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G.R.No.165142

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RepublicofthePhilippines
SUPREMECOURT
Manila
SECONDDIVISION
G.R.No.165142December10,2007
EDUARDOL.RAYO,Petitioner,
vs.
METROPOLITANBANKANDTRUSTCOMPANYANDBRANCH223OFTHEREGIONALTRIALCOURTOF
QUEZONCITY,Respondents.
DECISION
QUISUMBING,J.:
Before us is a petition for review assailing the Resolutions dated June 15, 20041 and August 23, 20042 of the
CourtofAppealsinCAG.R.SPNo.83895forannulmentofjudgment.
Thepertinentfactsareundisputed.
MidasDiversifiedExportCorp.(Midas),thruitspresident,Mr.SamuelU.Lee,obtainedsix(6)loansfromprivate
respondent Metropolitan Bank and Trust Company (Metrobank), amounting to P588,870,000 as evidenced by
promissory notes. To secure the payment of an P8,000,000 loan, Louisville Realty & Development Corporation
(Louisville), thru its president, Mr. Samuel U. Lee, executed in favor of Metrobank, a real estate mortgage over
threeparcelsoflandsituatedatNo.40TimogAve.,Brgy.LagingHanda,QuezonCity,withallthebuildingsand
improvements thereon. The properties are covered by Transfer Certificates of Title (TCT) Nos. N163455, N
166349andN166350issuedbytheRegistryofDeedsofQuezonCity.
When the debtormortgagor failed to pay, Metrobank extrajudicially foreclosed the real estate mortgage in
accordancewithActNo.3135,3asamended.Thereafter,inapublicauction,Metrobankwasthehighestbidder.A
CertificateofSale4datedDecember11,2000wasdulyregisteredwiththeRegistryofDeedsofQuezonCityon
December13,2000.WhenLouisvillerefusedtoturnovertherealproperties,onMarch17,2001,Metrobankfiled
beforetheRegionalTrialCourt(RTC),Branch223,QuezonCity,anexpartepetition5fortheissuanceofawritof
possessiondocketedasLRCCaseNo.Q13915(01).Afterpresentationofevidenceexparte, the RTC granted
thepetitioninanOrder6datedJuly5,2001,thedispositiveportionofwhichreadsasfollows:
WHEREFORE, in consideration of the foregoing premises, the instant petition is hereby GRANTED. Upon the
filingofabondintheamountofONEHUNDREDTHOUSANDPESOS([P]100,000.00), let a Writ of Possession
overthepropertiescoveredbyTransferCertificatesofTitleNos.N163455,N166349&N166350issueinfavor
ofthepetitionerMETROPOLITANBANK&TRUSTCOMPANYtobeimplementedbytheDeputySheriffofBranch
223,RegionalTrialCourtofQuezonCitybyplacingthepetitionerinpossessionovertheparcelsoflandwithallits
improvements.
SOORDERED.7
OnSeptember24,2001,Metrobankpostedtherequiredbond.Consequently,awritofpossessionwasissuedon
October 9, 2001. This was partially implemented as to TCT No. N163455, as evidenced by the TurnOver
Receipt8datedDecember13,2002.Thewritoverthetworemainingproperties,underTCTNos.N166349and
N166350,weresubsequentlyimplementedasevidencedbytheTurnOverReceipt9datedDecember3,2003.
Meanwhile, on April 3, 2002, petitioner Eduardo L. Rayo filed a complaint10 docketed as Civil Case No. Q02
46514againstMetrobankforNullificationofRealEstateMortgageContract(s)andExtrajudicialForeclosureSale,
intheRTC,Branch99,QuezonCity.
OnMay13,2004,petitionerRayofiledwiththeCourtofAppealsaPetition11forAnnulmentofJudgmentonthe
groundof"absolutelackofdueprocess."Petitionerallegedthathispredecessor,Louisville,wasnotnotifiedofthe
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proceedingsandthatSection712(expartemotionorpetitionfortheissuanceofawritofpossession)ofActNo.
3135isunconstitutional.
On June 15, 2004, the Court of Appeals denied the petition for lack of merit. The Court of Appeals ruled that
petitionerisneithertheregisteredownernorthesuccessorininterestoftheregisteredownerhence,notareal
partyininterest.ItalsoruledthatthereisnobasistochallengetheconstitutionalityofSection7ofActNo.3135,
as amended as it constitutes a collateral attack against said provision. Further, petitioner availed of the wrong
remedyinfilingCivilCaseNo.Q0246514.Petitionersoughtreconsideration,butwaslikewisedenied.
Petitionernowcomesbeforeusraisingthefollowingasprimaryissue:
WHETHER OR NOT SECTION 7 OF ACT NO. 3135 IS CONTRARY TO THE DUE PROCESS PROVISION OF
THE PHILIPPINE CONSTITUTION CONSIDERING THAT SUCH SECTION 7 OF THE LAW PROVIDES OR
ALLOWS, ACCORDING TO THIS HONORABLE COURT, FOR AN EXPARTE PROCEEDING WHICH IS A
"JUDICIALPROCEEDINGBROUGHTFORTHEBENEFITOFONEPARTYONLY,ANDWITHOUTNOTICETO,
OR CONSENT BY ANY PERSON ADVERSELY INTERESTED" "OR A PROCEEDING WHEREIN RELIEF IS
GRANTEDWITHOUTANOPPORTUNITYFORTHEPERSONAGAINSTWHOMTHERELIEFISSOUGHTTO
BE HEARD," AS HELD IN THE CASE OF GOVERNMENT SERVICE INSURANCE SYSTEM VS. COURT OF
APPEALS,169SCRA244@255,JANUARY20,1989.13
Healsoraisesthefollowingassecondaryissues:
I.
