G.R. No. L-67588 June 20, 1988
ALEJANDRO MIRASOL and LILIA E. MIRASOL (spouses), petitioners, vs. INTERMEDIATE APPELLATE COURT, PHILIPPINE NATIONAL BANK, Bacolod Branch, and THE PROVINCIAL SHERIFF OF NEGROS OCCIDENTAL, respondents.

FACTS

Petitioners-spouses Mirasol obtained a loan from respondent Philippine National Bank (PNB), secured by a real estate mortgage. A dispute arose when the petitioners alleged that PNB under-liquidated the proceeds from their sugar exports. Consequently, they filed a complaint for accounting and specific performance. Due to this dispute, the petitioners defaulted on their subsequent crop loans. PNB extrajudicially foreclosed the mortgage and purchased the property at the auction sale.
Subsequently, the petitioners filed a separate civil action for the annulment of the real estate mortgage and the foreclosure sale, arguing the mortgage had prescribed, the obligation was fully paid, and the claim was barred. Meanwhile, PNB filed an ex-parte petition for a writ of possession with the Regional Trial Court, which granted it. The Intermediate Appellate Court affirmed this order. The petitioners then elevated the case to the Supreme Court.

ISSUE

Whether the pendency of a civil case for annulment of the real estate mortgage constitutes a legal bar to the issuance of a writ of possession in favor of the mortgagee-purchaser after an extrajudicial foreclosure.

RULING

The Supreme Court ruled in the negative and dismissed the petition. The issuance of a writ of possession to a purchaser in an extrajudicial foreclosure sale is a ministerial duty of the court. This rule, established in De Gracia v. San Jose and reiterated in Philippine National Bank v. Adil, applies regardless of pending suits challenging the foreclosure’s validity, provided the mortgage itself is not assailed as void from its inception.
The Court examined the petitioners’ complaint for annulment and found they were not contesting the initial validity of the mortgage contract. Their grounds—prescription of action and the mortgage becoming “innocuous and lifeless” due to alleged overpayment—were attacks on the enforcement or foreclosure of a presumably valid mortgage, not on its void character. Since the mortgage was not impugned as void ab initio, the ministerial duty to issue the writ pursuant to Act No. 3135, as amended, and relevant jurisprudence, remained mandatory.
Furthermore, the Court cited Presidential Decree No. 385, which mandates government financial institutions like PNB to take possession of foreclosed properties to ensure effective loan collection. The pendency of the annulment case does not suspend this process. The petitioners’ proper recourse is to pursue their pending civil case to resolve questions on the foreclosure’s regularity, not to oppose the writ of possession. The writ merely places the purchaser in possession; it does not preclude a subsequent adjudication on the sale’s validity. The decision of the Intermediate Appellate Court was affirmed.