The Supreme Court has affirmed that a purchaser at an extrajudicial foreclosure sale is legally entitled to a writ of possession after consolidating ownership, assuming the mortgagor fails to redeem the property within the prescribed period. This entitlement is considered a matter of right, underscoring the purchaser’s vested interest in the property following a valid foreclosure. The Court clarified that while there are exceptions, the mere pendency of a case questioning the validity of the mortgage or foreclosure does not automatically suspend the purchaser’s right to possess the property. This decision reinforces the ministerial duty of courts to issue a writ of possession, ensuring that purchasers can realize their property rights without undue delay.

Foreclosure Fight: Can a Pending Lawsuit Block a Bank’s Possession?

Spouses Montano and Merlinda Tolosa entered into a Credit Agreement with United Coconut Planters Bank (UCPB), securing it with real estate mortgages. Upon the Spouses Tolosa’s failure to meet their financial obligations, UCPB foreclosed on the properties. After UCPB won the public auction and the Spouses Tolosa failed to redeem the properties, UCPB consolidated ownership and sought a writ of possession. The Spouses Tolosa opposed the writ, citing a pending case they filed questioning the validity of the mortgage and foreclosure. The Regional Trial Court (RTC) initially sided with the Spouses Tolosa, suspending the writ’s issuance, but the Court of Appeals (CA) reversed this decision, prompting the Supreme Court review. The central legal question before the Supreme Court was whether the pending case challenging the mortgage and foreclosure could prevent UCPB, as the purchaser, from obtaining a writ of possession.

The Supreme Court unequivocally stated that a writ of possession is an order compelling the sheriff to place someone in possession of real or personal property. According to Section 7 of Act No. 3135, as amended, a purchaser in a foreclosure sale is entitled to a writ of possession either during the one-year redemption period (with a bond) or after the redemption period lapses (without a bond). After the buyer consolidates the title due to the mortgagor’s failure to redeem, the right to possess becomes absolute, rooted in the purchaser’s ownership. “After the consolidation of title in the buyer’s name for failure of the mortgagor to redeem the property, entitlement to the writ of possession becomes a matter of right,” the Court noted, underscoring the importance of property rights in foreclosure proceedings.

The Court emphasized that the proceeding for a writ of possession is ex parte and summary, designed for the benefit of one party without requiring notice to adverse parties. The issuance of the writ is a ministerial function, leaving trial courts with no discretion. A judge need not examine the mortgage’s validity or the foreclosure method when a writ of possession application is filed. This underscores the legal principle that the court’s duty is to ensure compliance with legal requirements for transferring possession, not to adjudicate underlying disputes about the mortgage’s legitimacy.

The Spouses Tolosa argued that the pending Civil Case No. 6180 justified suspending the writ, alleging UCPB failed to release the full loan amount and imposed undisclosed interest rates in violation of Republic Act No. 3765, the Truth in Lending Act. However, the Court found these arguments insufficient to prevent UCPB from obtaining the writ. The Court reiterated that a pending action to annul a mortgage or foreclosure does not halt the writ of possession. The purchaser is still entitled to the writ, but the outcome of the annulment case is not prejudiced. “Regardless of the pendency of such suit, the purchaser remains entitled to a writ of possession, without prejudice, of course, to the eventual outcome of the pending annulment case,” the Court stated. This highlights that the writ of possession is a procedural mechanism distinct from the substantive issues of mortgage validity.

The Supreme Court addressed the jurisprudential exceptions, citing cases like Cometa v. Intermediate Appellate Court, where the auction sale price was unusually low, and Barican v. Intermediate Appellate Court, where the property was sold to third parties. However, these exceptions did not apply to the Spouses Tolosa’s case. The Court in Sulit v. Court of Appeals, ruled that failure of the mortgagee to deliver the surplus from the proceeds of the foreclosure sale equivalent to at least 40% of the mortgage debt was likewise found sufficient justification for the non-issuance of the writ of possession sought. In this instance, there was no evidence of an unusually low sale price or transfer to third parties. The Court sidestepped the validity issues in the Spouses Tolosa’s mortgage obligation because Case No. 6180 had yet to resolve them. The Court clarified, “the debtor may, in the proceedings in which possession was requested, but not later than thirty days after the purchaser was given possession, petition that the sale be set aside and the writ of possession cancelled, specifying the damages suffered by him, because the mortgage was not violated or the sale was not made in accordance with the provisions hereof.”

The Spouses Tolosa also claimed that their mortgage obligation was overpaid, arguing UCPB should have delivered a surplus from the foreclosure sale. However, the Court noted that the alleged surplus depended on the disputed validity of UCPB’s interest and charges, an unresolved issue in Case No. 6180. Even if there was a surplus, the Court noted that the exception in Sulit did not apply because the redemption period had expired, and UCPB had consolidated ownership. Having consolidated ownership after the Spouses Tolosa failed to redeem, UCPB was entitled to a writ of possession. Any mortgage or foreclosure validity questions did not legally justify refusing the writ. The RTC’s duty to issue the writ was not discretionary because Civil Case No. 6180 was pending, and the Spouses Tolosa’s petition did not adequately establish any exceptions to these rules.

FAQs

What is a writ of possession?	A writ of possession is a court order directing the sheriff to transfer the possession of real or personal property to the person entitled to it. In foreclosure cases, it is typically issued to the purchaser of the property after the redemption period has expired.
When is a purchaser entitled to a writ of possession?	A purchaser is entitled to a writ of possession after consolidating ownership of the foreclosed property. This typically occurs after the mortgagor fails to redeem the property within the legally prescribed period.
Is the issuance of a writ of possession discretionary for the court?	No, the issuance of a writ of possession is generally considered a ministerial duty for the court. This means the court must issue the writ if the purchaser has met all legal requirements, such as consolidating ownership.
Can a pending case questioning the validity of the mortgage prevent the issuance of a writ of possession?	Generally, no. The pendency of a case questioning the mortgage’s validity or foreclosure does not automatically prevent the court from issuing a writ of possession. The purchaser is still entitled to the writ, subject to the outcome of the pending case.
What is the effect of a surplus after the foreclosure sale?	If a surplus exists after the foreclosure sale, the mortgagee should return the excess to the mortgagor. However, this only applies if the issue of surplus had already been decided.
What is the Truth in Lending Act?	The Truth in Lending Act (Republic Act No. 3765) requires lenders to disclose to borrowers the true cost of credit, including interest rates and other charges. The borrower needs to show, as a ground, that these were not followed.
What are the exceptions to the rule on the issuance of a writ of possession?	Exceptions exist when the sale price was unusually low, the property was sold to third parties, or there was a failure to deliver the surplus from the foreclosure sale.
What should a mortgagor do if they believe the foreclosure was invalid?	The mortgagor can file a separate action to annul the mortgage or foreclosure sale. However, this action typically does not prevent the issuance of a writ of possession unless specific circumstances warranting an exception are present.

In conclusion, the Supreme Court’s decision underscores the importance of adhering to legal procedures in foreclosure proceedings. The ruling maintains the purchaser’s right to a writ of possession while acknowledging the mortgagor’s right to challenge the validity of the mortgage or foreclosure in a separate action. This balance ensures that property rights are protected while also providing avenues for redressal of grievances.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Spouses Montano T. Tolosa and Merlinda Tolosa vs. United Coconut Plantersbank, G.R. No. 183058, April 03, 2013