SPOUSES ANTHONY AN AND MA. FATIMA AN, PETITIONERS, VS. PHILIPPINE NATIONAL BANK, RESPONDENT.

Spouses An versus Philippine National Bank

The Case

This is a petition for review on certiorari brought by the Spouses Anthony An and Ma. Fatima An against the Philippine National Bank, questioning the decision and resolution of the Court of Appeals which affirmed the grant of a writ of possession in favor of the bank over a parcel of land in Legazpi City that the spouses had mortgaged and lost through extrajudicial foreclosure. The case matters because it gathers into one decision the whole architecture of possessory relief after extrajudicial foreclosure under Act Number 3135: the ministerial duty of the trial court to issue the writ once title is consolidated, the narrow scope of a Section 8 petition, the rule that an appeal does not stay the writ, and the exceptions to the ministerial rule. It is a bar candidate's one-stop review of the remedies of a debtor-mortgagor.

Procedural History

The Philippine National Bank filed a petition for the issuance of a writ of possession before Branch 5 of the Regional Trial Court of Legazpi City. The trial court granted the petition in its decision dated December 7, 2020, ordering the sheriff to place the bank in possession, holding that the issuance of the writ was ministerial after the spouses failed to redeem. The spouses filed a notice of appeal, which the trial court gave due course to in its order dated January 7, 2021. The trial court then issued an order dated January 11, 2021 holding in abeyance the implementation of the writ in view of the appeal. The bank moved to expunge the notice of appeal, but the trial court denied the motion, ruling that the soundness of the order granting the writ is reviewable by ordinary appeal. After the records were forwarded, the trial court noted the bank's motion for reconsideration for lack of jurisdiction.

The bank then filed a petition for certiorari before the Court of Appeals. The appeal and the certiorari petition were consolidated. In its decision dated June 6, 2022, the Court of Appeals denied the spouses' appeal and affirmed the trial court, while partially granting the bank's certiorari petition by annulling the January 11, 2021 order and directing the sheriff to proceed with implementation of the writ, without prejudice to the outcome of a pending civil case. The spouses' motion for reconsideration was denied in a resolution dated January 17, 2023. Hence, this petition for review on certiorari before the Supreme Court.

Facts

On September 29, 2011, the Spouses An obtained a loan of 2,000,000 pesos from Allied Banking Corporation, secured by a real estate mortgage over land in Barrio Tahao, Legazpi City, covered by Transfer Certificate of Title Number 57956. On February 9, 2013, Allied Bank merged into the Philippine National Bank, which became the surviving entity and succeeded to all the rights, obligations, and interests of Allied Bank.

The spouses failed to pay their loan. The bank extrajudicially foreclosed the mortgaged property under Act Number 3135. On December 15, 2015, the property was sold to the bank as the highest bidder at public auction, and a certificate of sale was issued in its favor and registered with the Registry of Deeds of Legazpi City on November 10, 2016. The one-year redemption period lapsed without the spouses redeeming. Ownership was consolidated in the bank's name, the old title was cancelled, and a new title was issued in the name of the bank.

Demands to vacate went unheeded, so the bank filed its petition for a writ of possession. The spouses opposed, claiming they had been regularly paying and were surprised by the foreclosure, having received no personal notice of the auction. They tried to redeem but were refused on the ground that they had waived the right of redemption under the mortgage contract, which they insisted is a statutory privilege that cannot be waived.

Issues

• Whether or not the Court of Appeals committed a reversible error in ruling that the Philippine National Bank is entitled to the issuance of the writ of possession.
• Whether or not the Court of Appeals committed a reversible error in ruling that the trial court committed grave abuse of discretion in holding in abeyance the implementation of the writ of possession.

Applicable Provisions

Section 7 of Act Number 3135 governs the petition for possession during the redemption period and provides:

Sec. 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 sec. 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 par. 11 of sec 114 of Act No. 496, 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 source of the writ the bank sought, and of the rule that the court's duty to issue it is ministerial.

