Spouses Pulido v. Agapito
REITERATIONFacts
The Antecedents: Bienvenido Agapito mortgaged a parcel of unregistered residential land to Rural Bank of Cavite City (RBCC). Upon failure to pay the loan, the mortgage was foreclosed and sold at public auction to RBCC. Agapito failed to redeem the property within the reglementary period. RBCC subsequently sold the property to spouses Juan and Filomena Pulido, who in turn sold it to spouses Alberto and Norma Gloria. Procedural History: Agapito filed a complaint seeking annulment of the foreclosure and sale, alleging lack of notice and non-compliance with posting requirements. The trial court upheld the validity of the foreclosure and subsequent sales. The Court of Appeals reversed the trial court, declaring the foreclosure sale void for failure to prove compliance with posting requirements. The appellate court ordered the deeds of sale void and granted Agapito a period to repurchase. The Petition: Spouses Pulido and Gloria appealed to the Supreme Court, contending that the Court of Appeals erred in finding non-compliance with posting requirements and asserting their status as buyers in good faith and for value.
Issue(s)
Whether the Court of Appeals erred in concluding that the requirement of posting notice for the extrajudicial foreclosure sale had not been complied with. Whether petitioners, as subsequent transferees of unregistered land, are entitled to protection as buyers in good faith and for value despite alleged defects in the foreclosure proceedings. Whether the Court of Appeals erred in ordering the petitioners to pay their respective vendors and in granting Agapito a period to repurchase; and the proper disposition of the parties' rights and obligations following the declaration of the foreclosure sale's nullity.
Ruling
The Supreme Court affirmed the decision of the Court of Appeals declaring the extrajudicial foreclosure of mortgage and auction sale void ab initio for failure to comply with the posting requirements. The Court modified the dispositive portion regarding the return of the property and the reimbursement of purchase prices with legal interest.
Ratio Decidendi
On the issue of compliance with posting requirements: The Court held that the burden of proof to show compliance with the posting requirement rests on the party alleging compliance. Section 5 of R.A. No. 720, as amended by P.D. No. 122, requires an affidavit of the sheriff or officer conducting the sale as proof of posting. In this case, no such affidavit was presented, nor was any equally competent proof offered. The "Notice of Extrajudicial Sale" did not prove actual posting, and the "Minutes of Sheriff Public Auction Sale" was not formally offered in evidence. Therefore, the failure to present the required proof of posting rebutted the presumption of regularity in the performance of official duties, leading to the conclusion that the foreclosure sale was void ab initio. On the status of petitioners as buyers in good faith and for value: The Court ruled that the defense of being innocent purchasers for value is unavailing in this case because the property involved is unregistered land. Registration under Act No. 3344, unlike under the Torrens system, does not afford full protection and must yield to a prior and valid title, even if unregistered. Petitioners could not capitalize on their alleged good faith over Agapito's prior and valid right to have his property foreclosed in accordance with law. Thus, the deeds of sale transferring the property to the Pulido and Gloria spouses were declared void. On the modification of the appellate court's order: The Court modified the appellate court's order regarding the return of the property and the reimbursement of purchase prices. It clarified that the spouses Gloria, as current possessors, should return the property to the mortgage creditor, RBCC. RBCC should then return the purchase price to the spouses Pulido, who in turn should return the purchase price to the spouses Gloria, with legal interest from the finality of the decision. The Court deleted the award of a repurchase period to Agapito, considering his prior opportunities to redeem the property which he ignored.
Main Doctrine
The failure to comply with the statutory requirement of posting notice in an extrajudicial foreclosure sale of unregistered land constitutes a jurisdictional defect that renders the sale void ab initio. Registration under Act No. 3344 does not afford full protection and must yield to a prior and valid title, even if unregistered, thus precluding a claim of being an innocent purchaser for value against such prior right.