METROPOLITAN BANK AND TRUST COMPANY AND ROGELIO T. UY, PETITIONERS, VS. JOSE B. TAN AND REY JOHN TAN, RESPONDENTS.

Metropolitan Bank and Trust Company versus Tan

The Case

This is a petition for review on certiorari brought by Metropolitan Bank and Trust Company and Rogelio T. Uy against Jose B. Tan and Rey John Tan. The bank asks the Supreme Court to reverse the Court of Appeals, which had set aside a writ of possession over three parcels of land that had been foreclosed and sold at public auction. The case matters because it fixes the character of the writ of possession in an extrajudicial foreclosure: it is a ministerial act, not a discretionary one, and it does not wait on the outcome of a separate suit attacking the validity of the mortgage.

Procedural History

The story begins in the Regional Trial Court of Misamis Oriental, Branch 38, in a civil case for the removal of cloud on title filed by Jose B. Tan and his wife Eliza Go Tan. That court, in a decision dated March 5, 2001, declared the real estate mortgages and the extrajudicial foreclosure void, and declared the principal obligations of Rey John Tan fully paid.

Meanwhile, the bank filed an ex parte petition for a writ of possession before the Regional Trial Court of Misamis Oriental, Branch 21, in a miscellaneous case. On April 2, 2001, that court granted the petition and ordered a writ of possession over the properties. A writ was issued on July 10, 2001, followed by a notice to vacate. The respondents moved for reconsideration and to quash the writ; both were denied in an order dated November 21, 2001, and reconsideration of that order was denied on December 13, 2001.

The respondents then went up to the Court of Appeals by petition for certiorari. In its decision dated March 21, 2003, the appellate court reversed the trial court, holding that the writ interfered with the judgment of a court of concurrent jurisdiction. On reconsideration, in a resolution dated September 1, 2003, the appellate court affirmed the factual and legal basis of the trial court's decision but held the writ of possession in abeyance until the appeal in the civil case for annulment of the mortgage was finally decided. The bank then came to the Supreme Court by petition for review.

Facts

Rey John Tan owned and actually possessed a parcel of land in Carmen, Cagayan de Oro City, covered by a transfer certificate of title. Jose B. Tan owned a parcel of commercial land in Lapasan, Cagayan de Oro City, also covered by a transfer certificate of title. The bank alleged that Jose B. Tan had been authorized, under a special power of attorney given by Ariel Tan, to mortgage Ariel Tan's commercial properties in favor of the bank.

The bank and Rogelio T. Uy then filed a petition for extrajudicial foreclosure over four parcels of land with the Office of the Provincial Sheriff of Misamis Oriental, to satisfy an alleged obligation of 48,311,003.39 pesos secured by real estate mortgages. The sheriff scheduled the public auction for April 17, 1998, and the properties were auctioned on that date.

One day before the auction, Jose B. Tan and his wife Eliza Go Tan filed an action to remove cloud on title with injunction before Branch 38 of the Regional Trial Court of Misamis Oriental. That court later declared the mortgages and the foreclosure void. Undeterred, the bank filed its ex parte petition for a writ of possession before Branch 21, which granted it, and the writ was issued and sought to be enforced against Rey John Tan.

Issues

• Whether or not the Court of Appeals should have dismissed the petition for certiorari because the respondents squandered the remedy of appeal, certiorari not being a substitute for a lost appeal.
• Whether or not the Court of Appeals should have dismissed the petition because the respondents had adequate remedies under Section 8 of Act 3135 and in the civil case for annulment of the mortgage.
• Whether or not the trial court gravely abused its discretion in issuing the writ of possession.
• Whether or not the Court of Appeals erred in holding the implementation of the writ in abeyance until the outcome of the civil case.

