SPS. GEORGE A. GALLENT, SR. AND MERCEDES M. GALLENT v. JUAN G.

VELASQUEZ/JUAN
G. VELASQUEZ v. SPS. GEORGE A. GALLENT, SR. AND MERCEDES M. GALLENT
G.R. No. 203949/G.R. No. 205071, APRIL 6, 2016, THIRD DIVISION, (Reyes, J.)
Petition for Review on Certiorari
Facts:
George A. Gallent, Sr. owned a residential property with improvements consisting of a 2-storey
house and a swimming pool. On 1996, the Spouses George and Mercedes Gallent (Spouses Gallent)
obtained a loan for P1.5 Million and mortgaged the said property to Allied Bank. The Spouses Gallent
failed to pay their loan which led to the extrajudicial foreclosure of the property. At the public auction,
Allied Bank was the highest bidder and since the couple failed to redeem the property one year later,
the bank consolidated its ownership. On 2003, Allied Bank agreed to sell back the foreclosed property
to the Spouses Gallent for P4 Million, with P3.5 Million as the downpayment and the balance in 12
monthly amortizations. The Spouses Gallent paid the downpayment and kept possession of the subject
property as tenants or lessees of the bank. Juan Velasquez was asked by the Spouses Gallent to help
them settle the remaining amortizations and as an inducement, the property will be registered under his
name until they have repaid him. A Deed of Assignment of Rights was executed by the Spouses
Gallent and Velasquez paid the remaining balance. Allied Bank and Velasquez then executed a Deed
of Absolute Sale but this instrument was not registered. Velasquez, purportedly for tax purposes,
executed another Deed of Sale and had it registered.
On 2008, Velasquez demanded that the Spouses Gallent vacate the property but the latter
refused. On 2009, Velasquez filed an ex parte petition for issuance of a writ of possession and the RTC
ruled in favor of him. The Spouses Gallent filed a motion for reconsideration but was denied. On 2010,
the Spouses filed a petition for certiorari before the CA seeking to annul the previous orders. The CA 4th
Division held that an ex parte writ of possession cannot issue against the Spouses Gallent, them being
the adverse claimants of the property who are in actual possession.
Also on 2010, the Spouses Gallent filed a complaint before the RTC to annul the deed of
assignment they previously executed because they alleged that their true intent was an equitable
mortgage. Further, the Spouses Gallent filed another petition before the CA arguing that the deed of
sale between Velasquez and Allied Bank was a forgery. The CA 10th Division held that Velasquez, as
the bank’s transferee and as the assignee of interest in the property, may petition the court for an ex
parte writ of possession.
Issue:
Whether or not the Regional Trial Court (RTC) may validly issue an ex parte writ of possession to the
transferee of the winning bidder at the extrajudicial foreclosure sale of mortgaged real property.
Ruling:
Wherefore, the Court grants the petition of the Spouses Gallent and denied the petition of
Velasquez. As a general rule in extrajudicial foreclosure of mortgage, after the consolidation of title over
the foreclosed property in the buyer, it is the ministerial duty of the court to issue a writ of possession
upon an ex parte petition by the new owner as a matter of right. However, the Spouses Gallent
maintained that their true agreement with Velasquez was an equitable mortgage and not an assignment
of their interest in the subject property. An equitable mortgage reveals the intention of the parties that
the real property is a security for a debt. Furthermore, a contract wherein the vendor/mortgagor remains
in physical possession as the lessee or otherwise has been held to be an equitable mortgage. The
Court determines the nature of the contract not by the title or name given to it by the parties but by their
conduct, words, actions and deeds prior to, during, and immediately after executing the agreement. In
the present case, the substantial payment of the Spouses Gallent entitles them to the legal presumption
that their assignment to Velasquez of all their interest under the Contract to Sell was indeed an
equitable mortgage. As held in Rockville Excel International Exim Corporation v. Spouses Culla and
Miranda, the property sold remaining in the vendor’s possession as lessee or otherwise and the
inadequate price of the sale results to the law deeming that the contract is an equitable mortgage.
Also in the present case, if there was a forgery in the sale of the said property to Velasquez
from Allied Bank, it was obviously a mere ploy to reduce the taxes and not cause for the transfer of the
title of Allied Bank to Velasquez. The Court held that even if it is eventually shown that there was in fact
forgery for the purpose of committing fraud against the Spouses Gallent, them being a third party
occupants should not be affected by the ex parte writ of possession by Velasquez because they are not
parties to the forgery. They cannot be summarily ejected without due process. The Spouses Gallent
entered into an equitable mortgage with Velasquez and they have a superior right to retain the
possession of the subject property.