G.R. No. L-41835 & G.R. No. L-49293; January 19, 1990
PRUDENTIAL BANK, petitioner, vs. HON. FILOMENO GAPULTOS, et al. and RAMON E. SAURA, respondents.

FACTS

Prudential Bank foreclosed a real estate mortgage on a property owned by Saura Import & Export Co., Inc., after which it acquired title. Prior to the foreclosure, the Saura company had entered into agricultural lease contracts over the property with its president, Ramon E. Saura. These lease contracts were not registered. After the foreclosure, Saura claimed that the bank, as the new owner, was subrogated to the rights and obligations of the former owner and thus became his agricultural lessor. He tendered lease payments, which the bank refused to accept.
Consequently, Saura filed two actions: one before the Court of Agrarian Relations (CAR) to compel the bank to accept rentals and recognize the lease, and another before the Ministry of Agrarian Reform (MAR) for Operation Land Transfer. The bank moved to dismiss both cases, arguing lack of jurisdiction, but its motions were denied. The bank then elevated the cases to the Supreme Court via petitions for certiorari and prohibition.

ISSUE

The core issue is whether the agrarian courts had jurisdiction over Saura’s complaints, given that the bank acquired the property through a foreclosure sale and the underlying lease contracts were unregistered and executed without the bank’s knowledge.

RULING

The Supreme Court ruled in favor of Prudential Bank, annulling the orders of the agrarian bodies. The legal logic is anchored on the nature of a mortgagee’s rights after a foreclosure sale. Upon foreclosure and the issuance of a new title, the purchaser’s right to possession becomes absolute. The Court has consistently held that a writ of possession is a ministerial duty, and its implementation cannot be delayed or restrained by claims of tenancy, especially when such tenancy was created after or in defiance of the mortgage.
Crucially, the lease agreements in question were not registered and were executed without the knowledge or consent of the mortgagee-bank. The law protects a mortgagee who acquires property at a foreclosure sale from being bound by unregistered leases or leases of which it had no prior knowledge. Since Saura’s leases were unregistered and unknown to the bank, they cannot prejudice the bank’s superior right of possession acquired through the foreclosure proceedings. Therefore, Saura’s claim of agricultural leasehold did not divest the regular courts of jurisdiction over the possession issue arising from the foreclosure. The agrarian forums had no jurisdiction to entertain the complaints, as the fundamental relationship of agricultural tenancy between Saura and the bank was not established.