Baclig v. Rural Bank of Cabugao
REITERATIONFacts
The Antecedents: In 1972, the parents of petitioner Antonio Baclig obtained a P1,000.00 loan from respondent The Rural Bank of Cabugao, Inc., secured by a mortgage on their property. Upon failure to pay the loan, the Bank initiated foreclosure proceedings. The property was sold at auction to the Bank, and after the redemption period expired without redemption, the Bank executed an Affidavit of Consolidation of Ownership and a Deed of Sale. Subsequently, the Bank filed a Petition for Issuance of Writ of Possession. In 2004, Baclig et al.'s parents filed a case for Annulment of Foreclosure and Auction Sale, alleging unconscionable price disparity and lack of personal notice. They questioned compliance with Act No. 3135. During the pendency of this case, Baclig et al.'s parents passed away and were substituted by their children. Procedural History: The Regional Trial Court (RTC) ruled in favor of the Bank, dismissing the complaint and holding that inadequacy of price does not nullify a sale, personal notice is not required under Act No. 3135, and laches and estoppel had set in. The Court of Appeals (CA) affirmed the RTC's decision, finding that publication of the notice of sale was not necessary as the loan did not exceed P50,000.00 and that posting sufficed. The CA later issued an Entry of Judgment, stating no motion for reconsideration was filed. Baclig et al.'s counsel claimed to have filed a motion for reconsideration via registered mail, but the CA's Division Clerk of Court reported that no such motion was received, and instead, a compliance for a different case was received. The CA denied the motion to set aside the entry of judgment and ordered the counsel to show cause why he should not be held in contempt. The counsel's whereabouts became unknown after a postal notation indicated he was deceased. Baclig et al.'s new counsel filed a manifestation, explaining the situation and asserting an honest mistake in filing the wrong pleading. The CA, in its assailed Resolution, noted the counsel's death, rendering the contempt issue moot, but denied the prayer to consider the alleged motion for reconsideration, maintaining the entry of judgment. The Petition: Petitioner Antonio Baclig, through a Petition for Review on Certiorari Under Rule 45, assails the CA's January 20, 2017 Resolution. He argues that the resolution violated the constitutional provision on decisions clearly and distinctly stating the facts and law, that a motion for reconsideration was indeed filed or, if not, it was an honest mistake, that his parents did not default on the loan, that newly-discovered evidence shows the Bank foreclosed the wrong obligation, that the property's price was inadequate, and that courts should protect them as indigents under Article 24 of the Civil Code. The Supreme Court initially denied the petition but reinstated it upon reconsideration, ultimately finding merit in the argument that the auction sale was void due to the failure to comply with the publication requirement under Act No. 3135, as the property's value exceeded P400.00, necessitating publication.
Issue(s)
Whether the Court of Appeals erred in issuing the assailed Resolution denying the admission of the Motion for Reconsideration and maintaining the entry of judgment. Whether the extrajudicial foreclosure sale is void for failure to comply with the publication requirement under Act No. 3135. Whether personal notice to the mortgagor is necessary in extrajudicial foreclosure proceedings. Whether the petitioners were in default on their loan obligation. Whether the action to enforce the mortgage right had prescribed. Whether Article 24 of the Civil Code is applicable to protect the petitioners as indigents. Whether the petitioners are entitled to damages.
Ruling
The Supreme Court partly granted the Petition. It set aside the CA Resolutions upholding the finality of the June 11, 2014 Decision and denying the admission of the Motion for Reconsideration and the Urgent Motion to Set Aside Resolution and Entry of Judgment. The Court ordered the Entry of Judgment to be stricken off the CA's Book of Entries of Judgment. The Court also partly granted the July 7, 2014 Motion for Reconsideration, reversing and setting aside the CA Decision and the RTC Decision. Consequently, the auction sale covering the subject property and the subsequent Certificate of Sale, Affidavit of Consolidation of Ownership, Deed of Sale, and Tax Declarations were declared null and void.
Ratio Decidendi
On the relaxation of procedural rules: The Court found that exceptional circumstances warranted the relaxation of the 15-day reglementary period for filing a motion for reconsideration. Despite the clear showing that no Motion for Reconsideration was filed within the period, and what was filed was a compliance for a different case, the Court considered the glaring irregularity in the foreclosure proceedings and the potential for outright deprivation of property. The Court reiterated that while the negligence of counsel generally binds the client, exceptions exist when it results in the deprivation of property or when the interests of justice require relief from a lawyer's gross or palpable mistake. The Court emphasized that the immutability of final judgments is not absolute and can be relaxed in cases involving matters of property, compelling circumstances, the merits of the case, and where the other party will not be unjustly prejudiced. Therefore, the Court admitted the Motion for Reconsideration. The Court also ruled that Section 14, Article VIII of the Constitution, requiring decisions to clearly state the facts and law, does not apply to resolutions disposing of incidental matters, such as the assailed Resolution, which merely reiterated a previous order. The Court also held that invoking newly-discovered evidence is improper in a Rule 45 petition, as such matters are typically raised in motions for new trial within the period for appeal. Furthermore, the petitioners failed to demonstrate that the alleged newly-discovered evidence could not have been discovered with reasonable diligence. On the validity of the auction sale: The Court declared the auction sale void for failure to comply with the publication requirement under Section 3 of Act No. 3135. This section mandates publication of the notice of sale if the property is worth more than P400.00. The Court clarified that it is the value of the property, not the loan amount, that determines the necessity of publication. In this case, the tax declarations showed the property's market value far exceeded P400.00, thus requiring publication. The Court noted that the Bank never denied the non-publication and could have easily produced an affidavit of publication or other evidence to refute the claim. The Court cited jurisprudence emphasizing that failure to advertise a foreclosure sale in compliance with statutory requirements constitutes a jurisdictional defect that invalidates the sale, and even slight deviations render the sale voidable or void. On the issue of personal notice: The Court reiterated the settled rule that unless stipulated by the parties, personal notice to the mortgagor in extrajudicial foreclosure proceedings is not necessary, as Act No. 3135 only requires posting and publication of the notice of sale. Since no stipulation for personal notice was shown, its absence did not invalidate the sale. On the issue of default: The Court found that the petitioners failed to prove they were not in default. The fact that the Bank took time to foreclose does not negate default. The records showed an admission of failure to pay the obligation. On the issue of prescription: The Court affirmed the CA's ruling that the right of action accrues from the mortgagor's default, not from the mortgage execution. The petitioners failed to prove that the Bank's right of action had prescribed. On the applicability of Article 24 of the Civil Code: The Court held that while Article 24 mandates courts to protect disadvantaged parties, it does not mean all cases must be decided in their favor. Cases must be decided on their merits. On the issue of damages: The prayer for damages was denied for lack of substantiation, as actual damages must be proven with reasonable certainty.
Main Doctrine
Failure to publish the notice of extrajudicial foreclosure sale, as required by Section 3 of Act No. 3135 when the property is worth more than P400.00, constitutes a jurisdictional defect that invalidates the sale. The value of the property, not the loan amount, determines the necessity of publication.