SPOUSES JEANETTE MALIWAT AND RUFINO MALIWAT, PETITIONERS, VS. METROPOLITAN BANK & TRUST COMPANY, RESPONDENT.

Maliwat versus Metropolitan Bank and Trust Company

The Case

This is a petition for review on certiorari brought by spouses Jeanette and Rufino Maliwat against the Metropolitan Bank and Trust Company. The spouses borrowed a large sum from the bank, secured the loan with real estate mortgages over their land in Valenzuela City, defaulted, and watched the property sold at a public auction where the bank emerged as the highest bidder. When the bank sought and obtained a writ of possession, the spouses asked the trial court to restrain its enforcement, and the trial court obliged. The case matters because it draws a hard line: once a writ of possession issues in an extrajudicial foreclosure, the court has no discretion to withhold or enjoin it, and any question about the validity of the sale must be litigated in a separate proceeding.

Procedural History

The bank filed with the Regional Trial Court of Valenzuela City, Branch 75, a petition for the issuance of a writ of possession. After the bank presented its evidence, the trial court granted the petition and issued the writ in its favor. Meanwhile, the spouses filed with another branch of the same court, Branch 172, a complaint for annulment of the mortgages, the foreclosure proceedings, and the auction sale, with a prayer for a temporary restraining order and preliminary injunction. Upon their motion, that complaint was consolidated with the possession case pending before Branch 75. Branch 75 then issued an order granting a writ of preliminary injunction enjoining the bank from enforcing the writ of possession, and it denied the bank's motion for reconsideration.

The bank went up to the Court of Appeals on certiorari, arguing that the trial court committed grave abuse of discretion in enjoining the enforcement of the writ. The Court of Appeals granted the petition, annulled and set aside the trial court's orders, and lifted the preliminary injunction for lack of basis in fact and in law. The spouses' motion for reconsideration was denied, so they came to the Supreme Court by petition for review on certiorari.

Facts

The spouses obtained a loan from the bank in the amount of 23,850,000 pesos, evidenced by a promissory note dated August 13, 1997. To secure the loan, they executed three real estate mortgages over their land in Malinta, Valenzuela City, covered by a transfer certificate of title.

The spouses failed to pay, prompting the bank to institute extrajudicial foreclosure proceedings. On October 14, 1999, the lot was sold at public auction, and the bank was the highest bidder. A certificate of sale was eventually issued in its favor. Despite demand, the spouses refused to turn over the property.

On July 20, 2000, the bank filed its petition for a writ of possession. The trial court granted it and issued the writ. The spouses then filed their complaint for annulment, and the trial court, after consolidating the cases, issued a preliminary injunction restraining the bank from enforcing the writ of possession. That injunction is what the Court of Appeals struck down.

Issues

• Whether or not the issuance of a writ of possession in an extrajudicial foreclosure may be enjoined by a writ of preliminary injunction issued by the same court.
• Whether or not the trial court committed grave abuse of discretion amounting to lack or excess of jurisdiction in enjoining the enforcement of the writ of possession.

Applicable Provisions

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

Section 7. In any sale made under the provisions of this Act, the purchaser may petition the Court of First Instance 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 one hundred and ninety-four of the Administrative Code, or 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 such cases the clerk of court shall, upon the filing of such petition, collect the fees specified in the paragraph eleven of section one hundred and fourteen of Act Numbered Four hundred and ninety-six, as amended by Act Numbered Twenty-eight hundred and sixty-six, 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 is the provision that entitles the purchaser at an extrajudicial foreclosure sale to possession, and its command that the court order the writ to issue is the textual anchor of the Court's ruling.

Ruling

On the first issue, the Court held that the writ of possession may not be enjoined. A writ of possession is a writ of execution commanding the sheriff to enter the land and give possession to the person entitled under the judgment. It issues in three settings: land registration proceedings, judicial foreclosure where the debtor is in possession and no third party has intervened, and extrajudicial foreclosure of a real estate mortgage under Section 7 of Act Numbered 3135. The Court placed this case in the extrajudicial foreclosure setting.

Relying on its earlier rulings, the Court stressed that under Section 7 the order for a writ of possession issues as a matter of course upon the filing of the proper motion and the approval of the corresponding bond. No discretion is left to the court. Any and all questions regarding the regularity and validity of the sale are left to be determined in a subsequent proceeding, and such questions may not be raised as a justification for opposing the issuance of the writ. The purchaser's right to possession holds even during the one-year redemption period, provided an indemnity bond is filed; after that period lapses without redemption, the right becomes absolute and may be demanded without a bond. An injunction to prohibit the issuance of a writ of possession is, in the Court's words, utterly out of place, and once the writ has issued the court has no alternative but to enforce it without delay.

On the second issue, the Court concluded that the Court of Appeals did not err in finding that the trial court committed grave abuse of discretion amounting to lack or excess of jurisdiction in enjoining the implementation of the writ issued in the bank's favor.

Doctrine

Three rules a Bar candidate should be able to write. First, in an extrajudicial foreclosure of a real estate mortgage, the purchaser is entitled as of right to a writ of possession under Section 7 of Act Numbered 3135, and the court has no discretion to refuse it once the proper motion is filed and the bond approved. Second, the pendency of a separate action to annul the mortgage, the foreclosure, or the auction sale is not a justification for opposing or enjoining the writ; those questions belong to a subsequent proceeding. Third, an injunction against the issuance or enforcement of a writ of possession is utterly out of place, and once the writ issues the court must enforce it without delay.

Disposition

The Supreme Court denied the petition and affirmed in toto the decision of the Court of Appeals, with costs against the spouses.

Remember This

Memorize the line that a writ of possession issues as a matter of course and that an injunction against it is utterly out of place. Examiners use this case to test whether a student knows that a separate annulment suit cannot block the purchaser's right to possession after an extrajudicial foreclosure.