Edralin vs. Philippine Veterans Bank

The right to possess a property follows the right of ownership; consequently, a registered owner cannot be barred from seeking possession thereof. The issuance of a writ of possession under Section 7 of Act No. 3135 becomes a ministerial duty of the court after the purchaser consolidates ownership and the mortgagor fails to redeem the property within the statutory period, and this right does not prescribe.

The case arose from a loan obligation secured by a real estate mortgage executed by spouses Fernando and Angelina Edralin in favor of Philippine Veterans Bank. Upon default, the Bank extrajudicially foreclosed the mortgage, emerged as the highest bidder, and consolidated ownership in its name. Despite registration of the title in the Bank's name, the Edralins refused to vacate the property. The Bank's initial ex-parte petition for a writ of possession was dismissed for failure to prosecute. A subsequent petition was dismissed by the trial court on the grounds that the mortgage contract allowed extrajudicial possession without court intervention and that the Bank's right to possession had prescribed. The Bank sought mandamus from the Court of Appeals, which granted the petition, leading to this appeal by the Edralins.

• On February 5, 1976, Philippine Veterans Bank granted spouses Fernando and Angelina Edralin a loan of P270,000.00 secured by a Real Estate Mortgage over a property in Parañaque covered by TCT No. 204889 registered in the name of Fernando Edralin.
• The mortgage was registered with the Registry of Deeds of Rizal and subsequent amendments were duly annotated at the back of the title.
• The Edralins failed to pay their obligation, prompting Veterans Bank to file a Petition for Extrajudicial Foreclosure on June 28, 1983.
• On September 8, 1983, the Ex-Officio Sheriff of Rizal conducted a public auction sale where Veterans Bank emerged as the highest bidder and was issued a Certificate of Sale, which was registered on October 25, 1983.
• The Edralins failed to redeem the property within the one-year period under Act No. 3135, resulting in Veterans Bank acquiring absolute ownership.
• On January 19, 1994, Veterans Bank executed an Affidavit of Consolidation of Ownership, and on February 3, 1994, the Register of Deeds cancelled TCT No. 204889 and issued TCT No. 78332 in the name of Veterans Bank.
• The Edralins refused to vacate and surrender possession of the property to Veterans Bank.
• Veterans Bank filed an ex-parte petition for writ of possession (LRC No. 96-060) on May 24, 1996, which was dismissed for failure to prosecute.
• On July 29, 2003, Veterans Bank filed a second ex-parte petition for writ of possession (LRC No. 03-0121), which the Edralins moved to dismiss on the ground of res judicata.
• The RTC denied the motion to dismiss but dismissed the petition in its November 8, 2004 Order, ruling that paragraph (d) of the REM allowed Veterans Bank to take possession without judicial intervention and that the right to seek possession had prescribed (10 years from February 24, 1983).
• Veterans Bank's motion for reconsideration, citing paragraph (c) of the REM which reserved the right to extrajudicial foreclosure, was denied by the RTC on January 28, 2005.

• Mandamus was improperly resorted to as a substitute for a lost appeal because the petition was filed beyond the reglementary period after the January 28, 2005 Order became final.
• Mandamus is not the proper remedy to seek review of final orders of the trial court; appeal is the correct remedy.
• Section 18 of Republic Act No. 3518 (the Veterans Bank Charter), which mentions redemption rights "fixed by the Court," limits Veterans Bank to judicial foreclosure only, prohibiting extrajudicial foreclosure.
• The consolidation of ownership through a Deed of Sale executed by Veterans Bank in its own favor constitutes pactum commissorium prohibited under Article 2088 of the Civil Code.
• The right to a writ of possession is subject to the statute of limitations under Articles 1139, 1149, and 1150 of the Civil Code, specifically the five-year period under Article 1149, which began to run from the issuance of the Certificate of Sale on September 12, 1983.

• The issuance of a writ of possession is not an ordinary action but a ministerial act of the court; therefore, appeal is not the proper remedy and mandamus lies to compel performance of this duty.
• Even if appeal were available, mandamus is the plain, speedy, and adequate remedy, and Section 3 of Rule 65 recognizes that mandamus may be availed of in conjunction with an appeal, unlike certiorari or prohibition.
• Paragraph (c) of the REM expressly granted Veterans Bank the power to foreclose extrajudicially under Act No. 3135, and Section 18 of RA 3518 merely grants redemption rights in judicial foreclosures without limiting the Bank to such remedy.
• There is no pactum commissorium because Veterans Bank did not automatically appropriate the mortgaged property upon default; instead, it underwent the entire extrajudicial foreclosure process and auction sale.
• The right to a writ of possession never prescribes because the right to possess follows ownership, and a petition for writ of possession under Section 7 of Act No. 3135 is an ex-parte motion, not an ordinary action subject to prescription.

• Procedural Issues:
  • Whether mandamus is the proper remedy to compel the issuance of a writ of possession, or whether appeal is the correct remedy.
• Substantive Issues:
  • Whether the Philippine Veterans Bank is limited to judicial foreclosure under its charter (RA 3518), or whether it may avail itself of extrajudicial foreclosure under Act No. 3135.
  • Whether the consolidation of ownership through a Deed of Sale constitutes prohibited pactum commissorium under Article 2088 of the Civil Code.
  • Whether the right to a writ of possession under Act No. 3135 is subject to the statute of limitations.

