Fei Hua Finance and Leasing Service vs. Castañeda

A condominium unit or subdivision lot buyer who is in actual possession of the property is a third-party adverse possessor excluded from the issuance or implementation of a writ of possession in an extrajudicial foreclosure, even though the buyer derives title from the developer-mortgagor, provided the buyer's possession is in his own right and not merely as a successor or transferee of the debtor. A writ of possession issued without notice to such a possessor is void, and its prior satisfaction does not render a motion to recall it moot and academic.

Fei Hua Finance and Leasing Service is a duly organized lending investor that extended a credit facility to Goldland Properties and Development Corporation, secured by a real estate mortgage over 60 parking spaces in Porto Vita Condominium in Cubao, Quezon City. One of those parking slots, covered by CCT No. 004-2011006807, had allegedly been sold by Goldland to respondent Edilberto Castañeda prior to its inclusion in the mortgage. The dispute arose from the intersection of Castañeda's claim as a prior purchaser in actual possession and Fei Hua's right as a foreclosure purchaser seeking a writ of possession over the same property.

Fei Hua Finance and Leasing Service, a duly organized lending investor, granted Goldland Properties and Development Corporation a credit facility in the principal amount of PHP 9,900,000.00. As security, Goldland executed a Deed of Real Estate Mortgage over 60 parking spaces in Porto Vita Condominium located at P. Tuazon Street corner 14th Avenue, Cubao, Quezon City, each covered by individual Condominium Certificates of Title registered in Goldland's name. The mortgage agreement stipulated that Fei Hua could foreclose either judicially or extrajudicially should Goldland default. One of the parking slots covered by CCT No. 004-2011006807 had allegedly been sold by Goldland to Edilberto Castañeda prior to its mortgage to Fei Hua.

Castañeda's purchase is evidenced by a Reservation Agreement and an Acknowledgment, both dated September 28, 2013, showing his full payment of the purchase price of PHP 700,000.00. On August 12, 2017, the parking space was turned over to Castañeda, and since then he had been in actual and constructive possession, regularly using it for his vehicle and paying the corresponding association dues and realty taxes. On September 12, 2018, Goldland executed a Deed of Absolute Sale over the subject parking space in favor of Castañeda, expressly declaring the lot free from any lien or encumbrance except those in the condominium's Master Deed. Goldland paid the transfer tax with the BIR, which issued a Certificate Authorizing Registration in Castañeda's name on the same date. Goldland, however, never delivered the corresponding CCT to Castañeda despite repeated follow-ups and full payment.

Goldland eventually defaulted, and as of June 23, 2017, its outstanding obligation had ballooned to PHP 23,700,000.00. Fei Hua filed an amended petition to extrajudicially foreclose the mortgage before the Office of the Clerk of Court and Ex-Officio Sheriff of the Quezon City RTC. A public auction was conducted, Fei Hua emerged as the highest bidder, and a Certificate of Sale was issued in its favor on February 23, 2018. The redemption period expired without Goldland redeeming the property. Fei Hua consolidated the titles, and on October 28, 2021, the Register of Deeds of Quezon City cancelled CCT No. 004-2011006807 and issued CCT No. 004-2021017619 in Fei Hua's name.

On February 15, 2022, Fei Hua filed an ex-parte petition for a writ of possession with the RTC of Quezon City, which was granted on June 27, 2022. The writ was issued, became final on August 11, 2022, and was fully satisfied per the Sheriff's Final Report dated September 13, 2022. On September 5, 2022, Castañeda was notified by the Portovita Condominium Association that the parking lot was the subject of a writ of possession and a notice to vacate. Four days later, Castañeda filed an Entry of Appearance with Manifestation and Very Urgent Motion to Recall the Writ of Possession, invoking Rule 39, Section 33 of the Rules of Court and claiming to be a purchaser in good faith with a better right over the property by virtue of his actual and constructive possession since August 12, 2017. Separately, Castañeda had commenced an action for specific performance against Goldland and Fei Hua before the HSAC RAB-NCR, which on April 28, 2023 declared the mortgage contract, the foreclosure sale, and the issuance of the new title null and void, and ordered the reinstatement of the original CCT in Castañeda's name.

