LIBRADA M. AQUINO, PETITIONER, V. BANK OF THE PHILIPPINE ISLANDS, THE PRESIDING JUDGE RTC OF QUEZON CITY, BRANCH 96, AND SHERIFF RAMON P. VILLANUEVA, RESPONDENTS.

Aquino versus Bank of the Philippine Islands

The Case

This is a consolidated petition for certiorari under Rule 65 brought by Librada Aquino and her children against the Bank of the Philippine Islands, the presiding judge of a Quezon City regional trial court, and the sheriff. The petitioners ask the Supreme Court to annul the trial court's orders that placed the subject parcels of land back within the coverage of a writ of possession issued in an extrajudicial foreclosure, together with the amended writ and the notice to vacate that followed. The case matters because it fixes the boundary of the purchaser's right to possession: that right, though ordinarily absolute and ministerial, yields the moment a third party holds the property adversely to the mortgagor, and the purchaser must then go to court by an ordinary action rather than by an ex parte writ.

Procedural History

The Bank of the Philippine Islands filed before the regional trial court of Quezon City, Branch 96, an ex parte petition for a writ of possession over several parcels of land that it had purchased at an extrajudicial foreclosure sale. The trial court granted the petition in an order dated January 7, 2004, commanding the sheriff to place the bank in possession. Librada Aquino moved for reconsideration, claiming ownership and possession of two of the covered parcels, and on March 20, 2006 the trial court modified its earlier order to exclude those two properties from the writ, subject to the outcome of the parties' respective cases. On the bank's motion for partial reconsideration, however, the trial court issued the order of November 6, 2006, partially reconsidering the March 20, 2006 order and directing that Librada Aquino's properties be included once more as subjects of the writ. A second amended writ of possession issued on November 16, 2006, and the sheriff served a notice to vacate dated November 24, 2006.

Librada Aquino filed a petition for certiorari before the Court of Appeals. Her children, Christian Aquino and the others, separately filed a motion for a clarificatory order before the trial court, claiming to be co-owners and co-possessors of the same properties; when that motion was denied on July 23, 2007, they too filed a petition for certiorari. The Supreme Court, by a resolution issued in April 2009, consolidated the two petitions. The consolidated petitions then reached the Supreme Court for disposition.

Facts

Spouses Ernesto and Agnes Aure obtained a loan from the Bank of the Philippine Islands, secured by a real estate mortgage over six parcels of land in Quezon City. The mortgagors defaulted despite demand, and the bank foreclosed the mortgage extrajudicially. After notice, posting, and publication, the properties were sold at public auction on January 5, 1998, with the bank as the highest bidder. A certificate of sale was issued and registered, and when the mortgagors failed to redeem, the bank consolidated ownership in its name and obtained new transfer certificates of title.

Demands on the mortgagors to surrender the properties went unheeded, so the bank filed an ex parte petition for a writ of possession. The trial court granted it in January 2004. Librada Aquino then came forward, asserting that she owned and possessed two of the covered parcels, and the trial court initially agreed, excluding those parcels in its March 2006 order. On the bank's motion, the trial court reversed course in November 2006 and ordered the two parcels included again, reasoning that Librada Aquino had herself executed a deed of absolute sale over the properties to give way for the mortgagor to mortgage them, so that she could not feign the innocence of a third party.

Librada Aquino's children likewise claimed to be co-owners and co-possessors of the properties, asserting that they had acquired their interest not from the mortgagors but from their deceased father, Manuel Aquino, who died before their mother allegedly sold the properties to the mortgagors. The trial court refused to exclude them, holding that they were merely successors-in-interest of their father and had stepped into his shoes. The amended writ and the notice to vacate were then directed against Librada Aquino and all persons claiming rights under her.

