Case Summary (G.R. No. 200991)
Factual Background
The respondent and New San Jose Builders, Inc. executed a loan agreement dated 10 December 1997 under which the developer mortgaged several projects as security, including one hundred two condominium units at St. John Condominium and rights over additional units. The mortgage was annotated on the titles on 10 December 1997. The developer allegedly sold Unit 205 in St. John Condominium to Spouses Wilfredo and Dominica Rosario. The developer defaulted. The respondent applied for extrajudicial foreclosure on 31 March 2003, conducted an auction on 17 June 2003, and became the highest bidder. Titles were consolidated in respondent’s name after the redemption period lapsed and the Register of Deeds cancelled the corresponding titles.
Trial Court Proceedings
After consolidation, respondent sought to recover possession and filed a petition for issuance of a writ of possession on 23 August 2006 against the developer and all occupants of the foreclosed properties. The developer and several of its buyers, including Spouses Wilfredo and Dominica Rosario, filed pleadings-in-intervention. The respondent moved to expunge those pleadings. On 07 April 2008, Branch 85, RTC resolved to grant the motions for intervention, treat an application for judicial notice as a motion to intervene, and grant respondent’s application for a writ of possession only as to unsold condominium units and lots not in possession of third-party buyers. The RTC denied respondent’s motion for partial reconsideration on 11 June 2009.
Ruling of the Court of Appeals
The Court of Appeals granted respondent’s petition for certiorari and reversed the RTC resolutions by Decision dated 28 July 2011. The CA found grave abuse of discretion in the RTC’s allowance of intervention in an ex parte proceeding for issuance of a writ of possession. The CA held that the RTC erred in restraining the implementation of the writ against the petitioners because they were not third parties actually possessing the foreclosed property adversely to the mortgagor. The CA instructed that the proper remedy for buyers alleging noncompliance with Section 18 of P.D. No. 957 is annulment of the mortgage or foreclosure before the HLURB.
Petitioners’ Contentions
The petitioners maintained that they qualified to intervene because they were third-party possessors of Unit 205 who had not been impleaded in respondent’s ex parte application. They asserted that they were co-owners rather than mere transferees of the developer and that their possession was adverse to respondent because the mortgage by the developer lacked HLURB authority in violation of Section 18 of P.D. No. 957.
Issue Presented
The central issue was whether the CA erred in concluding that the RTC committed grave abuse of discretion in allowing the petitioners to intervene in the ex parte application for a writ of possession and in exempting Unit 205, possessed by petitioners, from the writ’s implementation.
Ruling of the Supreme Court
The petition was granted. The Supreme Court reversed the CA Decision dated 28 July 2011 and Resolution dated 20 February 2012, and reinstated the RTC Resolution dated 07 April 2008 in LRC Case No. Q-22034. The Court held that writs of possession issued after consolidation cease to be ministerial and ought not to be enforced ex parte where third-party possessors hold the property adversely to the mortgagor; condominium and subdivision buyers actually occupying units or lots must be allowed to intervene and be excluded from enforcement of the writ pending a hearing to determine the nature of their possession.
Legal Basis and Reasoning
The Court reaffirmed that, as a general rule, the highest bidder at an extrajudicial foreclosure becomes absolute owner after the redemption period and is entitled to possession under Article 428 of the New Civil Code and jus possidendi. The ministerial duty to issue an ex parte writ under Sec. 33, Rule 39 is subject to an exception where a third party actually holds the property adversely to the judgment obligor. Citing precedent such as de Ortega v. Natividad, Angeles v. IAC, and others, the Court explained that a writ of possession cannot be enforced against a party who entered possession before the suit and whose possession raises a disputable presumption of ownership; summary possessory proceedings cannot resolve title disputes. The Court surveyed categories traditionally treated as third-party possessors — co-owners, usufructuaries, agricultural tenants, heirs in certain circumstances — and extended similar protection to condominium and subdivision buyers who occupy their units or lots. The Court grounded this extension on the protective policy of P.D. No. 957, which aims to safeguard small buyers against unscrupulous practices, and on the Maceda Law, R.A. No. 6552, which protects installment buyers. It observed that mortgagees who lend against developer properties assume the risk that individual buyers may exist and that the loan agreement itself in this case anticipated sales to buyers and conditioned proceeds to recoupment. Because the respondent knew the development context and consented to sales subject to conditions, it could not invoke lack of notice as a defence to summary dispossession. The Court therefore held that when bona fide buyers in actual possession intervene, the trial court must hold a hearing to determine the buyers’ status; if satisfied that they are bona fide occupants, the writ must exclude them from its implementation without prejudice to adjudication of the mortgage’s validity under Section 18 of P.D. No. 957 before HLURB or other competent fora.
