Rule 68 Foreclosure of Real Estate Mortgage FIRST DIVISION

G.R. No. 97070 March 19, 1993

ARTURO GRAVINA AND ZENAIDA GRAVINA, petitioners, vs. THE HON. COURT OF APPEALS, THE HON. ALFRIN S. VICENCIO, PRESIDING JUDGE, BR. 50, RTC, MANILA ALFREDO B. TAN, LUCILA EDNA TAN, DAILY SAVINGS AND LOAN ASSOCIATION, INC., AND MERCANTILE FINANCING CORPORATION, respondents.

Joaquin P. Yuseco, Jr. for petitioners.

Teofilo Ragodon for spouses Tan.

GRIO-AQUINO, J.:

Petitioners herein, Spouses Arturo Gravina and Zenaida Gravina, were original owners of a 116 square-meter lot in Tondo, Manila, which they mortgaged to the Daily Savings Loan Association (DLSA) in 1973, as security for loans totalling P109,000.00, obtained by them from the Association. Having failed to settle their obligation when it fell due, the DLSA foreclosed the mortgage on September 10, 1974, and bought the property as the highest bidder at the public auction sale. On October 10, 1974, ownership of the foreclosed property was consolidated in favor of DLSA and Transfer Certificate of Title No. 119695 of the Registry of Deeds of Manila was issued in its name. On January 29, 1976, DLSA sold the property to Mercantile Financing for P40,000.00. TCT No. 119695 was cancelled and TCT No. 120865 of the Registry of Deeds of Manila was issued to Mercantile Financing Corporation. On February 25, 1976, Mercantile Financing Corporation sold the property to the Spouses Alfredo and Lucila Edna Tan for P66,500.00. TCT No. 1121130 of the Registry of Deeds of Manila was issued to the vendees. On March 3, 1983, the Tans filed an ejectment complaint against the petitioners, Arturo and Zenaida Gravina, in the Metropolitan Trial Court of Manila (Civil Case No. 011866). A decision was rendered in favor of the Tans. Petitioners appealed to the Regional Trial Court of Manila. The RTC dismissed the case holding that the proper remedy of the Tans was an accion reivindicatoria or for recovery of property. The Tans filed an action to recover possession in the Regional Trial Court of Manila (Civil Case No. 83-16015). On November 7, 1986, the trial court rendered a decision in their favor, ordering the Gravinas to vacate and surrender the possession of the property to them (the Tans). The Gravina spouses filed a notice of appeal. However, before the perfection of the appeal, the petitioners (now private respondents) filed on November 26, 1986, a motion for execution pending appeal. The trial judge denied the motion. The private respondents went to the Court of Appeals on certiorari assailing the denial of their motion. The Court of Appeals consolidated the appeal of the Gravinas (CA-G.R. CV No. 13369) with the petition forcertiorari filed by the Tans. On July 9, 1990, the Court of Appeals rendered judgment as follows: WHEREFORE, the judgment appealed from in CA-G.R. CV No. 13369 entitled "Alfredo Tan, et al. vs. Arturo Gravina, et al., Defendants and Third Party Plaintiffs" is hereby AFFIRMED. Costs against the appellants; and In the certiorari case, CA-G.R. SP No. 12432 entitled "Alfredo Tan, et al., vs. Hon. Alfin Vicencio, et al.," the petition is DENIED DUE COURSE and ordered DISMISSED. No pronouncement as to costs. (p. 37 Rollo.) The Gravinas have filed the instant petition for review of the Court of Appeals' decision raising the following issues: 1. Whether or not the foreclosure of the mortgage executed by the Daily Savings and Loan Association Inc., was valid; 2. Whether or not the public auction sale by the sheriff was made in accordance with law; 3. Whether or not the consolidation of title in the name of Daily Savings and Loan Association was valid; and 4. Whether or not the sale to the mortgagee bank personnel is valid. The first three issues focus on the validity of the extrajudicial foreclosure of the mortgage which according to the petitioners, was done without notice to them as mortgagors. Whether or not they were notified of the extrajudicial foreclosure is, however, a factual issue. The finding of the trial court, which was sustained by the Court of Appeals, was that the DLSA did send a letter to the petitioners informing them of the foreclosure of the mortgage but the petitioners failed to claim the letter. The Court also found that said notice was published in the Evening News, a newspaper of general circulation in the City of Manila. We are bound by those factual findings of the Court of Appeals (Leuterio vs. CA, 197 SCRA 369).

