The Supreme Court has affirmed that after the one-year redemption period following a foreclosure sale, the issuance of a writ of possession is a ministerial duty of the court, unless a third party is holding the property adversely to the judgment debtor. This means the purchaser of the foreclosed property is entitled to possess it. The Court clarified that previous owners who have already sold the property cannot claim adverse rights, ensuring the buyer’s right to possess the property is upheld, absent legitimate adverse claims.

From Seller to Stranger? Examining Third-Party Claims in Foreclosure Disputes

In Spouses Batolinio v. Sheriff Janet Yap-Rosas and Philippine Savings Bank, G.R. No. 206598, the Supreme Court addressed the contentious issue of whether previous property owners could be considered third parties with adverse claims against a bank seeking a writ of possession after foreclosure. The core of the dispute centered on a property in Las Piñas City, initially owned by the Batolinio spouses, who later sold it to Nicefora Miñoza. Miñoza then mortgaged the property to Philippine Savings Bank (PSB). When Miñoza defaulted on her loan, PSB foreclosed the mortgage and emerged as the highest bidder at the public auction.

The Batolinios, however, contested PSB’s right to possess the property. They claimed the sale to Miñoza was fraudulent due to alleged forgery of their signatures on the deed of sale. They argued that this fraud invalidated Miñoza’s title and, consequently, PSB’s mortgage. They further asserted their continuous possession of the property, positioning themselves as third parties with adverse claims. The RTC, however, granted PSB’s petition for a writ of possession, a decision affirmed by the Court of Appeals (CA). The CA reasoned that the Batolinios had already relinquished their ownership through the absolute sale to Miñoza.

The Supreme Court, in its resolution, upheld the CA’s decision, emphasizing the ministerial duty of the court to issue a writ of possession to the purchaser after the redemption period has expired, unless a third party is holding the property adversely to the judgment debtor. The Court referred to Section 7 of Act No. 3135, as amended by Act No. 4118, which governs the procedure for the issuance of a writ of possession in extrajudicial foreclosure cases. The law specifies that after the sale, the purchaser can petition the court for possession, providing a bond during the redemption period or without a bond after the period lapses.

Sec. 7. In any sale made under the provisions of this Act, the purchaser may petition the Court of First Instance of the province or place where the property or any part thereof is situated, to give him possession thereof during the redemption period, furnishing bond in an amount equivalent to the use of the property for a period of twelve months, to indemnify the debtor in case it be shown that the sale was made without violating the mortgage or without complying with the requirements of this Act.

Building on this principle, the Court clarified the rights of a purchaser in foreclosure, stating that once the redemption period expires without redemption, the purchaser becomes the absolute owner and is entitled to all rights of ownership, including possession. The Court referenced Section 33, Rule 39 of the Rules of Court, highlighting that possession is granted unless a third party holds the property adversely to the judgment debtor. However, such a third party must be in possession of the property in his or her own right, such as a co-owner, tenant, or usufructuary, and not someone whose claim stems from the same title as the judgment debtor.

In this case, the Batolinios’ claim of adverse interest was deemed untenable because they had already sold the property to Miñoza. This action relinquished their title and rights over the property, preventing them from claiming an independent adverse interest. The Supreme Court emphasized that because the sale was absolute, with no reservation of ownership, the Batolinios could not be considered third parties with a distinct adverse claim. The Court stated:

[T]here is sufficient reason to conclude that petitioners have no independent right over the subject property.

Moreover, the Court addressed the Batolinio spouses’ concerns about due process, explaining that their rights were not violated. The Court highlighted that an ex parte application for a writ of possession is a summary proceeding designed for the benefit of one party, without necessarily requiring notice to adverse parties. The Court noted the Batolinios’ awareness of the mortgage between Miñoza and PSB, further diminishing their claim of being strangers to the transaction.

Additionally, the Court clarified that even a pending action to annul the mortgage or foreclosure sale does not automatically stay the issuance of a writ of possession. The validity of the mortgage or the manner of foreclosure are issues to be resolved in separate proceedings. The Court stated:

[N]ot even a pending action to annul the mortgage or the foreclosure sale will by itself stay the issuance of a writ of possession x x x. The trial court, where the application for a writ of possession is filed, does not need to look into the validity of the mortgage or the manner of its foreclosure.

The practical implication of this ruling is that financial institutions like PSB can efficiently recover properties that have been foreclosed, without being unduly delayed by claims from previous owners who have already transferred their rights. This promotes stability and predictability in real estate transactions and mortgage agreements. It also underscores the importance of ensuring the validity of property transfers and mortgage contracts to prevent future disputes. This decision also highlights the narrow interpretation of what constitutes a third party holding property adversely, emphasizing the need for such claims to be based on rights independent of the judgment debtor’s title.

FAQs

What was the key issue in this case?	The key issue was whether the previous owners of a foreclosed property could be considered third parties holding the property adversely to the judgment debtor, thereby preventing the issuance of a writ of possession.
What is a writ of possession?	A writ of possession is a court order directing the sheriff to place someone in possession of a property. In foreclosure cases, it allows the purchaser of the foreclosed property to take possession of it.
When can a purchaser apply for a writ of possession?	A purchaser can apply for a writ of possession (1) during the redemption period upon filing of a bond, and (2) after the expiration of the redemption period without needing a bond.
Who is considered a third party holding the property adversely?	A third party holding the property adversely is someone in possession of the property in their own right, such as a co-owner, tenant, or usufructuary, with rights independent of the judgment debtor’s title.
What happens if there is a pending case to annul the mortgage?	A pending case to annul the mortgage or foreclosure sale does not automatically stop the issuance of a writ of possession. The court does not need to determine the validity of the mortgage in a writ of possession application.
What was the court’s ruling on the previous owners’ claim?	The court ruled that the previous owners could not be considered third parties with adverse claims because they had already sold the property, relinquishing their rights and title to it.
What is the significance of an ‘absolute sale’?	An absolute sale means the transfer of ownership without any reservation of rights by the seller. This prevents the seller from claiming any further interest in the property.
Does an ex parte application for a writ of possession violate due process?	No, an ex parte application for a writ of possession does not violate due process because it is a summary proceeding. It does not prevent adverse parties from filing a separate action to assert their rights.

In conclusion, the Supreme Court’s ruling in Spouses Batolinio v. Sheriff Janet Yap-Rosas and Philippine Savings Bank reinforces the rights of purchasers in foreclosure sales to obtain possession of the property, provided no legitimate third-party claims exist. The decision provides clarity on who qualifies as a third party with adverse claims and underscores the ministerial duty of the court to issue a writ of possession in the absence of such claims. The decision promotes efficiency and stability in property transactions, ensuring that financial institutions can recover foreclosed properties without undue delay.

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 Batolinio v. Sheriff Janet Yap-Rosas and Philippine Savings Bank, G.R. No. 206598, September 04, 2019