Writ of Possession in Foreclosure: Bank Rights Prevail Over Third-Party Claims

The Supreme Court's 2003 decision in China Banking Corporation v. Spouses Ordinario clarifies an important point in Philippine foreclosure law: when a bank purchases property at an extrajudicial foreclosure sale, the trial court has a ministerial duty to issue a writ of possession in the bank's favor. Third parties who claim rights over the foreclosed property cannot block this writ through a simple motion for reconsideration—they must pursue the proper legal remedies.

Facts of the Case

China Banking Corporation granted three loans totaling P27,353,000.00 to TransAmerican Sales and Exposition, Inc. The loans were secured by real estate mortgages over 45 parcels of land owned by Jesus Garcia, registered in the Registry of Deeds of Quezon City. When TransAmerican failed to pay, the bank extrajudicially foreclosed the mortgages. At the public auction on August 27, 1990, the bank was the highest bidder at P38,004,205.01, and the Certificate of Sale was registered on September 3, 1990.

The bank then filed an ex parte petition for a writ of possession with the Regional Trial Court (RTC) of Quezon City. On April 10, 1991, the trial court granted the petition, ordering the issuance of a writ of possession over all 45 parcels.

Spouses Oscar and Lolita Ordinario later filed a motion for reconsideration, claiming they had purchased the property covered by TCT No. 7637 in November 1989, where their townhouse stood. They argued they were indispensable parties who should have been notified, and that the bank should have filed an action for recovery of possession instead.

The Issue

The central question was whether the trial court could exclude a third party's claimed property from a writ of possession issued in favor of the foreclosure purchaser, or whether the third party must pursue other remedies.

The Ruling

The Supreme Court ruled in favor of the bank, reversing the Court of Appeals. The Court held that under Section 7 of Act No. 3135 (the law regulating extrajudicial foreclosure of real estate mortgages), the purchaser at a foreclosure sale is entitled to possession of the property as a matter of course. Issuing the writ is a ministerial duty of the trial court—the court has no discretion to deny it.

The Court emphasized that questions about the validity or regularity of the foreclosure sale should be resolved in a separate proceeding, not through a motion to reconsider the writ of possession.

Third-Party Remedies Under Rule 39

The Court acknowledged an exception: under Section 33, Rule 39 of the Rules of Civil Procedure, possession may not be awarded if a third party is actually holding the property adversely to the judgment debtor. However, the Court explained that third-party claimants have two specific remedies:

1. Terceria – filing an affidavit of title with the sheriff and the judgment creditor, which may stop the sheriff from keeping the property unless a bond is posted
2. A separate action – filing an independent suit to recover ownership or possession of the property

These remedies are cumulative, and a third-party claimant may pursue either or both. The Ordinarios' resort to a motion for reconsideration was a "procedural misstep" because the writ of possession proceeding is not the proper forum to litigate ownership claims.

Practical Takeaways

• A writ of possession in extrajudicial foreclosure is issued as a matter of course; the trial court has no discretion to deny it once the bank posts the required bond
• Third parties claiming ownership over foreclosed property cannot block the writ through a motion for reconsideration in the same case
• The proper remedies for third-party claimants are a terceria claim or a separate civil action to vindicate their rights
• The bank's right to possession is protected even if the third party claims to have purchased the property before foreclosure
• Third-party claims should be raised in the proper forum, not in the ex parte writ of possession proceedings

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.