G.R. No. 213736 , June 17, 2020
ALFREDO F. SY AND RODOLFO F. SY, PETITIONERS, VS. CHINA BANKING CORPORATION, RESPONDENT.

FACTS

The case involves Lot No. 4740 in Cebu, originally registered in the name of Bernandina Fernandez. On July 18, 1969, Bernandina simulated a Deed of Absolute Sale over the property in favor of her son, Priscilo, to enable his business. Priscilo mortgaged the property to the Development Bank of the Philippines (DBP), failed to pay, and the property was foreclosed. Priscilo migrated to the U.S. and executed a Special Power of Attorney authorizing his sister, Elena, to redeem the property for the benefit of his younger brothers, petitioners Alfredo and Rodolfo Sy, the actual occupants. However, after redeeming it, Elena allegedly forged documents to transfer the title to her children, Eleazar Jr. and Elaine Adlawan (the mortgagors). The mortgagors then mortgaged the property to respondent China Banking Corporation (China Bank) to secure a loan. Upon the mortgagors’ default, China Bank foreclosed the property, became the highest bidder at the public auction on September 28, 1998, consolidated its title after the redemption period, and obtained a new Transfer Certificate of Title on December 16, 1999.
On December 11, 2000, China Bank filed a Petition for Issuance of a Writ of Possession with the Regional Trial Court (RTC), which granted it on December 30, 2000. Petitioners moved for its dissolution, alleging they were actual possessors and the mortgagors obtained title through falsification. The RTC granted the motion and dissolved the writ. China Bank’s appeal was dismissed for failure to pay docket fees. Meanwhile, petitioners filed a separate action for recovery of ownership, possession, and partition (Civil Case No. CEB-22570) and criminal cases for estafa through falsification.
On January 22, 2009, China Bank filed a second petition for a writ of possession, which the RTC granted on January 4, 2010, without mentioning the prior dissolved writ. Petitioners opposed via an Omnibus Motion, but the RTC denied it on April 7, 2010, ruling that issuance was ministerial upon consolidation of title, noted an Undertaking signed by petitioners recognizing China Bank’s superior right, and stated petitioners had other remedies like a terceria or an independent action. The RTC denied reconsideration on May 25, 2011. Petitioners filed a Petition for Certiorari with the Court of Appeals (CA), which denied it on September 18, 2013, holding certiorari was improper as the issuance was ministerial, the first dissolution did not bar a second writ, res judicata was inapplicable, and the Undertaking had probative value. The CA denied reconsideration on July 1, 2014.

ISSUE

Whether the issuance of the Writ of Possession in favor of China Bank and against petitioners was proper.

RULING

No, the issuance was not proper. The Supreme Court granted the petition, reversed the CA Decision and Resolution, and recalled and dissolved the Writ of Possession dated January 4, 2010.
The general rule is that after consolidation of title following an extrajudicial foreclosure sale, the purchaser’s right to a writ of possession becomes absolute, and its issuance is a ministerial duty of the court upon ex parte application. However, an exception applies under Section 33, Rule 39 of the Rules of Court, extended to extrajudicial foreclosures by Section 6 of Act No. 3135 . This exception states that possession shall be given to the purchaser “unless a third party is actually holding the property adversely to the judgment obligor.”
In this case, petitioners are third parties who are in actual possession of the property and claim ownership adverse to the mortgagors (the judgment obligors). They have a pending action for recovery of ownership and possession (Civil Case No. CEB-22570) and criminal cases alleging the mortgagors obtained title through forgery. Therefore, China Bank’s possessory right is recognized only against the mortgagor and successors-in-interest, not against third parties like petitioners whose possession is adverse. Issuing a writ of possession ex parte under these circumstances would summarily eject petitioners without due process. The Court found the exception, not the general rule, applicable. The Undertaking signed by petitioners did not negate their adverse claim, as it was presented as a request for a brief extension to vacate and did not constitute a waiver of their rights. Consequently, the writ of possession was improperly issued.