Applicable Provisions

Section 7 of Act 3135, the law governing extrajudicial foreclosure, provides:

Section 7. In any sale made under the provisions of this Act, the purchaser may petition the Regional Trial Court of the province or place where the property or any part thereof is situated, to give him possession thereof during the redemption period, furnishing bond in an amount equivalent to the use of the property for a period of twelve months, to indemnify the debtor in case it be shown that the sale was made without violating the mortgage or without complying with the requirements of this Act. Such petition shall be made under oath and filed in form of an ex-parte motion in the registration or cadastral proceedings if the property is registered, or in special proceedings in the case of property registered under the Mortgage Law or under section one hundred and ninety-four of the Administrative Code, or of any other real property encumbered with a mortgage duly registered in the office of any register of deeds in accordance with any existing law, and in each case the clerk of the court shall, upon the filing of such petition, collect the fees specified in paragraph eleven of section one hundred and fourteen of Act Numbered Twenty-eight hundred and sixty-six, and the court shall, upon approval of the bond, order that a writ of possession issue, addressed to the sheriff of the province in which the property is situated, who shall execute said order immediately.

This is the source of the purchaser's right to possession during the redemption period, and it is the provision the Court reads as imposing a ministerial duty on the court.

Section 8 of Act 3135 provides:

Section 8. The debtor may, in the proceedings in which possession was requested, but not later than thirty days after the purchaser was given possession, petition that the sale be set aside and the writ of possession cancelled, specifying the damages suffered by him, because the mortgage was not violated or the sale was not made in accordance with the provisions hereof, and the court shall take cognizance of this petition in accordance with the summary procedure provided for in section one hundred and twelve of Act Numbered Four hundred and ninety-six; and if it finds the complaint of the debtor justified, it shall dispose in his favor of all or part of the bond furnished by the person who obtained possession. Either of the parties may appeal from the order of the judge in accordance with section fourteen of Act Numbered Four hundred and ninety-six; but the order of possession shall continue in effect during the pendency of the appeal.

This is the remedy the Court identifies as the debtor's proper recourse, and it expressly keeps the order of possession in force during appeal.

Ruling

On the first issue, the Court held that the trial court's order granting the writ of possession is final. The proper remedy of the respondents was an appeal, not a petition for certiorari. As long as the court acts within its jurisdiction, alleged errors in the exercise of discretion amount to nothing more than errors of judgment, correctable by appeal where factual and legal issues are raised, or by a petition for review where only questions of law are involved.

On the second issue, the Court held that the pendency of a separate civil suit questioning the validity of the mortgage does not bar the issuance of the writ of possession. The Court noted that its own earlier ruling had set aside the appellate court's judgment in the civil case and dismissed that case, declaring the extrajudicial foreclosure and subsequent sale valid. That removed the leg on which the respondents' theory stood.

On the third issue, the Court held that no discretion is left to the trial court in issuing the writ. It is the court's ministerial duty to issue a writ of possession in favor of the purchaser of the mortgaged realty during the redemption period, provided that a proper motion is filed, a bond is approved, and no third person is involved. The ministerial duty does not become discretionary upon the filing of a complaint questioning the mortgage. The trial court therefore committed no grave abuse of discretion, because no exercise of discretion was required.

On the fourth issue, the Court held that the appellate court erred in holding the writ in abeyance. Since the issuance of the writ is ministerial and does not depend on the validity of the mortgage, there was no basis for suspending its implementation pending the outcome of the civil case.

Doctrine

In an extrajudicial foreclosure under Act 3135, the issuance of a writ of possession in favor of the purchaser during the redemption period is a ministerial act. The court has no discretion to withhold it once a proper motion is filed, the bond is approved, and no third person is involved. The pendency of an action to annul the mortgage is not a ground for refusing to enforce the writ, and the court's ministerial duty does not become discretionary upon the filing of such a complaint. The debtor's remedy is found in Section 8 of Act 3135, which allows a petition to set aside the sale and cancel the writ within thirty days after possession is given, and which keeps the order of possession in effect during appeal. The order granting the writ is final, so the remedy against it is appeal, not certiorari.

Disposition

The Supreme Court granted the petition and set aside the decision and resolution of the Court of Appeals, thereby restoring the writ of possession in favor of the bank.

Remember This

The one line to memorize: the writ of possession in an extrajudicial foreclosure is a ministerial act that issues even while a suit to annul the mortgage is pending. Examiners use this case to test the ministerial character of the writ and the rule that certiorari cannot substitute for a lost appeal.