ADORACION PAGUYO, COMPLAINANT, VS. CHARLIE S. GATBUNTON, RESPONDENT.

Paguyo versus Gatbunton

The Case

This is an administrative complaint filed by Adoracion Paguyo against Charlie S. Gatbunton, Sheriff IV of the Regional Trial Court, Branch 4, Balanga, Bataan, charging him with grave abuse of authority and gross ignorance of the law. The complaint arose from the sheriff's conduct of an extrajudicial foreclosure of a real estate mortgage over the Paguyo spouses' residential property in Mariveles, Bataan. The case matters because it fixes two boundaries every reviewee must know: who, as between the sheriff and the Clerk of Court, must examine an application for extrajudicial foreclosure for the required special power to foreclose, and what publication is required when a scheduled auction sale is postponed to a new date.

Procedural History

The complaint was filed with the Office of the Court Administrator and docketed there as an administrative complaint. In its Report of January 4, 2006, the Office of the Court Administrator found no basis to hold the sheriff liable for failing to check whether the deed of real estate mortgage incorporated a special power of attorney authorizing extrajudicial foreclosure. It nonetheless faulted him for conducting the auction sale on December 1, 2003 without republishing the Notice of Sheriff's Sale with the new auction date, and recommended a fine of 10,000 pesos for gross ignorance of the law, with a warning. The Supreme Court, by Resolution of March 6, 2006, ordered the re-docketing of the case as a regular administrative matter and required the parties to manifest whether they were willing to submit the case for resolution on the pleadings. Both parties manifested their agreement, and the case was resolved on the record.

Facts

On September 9, 2002, the spouses Danilo Paguyo, Sr. and Adoracion Paguyo executed a Deed of Real Estate Mortgage in favor of Jeanlyn's Lending Investor as security for a loan of 20,000 pesos. On February 11, 2003, the spouses Celso Garcia and Jenelita Garcia, owners and operators of the lending investor, filed an application for extrajudicial foreclosure of the mortgage with the Regional Trial Court, Branch 4, Balanga, Bataan, alleging that the Paguyos had defaulted since January 9, 2003.

The respondent sheriff issued a Notice of Sheriff's Sale setting the public auction on April 11, 2003. The notice was posted on February 24, 2003 and published in Sierra Pacific News in its issues of March 12, 15 and 19, 2003. The auction was not held on April 11, 2003. Instead, the sheriff conducted it on December 1, 2003, with Jenelita Garcia emerging as the highest bidder. The sheriff later explained that the Garcias had asked for deferment to let the Paguyos settle, that he gave the Paguyos a fifteen-day grace period, and that he then reposted the notice and informed the Paguyos before rescheduling.

Adoracion Paguyo complained that the loan, including interest, had already been fully paid before the foreclosure application was filed; that no special power of attorney was attached to or incorporated in the mortgage authorizing extrajudicial foreclosure; and that there was no republication of the Notice of Sale for the December 1, 2003 auction. The sheriff answered that proceeding with the sale was his ministerial duty because the application had been approved by the Ex-Officio Provincial Sheriff and Acting Clerk of Court.

Issues

• Whether or not the respondent sheriff may be held administratively liable for proceeding with the extrajudicial foreclosure although the deed of real estate mortgage contained no special power authorizing extrajudicial foreclosure.
• Whether or not the respondent sheriff may be held liable for conducting the auction sale on December 1, 2003 without republication of the Notice of Sheriff's Sale bearing the new auction date, and if so, for what offense and penalty.

Applicable Provisions

Section 1 of Act 3135, as amended, governs when extrajudicial foreclosure is proper:

Section 1. When a sale is made under a special power inserted in or attached to any real estate mortgage, hereafter made, if the provisions of the mortgage provide that the sale shall be made in accordance with the provisions of this Act, the sale shall be made in accordance with the provisions of this Act.

The Court cites it to hold that extrajudicial foreclosure sales are proper only when a special power is inserted in or attached to the mortgage contract.

