G.R. No. 202387. August 30, 2017

THIRD DIVISION: [G.R. No. 202387, August 30, 2017] PHILIPPINE NATIONAL BANK (GOA BRANCH, GOA, CAMARINES SUR), PETITIONER, V. JACINTO PEÑAFLOR, JR., RESPONDENT.

The Court NOTES the letter dated May 19, 2017 of Doerlyn D. Dural, Records Officer II, Archives Section, Judicial Records Division of the Court of Appeals (CA), Manila, elevating to this Court the CA rollo of this case.

We resolve the petition for review on certiorari filed by petitioner imputing grave abuse of discretion against the Court of Appeals (CA) in promulgating its decision of November 22, 2011[1] reversing and setting aside the order issued on March 14, 2008[2] by the Regional Trial Court (RTC), Branch 33, in Pili, Camarines Sur in Special Proceedings No. 1648 granting the petition for the issuance of writ of possession filed by the petitioner.

Antecedents

The late Spouses Jacinto Sr. and Mary Anne Peñaflor obtained a loan from the petitioner and, as security, they executed a deed of mortgage[3] over two parcels of land covered by Transfer Certificate of Title (TCT) No. 21221 and TCT) No 21222, both of the Registry of Deeds of Camarines Sur. Due to their failure to pay the obligation, the petitioner extra-judicially foreclosed the mortgage, and, being the highest bidder at the ensuing public auction sale of the mortgaged properties, was issued the certificate of sale on June 5, 1997[4] that it registered with the Registry of Deeds of Camarines Sur on June 20, 1997. After the Sps. Peñaflor did not redeem the properties, the petitioner consolidated its title over the properties. Hence, new certificates of title were issued in due course to the petitioner, i.e., TCT No. T-32641[5] and TCT No. T-32642.[6]

On August 20, 1999, the petitioner entered into a deed of conditional sale[7] with respondent Jacinto Peñaflor, the son of the late Sps. Peñaflor. Based on the contract, the petitioner agreed to transfer the ownership of the properties to Jacinto upon full payment of the purchase price of P580,000.00; and that Jacinto would initially deposit P100,000.00, and would pay the balance in 60 equal monthly installments.

After paying the initial deposit and first few months amortizations, Jacinto defaulted, prompting the petitioner to rescind the deed of conditional sale by filing a notarial notice of rescission on July 11, 2002.[8]

On February 28, 2006, the petitioner filed an ex parte petition for issuance of writ of possession[9] in the RTC, docketed as Special Proceeding No. T-909, asserting that it was entitled as a matter of right to the issuance of the writ of possession as the highest bidder in the foreclosure sale of the properties whose titles were already in its name pursuant to Section 7 of Act No. 3135.

Finding merit in the petitioner's petition, the RTC issued its order dated March 14, 2008 granting the issuance of the writ of possession.[10]

Undeterred, Jacinto moved for reconsideration, but the RTC denied the motion on August 13, 2008.[11]

Jacinto assailed the order dated March 14, 2008 via petition for certiorari in the CA.[12]

On November 22, 2011,[13] the CA annulled and set aside the order of the RTC issued on March 14, 2008, holding thusly:
A writ of possession is an order by which the sheriff is commanded to place a person in possession of a real or personal property. It may be issued under any of the following instances: (1) land registration proceedings under Section 17 of Act No. 496; (2) judicial foreclosure, provided the debtor is in possession of the mortgaged realty and no third person, not a party to the foreclosure suit, had intervened; and (3) extrajudicial foreclosure of a real estate mortgage under Section 7 of Act No. 3135 as amended by Act No. 4118.

In asserting that it is entitled to the issuance of the writ of possession, respondent cited the third instance mentioned above. Respondent argues that as the highest bidder in the foreclosure sale, and after consolidating the title in its name, it is entitled to possession as a matter of right.

We do not Agree. A close scrutiny of the records of the case reveals that respondent had already abandoned its right to possession of the subject properties under Act No. 3135 when it entered into a Deed of Conditional Sale with the petitioner. While it is true that respondent as the purchaser in the foreclosure sale is entitled to possession by mere filing an ex-parte motion after the redemption period had expired without the mortgagors exercising their right of redemption, this does not hold true in the case at bar. Herein, respondent, instead of filing a motion for issuance of writ of possession after acquiring absolute ownership on the foreclosed properties, entered into a conditional sale with a third person who is not a party to the mortgage contract. The conditional sale supersedes the mortgage, and, the rights and obligations of parties vis-a-vis the subject properties is now governed by an entirely different set of rules. Respondent cannot be permitted to invoke a right rooted on a contractual relation that is no longer existing. By entering into a conditional sale, respondent effectively abdicated its right to possession under Act No. 3135.

Let it be emphasized that the Deed of Conditional Sale between petitioner and respondent is a contract that is entirely separate and distinct from the mortgage earlier contracted by petitioner's parents. The incidents of the conditional sale, in case of breach or non-fulfillment of the condition, are completely different from breach of the mortgage contract.