WHETHERORNOTTHEPETITIONERHASTHELEGALPERSONALITYTOSEEKTHEANNULMENTOF
JUDGMENTIN[THE]SUBJECTLRCCASENO.Q13915(01).
II.
WHETHER OR NOT PRIVATE RESPONDENT VIOLATED THE RULE AGAINST FORUMSHOPPING
WHEN IT DID NOT INFORM THE HONORABLE BRANCH 223 OF THE REGIONAL TRIAL COURT OF
QUEZON CITY REGARDING THE FILING OF CIVIL CASE NO. Q0246514 FOR NULLIFICATION OF
REAL ESTATE MORTGAGE CONTRACT AND THE EXTRAJUDICIAL FORECLOSURE SALE OF THE
SAMESUBJECTREALPROPERTIESANDTHEPENDENCYOFTHESAMEBEFORETHEHONORABLE
BRANCH99OFTHESAMEREGIONALTRIALCOURT.14
Statedsimply,theissuesraisedare:(1)Doespetitionerhavethelegalpersonalityintheannulmentofjudgment
proceedings?(2)IsSection7ofActNo.3135,asamended,unconstitutional?(3)Isrespondentguiltyofforum
shopping?
Petitioner insists that contrary to the ruling of the Court of Appeals, he has the legal personality to institute the
annulment of judgment case against Metrobank, considering that the March 25, 2002 deed of assignment he
enteredintowithLouisvilleandWinstonLinwyL.Chuamakeshimacoassigneeoverthesubjectrealproperties.
For its part, Metrobank claims that it was not a party to the deed of assignment among Louisville, Chua and
petitioner,hence,ithasnoprivityofcontractwithpetitionerRayo.Moreover,Metrobankpointsoutthatthereal
properties had already been extrajudicially foreclosed when petitioner and his assignors executed the deed of
assignment.
UnderSection2,15Rule3oftheRulesofCourt,everyactionmustbeprosecutedordefendedinthenameofthe
realpartyininterest,orone"whostandstobebenefitedorinjuredbythejudgmentinthesuit."16Arealpartyin
interestisonewith"apresentsubstantialinterest"whichmeanssuchinterestofapartyinthesubjectmatterof
theactionaswillentitlehim,underthesubstantivelaw,torecoveriftheevidenceissufficient,orthathehasthe
legaltitletodemand.17
Now,ispetitionerRayoarealpartyininterest?Initially,werecognizedhereinpetitionerasthecoassigneeofthe
subjectrealpropertiesasshownintheMarch25,2002deedofassignment.However,whilepetitionerwouldbe
injured by the judgment in this suit, we find that petitioner has no present substantial interest to institute the
annulmentofjudgmentproceedingsandnullifytheordergrantingthewritofpossession.
First,therewasnoviolationofpetitionersrighttoconstitutionaldueprocess.Inalonglineofcases,18wehave
consistently ruled that the issuance of a writ of possession in favor of the purchaser in a foreclosure sale of a
mortgaged property under Section 7 of Act No. 3135, as amended is a ministerial duty of the court. The
purchaser of the foreclosed property, upon exparte application and the posting of the required bond, has the
right to acquire possession of the foreclosed property during the 12month redemption period and with more
reason,aftertheexpirationoftheredemptionperiod.
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An ex parte petition for the issuance of a writ of possession under Section 7 of Act No. 3135 is not, strictly
speaking,a"judicialprocess"ascontemplatedinArticle43319oftheCivilCode.Itisajudicialproceedingforthe
enforcementofonesrightofpossessionaspurchaserinaforeclosuresale.Itisnotanordinarysuitfiledincourt,
by which one party "sues another for the enforcement of a wrong or protection of a right, or the prevention or
redress of a wrong." It is a nonlitigious proceeding authorized in an extrajudicial foreclosure of mortgage
pursuanttoActNo.3135,asamended,andisbroughtforthebenefitofonepartyonly,andwithoutnoticeto,or
consent by any person adversely interested. It is a proceeding where the relief is granted without requiring an
opportunityforthepersonagainstwhomthereliefissoughttobeheard.Nonoticeisneededtobeservedupon
personsinterestedinthesubjectproperty.20
Second, in the deed of assignment, petitioner also acknowledged that the subject real properties were already
sold at various extrajudicial foreclosure sales and bought by Metrobank. Clearly, petitioner recognized the prior
existingrightofMetrobankasthemortgageepurchaseroverthesubjectrealproperties.21Actualknowledgeofa
prior mortgage with Metrobank is equivalent to notice of registration22 in accordance with Article 212523 of the
Civil Code. Conformably with Articles 131224 and 212625 of the Civil Code, a real right or lien in favor of
Metrobank had already been established, subsisting over the properties until the discharge of the principal
obligation,whoeverthepossessor(s)ofthelandmightbe.26Aspetitionerisnotapartywhoseinterestisadverse
tothatofLouisville,therewasnobartotheissuanceofawritofpossessiontoMetrobank.Itdoesnotmatterthat
petitionerwasnotspecificallynamedinthewritofpossessionnornotifiedofsuchproceedings.
1 a v v p h i1

