CASE DIGEST : Heirs of Jose Peñaflor v. Heirs of Artemio and Lydia Dela Cruz G.R. No. 197797, August 9, 2017 Supreme Court, First Division Ponente: Justice Estela M. Perlas-Bernabe

 

FACTS

Nicolasa Dela Cruz was the original owner and possessor of a parcel of land with a two-storey building located at No. 11 Ifugao Street, Barangay Barretto, Olongapo City. On April 15, 1991, Nicolasa authorized her daughter, Carmelita C. Guanga, to mortgage the property to Jose R. Peñaflor to secure a loan of ₱112,000.00. When Nicolasa failed to pay the obligation, Peñaflor initiated extrajudicial foreclosure proceedings. After compliance with the requirements of posting, notice, and publication, the property was sold at public auction, with Peñaflor emerging as the highest bidder. The redemption period expired without redemption, resulting in the issuance and registration of a Final Bill of Sale in Peñaflor's name, followed by his Affidavit of Consolidation of Ownership.

Despite the consolidation of ownership, Nicolasa continued occupying the property and refused to surrender possession. Peñaflor therefore filed an ex parte petition for a writ of possession before the RTC of Olongapo City. On November 19, 1993, the RTC granted the petition. Nicolasa and Carmelita did not appeal, causing the order to become final. The writ, however, was not immediately enforced because Artemio Dela Cruz, Nicolasa's son, filed an action for annulment of judgment claiming that he was the lawful owner and possessor of the property even before the mortgage. His complaint was eventually dismissed without prejudice for lack of jurisdiction.

In April 1998, Artemio filed a separate ejectment case against his sister Carmelita. He presented, among others, a Miscellaneous Sales Application, deeds of real estate mortgage, tax-related certifications, and a notarized May 3, 1989 Waiver and Transfer of Possessory Rights executed by Nicolasa in his favor. The MTCC ruled in Artemio's favor, and the ruling was eventually affirmed by the Supreme Court in G.R. No. 150187, Carmelita Guanga v. Artemio Dela Cruz. Meanwhile, the writ-of-possession proceedings continued. On June 27, 2008, the RTC issued an Amended Order again granting Peñaflor's application and issued a Writ of Possession. Artemio and his wife Lydia moved to quash the writ, claiming that they were third persons actually possessing the property adversely to Nicolasa, the judgment obligor.

The RTC denied the motion. After Artemio and Lydia died, their heirs continued the challenge. The Court of Appeals reversed the RTC, annulled the Writ of Possession and Notice to Vacate, and held that Artemio had sufficiently demonstrated an adverse claim over the property. The CA relied principally upon the 1989 Waiver and the evidence presented by Artemio in the earlier ejectment case. It ruled that the remedy of Peñaflor's heirs was to file an ordinary action for ejectment or reinvindicatory action instead of implementing the writ. Peñaflor's heirs then elevated the case to the Supreme Court.

ISSUE

Whether or not the Court of Appeals correctly annulled the Writ of Possession and Notice to Vacate on the ground that the heirs of Artemio and Lydia Dela Cruz were third persons actually holding the property adversely to Nicolasa Dela Cruz, the judgment obligor.

Whether or not Artemio Dela Cruz had established an independent right or title over the property adverse to Nicolasa, sufficient to prevent the implementation of the writ of possession issued in favor of Peñaflor's heirs.

Whether or not the May 3, 1989 Waiver and Transfer of Possessory Rights was an effective mode of transferring ownership from Nicolasa to Artemio under Article 712 of the Civil Code.

Whether or not the evidence presented by Artemio in the separate ejectment case could properly be considered in the writ-of-possession proceedings against Peñaflor and his heirs.

HELD

The Supreme Court GRANTED the petition and REVERSED and SET ASIDE the Decision and Resolution of the Court of Appeals. The Court reinstated the Writ of Possession dated June 27, 2008 and the Notice to Vacate dated June 18, 2009 issued by the RTC. The Court held that a purchaser in an extrajudicial foreclosure becomes the absolute owner of the property when the redemption period expires without redemption. As absolute owner, the purchaser acquires the rights recognized under Article 428 of the Civil Code, including the right to possess the property.

