GR 81552; (May, 1990) (Digest)
G.R. No. 81552 May 28, 1990
DIONISIO FIESTAN and JUANITA ARCONADO, petitioners, vs. COURT OF APPEALS; DEVELOPMENT BANK OF THE PHILIPPINES, LAOAG CITY BRANCH; PHILIPPINE NATIONAL BANK, VIGAN BRANCH, ILOCOS SUR, FRANCISCO PERIA and REGISTER OF DEEDS OF ILOCOS SUR, respondents.
FACTS
Petitioners spouses mortgaged their land to the Development Bank of the Philippines (DBP) to secure a loan. Due to their failure to pay the debt, DBP extrajudicially foreclosed the mortgage. The property was sold at a public auction on August 6, 1979, with DBP as the highest bidder. A certificate of sale was issued and registered. Petitioners failed to redeem the property within the one-year period. Consequently, DBP consolidated its ownership and later sold the land to respondent Francisco Peria, who then mortgaged it to the Philippine National Bank (PNB). Petitioners, who remained in possession, were ordered to vacate. They filed a complaint seeking the annulment of the foreclosure sale, the subsequent sale to Peria, and the mortgage to PNB.
ISSUE
The core issue is whether the extrajudicial foreclosure sale is null and void due to the Provincial Sheriff’s alleged failure to effect a levy on the property before the public auction.
RULING
The Supreme Court denied the petition and affirmed the lower courts’ decisions. The Court held that petitioners’ contention is untenable. The legal logic is grounded on the distinction between different kinds of sales and the applicable laws. Petitioners erroneously applied the rules governing ordinary execution sales, specifically the requirement of a levy under Rule 39 of the Rules of Court. The case involves an extrajudicial foreclosure sale, which is governed specifically by Act No. 3135 , as amended. This special law does not require a levy as a condition precedent for a valid auction sale. The mortgage contract itself granted DBP, as attorney-in-fact, the authority to foreclose and sell the property under Act No. 3135 . Furthermore, the Court emphasized that Act No. 3135 , being a special law, prevails over general statutes. Under Section 5 of this Act, the mortgagee-creditor is expressly permitted to participate in the bidding and purchase at the sale. Therefore, DBP’s purchase at its own foreclosure sale was valid. Since the foreclosure sale was valid, the subsequent sale to Peria and the mortgage he constituted in favor of PNB were also upheld as valid transactions.