BANGKO MABUHAY (RURAL BANK OF TANZA (CAVITE), INC., PETITIONER-APPELLEE, VS. SPOUSES FERNANDO AND PAULINA LYN TELMO, OPPOSITORS-APPELLANTS.

Bangko Mabuhay versus Spouses Telmo

The Case

This is a petition for the issuance of a writ of possession filed by Bangko Mabuhay, formerly the Rural Bank of Tanza of Cavite, against the spouses Fernando and Paulina Lyn Telmo. The bank had foreclosed the spouses' real estate mortgage extrajudicially, bought the properties at the auction as the sole and highest bidder, and consolidated title in its name after the redemption period lapsed. When the spouses refused to surrender possession, the bank asked the trial court for a writ of possession. The case matters because it fixes the character of that writ: once title is consolidated in the purchaser's name, the writ issues as a matter of right and the court has no discretion to withhold it. The validity of the foreclosure is not a defense to the petition; it must be raised in a separate proceeding.

Procedural History

The bank filed its petition for the issuance of a writ of possession before the Regional Trial Court of Naic, Cavite, Branch 15. The spouses filed a comment and opposition, the bank replied, the spouses rejoined, and the bank filed a sur-rejoinder. After the parties presented their evidence, the trial court granted the petition and directed the Clerk of Court to issue the corresponding writ of possession in favor of the bank. The spouses appealed. The Supreme Court, through the Third Division, affirmed the trial court's decision and order.

Facts

On 20 August 1996, the spouses Fernando and Paulina Lyn Telmo executed a promissory note in favor of the Rural Bank of Tanza of Cavite for One Million Six Hundred Thousand Pesos. The loan was secured by a real estate mortgage over two parcels of land in Indang, Cavite, together with the building and all improvements thereon.

The spouses failed to pay despite demands, so the bank applied for the extrajudicial foreclosure of the mortgage before the Regional Trial Court of Naic, Cavite, Branch 15. A notice of extrajudicial sale was issued on 28 April 2000. On 5 June 2000, the auction sale was held, and the bank was the sole and highest bidder at One Million Six Hundred Thousand Pesos. A certificate of sale was issued in its favor on 13 June 2000.

The one-year redemption period expired without redemption, and on 26 June 2001 the bank's president and general manager executed an affidavit of consolidation. On 29 August 2003, the bank, now named Bangko Mabuhay, filed its petition for a writ of possession over the two parcels and all improvements. The spouses opposed, questioning the regularity of the auction: they claimed the sale should have been held at the municipal building of Indang rather than the Hall of Justice of Naic, that there was no certificate of posting and no proof of publication, and that the consolidation of ownership was premature.

Issues

• Whether or not the issuance of a writ of possession over the foreclosed properties is proper after title has been consolidated in the purchaser's name.
• Whether or not the alleged irregularities in the foreclosure sale may be raised to oppose the petition for the issuance of a writ of possession.
• Whether or not the petition is fatally defective for invalid verification.

Applicable Provisions

Section 2 of Act Number 3135, as amended, governs the place of the sale and provides:

Said sale cannot be made legally outside of the province in which the property sold is situated; and in case the place within said province in which the sale is to be made is subject to stipulation, such sale shall be made in said place or in the municipal building of the municipality in which the property or part thereof is situated.

The spouses invoked this provision to argue that the auction should have been held in Indang, but the Court held that such objections cannot defeat the writ of possession.

Section 6 of Republic Act Number 7353, which the spouses also invoked, provides in its pertinent part:

The foreclosure of mortgages covering loans granted by rural banks and executions of judgment thereon involving real properties levied upon by a sheriff shall be exempt from the publications in newspapers now required by law where the total amount of loan, excluding interest due and unpaid, does not exceed One hundred thousand pesos (P100,000) or such amount as the Monetary Board may prescribe as may be warranted by prevailing economic conditions.

This provision concerns publication of foreclosure notices for rural bank loans, and the Court treated the spouses' publication objections as matters that cannot be raised against the petition for possession.

Section 8 of Act Number 3135 supplies the remedy of the debtor-mortgagor, as the Court explained:

Section 8 of Act No. 3135 gives the debtor-mortgagor the right to file a petition for the setting aside of the foreclosure sale and for the cancellation of a writ of possession in the same proceedings where the writ was issued within 30 days after the purchaser-mortgagee was given possession.

This is the proper vehicle for attacking the foreclosure, not an opposition to the petition for possession.

Ruling

On the first issue, the Court held that the writ of possession is proper. After the consolidation of titles in the buyer's name for failure of the mortgagor to redeem, the writ of possession becomes a matter of right, and its issuance to a purchaser in an extrajudicial foreclosure is merely a ministerial function. The basis of the right to possession is the purchaser's ownership. Here, title was consolidated in the bank's name because the spouses failed to redeem within the one-year redemption period, so the trial court had no discretion on the matter.

On the second issue, the Court held that the alleged irregularities in the foreclosure cannot be raised to oppose the petition. The judge with whom an application for a writ of possession is filed need not look into the validity of the mortgage or the manner of its foreclosure; the writ issues as a matter of course. The rationale, the Court said, is to allow the purchaser to have possession of the foreclosed property without delay, such possession being founded on the right of ownership. Until the foreclosure sale is annulled by a court of competent jurisdiction, the issuance of the writ remains the ministerial duty of the trial court, and so does its implementation; otherwise the writ would be a useless paper judgment.

On the third issue, the Court rejected the claim that the petition was fatally defective for invalid verification, finding the appeal without merit.

Doctrine

After the consolidation of title in the buyer's name for failure of the mortgagor to redeem, the writ of possession becomes a matter of right, and its issuance is a ministerial function of the court. The purchaser's right to possession rests on ownership, and it becomes absolute upon the expiration of the redemption period. The court hearing the application does not inquire into the validity of the mortgage or the manner of foreclosure; those questions are raised in a separate petition to set aside the sale and cancel the writ, filed within thirty days after the purchaser-mortgagee is given possession under Section 8 of Act Number 3135. Until the sale is annulled by a court of competent jurisdiction, the writ issues and is enforced as a matter of course.

Disposition

The Supreme Court affirmed the trial court's decision and order granting the writ of possession in favor of Bangko Mabuhay.

Remember This

Memorize the line: after consolidation of title for failure to redeem, the writ of possession is a matter of right and its issuance is ministerial. Examiners use this case to test whether a student knows that foreclosure irregularities are raised in a separate petition to set aside the sale under Section 8 of Act Number 3135, not in an opposition to the petition for possession.