• Procedural:
  • The Court held that mandamus is the proper remedy to compel the issuance of a writ of possession. The issuance of a writ of possession under Section 7 of Act No. 3135 is a ministerial duty of the trial court once the purchaser has consolidated ownership in its name and the mortgagor has failed to redeem the property. A ministerial act is one performed in obedience to a legal mandate without regard to the exercise of discretion or judgment. Since the court has no discretion to deny the writ once ownership is consolidated, mandamus lies to compel performance. Furthermore, a petition for writ of possession is not an ordinary action but an ex-parte motion, making appeal an improper remedy.
• Substantive:
  • Power to Extrajudicially Foreclose: The Court ruled that Section 18 of RA 3518 does not limit Veterans Bank to judicial foreclosure only. The provision merely grants mortgagors the right to redeem judicially foreclosed properties and was included because mortgagors generally do not have redemption rights in judicial foreclosures unless expressly granted by law. The availability of extrajudicial foreclosure depends on the agreement of the parties, and paragraph (c) of the REM expressly granted Veterans Bank the special power to foreclose extrajudicially under Act No. 3135.
  • Pactum Commissorium: The Court held that there was no pactum commissorium because Veterans Bank did not automatically acquire or appropriate the mortgaged property upon the Edralins' default. Instead, the Bank underwent the entire extrajudicial foreclosure process, including public auction, and was issued a Certificate of Sale as proof of purchase. The elements of pactum commissorium—automatic appropriation without foreclosure proceedings—were absent.
  • Prescription of Right to Writ of Possession: The Court ruled that the right to a writ of possession never prescribes. The right to possess follows the right of ownership, and it would be illogical to bar an owner from seeking possession. A petition for issuance of a writ of possession under Section 7 of Act No. 3135 is not an "action" subject to prescription under the Civil Code but is in the nature of an ex-parte motion. The purchaser can demand possession at any time following consolidation of ownership and issuance of a new certificate of title.

• Ministerial Duty — A ministerial act is one which an officer or tribunal performs in a given state of facts, in a prescribed manner, in obedience to the mandate of legal authority, without regard to or the exercise of his own judgment upon the propriety or impropriety of the act done. Applied in this case to hold that the trial court has a ministerial duty to issue a writ of possession after the purchaser consolidates ownership and the mortgagor fails to redeem.
• Pactum Commissorium — A stipulation empowering the creditor to appropriate the thing given as guaranty for the fulfillment of the obligation in the event the obligor fails to live up to his undertakings, without further formality such as foreclosure proceedings and public sale. The Court applied the two elements: (1) property mortgaged as security, and (2) stipulation for automatic appropriation without foreclosure, finding the second element absent because foreclosure proceedings were actually conducted.
• Right to Possession Follows Ownership — The right to possess a property merely follows the right of ownership, and a registered owner cannot be barred from seeking possession thereof. This doctrine was applied to hold that the right to a writ of possession never prescribes.

• "The right to possess a property follows the right of ownership; consequently, it would be illogical to hold that a person having ownership of a parcel of land is barred from seeking possession thereof."
• "The purchaser can demand possession at any time following the consolidation of ownership in his name and the issuance to him of a new TCT."
• "A petition for the issuance of the writ, under Section 7 of Act No. 3135, as amended, is not an ordinary action filed in court, by which one party `sues another for the enforcement or protection of a right, or prevention or redress of a wrong.' It is in the nature of an ex parte motion [in] which the court hears only one side."

• Saguan v. Philippine Bank of Communications — Cited as precedent establishing that the duty of the trial court to grant a writ of possession is ministerial and the court may not exercise discretion.
• Bank of the Philippine Islands v. Tarampi — Cited for the principle that with consolidated title, the purchaser becomes entitled to a writ of possession and the trial court has the ministerial duty to issue such writ.
• Spouses Carpo v. Chua — Cited for the rule that the remedy of mandamus lies to compel the performance of the ministerial duty to issue a writ of possession.
• Calacala v. Republic of the Philippines — Cited extensively for the principle that the right to request issuance of a writ of possession never prescribes and that failure to execute an affidavit of consolidation does not restore rights to the original owner.
• Metropolitan Bank and Trust Co. v. Santos — Cited for the definition of "action" subject to prescription and the distinction between ordinary actions and ex-parte motions for writ of possession.
• Ong v. Roban Lending Corporation — Cited for the definition and elements of pactum commissorium.
• Limpin v. Intermediate Appellate Court — Cited regarding redemption rights in judicial foreclosures under Rule 68.

• Section 7 of Act No. 3135 (as amended by Act No. 4118) — Governs the issuance of a writ of possession to the purchaser in an extrajudicial foreclosure sale, providing that the court shall order the issuance of the writ upon approval of the bond, and after consolidation of ownership, the bond is no longer needed.
• Section 18 of Republic Act No. 3518 — Provision in the Veterans Bank Charter regarding the right of redemption of foreclosed property, interpreted by the Court as not limiting the Bank to judicial foreclosure.
• Article 2088 of the Civil Code — Prohibits pactum commissorium, cited by petitioners but held inapplicable because foreclosure proceedings were actually conducted.
• Articles 1139, 1149, and 1150 of the Civil Code — Provisions on prescription of actions, held inapplicable to petitions for writ of possession which are not ordinary actions but ex-parte motions.
• Rule 65, Section 3 of the Rules of Court — Recognizes that mandamus may be availed of even if there is an appeal available, unlike certiorari or prohibition.
• Rule 41, Section 1 of the Rules of Court — Provides that no appeal may be taken from an order of execution, supporting the propriety of mandamus.