G.R. No. 233127 - Integrated Credit and Corporate Services, Co. vs. Labrador

Case Summary (G.R. No. 233127)

Factual Background

Novelita Labrador owned two parcels of land in Paranaque City covered by TCT Nos. 173576 and 173577. On September 26, 2007, she obtained a loan from Chinatrust (Phils.) Commercial Bank Corporation for P3,440,000.00 and executed a real estate mortgage registered and annotated on the TCTs. After default, Chinatrust conducted an extrajudicial foreclosure under Act No. 3135, and the subject properties were sold at public auction on May 26, 2009. Integrated Credit and Corporate Services, Co. was declared highest bidder; a Certificate of Sale dated June 18, 2009 was issued to it and registered and annotated on the TCTs on July 3, 2009. Labrador did not exercise redemption within one year; petitioner executed an Affidavit of Consolidation on July 5, 2010, the old TCTs were cancelled, and new TCT Nos. 010-2010002226 and 010-2010002227 were issued in favor of petitioner.

Demand and Ex Parte Petition for Writ of Possession

On February 7, 2012, petitioner demanded surrender of possession from Labrador and another person who remained in possession. Petitioner filed an Ex Parte Petition for Issuance of a Writ of Possession before the RTC on March 21, 2012, seeking a writ and, if necessary, a break open order to enforce the writ. The RTC initially found the petition sufficient. Opposing the petition, Philippians Academy of Paranaque City filed a Comment and later a Counter-Petition, asserting that a Declaration of Trust, notarized September 28, 2007, made Labrador a trustee and the Academy the true owner; petitioner submitted a judicial affidavit in lieu of direct examination.

RTC Order Dismissing the Ex Parte Petition

On December 10, 2012, the RTC issued an Order denying petitioner’s motion to dismiss and dismissing the Ex Parte Petition for Issuance of a Writ of Possession. The RTC concluded that the matter had become adversarial because of the alleged trust agreement and jurisprudence holding that where a third party stands to be gravely affected, issuance of a writ of possession is not merely ministerial. The RTC reasoned that a hearing to determine the nature of any adverse possession and the better right of the parties was necessary and that these matters were better resolved in a proper action.

Appeal to the Court of Appeals and Its Ruling

Petitioner appealed to the Court of Appeals under Rule 41. In a February 15, 2017 Decision, the CA dismissed the appeal outright as the wrong legal remedy and affirmed the RTC Order. The CA held that the RTC Order was interlocutory and that Section 1(c) of Rule 41 precludes appeals from interlocutory orders. The CA further relied on Rule 50, Sec. 2, para. 2 to dismiss appeals erroneously taken to the CA rather than transferring them. A motion for reconsideration was denied in an August 2, 2017 Resolution.

Issues Presented to the Supreme Court

Petitioner framed five principal issues: whether the CA erred in treating the RTC dismissal as interlocutory rather than final on the merits; whether a writ of possession is a matter of right after consolidation of title; whether Philippians Academy failed to comply with statutory requirements to oppose issuance of a writ of possession; whether Philippians Academy proved it was a “third party” claiming rights adverse to the mortgagor under Sec. 33, Rule 39; and whether petitioner’s status as purchaser in good faith and for value entitled it to relief.

Parties’ Contentions on the Merits

Petitioner insisted the RTC Order was final and dismissed on the merits, that the issuance of the writ is a ministerial duty upon consolidation of title, and that Philippians Academy failed to meet the statutory prerequisites or to prove any adverse right, noting defects in the Declaration of Trust’s notarization and lack of registration. Philippians Academy maintained that the RTC and CA correctly treated the matter as interlocutory because an adversarial dispute over ownership existed and must be resolved first.

Supreme Court’s Procedural Determination

The Supreme Court held that the RTC Order was interlocutory because it did not finally dispose of the controversy or determine the parties’ respective rights and liabilities; the RTC left something to be done in the trial court by requiring an adversarial proceeding to determine the better right. The Court applied the established test and precedent, notably Spouses Limso v. Philippine National Bank, to distinguish interlocutory from final orders. The Court acknowledged that the proper remedy against interlocutory orders is a special civil action under Rule 65 for grave abuse of discretion, but it exercised discretion to relax procedural strictness and excuse petitioner’s mistaken resort to appeal in the interest of substantial justice.