Third,wealsonotethatpetitioneravailedofthewrongremedyinfilingCivilCaseNo.Q0246514,fornullification
ofrealestatemortgageandextrajudicialforeclosuresale,morethansix(6)monthsaftertheissuanceofthewrit
of possession considering the mandate of Section 827 of Act No. 3135, as amended. Hence, even petitioners
actionforannulmentofjudgmentcannotprosperasitcannotbeasubstituteforalostremedy.
Now, petitioner is challenging the constitutionality of Section 7 of Act No. 3135, as amended. He avers that
Section 7 violates the due process clause because, by the mere filing of an ex parte motion in the proper
cadastral court, the purchaser in a foreclosure sale is allowed to obtain possession of the foreclosed property
duringtheredemptionperiod.
TheCourtofAppealsruledthatpetitionersattempttochallengetheconstitutionalityofSection7ofActNo.3135,
asamended,constitutesacollateralattackthatisnotallowed.Wefullyagreewiththeappellatecourtsruling.For
reasonsofpublicpolicy,theconstitutionalityofalawcannotbeattackedcollaterally.28
With regard to forumshopping forumshopping is the filing of multiple suits involving the same parties for the
samecauseofaction,eithersimultaneouslyorsuccessively,forthepurposeofobtainingafavorablejudgment.It
existswheretheelementsoflitispendentiaarepresentorwhereafinaljudgmentinonecasewillamounttores
judicatainanother.29Theissuanceofthewritofpossessionbeingaministerialfunction,andsummaryinnature,
itcannotbesaidtobeajudgmentonthemerits.Itisonlyanincidentinthetransferoftitle.Hence,aseparate
case for annulment of mortgage and foreclosure sale cannot be barred by litis pendentia or res judicata.30
Clearly,insofarasLRCCaseNo.Q13915(01)andCivilCaseNo.Q0246514areconcerned,Metrobankisnot
guiltyofforumshopping.
WHEREFORE,thepetitionisDENIEDforlackofmerit.TheassailedResolutionsdatedJune15,2004andAugust
23,2004oftheCourtofAppealsinCAG.R.SPNo.83895areherebyAFFIRMED.Costsagainstthepetitioner.
SOORDERED.
LEONARDOA.QUISUMBING
AssociateJustice
WECONCUR:
ANTONIOT.CARPIO
AssociateJustice
CONCHITACARPIOMORALES
AssociateJustice

