G.R. No. 165142 ; December 10, 2007
EDUARDO L. RAYO, Petitioner, vs. METROPOLITAN BANK AND TRUST COMPANY AND BRANCH 223 OF THE REGIONAL TRIAL COURT OF QUEZON CITY, Respondents.

FACTS

Metropolitan Bank and Trust Company (Metrobank) extrajudicially foreclosed a real estate mortgage executed by Louisville Realty & Development Corporation, through its president Samuel U. Lee, to secure a loan. After a public auction where Metrobank was the highest bidder, it filed an ex parte petition for a writ of possession before the Regional Trial Court (RTC) of Quezon City, Branch 223, which was granted. The writ was subsequently implemented.
Petitioner Eduardo L. Rayo later filed a complaint for nullification of the mortgage and foreclosure sale in another branch of the RTC. Subsequently, he filed a Petition for Annulment of Judgment with the Court of Appeals, seeking to nullify the RTC order granting the writ of possession. He argued there was an absolute lack of due process as Louisville was not notified of the ex parte proceedings and that Section 7 of Act No. 3135 , which allows such ex parte petitions for a writ of possession, is unconstitutional.

ISSUE

The primary issues are: (1) Whether petitioner Rayo has the legal personality to seek annulment of judgment; (2) Whether Section 7 of Act No. 3135 is unconstitutional for violating due process; and (3) Whether Metrobank is guilty of forum-shopping.

RULING

The Supreme Court denied the petition. On the first issue, Rayo is not a real party-in-interest entitled to seek annulment. A real party-in-interest is one who stands to be benefited or injured by the judgment. Rayo claimed an interest via a deed of assignment executed after the foreclosure. However, the foreclosure had already extinguished Louisville’s rights, and the assignors could not convey a right they no longer possessed. Rayo, as a mere assignee of a defunct interest, had no substantive right to challenge the writ.
On the constitutional challenge, Section 7 of Act No. 3135 is not unconstitutional. The ex parte proceeding for a writ of possession is a ministerial duty of the court following a confirmed foreclosure sale. It is a summary proceeding meant to place the purchaser in possession, not to litigate ownership. The law provides sufficient safeguards: the debtor can file a separate action to annul the mortgage or sale, and under Section 8 of the same Act, the debtor can, within 30 days after the purchaser obtains possession, petition the court to set aside the sale. This opportunity for a hearing satisfies due process requirements.
Finally, Metrobank is not guilty of forum-shopping. The ex parte petition for a writ of possession and the separate complaint for nullification filed by Rayo involve different causes of action and reliefs. The bank’s petition was a summary proceeding for possession, while Rayo’s suit questioned the validity of the mortgage and foreclosure. There was no willful and deliberate forum-shopping by Metrobank.