Title
Marcelo Steel Corp. vs. Court of Appeals
Case
G.R. No. L-34317
Decision Date
Nov 28, 1973
Spouses Farin mortgaged land to Marcelo Steel Corp., contested foreclosure, appealed trial court's dismissal. SC upheld foreclosure sale and writ of possession under Act 3135, ruling appeal didn’t suspend proceedings.
foreclosure sale
writ of possession
jurisdiction

Case Summary (G.R. No. L-34317)

Factual Background and Chronology

On October 30, 1964, the Farins executed a deed of real estate mortgage in favor of Marcelo Steel Corporation over a parcel of land covered by TCT No. 42589, as security for payment of a promissory note in the amount of P600,000.00. On July 24, 1965, Marcelo Steel Corporation filed with the Sheriff of Quezon City a verified letter-petition for the extra-judicial foreclosure of the mortgaged property. The sheriff scheduled the foreclosure sale for August 26, 1965.

Before the sale, on August 21, 1965, the Farins filed against Marcelo Steel Corporation and the sheriff a petition for “Prohibition with Injunction and Damages”, docketed as Civil Case No. Q-9384 in the Court of First Instance of Rizal. They sought a permanent injunction against the sheriff’s proceeding with the auction sale and demanded damages, alleging they had not been in default. On that same date, the trial judge issued an order commanding the sheriff and Marcelo Steel Corporation to desist from proceeding with the public auction sale.

After trial, the trial court rendered a decision on October 3, 1970, dismissing the prohibition case and awarding specified attorney’s fees, actual exemplary damages, and costs. Critically, it lifted and set aside the status quo order and expressly allowed the sheriff to proceed with the extrajudicial foreclosure. A copy of the decision was received by the Farins on October 15, 1970.

On October 19, 1970, Marcelo Steel Corporation filed another verified letter-petition with the sheriff informing it of the decision and praying for the continuance of extrajudicial foreclosure. Acting on the letter-petition, the sheriff set the public auction sale for December 9, 1970. On October 30, 1970, the Farins filed a notice of appeal, an appeal bond, and a record on appeal. On December 2, 1970, they filed an “Urgent Motion” to require respondents to desist from proceeding with the scheduled public auction sale.

After Marcelo Steel Corporation opposed, the trial judge issued on December 9, 1970 an order denying the motion to stop the auction. On the same date, the sheriff proceeded with the auction sale, Marcelo Steel Corporation was the successful bidder, and a certificate of sale dated December 9, 1970 was issued. Also on December 9, 1970, the trial judge issued an order approving the Farins’ record on appeal.

L.R.C. Petition and Writ of Possession

On January 12, 1971, Marcelo Steel Corporation filed in L.R.C. Record No. 7681 an independent petition for issuance of a writ of possession over the same parcel, denominated “In the Matter of the Petition For Issuance of Writ of Possession” over the land under TCT No. 42589, stating the mortgagor and the mortgagee. The Farins did not file an opposition. On January 18, 1971, the trial judge ordered the presentation and submission of evidence before the branch clerk of court. After Marcelo Steel Corporation submitted evidence, the trial court issued an order on February 4, 1971, granting the petition and directing the issuance of a writ of possession.

The Farins then filed the petitions that culminated in the Supreme Court’s review of the Court of Appeals’ reversal.

Court of Appeals’ Ruling on Certiorari

In its decision, the Court of Appeals treated the Farins’ efforts as sufficient to require the trial court to refrain from allowing the foreclosure sale and from issuing consequent relief in the land registration proceeding. The appellate court held that the trial court exceeded its jurisdiction when it denied the motion of the Farins to enjoin the foreclosure sale, particularly because the Farins had already perfected their appeal from the dismissal of their Civil Case No. Q-9384.

According to the Court of Appeals, the remedy pursued by the Farins was a special civil action of prohibition, not an ordinary action of injunction contemplated by Section 4 of Rule 39, nor an action for the annulment of a mortgage. It concluded that the trial court’s decision dismissing the prohibition case was not immediately executory “as a matter of right,” but only subject to judicial discretion under Section 2 of the same rule. The appellate court also pointed to the fact that the prevailing party had not moved for immediate execution, and therefore reasoned that the trial court could not have used Section 2 of Rule 39 to permit execution during the pendency of appeal.