Doctrinal T
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Case Syllabus (G.R. No. 200991)
Parties and Posture
- Spouses Wilfredo and Dominica Rosario filed the petitioners before the Court to challenge the Court of Appeals' reversal of the Regional Trial Court's resolution that allowed their intervention and limited enforcement of a writ of possession.
- Government Service Insurance System is the respondent and successful bidder in the extrajudicial foreclosure who sought issuance and implementation of a writ of possession.
- The matter reached the Court by way of a petition for review on certiorari assailing the Court of Appeals Decision dated 28 July 2011 and Resolution dated 20 February 2012 in CA-G.R. SP No. 110231.
- The Court considered whether the Court of Appeals erred in finding grave abuse of discretion in the RTC's grant of intervention and in exempting Unit 205 from the writ of possession.
Key Facts
- New San Jose Builders, Inc. and GSIS entered into a Loan Agreement dated 10 December 1997 for Php 600,000,000 to finance housing projects and purchase lots.
- NSJBI mortgaged several properties including 102 condominium units at St. John Condominium, among them Unit 205, and the mortgage was annotated on the respective titles on 10 December 1997.
- Petitioners allegedly purchased Unit 205 from NSJBI and have been in actual possession since 1998 while making installment payments under their contract to sell.
- NSJBI defaulted and GSIS applied for extrajudicial foreclosure on 31 March 2003 and became the highest bidder at auction on 17 June 2003, after which titles were consolidated in GSIS's name.
- GSIS filed a petition for writ of possession on 23 August 2006; NSJBI buyers including petitioners sought leave to intervene and the RTC allowed intervention and limited the writ to exclude sold units in actual possession of third-party buyers.
- The RTC denied reconsideration on 11 June 2009, the Court of Appeals reversed and ordered full enforcement of the writ, and the petitioners sought relief before the Supreme Court.
Procedural History
- The RTC of Quezon City, Branch 85, in LRC Case No. Q-22034 issued a Resolution on 07 April 2008 admitting interventions and limiting the writ of possession.
- The RTC denied GSIS's motion for partial reconsideration in a Resolution dated 11 June 2009.
- Court of Appeals granted GSIS's certiorari petition and reversed the RTC on 28 July 2011, with a subsequent resolution on 20 February 2012.
- The Supreme Court entertained the petition for review on certiorari and rendered the present decision.
Issues
- Whether the Court of Appeals erred in ruling that the RTC committed grave abuse of discretion in allowing petitioners to intervene in the ex parte application for a writ of possession.
- Whether Unit 205, possessed by petitioners, is exempt from implementation of the writ of possession issued in favor of GSIS.
Contentions
- Petitioners contended that they are third-party possessors and should be allowed to intervene because they are co-owners in possession or bona fide purchasers in actual possession and that the mortgage was executed without HLURB approval in violation of Section 18, P.D. No. 957.
- GSIS contended that petitioners are mere transferees or successors-in-interest of the mortgagor and therefore not third parties whose possession is adverse to the mortgagor, and that the writ of possession should issue ministerially once redemption lapsed.
- GSIS further maintained that the proper remedy for petitioners complaining of Section 18 violations is annulment proceedings before HLURB.
Statutory Framework
- Sec. 33, Rule 39 of the Rules of Court, made