In Villanueva v. Cherdan Lending Investors Corporation, the Supreme Court held that a writ of possession cannot be used to eject a third party who possesses the property under a claim of ownership that is adverse to the mortgagor. This decision underscores the importance of due process and protects the rights of individuals who may not have been party to the original mortgage agreement. The ruling clarifies the limits of extrajudicial foreclosure proceedings and ensures that third parties have the opportunity to assert their rights in court.

Foreclosure Frustration: Can a Lender Evict a Claiming Owner?

The case revolves around a property initially owned by Emmanuel Villanueva. Due to a series of transactions, the property was mortgaged by spouses Fortunato and Rachel Peñaredondo to Cherdan Lending Investors Corporation. When the spouses defaulted on their loan, Cherdan foreclosed the mortgage and sought a writ of possession to take control of the property. However, Villanueva opposed the writ, asserting that he was the true owner and in actual possession, claiming the transfer to the spouses Peñaredondo was fraudulent. This led to a legal battle over whether Cherdan could simply evict Villanueva through the writ of possession obtained via the foreclosure proceedings.

A writ of possession is generally a court order directing the sheriff to place someone in possession of property. In the context of extrajudicial foreclosures, it’s often a ministerial duty of the court to issue such a writ to the winning bidder after the redemption period expires. This is meant to swiftly transfer possession to the new owner. However, this general rule encounters an exception when a third party, like Villanueva, is in possession of the property and claims ownership adverse to the mortgagor. In such instances, the Supreme Court has consistently held that the court’s obligation to issue a writ of possession ceases to be purely ministerial.

The Court anchored its decision on Section 33, Rule 39 of the Rules of Court, which applies suppletorily to extrajudicial foreclosures under Act 3135. This provision states that possession shall be given to the purchaser unless a third party is actually holding the property adversely to the judgment obligor. The Supreme Court emphasized that Villanueva’s claim of ownership, coupled with his actual possession, triggered this exception. The Court cited Article 433 of the Civil Code, which provides:

Art. 433. Actual possession under claim of ownership raises a disputable presumption of ownership. The true owner must resort to judicial process for the recovery of the property.

Building on this principle, the Court explained that Cherdan, as the purchaser in the foreclosure sale, could not simply rely on the writ of possession to dislodge Villanueva. Instead, Cherdan needed to pursue a separate judicial action, such as an ejectment suit or a reivindicatory action, to properly determine the issue of ownership and Villanueva’s right to possess the property. This requirement ensures that Villanueva is afforded due process and an opportunity to present his case in court.

The Supreme Court distinguished the present case from previous rulings where the issuance of a writ of possession was deemed ministerial despite pending annulment cases. In those cases, the oppositors were parties to the mortgage and foreclosure proceedings, unlike Villanueva, who was a third party stranger to the mortgage. The court emphasized that these factual differences necessitated a different legal approach, protecting the rights of third-party possessors who were not involved in the original debt agreement.

The court clarified that the ex parte petition for a writ of possession is not the appropriate judicial process for resolving ownership disputes. The nature of extrajudicial foreclosure under Act 3135 does not provide an opportunity for third parties to be heard on their claims. Therefore, dispossessing a third party based solely on an ex parte possessory writ would violate their right to due process. The Supreme Court refused to sanction such a procedural shortcut, underscoring the importance of judicial intervention to protect property rights.

Here’s a comparison of the key distinctions between the current case and those cited by the appellate court:

Feature	Villanueva v. Cherdan	Cases Cited by Appellate Court (e.g., Ancheta, PNB v. Sanao)
Oppositor’s Status	Third-party stranger to the mortgage	Party to the mortgage and foreclosure
Basis of Opposition	Claim of ownership and actual possession	Pendency of annulment case
Key Legal Issue	Right of third-party possessor vs. ministerial duty to issue writ	Effect of pending annulment case on writ issuance

FAQs

What was the key issue in this case?	The central issue was whether a writ of possession, obtained through extrajudicial foreclosure, could be used to evict a third party claiming ownership of the property.
What is a writ of possession?	A writ of possession is a court order directing the sheriff to place a person in possession of a specific property, often used after a foreclosure sale.
When is the issuance of a writ of possession considered ‘ministerial’?	The issuance is ministerial when the redemption period has expired, ownership has consolidated in the purchaser, and no third party is adversely holding the property.
What is the significance of Section 33, Rule 39 of the Rules of Court in this case?	This section provides an exception to the ministerial duty to issue a writ of possession when a third party is in adverse possession of the property.
What kind of legal action must the purchaser file to dislodge a third-party possessor?	The purchaser must file a separate judicial action like an ejectment suit or a reivindicatory action to determine the rights of the third-party possessor.
Why couldn’t Cherdan simply evict Villanueva using the writ of possession?	Villanueva claimed ownership and was in actual possession, thus triggering the exception in Section 33, Rule 39 and requiring Cherdan to pursue a separate legal action.
What does ‘due process’ mean in the context of this case?	Due process means that Villanueva has the right to be heard in court and present evidence to support his claim of ownership before being evicted from the property.
What was the appellate court’s error in this case?	The appellate court failed to recognize the distinction between cases involving parties to the mortgage and those involving third-party possessors claiming adverse ownership.
What is the practical implication of this ruling for lenders?	Lenders must be aware that obtaining a writ of possession might not be sufficient to evict occupants claiming adverse ownership; they may need to pursue further legal action.

This decision serves as a crucial reminder of the limits of extrajudicial foreclosure and the importance of protecting the due process rights of all parties involved. By recognizing the rights of third-party possessors, the Supreme Court ensures that property disputes are resolved through proper judicial proceedings, preventing potential injustices.

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: EMMANUEL C. VILLANUEVA v. CHERDAN LENDING INVESTORS CORPORATION, G.R. No. 177881, October 13, 2010