In this case, the Supreme Court clarified the rights of subsequent purchasers of foreclosed properties to obtain a writ of possession. The Court affirmed that while a subsequent purchaser can indeed apply for a writ of possession, unlike the original mortgagee-purchaser, this right is not automatic. It requires a hearing to determine if the property remains in the possession of the mortgagor. This decision balances the rights of property owners with the need to ensure a fair process for all parties involved, particularly after a property has changed hands following foreclosure.

From Foreclosure to New Ownership: Can Subsequent Buyers Get a Writ of Possession?

The case of Spouses Rosalino R. Reyes, Jr. and Sylvia S. Reyes vs. Spouses Herbert Bun Hong G. Chung and Wienna T. Chung revolves around a property dispute following a foreclosure. The Reyes spouses originally obtained a loan from Export and Industry Bank, Inc. (EIBI), securing it with a real estate mortgage on their property. After they defaulted on their loan payments, EIBI foreclosed on the property and became the highest bidder at the public auction. The Reyeses failed to redeem the property within the one-year period, leading to the consolidation of title in EIBI’s name. EIBI then sold the property to LNC (SPV-AMC) Corporation, which subsequently sold it to the Chung spouses. When the Chungs sought to take possession of the property, the Reyeses refused to vacate, leading to legal complications and ultimately, the Supreme Court’s involvement.

The central legal question is whether the Chung spouses, as subsequent purchasers, were entitled to a writ of possession to evict the Reyeses from the property. This issue hinges on the interpretation of Act No. 3135, the law governing extrajudicial foreclosure sales, and its interplay with the rights of subsequent property owners. The Reyeses argued that the Chungs were not entitled to the writ of possession because they did not purchase the property directly from the foreclosure sale and that the Chungs were guilty of forum shopping.

The Supreme Court addressed the issue of forum shopping first, defining it as the act of availing oneself of several judicial remedies in different courts, simultaneously or successively, all substantially founded on the same transactions and the same essential facts and circumstances, and all raising substantially the same issues. The Court noted that the test for determining forum shopping is whether the elements of litis pendentia or res judicata are present. In this case, the Court found that the Chungs had withdrawn their earlier ejectment case before filing the ex-parte petition for a writ of possession, thus negating the element of litis pendentia. Further, the prior ejectment case would not amount to res judicata because the two proceedings lacked identity of action, with the latter being merely an incident in the transfer of title.

Regarding the writ of possession, the Court acknowledged that while the initial right to seek the writ belonged to EIBI as the mortgagee-purchaser, this right extended to subsequent purchasers like the Chungs. This principle is rooted in the idea that ownership carries with it the right to possess the property. The Court quoted Section 7 of Act No. 3135, as amended, which provides the framework for a purchaser to petition the court for possession:

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 form of an ex parte motion in the registration or cadastral proceedings if the property is registered, or in special proceedings in the case of property registered under the Mortgage Law or under section one hundred and ninety-four of the Administrative Code, or of any other real property encumbered with a mortgage duly registered in the office of any register of deeds in accordance with any existing law, and in each case the clerk of the court shall, upon the filing of such petition, collect the fees specified in paragraph eleven of section one hundred and fourteen of Act Numbered Four hundred and ninety-six, as amended by Act Numbered Twenty-eight hundred and sixty-six, 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.

However, the Court also emphasized a crucial distinction between the original mortgagee-purchaser and subsequent purchasers. Unlike the former, the latter’s right to the writ of possession is not absolute and cannot be granted ex parte. The Court referred to the case of Okabe v. Saturnino, clarifying that a hearing is necessary to determine whether the property is still in the possession of the mortgagor. This requirement ensures that the mortgagor is given an opportunity to contest the issuance of the writ and present any defenses they may have. The Supreme Court in Okabe v. Saturnino stated:

The remedy of a writ of possession, a remedy that is available to the mortgagee-purchaser to acquire possession of the foreclosed property from the mortgagor, is made available to a subsequent purchaser, but only after hearing and after determining that the subject property is still in the possession of the mortgagor.

