Title
San Ferdo Rural Bank, Inc. vs. Pampanga Omnibus Development Corporation
Case
G.R. No. 168088
Decision Date
Apr 4, 2007
PODC mortgaged property to San Fernando Rural Bank; after foreclosure, redemption dispute arose over validity and price. Supreme Court ruled writ of possession ministerial, redemption validity separate.
dispute
possession
property

Case Summary (G.R. No. 168088)

Loans, Mortgage, Extrajudicial Foreclosure, and the Certificate of Sale

PODC was the registered owner of the subject lot under TCT No. 275745-R. It secured loans from petitioner totaling P1,500,000.00 (with interest at 24% annually), evidenced by separate promissory notes executed by Federico R. Mendoza and Anastacio E. de Vera, and secured by a real estate mortgage. The mortgage expressly provided that upon failure to pay, the mortgage may be extrajudicially foreclosed in accordance with Act No. 3135, as amended.

Upon PODC’s failure to pay, petitioner filed for extrajudicial foreclosure. At the auction on April 23, 2001, petitioner emerged as the winning bidder for P1,245,982.05. The Ex-Officio Sheriff executed a Certificate of Sale on May 9, 2001, stating that the period of redemption would expire one (1) year after registration in the Register of Deeds. The certificate was annotated at the dorsal portion of TCT No. 275745-R on June 7, 2001.

Petitioner did not file a petition for a writ of possession during the redemption period.

Assignment of Redemption Rights to Aquino and Aquino’s Redemption Payments

On May 11, 2002, petitioner—through Eliza Garbes and with board authority—executed a notarized deed of assignment in favor of Aquino, covering PODC’s right of redemption.

On May 29, 2002, Aquino offered to redeem by paying P1,588,094.28, but petitioner rejected the offer and demanded P16,805,414.71 as redemption money. Aquino refused petitioner’s demand and remitted P1,588,094.28 to the Ex-Officio Sheriff as redemption money on May 30, 2002, with the Ex-Officio Sheriff issuing a receipt dated May 31, 2002.

In a letter dated June 4, 2002, the Ex-Officio Sheriff informed petitioner that Aquino had redeemed the property and requested computation of the correct redemption price. Petitioner submitted a statement of account asserting that the redemption price was P9,052,309.23, and that including the loan of the spouses Garbes, the total redemption money was P16,805,414.71. The Ex-Officio Sheriff later computed the redemption price based on R.A. No. 8791 (General Banking Act) and R.A. No. 7353 (Rural Bank Act of 1992) and fixed it at P5,194,742.50. Aquino then remitted the difference by paying P3,606,648.52, and the Ex-Officio Sheriff issued an official receipt and a Certificate of Redemption dated June 7, 2002, expressly reflecting payment of P5,194,742.50 under official receipts.

Petitioner’s representative inquired about how the redemption amount was computed but refused to receive a copy of the certificate of redemption when it was offered.

Affidavit of Consolidation Filed by Petitioner and Registration Issues

On June 10, 2002, petitioner filed an Affidavit of Consolidation, alleging that the mortgagors and other persons entitled to redeem had failed to exercise their right within the one-year period and requesting the Register of Deeds to cancel PODC’s title and issue a new certificate of title in petitioner’s favor.

Although the affidavit was entered in the registry, the Register of Deeds did not issue a new title. A letter dated June 18, 2002 shows that the Registrar sought guidance from the Land Registration Authority (LRA) Administrator on whether to issue a new title to petitioner or to annotate Aquino’s redemption certificate. The Ex-Officio Sheriff also asked petitioner to turn over the owner’s duplicate title, but petitioner refused. Petitioner did not file Aquino’s Certificate of Redemption with the Register of Deeds.

Meanwhile, Aquino, as assignee, wrote the Register of Deeds on June 14, 2002, insisting that redemption had been made on June 7, 2002 and requesting cancellation of petitioner’s consolidation affidavit. Aquino subsequently filed the Certificate of Redemption with the Register of Deeds on June 17, 2002, while the deed of assignment was likewise entered in the registry on June 17, 2002.

The Register of Deeds Administrator, acting on the consulta, later resolved that the Affidavit of Consolidation was superior to the Certificate of Redemption, reasoning that documents were not registered within the redemption period and applying the principle that the first in registration is the first in law.

RTC Proceedings in LRC No. 890: Petition for Writ of Possession

On October 15, 2002, petitioner filed a Petition for a Writ of Possession in the RTC of Pampanga, docketed as LRC No. 890. Petitioner relied on its status as purchaser at the foreclosure sale and argued that redemption rights had expired and that, under Act No. 3135, as amended, it was entitled to possession during or even after the redemption period upon filing the required bond.

