By Erika Mae P. Sinaking, Reporter

A borrower’s appeal cannot automatically prevent a buyer from taking possession of foreclosed property once the redemption period has expired and ownership has been transferred, the Supreme Court (SC) said in upholding the Philippine National Bank’s (PNB) right to take over property in Legazpi City.

“The mere filing of the appeal by the spouses An did not stay the implementation of such writ,” the SC Third Division said in a 20-page decision written by Associate Justice Maria Filomena D. Singh and made public on Tuesday.

The court denied the petition filed by spouses Anthony and Ma. Fatima An and upheld the order granting PNB a writ of possession, which allows a buyer to take control of foreclosed property.

The spouses borrowed P2 million from Allied Banking Corp. in 2011, using land as collateral. PNB later absorbed Allied Bank through a merger, placing the original lender’s loan and the collateral behind it under PNB’s umbrella.

After the spouses defaulted on the loan, PNB foreclosed on the property and purchased it as the highest bidder at an auction in December 2015. The spouses did not redeem the property within the one-year period allowed by law. Ownership was subsequently transferred to PNB, according to the ruling.

PNB then asked the Regional Trial Court (RTC) in Legazpi City to issue a writ of possession.

The spouses opposed the request, claiming that they had regularly paid their loan and had not received notice of the auction. They also accused PNB of refusing their attempt to redeem the property and cited a waiver in their mortgage contract.

The RTC granted the writ in December 2020 but suspended its enforcement while the spouses’ appeal was pending. The Court of Appeals (CA) upheld the writ in June 2022 and lifted the suspension, prompting the spouses to bring the matter to the SC.

The high court ruled that the RTC had no discretion to suspend enforcement of the writ after the redemption period had expired and the title had been transferred to PNB. It said a buyer becomes the property’s absolute owner when the borrower fails to redeem it within one year from the registration of the foreclosure sale. The ruling effectively pegs a foreclosure buyer’s possession to the lapse of the redemption period rather than to the outcome of an appeal, a clarification that bears on banks acquiring foreclosed assets through auction or merger, where possession will not wait on pending challenges.

Allowing an appeal to suspend a writ of possession would defeat the purpose of the writ, the SC said.

“It would be incongruous to hold that a ministerial duty exercised by the RTC in issuing the writ of possession may easily be suspended by the filing of an appeal,” the tribunal said.

“Borrowers may challenge the issuance of a writ of possession or the validity of the foreclosure, but these remedies, including an appeal, do not automatically prevent the purchaser from taking possession of the property,” the SC Office of the Spokesperson said in a statement on Tuesday.

The high court said borrowers may still file a separate case seeking to cancel the mortgage and foreclosure sale. Such a case will not suspend enforcement of the writ, although its outcome could ultimately favor the borrower. For the spouses, that separate cancellation suit remains the avenue that could still end in their favor, even though it will not return possession of the Legazpi City property while the writ stands.

The spouses’ petition did not contest the merits of the writ. Instead, it raised two procedural issues that had not been presented before either the trial court or the appellate court: whether a PNB officer was authorized to file the request and whether the bank filed its petition with the CA within the prescribed period.

The SC said parties may raise issues for the first time on appeal. It added, however, that both arguments would fail even if they were considered.

A PNB vice-president was authorized to sign the filing under a board resolution. The bank’s two-day delay in appealing to the CA was also excused because the case involved a buyer’s property rights.