Rule 68 Foreclosure of Real Estate Mortgage

Moreover, Section 3 of Act No. 3135 (Mortgage Law) requires only the posting of the notices of sale in three public places and the publication of the same in a newspaper of general circulation. Personal notice is not required. Sec. 3 Notice shall be given by posting notices of the sale for not less than twenty days in at least three public places of the municipality or city where the property is situated, and if such property is worth more than four hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or City. In the case of Philippine National Bank vs. International Corporate Bank, 129 SCRA 508, 509, the Court likewise ruled that: The contention of private respondent in its opposition that the extrajudicial foreclosure is null and void for failure of the petitioner to inform them of the said foreclosure and the pertinent dates of redemption so that it can exercise its prerogatives under the law is untenable. There being obviously no contractual stipulation therefor, personal notice is not necessary and what governs is the general rule in Section 3 of Act 3135, as amended, which directs the posting of notices of the sale in at least three (3) public places of the municipality where the property is situated, and the publication thereof in a newspaper of general circulation in said municipality. There is no merit in petitioners' contention that the sale of the foreclosed property to Lucila Edna Tan, an employee of the bank, was invalid. In the first place, the Tans did not buy the property from the mortgagee, the Daily Savings and Loan Association, but from the Mercantile Financing Corporation. Secondly, it is not prohibited for the bank to sell to its employee property acquired by the bank at a mortgage foreclosure sale. The claim of the petitioners that there was collusion between DLSA and the Tans was not proven. The Court of Appeals held: As to the argument of the appellant that there was conspiracy and collusion among the plaintiffs and the third party defendants, the trial court held that there was no sufficient proof to sustain the defense and We see no cogent reason for Us to disturb these findings of fact on appeal. (p. 36, Rollo.) WHEREFORE, the petition for review of the decision of the Court of Appeals in CA G.R. SP No. 12432 is DENIED for lack of merit. SO ORDERED. Cruz, Bellosillo and Quiason, JJ., concur.

Rule 68 Foreclosure of Real Estate Mortgage

FIRST DIVISION

G.R. No. 129279

March 4, 2003

ALFREDO M. OUANO, petitioner, vs. COURT OF APPEALS, and HEIRS OF JULIETA M. OUANO, respondents.

AZCUNA, J.:

Before us is a petition for review on certiorari against the decision and resolution of the Court of Appeals on CA-GR CV No. 334991 affirming the decision of the Regional Trial Court of Cebu, Branch 19, in Civil Case No. CEB-596, which set aside the extrajudicial foreclosure proceedings involving respondents' properties. From the documentary evidence and the Stipulation of Facts2 filed by the parties before the Regional Trial Court of Cebu, the facts of the case are, as follows: On June 8, 1977, respondent Julieta M. Ouano (Julieta), now deceased, obtained a loan from the Philippine National Bank (PNB) in the amount of P104,280.00. As security for said loan, she executed a real estate mortgage over two parcels of land located at Opao, Mandaue City. 3 She defaulted on her obligation. On September 29, 1980, PNB filed a petition for extrajudicial foreclosure with the City Sheriff of Mandaue City. On November 4, 1980, the sheriff prepared a notice of sale setting the date of public auction of the two parcels of land on December 5, 1980 at 9:00 a.m. to 4:00 p.m.4 He caused the notice to be published in the Cebu Daily Times, a newspaper of general circulation in Mandaue City, in its issues of November 13, 20 and 27, 1980.5 He likewise posted copies thereof in public places in Mandaue City and in the place where the properties are located.6 However, the sale as scheduled and published did not take place as the parties, on four separate dates, executed Agreements to Postpone Sale (Agreements).7 These Agreements were addressed to the sheriff, requesting the latter to defer the auction sale to another date at the same time and place, "without any further republication of the Notice." The first of the four pro-forma Agreements reads, as follows: AGREEMENT TO POSTPONE SALE Provincial Sheriff Mandaue City Sir: In accordance with this agreement of the parties in the above named case, it is respectfully requested that the auction sale of the properties of the mortgagor, scheduled to take place on December 5 1980 at 9:00o'clock in the morning at Office of the City Sheriff of Mandaue City be postponed to February 5, 1981, at the same time and place, without any further republication of the notice of sale as required by law. [italics supplied] Cebu City, December 11, 1980. PHILIPPINE NATIONAL BANK (Mortgagee) By: (SGD.) F.B. Briones Cebu Branch Branch Attorney (SGD.) JULIETA M. OUANO (Mortgagor) Address: Opao, Mandaue City On December 3, 1980, two days prior to the date of the sale as published, the parties executed and filed with the sheriff the Agreement to Postpone Sale moving the date of sale from December 5, 1980 to February 5, 1981.8 On February 5, 1981, however, no sale occurred. Eight days later, on February 13, 1981, the parties executed and filed for the second time a similar agreement moving the date of sale to February 28, 1981.9 Again, on February 28, 1981, no sale occurred.

