G.R. No. 207597 - Campos vs. Bank of the Philippine Islands

Case Summary (G.R. No. 207597)

Factual Background

In 1980, Campos mortgaged fourteen lots in favor of FEBTC (later merged with BPI/the Bank) to secure a One (1) Million peso loan. One of the mortgaged properties was the then vacant Lot No. 7-G-4 (subject lot). Campos allegedly constructed a two-storey building on the subject lot sometime in the late 1980’s, and he claimed that he did so with the knowledge and consent of the Bank. Because Campos failed to pay, the loan allegedly ballooned from the original amount to Eleven (11) Million pesos (P11,000,000.00) due to his default and the accumulation of interest and penalties.

After default, the Bank moved for extra judicial foreclosure of the mortgaged properties. The Bank was declared the highest bidder at a public auction bid of 11.3 million pesos and obtained a Certificate of Sale. When Campos did not redeem within the legal period, the Bank consolidated its ownership of the properties. The Bank then sought a writ of possession in the RTC, and on August 7, 2006, the RTC granted the ex parte motion and directed the Clerk of Court and the Ex Officio Sheriff to place the Bank in possession of the lots. On September 8, 2006, the RTC issued the writ commanding the Ex Officio Provincial Sheriff of Negros Occidental to execute the August 7, 2006 order.

Campos’s Motion for Suspension and the RTC’s Denial

Long after the RTC’s August 7, 2006 order had become final and executory, Campos filed a Motion for the Suspension of the Implementation of the Writ of Possession and/or to Allow Mortgagor to Present Evidence of Good Faith dated February 12, 2007. He claimed that his construction of the building on Lot No. 7-G-4 was in good faith and with the Bank’s consent. He invoked Article 546, in relation to Articles 448 and 450 of the Civil Code, and asserted a right to retain possession until the Bank reimbursed him for the value of the building.

The Bank opposed the motion. It argued that a purchaser at foreclosure has no obligation to reimburse the mortgagor for improvements. The Bank also pointed to the mortgage contract, which Campos executed, stating that the mortgagor transferred and conveyed, by way of mortgage, not only the land but also “all the buildings and improvements now existing or which may hereafter be erected or constructed thereon,” and that the mortgagor declared itself the absolute owner free from liens and encumbrances.

On April 16, 2007, the RTC denied Campos’s motion for lack of merit. The RTC reasoned that once the redemption period expired, its duty to issue a writ of possession was ministerial, citing Ong v. Court of Appeals and De Vera v. Agloro. It further held that any reimbursement claim could be pursued only in a separate civil action, not through a non-litigious and ex parte proceeding for the issuance of a writ of possession.

Campos moved for reconsideration on April 20, 2007, relying on Policarpio v. Court of Appeals, where the Court had allowed mortgagor’s heirs to present evidence of good faith. On September 10, 2007, the RTC denied reconsideration. It distinguished Policarpio by explaining that the controversy there involved a due process problem: the trial court had repeatedly asked for evidence of good faith, but then allegedly reversed itself when counsel was absent due to illness and received the respondent’s evidence ex parte. The RTC also stressed that Campos’s motion came long after the writ of possession had attained finality.

Proceedings Before the Court of Appeals

Campos filed a petition for certiorari with the CA and sought a Temporary Restraining Order (TRO). The petition was docketed as CA-G.R. CEB SP No. 02964. On July 24, 2012, the CA dismissed the petition, finding no grave abuse of discretion on the part of the RTC. The CA held that the RTC’s issuance of a writ of possession was authorized under Section 7 of Act No. 3135 and was a ministerial duty upon lapse of the redemption period. It added that Campos’s remedy under Section 8 of Act No. 3135 was to file, within thirty days after the purchaser was given possession, a petition to set aside or cancel the writ of possession.

Campos moved for reconsideration, reiterating that he was not furnished a copy of the Bank’s ex parte motion or of the RTC’s order granting the writ of possession. He also insisted that Policarpio applied. On May 23, 2013, the CA denied the motion. Hence, Campos elevated the matter to the Supreme Court through the present petition for review on certiorari.

The Parties’ Contentions in the Supreme Court

Campos maintained that he had the right to prove that he was a builder in good faith under Policarpio. He also argued factual and equitable points: that the Bank already had thirteen (13) of the fourteen (14) mortgaged lots; that the assessed and market values of those lots were significantly higher than the original loan; and that his loan had allegedly ballooned due to allegedly exorbitant interest and excessive penalties imposed by the Bank. He also insisted that the Bank did not furnish him a copy of the ex parte motion and that he was denied notice of the proceedings. Finally, he asserted that the Bank would be unjustly enriched if he was not reimbursed for improvements he allegedly built in good faith.

