BUKIDNON DOCTORS HOSPITAL VS METROPOLITANT BANK TRUST & CO.

GR 161882 JULY 8, 2005

FACTS:

Herein petitioner loaned a money amounting to P25 M from respondent as a security it mortgaged 6 parcels of land located in Bukidnon. Upon default in the payment of the loan, the said parcels of land were extrajucially foreclosed and put in a public auction and were sold to the repondent bank.

In order to continue its business the petitioner proposed that It would lease the land where its hospital is erected in 3 years for 100,000 a month. Respondent bank agreed to the proposal however increasing the rental to 200,000 a month with the contract subject to a review every 6 months. The parties were able to agree with a monthly rental of 150,000 and that the contract shall take effect in November 2001.

Approximately 1 year and 8 months, respodent ordered the petitioner to vacate the premises within 15 days. The latter refused.

MBTC filed for Ex Parte Motion for a Writ of Possession.

RTC granted the motion.

ISSUE:

whether or not a writ of possession is the proper remedy for evicting a mortgagor who became a lessee of the mortgaged properties after the mortgagee has consolidated ownership over the properties and was issued new certificates of title.

HELD:

NO

In the case at bar, it is not disputed that after the foreclosure of the property in question and the issuance of new certificates of title in favor of the respondent, the petitioner and the respondent entered into a contract of lease of the subject properties. This new contractual relation presupposed that the petitioner recognized that possession of the properties had been legally placed in the hands of the respondent, and that the latter had taken such possession but delivered it to the former as lessee of the property. By paying the monthly rentals, the petitioner also recognized the superior right of the respondent to the possession of the property as owner thereof. And by accepting the monthly rentals, the respondent enjoyed the fruits of its possession over the subject property. Clearly, the respondent is in material possession of the subject premises. Thus, the trial court’s issuance of a writ of possession is not only superfluous, but improper under the law. Moreover, as a lessee, the petitioner was a legitimate possessor of the subject properties under Article 525 of the Civil Code. Thus, it could not be deprived of its lawful possession by a mere ex parte motion for a writ of possession.

In a nutshell, where a lease agreement, whether express or implied, is subsequently entered into by the mortgagor and the mortgagee after the expiration of the redemption period and the consolidation of title in the name of the latter, a case for ejectment or unlawful detainer, not a motion for a writ of possession, is the proper remedy in order to evict from the questioned premises a mortgagor-turned-lessee.  The rationale for this rule is that a new relationship between the parties has been created.  What applies is no longer the law on extrajudicial foreclosure, but the law on lease.  And when an issue arises, as in the case at bar, regarding the right of the lessee to continue occupying the leased premises, the rights of the parties must be heard and resolved in a case for ejectment or unlawful detainer under Rule 70 of the Rules of Court.