G.R. No. L-55900. April 27, 1984.
LUMEN POLICARPIO, petitioner, vs. HON. COURT OF APPEALS (now Intermediate Appellate Court), HON. ELVIRO L. PERALTA, and PHILIPPINE TRUST COMPANY, respondents.

FACTS

The Philippine Trust Company foreclosed a mortgage executed by the spouses Simeon and Modesta Policarpio and their daughter Lumen (the petitioner). The mortgaged properties were sold at public auction in 1970, and the sale was confirmed in 1971. After Simeon’s death, the bank filed a motion for a writ of possession in 1976. The petitioner and her siblings opposed, but the trial court ruled the foreclosure and sale bound the heirs. However, the court deferred issuing the writ, noting circumstances requiring resolution. Specifically, it ordered the reception of evidence to determine whether the defendants, who had constructed a new house on the property, were builders in good faith under Article 546 of the Civil Code, entitling them to reimbursement and a right of retention.
The trial court issued several orders from 1977 to 1979 setting hearings for this purpose. Despite initially admitting the bank’s evidence, the presiding judge, Hon. Elviro L. Peralta, subsequently issued an order on May 28, 1979, granting the writ of possession without allowing the petitioner to cross-examine the bank’s witnesses or present her own evidence on good faith. The judge reversed his prior stance, citing a mortgage stipulation covering future improvements. The petitioner filed a certiorari petition with the Court of Appeals, which dismissed it on the ground of res judicata, holding the bank’s right to possession was already settled, and passed over the good faith issue.

ISSUE

Whether the Court of Appeals erred in dismissing the petition and failing to address the petitioner’s claim of being a builder in good faith entitled to a factual hearing on her right to reimbursement and retention under Articles 546, 448, and 450 of the Civil Code.

RULING

Yes. The Supreme Court set aside the appellate court’s decision and remanded the case to the Intermediate Appellate Court. The legal logic is clear: the right to a writ of possession following a confirmed foreclosure sale is indeed ministerial, but it is not absolute when a colorable claim of a builder in good faith is properly raised. The trial court correctly recognized this exception in its initial orders, creating a factual issue—the petitioner’s good faith—that must be resolved before the writ can be justly issued.
The subsequent order denying the petitioner the opportunity to present evidence on this pivotal factual question constituted a denial of due process and a grave abuse of discretion. The mortgage stipulation cited by the trial judge to foreclose the reimbursement right was not the issue before the court; the central issue was the existence of good faith. The Court of Appeals’ dismissal on res judicata grounds was erroneous, as it overlooked this unresolved factual issue. Since the determination of good faith is factual, and pursuant to Section 9 of Batas Pambansa Blg. 129 granting the Intermediate Appellate Court the power to receive evidence and resolve factual issues, remand is the proper remedy to allow the petitioner to prove her claim and for the court to apply Articles 546, 448, and 450 of the Civil Code accordingly.