Anecito Campos v. BPI (substituted by Houston Homedepot Inc.)

FACTS:

Anecito Campos mortgaged fourteen (14) lots in favour of Far East Bank and Trust Co. who merged with BPI(Bank) to secure a loan of P1 Million. On one of the vacant lots mortgaged, Campos constructed a 2-storey building with the knowledge and consent of the Bank. Campos defaulted and the Bank moved for the extra judicial foreclosure of the mortgaged properties.

As the Bank was the highest bidder during the public auction, the Bank was issued a Certificate of Sale. Campos failed to redeem the properties during the legal redemption period. Hence, the Bank filed a writ of possession before the Regional Trial Court. But before the Order for the Writ of Possession became final and executory, Campos filed a Motion for the Suspension of the Implementation of the Writ of Possession and/or to Allow Mortgagor to Present Evidence of Good Faith.

Campos claims that he was in good faith when the 2-storey building was constructed. He claims that he has the right to retain possession of the building and the lot until the Bank reimburses him for the value of the building.

The Bank opposed, claiming that the purchaser in a foreclosure sale has no obligation to reimburse the mortgagor for the value of the improvements. It also cited a stipulation in the Mortgage Contract which states that the mortgagor transfers the parcel of land “together with all the buildings and improvements now existing or which may hereafter be erected or constructed thereon…” Houston HomeDepot was impleaded in the case as it was the Bank’s transferee pendente lite.

RTC denied Campos’ motion for lack of merit. It also denied Campos’ motion for reconsideration, hence the Petition for Certiorari.

ISSUE:

a. Whether or not the RTC committed grave abuse of discretion when it denied Campos’ motion to suspend the implementation of the writ of possession.

b. Whether or not Campos’ can claim that he is a builder in good faith and therefore entitled to reimbursement from the Bank.

HELD:


a. No. The RTC did not commit grave abuse of discretion in denying Campos’ motion.

Section 7 of Act No. 3135 states that:

"In any sale made under the provisions of this Act, the purchaser may petition the Court of First Instance of the province or place where the property or any part thereof is situated, to give him possession thereof during the redemption period, furnishing bond in an amount equivalent to the use of the property for a period of twelve months, to indemnify the debtor in case it be shown that the sale was made without violating the period of twelve months, to indemnify the debtor in case it be shown that the sale was made without violating the mortgage or without complying the requirements of this Act. Such petition shall be made under oath and filed in the form of an ex parte motion x x x and the court shall, upon approval of the bond, order that a writ of possession issue, addressed to the sheriff of the province in which the property is situated, who shall execute said order immediately." (emphasis supplied)

This provision explicitly allows the purchaser of a foreclosed property to file an ex parte motion to acquire possession of the property. Since Campos never questioned the validity of the foreclosure sale, his remedy was to institute a separate value of the improvements This provision explicitly allows the purchaser of a foreclosed property to file an ex parte motion to acquire possession of the property. Since Campos never questioned the validity of the foreclosure sale, his remedy was to institute a separate civil action for the value of the improvements (i.e. the building).

Failure to redeem the foreclosed property extinguishes the mortgagor’s remaining interest in it. Following the consolidation of ownership and the issuance of a new title in the purchaser’s name, the purchaser can demand possession at any time as a result of his absolute ownership. It becomes a ministerial duty of the court to issue the writ of possession. The only exception to this is if the property is possessed by a third party whose possession is adverse to the mortgagor.

b. Campos cannot claim that he is a builder in good faith. Articles 448, 350 and 456 of the Civil Code do not apply in his situation. The articles contemplate situations when a person builds on the land of another. In Campos’ case, he built on his own property.

Also, following the principle of Autonomy of Contracts – that contractual obligations have the force of law between the parties and should be complied with in good faith – Campos’ voluntarily included the building when he entered into the mortgage contract with the Bank.