Direct Funders Holdings Corporation vs. Laviña

A claim to possession based on an unconsummated and unregistered conditional sale executed without the mortgagee's consent cannot prevail over the right of a mortgagee's successor-in-interest who has consolidated ownership and obtained a writ of possession.

Spouses Espino mortgaged their property to United Savings Bank, stipulating that the property would not be sold or encumbered without the mortgagee's written consent. Approximately eight years later, the Espinos entered into a conditional sale agreement with respondent Kambiak Y. Chan, Jr. without the bank's consent. Subsequently, the bank assigned its rights as mortgagee to petitioner Direct Funders Holdings Corporation, and the Espinos assigned their right of redemption to the bank and its successors-in-interest. Petitioner consolidated ownership, obtained a new title, and secured a writ of possession from the Regional Trial Court of Pasig, Branch 157.

• The Real Estate Mortgage: Spouses Espino executed a real estate mortgage over the property in favor of United Savings Bank (later UCPB Savings Bank). The mortgage contract contained an express stipulation prohibiting the mortgagors from selling, leasing, or disposing of the property in any manner without the written consent of the mortgagee.
• The Conditional Sale Agreement: Approximately eight years after the execution of the real estate mortgage, the Spouses Espino entered into a conditional sale agreement with respondent Kambiak Y. Chan, Jr. The agreement was neither consummated nor registered and annotated on the Transfer Certificate of Title.
• Assignment and Consolidation of Ownership: UCPB Savings Bank assigned its rights as mortgagee to petitioner Direct Funders Holdings Corporation. The Spouses Espino likewise assigned their right of redemption over the subject property to UCPB Savings Bank and its successors-in-interest. Petitioner subsequently consolidated ownership, supported by a sheriff's certificate of sale, an affidavit of consolidation of ownership, and the issuance of a new Transfer Certificate of Title in its name.
• Writ of Possession and Injunction: RTC, Branch 157, Pasig City issued a writ of possession in favor of petitioner. Respondent then filed an action for annulment of documents, reconveyance, and recovery of possession before RTC, Branch 71, Pasig City, seeking a writ of preliminary mandatory injunction. Despite being informed of the writ of possession issued by the coordinate court, the presiding judge of Branch 71 issued a temporary restraining order and subsequently a writ of preliminary injunction restoring possession to respondent.

• Grave Abuse of Discretion: Petitioner argued that the trial court judge committed grave abuse of discretion amounting to lack of jurisdiction in issuing a writ of preliminary mandatory injunction despite the existence of a lawful writ of possession from a coordinate court.
• Interference with Coordinate Court: Petitioner maintained that the injunction improperly interfered with and restrained the implementation of the writ of possession issued by RTC, Branch 157, a coordinate and co-equal court.

• Jurisdiction to Issue Injunction: Respondent countered that the trial court possessed jurisdiction to issue the writ of preliminary injunction.
• No Interference with Writ of Possession: Respondent argued that the issuance of the injunction did not interfere with the writ of possession issued by the coordinate court.

• Right to Possession: Whether the Court of Appeals erred in affirming the trial court's issuance of a writ of injunction restraining a writ of possession from a coordinate court, i.e., who between petitioner and respondent has a better right to the possession of the subject property.

• Right to Possession: The appellate court's decision was reversed, petitioner having established a superior right to possession. Respondent's conditional sale agreement was deemed officious and ineffectual because it was not consummated, not registered or annotated on the title, and executed without the mortgagee's consent. The execution of the conditional sale without the mortgagee's consent constituted a material breach of the real estate mortgage contract. Under Article 1181 of the Civil Code, no rights are acquired under a conditional obligation if the condition does not transpire. Conversely, petitioner's right rests on a validly registered mortgage, a deed of assignment of mortgage rights, an assignment of the right of redemption, consolidation of ownership, and a writ of possession.

• Conditional Obligations (Article 1181, Civil Code) — In conditional obligations, the acquisition of rights, as well as the extinguishment or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition. Applied to rule that respondent acquired no rights under the conditional sale agreement because its conditions were not fulfilled.
• Privity of Contracts and Mortgage Stipulations — A person not a party to an agreement cannot be affected thereby; thus, a conditional sale executed without the mortgagee's consent cannot bind the mortgagee or its successors-in-interest. Furthermore, alienating mortgaged property without the mortgagee's written consent constitutes a material breach of the mortgage contract.

• "In conditional obligations, the acquisition of rights, as well as the extinguishments or loss of those already acquired, shall depend upon the happening of the event which constitutes the condition." — Cited to emphasize that respondent's claim was ineffectual because the conditions of the conditional sale agreement were not fulfilled.
• "It is a fundamental axiom in the law on contracts that a person not a party to an agreement cannot be affected thereby." — Cited to stress that the mortgagee was not bound by the conditional sale executed without its consent.

• Soriano v. Bautista, 116 Phil. 1235 (1962) — Followed. The Court cited this case to affirm that stipulations in a real estate mortgage giving the mortgagee an option to purchase the property, rendering the mortgagors' right to redeem defeasible at the election of the mortgagee, are valid and sanctioned by Article 1479 of the Civil Code.

• Article 1181, Civil Code — Governs conditional obligations. Applied to rule that no rights were acquired by respondent under the conditional sale agreement because the conditions were not fulfilled.
• Article 1479, Civil Code — Provides that a promise to buy and sell a determinate thing for a price certain is binding if supported by a consideration distinct from the price. Cited via Soriano v. Bautista to uphold the validity of option stipulations within mortgage contracts.

Davide, Jr., C.J., Puno, Kapunan, and Ynares-Santiago, JJ.