Case Summary (G.R. No. 233127)
Relevant Dates and Procedural History
- September 26, 2007: Labrador executed a REM to secure a loan.
- May 26, 2009: Public auction sale took place; petitioner was the highest bidder.
- July 3, 2009: Certificate of sale was registered.
- July 5, 2010: Petitioner executed an affidavit consolidating ownership as Labrador failed to redeem.
- February 7, 2012: Demand to surrender possession sent to Labrador and Benjamin Labrador.
- March 21, 2012: Petitioner filed ex parte petition for writ of possession.
- December 10, 2012: RTC denied the writ of possession and dismissed the petition.
- February 15 and August 2, 2017: Court of Appeals denied petitioner’s appeal as an improper remedy.
- July 10, 2023: Supreme Court decision reversing the CA rulings.
Applicable Law and Legal Framework
The case is adjudicated under the 1987 Philippine Constitution and applicable procedural rules, including the Rules of Court (Rules 41 and 65, Rules 39, and Rule 50), and substantive laws governing extrajudicial foreclosure under Act No. 3135, as amended by Act No. 4118. Jurisprudence interpreting ownership, possession, trust relationships, and writs of possession applies.
Background: Mortgage, Foreclosure, and Ownership Consolidation
Labrador obtained a loan and put up two parcels of land as collateral through a registered REM. Upon default, Chinatrust extrajudicially foreclosed and auctioned the properties. Petitioner, as the winning bidder, registered the certificate of sale, and after the redemption period lapsed without Labrador redeeming the property, petitioner consolidated ownership. Consequently, new Transfer Certificates of Title were issued in petitioner’s name. Petitioner then sought to recover possession, prompting a writ of possession petition.
Proceedings Before the RTC: Denial of Writ of Possession
The RTC found that an adversarial dispute had arisen because Philippians Academy claimed ownership through a Declaration of Trust executed by Labrador. The court emphasized that a writ of possession is not a mere ministerial duty when a third party possessing the property holds a right adverse to the mortgagor. The existence of an express trust created an issue affecting ownership and possession, compelling the court to require a full adversarial action to determine ownership. Consequently, the RTC denied petitioner’s ex parte petition for writ of possession and dismissed the petition.
The Court of Appeals’ Ruling and Procedural Issue
Petitioner appealed to the Court of Appeals under Rule 41, which dismissed the appeal outright for being an improper remedy, as the RTC order was interlocutory and thus not appealable. The CA held that the proper remedy was a petition for certiorari under Rule 65. The CA affirmed the RTC's reasoning regarding the presence of an adversarial dispute due to the trust claim.
Issues Raised in the Supreme Court Petition
Petitioner challenged the CA ruling on several grounds, including whether the RTC order was final or interlocutory, whether the writ of possession should have been issued as a matter of right following ownership consolidation, whether Philippians Academy complied with the legal requirements to oppose the writ, and whether Philippians Academy truly held adverse possession under Rule 39, Section 33.
Supreme Court’s Analysis: Nature of the RTC Order and Proper Remedy
The Supreme Court determined that the RTC order denying the writ and dismissing the petition was interlocutory because it did not finally dispose of the case and left unresolved the parties’ substantive claims to possession. The order envisaged further proceedings before the RTC, thus not final on the merits. Under Section 1(c), Rule 41 of the Rules of Court, interlocutory orders are not appealable; the proper remedy is a petition for certiorari under Rule 65, but only upon showing grave abuse of discretion.
Relaxation of Procedural Rules in Substantial Justice
The Court recognized the procedural defect in the petitioner’s chosen remedy but excused it due to the demands of substantial justice. The Court found the RTC’s conclusions speculative and unsubstantiated, justifying the relaxation of the procedural rules to reach the substantive merits of the case.
Legal Principles on Writ of Possession in Extrajudicial Foreclosure
A writ of possession is an order compelling the sheriff to place the lawful owner in possession of land. Under Act No. 3135, as amended, a writ may be issued during the redemption period upon good cause or after the lapse of such period when ownership consolidates in the purchaser’s name. Once ownership is consolidated and a new TCT is issued, possession follows as a matter of law, and the court’s issuance of a writ of possession becomes a ministerial, non-discretionary duty.
Exceptions to the Ministerial Duty to Issue Writ of Possession
There are exceptions where the writ should not be issued ex parte, including: a) Gross inadequacy of purchase price; b) Presence of a third party possessing the property adversely to the mortgagor/debtor; c) Failure to pay surplus proceeds to the mortgagor. Of particular importance is the exception regarding third-party adverse possession, which requires (i) the third party to possess in their own right (e.g., as co-owner, tenant, or usufructuary), and (ii) the possession to be adverse to the judgment obligor.
