filing a special civil action for certiorari before the CA because certiorari is available only when there is no speedy and adequate remedy in the ordinary course of law. Respondent should have appealed the RTC's April 12, 2002 Order but did not, and certiorari cannot substitute for a lost appeal.
• No Forum Shopping: Petitioner claimed she was not guilty of forum shopping because Civil Case No. 21957 involves ownership while the writ-of-possession proceedings concern possession, and the subject matters differ. Even if the same parcels of land are involved, a writ of possession may still be validly issued and implemented independently of the action which third-party claimants may bring to enforce their claim of ownership, pursuant to the rule that proceedings incident to extra-judicial foreclosure may proceed independently.
• Entitlement to Possession: Petitioner asserted entitlement to possession of the entire Lots 3834, 1-A, 6153, 6156, 6158, and 6159, including the 14,940 square meters occupied by respondent, characterizing respondent's occupation as that of a mere intruder or trespasser.
• Different Property: Petitioner insisted that respondent's TCT No. T-47484 refers to a lot different from those being contested in the instant case.

• Propriety of Certiorari: Respondent argued that it did not err in resorting to certiorari, as the Supreme Court allows the remedy even when appeal is available if the petition is genuinely meritorious or based on a patent, capricious, and whimsical exercise of discretion by the trial judge, or when appeal would not promptly relieve petitioner from the injurious effects of the disputed orders.
• Collateral Attack on Title: Respondent contended that the RTC's Amended Order dated January 8, 2002 collaterally attacked respondent's title over the disputed property.
• Petitioner Not a Buyer in Good Faith: Respondent argued that petitioner was not a buyer in good faith and, as a transferee, merely acquired the rights and interests that TRB had by reason of the foreclosure.
• Bar by Res Judicata and Litis Pendentia: Respondent asserted that the contested Alias Writ of Execution is barred by res judicata and litis pendentia.
• Right to Possess: Respondent maintained that it has the right to possess the disputed property as the registered owner holding title over the subject property.

• Availability of Certiorari: Whether respondent was barred from filing a petition for certiorari with the Court of Appeals on the ground that certiorari cannot substitute for a lost appeal.
• Forum Shopping: Whether petitioner is guilty of forum shopping by simultaneously pursuing the writ-of-possession proceedings and Civil Case No. 21957.
• Propriety of Writ of Possession Against a Third-Party Possessor: Whether petitioner is entitled to eject respondent from the disputed property by means of an ex-parte writ of possession issued in connection with an extra-judicial foreclosure sale.

• Availability of Certiorari: No. The CA did not err in giving due course to the petition for certiorari, as respondent's case was genuinely meritorious. The rule that certiorari may not substitute for a lost appeal is not strictly enforced when the petition is genuinely meritorious and rigid application would frustrate substantial justice.
• Forum Shopping: No. Neither litis pendentia nor res judicata exists because the writ-of-possession proceedings are ex parte and summary in nature and cannot constitute a judgment on the merits, and the basic issue in those proceedings is possession while Civil Case No. 21957 concerns ownership.
• Propriety of Writ of Possession Against a Third-Party Possessor: No. The RTC's duty to issue a writ of possession ceases to be ministerial once a third party in actual possession claims a right adverse to the mortgagor. Such a third party, who was not party to the foreclosure proceedings, cannot be dispossessed through a mere ex-parte writ without violation of due process.

• Availability of Certiorari: While certiorari is generally not a substitute for a lost appeal, the Court has held that where rigid application of the rules would frustrate substantial justice or bar the vindication of a legitimate grievance, courts are justified in exempting a particular case from the operation of the rules. The Court has given due course to petitions for certiorari although appeal is the proper remedy where the equities of the case warranted such action, mindful that dismissals based on technicalities are disfavored. In this case, respondent's case was genuinely meritorious because the RTC issued an ex-parte writ of possession to eject a third-party possessor who was not party to the foreclosure proceedings and who held a claim of ownership adverse to the mortgagor. The CA therefore committed no error in giving due course to the petition.