• Wrong Mode of Appeal: Fei Hua argued that Castañeda availed of the wrong mode of appeal when he filed a petition for certiorari under Rule 65 before the CA, positing that the assailed RTC Orders were final in nature and that the proper recourse should have been an ordinary appeal under Rule 41.
• Moot and Academic: Fei Hua contended that Castañeda's motion to recall the writ of possession was already moot and academic because the writ had been duly satisfied and fully implemented.
• Mere Successor or Transferee: Fei Hua maintained that Castañeda does not fall under the exception for third-party adverse possessors because his possession merely sprung from his supposed right as a successor or transferee of Goldland, and thus cannot be considered adverse to the judgment debtor.

• Third-Party Adverse Possessor: Castañeda averred that he is a purchaser in good faith and for value, and that he has a better right over the subject parking lot having been in actual and constructive possession thereof from the moment it was turned over to him on August 12, 2017, invoking the last sentence of Rule 39, Section 33 of the Rules of Court.
• Prior Purchase and Non-Disclosure: Castañeda alleged that he bought the parking space from Goldland in 2013, before it was mortgaged to Fei Hua in 2016, and that Goldland never disclosed any prior mortgage or encumbrance over the subject property, as evidenced by the Deed of Absolute Sale declaring the lot free from any lien or encumbrance.

• Propriety of Remedy: Whether Castañeda availed of the correct mode of appeal in filing a petition for certiorari under Rule 65 before the CA to challenge the RTC Orders denying his motion to recall the writ of possession.
• Third-Party Adverse Possession: Whether Castañeda qualifies as a third-party adverse possessor entitled to exclusion from the writ of possession under Rule 39, Section 33 of the Rules of Court, notwithstanding that he derived his title from Goldland.
• Mootness: Whether the prior satisfaction and implementation of the writ of possession rendered Castañeda's motion to recall it moot and academic.

• Propriety of Remedy: Yes. An order denying a motion to recall a writ of possession partakes of the nature of an order of execution, which is interlocutory and not appealable under Rule 41, Section 1; the proper recourse is a special civil action under Rule 65, which Castañeda correctly availed of.
• Third-Party Adverse Possession: Yes. Pursuant to the modified rule in Spouses Rosario, individual buyers of condominium units or subdivision lots who are in actual possession of the property are excluded from the issuance or implementation of a writ of possession, even if they derive title from the developer-mortgagor.
• Mootness: No. The writ of possession was void for having been issued without due process, Castañeda having been completely unaware of the proceedings; a void writ's prior satisfaction does not render a motion to recall it moot and academic.

• Propriety of Remedy: A writ of possession is a variant of a writ of execution that enforces a judgment to recover possession of land. In Rizal Commercial Banking Corporation vs. F. Franco Transport, Inc., the Court settled that an order involving the implementation of a writ of possession is interlocutory in character and is among the orders listed in Section 1, Rule 41 as not subject to appeal. The proper recourse against an interlocutory order is a special civil action under Rule 65. Since the RTC Orders essentially denied Castañeda's motion to recall the writ of possession—an order of execution in character—Castañeda correctly filed a Rule 65 petition before the CA.