Analysis of Philippians Academy’s Claim as Third Party Possessor
Philippians Academy claimed ownership based on a Declaration of Trust executed two days after the REM and alleged that Labrador held the properties in trust. The Court clarified that a trust relationship creates a fiduciary duty of the trustee (Labrador) to the beneficiary (Philippians Academy). The beneficiary’s interest is not adverse but derivative and subordinate to the trustee’s legal title.
Philippians Academy was thereby not a co-owner or possessor in its own right but a beneficiary. Their possession was not adverse to Labrador’s, the debtor-mortgagor. Moreover, the Declaration of Trust was not registered and was ineffective against third parties, binding only the original parties. The loan secured by the REM was partly used to acquire the property for Philippians Academy’s benefit, indicating Philippians Academy’s assent to the mortgage and actions of Labrador as trustee. There was no allegation or proof of fraud or breach of fiduciary duty by Labrador.
The Court’s Finding on the Necessity of a Hearing
The RTC’s refusal to issue the writ was premised on the existence of an adversarial dispu
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Case Syllabus (G.R. No. 233127)
Nature and Procedural Background of the Case
- This case is an appeal by certiorari seeking to reverse and set aside the February 15, 2017 Decision and August 2, 2017 Resolution of the Court of Appeals (CA) in CA-G.R. CV No. 100060.
- The CA dismissed outright the appeal of Integrated Credit and Corporate Services, Co. (petitioner) for improper legal remedy, holding the order appealed from was interlocutory and thus not appealable.
- The controversy arose from petitioner’s ex parte petition for the issuance of a writ of possession following extrajudicial foreclosure of two parcels of land owned by respondent Novelita Labrador.
- Respondent Philippians Academy of ParaAaque City filed a counter-petition claiming ownership of the subject properties through a Declaration of Trust executed by Labrador.
- The Regional Trial Court (RTC) denied petitioner’s writ of possession petition and dismissed it due to the existence of an adversarial dispute raised by Philippians Academy’s claim.
- Petitioner’s procedural recourse through appeal was held improper; remedy under Rule 65, petition for certiorari, was suggested but not availed instead.
Factual and Transactional Background
- Novelita Labrador was registered owner of two parcels with improvements in ParaAaque City under TCT Nos. 173576 and 173577 (the subject properties).
- Labrador obtained a loan of P3,440,000.00 from Chinatrust (Phils.) Commercial Bank Corporation.
- To secure the loan, Labrador executed a real estate mortgage (REM) over the subject properties in favor of Chinatrust on September 26, 2007.
- After defaulting, Chinatrust executed extrajudicial foreclosure and sold the properties at public auction on May 26, 2009.
- Petitioner was the highest bidder; Certificate of Sale was issued on June 18, 2009 and registered with annotation on the TCTs on July 3, 2009.
- Labrador failed to exercise her right of redemption within the one-year period; petitioner consolidated rights by affidavit executed July 5, 2010.
- New TCTs were issued in petitioner’s name, canceling Labrador’s certificate.
- Petitioner sent a demand letter for possession in February 2012, but respondents failed to vacate.
- Petitioner filed an ex parte petition for writ of possession on March 21, 2012.
- Philippians Academy filed comment and counter-petition alleging ownership via a Declaration of Trust notarized September 28, 2007.
RTC’s Ruling and Grounds for Denial of Writ of Possession
- The RTC found the existence of an adversarial dispute and held that the writ of possession was not a ministerial duty when a third party with an adverse claim is in possession.
- The court noted the necessity of a hearing to determine the nature of the adverse possession.
- It dismissed petitioner’s ex parte petition for writ of possession and denied the motion to dismiss Philippians Academy’s counter-petition.
- RTC concluded that ownership and trust issues are best resolved through a proper action rather than summary issuance of possession.
- The ruling emphasized the principle that a writ of possession cannot be issued where third-party adverse claims exist to property subject to extrajudicial foreclosure.
CA’s Decision and Procedural Issue on Appellate Remedy
- CA affirmed the RTC order and dismissed petitioner’s appeal outright for being filed under the wrong remedy.
- The appeal was held improper because the RTC order was interlocutory, denying a motion to dismiss and dismissal of the petition without final disposition on the merits.
- Citing Section 1(c) Rule 41, the CA stated interlocutory orders are not appealable.
- The proper remedy was a petition for