The Court explained that Section 7 of Act No. 3135, as amended by Act No. 4118, imposes upon the RTC a ministerial duty to issue a writ of possession to the purchaser of property sold through extrajudicial foreclosure upon proper application. After consolidation of title, the purchaser's right to possession becomes a matter of right. The Court reiterated that an ordinary action for possession is generally unnecessary because the purchaser's right to possession arises from the ownership acquired through the foreclosure sale and consolidation of title.

However, the Court recognized the exception under Section 33, Rule 39 of the Rules of Court, which is applicable to extrajudicial foreclosure proceedings through Section 6 of Act No. 3135. When a third party is actually holding the property adversely to the judgment obligor or mortgagor, the court's duty to issue the writ is no longer purely ministerial. Instead, the court must conduct a hearing to determine the nature of the third party's adverse possession. The third party must demonstrate an independent right or title, not merely claim ownership or possession.

Applying this exception, the Court held that Artemio failed to establish an independent right over the property. His principal basis was the May 3, 1989 Waiver and Transfer of Possessory Rights executed by his mother, Nicolasa. The Court held that a mere waiver of rights is not an effective mode of transferring ownership under the Civil Code. Under Article 712 of the Civil Code, ownership is acquired through recognized original or derivative modes, including occupation, acquisitive prescription, law, succession, and tradition resulting from contracts such as sale, barter, donation, assignment, or mutuum. The waiver did not constitute any of these recognized modes.

The Court specifically explained that the 1989 Waiver could not be treated as a sale, because it contained no price certain in money or its equivalent; neither was it a barter, because there was no consideration consisting of another thing; nor was it a donation, because the requirements for donation, including the necessary animus donandi and acceptance, were not established. It likewise could not be treated as an assignment or mutuum. Thus, Artemio could not acquire ownership merely from the waiver document. The Court relied on Acap v. Court of Appeals, which likewise held that a waiver document that does not contain the elements of a recognized mode of transferring ownership cannot by itself establish ownership.

The other documents relied upon by Artemio were likewise insufficient. The Miscellaneous Sales Application was merely an application for a sales patent and was not shown to have actually resulted in the grant of title. The deeds of real estate mortgage did not establish the source of Artemio's ownership because such documents merely assumed that he already possessed ownership sufficient to mortgage the property. The tax declarations and certifications only constituted evidence of a claim of ownership and were not valid documents establishing the source of title.

More importantly, the Court held that these documents were inadmissible against Peñaflor and his heirs in the present proceedings because they had been submitted and considered in the separate ejectment case filed by Artemio against Carmelita. Peñaflor was not a party to that case and therefore had no opportunity to contest the authenticity and genuineness of the documents or present evidence to rebut them. Considering those documents against Peñaflor in the present case would violate his right to due process.

The Court also emphasized that the earlier ejectment case, G.R. No. 150187, only determined who between Artemio and Carmelita had the better right of possession de facto. Although ownership may be provisionally considered in an ejectment case, it is examined only for the limited purpose of determining prior possession. Thus, the ruling in that case could not establish Artemio's ownership against Peñaflor, who was not a party to that proceeding.

Finally, the Court found that Artemio's claim was weakened by several material inconsistencies. In his earlier annulment case, he claimed that he had applied for a sales patent and that Nicolasa did not own the property. Yet, in the present proceedings, he and his heirs claimed that Nicolasa transferred her rights to him through the 1989 Waiver. Other members of Nicolasa's family likewise asserted conflicting claims of ownership. The Court also noted that Artemio filed his ejectment case only in April 1998, seven years after the property had already been mortgaged to Peñaflor. These circumstances further undermined his claim that he possessed an independent right adverse to Nicolasa at the time of the mortgage.

Accordingly, the Supreme Court held that Artemio and his heirs were not third parties actually holding the property adversely to Nicolasa within the contemplation of Section 33, Rule 39. The Court stressed that a mere claim of ownership is insufficient. In an adversarial hearing, the third-party claimant bears the burden of proving the independent right by preponderance of evidence, and evidence that was not presented or formally offered against the opposing party cannot simply be used against that party. Since Artemio's heirs failed to establish such an independent right, Peñaflor's heirs were entitled to the writ of possession arising from their consolidated ownership.

WHEREFORE, the petition was GRANTED. The CA Decision dated February 18, 2011 and Resolution dated July 8, 2011 were REVERSED and SET ASIDE, and the RTC's Writ of Possession dated June 27, 2008 and Notice to Vacate dated June 18, 2009 were reinstated