Century Savings Bank v. Samonte
REITERATIONFacts
The Antecedents: Spouses Danilo T. Samonte and Rosalinda M. Samonte (Respondents) obtained two loans from Century Savings Bank (Petitioner) totaling ₱3,500,000.00, secured by real estate mortgages over two parcels of land. Respondents defaulted in their loan payments. Petitioner initiated extrajudicial foreclosure proceedings under Act No. 3135. Petitioner published a Notice of Sale dated November 12, 1999, in the Challenger News on November 15, 22, and 29, 1999. Notary Public Enriqueto I. Magpantay issued a Certificate of Posting dated December 9, 1999, attesting to the posting of three copies of the Notice of Sale on November 15, 1999, in three conspicuous places in Makati City. The public auction was held on December 9, 1999, with Petitioner as the highest bidder. Petitioner subsequently consolidated its titles to the foreclosed properties, and new certificates of title were issued in its name. Petitioner also filed a complaint for the collection of the deficiency balance of the loans. Procedural History: Respondents filed a Complaint for annulment of the extrajudicial foreclosure sale, alleging non-compliance with the posting requirements of Act No. 3135. The Regional Trial Court (RTC), Branch 58, Makati City, dismissed the Complaint, finding that the Notice of Sale was posted for twenty days and that publication alone satisfied the notice requirement. The RTC also invoked estoppel, citing a Contract of Lease executed by the parties in 2001, wherein respondents acknowledged Petitioner's ownership. The Court of Appeals (CA) reversed the RTC Decision, annulling the foreclosure sale due to fatal defects in the Certificate of Posting, which failed to explicitly state the 20-day posting period and the posting in public places. The CA also held that the presumption of regularity did not apply as the notary public did not testify, and estoppel could not validate an illegal act. The Petition: Petitioner filed a Petition for Review on Certiorari with the Supreme Court, asserting that the posting and publication requirements of Act No. 3135 were substantially complied with. Petitioner argued that the Certificate of Posting, though not perfectly worded, indicated posting for 24 days, exceeding the 20-day requirement. Petitioner also contended that publication alone was sufficient and that the presumption of regularity applied. Petitioner further argued that respondents, having entered into a Contract of Lease, were estopped from questioning the foreclosure sale.
Issue(s)
Whether the extrajudicial foreclosure sale was valid despite alleged non-compliance with the posting requirements under Act No. 3135. Whether the publication of the Notice of Sale in a newspaper of general circulation constitutes sufficient compliance with the notice requirements of Act No. 3135. Whether the respondents are estopped from challenging the validity of the extrajudicial foreclosure sale by virtue of the Contract of Lease they executed with the petitioner.
Ruling
The Supreme Court granted the petition, set aside the Court of Appeals' decision, and reinstated the Regional Trial Court's decision dismissing the respondents' complaint. The extrajudicial foreclosure sale was declared valid.
Ratio Decidendi
On the validity of the extrajudicial foreclosure sale and compliance with posting requirements: The Court held that the burden of proof to establish non-compliance with the posting requirements of Act No. 3135 rests on the mortgagor who alleges such defect. In this case, the respondents failed to present any evidence to prove that the notices of sale were not posted as required. The Court found the respondents' interpretation of the Certificate of Posting as indicating only one day of posting to be specious, opining that it was more logical to understand the phrase as indicating the commencement of the posting. The use of "conspicuous places" instead of "public places" was also deemed satisfactory compliance, as "conspicuous" is a synonym for "public" in the context of being exposed to general view. The presumption of regularity in the performance of official duties favors the foreclosure proceedings, and this presumption was not sufficiently rebutted by the respondents. On whether publication constitutes sufficient compliance: The Court reiterated its ruling that the publication of the notice of sale in a newspaper of general circulation is sufficient compliance with the notice requirements of Act No. 3135. Citing Olizon v. Court of Appeals, the Court explained that newspaper publications have a wider reach and better serve the purpose of informing the public and securing bidders than mere posting. Since the notice was duly published and there was no showing of mistakes or omissions calculated to mislead bidders or depreciate the property's value, the alleged non-compliance with posting requirements, even if true, would not invalidate the sale. On the principle of estoppel: The Court agreed with the RTC that the respondents were estopped from challenging the validity of the foreclosure sale. By entering into a Contract of Lease with the petitioner over one of the foreclosed properties, the respondents acknowledged the petitioner's title as landlord. Under Section 2(b), Rule 131 of the Rules of Court, a tenant is not permitted to deny the title of his landlord at the time of the commencement of the landlord-tenant relationship. The respondents' execution of the lease contract, which explicitly recognized the petitioner's valid and legal right and title as absolute owner, bound them to the stipulations therein and precluded them from impugning the foreclosure proceedings.
Main Doctrine
The publication of the notice of sale in a newspaper of general circulation, coupled with the presumption of regularity in the performance of official duties and the mortgagor's failure to present substantial evidence of non-compliance, is sufficient to validate an extrajudicial foreclosure sale, even if the certificate of posting has technical deficiencies. Furthermore, the execution of a lease contract over the foreclosed property by the mortgagor estops them from challenging the validity of the foreclosure sale.