In Fe H. Okabe v. Ernesto A. Saturnino, the Supreme Court clarified the rights of subsequent purchasers of foreclosed properties regarding the issuance of a writ of possession. The Court ruled that while an original purchaser at a foreclosure sale is entitled to an ex-parte writ of possession, a subsequent purchaser who acquires the property after the redemption period must, if the property is occupied by a third party, obtain possession through a hearing to ensure due process. This decision balances the rights of property owners with the need to protect the possessory rights of third parties.

From Bank to Buyer: Can Subsequent Owners Use Ex-Parte Writs for Foreclosed Properties?

The case revolves around an eighty-one (81) square meter property in Makati City, initially owned by the respondent Ernesto A. Saturnino’s wife. After the couple defaulted on a loan with the Philippine National Bank (PNB), the property was foreclosed and eventually sold to the petitioner, Fe H. Okabe, after the redemption period had expired. Okabe then filed an ex-parte petition for a writ of possession, which Saturnino opposed. The Regional Trial Court (RTC) initially granted Okabe’s petition, but the Court of Appeals (CA) reversed this decision, leading to the Supreme Court review.

At the heart of the matter is the interpretation of Section 7 of Act No. 3135, as amended by Act No. 4118, which governs the sale of property under special powers inserted in real estate mortgages. This law allows a purchaser to petition the court for possession of the property during the redemption period via an ex-parte motion, provided a bond is furnished. The key question is whether this right extends to subsequent purchasers who acquire the property after the redemption period has lapsed.

Section 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. Such petition shall be made under oath and filed in the form of an ex parte motion x x x and the court shall, upon approval of the bond, order that a writ of possession issue, addressed to the sheriff of the province in which the property is situated, who shall execute said order immediately.

The Supreme Court acknowledged that the issuance of a writ of possession to a purchaser in an extrajudicial foreclosure is generally ministerial. However, this ministerial duty is not absolute. The Court distinguished between the rights of the original purchaser at the foreclosure sale (or the mortgagee-purchaser) and those of a subsequent purchaser. While the former can avail of an ex-parte writ of possession during the redemption period, the latter’s right is subject to certain limitations, especially when a third party is in possession of the property.

The Court emphasized that the right to an ex-parte writ of possession is primarily intended for the purchaser during the redemption period, or the mortgagee who becomes the purchaser. This is to protect their investment and ensure that the property can be utilized or preserved during this period. However, extending this right without qualification to subsequent purchasers could potentially infringe upon the due process rights of occupants who may have acquired possessory rights independent of the original mortgagor.

Building on this principle, the Supreme Court cited Section 33, Rule 39 of the Rules of Court, which governs the procedure for obtaining possession of property after the expiration of the redemption period in execution sales. By virtue of Section 6 of Act No. 3135, this provision is applicable to extrajudicial foreclosures as well. Section 33 states that the purchaser is entitled to possession of the property unless a third party is actually holding the property adversely to the judgment obligor.

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 registration of the certificate of sale, the purchaser is entitled to a conveyance and possession of the property; or, if so redeemed whenever sixty (60) days have elapsed and no other redemption has been made, and notice thereof given, and the time for redemption has expired, the last redemptioner is entitled to the conveyance and possession; but in all cases the judgment obligor shall have the entire period of one (1) year from the date of registration of the sale to redeem the property. The deed shall be executed by the officer making the sale or his successor in office, and in the latter case shall have the same validity as though the officer making the sale had continued in office and executed it.

Upon the expiration of the right of redemption, the purchaser or redemptioner shall be substituted to and acquire all the rights, title, interest and claim of the judgment obligor to the property as of the time of the levy. 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.

In essence, if a third party is in possession of the property, the court must conduct a hearing to determine the nature of that possession. This hearing is crucial to ascertain whether the third party’s claim is indeed adverse to the original debtor. Only after such a determination can the court properly decide whether to issue a writ of possession in favor of the subsequent purchaser.

This approach contrasts with the procedure for the original purchaser or mortgagee, who can obtain an ex-parte writ. The distinction lies in the potential for abuse and the need to protect the rights of third parties who may have legitimate claims to the property that are independent of the original mortgage. Therefore, due process considerations dictate that a hearing be held before a subsequent purchaser can dispossess a third party.

To further illustrate, consider a situation where a tenant has a valid lease agreement with the original mortgagor. If a subsequent purchaser could simply obtain an ex-parte writ of possession, the tenant’s rights would be summarily extinguished without any opportunity to be heard. The Supreme Court’s decision ensures that such scenarios are avoided by requiring a hearing to determine the validity of the tenant’s claim.

The Supreme Court emphasized that requiring a separate ejectment case would only prolong the proceedings and unduly deny the subsequent purchaser of their right to possession. Instead, the Court sought a middle ground that balances the purchaser’s rights with the due process rights of occupants. The hearing requirement allows for a more expeditious resolution of the issue while ensuring fairness to all parties involved.

Ultimately, the Supreme Court granted the petition, reversing the Court of Appeals’ decision. However, the Court clarified that while Okabe, as the subsequent purchaser, was entitled to seek possession of the property, she could only do so after a hearing to determine the nature of Saturnino’s possession. This nuanced approach ensures that the rights of all parties are properly considered and protected.

FAQs

What was the key issue in this case?	The key issue was whether a subsequent purchaser of a foreclosed property can obtain a writ of possession through an ex-parte petition, similar to the original purchaser at the foreclosure sale. The Supreme Court clarified the requirements for subsequent purchasers to obtain possession, especially when third parties occupy the property.
Who was the original owner of the property?	The property was originally owned by the wife of the respondent, Ernesto A. Saturnino. The property was later foreclosed due to the couple’s failure to pay their loan obligations to the Philippine National Bank (PNB).
What is an ex-parte petition?	An ex-parte petition is a request to the court made by one party without requiring the other party to be present or notified. In the context of a writ of possession, it allows the purchaser to obtain possession of the property without a full trial or hearing.
What is a writ of possession?	A writ of possession is a court order that directs the sheriff to place a certain person in possession of a property. It is often used in foreclosure cases to allow the purchaser to take control of the property.
When can a purchaser obtain a writ of possession ex-parte?	A purchaser can typically obtain a writ of possession ex-parte during the redemption period, as per Act No. 3135, provided they post a bond. However, this right is more straightforward for the original purchaser or the mortgagee who becomes the purchaser.
What happens if a third party is occupying the property?	If a third party is occupying the property adversely to the judgment debtor, the court must conduct a hearing to determine the nature of the possession. This is to ensure that the third party’s rights are not violated without due process.
What is the significance of Section 33, Rule 39 of the Rules of Court?	Section 33, Rule 39 of the Rules of Court, which applies to execution sales, is also relevant to extrajudicial foreclosures due to Section 6 of Act No. 3135. It states that the purchaser is entitled to possession unless a third party is holding the property adversely to the judgment obligor.
What is the main takeaway of this case for subsequent purchasers?	Subsequent purchasers who acquire property after the redemption period cannot automatically obtain an ex-parte writ of possession if a third party is occupying the property. They must first go through a hearing to determine the nature of the third party’s possession.

This case underscores the importance of due process in property disputes and provides clarity on the rights and obligations of subsequent purchasers of foreclosed properties. It balances the interests of property owners with the need to protect the possessory rights of third parties, ensuring a fair and equitable resolution of such conflicts.

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: FE H. OKABE VS. ERNESTO A. SATURNINO, G.R. No. 196040, August 26, 2014