Section 8 of Act Number 3135 gives the debtor the remedy to set aside the sale and cancel the writ, and provides:

Sec. 8. The debtor may, in the proceedings in which possession was requested, but not later than thirty days after the purchaser was given possession, petition that the sale be set aside and the writ of possession cancelled, specifying the damages suffered by him, because the mortgage was not violated or the sale was not made in accordance with the provisions hereof, and the court shall take cognizance of this petition in accordance with the summary procedure provided for in section one hundred and twelve of Act No. 496; and if it finds the complaint of the debtor justified, it shall dispose in his favor of all or part of the bond furnished by the person who obtained possession. Either of the parties may appeal from the order of the judge in accordance with section 14 of Act No. 196; but the order of possession shall continue in effect during the pendency of the appeal.

The final clause is decisive: even an appeal from an adverse ruling does not suspend the writ of possession.

Section 4 of Rule 65 of the Rules of Court fixes the period for a petition for certiorari, which the Court discusses in excusing the bank's two-day delay:

A petition for certiorari must be filed within 60 days from receipt of the assailed order or judgment.

Ruling

On the first issue, the Court held that the Court of Appeals committed no reversible error. The spouses raised two procedural arguments for the first time on appeal: that the bank's signatory was unauthorized, and that the bank's certiorari petition was filed late. The Court refused to entertain new theories on appeal, as this would offend fair play and due process. Even so, it found both arguments without merit. The secretary's certificate showed that a Vice President of the bank was authorized by board resolution to sign the verification and certification against forum shopping, and the signatory held that rank. On the late filing, the Court counted sixty days from the bank's receipt of the assailed order on March 29, 2021, making the deadline May 28, 2021, while the petition was filed May 31, 2021. The Court nevertheless relaxed the rule, because what is at stake is the property right of a purchaser in a foreclosure sale, the filing was not frivolous, and substantial justice warranted excusing a two-day delay.

On the merits of possession, the Court held that after consolidation of title in the buyer's name for failure of the mortgagor to redeem, entitlement to a writ of possession becomes a matter of right, and its issuance is the ministerial duty of the court. No bond is required, and a pending suit to annul the mortgage or the sale does not stay the writ. The Court listed the recognized exceptions to the ministerial rule: gross inadequacy of the purchase price, a third party claiming a right adverse to the debtor-mortgagor, and failure to pay the surplus proceeds to the mortgagor. None applied, since the spouses were the debtor-mortgagors themselves and raised only the validity of the foreclosure.

On the second issue, the Court held that the trial court gravely abused its discretion in holding the writ in abeyance. It clarified the remedies of a debtor-mortgagor: first, a petition under Section 8 of Act Number 3135, which is summary, limited to the grounds that the mortgage was not violated or that the sale did not comply with the law, and available only while the purchaser has not yet taken actual possession; second, a separate and independent suit to annul the mortgage or the sale, available once the redemption period has lapsed and title is consolidated. The Court stressed the statutory command that the order of possession shall continue in effect during the pendency of the appeal.

Doctrine

After the redemption period lapses without redemption and title is consolidated in the purchaser's name, the purchaser's right to possession becomes absolute, and the issuance of a writ of possession is a ministerial duty of the court upon a proper ex parte application and proof of title. No bond is required at that stage. The ministerial rule admits only three exceptions: gross inadequacy of the purchase price, a third party holding under an adverse title, and failure to remit surplus proceeds. A Section 8 petition is narrow, summary, and exclusive as to its two grounds, and it cannot annul the mortgage or the foreclosure. Neither a Section 8 petition nor an appeal from an order granting possession stays the writ, for the statute itself says the order of possession shall continue in effect during the pendency of the appeal. Procedural periods, such as the sixty-day period under Rule 65, may be relaxed in the interest of substantial justice where property rights and the merits so require.

Disposition

The petition was denied, and the decision and resolution of the Court of Appeals were affirmed, with the sheriff directed to proceed with the implementation of the writ of possession in favor of the Philippine National Bank.

Remember This

Memorize the line that after consolidation of title, the writ of possession is a matter of right and its issuance is ministerial, subject only to the three exceptions. Examiners use this case to test the remedies of a debtor-mortgagor under Act Number 3135 and the rule that an appeal does not stay the writ of possession.