This case clarifies the rights of buyers of foreclosed properties, ruling that a bank can obtain a writ of possession to eject occupants who derive their right from the original debtor. This means if your right to occupy a property stems from an agreement with the previous owner who defaulted on a loan, the bank, as the new owner after foreclosure, has the legal right to evict you, even without your direct involvement in the loan agreement.

Foreclosure Face-Off: Can China Bank Evict the Lozadas from Their Condo?

In this case, China Banking Corporation (CBC) sought to evict Spouses Lozada from a condominium unit they were purchasing from Primetown Property Group, Inc. (PPGI). PPGI had mortgaged the property to CBC, and when PPGI defaulted on its loan, CBC foreclosed on the mortgage. The central legal question was whether CBC could obtain a writ of possession to evict the Spouses Lozada, who had a contract to sell with PPGI but were not direct parties to the mortgage agreement.

The facts reveal that the Spouses Lozada entered into a Contract to Sell with PPGI on June 25, 1995, for Unit No. 402 of the Makati Prime City Condominium Townhomes Project. Subsequently, on December 7, 1995, PPGI executed two Deeds of Real Estate Mortgage in favor of CBC to secure credit facilities, including the unit being purchased by the Spouses Lozada. When PPGI failed to pay its debt, CBC initiated extrajudicial foreclosure proceedings. CBC emerged as the highest bidder at the public auction sale and eventually consolidated its ownership over the property, leading to the issuance of a new Condominium Certificate of Title (CCT) in CBC’s name.

The Spouses Lozada argued that they had a right to possess the property and that CBC should not be able to evict them through an ex parte writ of possession. The Court of Appeals initially sided with the Spouses Lozada, holding that the issuance of the writ was not merely ministerial and that they should have been given a hearing. However, the Supreme Court reversed the Court of Appeals’ decision.

The Supreme Court emphasized that the issuance of a writ of possession in favor of a purchaser at a foreclosure sale is generally a ministerial duty of the court. This means that upon proper application and proof of title, the court is obligated to issue the writ. However, an exception exists when a third party is holding the property adversely to the judgment debtor.

SEC. 33. Deed and possession to be given at expiration of redemption period; by whom executed or given. – If no redemption be made within one (1) year from the date of the registration of the certificate of sale, the purchaser is entitled to a conveyance and possession of the property; x x x. The possession of the property shall be given to the purchaser or last redemptioner by the same officer unless a third party is actually holding the property adversely to the judgment obligor.

The Court found that the Spouses Lozada’s possession was not adverse to PPGI because their right to possess stemmed from the Contract to Sell with PPGI. The court ruled that the spouses’ possession of Unit No. 402 cannot be considered adverse to that of PPGI. Their right to possess the said property was derived from PPGI under the terms of the Contract to Sell executed by the latter in their favor. The Spouses Lozada can be more appropriately considered the transferee of or successor to the right of possession of PPGI over Unit No. 402. The spouses cannot assert that said right of possession is adverse or contrary to that of PPGI when they have no independent right of possession other than what they acquired from PPGI.

The Supreme Court distinguished this case from situations involving co-owners, tenants, or usufructuaries who possess property in their own right. The spouses Lozada, as buyers under a contract to sell, derived their right from PPGI and were therefore bound by the mortgage agreement between PPGI and CBC. Even though the Contract to Sell was executed prior to the mortgage, it only promised to transfer ownership upon full payment, meaning the mortgage still encumbered PPGI’s rights at the time the Spouses Lozada entered into possession. Ultimately, the Court held that the Spouses Lozada stepped into PPGI’s shoes and could not claim a better right than PPGI had.

The Court also addressed the HLURB’s jurisdiction. The Court emphasized that the HLURB’s authority to resolve disputes between buyers and developers does not extend to enjoining the enforcement of a writ of possession issued by a court of concurrent jurisdiction. Even with HLURB proceedings underway, CBC was entitled to enforce its writ of possession. The fact that the HLURB issued a Status Quo Order would neither have the power to interfere by an injunction, or in this case, a status quo order, with the issuance or enforcement of the writ of possession issued by the Makati City RTC.

FAQs

What was the key issue in this case?	The key issue was whether a bank could obtain an ex parte writ of possession to evict occupants who derive their right from the original debtor after foreclosure.
What is a writ of possession?	A writ of possession is a court order that directs the sheriff to place a party in possession of a property. In foreclosure cases, it allows the buyer (often a bank) to take possession of the foreclosed property.
What does “ex parte” mean in this context?	“Ex parte” refers to a legal proceeding conducted without requiring all parties to be present or notified. In this case, CBC initially obtained the writ of possession without the Spouses Lozada being formally notified or given a chance to contest it.
Who were the parties involved?	The parties were China Banking Corporation (CBC), Spouses Tobias L. Lozada and Erlina P. Lozada, and Primetown Property Group, Inc. (PPGI). CBC was the bank, the Spouses Lozada were the buyers, and PPGI was the developer.
Why did the Spouses Lozada argue against the writ of possession?	The Spouses Lozada argued that they had a contract to sell with PPGI and a right to possess the property and that the bank should not be able to evict them without a hearing or a separate legal action.
How did the Supreme Court rule?	The Supreme Court ruled in favor of CBC, holding that the issuance of the writ of possession was proper because the Spouses Lozada derived their right to possess from PPGI and were not adverse third parties.
What is the significance of Presidential Decree No. 957 in this case?	Presidential Decree No. 957 regulates the sale of subdivision lots and condominiums and aims to protect buyers. While the spouses argued PPGI did not comply with the law, the court didn’t make a final determination because it wasn’t material to the question of possession.
Can a buyer file a case with the HLURB while the bank is trying to obtain a writ of possession?	Yes, a buyer can file a case with the HLURB, but this action does not prevent a court from issuing or enforcing a writ of possession, as HLURB jurisdiction doesn’t extend to interfering with court orders.

In conclusion, this case underscores the importance of understanding the legal implications of real estate transactions. Buyers of properties subject to mortgages must recognize that their rights are subordinate to those of the mortgagee, especially after foreclosure. It also highlights the fact that filing complaints with administrative bodies does not stop the orders or decisions coming from courts of proper jurisdiction.

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: China Banking Corporation v. Spouses Lozada, G.R. No. 164919, July 4, 2008