Rule 68 Foreclosure of Real Estate Mortgage

Ten days later, on March 10, 1981, the parties executed and filed for the third time a similar agreement moving the date of sale to March 30, 1981.10 No sale occurred on this date. On March 30, 1981, the parties executed for the fourth time a similar agreement moving the date of sale to May 29, 1981.11 This agreement was filed with the sheriff on April 30, 1981. In all these postponements, no new notice of sale was issued, nor was there any republication or reposting of notice for the rescheduled dates. Finally, on May 29, 1981, the sheriff conducted the auction sale, awarding the two parcels of land to PNB, the only bidder. He executed a Certificate of Sale certifying the sale for and in consideration of P195, 510.50.12 As Julieta failed to redeem the properties within the one year period from registration of sale, PNB consolidated its title on February 12, 1983.13 On February 23 of the same year, it conveyed the properties to herein petitioner Alfredo Ouano, the brother of Julieta, under a Deed of Promise to Sell payable in five years.14 On March 28, 1983, Julieta sent demand letters to PNB and petitioner, pointing out irregularities in the foreclosure sale. 15 On April 18, 1983, Julieta filed a complaint with the Regional Trial Court (RTC) of Cebu for the nullification of the May 29, 1981 foreclosure sale.16 Petitioner filed a motion for leave to intervene in said case, and filed his Answer in Intervention to protect his rights over the properties.17 While the case was pending, on February 25, 1986, PNB executed a Deed of Sale in favor of petitioner.18 The Register of Deeds of Mandaue City accordingly cancelled the TCTs in PNB's name and issued in lieu thereof TCTs in the name of petitioner over the two parcels of land.19 On January 29, 1990, the Regional Trial Court of Cebu rendered a decision in favor of Julieta, holding that the lack of republication rendered the foreclosure sale void. The dispositive portion of said decision state: WHEREFORE, judgment is hereby rendered, 1. declaring as null and void: a) the auction sale by the City Sheriff of Mandaue City on May 29, 1981 over the aforesaid properties of plaintiff Julieta Ouano; b) the Certificate of Sale (Exhibit K) issued by the City Sheriff of Mandaue City on May 29, 1981, in favor of the Philippine National Bank; c) the Deed of Sale (Exhibit L) executed by PNB to itself; d) the Deed of Promise to Sell (Exhibit O) executed by PNB on February 23, 1983 in favor of Alfredo Ouano e) the Deed of Sale (Exhibit 24) executed by PNB on February 5, 1986 in favor of Alfredo Ouano; f) TCT No. 17929 (Exhibit M) and TCT No. 17930 (Exhibit N) in the name of PNB; g) TCT No. 21982 (Exhibit 21) and TCT No. 21987 (Exhibit 22) in the name of Alfredo Ouano; 2. ordering the Register of Deeds of Mandaue City to cancel the aforementioned titles (TCT Nos. 17929 and 17930, as well as TCT Nos. 21982 and 21987), and to reinstate TCT Nos. 15724 (5033) and 24377 (6876) in the name of Julieta Ouano; 3. ordering the City Sheriff of Mandaue City to conduct a new auction sale strictly complying with the requirements for publication and posting as required by Act 3135, as amended by Act 4118; 4. ordering PNB to return to Alfredo Ouano all amounts the latter has paid to the said bank; 5. ordering Alfredo Ouano to vacate the premises in question and turn them over to Julieta Ouano; 6. ordering PNB to pay the plaintiff the sum equivalent to 10% of the market value of the properties in question as indicated in Tax Declaration Nos. 01134 and 00510, as attorney's fees, and to pay the costs. SO ORDERED.20 Not satisfied, PNB and petitioner brought the case to the Court of Appeals. 21 In its decision dated February 17, 1997, said court affirmed the trial court's ruling on the same ground that there was no compliance with the mandatory requirements of posting and publication of notice of sale. 22 Petitioner filed a motion for reconsideration, which was denied for lack of merit by the same court on April 15, 1997.23 PNB and petitioner filed their own petitions for review on certiorari before us. PNB's petition however was dismissed on July 21, 1997 for being filed out of time and for lack of certification of non-forum-shopping.24 The petition herein remaining is the one filed by petitioner.

