“A home is not just property; it is a sanctuary, a realized dream.”
Thus, the Supreme Court (SC) has ordered that “if for justifiable causes it must be seized, courts must ensure that the same is in accordance with law and upon observance of the requisites of due process.”
In a decision released last July 12 and written by Associate Justice Rodil V. Zalameda, the SC ruled:
“The issuance of a writ of possession (by trial courts) ceases to be ministerial if a condominium unit or subdivision lot buyer intervenes to protect their rights against a mortgagee bank or financial institution.
“The court must order a hearing to determine the nature and source of the buyer's supposed right to the foreclosed property.
“Should the judge be satisfied that the oppositors to the issuance of the writ are bona fide condominium or subdivision buyers who are in actual possession of the property, the writ should thus be issued excluding the aforesaid buyers from its implementation.
“It should, however, be clarified that exclusion of such buyers is without prejudice to the outcome of cases concerning the validity of the mortgage between the developer and the mortgagee financial institution or bank under Section 18 of PD (Presidential Decree) No. 957“ (Regulating the Sale of Subdivision Lots and Condominiums, Providing Penalties for Violations Thereof).
The 1976 PD was issued due to reports of violations by real estate subdivision owners, developers, operators or sellers on their obligations like provisions and maintenance of roads, drainage, water and lighting systems, failure to deliver titles to buyers, non-payment of taxes, and double sale of lots to unsuspecting buyers.
Among other things, Section 18 of PD 957 provides that “no mortgage on any unit or lot shall be made by the owner or developer without prior written approval of the National Housing Authority, and such approval shall not be granted unless it is shown that the proceeds of the mortgage loan shall be used for the development of the condominium or subdivision project... and the buyer may, at his option, pay his installment for the lot or unit directly to the mortgagee who shall apply the payments to the corresponding mortgage indebtedness secured by the particular lot or unit being paid for, with a view to enabling said buyer to obtain title over the lot or unit promptly after full payment thereto.”
The SC decision released last July 12 was issued by the SC on the petition filed by spouses Wilfredo and Dominica Rosario against the 2011 ruling of the Court of Appeals (CA) which reversed that issued by the Quezon City regional trial court (RTC) in 2008.
Case records showed that in 1997 the New San Jose Builders, Inc. (NSJBI) and the Government Service Insurance System (GSIS) entered into a P600 million loan agreement to finance the completion of two (2) housing projects and to purchase a lot for construction of more housing projects.
As security for the loan, NSJBI mortgaged three (3) parcels of land with existing improvements -- 365 lots with existing low-cost houses at Mary Homes, Bacoor, Cavite; 102 condominium units at St. John Condominium at Scout Rallos, Quezon City (mortgaged properties); and rights over 240 condominium units in GSIS Metro Homes.
Under the loan agreement, “NSJBI shall not alienate sell, dispose of, mortgage, or in any manner encumber the mortgaged properties or any portion thereof without the prior consent of the respondent” (GSIS).
There was also an agreement that NSJBI will continue to sell the mortgaged properties on condition that the net proceeds from the sales should be exclusively used in the recoupment of the loan.
Non-compliance with the agreement will allow GSIS to immediately foreclose the mortgaged pieces of property.
The mortgage was annotated on the land titles and condominium certificates of title. One of those mortgaged was the condominium unit (Unit 205) of spouses Rosario sold to them by NSJBI.
When NSJBI defaulted in the payment of the loan, GSIS instituted in 2003 an extrajudicial foreclosure of the mortgaged pieces of property. Thereafter, an auction sale was conducted with GSIS as the highest bidder.
When NSJBI failed to exercise its right of redemption, the titles and ownership of the pieces of property were transferred in the name of GSIS.
On Aug. 23, 2006, GSIS filed a petition for a writ of possession before the RTC.
NSJBI and its buyers, including spouses Rosario, filed their pleadings-in-intervention.
On April 7, 2008, the RTC granted the intervention and “the application for a writ of possession as against NSJBI but only as to unsold condominium units and lots that are not in possession of third-party buyers.”
On appeal by GSIS, the CA on June 11, 2009 reversed the RTC’s ruling which granted the motion for intervention of spouses Rosario and others.
The CA said that the RTC erred in stopping the implementation of the writ of possession against spouses Rosario whom, the appellate court, ruled were not third parties who were in adverse possession of the foreclosed property.
The CA said that the proper remedy for spouses Rosario was to seek annulment of the mortgage or foreclosure before the House and Land Use Regulatory Board (HLURB).
Spouses Rosario challenged the CA’s ruling before the SC.
In resolving the issue, the SC said that “as a general rule, the highest bidder in the foreclosure sale becomes the absolute owner of the foreclosed property after the lapse of the redemption period and no redemption is made, and as owner, he is entitled to all the rights of ownership over a property recognized in Article 428 of the New Civil Code, including the right to possess the same....”
But the SC said that “as an exception, the ministerial duty of the court to issue an ex-parte (without notice to the other party) writ of possession ceases when there are third-parties who are actually holding the mortgaged property adversely to the judgment debtor.”
It said: “Jurisprudence teaches that when there are third-party possessors of the property, the RTC should instead conduct a hearing to determine the nature of the adverse possession. However, for this exception to apply, it is not enough that the property is in the possession of a third party, it must also be held by the third party adversely to the judgment debtor or mortgagor.”
The SC also said:
“We underscore that condominium and subdivision lot buyers are protected by PD No. 957.
“In a similar way, herein respondent (GSIS) should not be allowed to summarily divest petitioners of their possession of Unit 205. The protection afforded to a subdivision lot buyer under PD No. 957 should not be defeated, particularly by someone who is not a mortgagee in good faith.
“In this case, respondent knew that the mortgaged properties form part of a condominium project, which are within the purview of PD No. 957. It was aware that the loaned amounts were to be used for the development of NSJBI's various projects.
“Under the circumstances, respondent knew the possibility and assumed the risk that some of the condominium units would eventually be sold to individual buyers. Hence, it cannot now claim that it was unaware of the individual buyers' rights, nor should it be allowed to bypass the same, through a summary application for a writ of possession without according them the opportunity to be heard.
“The RTC thus correctly allowed petitioners and the other condominium unit buyers to intervene, and be excluded from the issuance of the writ of possession. Respondent's supposed superior right over occupied condominium units should instead be determined in a full-blown proceeding where all the parties' claims are ventilated and scrutinized by the courts.
“WHEREFORE, the petition is hereby GRANTED. The Decision dated 28 July 2011 and Resolution dated 20 February 2012 of the Court of Appeals, in CA-G.R. SP No. 110231 are hereby REVERSED and SET ASIDE. The Resolution dated 07 April 2008 of Branch 85, Regional Trial Court of Quezon City in LRC Case No. Q-22034 is REINSTATED. The writ of possession should exclude units possessed by petitioners and third-party buyers. SO ORDERED.”