G.R. No. 203949 and G.R. No. 205071, April 6, 2016
Spouses George A. Gallent, Sr. and Mercedes M. Gallent vs. Juan G. Velasquez ( G.R. No. 203949 ) and Juan G. Velasquez vs. Spouses George A. Gallent, Sr. and Mercedes M. Gallent (G.R. No. 205071)

FACTS

Spouses George and Mercedes Gallent mortgaged their property to Allied Banking Corporation (Allied Bank) to secure a loan. They defaulted, and Allied Bank extrajudicially foreclosed the property, emerged as the highest bidder at the auction, and, after the redemption period, consolidated its ownership. Subsequently, Allied Bank and the Spouses Gallent entered into an Agreement to Sell, where the bank agreed to sell the property back to the spouses, who paid a down payment and were allowed to remain in possession as lessees. Due to financial difficulties, the Spouses Gallent sought help from Juan Velasquez, a family friend. They executed a Deed of Assignment of Rights, assigning all their rights and obligations under the Agreement to Sell to Velasquez, who paid the remaining balance to Allied Bank. Allied Bank and Velasquez then executed a Deed of Absolute Sale, and a new title was issued in Velasquez’s name. After more than four years, Velasquez demanded that the Spouses Gallent vacate the property. When they refused, Velasquez filed an ex parte petition for a writ of possession in the Regional Trial Court (RTC). The Spouses Gallent moved to dismiss, arguing they were adverse claimants in possession. The RTC denied their motions and later granted the writ of possession. The Spouses Gallent filed two separate petitions for certiorari before the Court of Appeals (CA). The CA’s 10th Division, in CA-G.R. SP No. 116097, ruled in favor of Velasquez, holding that as Allied Bank’s transferee, he was entitled to an ex parte writ of possession. The CA’s Special 4th Division, in CA-G.R. SP No. 114527, ruled in favor of the Spouses Gallent, holding that an ex parte writ could not issue against them as adverse claimants in possession. These conflicting decisions were elevated to the Supreme Court.

ISSUE

Whether the Regional Trial Court may validly issue an ex parte writ of possession to the transferee (Juan Velasquez) of the winning bidder (Allied Bank) at the extrajudicial foreclosure sale of mortgaged real property.

RULING

No. The Supreme Court ruled that an ex parte writ of possession cannot be issued in favor of a transferee of the mortgagee-purchaser after consolidation of title. The Court held that the ministerial duty to issue an ex parte writ of possession under Act No. 3135 , as amended, applies only to the mortgagee-purchaser at the foreclosure sale or its successor-in-interest by reason of the sale (e.g., an assignee of the certificate of sale). It does not extend to a subsequent transferee of the property who acquires it through a separate deed of sale after the mortgagee-purchaser has already consolidated its title. In such a case, the transferee’s right to possession is no longer derived from the foreclosure sale but from the subsequent sale. If the mortgagor or a third party remains in possession of the property under a claim of right, the transferee’s remedy is to file a separate ejectment action or an action for recovery of possession, where the issue of possession can be adjudicated. In this case, Velasquez purchased the property from Allied Bank after consolidation, and the Spouses Gallent remained in possession under a claim of right based on their substantial payments and the allegation that their transaction with Velasquez was an equitable mortgage. Therefore, Velasquez was not entitled to an ex parte writ of possession, and his proper remedy was an ordinary action for ejectment or recovery of possession. The Court affirmed the decision of the CA Special 4th Division and reversed the decision of the CA 10th Division.