CECILIA S. BALDUEZA, REPRESENTED BY HER ATTORNEY-IN-FACT CLODUALDO M. ESCOBAR, PETITIONER, VS. HONORABLE COURT OF APPEALS, PRUDENTIAL BANK, AND HON. ARTURO G. TAYAG, DEPUTY SHER…

Baldueza versus Prudential Bank

The Case

This is a petition for review on certiorari brought by Cecilia S. Baldueza, later substituted by her children, against the Court of Appeals, Prudential Bank, and the Deputy Sheriff, asking the Supreme Court to set aside the writ of possession issued in favor of the bank over a parcel of land in Meycauayan, Bulacan that had been mortgaged to the bank and later sold at a public auction. The case matters because it fixes the rule on when a purchaser at a foreclosure sale is entitled to possession, and when the issuance of a writ of possession becomes a ministerial duty of the court that cannot be blocked by a pending suit attacking the mortgage.

Procedural History

The bank filed an ex parte petition for the issuance of a writ of possession before the Regional Trial Court of Malolos, Bulacan, Branch 79. The trial court granted the writ in an order dated November 15, 2001, relying on Section 7 of Act Number 3135, as amended, and holding that after the redemption period the purchaser may demand possession without posting a bond, so that issuance of the writ becomes ministerial. The petitioner's motion for reconsideration was denied in an order dated February 15, 2002.

The petitioner then went up to the Court of Appeals on a petition for certiorari, prohibition, and preliminary injunction with a prayer for a temporary restraining order. The Court of Appeals dismissed the petition for lack of merit in a decision dated July 26, 2002, and denied reconsideration in a resolution dated October 10, 2002. Hence the present petition for review on certiorari before the Supreme Court. The petitioner died on November 27, 2002, and the Court allowed her substitution by her son, Caesar Baldueza, and her daughter, Jennifer Baldueza.

Facts

Cecilia S. Baldueza mortgaged to Prudential Bank a parcel of land with an area of 212 square meters in Meycauayan, Bulacan, covered by Transfer Certificate of Title Number T-114481 (M), to secure a loan of 380,000 pesos. She failed to pay the loan upon maturity despite demand.

On December 12, 1995, the bank extrajudicially foreclosed the mortgaged property under Act Number 3135, as amended, and was the highest bidder at the public auction. On the same date, the petitioner filed a complaint for declaration of nullity and cancellation of contract with damages, with a prayer for a writ of preliminary injunction, raffled to the Regional Trial Court of Malolos, Bulacan, Branch 80.

On December 12, 1996, the one-year redemption period expired without the petitioner redeeming the property. The bank consolidated ownership, and the Registry of Deeds cancelled the old title and issued Transfer Certificate of Title Number T-297416 (M) in the bank's name. On August 8, 2001, the bank filed an ex parte petition for a writ of possession, which the trial court granted. The petitioner opposed it, alleging bad faith on the bank's part, but both the trial court and the Court of Appeals found no bad faith and sustained the writ.

Issues

• Whether or not the Court of Appeals correctly sustained the issuance of a writ of possession in favor of the bank.
• Whether or not the bank's alleged bad faith, and the pendency of the suit for annulment of the mortgage, may bar the issuance of the writ of possession.

Applicable Provisions

Section 7 of Act Number 3135, as amended by Act Number 4118, provides:

Section 7. In any sale made under the provisions of this Act, the purchaser may petition the Regional Trial Court of the province or place where the property or any part thereof is situated, to give him possession thereof during the redemption period, furnishing bond in an amount equivalent to the use of the property for a period of twelve months, to indemnify the debtor in case it be shown that the sale was made without violating the mortgage or without complying with the requirements of this Act. Such petition shall be made under oath and filed in form of an ex parte motion in the registration or cadastral proceedings if the property is registered, or in special proceedings in the case of property registered under the Mortgage Law or under Section 194 of the Administrative Code, or of any other real property encumbered with a mortgage duly registered in the office of any register of deeds in accordance with any existing law, and in each case the clerk of court shall, upon the filing of such petition, collect the fees specified in paragraph 11 of Section 114 of Act Number 496, as amended by Act Number 2866, and the court shall, upon approval of the bond, order that a writ of possession issue, addressed to the sheriff of the province in which the property is situated, who shall execute said order immediately.

This provision is the source of the purchaser's right to possession during the redemption period, conditioned on a bond, and it is the provision the Court applies to the period after redemption as well.

Ruling

On the first issue, the Court upheld the Court of Appeals. It held that the buyer in a foreclosure sale becomes the absolute owner of the property if it is not redeemed within one year after registration of the sale, and as such is entitled to possession, which he may demand at any time after consolidation of ownership in his name and issuance of a new transfer certificate of title. The Court quoted its settled doctrine:

It is settled the buyer in a foreclosure sale becomes the absolute owner of the property purchased if it is not redeemed during the period of one year after the registration of the sale. As such, he is entitled to the possession of the property and can demand it at any time following the consolidation of ownership in his name and the issuance to him of a new transfer certificate of title. The buyer can in fact demand possession of the land even during the redemption period except that he has to post a bond in accordance with Section 7 of Act 3135 as amended. No such bond is required after the redemption period if the property is not redeemed. Possession of the land then becomes an absolute right of the purchaser as confirmed owner. Upon proper application and proof of title, the issuance of the writ of possession becomes a ministerial duty of the court.

Since the petitioner failed to redeem within the one-year period, the bank consolidated ownership and a new title was issued in its favor, so it became the ministerial duty of the court to issue the writ.

On the second issue, the Court held that the bank is entitled to the writ despite the pending suit for annulment of the mortgage and the notice of sheriff's sale, without prejudice to the eventual outcome of that case. The petitioner's allegations of bad faith were factual matters already raised below, and since the trial court and the Court of Appeals did not find bad faith, their factual finding is binding on the Supreme Court, which is not a trier of facts.

Doctrine

A Bar candidate should retain these rules. First, the purchaser at a foreclosure sale becomes the absolute owner of the property if it is not redeemed within one year after registration of the sale. Second, during the redemption period the purchaser may demand possession but must post a bond under Section 7 of Act Number 3135, as amended. Third, after the redemption period expires without redemption, no bond is required, and possession becomes the purchaser's absolute right as confirmed owner. Fourth, upon proper application and proof of title, the issuance of the writ of possession becomes a ministerial duty of the court. Fifth, a pending action for annulment of the mortgage does not bar the writ, and the writ is issued without prejudice to the outcome of that case.

Disposition

The petition was denied, and the decision and resolution of the Court of Appeals were affirmed, with costs against the petitioner. The bank won and retained its right to possession.

Remember This

Memorize the line that after the redemption period expires without redemption, possession becomes the absolute right of the purchaser and the issuance of the writ of possession becomes a ministerial duty of the court. Examiners use this case to test the ministerial nature of the writ of possession and the rule that a pending annulment suit does not stay its issuance.