Houston, as substituted transferee, opposed the petition. It denied Campos’s good faith, citing the mortgage stipulation including future improvements as part of the mortgage. Houston also alleged obstructive conduct by Campos, describing that he allegedly dismantled much of the improvements and locked up the premises while Houston’s motion to enforce the writ was being heard. The Bank, through its comment, also refuted Campos’s allegations on the loan’s value and produced mortgage contracts showing the value of the loan at P9,324,000.00. It further noted that the earliest mortgage contract in the record was dated June 28, 1990, later than the period when Campos claimed he constructed the building. The Bank argued that even if the building were constructed after the mortgage, the contract still expressly included future improvements as part of the mortgage. It also contended that Campos invoked an improper remedy by filing a motion to suspend implementation of the writ of possession instead of the remedy under Section 8. Finally, the Bank argued that Policarpio did not apply because (a) it involved a judicial foreclosure, and (b) in Policarpio, the mortgagor’s heirs allegedly constructed a new house only about three years after the foreclosure sale with the bank’s consent, and the subsequent circumstances differed from those in Campos’s case.

Issues for Resolution

The core issue before the Court was whether the RTC acted beyond its jurisdiction or committed grave abuse of discretion when it denied Campos’s motion to suspend the implementation of the writ of possession. Related to that inquiry were the questions whether the RTC was required to furnish Campos notice in the ex parte proceeding under Act No. 3135, and whether Campos could invoke Policarpio to justify reopening factual matters about good faith builder status and reimbursement in the context of writ-of-possession proceedings.

The Supreme Court’s Ruling

The Court denied the petition for lack of merit and affirmed the CA’s July 24, 2012 decision and May 23, 2013 resolution. The Court emphasized that it was not a trier of facts and would not weigh conflicting evidence anew after the lower courts had already sifted through it. It refused to pass upon conflicting allegations on the original amount of the loan. It also characterized the issues as immaterial to whether the RTC acted in excess of jurisdiction or with grave abuse of discretion.

The Court underscored the limited nature of certiorari review at each stage. The CA’s task had been to determine whether the RTC acted without jurisdiction or with grave abuse of discretion. The Supreme Court’s review of the CA’s dismissal was narrower still; it did not correct mere errors of law but evaluated whether the CA committed errors of law in dismissing the certiorari petition.

Legal Basis and Reasoning

The Court held that Section 7 of Act No. 3135, as amended by Act No. 4118, expressly allowed the purchaser to file an ex parte motion to obtain possession during the redemption period, subject to filing a bond and the court’s approval. The Court stressed that neither the Bank nor the RTC was obligated to furnish Campos notice because the proceeding was ex parte and, by definition, made at the instance and for the benefit of one party only, without notice or hearing to persons adversely affected. It concluded that Campos was not entitled to participate in the proceedings except to the extent provided by Section 8 of Act No. 3135.

The Court further reasoned that Campos did not question the validity of the sale. Under the governing statutory scheme, his remedy was to bring a separate civil action for the value of the improvements rather than to seek suspension in the writ-of-possession proceeding. After Campos failed to redeem, his remaining interest was extinguished. With consolidation of ownership and issuance of a new certificate of title in the purchaser’s name, the purchaser became entitled to possession as an incident of absolute ownership, and the court’s duty to issue the writ became ministerial. The Court explained that if courts retained discretion to deny the writ, the writ would be a useless paper judgment. It added that the rationale for ministerial issuance was to immediately vest possession in the purchaser based on the right of ownership, with an exception only when possession was held by a third party whose possession was adverse to the mortgagor.

Applying these principles, the Court held that the RTC did not commit error or grave abuse of discretion when it issued the writ ex parte and denied Campos’s motion to suspend its implementation. It noted that the RTC observed Act No. 3135 and adhered narrowly to jurisprudence on the ministerial nature of it

Case Syllabus (G.R. No. 207597)

Parties and Procedural Posture

Anecito Campos filed a petition for certiorari with the Court of Appeals (CA) to assail the Regional Trial Court (RTC) denial of his motion to suspend the implementation of a writ of possession.
The CA dismissed the certiorari petition for lack of grave abuse of discretion on the part of the RTC.
Bank of the Philippine Islands (BPI) was the original respondent bank in the foreclosure proceedings, and Houston HomeDepot, Inc. was later substituted as the bank’s transferee pendente lite.
Campos sought review on certiorari before the Supreme Court, challenging the CA’s dismissal of his CA certiorari petition.