Nature and Sources of the Writ of Possession

The Court explained that a writ of possession is a writ of execution to recover possession of land and that under Act No. 3135 a purchaser at extrajudicial sale may petition for possession during the redemption period under Section 7 by filing an ex parte motion and furnishing bond, and that after consolidation upon lapse of the one-year redemption period under Section 6 the purchaser’s ownership and right to possession become consolidated. The Court cited Philippine National Bank v. Sanao Marketing Corporation and Tolentino v. Laurel for the proposition that a Torrens certificate is conclusive evidence of ownership and ordinarily entitles the titleholder to possession.

Exceptions to the Ministerial Duty to Issue a Writ

The Court recited the narrow jurisprudential exceptions to the ministerial issuance of an ex parte writ where a purchaser holds a consolidated title, drawn principally from Nagtalon v. United Coconut Planters Bank: (a) gross inadequacy of the purchase price; (b) a third party claiming a right adverse to the mortgagor/debtor; and (c) failure to pay surplus proceeds to the mortgagor. The Court elaborated that the second exception requires that the third party actually hold the property adversely to the mortgagor — that is, possess in his own right such as a co-owner, tenant, or usufructuary — and cited Madriaga, Jr. v. China Banking Corp. and Spouses Rosario v. Government Service Insurance System.

Application of the Exceptions to the Present Case

The Court analyzed Phil

Case Syllabus (G.R. No. 233127)

Parties and Posture

Integrated Credit and Corporate Services, Co. was the purchaser at an extrajudicial foreclosure sale and petitioner before the Supreme Court.
Novelita Labrador was the mortgagor and original registered owner of the subject properties.
Philippians Academy of Paranaque City asserted ownership through a Declaration of Trust and filed a counter-petition opposing issuance of a writ of possession.
The petitioner sought review under Rule 45, Rules of Court from the Court of Appeals decision and resolution that dismissed petitioner's appeal under Rule 41, Rules of Court.

Key Facts

Novelita Labrador executed a real estate mortgage on September 26, 2007 to secure a PHP 3,440,000 loan from Chinatrust, and the mortgage was registered and annotated on TCT Nos. 173576 and 173577.
After default, extrajudicial foreclosure proceedings were instituted and a public auction occurred on May 26, 2009, where petitioner became the highest bidder and obtained a Certificate of Sale dated June 18, 2009.
The Certificate of Sale was annotated on July 3, 2009, and Labrador failed to redeem within one year, whereupon petitioner executed an Affidavit of Consolidation dated July 5, 2010 and was issued TCT Nos. 010-2010002226 and 010-2010002227.
Petitioner demanded possession on February 7, 2012 and filed an ex parte petition for a writ of possession on March 21, 2012, including a prayer for a break-open order.
Philippians Academy filed a Comment and, on September 26, 2012, a Counter-Petition claiming equitable ownership by virtue of a Declaration of Trust notarized September 28, 2007.

Procedural History

The Regional Trial Court of Parañaque City, Branch 196 issued an Order dated December 10, 2012 denying petitioner's motion to dismiss and dismissing the ex parte petition for a writ of possession on the ground that an adversarial issue existed requiring plenary determination.
Petitioner appealed to the Court of Appeals under Rule 41, which dismissed the appeal outright in its February 15, 2017 Decision for being an improper remedy from an interlocutory order, and denied reconsideration in its August 2, 2017 Resolution.
Petitioner filed the present petition for certiorari under Rule 45 before the Supreme Court.

Issues Presented

Whether the RTC Order dismissing the ex parte petition was a final judgment on the merits rather than an interlocutory order.
Whether a writ of possession became a matter of right upon consolidation of title in the name of the purchaser at the foreclosure sale.
Whether Philippians Academy complied with the statutory and jurisprudential requirements to oppose issuance of a writ of possession.
Whether Philippians Academy established that it was a “third party which is claiming a right adverse to that of the debtor or mortgagor” under Sec. 33, Rule 39, Rules of Court.
Whether the Court of Appeals erred in affirming the RTC where petitioner alleged good faith purchase for value and defects in the alleged trust document.

Ruling

The petition was GRANTED and the Court REVERSED and SET ASIDE the Court of Appeals Decision dated February 15, 2017 and Resolution dated August 2, 2017.
The Regional Trial Court of Parañaque City, Branch 196 and its Sheriff were ORDERED to issue and proceed with implementation of the ex parte writ of possession in favor of petitioner Integrated Credit and Corporate Services, Co..

Reasoning — Procedural Law

The Court