G.R. No. 101083
METROPOLITAN BANK AND TRUST COMPANY, petitioner, vs. HON. COURT OF APPEALS AND SPOUSES ANTONIO and LETICIA BERNARDO, respondents.

July 8, 1996

FACTS

Spouses Antonio and Leticia Bernardo obtained a loan from Metropolitan Bank and Trust Company (Metrobank) secured by a real estate mortgage over their property. They defaulted on the loan. Metrobank extrajudicially foreclosed the mortgage and purchased the property as the highest bidder at the public auction. The one-year redemption period expired without the spouses redeeming the property. Metrobank then filed a petition for the issuance of a writ of possession with the Regional Trial Court (RTC), which was granted. The spouses Bernardo filed a motion to quash the writ, arguing that the foreclosure and sale were void because Metrobank failed to return the surplus of the bid price (the excess of the bid amount over the total loan obligation) as required by Act No. 3135, as amended. The RTC denied the motion and ordered the issuance of the writ. The Court of Appeals reversed the RTC, holding that the failure to return or account for the surplus rendered the foreclosure sale void and thus deprived Metrobank of the right to a writ of possession. Metrobank appealed to the Supreme Court.

ISSUE

Whether the failure of the mortgagee-purchaser in an extrajudicial foreclosure sale to return or account for the surplus of the bid price renders the foreclosure sale void and precludes the issuance of a writ of possession.

RULING

No. The Supreme Court granted Metrobank’s petition and reversed the decision of the Court of Appeals. The Court held that the failure to return or account for the surplus of the bid price does not render the extrajudicial foreclosure sale void, nor does it affect the mortgagee’s right to a writ of possession after the redemption period has expired. The writ of possession is a ministerial act issued as a matter of course once the mortgagee files a petition under Section 7 of Act No. 3135, after the redemption period has lapsed without the mortgagor exercising the right of redemption. The duty to return the surplus is a separate and distinct obligation from the right to possess the property. The mortgagor’s remedy for the failure to return the surplus is a separate civil action for the recovery of the sum, not the annulment of the foreclosure sale or the prevention of the issuance of the writ of possession. The Court emphasized that the issuance of the writ is a summary proceeding and is not the proper venue to litigate claims for the surplus. Consequently, the Supreme Court ordered the reinstatement of the RTC’s order granting the writ of possession to Metrobank.