GR L 79906; (June, 1988) (Digest)
G.R. No. L-79906 June 20, 1988
RAFAEL BARICAN and ARACELI ALEJO, petitioners, vs. INTERMEDIATE APPELLATE COURT, and DEVELOPMENT BANK OF THE PHILIPPINES, respondents.
FACTS
Spouses Antonio Regondola and Dominga Zabat obtained a loan from the Development Bank of the Philippines (DBP), secured by a real estate mortgage. Upon the Regondolas’ default, DBP extrajudicially foreclosed the mortgage, purchased the property at the auction sale in 1980, and consolidated title after the redemption period lapsed. DBP subsequently sold the property to Nicanor Reyes in 1984. In 1985, DBP filed for a writ of possession, which the trial court initially granted.
Petitioners Rafael Barican and Araceli Alejo opposed the writ, claiming ownership and possession of the property by virtue of a prior deed of sale with assumption of mortgage executed with the Regondolas. They revealed they had filed a separate civil case (Civil Case No. C-11232) against DBP and Reyes for declaration of ownership and damages, alleging DBP knew of their assumption and had accepted payments from them. The trial court stayed the writ, finding the petitioners’ rights would be prejudiced, and later denied DBP’s petition for an alias writ of possession.
ISSUE
Whether the pendency of a civil case for ownership filed by third-party possessors constitutes a legal bar to the issuance of a writ of possession in favor of the purchaser in an extrajudicial foreclosure sale.
RULING
The Supreme Court ruled in favor of the petitioners, reversing the appellate court. The Court held that the general rule making the issuance of a writ of possession a ministerial duty under Act No. 3135 is not absolute. It yields when the rights of third parties who were not parties to the mortgage foreclosure are involved and are claiming adverse, colorable title.
The Court found Section 4 of P.D. No. 385, which mandates swift possession for government financial institutions, inapplicable because DBP had already sold the property to Reyes, thereby divesting itself of ownership. Crucially, the petitioners were in possession as third-party claimants under a deed of sale and had made payments to DBP, facts which raised legitimate questions of ownership needing adjudication in the pending civil case. The Court emphasized that where a third party is in possession claiming a right adverse to that of the mortgagor/debtor, a separate action to determine such conflicting claims is proper, and the ministerial issuance of a writ is precluded. The trial court correctly exercised discretion in denying the alias writ pending resolution of the civil case to prevent prejudice to the petitioners’ substantial claims. The temporary restraining order was made permanent.