• Third-Party Adverse Possession: Generally, after consolidation of title in the purchaser's name following extrajudicial foreclosure, the issuance of a writ of possession becomes a ministerial function of the court. A narrow exception exists when a third party claims a right adverse to the mortgagor/debtor. Under the old rule in China Banking Corporation vs. Spouses Lozada, condominium unit or subdivision lot buyers were classified as mere transferees or successors-in-interest of the developer, and thus could not be considered third-party adverse possessors. However, in Spouses Rosario vs. GSIS, the Court modified this rule guided by the policy behind Presidential Decree No. 957, holding that individual buyers of condominium units or subdivision lots who are actually occupying the unit or lot should be excluded from the issuance or implementation of a writ of possession. In this case, Castañeda fully paid for the parking slot in 2013, was placed in actual possession on August 12, 2017, and executed a Deed of Absolute Sale on September 12, 2018—all before and independent of the mortgage to Fei Hua on April 27, 2016. Fei Hua neither impugned nor countered the overwhelming evidence of Castañeda's purchase and possession. Moreover, the HSAC RAB-NCR had already declared the mortgage contract, foreclosure sale, and new title null and void. Castañeda therefore qualified as a third-party adverse possessor under Rule 39, Section 33 and Spouses Rosario.

• Mootness: In Carpio vs. Court of Appeals, the Court stressed that nothing in jurisprudence says that if the sheriff has executed an otherwise invalid writ of execution pending appeal, the appealed case becomes moot and academic. In Spouses Rosario, the Court further held that a third-party adverse possessor cannot be summarily dispossessed on the strength of a mere ex-parte possessory writ, as this would constitute summary ejectment in violation of due process. A decision rendered without due process is void ab initio for lack of jurisdiction. Castañeda was completely unaware of the proceedings before the trial court and was notified only after the writ had been issued and become final. The writ was therefore void, and all actions taken pursuant to it—including its full implementation and satisfaction—were of no legal effect. The writ's enforcement did not render Castañeda's motion to recall it moot and academic.

• Ministerial Duty to Issue Writ of Possession and Exceptions — After consolidation of title and issuance of a new certificate of title in the purchaser's name following extrajudicial foreclosure, the court's duty to issue a writ of possession upon proper application and proof of title becomes ministerial and cannot be enjoined or restrained. Questions concerning the regularity or validity of the mortgage or foreclosure cannot be raised to oppose the writ. The narrow exception is when a third party claims a right adverse to the mortgagor/debtor; in such case, the duty to issue the writ ceases to be ministerial. The Court applied this exception in favor of Castañeda, who was held to be a third-party adverse possessor.

• Modified Rule on Condominium/Subdivision Buyers as Third-Party Adverse Possessors (Spouses Rosario Doctrine) — Under the modified rule in Spouses Rosario vs. GSIS, individual buyers of condominium units or subdivision lots, while having privity with developer-mortgagors, should be excluded from the issuance or implementation of a writ of possession if they are actually occupying the unit or lot. The issuance of a writ of possession ceases to be ministerial if a condominium unit or subdivision lot buyer intervenes to protect their rights against a mortgagee bank or financial institution. The court must order a hearing to determine the nature and source of the buyer's supposed right. If the oppositors are bona fide buyers in actual possession, the writ should exclude them, without prejudice to the outcome of cases concerning the validity of the mortgage under Section 18 of PD 957. The Court applied this doctrine because Castañeda was a bona fide buyer who had fully paid in 2013 and was in actual possession since 2017.

• Void Writ Doctrine — A writ of possession issued without due process is void ab initio for lack of jurisdiction. All actions and proceedings conducted pursuant to a void writ, including its full implementation and satisfaction, are also void and of no legal effect. The prior satisfaction of a void writ does not clothe it with validity and does not render a motion to recall it moot and academic. The Court applied this doctrine because Castañeda was completely unaware of the proceedings and was notified only after the writ became final.

• "Individual buyers of condominium units or subdivision lots, while having privity with developer-mortgagors, should be excluded from the issuance or implementation of a writ of possession if they are actually occupying the unit or lot." — This is the canonical formulation of the modified rule from Spouses Rosario as quoted and applied by the Court, establishing the doctrine that protects individual property buyers from summary dispossession through writs of possession in foreclosure proceedings.