The RTC held a hearing on November 28, 2002. PODC opposed the petition, asserting that petitioner concealed redemption, that Aquino paid the correct redemption money based on the Ex-Officio Sheriff’s computation, that Aquino’s redemption had been properly made within the period, and that Aquino—having redeemed—was the proper party entitled to possession. PODC further argued that possession could not be disturbed because Aquino was already in actual possession and that the RTC could not determine the validity of redemption in a writ-of-possession proceeding.

Petitioner countered that Aquino’s offer was short of the correct redemption price, that an invalid redemption followed, and that the mortgaged obligation persisted unless the loans secured by the mortgage were fully paid, including the spouses Garbes loan account. Petitioner also maintained that the oppositor had lost interest because PODC had assigned its right of redemption.

On December 20, 2002, the RTC granted petitioner’s petition and ordered issuance of a writ of possession upon bond equivalent to the market value. The RTC treated the proceeding as essentially ministerial and ruled that the issues involving the validity of redemption and the registrability and effect of documents could not be used to oppose the writ. It further reasoned that no third party was adversely holding the property against PODC and therefore concluded that the RTC had a ministerial duty to issue the writ upon showing purchase at auction and bond compliance.

When respondents moved for reconsideration, they invoked the need for Torrens title consolidation in petitioner’s name before issuance of a writ of possession, arguing that petitioner failed to present a Torrens title in its name. The RTC denied reconsideration on February 18, 2003, reaffirming that the right of the purchaser to possession attached from purchase and not from title issuance.

CA Proceedings in CA-G.R. SP No. 75787 and the CA’s Ruling

Respondents filed a petition for certiorari with the CA on March 6, 2003, challenging the RTC’s orders granting writ of possession. They argued that grave abuse of discretion existed and that substantial issues were pending, including Aquino’s right to redeem, the validity of redemption, and the redemption price. They also contended that petitioner posted a redemption bond beyond the redemption period. Respondents invoked rulings that the writ-of-possession should not issue when substantial issues remain to be resolved.

Petitioner argued that certiorari was improper and that the RTC orders were properly reviewable by appeal, not Rule 65. Petitioner also maintained that it acted in accordance with law and facts.

The CA, in CA-G.R. SP No. 75787, ruled that the RTC’s order granting the writ of possession was interlocutory and thus reviewable through certiorari under Rule 65, citing City of Manila v. Serrano. It held that grave abuse of discretion attended the RTC’s grant of possession. Applying Act No. 3135, as amended, and Section 27(a), Rule 39 of the Rules of Court, the CA reasoned that Aquino, as successor-in-interest by assignment, redeemed on June 7, 2002 and was entitled to possession. It added that registration of redemption was merely required to bind third persons and that petitioner could not refuse redemption because its right was only inchoate until the redemption period expired without valid redemption.

The Supreme Court’s Ruling: Remedy, Jurisdictional Error, and Ministerial Duty

The Supreme Court granted the petition. It held that the CA erred in treating the RTC’s December 20, 2002 order granting the writ of possession as interlocutory. The Court explained the doctrinal distinction between interlocutory and final orders. Interlocutory orders determine incidental matters and do not dispose of the case on the merits. Final orders dispose of the whole matter or terminate the particular proceedings such that nothing remains to be done except execution.

The Supreme Court ruled that the RTC’s order granting the writ of possession under Act No. 3135, as amended, was a final order. Accordingly, the proper remedy for respondents was appeal under Rule 41 of the Rules of Court, not certiorari under Rule 65. It further held that even if the RTC erred, it was an error of judgment correctible by ordinary appeal, not a jurisdictional error remediable only by certiorari. The Court reiterated that certiorari is available only to correct errors of jurisdiction or grave abuse of discretion amounting to lack or excess of jurisdiction, and it is not a substitute for appeal. It emphasized the standard for grave abuse of discretion: capricious and whimsical exercise of judgment equivalent to lack or excess of jurisdiction, displayed in a manner so patent and gross as to amount to evasion of duty or refusal to act in contemplation of law.

The Supreme Court also reasoned that the statutory framework for setting aside a writ of possession under Section 8 of Act No. 3135, as amended, places matters concerning the validity of the mortgage foreclosure and damages within the summary procedure within the RTC proceedings. It observed that during the pendency of an appeal from such an order, the purchaser must be placed in possession, predicated on the right of ownership.

Redemption Rights, the LRA’s Limited Role, and the Court’s Treatment of Subs

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