PHILIPPINE NATIONAL BANK vs. COURT OF APPEALS, HON.

JUDGE OF THE REGIONAL TRIAL

COURT OF GAPAN, NUEVA ECIJA, BR. 34, and NILDEFONSO MONTANO
G.R. No. 105760, July 7, 1997, FRANCISCO, J. (84 SCAD 209)

FACTS:

In 1978, spouses Crisanto de la Cruz and Pepita Montano mortgaged two parcels of land to
petitioner PNB for a loan of P24,000.00. In 1984, PNB extra-judicially foreclosed the mortgage and
was the only bidder at the public auction sale. On the same day, a Certificate of Sale over said lots was
issued in favor of PNB and was annotated on the Transfer Certificate of Title. In 1986, for the failure
of the mortgagors to redeem the property within a period of one year, PNB filed before the Regional
Trial Court of Gapan, Nueva Ecija a Petition for the Issuance of a Writ of Possession. The RTC granted
granted the petition and issued the writ.

Before implementation of the writ, petitioner Montano filed a Motion for the Dissolution of
the Writ of Possession alleging that he was instituted as tenant on the subject property even before
1972 by the former owners of the land; the two lots are the subject matters of CAR Case before the
Regional Trial Court of Gapan, Nueva Ecija which he instituted in 1983 against the mortgagors; after
the foreclosure of the subject land, his counsel wrote PNB of the pending case; the issuance of said
Writ would violate his rights; he was issued a certification by the Cabiao-San Isidro Agrarian Reform
Team that he is an agricultural lessee in the subject landholding and another certification that he is
an active member of the Samahang Nayon; and in line with the ruling in "Clapano vs. Gapultos" that
possession of property is given to a purchaser in Extra-Judicial foreclosure unless a third-party is
actually holding the property adversely to the judgment debtor, he is to be considered a "third person".
The RTC granted Montano's motion to dissolve the writ of possession. PNB appealed but the case was
referred to the Court of Appeals which initially rendered judgment in favor of PNB but eventually
reversed itself upon motion by Montano.

ISSUE:

Whether PNB is entitled to a Writ of Possession of the land in question.

RULING:

PNB is not entitled to a Writ of Possession. The Court ruled that, granting that PNB’s title
over the subject property has been consolidated or confirmed in its favor, it is not still entitled to a
Writ of Possession, as the same may be issued in extrajudicial foreclosure of real estate mortgage
only if the debtor is in possession and no third person had intervened. Such requisite is evidently lacking
in the case at bar as it has been established that Montano has been in possession and finally adjudged
as the tenant of the subject landholding.

Even if the fact of tenancy had not been reflected on the title, PNB admitted that before they
consented to the mortgage, an ocular inspection was conducted on the landholding on the occasion
of which, PNB’s Credit Investigator already found Montano staying on the land and even interviewed
the latter. It cannot be denied therefore, that PNB had been put on notice by its actual knowledge of
another person possessing the land, no matter what the given reason may have been for Montano’s
occupancy of the properties in question.

Under Art. 428 of the NCC, the owner has the right to dispose of a thing without other
limitations than those established by law. As an incident of ownership, therefore, there is nothing to
prevent the landowner from donating his naked title to the land. However, the new owner must
respect the rights of the tenant.

Petition is denied.