DANTEO.TINGA
AssociateJustice

PRESBITEROJ.VELASCO,JR.
AssociateJustice
ATTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case was
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assignedtothewriteroftheopinionoftheCourtsDivision.
LEONARDOA.QUISUMBING
AssociateJustice
Chairperson
CERTIFICATION
PursuanttoSection13,ArticleVIIIoftheConstitution,andtheDivisionChairpersonsAttestation,Icertifythatthe
conclusionsintheaboveDecisionhadbeenreachedinconsultationbeforethecasewasassignedtothewriterof
theopinionoftheCourtsDivision.
REYNATOS.PUNO
ChiefJustice

Footnotes
1 Rollo, pp. 2431. Penned by Associate Justice Fernanda Lampas Peralta, with Associate Justices

JosefinaGuevaraSalongaandJuanQ.Enriquez,Jr.concurring.
2Id.at38.
3 An Act to Regulate the Sale of Property Under Special Powers Inserted in or Annexed to RealEstate

Mortgages.ApprovedonMarch6,1924.
4Rollo,pp.106107.
5Id.at7075.
6Id.at6669.
7Id.at68.
8Id.at259.
9Id.at260.
10Id.at116130.
11Id.at3965.
12 Sec. 7. Possession during redemption period. In any sale made under the provisions of this Act, the

purchasermaypetitiontheCourtofFirstInstanceoftheprovinceorplacewherethepropertyoranypart
thereof is situated, to give him possession thereof during the redemption period, furnishing bond in an
amountequivalenttotheuseofthepropertyforaperiodoftwelvemonths,toindemnifythedebtorincase
it be shown that the sale was made without violating the mortgage or without complying with the
requirementsofthisAct.Suchpetitionshallbemadeunderoathandfiledinformofanexpartemotionin
theregistrationorcadastralproceedingsifthepropertyisregistered,orinspecialproceedingsinthecase
of property registered under the Mortgage Law or under section one hundred and ninetyfour of the
AdministrativeCode,orofanyotherrealpropertyencumberedwithamortgagedulyregisteredintheoffice
ofanyregisterofdeedsinaccordancewithanyexistinglaw,andineachcasetheclerkofthecourtshall,
uponthefilingofsuchpetition,collectthefeesspecifiedinparagraphelevenofsectiononehundredand
fourteen of Act Numbered Four hundred and ninetysix, as amended by Act Numbered Twentyeight
hundredandsixtysix,andthecourtshall,uponapprovalofthebond,orderthatawritofpossessionissue,
addressed to the sheriff of the province in which the property is situated, who shall execute said order
immediately.
13Rollo,pp.227228.
14Id.at228.
15SEC.2.Partiesininterest.Arealpartyininterestisthepartywhostandstobebenefitedorinjuredby