Rule 68 Foreclosure of Real Estate Mortgage

Petitioner assigns the following errors: I. RESPONDENT COURT OF APPEALS ERRED IN SUSTAINING THE FINDING OF THE LOWER COURT THAT THE POSTPONED AUCTION SALE OF SUBJECT PROPERTIES HELD ON MAY 29, 1981 UPON WRITTEN AGREEMENT OF THE PARTIES WAS NULL AND VOID FOR LACK OF PUBLICATION OF NOTICE OF SALE ON THE SAID DATE ALTHOUGH THE REQUIREMENTS OF PUBLICATION OF NOTICE OF SALE ON THE ORIGINALLY INTENDED DATE [WERE] FULLY COMPLIED WITH. II. RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT THE PROVISION OF SEC. 24, RULE 39 OF THE RULES OF COURT WHICH ALLOWS THE SHERIFF TO ADJOURN ANY SALE UPON EXECUTION TO ANY DATE AGREED UPON BY THE PARTIES IS NOT APPLICABLE TO THIS CASE. III. RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT JULIETA M. OUANO IS NOT ESTOPPED FROM CHALLENGING THE VALIDITY OF THE AUCTION SALE SINCE THE SALE WAS REPEATEDLY POSTPONED UPON HER REQUEST AND WRITTEN AGREEMENT[S] THAT THERE WOULD BE NO REPUBLICATION OF THE NOTICE OF SALE. IV. RESPONDENT COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF THE LOWER COURT ALTHOUGH JULIETA M. OUANO FILED HER COMPLAINT AFTER ALMOST TWO YEARS FROM THE DATE OF THE AUCTION SALE.25 The main issue before us is whether or not the requirements of Act No. 3135 were complied with in the May 29, 1981 foreclosure sale. The governing law for extrajudicial foreclosures is Act No. 3135 as amended by Act No. 4118. The provision relevant to this case is Section 3, which provides: SEC. 3. Notice shall be given by posting notices of the sale for not less than twenty (20) days in at least three public places of the municipality or city where the property is situated, and if such property is worth more than four hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality of city. It is a well-settled rule that statutory provisions governing publication of notice of mortgage foreclosure sales must be strictly complied with, and that even slight deviations therefrom will invalidate the notice and render the sale at least voidable. 26 In a number of cases, we have consistently held that failure to advertise a mortgage foreclosure sale in compliance with statutory requirements constitutes a jurisdictional defect invalidating the sale.27Consequently, such defect renders the sale absolutely void and no title passes.28 Petitioner, however, insists that there was substantial compliance with the publication requirement, considering that prior publication and posting of the notice of the first date were made. In Tambunting v. Court of Appeals,29 we held that republication in the manner prescribed by Act No. 3135 is necessary for the validity of a postponed extrajudicial foreclosure sale. Thus we stated: Where required by the statute or by the terms of the foreclosure decree, public notice of the place and time of the mortgage foreclosure sale must be given, a statute requiring it being held applicable to subsequent sales as well as to the first advertised sale of the property. [emphasis supplied]. Petitioner further contends that republication may be waived voluntarily by the parties.30 This argument has no basis in law. The issue of whether republication may be waived is not novel, as we have passed upon the same query in Philippine National Bank v. Nepomuceno Productions Inc,.31 Petitioner therein sought extrajudicial foreclosure of respondent's mortgaged properties with the Sheriff's Office of Pasig, Rizal. Initially scheduled on August 12, 1976, the auction sale was rescheduled several times without republication of the notice of sale, as stipulated in their Agreements to Postpone Sale. Finally, the auction sale proceeded on December 20, 1976, with petitioner as the highest bidder. Aggrieved, respondents sued to nullify the foreclosure sale. The trial court declared the sale void for non-compliance with Act No. 3135. This decision was affirmed in totoby the Court of Appeals. Upholding the conclusions of the trial and appellate court, we categorically held: Petitioner and respondents have absolutely no right to waive the posting and publication requirements of Act No. 3135. In People v. Donato, the Court expounded on what rights and privileges may be waived, viz.: xxx xxx xxx

[T]he principle is recognized that everyone has a right to waive, and agree to waive, the advantage of a law or rule made solely for the benefit and protection of the individual in his private capacity, if it can be dispensed with and relinquished without infringing on any public right, and without detriment to the community at large. xxx xxx xxx

Although the general rule is that any right or privilege conferred by statute or guaranteed by constitution may be waived, a waiver in derogation of a statutory right is not favored, and a waiver will be inoperative and void if it infringes on the rights of others, or would be against public policy or morals and the public interest may be waived.

