G.R. No. 97132. December 10, 1991
MASANTOL RURAL BANK, INC., PETITIONER, VS. THE HON. COURT OF APPEALS AND REMEDIOS B. SORIANO, RESPONDENTS.
FELICIANO, J.:
Petitioner spouses Antonio and Remedios Soriano in G.R. No. 70937
urge the Court to set aside the Order of the Regional Trial Court of Manila in
LRC Record No. 302 granting a writ of possession to private respondent therein,
the Masantol Rural Bank, Inc. (“Masantol Bank”), which Order was affirmed by
the then Intermediate Appellate Court in its Decision and Resolution in
A.C.-G.R. SP No. 04821.
Upon the other hand, petitioner Masantol Bank in G.R. No. 97132
seeks to annul the Decision of the Regional Trial Court of Manila in Civil Case
No. 84-24524 declaring its auction sale and consolidation of ownership of the
property owned by private respondent Soriano spouses null and void ab initio, which Decision was affirmed by the Court of Appeals in
C.A.-G.R. CV No. 21337.
The spouses Antonio Soriano and Remedios
Soriano had on two occasions, obtained from Masantol Bank three (3) loan
accounts in the aggregate amount of P25,000.00.
Each loan was covered by a promissory note and secured by a real estate
mortgage constituted over a parcel of land and house owned by the Soriano
spouses located at 3392 J.C. Cruz, Barrio Obrero, Tondo, Manila. The real estate mortgage contained a special
power of attorney authorizing Masantol Bank to foreclose the property
extrajudicially in the event the Soriano spouses defaulted on their
obligations.[1]
Because the Soriano spouses were unable to pay their indebtedness
on the dates each of the loans respectively fell due, Masantol Bank caused the
mortgaged property to be foreclosed extrajudicially. The auction sale was initially scheduled for
20 October 1977 but for one reason or another, it did not take place on that
date. At the auction sale subsequently
held on 22 June 1978, Masantol Bank was the lone bidder and bought the
mortgaged property for the sum of P38,280.44.
The Sheriff of Manila who conducted the auction sale then executed a
certificate of sale[2]
in the name of Masantol Bank which, in turn, had the fact of sale annotated on
the back of the certificate of title standing in the name of the Soriano
spouses. On 10 December 1979, Masantol
Bank, as attorney-in-fact, executed a deed of sale[3]
assigning the property to itself for failure of the Soriano spouses to redeem
the property within the redemption period of one (1) year from the date the
certificate of sale was registered. The
deed of sale was presented to the Register of Deeds of Manila who issued
Transfer Certificate of Title No. 136368 in the name of Masantol Bank.
After it had consolidated its ownership of the Barrio Obrero house
and lot, Masantol Bank filed in the Regional Trial Court of Manila, Branch 4
sitting as a land registration court, an ex parte motion for issuance of a writ of possession.[4]
The land registration court allowed the Soriano spouses time to controvert the allegations
in the motion filed by Masantol Bank but the period granted them lapsed without
their having filed any pleading. On 18
August 1981, the land registration court issued an Order the dispositive
portion of which reads as follows:
“WHEREFORE, let the corresponding writ of possession be issued
directing the Sheriff of Manila or his duly authorized representative to place
the herein petitioner in possession of the property described in said Transfer
Certificate of Title No. 136368 and to eject therefrom the mortgagors,
occupants, lessees, representatives and all persons claiming rights under them.
SO ORDERED.”[5]
The Soriano spouses questioned the above Order granting the writ
of possession before this Court in G.R. No. 69171; however, the petition for certiorari
and mandamus was referred by the Court to the Intermediate Appellate
Court on 26 November 1984.
On 28 November 1984, the Intermediate Appellate Court restrained
the enforcement of the writ of possession.
The restraining order was later lifted and vacated when the Intermediate
Appellate Court eventually dismissed the petition in its Decision dated 8 April
1985. The Soriano spouses filed a motion
for reconsideration which was denied.
On 30 May 1985, the Soriano spouses filed with us a petition for
review of the decision and resolution of the Intermediate Appellate Court, now
docketed as G.R. No. 70937. The Court
issued a temporary restraining order enjoining enforcement or implementation of
the writ of possession dated 18 August 1981.[6]
The Soriano spouses alleged in their petition for review that the Intermediate
Appellate Court had erred -?
1. In
sustaining the writ of possession issued by the respondent land registration
court upon a reliance on private respondent’s alleged ‘title’ to the controverted
property;
2. In
ruling that the respondent land registration court did not commit grave abuse
of discretion amounting to lack of jurisdiction in issuing the questioned writ considering
that:
a. private respondent’s alleged title was
illegal and void; and
b. serious questions and objections affecting
said title were raised in the summary proceedings.