• Forum Shopping: Forum shopping exists when a party avails of several judicial remedies in different courts, simultaneously or successively, all substantially founded on the same transactions and essential facts and raising substantially the same issues. The test is whether the elements of litis pendentia are present or whether a final judgment in one case would amount to res judicata in another. The requisites of litis pendentia are: (a) identity of parties or interests; (b) identity of rights asserted and relief prayed for, founded on the same facts; and (c) identity of the two cases such that judgment in one would amount to res judicata in the other. Here, proceedings subsequent to a petition for writ of possession are ex parte and summary in nature; the order for issuance of the writ is simply an incident in the transfer of title and cannot be considered a judgment on the merits. Moreover, the basic issue in the writ-of-possession proceedings is possession, while Civil Case No. 21957 concerns ownership. Since neither litis pendentia nor res judicata exists, forum shopping cannot exist.

• Propriety of Writ of Possession Against a Third-Party Possessor: Under Article 433 of the Civil Code, actual possession under claim of ownership raises a disputable presumption of ownership, and the true owner must resort to judicial process for recovery of the property—meaning an ejectment suit or reivindicatory action in which ownership claims may be properly heard and adjudicated. Section 33, Rule 39 of the Rules of Court provides that possession shall be given to the purchaser "unless a third party is actually holding the property adversely to the judgment obligor." In Barican vs. Intermediate Appellate Court, the Court held that the obligation to issue a writ of possession ceases to be ministerial once a third party in possession claims a right adverse to the mortgagor and is a stranger to the foreclosure proceedings. An ex-parte petition for writ of possession under Act 3135 is a non-litigious proceeding brought for the benefit of one party only, without notice to adversely interested persons; a third person claiming a right superior to the mortgagor is given no opportunity to be heard. To dispossess such a person on the strength of a mere ex-parte writ would be tantamount to summary ejectment in violation of due process. Here, Shell had been in possession since 1975, held TCT No. T-47484 derived from DBP, and was not a successor-in-interest of PRI. The original writ of possession issued in 1990 directed ejectment of PRI or persons claiming under it—Shell was neither. Petitioner had knowledge of Shell's prior possession yet pursued the writ instead of the pending Civil Case No. 21957. Registration of the lots in petitioner's name does not automatically entitle her to possession, especially since Shell also holds a transfer certificate of title. The RTC could not rely on the Surveyor's Report because Shell was not given the opportunity to refute it in the ex-parte proceedings. The mortgage itself expressly excluded areas already sold to Shell. Whether Shell's title refers to the same property and whether the lots sold to petitioner are the same as those foreclosed are issues properly resolved in Civil Case No. 21957, not in an ex-parte proceeding for a writ of possession.

• Ministerial Duty to Issue Writ of Possession; Exception for Third-Party Possessors — In an extra-judicial foreclosure sale under Act 3135, the issuance of a writ of possession in favor of the purchaser is generally a ministerial duty of the court. However, this duty ceases to be ministerial once it is shown that a third party is in actual possession of the property claiming a right adverse to the mortgagor and is a stranger to the foreclosure proceedings. Such a third party may not be dispossessed through a mere ex-parte possessory writ, as this would constitute summary ejectment in violation of due process. The purchaser must instead resort to an ordinary judicial action for recovery of possession. The Court applied this doctrine to hold that Shell, which had possessed the property since 1975 under a claim of ownership derived from DBP and was not a party to the foreclosure, could not be ejected by the ex-parte writ obtained by petitioner.

• Forum Shopping; Test via Litis Pendentia and Res Judicata — Forum shopping exists when a party avails of several judicial remedies in different courts, simultaneously or successively, all substantially founded on the same transactions and essential facts and raising substantially the same issues. The test for determining forum shopping is whether the elements of litis pendentia are present or whether a final judgment in one case would amount to res judicata in another. When neither litis pendentia nor res judicata exists, neither can forum shopping exist. The Court found no forum shopping because the ex-parte writ-of-possession proceedings could not constitute a judgment on the merits and the issues differed—possession versus ownership.

• Article 433, Civil Code — Actual Possession Under Claim of Ownership — Actual possession under claim of ownership raises a disputable presumption of ownership. The true owner must resort to judicial process for the recovery of the property. "Judicial process" means no less than an ejectment suit or reivindicatory action in which the ownership claims of contending parties may be properly heard and adjudicated. The Court applied this provision to require petitioner to pursue Civil Case No. 21957 rather than shortcut the process through an ex-parte writ.

