GR 150852; (July, 2006) (Digest)
G.R. No. 150852 ; July 31, 2006
LUISA GUANCO, assisted by her husband, LEONARDO GUANCO, petitioner, vs. ISIDRO ANTOLO, respondent.
FACTS
Respondent Isidro Antolo obtained a loan from the Rural Bank of Sibalom (RBS), secured by a real estate mortgage on his land. After moving to Bacolod City, he failed to pay the loan upon maturity. RBS sent collection letters, but Antolo claimed he did not receive them. Subsequently, the bank extrajudicially foreclosed the mortgage. At the public auction on August 19, 1977, petitioner Luisa Guanco was the winning bidder. A certificate of sale was issued and later, a final deed of sale, leading to the cancellation of Antolo’s title and the issuance of a new one in Guanco’s name. Crucially, Antolo later inquired with RBS about his loan and was informed it had been paid on August 29, 1977, and the title released. Antolo discovered the foreclosure and sale only afterwards. He filed a complaint for annulment of the sheriff’s sale, alleging lack of proper notice and that the foreclosure proceeded despite the loan being paid.
ISSUE
The core issue is whether the extrajudicial foreclosure sale was valid, particularly focusing on the compliance with statutory notice requirements to the mortgagor.
RULING
The Supreme Court affirmed the Court of Appeals’ decision annulling the foreclosure sale. The legal logic hinges on strict compliance with Act No. 3135 , as amended. For a valid extrajudicial foreclosure, the law mandates posting of notice in public places and publication in a newspaper. Crucially, it also requires that written notice of the sale be sent to the mortgagor. The Court found that the bank failed to prove that Antolo received the requisite personal notices. The collection letters sent prior to foreclosure were insufficient to constitute the specific notice of sale required by law. The absence of this mandatory notice rendered the foreclosure proceedings void. The Court rejected Guanco’s claim of being a purchaser in good faith, as the defect was in the very authority of the sheriff to conduct the sale, making the certificate of sale void. Consequently, all subsequent acts, including the final deed of sale and the new title issued to Guanco, were also void. The right to redeem never arose from a void sale, and Antolo’s action for annulment was not barred by prescription, as an action to declare the nullity of a void contract does not prescribe.