Rule 68 Foreclosure of Real Estate Mortgage

xxx

xxx

xxx

The principal object of a notice of sale in a foreclosure of mortgage is not so much to notify the mortgagor as to inform the public generally of the nature and condition of the property to be sold, and of the time, place, and terms of the sale. Notices are given to secure bidders and prevent a sacrifice of the property. Clearly, the statutory requirements of posting and publication are mandated, not for the mortgagor's benefit, but for the public or third persons. In fact, personal notice to the mortgagor in extrajudicial foreclosure proceedings is not even necessary, unless stipulated. As such, it is imbued with public policy considerations and any waiver thereon would be inconsistent with the intent and letter of Act No. 3135. Publication, therefore, is required to give the foreclosure sale a reasonably wide publicity such that those interested might attend the public sale.32 To allow the parties to waive this jurisdictional requirement would result in converting into a private sale what ought to be a public auction. Moreover, assuming arguendo that the written waivers are valid, we find noticeable flaws that would nevertheless invalidate the foreclosure proceedings. First, the Agreements, as worded, only waived "further republication of the notice of sale." Nothing in the Agreements indicates that the parties likewise dispensed with the reposting of the notices of sale. As there was no reposting of notice of the May 29, 1981 sale, the foreclosure fell short of the requirements of Act No. 3135. Second, we observe that the Agreements were executed and filed with the sheriff several days after each rescheduled date. As stated in the facts, the first agreement was timely filed, two days prior to the originally scheduled sale on December 5, 1980. The second agreement, however, was executed and filed eight days after the rescheduled sale on February 5, 1981. The third agreement was executed and filed ten days after the rescheduled sale on February 28, 1981. The fourth agreement was timely executed, but was filed with the sheriff one month after the rescheduled sale on March 30, 1981. On the rescheduled dates, therefore, no public sale occurred, nor was there any request to postpone filed with the sheriff, except for the first one. In short, the Agreements are clearly defective for having been belatedly executed and filed with the sheriff. The party who may be said to be at fault for this failure, and who should bear the consequences, is no other than PNB, the mortgagee in the case at bar. It is the mortgagee who causes the mortgaged property to be sold, and the date of sale is fixed upon his instruction. 33 We have held that the mortgagee's right to foreclose a mortgage must be exercised according to the clear mandate of the law. Every requirement of the law must be complied with, lest the valid exercise of the right would end.34 PNB's inaction on the scheduled date of sale and belated filing of requests to postpone may be deemed as an abandonment of the petition to foreclose it filed with the sheriff. Consequently, its right to foreclose the mortgage based on said petition lapsed. In a vain attempt to uphold the validity of the aforesaid waiver, petitioner asserts that the Court of Appeals should have applied Rule 39, Section 24 of the Rules of Court, which allows adjournment of execution sales by agreement of the parties. The said provision provides: Sec. 24. Adjournment of Sale By written consent of debtor and creditor, the officer may adjourn any sale upon execution to any date agreed upon in writing by the parties. Without such agreement, he may adjourn the sale from day to day, if it becomes necessary to do so for lack of time to complete the sale on the day fixed in the notice.35 Petitioner submits that the language of the abovecited provision implies that the written request of the parties suffices to authorize the sheriff to reset the sale without republication or reposting.36 At the outset, distinction should be made of the three different kinds of sales under the law, namely: an ordinary execution sale, a judicial foreclosure sale, and an extrajudicial foreclosure sale. An ordinary execution sale is governed by the pertinent provisions of Rule 39 of the Rules of Court. Rule 68 of the Rules of Court applies in cases of judicial foreclosure sale. On the other hand, Act No. 3135, as amended by Act No. 4118 otherwise known as "An Act to Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real Estate Mortgages" applies in cases of extrajudicial foreclosure sale. A different set of law applies to each class of sale mentioned.37 The cited provision in the Rules of Court hence does not apply to an extrajudicial foreclosure sale. Moreover, even assuming that the aforecited provision applies, all it authorizes is the adjournment of the execution sale by agreement of the parties. Nowhere does it state that republication and reposting of notice for the postponed sale may be waived. Thus, it cannot, by any means, sanction the waiver in the case at bar. Next, petitioner maintains that Julieta's act of requesting the postponement and repeatedly signing the Agreements had placed her under estoppel, barring her from challenging the lack of publication of the auction sale.38 We rule otherwise. Julieta did request for the postponement of the foreclosure sale to extend the period to settle her obligation.39 However, the records do not show that she requested the postponement without need of republication and reporting of notice of sale. In Nepomuceno,40 we held: . . . To request postponement of the sale is one thing; to request it without need of compliance with the statutory requirements is another. Respondents, therefore, did not commit any act that would have estopped them from questioning the validity of the foreclosure sale for noncompliance with Act No. 3135. . . . In addition, we observe herein that the Agreements prepared by the counsel of PNB were in standard forms of the bank, labeled as "Legal Form No. 41." The Nepomuceno41 case likewise involved an "Agreement to Postpone Sale" that was in a ready-made form, and the only participation of respondents therein was to affix or "adhere" their signatures thereto. We therefore held that said agreement partakes of the nature of a contract of adhesion, i.e., one in which one of the contracting parties imposes a ready-made form of contract which the other party may accept or reject, but cannot modify. One party prepares the stipulation in the contract, while the other party merely affixes his signature or his "adhesion" thereto, giving no room for negotiation, and depriving the latter of the opportunity to bargain on equal footing.42 As such, their terms are construed strictly against the party who drafted it.43 More importantly, the waiver being void for being contrary to the express mandate of Act No. 3135, such cannot be ratified by estoppel. 44 Estoppel cannot give validity to an act that is prohibited by law or one that is against public policy.45 Neither can the defense of illegality be waived.46

Rule 68 Foreclosure of Real Estate Mortgage

Petitioner, moreover, makes much of the fact that Julieta filed her complaint with the trial court after almost two years from the May 29, 1981 auction sale, thus arguing that the delayed filing was a clear case of laches.47 Laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence, could or should have been done earlier.48 In the case at bar, Julieta only realized the defect in the foreclosure sale upon conferring with her counsel who discovered the irregularity.49 Thus, on March 25, 1983, Julieta filed her adverse claim with the Registrar of Deeds.50 Three days after, she sent demand letters to PNB and petitioner.51 Soon after they replied on April 6 and 7, 1983,52 she promptly sued to nullify the foreclosure sale in the Regional Trial Court of Mandaue City on April 20, 1983.53 She likewise filed a suit for forcible entry against petitioner in the Municipal Trial Court of Mandaue City. 54 Considering all these, we find the delay of almost two years not unreasonable. Julieta cannot be guilty of laches. Her prompt actions upon discovering her cause of action negate the claim that she has abandoned her right to claim the properties. Besides, this defense lacks merit in light of the Civil Code stating that an action or defense for the declaration of the inexistence of a contract does not prescribe.55 WHEREFORE, premises considered, the Decision dated February 17, 1997 in CA-G.R. CV No. 33499 and the Resolution therein dated April 15, 1997 are AFFIRMED. No costs. SO ORDERED. Davide, Jr., C.J ., Vitug, and Carpio, JJ ., concur. Ynares-Santiago, on leave.

