Key Takeaway: Third-Party Rights Must Be Considered in Issuing Writs of Possession

Alfredo F. Sy and Rodolfo F. Sy v. China Banking Corporation, G.R. No. 213736, June 17, 2020

Imagine waking up one day to find a notice on your door demanding you vacate your home immediately, despite your belief that you are the rightful owner. This nightmare became a reality for Alfredo and Rodolfo Sy, who found themselves entangled in a legal battle over their family property in Cebu. At the heart of their struggle was the issuance of a writ of possession, a powerful legal tool that can drastically alter property rights. This case highlights the critical balance between a purchaser’s rights in a foreclosure sale and the protections afforded to third parties claiming adverse possession.

The case of Alfredo F. Sy and Rodolfo F. Sy versus China Banking Corporation revolves around a piece of land in Cebu, originally owned by their mother, Bernandina Fernandez. The property was transferred through a series of transactions, culminating in a mortgage and subsequent foreclosure by China Bank. The central legal question was whether the bank could obtain a writ of possession to evict the Sy brothers, who claimed they were the true owners and had been in possession of the property.

Legal Context: Understanding Writs of Possession and Third-Party Rights

A writ of possession is a court order that allows a party to take possession of a property, often used after foreclosure sales. Under Philippine law, this writ is typically issued as a ministerial duty once the purchaser’s title is consolidated, meaning the court has little discretion to deny it if the legal requirements are met.

However, the law also recognizes the rights of third parties who may be adversely possessing the property. Section 33 of Rule 39 in the Rules of Court states that upon the expiration of the redemption period, the purchaser gains possession unless a third party is holding the property adversely to the judgment debtor. This exception was extended to extra-judicial foreclosure sales by Section 6 of Act No. 3135.

In simpler terms, if someone other than the original owner (the judgment debtor) is occupying the property and claims ownership, the court must consider their rights before issuing a writ of possession. This ensures that third parties are not summarily evicted without due process, a fundamental right under the Philippine Constitution.

For example, consider a scenario where a family has been living on a piece of land for decades, believing they own it. If the land was foreclosed due to a mortgage taken out by a previous owner, the bank cannot simply evict the family without considering their claim of ownership and possession.

Case Breakdown: The Journey of Alfredo and Rodolfo Sy

The story of Alfredo and Rodolfo Sy began with their mother, Bernandina Fernandez, who transferred the property to her son Priscilo through a simulated deed of sale in 1969. Priscilo then mortgaged the property to the Development Bank of the Philippines (DBP), which foreclosed it when he defaulted on the loan. Priscilo left for the United States, authorizing his sister Elena to redeem the property on behalf of the Sy brothers.

However, Elena allegedly forged documents to transfer the property to her children, Eleazar Jr. and Elaine, who then mortgaged it to China Bank. When they defaulted, China Bank foreclosed the property and sought a writ of possession to evict the Sy brothers, who had been living on the property all along.

The Sy brothers opposed the writ, arguing they were the true owners and had been in possession. They presented evidence, including a certification from the Philippine National Police Crime Laboratory, showing that the signatures on the documents transferring the property to Eleazar Jr. and Elaine were forged.

The case went through multiple court levels, with China Bank initially obtaining a writ of possession that was later dissolved upon the Sy brothers’ motion. China Bank appealed but failed to pay the required docket fees, resulting in the dismissal of their appeal. Nine years later, China Bank filed a second application for a writ of possession, which was granted by a different judge.

The Supreme Court ultimately ruled in favor of the Sy brothers, emphasizing the importance of third-party rights in foreclosure cases. Justice Carandang wrote:

“The court’s obligation to issue an ex parte writ of possession in favor of the purchaser, in an extra-judicial foreclosure sale, ceases to be ministerial in those exceptional cases where a third party is claiming the property adversely to that of the judgment debtor/mortgagor.”

The Court also criticized China Bank’s actions, noting that:

“The institution of the second application for the writ of possession makes a mockery of the judicial process. China Bank seems to be soliciting a much friendly forum as to get what it prays for considering that it waited for so long and after the judge who dissolved the first writ of possession retired before instituting the second application for the writ of possession.”

Practical Implications: Navigating Foreclosure and Third-Party Rights

This ruling has significant implications for future foreclosure cases involving third-party claims. It reinforces the principle that banks and other purchasers in foreclosure sales must respect the rights of those who may be adversely possessing the property.

For property owners and potential buyers, this case serves as a reminder to thoroughly investigate the history of any property before engaging in transactions. Banks, in particular, must exercise due diligence to avoid situations where they may be seen as closing their eyes to defects in the title.

Key Lessons:

• Always verify the ownership and possession history of a property before purchasing or using it as collateral.
• Third parties claiming adverse possession have rights that must be considered in foreclosure proceedings.
• Banks and other institutions must act in good faith and with due diligence in foreclosure sales to avoid legal challenges.

Frequently Asked Questions

What is a writ of possession?

A writ of possession is a court order that allows a party to take possession of a property, typically used after foreclosure sales.

Can a third party challenge a writ of possession?

Yes, a third party claiming adverse possession can challenge a writ of possession, and the court must consider their rights before issuing the writ.

What should I do if I believe I am the rightful owner of a property being foreclosed?

Seek legal advice immediately. You may need to file an independent action to assert your ownership and possession rights.

How can I protect my property from being wrongfully foreclosed?

Ensure all transactions involving your property are properly documented and registered. Monitor any mortgages or liens on your property and address any issues promptly.

What are the responsibilities of banks in foreclosure sales?

Banks must exercise due diligence to ensure the validity of the title and consider the rights of any third parties claiming adverse possession.

ASG Law specializes in property law and foreclosure cases. Contact us or email hello@asglawpartners.com to schedule a consultation.