In Rural Bank of Sta. Barbara (Iloilo), Inc. v. Centeno, the Supreme Court addressed the issuance of a writ of possession following an extrajudicial foreclosure. The Court clarified that while the issuance of a writ of possession is typically a ministerial duty after the consolidation of title, this is not the case when a third party holds the property adversely to the judgment obligor. The decision emphasizes that a successor-in-interest, such as a buyer from the original mortgagor, does not qualify as a third party with adverse rights, and therefore, the writ of possession should still be issued in favor of the purchaser at the foreclosure sale. This ruling reinforces the rights of banks and other purchasers in foreclosure sales while defining the limits of third-party claims.

Foreclosure Fallout: When Does a Buyer Gain Uncontested Possession?

The case revolves around a petition filed by Rural Bank of Sta. Barbara (Iloilo), Inc. for a writ of possession over several lots in Ajuy, Iloilo, previously owned by Spouses Gregorio and Rosario Centeno. These lots were mortgaged to the bank as security for a loan, but the spouses defaulted, leading to the extrajudicial foreclosure of the mortgage. The bank emerged as the highest bidder at the auction sale and obtained a Certificate of Sale.

The Centenos failed to redeem the properties within the one-year redemption period stipulated under Section 6 of Act No. 3135, also known as “AN ACT TO REGULATE THE SALE OF PROPERTY UNDER SPECIAL POWERS INSERTED IN OR ANNEXED TO REAL-ESTATE MORTGAGES”. Despite this, they continued to possess and cultivate the lots. Later, their son, Gerry Centeno, the respondent, took over the cultivation and eventually purchased the lots from his parents. He then opposed the bank’s petition for a writ of possession, claiming ownership and adverse possession for over fifteen years, arguing that the foreclosure sale was invalid due to alleged forged signatures and prescription.

The Regional Trial Court (RTC) initially ruled in favor of the bank, asserting that the issuance of a writ of possession was a ministerial duty. However, the Court of Appeals (CA) reversed this decision, considering Gerry Centeno as a third party with adverse claims who should be allowed to litigate his rights in a separate judicial proceeding. This divergence between the RTC and CA rulings set the stage for the Supreme Court to clarify the rights of parties in such foreclosure scenarios.

The Supreme Court addressed the central issue of whether the bank was entitled to a writ of possession over the disputed lots. The Court emphasized the well-established principle that after the consolidation of title in the purchaser’s name, the right to possession becomes absolute. The issuance of a writ of possession then becomes a ministerial function, provided proper application and proof of title are presented. The pivotal exception to this rule arises when a third party is in possession of the property, claiming a right adverse to that of the mortgagor.

The Court referred to Section 33, Rule 39 of the Rules of Court, which governs the process of transferring possession after the expiration of the redemption period. This section specifies that possession shall be given to the purchaser unless a third party is actually holding the property adversely to the judgment obligor. The key question, therefore, was whether Gerry Centeno qualified as such a third party.

To address this question, the Supreme Court turned to its prior ruling in China Banking Corporation v. Lozada, which provided guidance on interpreting the phrase “a third party who is actually holding the property adversely to the judgment obligor”. According to the Court, this phrase refers to situations where a third party holds the property by adverse title or right, such as a co-owner, tenant, or usufructuary. These parties possess the property in their own right and are not merely successors or transferees of the right of possession of the original owner.

“The co-owner, agricultural tenant, and usufructuary possess the property in their own right, and they are not merely the successor or transferee of the right of possession of another co-owner or the owner of the property.”

Applying this principle to the case at hand, the Supreme Court found that Gerry Centeno did not qualify as a third party with adverse rights. He acquired the subject lots from his parents after the Certificate of Sale at Public Auction had already been registered in favor of the bank. Therefore, he was deemed a mere successor-in-interest of the Spouses Centeno. As such, he could not claim any rights adverse to the judgment obligor that would prevent the issuance of a writ of possession.

The Court also addressed the respondent’s arguments regarding the identity of the lots. It noted that the RTC had already determined the identity of the lots during the proceedings, establishing the bank’s title for the purpose of issuing the writ of possession. The Supreme Court reiterated the principle that factual findings of lower courts are generally binding and conclusive, absent any showing of abuse, arbitrariness, or capriciousness.

Finally, regarding the issue of laches, the Court clarified that the case pertained solely to the issuance of a writ of possession, which is a ministerial function. Any defenses, including laches, should be raised in a separate proceeding. This separation ensures that the foreclosure process remains efficient while still allowing for the adjudication of any substantive claims.

The decision serves as a clear reaffirmation of the rights of purchasers in foreclosure sales. Once the title is consolidated, the issuance of a writ of possession is a ministerial duty, unless a true third party with adverse rights is in possession. A successor-in-interest of the mortgagor cannot defeat this right, emphasizing the importance of timely redemption and the finality of foreclosure proceedings.

FAQs

What was the key issue in this case?	The central issue was whether the bank was entitled to a writ of possession over foreclosed properties, despite a claim of adverse possession by the mortgagor’s son.
Who was Gerry Centeno in relation to the original mortgagors?	Gerry Centeno was the son of the original mortgagors, Spouses Gregorio and Rosario Centeno, and he claimed to have purchased the property from them after the foreclosure sale.
What is a writ of possession?	A writ of possession is a court order directing a sheriff to deliver possession of property to the person entitled to it, such as the purchaser in a foreclosure sale.
When is the issuance of a writ of possession considered a ministerial duty?	The issuance of a writ of possession is considered a ministerial duty after the consolidation of title in the purchaser’s name following a foreclosure sale, assuming proper application and proof of title.
What exception exists to the ministerial duty of issuing a writ of possession?	The exception arises when a third party is in possession of the property, claiming a right adverse to that of the mortgagor.
Did the Supreme Court consider Gerry Centeno a third party with adverse rights?	No, the Supreme Court did not consider Gerry Centeno a third party with adverse rights because he acquired the property from his parents, the original mortgagors, after the foreclosure sale.
What was the significance of the China Banking Corporation v. Lozada case in this decision?	The Court cited the Lozada case to define who qualifies as a third party with adverse rights, clarifying that it refers to those with independent claims like co-owners or tenants, not successors-in-interest.
What did the Court say about the issue of laches raised by the respondent?	The Court stated that the issue of laches and other defenses should be ventilated through a separate proceeding, as the current case only concerned the ministerial issuance of a writ of possession.

In conclusion, the Supreme Court’s decision in Rural Bank of Sta. Barbara (Iloilo), Inc. v. Centeno provides clarity on the rights of purchasers in foreclosure sales and the limitations on claims by successors-in-interest. This ruling underscores the importance of understanding the legal framework surrounding foreclosure proceedings and the need for timely action to protect one’s rights.

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: Rural Bank of Sta. Barbara (Iloilo), Inc. v. Gerry Centeno, G.R. No. 200667, March 11, 2013