Rule 68 Foreclosure of Real Estate Mortgage SECOND DIVISION

G.R. No. 141365

November 27, 2002

SPOUSES FELIPE YULIENCO and FLORA YULIENCO, petitioners, vs. HON. COURT OF APPEALS (4th DIVISION); HON. LUCAS P. BERSAMIN in his official capacity as Presiding Judge of the Regional Trial Court, Branch 96, NCJR, Quezon City; DEPUTY SHERIFF JOSE G. MARTINEZ of Branch 96, RTC, Quezon City; and ADVANCE CAPITAL CORPORATION, respondents.

DECISION

QUISUMBING, J.:

Petitioners seek to annul and set aside the decision1 dated December 20, 1999 of the Court of Appeals, which (1) affirmed the order of the Regional Trial Court of Quezon City, Branch 96, in Land Registration Case No. Q-11564 (99) granting a writ of possession to private respondent Advance Capital Corporation; and (2) lifted the temporary restraining order issued by the CA on September 17, 1999. The records show that petitioner spouses Felipe and Flora Yulienco were the owners of a residential house and lot located at Nos. 136-138 Biak-naBato Street, Sta. Mesa Heights, Quezon City, covered by Transfer Certificate of Title No. RT-2572 (57609). 2 On June 29, 1990, petitioners obtained a loan of P20,000,000 from private respondent Advance Capital Corporation (ACC) with interest at 24 percent per annum and evidenced by a promissory note. To secure the loan, deeds of real estate mortgage were executed on their properties in Makati City, Benguet, and Quezon City. When petitioners failed to pay the loan in full, ACC filed on July 2, 1993 a petition for extrajudicial foreclosures of the properties with the Ex-Officio Sheriff of Quezon City, pursuant to the authority provided in the deed of real estate mortgage. Auction sale of the properties was scheduled on July 30, 1993 and notice of the sale was published in the Times Record on July 7, 14, and 21, 1993.3 To forestall the foreclosure of their properties, petitioners filed on July 26, 1993 a petition for injunction, reformation, and damages with prayer for temporary restraining order and/or preliminary injunction against ACC with the Regional Trial Court of Makati City, Branch 61. In their complaint, petitioners questioned the validity of the promissory notes and real estate mortgages. They alleged that their true agreement with ACC was to pay the loan from the proceeds of the sale of their shares of stock in PHESCO which were then subject of a pending case in the Securities and Exchange Commission. They also assailed the Notice of Sheriffs Sale in Makati and Quezon City because it was not published in newspapers of general circulation in Metro Manila. On July 28, 1993, or two days before the scheduled sale, the Makati RTC issued an order 4 enjoining private respondent and the sheriffs of Makati, Quezon City, and Benguet from proceeding with the foreclosure of petitioners properties. The auction sale of petitioners Quezon City property scheduled on July 30, 1993 was likewise cancelled. On August 30, 1993, ACC filed with the Office of the Clerk of Court and Ex-Officio Sheriff of Quezon City a letter-request to proceed with the auction sale of petitioners Quezon City property since, by that time, the 20-day effectivity period of the temporary restraining order issued by the Makati RTC had expired5 and, therefore, there was no more legal impediment to the sale. On the same day, the Sheriff of Quezon City prepared and issued a Second Notice of Sheriffs Sale of the Quezon City property, scheduling the sale on September 27, 1993. The notice was published in the Times Record on September 1, 8, and 15 1993.6 In the meantime, the RTC of Makati issued on September 20, 1993 an order granting petitioners prayer for preliminary injunction as to the foreclosure of their property in Makati City, but not as to the Quezon City and Benguet properties since under Section 21 of Batas Pambansa Bilang 129, the court does not have jurisdiction to enforce a writ of preliminary injunction outside its territorial jurisdiction. The public auction was held on September 27, 1993 and petitioners Quezon City property was sold to ACC as the highest bidder. 7 On the same date, the Sheriffs Certificate of Sale was annotated on the TCT.8 A year later, petitioners filed a second amended and supplemental petition in the case pending before the RTC of Makati. On September 26, 1994, the RTC issued a temporary restraining order enjoining ACC from exercising its right of consolidation of ownership of the foreclosed property in Quezon City.9 Then on October 13, 1994, the RTC, again citing Section 21 of Batas Pambansa Bilang 129, finally denied petitioners prayer for preliminary injunction to enjoin ACC from consolidating title.10 Thereafter, when petitioners failed to redeem the foreclosed property, ACC caused the consolidation of its ownership and paid the necessary taxes with the Bureau of Internal Revenue to effect transfer of the title to its name.11 Accordingly, the Register of Deeds of Quezon City cancelled TCT No. RT-2572 (57609) and issued TCT No. 119740 in ACCs name.12 Tax declarations over the subject property were likewise transferred in the name of ACC after it paid real estate taxes.13 From then on, private respondent ACC has been paying real taxes on the property.14 Petitioners continued to occupy the house and lot over the property so, in a letter dated May 3, 1999, ACC made a formal and final demand on petitioners to vacate the subject house and lot within five days from receipt of the letter. ACC also demanded P1,080,000 corresponding to rental arrearages from October 1994 to the date of the letter, at P20,000 per month.15 ACC likewise filed with the RTC of Quezon City, Branch 96, a petition for the issuance of a writ of possession over the subject property. The case was docketed as Land Registration Case No. Q-11564 (99).16 At the hearing of June 25, 1999, public respondent Hon. Lucas Bersamin, the presiding judge of the RTC of Quezon City, Branch 96, allowed ACC to present its evidence ex parte without prejudice to any comment that may be filed by petitioners. In their comment below, petitioners alleged, among others, that it would be improper for the court to issue a writ of possession pending the outcome of Special Civil Case No. 93-2521 before Branch 61 of the Makati RTC for injunction, reformation, and damages assailing the validity of the loan and the mortgage.17 On September 3, 1999, the RTC of Quezon City granted the petition for writ of possession, disposing as follows:

Rule 68 Foreclosure of Real Estate Mortgage

ACCORDINGLY, premises considered, the instant petition is hereby GRANTED. Let a writ of possession be issued over the property covered by Transfer Certificate of Title No. 119740 of the Registry of Deeds of Quezon City and located at 136-138 Biak-na-Bato, Sta. Mesa Heights, Quezon City. SO ORDERED.18 Petitioners motion for reconsideration was denied. To annul the trial courts decision dated September 3, 1999, petitioners elevated the case to the Court of Appeals via certiorari and prohibition with a prayer for temporary restraining order and/or writ of preliminary injunction. 19 In a resolution dated September 17, 1999, the CA issued a temporary restraining order enjoining the implementation of the writ of possession issued by the RTC of Quezon City.20 Then on December 20, 1999, respondent Court of Appeals denied the petition for certiorari.21 The appellate court confined its discussion to the validity of the trial courts issuance of the writ of possession, finding the same neither a capricious nor a whimsical exercise of judgment that could amount to grave abuse of discretion. In the same decision, the CA likewise lifted the temporary restraining order it issued on September 17, 1999.22 Hence, the instant petition under Rule 45 of the Rules of Court, anchored on the following averments: A. THE RESPONDENT COURT HAS RENDERED THE DECISION DATED DECEMBER 20, 1999 (ANNEX B) IN DISREGARD OF THE FRAUD COMMITTED BY RESPONDENT ACC PROVEN BY FACTS NOT DENIED BY RESPONDENT ACC WHICH CLEARLY VIOLATE THE CONSTITUTIONAL RIGHT TO DUE PROCESS OF PETITIONERS AND WILL FRAUDULENTLY ENRICH RESPONDENT ACC THRU ACTUAL AND ILLEGAL CONFISCATION OF THE PROPERTIES OF PETITIONERS IN AN ILLEGAL AND FRAUDULENT MANNER, THUS CONSTITUTING A DEPARTURE FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS OR SO FAR SANCTIONED SUCH DEPARTURE BY A LOWER COURT, AS TO CALL FOR AN EXERCISE OF THE POWER OF SUPERVISION OF THIS HONORABLE COURT; and B. THE RESPONDENT JUDGE COURT HAS DECIDED IN ITS DECISION DATED DEC. 20, 1999 (ANNEX B) QUESTIONS OF SUBSTANCE NOT THERETOFORE DETERMINED BY THIS HONORABLE COURT, OR HAS DECIDED IT IN A WAY NOT IN ACCORD WITH LAW AND LOGIC AND/OR WITH THE APPLICABLE DECISIONS OF THIS HONORABLE COURT.23 At issue is whether the Court of Appeals committed reversible error in affirming the RTC decision granting the writ of possession to respondent corporation. To resolve this issue, we must also inquire whether prohibition lies to enjoin the Regional Trial Court of Quezon City from issuing to ACC the writ of possession over the property covered by TCT No. 119740 of the Quezon City Register of Deeds. Petitioners assail the jurisdiction of the Quezon City RTC in taking cognizance of the present case on the ground that there is a pending case in the Makati RTC for injunction, reformation, and damages impugning the validity of the promissory notes and mortgage contracts used as basis for the foreclosure sale. They likewise lament that the grant of the writ and the displacement of petitioners from their residence on the basis of fraud smacks of deprivation of property without due process of law. Petitioners contention cannot stand judicial muster. Act 3135, otherwise known as "An Act to Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real Estate Mortgages," mandates that jurisdiction over a petition for a writ of possession lies in the court of the province, city, or municipality where the property subject thereof is situated. Section 7 of the said Act is clear on this matter, thus: SEC. 7. In any sale made under the provisions of this Act, the purchaser may petition the Court of First Instance [now 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. Since the land subject of the controversy is located in Quezon City, the citys RTC should rightly take cognizance of the case, to the exclusion of other courts. Neither can this Court consider the pendency of Special Civil Case No. 93-2521 before Branch 61 of the Makati RTC a procedural obstacle. Said action for injunction, reformation, and damages does not raise an issue that constitutes a prejudicial question in relation to the present case. A prejudicial question is one that arises in a case the resolution of which is a logical antecedent of the issue involved therein, and the cognizance of which pertains to another tribunal.24 It generally comes into play in a situation where a civil action and a criminal action are both pending and there exists in the former an issue that must be preemptively resolved before the criminal action may proceed, because howsoever the issue raised in the civil action is resolved would be determinative juris et de jure of the guilt or innocence of the accused in the criminal case.25 The rationale behind the principle of prejudicial question is to avoid two conflicting decisions.26 Here, Special Civil Case No. 93-2521 and the present one are both civil in nature and, therefore, no prejudicial question can arise from the existence of the two actions. It taxes our imagination how the questions raised in Special Civil Case No. 93-2521 would be determinative of Land Registration Case No. Q-11564 (99). The basic issue in the former is whether the promissory note and mortgage agreement executed between petitioners and private respondent ACC are valid. In the latter case, the issue is whether respondent, armed with a TCT in its name, is entitled to a writ of possession. Clearly, the two cases can proceed separately and take their own direction independently of each other. In the present case, petitioners cannot anchor their case on the purported interest they have, as owners, over the land and the improvements thereon. They have been stripped of their rights over the property when, as mortgagors, they failed to redeem it after foreclosure took place. A mortgagor has

