The Supreme Court held that the right to seek a writ of possession for a foreclosed property does not prescribe and is a ministerial duty of the court once ownership is consolidated. This means that a bank or any purchaser who acquires property through foreclosure can always enforce their right to possess the property, ensuring their investment is protected regardless of the time elapsed after consolidation. The court clarified that the remedy of mandamus is appropriate to compel the court to issue the writ, underscoring the certainty and enforceability of property rights in foreclosure scenarios.

Mortgage Default and Possession Disputes: Can Banks Immediately Claim Your Property?

This case involves Spouses Fernando and Angelina Edralin, who obtained a loan from Philippine Veterans Bank (PVB) in 1976, secured by a real estate mortgage (REM) on their property. When the Edralins defaulted on their loan payments, PVB initiated extrajudicial foreclosure proceedings, emerging as the highest bidder and subsequently consolidating ownership of the property in 1994. Despite this, the Edralins failed to vacate the property, leading PVB to file an Ex-Parte Petition for Issuance of Writ of Possession. The core legal issue revolves around PVB’s right to possess the property and whether their claim had prescribed due to the passage of time.

The Regional Trial Court (RTC) initially dismissed PVB’s petition, citing a clause in the REM that allowed the bank to take possession without judicial intervention, suggesting that seeking a writ of possession was unnecessary and that the bank’s right to seek possession had already prescribed. The RTC referenced paragraph (d) of the REM, which stated that upon breach of any condition of the mortgage, the bank was authorized to take possession of the mortgaged property without any judicial order or permission. Veterans Bank, however, pointed to paragraph (c) of the REM, which expressly granted the mortgagee the right to avail itself of the remedy of extrajudicial foreclosure in case of the mortgagor’s default. The Court of Appeals (CA) reversed the RTC’s decision, asserting that the right to a writ of possession is distinct from the contractual provision allowing immediate possession and that the issuance of the writ is a ministerial function following consolidation of ownership.

The Supreme Court sided with the CA, emphasizing that the issuance of a writ of possession is a ministerial duty of the trial court, especially after the purchaser consolidates ownership. This duty arises from Section 7 of Act No. 3135, as amended by Act No. 4118, which outlines the process for obtaining possession of property sold under the provisions of the Act. The court explained that once the redemption period expires and no redemption is made, the purchaser (in this case, Veterans Bank) becomes the absolute owner of the property. Therefore, the issuance of a writ of possession becomes a ministerial function, and the court cannot exercise discretion.

The Edralins argued that Veterans Bank’s right to extrajudicially foreclose on the mortgage was limited by Section 18 of the Veterans Bank charter (RA No. 3518), which refers to the right of redemption of property foreclosed and mentions amounts fixed by the court. However, the Supreme Court clarified that this provision pertains specifically to judicial foreclosures and does not preclude Veterans Bank from availing itself of the benefits of Act No. 3135, which allows for extrajudicial foreclosures. The Court noted that the availability of extrajudicial foreclosure depends upon the agreement of the contracting parties, and in this case, the REM explicitly granted Veterans Bank the special power to act as the Edralins’ attorney-in-fact for the purpose of extrajudicial foreclosure.

The Edralins also contended that the consolidation of title was not done in accordance with law, claiming that the Deed of Sale executed by Veterans Bank in its own favor constituted a pactum commissorium, which is prohibited under Article 2088 of the Civil Code. Pactum commissorium is a stipulation that allows the creditor to automatically appropriate the thing given as security for the fulfillment of the obligation if the obligor fails to meet their obligations. The Supreme Court dismissed this argument, stating that pactum commissorium requires (1) a property mortgaged as security and (2) a stipulation for automatic appropriation by the creditor in case of non-payment. Since Veterans Bank did not automatically acquire the property but instead resorted to extrajudicial foreclosure, the element of automatic appropriation was missing.

A significant point of contention was whether the right to a writ of possession prescribes. The Edralins argued that Articles 1139, 1149, and 1150 of the Civil Code, which deal with prescriptive periods, should apply, limiting Veterans Bank’s right to seek a writ of possession to five years from the issuance of the Certificate of Sale. The Supreme Court rejected this argument, reiterating that the purchaser’s right to request the issuance of a writ of possession never prescribes. The Court clarified that the right to possess a property follows the right of ownership, making it illogical to bar an owner from seeking possession. The Supreme Court cited Calacala v. Republic of the Philippines, where it was held that the failure of a buyer in a foreclosure sale to secure a Certificate of Final Sale, execute an Affidavit of Consolidation of Ownership, and obtain a writ of possession within ten years does not restore ownership to the previous owner.

Furthermore, the Court distinguished between an action and a petition for the issuance of a writ of possession. An action is defined as an ordinary suit in a court of justice, whereas a petition for a writ of possession is considered an ex parte motion. This means the court hears only one side, and upon the filing of a proper motion by the purchaser and approval of the bond, the writ of possession issues as a matter of course, without the court exercising discretion. Therefore, the prescriptive periods for actions do not apply to petitions for a writ of possession.

FAQs

What is a writ of possession?	A writ of possession is a court order that directs the sheriff to place someone in possession of a property. In foreclosure cases, it is used to allow the purchaser of the property to take possession.
What is extrajudicial foreclosure?	Extrajudicial foreclosure is the process of selling a mortgaged property outside of court proceedings, based on a special power of attorney included in the mortgage contract. It is governed by Act No. 3135.
What does it mean to consolidate ownership?	Consolidation of ownership occurs when the redemption period after a foreclosure sale expires, and the purchaser registers the property in their name, becoming the new legal owner.
Is the issuance of a writ of possession discretionary for the court?	No, the issuance of a writ of possession is a ministerial duty of the court once the purchaser has consolidated ownership and met the legal requirements.
What is pactum commissorium?	Pactum commissorium is an illegal stipulation in a mortgage contract that allows the creditor to automatically own the property if the debtor defaults, without proper foreclosure proceedings.
Does the right to obtain a writ of possession expire?	No, according to the Supreme Court, the right of the purchaser to request a writ of possession does not prescribe or expire, as it is tied to their ownership of the property.
What is mandamus?	Mandamus is a legal remedy used to compel a government official or court to perform a ministerial duty. In this case, it was used to compel the trial court to issue the writ of possession.
Can a bank take possession of a mortgaged property without a court order?	Some mortgage contracts may contain provisions allowing the mortgagee to take possession without a court order upon default. However, this does not negate the right to seek a writ of possession through legal channels.

In conclusion, the Supreme Court’s decision in Spouses Edralin v. Philippine Veterans Bank reaffirms the stability of property rights in foreclosure scenarios. The ruling clarifies that the right to seek a writ of possession does not prescribe, and its issuance is a ministerial duty of the court, providing certainty to purchasers of foreclosed properties.

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 Edralin v. Philippine Veterans Bank, G.R. No. 168523, March 9, 2011