CESAR SULIT VS. CA G.R NO. 119247, FEB. 17, 1997

Iluminada Cayco executed a Real Estate Mortgage (REM) over lot in favor of Cesar Sulit to secure a loan of PhP 4 Million.  Upon petitioner's failure to pay, Sulit caused the foreclosure of the mortgage.  hence, in a public auction the lot was sold to the mortgagee, with a winning bid of PhP 7Million.  He then petitioned the court for the issuance of a writ of possession in his favor, the same was granted.  Later, Iluminada filed a petition to set aside the auction sale and to deter the issuance of the writ of possession contending that the surplus proceeds of the sale was not paid by Sulit.  The same was denied.  On appeal the CA reversed the decision.

ISSUE:  WON purchaser in an extrajudicial foreclosure sale is entitled to the issuance of a writ of possession over the mortgaged property despite his failure to pay the surplus proceeds of the sale of the mortgagor?

WON mere inadequacy of price would invalidate the sale or the person entitled thereto?

HELD:
The law authorizes the purchaser in a foreclosure sale to apply for a writ of possession and no discretion appears to be left to the court.  Any question regarding the regularity and validity of the sale, as well as the consequent cancellation of the writ, is to be determined in a subsequent proceeding and it cannot be raised as a justification for opposing the issuance of the writ of "unless a third party is actually holding the property adversely to the judgment debtor."  As it was held in Barican vs. IAC, the obligation of the court to issue a writ of possession ceases to be ministerial if it was no longer the judgment debtor who was in possession of the property.

As to the second issue, the mere inadequacy of the price obtained at the sheriff's sale, unless shocking to the conscience, is insufficient to set aside a sale.  this is because no disadvantage is caused to the mortgagor.  On the contrary, a mortgagor stands to gain with a reduced price because he possesses the right of redemption.  When there is the right to redeem, inadequacy of price becomes immaterial since the judgement debtor may reacquire the property or sell his right to redeem, and thus recover the loss he claims to have suffered by reason of the price obtained at the auction sale.

The case at bar is quite the reverse, in the sense that instead of an inadequacy in price, there is due in favor of private respondent, as mortgagor, a surplus from the proceeds of the sale equivalent to approximately 40% of the total mortgage debt, which excess is indisputably a substantial amount.  Nevertheless, equitable considerations demand that a writ of possession should also not issue in this case pursuant to the provision of the Rules of Court particularly on the disposition of the proceeds of the sale.

Where there is a balance or residue after payment of the mortgage, the same shall be paid to the mortgagor.  The better rule is that if the mortgagee is retaining more of the proceeds of the sale than he is entitled to, this fact alone will not affect the validity of the sale but simply gives the mortgagor a cause of action to recover such surplus.