• "In keeping with the avowed purpose of [Presidential Decree] No. 957, the rule should now be that the issuance of a writ of possession ceases to be ministerial if a condominium unit or subdivision lot buyer intervenes to protect their rights against a mortgagee bank or financial institution." — This passage states the operative legal standard that governs when a condominium or subdivision buyer's intervention suspends the ministerial duty to issue a writ of possession, directly controlling the outcome of this case.

• "Nothing in jurisprudence says that if the sheriff has in the meantime executed an otherwise invalid writ of execution pending appeal, the appealed case becomes moot and academic. That would be an absurd conclusion." — This quotation from Carpio vs. Court of Appeals, adopted by the Court, articulates the principle that prior execution of a void writ does not moot a challenge to its validity, resolving the mootness issue in this case.

• "It is elementary that a decision rendered without due process is void ab initio for lack of jurisdiction." — This passage establishes the jurisdictional consequence of the lack of due process in the issuance of the writ of possession, underpinning the Court's conclusion that the writ and all actions taken pursuant to it were void.

• Spouses Rosario vs. Government Service Insurance System, G.R. No. 200991, March 18, 2021 — Controlling precedent. The Court applied its modified rule that individual buyers of condominium units or subdivision lots in actual possession should be excluded from writs of possession, even if they derive title from the developer-mortgagor. This case expressly modified the earlier rule in China Banking Corporation.

• China Banking Corporation vs. Spouses Lozada, 579 Phil. 454 (2008) — Distinguished and modified. The RTC relied on this case to deny Castañeda's motion, classifying condominium buyers as mere transferees not entitled to third-party adverse possessor status. The Court held this reliance was misplaced because Spouses Rosario had already modified the rule.

• Rizal Commercial Banking Corporation vs. F. Franco Transport, Inc., 843 Phil. 556 (2018) — Followed. The Court applied its ruling that a writ of possession is a variant of a writ of execution, interlocutory in character, and that an order involving its implementation is not appealable under Rule 41, Section 1, making Rule 65 the proper remedy.

• Carpio vs. Court of Appeals, 705 Phil. 153 (2013) — Followed. The Court applied its holding that prior execution of an otherwise invalid writ of execution pending appeal does not render the appealed case moot and academic, and that a decision rendered without due process is void ab initio.

• Integrated Credit and Corporate Services Co. vs. Labrador, G.R. No. 233127, July 10, 2023 — Followed. Cited for the general rule that the issuance of a writ of possession after consolidation of title is a ministerial function of the court, and for the exception when a third party claims a right adverse to the mortgagor/debtor.

• Rule 39, Section 33, Rules of Court — Provides that upon expiration of the right of redemption, the purchaser acquires all rights of the judgment obligor to the property, and possession shall be given to the purchaser "unless a third party is actually holding the property adversely to the judgment obligor." The Court applied this provision to exclude Castañeda from the writ of possession, as he was actually holding the parking lot adversely to Goldland.

• Rule 41, Section 1, Rules of Court — Lists orders not subject to appeal, including interlocutory orders and orders of execution. The Court applied this provision to uphold the propriety of Castañeda's Rule 65 petition, since the RTC Orders denying his motion to recall the writ of possession were orders of execution, interlocutory in character, and thus not appealable under Rule 41.

• Rule 65, Rules of Court — Governs special civil actions for certiorari. The Court confirmed that Castañeda correctly availed of this remedy to challenge the interlocutory RTC Orders, as it is the proper recourse against interlocutory orders that are not appealable under Rule 41.

• Presidential Decree No. 957, Sections 18 and 25 — The policy behind PD 957 guided the Court's modification of the rule in Spouses Rosario, protecting individual subdivision and condominium buyers from summary ejection through foreclosure processes. Section 18 concerns the prior written approval of the HLURB for mortgages entered into by developers, and Section 25 concerns the registration of condominium units. The HSAC RAB-NCR found Goldland liable for violations of these sections.

Gesmundo, C.J. (Chairperson), Zalameda, and Marquez, JJ., concurred. Rosario, J., was on official leave.