On that premise, the Court of Appeals further held that the later issuance of a writ of possession effectively amounted to an execution of the decision in the civil case, and thus the trial court should have desisted.

Issues Before the Supreme Court

The decisive controversy for the Supreme Court centered on whether the trial court’s orders—(a) the denial of the Farins’ motion to stop the foreclosure sale and (b) the grant of the writ of possession—were unauthorized because the Farins had appealed the dismissal of their prohibition case and had allegedly thereby restored the status quo order. Corollary to this were the questions of (a) whether the sheriff’s foreclosure proceeded by virtue of any judicial execution order or merely pursuant to statutory authority under Act 3135, and (b) whether the writ of possession issued under Act 3135, as amended by Act 4118, required postponement due to the pending appeal in the prohibition case.

Supreme Court’s Reasoning: No Execution by Court Order; Foreclosure Under Act 3135

The Supreme Court ruled that the Court of Appeals “missed the point.” It emphasized that the trial court did not issue any order of execution. The sheriff’s act of proceeding with the foreclosure sale was not performed under a judicial execution directive. Instead, the sheriff acted under a statutory duty and authority pursuant to Act 3135, as amended by Act 4118, which required only the sale at public auction to the highest bidder upon a verified petition by the mortgagee. Judicial compulsion was not a prerequisite for the extrajudicial foreclosure process.

The Court explained that the sheriff proceeded not because the court ordered execution, but because the court refused to restrain the sheriff by dismissing the Farins’ prohibition petition and by lifting the preliminary status quo order. Thus, the Court held that the perfection of the appeal, by itself, could not have automatically restored the status quo order without an express order to that effect, which the court could issue but did not do.

To support this approach, the Supreme Court invoked doctrinal precedent, including Watson & Co. vs. Enriquez (as quoted in the decision), and reaffirmed the idea that an appeal from a decree dissolving an injunction did not, by itself, revive the injunction’s operative effect unless there was an affirmative order continuing the status quo. The Court also referred to Sitia Teco vs. Ventura, and Aguilar vs. Tan to underscore that the appeal did not suspend the operative effect of the final judgment dismissing the request for prohibition/injunction.

Supreme Court’s Reasoning: Writ of Possession Properly Issued; Act 3135 Creates a Mandatory Outcome

The Supreme Court further rejected the appellate court’s view that the writ of possession amounted to an impermissible execution pending appeal. It held that the sheriff’s foreclosure was not predicated on any judicial order; consequently, the subsequent writ of possession was properly issued under the statutory scheme.

The Court relied on De Gracia vs. San Jose, which it described as “on all fours” with the situation before it. De Gracia held that where a foreclosure sale was conducted under Act 3135, as amended by Act 4118, the purchaser had the statutory right to obtain possession during the redemption period. Sections 7 and 8 of Act 3135, as amended, were central. Under Section 7, the purchaser could petition the court for issuance of a writ of possession during the redemption period by filing an ex parte verified motion and furnishing the required bond, and the court was directed—upon approval of the bond—to order that a writ issue addressed to the sheriff, who would execute it immediately. Under Section 8, the debtor could file a petition to set aside the sale and cancel the writ within the time and procedure specified, and appeal from the order on that debtor petition was available, but the order granting possession would continue in effect during the pendency of the appeal.

The Supreme Court emphasized that the law left no discretion to the trial court once the purchaser complied with the statutory requirements. It characterized the issuance of the writ as a matter of course upon the proper filing of the petition and approval of the bond. Matters concerning the regularity or validity of the sale were to be raised in the debtor’s subsequent remedy under the statute and could not justify resisting the issuance of the writ at the initial ex parte stage.

Applying those principles, the Supreme Court held that the writ of possession in L.R.C. Record No. 7681 was properly granted because the foreclosure was an extrajudicial

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