GR 168672; (August, 2010) (Digest)
G.R. No. 168672 ; August 8, 2010
EQUITABLE PCI BANK, INC., Petitioner, vs. DNG REALTY and DEVELOPMENT CORPORATION, Respondent.
FACTS
Respondent DNG Realty obtained a loan from petitioner Equitable PCI Bank (EPCIB), secured by a real estate mortgage. Due to financial difficulties, DNG defaulted, prompting EPCIB to extrajudicially foreclose the mortgage. The property was sold at public auction to EPCIB as the highest bidder on September 4, 2003, and a Certificate of Sale was issued. Subsequently, on October 21, 2003, DNG filed a petition for corporate rehabilitation before the Regional Trial Court (RTC), Branch 28. The rehabilitation court issued a Stay Order on October 27, 2003. Despite this Stay Order, EPCIB recorded the Certificate of Sale with the Register of Deeds on December 3, 2003, executed an Affidavit of Consolidation, and obtained a new title in its name on December 10, 2003. EPCIB later filed an ex-parte petition for a writ of possession, which was granted by RTC Branch 23.
ISSUE
Whether the Court of Appeals correctly nullified the consolidation of title and the issuance of the writ of possession in favor of EPCIB due to the pendency of the corporate rehabilitation proceedings and the issued Stay Order.
RULING
The Supreme Court REVERSED the Court of Appeals and REINSTATED the writ of possession and EPCIB’s title. The legal logic is anchored on the nature of an extrajudicial foreclosure and the specific point at which a rehabilitation Stay Order becomes effective. The Court held that the Stay Order issued under corporate rehabilitation rules suspends the enforcement of claims against the debtor. However, an extrajudicial foreclosure sale, once consummated, is considered a final and completed act. The right to consolidate ownership and obtain a writ of possession accrues upon the expiration of the redemption period without the debtor exercising its right of redemption.
Here, the foreclosure sale was conducted on September 4, 2003, which was prior to the filing of the rehabilitation petition on October 21, 2003, and the issuance of the Stay Order on October 27, 2003. The one-year redemption period expired on September 4, 2004, without DNG exercising its right. Consequently, EPCIB’s acts of consolidating ownership and seeking a writ of possession, which occurred after the Stay Order but were based on rights that vested from a completed sale, were valid. The Stay Order could not invalidate acts that perfected EPCIB’s rights prior to its issuance. The Court distinguished this from cases where the foreclosure sale itself occurred after the Stay Order, which would be void. Since the sale was a fait accompli, the subsequent steps were merely ministerial consequences of a concluded proceeding.