Metropolitan Bank v. Santos
REITERATIONFacts
1. The Antecedents: Respondent Lamb Construction Consortium Corporation obtained a P5.5 million loan from petitioner Metropolitan Bank & Trust Co. (MBTC), secured by a real estate mortgage over six parcels of land. Upon respondent's failure to pay the loan upon maturity, MBTC initiated extra-judicial foreclosure proceedings. During the auction sale on January 27, 2000, MBTC emerged as the highest bidder with a bid of P6,669,765.75, and was issued a Certificate of Sale. Subsequently, respondent redeemed one of the foreclosed properties. 2. Procedural History: On June 23, 2000, MBTC filed a petition for a writ of possession with the Regional Trial Court (RTC) of Parañaque City, alleging respondent's refusal to turn over possession of the foreclosed properties. The RTC denied the petition, ruling that MBTC failed to deposit the surplus proceeds from the foreclosure sale. MBTC's motion for reconsideration was also denied. On appeal, the Court of Appeals (CA) granted the writ of possession but also ordered MBTC to pay respondent the surplus bid price of P488,289.35, with legal interest. The CA subsequently denied MBTC's motion for partial reconsideration. 3. The Petition: MBTC filed this Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the CA's decision and resolution. MBTC argues that the CA erred in ruling on the surplus proceeds, as a petition for a writ of possession is summary and non-adversarial, with the sole issue being the purchaser's entitlement to possession. MBTC contends that any dispute over surplus proceeds should be resolved in a separate civil action, not within the writ of possession proceedings.
Issue(s)
Whether the Court of Appeals erred in ordering the petitioner to pay the respondent the excess of the bid price in the amount of ₱488,289.35 with legal interest. Whether the determination of surplus proceeds is a proper issue in a petition for the issuance of a writ of possession.
Ruling
The petition is meritorious. The Supreme Court granted the petition and modified the decision of the Court of Appeals by deleting the portion ordering petitioner to pay respondent the excess of its bid price in the sum of ₱488,289.35 with legal interest.
Ratio Decidendi
On the issue of whether the Court of Appeals erred in ordering the petitioner to pay the respondent the excess of the bid price: The Court held that while the issuance of a writ of possession is generally ministerial, equitable considerations may warrant its withholding. The Court cited Sulit v. Court of Appeals, where the issuance of the writ was withheld due to the mortgagee's failure to deliver substantial surplus proceeds. However, the Court clarified that in Saguan v. Philippine Bank of Communications, it was held that the exception in Sulit does not apply when the period to redeem has expired or ownership has been consolidated. In the present case, the redemption period had lapsed, thus, following Saguan, the issuance of a writ of possession in favor of the petitioner is in order. The failure of the mortgagee to deliver the surplus proceeds does not affect the validity of the foreclosure sale but gives rise to a cause of action for the mortgagor to file a separate civil action to recover such surplus. The cadastral court is without jurisdiction to order the delivery of surplus proceeds in a petition for a writ of possession, as the only issue is the purchaser's entitlement to possession. On the issue of whether the determination of surplus proceeds is a proper issue in a petition for the issuance of a writ of possession: The Court reiterated that the issuance of a writ of possession is ex parte, non-adversarial, and summary in nature, with the sole issue being the purchaser's right to possession. Section 7 of Act 3135 mandates the ministerial duty of the court to issue the writ unless exceptions apply. The Court emphasized that any question regarding the regularity and validity of the sale, or the consequent cancellation of the writ, is to be determined in a subsequent proceeding. The failure or refusal of the mortgagee-purchaser to return the surplus does not affect the validity of the sale but gives the mortgagor a cause of action against the mortgagee-purchaser. The remedy of the mortgagor lies in a separate civil action for collection of a sum of money, where both parties can establish their respective rights and obligations. The Court also noted that an action to collect surplus proceeds is improper where there is a pending action for the nullification of the foreclosure proceedings, as suing for the return of surplus proceeds implies affirmation of the sale's validity.
Main Doctrine
While the issuance of a writ of possession is generally ministerial, equitable considerations may warrant its withholding, particularly when the mortgagee-purchaser fails to return surplus proceeds from a foreclosure sale, which surplus is substantial. However, the failure to return surplus proceeds does not affect the validity of the foreclosure sale itself, but gives the mortgagor a cause of action to recover such surplus in a separate civil action, unless the validity of the foreclosure is being contested.