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only one year after registration of sale with the Register of Deeds within which to redeem the foreclosed real estate.27 After that one-year period, he loses all his interests over it. This is in consonance with Section 78 of Republic Act 337, otherwise known as the "General Banking Act," which provides: SEC. 78. In the event of foreclosure, whether judicially or extrajudicially, of any mortgage on real estate which is security for any loan granted before the passage of this Act or under the provisions of this Act, the mortgagor or debtor whose real property has been sold at public auction, judicially or extrajudicially, for the full or partial payment of an obligation to any bank, banking, or credit institution, within the purview of this Act, shall have the right, within one year after the sale of the real estate as a result of the foreclosure of the respective mortgage, to redeem the property by paying the amount fixed by the court in the order of execution (Emphasis supplied.) Likewise, Section 6 of Act 3135 states: SEC. 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore referred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of said debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold, may redeem the same at any time within the term of one year from and after the date of the sale; (Emphasis supplied.) Well established is the rule that after the consolidation of title in the buyers name, for failure of the mortgagor to redeem, the writ of possession becomes a matter of right.28 Its issuance to a purchaser in an extrajudicial foreclosure is merely a ministerial function.29 The writ of possession issues as a matter of course upon the filing of the proper motion and the approval of the corresponding bond. The judge issuing the writ following these express provisions of law neither exercises his official discretion nor judgment.30 As such, the court granting the writ cannot be charged with having acted without jurisdiction or with grave abuse of discretion. Petitioners cite the 1987 case of Cometa vs. IAC,31 to bolster their argument that a writ of possession should not be granted in the light of a pending case for annulment of the foreclosure sale wherein the properties were sold at an unusually low price. We note that petitioners reliance thereon is as flawed as their citation thereof.32 In said case, there was a pending action where the validity of the levy and sale of the properties in question were directly put in issue, which is not the case here. Special Civil Case No. 93-2521 pending before the Makati RTC for reformation of instrument is not the pending case as contemplated in Cometa because (1) the sale and levy of the property are not directly put in issue, and (2) the Makati RTC could not have taken cognizance of the foreclosure proceedings of the Quezon City property for lack of jurisdiction. A direct action for annulment of the foreclosure sale of the subject property should have been filed in the RTC of Quezon City where the property is located. More instructive is the 1997 case of Arcega vs. CA,33 where we held that the purchaser in a foreclosure sale is entitled to possession of the property: Respondent banks right to possess the property is clear and is based on its right of ownership as a purchaser of the properties in the foreclosure sale to whom title has been conveyed. Under Section 7 of Act No. 3135 and Section 35 [now Section 33] of Rule 39, the purchaser in a foreclosure sale is entitled to possession of the property. The bank in this case has a better right to possess the subject property because of its title over the same. (Emphasis supplied.) If only to stress the writs ministerial character, we have, in a case more recent than Cometa, disallowed injunction prohibiting its issuance,34 just as we have held that its issuance may not be stayed by a pending action for annulment of mortgage or the foreclosure itself.35 Guided by the foregoing principles, until the foreclosure sale of the property in question is annulled by a court of competent jurisdiction, petitioners are bereft of valid title and right to prevent the issuance of a writ of possession to respondent corporation. Until then, it is the trial courts ministerial function to grant the possessory writ to said corporation. No error could be attributed to the respondent appellate court for affirming the trial courts order in favor of private respondent, Advance Capital Corporation. WHEREFORE, the instant petition is DENIED for lack of merit. The challenged decision of the Court of Appeals dated December 20, 1999 in CA-G.R. SP No. 54949 is AFFIRMED. Costs against petitioners. SO ORDERED. Bellosillo, (Chairman) Acting Chief Justice, Mendoza, Austria-Martinez, and Callejo, Sr., JJ., concur.