Despite acknowledging that the RTC-Br. 226 erred in issuing the writ of possession ex parte, the Court refrained from nullifying it, given that the Reyeses were eventually allowed to file a Motion to Quash and present their arguments. The Court emphasized the essence of being heard and clarified that this did not require verbal argumentation alone, as written explanations and pleadings are just as effective. Ultimately, the Supreme Court held that annulling the writ and requiring the Chungs to petition for another one would only prolong the proceedings and unduly deny them possession of the property they rightfully owned.

The Court also affirmed the issuance of the Break Open Order, finding it appropriate given that the property was unoccupied and padlocked at the time the sheriff attempted to serve the Notice to Vacate. This underscored the principle that a writ of possession carries with it the authority to break open the property if necessary to execute the court’s command.

The case highlights the importance of due process in property disputes, especially when involving foreclosures and subsequent transfers of ownership. While the right to possess property is a fundamental aspect of ownership, it must be balanced with the rights of those who may be dispossessed as a result of foreclosure. The requirement of a hearing for subsequent purchasers ensures that these rights are adequately protected. The Court’s decision reflects a practical approach, seeking to avoid unnecessary delays and complications while upholding the principles of fairness and due process. This careful balancing act reinforces the integrity of property transactions and protects the interests of all parties involved.

FAQs

What was the key issue in this case?	The key issue was whether subsequent purchasers of a foreclosed property, who were not the original buyers at the foreclosure sale, are entitled to a writ of possession. This involved determining the extent of their rights and the procedural requirements for obtaining such a writ.
What is a writ of possession?	A writ of possession is a court order that commands the sheriff to enter a property and give its possession to the person entitled to it under a judgment. It is used to enforce a judgment to recover the possession of land.
What is forum shopping, and did the respondents commit it?	Forum shopping is when a party files multiple cases based on the same cause of action, hoping to obtain a favorable outcome in one of them. The Supreme Court ruled that the respondents did not commit forum shopping because they withdrew their earlier ejectment case before pursuing the writ of possession.
What is the significance of Act No. 3135 in this case?	Act No. 3135 governs extrajudicial foreclosure sales in the Philippines and provides the legal basis for a purchaser to petition the court for possession of the foreclosed property. Section 7 of this Act is particularly relevant as it outlines the procedure for obtaining a writ of possession.
Why was a hearing required for the subsequent purchasers in this case?	A hearing was required because the respondents were subsequent purchasers, not the original buyers at the foreclosure sale. The hearing was necessary to determine whether the property was still in the possession of the mortgagor, as the procedure for obtaining a writ of possession differs for original purchasers and subsequent purchasers.
What is a Break Open Order, and why was it issued?	A Break Open Order is a court order that authorizes the sheriff to forcibly enter a property if necessary to execute a writ of possession. It was issued in this case because the property was padlocked and unoccupied, preventing the sheriff from serving the Notice to Vacate and implementing the writ of possession.
What was the final ruling of the Supreme Court?	The Supreme Court affirmed the Court of Appeals’ decision, upholding the issuance of the Writ of Possession and the Break Open Order in favor of the respondents. The Court recognized the rights of subsequent purchasers to obtain a writ of possession after a hearing and found that the procedural errors did not warrant nullifying the writ.
What does this case mean for subsequent purchasers of foreclosed properties?	This case clarifies that subsequent purchasers of foreclosed properties have the right to apply for a writ of possession, but they must undergo a hearing to determine the property’s occupancy status. This ensures due process for all parties involved.

In conclusion, the Supreme Court’s decision in Spouses Rosalino R. Reyes, Jr. and Sylvia S. Reyes vs. Spouses Herbert Bun Hong G. Chung and Wienna T. Chung provides important guidance on the rights and responsibilities of subsequent purchasers of foreclosed properties. It highlights the necessity of balancing property rights with due process, ensuring fairness for all parties involved in foreclosure proceedings and subsequent transactions.

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 Rosalino R. Reyes, Jr. and Sylvia S. Reyes vs. Spouses Herbert Bun Hong G. Chung and Wienna T. Chung, G.R. No. 228112, September 13, 2017