thejudgmentinthesuit,orthepartyentitledtotheavailsofthesuit.Unlessotherwiseauthorizedbylawor
theseRules,everyactionmustbeprosecutedordefendedinthenameoftherealpartyininterest.
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16Carov.Sucaldito,G.R.No.157536,May16,2005,458SCRA595,605.
17SeeKilosbayan,Incorporatedv.Morato,G.R.No.118910,July17,1995,246SCRA540,564565.
18Anchetav.MetropolitanBank&TrustCompany,Inc.,G.R.No.163410,September16,2005,470SCRA

157Paderesv.CourtofAppeals,G.R.Nos.147074and147075,July15,2005,463SCRA504Arquizav.
CourtofAppeals,G.R.No.160479,June8,2005,459SCRA753DevelopmentBankofthePhilippinesv.
Gatal, G.R. No. 138567, March 4, 2005, 452 SCRA 697 Idolor v. Court of Appeals, G.R. No. 161028,
January31,2005,450SCRA396DeVerav.Agloro,G.R.No.155673,January14,2005,448SCRA203
Ong v. Court of Appeals, G.R. No. 121494, June 8, 2000, 333 SCRA 189 Samson v. Rivera, G.R. No.
154355,May20,2004,428SCRA759.
19Art.433.Actualpossessionunderclaimofownershipraisesadisputablepresumptionofownership.The

trueownermustresorttojudicialprocessfortherecoveryoftheproperty.
20DeVerav.Agloro,supraat215.
21Rollo,p.142.
22SeeRehabilitationFinanceCorp.v.Javillonar,etal.,107Phil664,668(1960).
23Art.2125.InadditiontotherequisitesstatedinArticle2085,itisindispensable,inorderthatamortgage

maybevalidlyconstituted,thatthedocumentinwhichitappearsberecordedintheRegistryofProperty.If
theinstrumentisnotrecorded,themortgageisneverthelessbindingbetweentheparties.
The persons in whose favor the law establishes a mortgage have no other right than to demand the
executionandtherecordingofthedocumentinwhichthemortgageisformalized.
24Art.1312.Incontractscreatingrealrights,thirdpersonswhocomeintopossessionoftheobjectofthe

contractareboundthereby,subjecttotheprovisionsoftheMortgageLawandtheLandRegistrationlaws.
25 Art. 2126. The mortgage directly and immediately subjects the property upon which it is imposed,

whoeverthepossessormaybe,tothefulfillmentoftheobligationforwhosesecurityitwasconstituted.
26SeePaderesv.CourtofAppeals,supraat512.
27 Sec. 8. The debtor may, in the proceedings in which possession was requested, but not later

thanthirtydaysafterthepurchaserwasgivenpossession,petitionthatthesalebesetasideand
thewritofpossessioncancelled, specifying the damages suffered by him, because the mortgage was
not violated or the sale was not made in accordance with the provisions hereof, and the court shall take
cognizanceofthispetitioninaccordancewiththesummaryprocedureprovidedforinsectiononehundred
andtwelveofActNumberedFourhundredandninetysixandifitfindsthecomplaintofthedebtorjustified,
it shall dispose in his favor of all or part of the bond furnished by the person who obtained possession.
Either of the parties may appeal from the order of the judge in accordance with section fourteen of Act
Numbered Four hundred and ninety six but the order of possession shall continue in effect during the
pendencyoftheappeal.(Emphasisours.)
28PhilippineNationalBankv.Palma,G.R.No.157279,August9,2005,466SCRA307,322323.
29Melov.CourtofAppeals,G.R.No.123686,November16,1999,318SCRA94,100.
30Arquizav.CourtofAppeals,supranote18,at765.
TheLawphilProjectArellanoLawFoundation

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