Key Factual Background

In 1980, Campos mortgaged fourteen (14) lots in favor of Far East Bank and Trust, Co. (FEBTC), which later merged with BPI.
The loan secured by the mortgage initially involved a stated One (1) Million peso loan.
Among the mortgaged properties was the then vacant Lot No. 7-G-4 (subject lot).
In the late 1980s, Campos constructed a two-storey building on the subject lot, alleging it was done with the knowledge and consent of the bank.
Campos defaulted on the loan due to business losses, and the loan allegedly ballooned from the original amount to Eleven (11) Million pesos (P11,000,000.00).
The bank sought extra-judicial foreclosure of the mortgaged properties.
The bank became the highest bidder at public auction with a bid of 11.3 million pesos, obtained a Certificate of Sale, and later consolidated its ownership after Campos failed to redeem within the legal redemption period.
The bank filed an ex parte motion for issuance of a writ of possession in RTC, Negros Occidental, Branch 46, Bacolod City.
On August 7, 2006, the RTC granted the motion and ordered the Clerk of Court and the Ex Officio Sheriff to place the bank in possession.
On September 8, 2006, the RTC issued the writ of possession, commanding the Ex Officio Provincial Sheriff of Negros Occidental to execute the August 7, 2006 order.
Long after the RTC order became final and executory, Campos filed a motion dated February 12, 2007 to suspend the implementation of the writ of possession and/or to allow him to present evidence of good faith.
Campos asserted that he was entitled to reimbursement for improvements under Article 546, in relation to Articles 448 and 450 of the Civil Code.
The bank opposed, arguing that the purchaser in foreclosure has no duty to reimburse improvements in a writ-of-possession proceeding and emphasizing the mortgage contract’s stipulation that future improvements are included in the mortgage.

Mortgage Contract Stipulations

The mortgage contract stated that the mortgagor transferred to the mortgagee, together with the land, all buildings and improvements now existing or which may hereafter be erected or constructed on the properties.
The bank relied on this clause to argue that Campos had contractually included future improvements as part of the mortgaged property.
In later pleadings, Houston HomeDepot, Inc. similarly invoked the stipulation to dispute Campos’s claim of good faith.

RTC Proceedings on Suspension

On April 16, 2007, the RTC denied Campos’s motion for lack of merit.
The RTC held that after the redemption period expired, issuance of a writ of possession is ministerial.
The RTC further held that reimbursement issues could be pursued in a separate civil action but not through a non-litigious and ex parte writ-of-possession proceeding.
Campos moved for reconsideration on April 20, 2007, citing Policarpio v. Court of Appeals for the proposition that mortgagor’s heirs may present evidence of good faith.
On September 10, 2007, the RTC denied reconsideration.
The RTC reasoned that in Policarpio, the core issue was due process arising from the trial court’s capricious handling of the evidence, including the reception of the bank’s evidence ex parte due to counsel’s illness.
The RTC also emphasized that Campos’s suspension motion was filed long after the writ of possession had attained finality.

CA Review and Holdings

Campos filed a petition for certiorari with the CA, docketed as CA-G.R. CEB SP No. 02964, with an application for a Temporary Restraining Order (TRO).
On July 24, 2012, the CA dismissed the petition.
The CA held that the RTC’s act was sanctioned by Section 7 of Act No. 3135, as amended by Act No. 4118, which allows the purchaser to petition for possession ex parte after the redemption period.
The CA concluded that the RTC’s duty to issue a writ of possession after expiration of the redemption period was ministerial.
The CA held that Campos’s remedy under Section 8 of Act No. 3135 was to petition to set aside or cancel the writ of possession within thirty (30) days after the purchaser was given possession.
Campos moved for reconsideration, asserting he was not furnished a copy of the ex parte motion and that he was denied notice.
On May 23, 2013, the CA denied reconsideration, maintaining that Campos failed to show grave abuse of discretion.

Issues Presented

The primary issue was whether the RTC acted beyond its jurisdiction or committed grave abuse of discretion when it denied Campos’s motion to suspend the implementation of the writ of possession.
Campos also challenged the RTC’s refusal to allow him to present evidence of good faith based on Policarpio and sought reimbursement for improvements.
Campos asserted denial of notice and lack of furnishing him a copy of the ex parte motion for the writ of possession.

Arguments of Campos

Campos insisted on his right to prove he was a builder in good faith pursuant to Policarpio.
Campos argued the bank already owned thirteen (13) of the fourteen mortgaged lots.
Campos claimed the assessed and market values of the lots far exceeded the original loan and that interest rates and penalties allegedly ballooned the loan from the original amount to 11 million pesos.
Campos argued the bank did not furnish him a copy of it