Section 1 of Circular Number 7-2002, issued on January 22, 2002 and effective on April 22, 2002, provides:

Section 1. All applications for the extrajudicial foreclosure of mortgage whether under the direction of the Sheriff or a notary public pursuant to Act Number 3135, as amended, and Act Number 1508, as amended shall be filed with the Executive Judge, through the Clerk of Court, who is also the Ex-Officio Sheriff.

It locates the application before the Clerk of Court, which bears on who must examine it.

Section 2 of the same Circular provides:

Section 2. Upon receipt of the application, the Clerk of Court shall: a. Examine the same to insure that the special power of attorney authorizing the extrajudicial foreclosure of the real property is either inserted into or attached to the deed of real estate mortgage.

This is the provision that shifts the duty of examination from the sheriff to the Clerk of Court.

Section 4 of the same Circular provides:

Section 4. The sheriff to whom the application for extrajudicial foreclosure of mortgage was raffled shall do the following: In case of foreclosure of real estate mortgage, cause the publication of the notice of sale by posting it for not less than twenty days in at least three public places in the municipality or city where the property is situated and if such property is worth more than four hundred pesos, by having such notice published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city.

This imposes on the sheriff the duty of publication that he failed to discharge for the rescheduled sale.

Ruling

On the first issue, the Court held that the sheriff cannot be held administratively liable. While the mortgage deed contained no special power authorizing extrajudicial foreclosure, the duty to examine the application had already been transferred. Under Administrative Order Number 3, series of 1984, it was the sheriff's duty to examine whether the application complied with the requirements of Section 4 of Act 3135. But amendments made it the specific duty of the Clerk of Court, and the very recent amendment is Circular Number 7-2002. Since the application was filed on February 11, 2003, after that amendment took effect, the duty to examine whether the deed contained or incorporated the special power devolved upon the Clerk of Court, not on the respondent sheriff.

On the second issue, the Court held the sheriff liable, but not for gross ignorance of the law, because there is no such administrative offense. He was liable for inefficiency and incompetence in the performance of his official duties under Section 52(A)(16) of the Revised Uniform Rules on Administrative Cases in the Civil Service. The Court stressed that republication is necessary for the validity of a postponed extrajudicial foreclosure sale, and that the absence of republication invalidates the sale. The only notice published referred to the April 11, 2003 sale; no record showed a new notice for the December 1, 2003 auction, and the sheriff offered no explanation for that failure. The Court reminded sheriffs that their conduct must be above suspicion at all times.

Doctrine

• Under Section 1 of Act 3135, as amended, extrajudicial foreclosure is proper only when a special power authorizing it is inserted in or attached to the real estate mortgage.
• Under Section 2 of Circular Number 7-2002, the duty to examine the application and to insure that the special power is inserted into or attached to the deed belongs to the Clerk of Court, not to the sheriff; a sheriff who proceeds with the foreclosure despite the absence of the special power is not administratively liable.
• Under Section 4 of Circular Number 7-2002, the sheriff must cause publication of the notice of sale; republication in the manner prescribed by Act 3135 is necessary for the validity of a postponed extrajudicial foreclosure sale, and the absence of republication invalidates the sale.
• Failure to republish the notice for a rescheduled auction constitutes inefficiency and incompetence in the performance of official duties under Section 52(A)(16) of the Revised Uniform Rules on Administrative Cases in the Civil Service, not gross ignorance of the law, which is not an administrative offense.

Disposition

The Court found the respondent sheriff guilty of inefficiency and incompetence in the performance of his official duties and suspended him for six months and one day without pay, with a stern warning that a repetition of the same or similar act shall be dealt with more severely.

Remember This

Memorize this line: the Clerk of Court examines the application for the special power to foreclose, but the sheriff must republish the notice when the auction is postponed. Examiners use this case to test the division of duties under Circular Number 7-2002 and the rule that a postponed extrajudicial sale without republication is invalid.