In a conditional sale as in a contract to sell, ownership to the vendor does not pass to the vendee until full payment of the purchase price. The full payment of the purchase price partakes of the suspensive condition, and the non-fulfillment of the condition prevents the obligation to sell from arising. Thus, for its non-fulfillment, there is no contract to speak of, the obligor having failed to perform the suspensive condition which enforces a juridical relation. With this circumstance, there can be no fulfillment rescission or fulfillment of the obligation that is still non¬existent, the suspensive condition having not occured yet.

Concededly, petitioner defaulted in the payment of its monthly amortizations, a breach which prevented the transfer of ownership to him. The ownership therefore of the subject properties is retained by the petitioner which rightfully entitles him to the possession thereof. However, the failure of the new contractual relation to arise does not revert back to the old contractual relation between respondent and Spouses Peñaflor. As We had painstakingly nailed earlier, the conditional sale superseded the mortgage contract and the rights and obligations of the parties on the subject properties is now rooted on the conditional sale, and not on the mortgage contract. The conditional sale entered by petitioner and respondent is a supervening event which renders the former mortgage relations between petitioner and Spouses Peñaflor terminated.

Certainly, respondent cannot be permitted to revive a right which it had long abandoned by forging a new contractual relation. Its right of possession this time is no longer founded on its being the highest bidder in the foreclosure sale and the non-redemption of the mortgagor but on the breach of the suspension condition in a conditional sale authorizing it to retain the ownership of the subject properties. Corollarily, respondent cannot invoke Act No. 3135, in asserting its possession since the operation of the said statute is limited only to situations where the parties are governed by mortgage relations.

WHEREFORE, premises considered, the instant petition is GRANTED and the Order dated March 14, 2008, of the Regional Trial Court of Pili, Camarines Sur, Branch 33 in Special Proceedings No. P-1648 is hereby REVERSED and SET ASIDE.

SO ORDERED.
Hence, this appeal, whereby the petitioner insists that the CA erred: (1) in declaring that it was not entitled to the issuance of a writ of possession; and (2) in declaring that ownership of the properties was retained by Jacinto.

Ruling of the Court

The appeal lacks merit.

In Philippine National Bank v. Pimentel[14] the Court ruled that the petitioner could no longer apply for and be granted a writ of possession of the previously mortgaged property once the property had been subsequently subjected to a contract of conditional sale executed after the foreclosure sale thereof pursuant to Act No. 3135. The Court opined:

The next question then is, since there was an alleged breach of the subsequent contract of conditional sale, may PNB still regain possession of the subject property by applying for a writ of possession under Act No. 3135? The Court answers in the negative.

Section 7 of Act No. 3135 only provides for the procedure by which possession may be expeditiously turned over to the new owner, that is, the winning bidder at the public auction. It distinctly states that said rule of procedure for the issuance of a writ of possession applies only to "any sale made under the provisions of this Act x x x." The rule is meant to benefit only the winning bidder at the public auction conducted in accordance with the provisions of Act No. 3135.

Plainly, when PNB executed the deed of conditional sale in favor of herein respondents, the transaction is no longer a sale under the provisions of Act No. 3135. On this ground alone, it is evident that PNB could no longer obtain a writ of possession under the provisions of Act No. 3135.

Moreover, when herein parties executed the Deed of Conditional Sale, where it was stipulated that PNB was constructively placing respondents in possession of subject property, the parties, in effect, admitted that PNB already had legal possession at that time. Upon execution of the contract, however, PNB voluntarily transferred possession to respondents. Pursuant to the terms of the Deed of Conditional Sale, respondents gained valid possession of the property, but ownership remained with PNB. Thus, when the Deed of Conditional Sale was rescinded, respondents' right to possess subject property became questionable.

Paragraph No. 5[15] of the deed of conditional sale stipulated that:

5. The Vendee hereby waives his right to be placed in actual possession of the Property and agrees that upon execution hereof, they are deemed to have been constructively place in possession thereof. The vendee further agrees to undertake, at his own expense, to eject any occupants of the Property.

Under this stipulation, the petitioner admitted that it had already the legal possession of the properties at the time of the execution of the deed of conditional sale. Hence, the issuance of a writ of possession in its favor as against the debtors who were no longer in possession of the then mortgaged realty was not availing. As such, the CA correctly reversed and set aside the order dated March 14, 2008 of the RTC.

WHEREFORE, We AFFIRM the decision promulgated on November 22, 2011; and DIRECT the petitioner to pay the costs of suit.

SO ORDERED.

[1] Rollo, pp. 8-13; penned by Associate Justice Samuel H. Gaerlan, with Associate Justice Amelita G. Tolentino and Associate Justice Ramon R. Garcia concurring.

[2] Id. at 81; penned by Presiding Judge Nilo A. Malanyaon.

[3]Id. at 51-52.

[4] Id. at 53-55.

[5] Id. at 56-57.

[6] Id. at 58-59.

[7] Id. at 60-62.

[8] Id. at 63.

[9] Id. at 74-77.

[10] Id. at 81.

[11] Id. at 88.

[12] Id. at 89-97.

[13] Id. at 8-13.

[14] G.R. No. 187882, August 24, 2015, 768 SCRA 24, 31-32.

[15] Rollo p. 60.

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