Issues

• Whether or not the trial court committed grave abuse of discretion in reversing its earlier order of exclusion and in including Librada Aquino's properties within the writ of possession.
• Whether or not a writ of possession may be issued ex parte over properties in the possession of third parties who hold them adversely to the mortgagor.
• Whether or not the amended writ of possession and the notice to vacate could properly be implemented against Librada Aquino and her children.

Applicable Provisions

Section 35 of Rule 39 of the Rules of Court, made suppletory to extrajudicial foreclosure by Section 6 of Act 3135, as amended, provides:

Under Section 35, Rule 39 of the Rules of Court, which is made suppletory to the extrajudicial foreclosure of real estate mortgages by Section 6 of Act 3135, as amended, the possession of the mortgaged property may be awarded to a purchaser in the extrajudicial foreclosure unless a third party is actually holding the property adversely to the judgment debtor.

This is the exception on which the entire case turns: the ministerial duty to issue the writ stops where a third party holds the property adversely to the debtor.

Article 433 of the Civil Code, as quoted in the decision, provides:

Under Article 433 of the Civil Code, one who claims to be the owner of a property possessed by another must bring the appropriate judicial action for its physical recovery.

This is why the bank's remedy against adverse third-party possessors is an ordinary judicial action, not a summary writ.

Ruling

On the first issue, the Court held that the trial court gravely abused its discretion. The settled rule is that the issuance of a writ of possession may no longer be done ex parte if the foreclosed property is in the possession of a third party holding it adversely to the defaulting debtor or mortgagor. The Court found that Librada Aquino's children were possessing the properties adversely to the mortgagors, having claimed in their motion to be co-possessors and co-owners who were never made parties to the proceedings.

On the second issue, the Court stressed that the exception requires not merely third-party possession but possession held adversely to the debtor. The children did not acquire their title and possession from the mortgagors but from their deceased father, Manuel Aquino, who died before Librada Aquino allegedly sold the properties to the mortgagors. They therefore stood in the same position as a stranger or third person whose rights could not be resolved in an ex parte proceeding where they were not impleaded. The Court quoted its own ruling that such a person stands in the same position as a stranger or third party whose rights to the property cannot be resolved in an ex parte proceeding where it was not impleaded or where it could appear to present its side.

On the third issue, the Court held that the amended writ of possession and the notice to vacate could not properly be implemented against the petitioners, who were in possession of the subject properties. The proper remedy of the bank was to file the appropriate judicial action for recovery of possession, in which the claims of the petitioners could be properly heard and adjudicated. An ex parte possessory writ against them would amount to summary ejectment in violation of due process.

Doctrine

First, the issuance of a writ of possession in an extrajudicial foreclosure is ministerial, but it ceases to be ministerial and may no longer be done ex parte once it appears that a third party is in possession of the property and is claiming a right adverse to the debtor or mortgagor.

Second, the exception requires two elements: the property must be in the possession of a third party, and that third party must hold it adversely to the debtor or mortgagor. A co-owner, tenant, or usufructuary who possesses in his own right, and not merely as a successor or transferee of the debtor's right of possession, falls within the exception.

Third, a third person in possession who claims a right superior to that of the original mortgagor has no opportunity to be heard in an ex parte proceeding, and may not be dispossessed on the strength of a mere ex parte possessory writ, for that would be summary ejectment in violation of due process.

Fourth, the purchaser's remedy against such a third-party possessor is the appropriate judicial action for physical recovery of the property, consistent with Article 433 of the Civil Code, in which the conflicting claims of ownership may be properly heard and adjudicated.

Disposition

The petitions were granted, and the trial court's assailed orders and the sheriff's notice to vacate were set aside and declared null and void.

Remember This

Memorize the line: the writ of possession is ministerial, but it ceases to be so and may no longer issue ex parte once a third party holds the property adversely to the mortgagor. Examiners use this case to test the exception to the ministerial duty in extrajudicial foreclosure, and the rule that an adverse third-party possessor may be ejected only through an ordinary judicial action, never by a summary writ.