• Ex-Parte Nature of Writ of Possession Proceedings — An ex-parte petition for issuance of a writ of possession under Act 3135 is a non-litigious proceeding brought for the benefit of one party only, without notice to or consent by any person adversely interested. A third person in possession of an extra-judicially foreclosed property who claims a right superior to the original mortgagor is given no opportunity to be heard. It follows that such a third person may not be dispossessed on the strength of a mere ex-parte possessory writ.

• "the obligation of a court to issue a writ of possession in favor of the purchaser in an extra-judicial foreclosure sale of a mortgaged property ceases to be ministerial once it is shown that there is a third party in possession of the property who is claiming a right adverse to that of the mortgagor and that such third party is a stranger to the foreclosure proceedings in which the ex-parte writ of possession was applied for." — This passage articulates the controlling rule from Barican vs. Intermediate Appellate Court as applied to the facts, establishing the exception to the ministerial duty to issue a writ of possession.

• "It stands to reason, therefore, that such third person may not be dispossessed on the strength of a mere ex-parte possessory writ, since to do so would be tantamount to his summary ejectment, in violation of the basic tenets of due process." — This formulation captures the due process rationale underlying the rule protecting third-party possessors from ex-parte dispossessory writs.

• "registration of the lots in petitioner's name does not automatically entitle the latter to possession thereof." — This principle clarifies that issuance of a certificate of title in the name of the foreclosure purchaser does not, by itself, justify ouster of an adverse third-party possessor, particularly one who also holds a certificate of title.

• Barican vs. Intermediate Appellate Court, G.R. No. L-79906, June 20, 1988, 162 SCRA 358 — Controlling precedent. The Court relied on this case for the rule that the duty to issue a writ of possession ceases to be ministerial when a third party in possession claims a right adverse to the mortgagor and is a stranger to the foreclosure proceedings.
• Philippine National Bank vs. Court of Appeals, 424 Phil. 757 (2002) — Followed for the proposition that Article 433 of the Civil Code requires the true owner to resort to judicial process—ejectment or reivindicatory action—for recovery of property, and that registration of title does not automatically entitle the registered owner to possession against an adverse third-party possessor.
• China Banking Corporation vs. The Board of Trustees, Home Development Mutual Fund, 366 Phil. 913 (1999) — Cited for the rule that certiorari may not be used as a substitute for a lost appeal, but that this rule should not be strictly enforced if the petition is genuinely meritorious.
• De Vera vs. Agloro, G.R. No. 155673, January 14, 2005, 448 SCRA 203 — Cited for the characterization of an ex-parte petition for writ of possession under Act 3135 as a non-litigious proceeding brought for the benefit of one party only.
• Capital Credit Dimension, Inc. vs. Chua, G.R. No. 157213, April 28, 2004, 428 SCRA 259 — Cited for the principle that a third person in possession of an extra-judicially foreclosed property who claims a right superior to the mortgagor is given no opportunity to be heard in the ex-parte proceedings.

• Article 433, Civil Code — Provides that actual possession under claim of ownership raises a disputable presumption of ownership and that the true owner must resort to judicial process for recovery of the property. The Court applied this provision to hold that petitioner must pursue an ordinary judicial action (Civil Case No. 21957) rather than an ex-parte writ to recover possession from Shell.
• Section 33, Rule 39, Rules of Court — Governs the right of possession of a purchaser in an extra-judicial foreclosure sale after expiration of the redemption period. The second paragraph provides that possession shall be given to the purchaser "unless a third party is actually holding the property adversely to the judgment obligor." The Court relied on this proviso to hold that Shell's adverse possession barred the ministerial issuance of a writ against it.
• Act No. 3135, as amended — Governs extra-judicial foreclosure of real estate mortgages. The Court noted that under Act 3135, foreclosure is effected by filing a petition with the office of the sheriff, not with a court of justice, and that the ex-parte writ of possession is a non-litigious proceeding authorized under this Act. The purchaser's right of possession under Act 3135 may be enforced only against the mortgagor and its successors-in-interest, not against a third-party possessor claiming adverse ownership.

Consuelo Ynares-Santiago (Chairperson), Minita V. Chico-Nazario, and Antonio Eduardo B. Nachura concurred. No separate concurring opinions were written.