3. In applying to the case before it the
doctrine enunciated in IFC Service Leasing and Barrameda.
Earlier, i.e. on 21 May 1984 pending litigation of the validity
of the writ of possession, Remedios Soriano who had been separated from her
husband for a period of at least one year, filed a complaint in the Regional
Trial Court of Manila, Branch 26, seeking, among other things, the annulment
of: (1) the auction sale held on 22 June
1978 of the foreclosed Barrio Obrero property; (2) the deed of sale executed in
favor of Masantol Bank; and (3) the transfer certificate of title issued in the
name of Masantol Bank. After the issues
were joined, the case proceeded to trial.
On 20 July 1987, the trial court rendered a decision with the following
dispositive portion:
“WHEREFORE, premises considered, judgment is hereby rendered
declaring the foreclosure sale and consolidation of ownership to Masantol Rural
Bank, Inc. of the property covered by Transfer Certificate of Title No. 22324
null and void ab initio; and
ORDERS the following:
(a)
the cancellation of Transfer Certificate of
Title No. 136368 in the name of Masantol Rural Bank, Inc. and the reinstatement
of Transfer Certificate of Title No. 22324 in the name of Antonio P. Soriano
and Remedios B. Soriano;
(b)
the defendant Masantol Rural Bank, Inc. to allow
the plaintiff Remedios B. Soriano to redeem the mortgaged property covered by
Transfer Certificate of Title No. 22324 in the amount of twenty five thousand
(P25,000.00) pesos plus interest from the dates of the loans to June 1980, when
plaintiff first offered to redeem the property;
(c)
the defendant Masantol Rural Bank, Inc. to pay
the plaintiff the amount of P10,000.00 as moral and exemplary damages; and to
pay the cost of litigation.
No award is ordered for attorney’s fees.
SO ORDERED.”[7]
On appeal to the Court of Appeals, the trial court’s decision was
affirmed except that the award of P10,000.00 for moral and exemplary damages
was deleted.
Masantol Bank accordingly filed the instant Petition for Review
docketed as G.R. No. 97132. Its position
is anchored on the following grounds:
1.
Resolution No. 542, Series of 1956 of the
Municipal Board of the City of Manila and the case of Citizens’ Surety Insurance Co., Inc. vs. Hon.
Ricardo Puna, et al. (119 SCRA 216 [1982]) are not applicable to the
instant case.
2.
Under the prevailing circumstances, the
foreclosure auction sale and consolidation of ownership cannot be declared null
and void ab initio.
3.
The redemption of the mortgaged property, and
the suspension of the running of interest from June 1980 are without basis in
law.
4.
The issue
of republication was not admitted as an issue in the trial court and therefore
should not have been passed upon by the Court of Appeals.[8]
Ordinarily, G.R. No. 97132,
as the case with the higher or
later general records number, should have been consolidated with G.R. No.
70937. However, since the principal
issue litigated in G.R. No. 70937, i.e., the validity of the writ of possession
issued on the basis of Masantol Bank’s title is peripheral to the principal
issue in G.R. No. 97132 where the validity of Masantol Bank’s title itself is
directly questioned, the Court decided to consolidate G.R. No. 70937 with G.R.
No. 97132.
The ultimate question of the validity of Masantol Bank’s title to
the house and lot in Barrio Obrero relates to two (2) issues: firstly, the issue of whether or not Masantol
Bank was legally qualified to acquire ownership of the house and lot in Barrio
Obrero; and secondly, the issue of whether or not the necessary notices for the
foreclosure auction sale at which Masantol Bank bought the Barrio Obrero real property had been given.
Turning to the first issue, the complete text of Resolution No.
168, as amended by Resolution No. 542, of the Municipal Board of the City of
Manila, dated 29 November 1956, reads as follows:
“RESOLVED, That Resolution No. 168, Series of 1922, as Amended by
Resolution No. 218, Series of 1946, Resolution No. 228, Series of 1948,
Resolution No. 66, Series of 1950 and Resolution No. 283, Series of 1954 be,
and the same hereby is, further
amended, by deleting Item No. 6 therefrom, so that same shall read as follows:
BE IT RESOLVED by the Municipal Board of the City of Manila, that:
The following shall be the plan in establishing the Barrio Obrero:
1.
The Barrio Obrero shall be parcelled out in
accordance with the plan now under preparation by the City Engineer.
2.
Each lot, according to said plan, shall contain
108 square meters with a frontage of 9 and a depth of 12 meters.
3. Not
more than one lot shall be sold to a person or persons belonging to the same
household.
4.
Only
Filipino laborers who are bona fide residents in Manila whose wages do not exceed
P180.00 per month, or P6.00 per
day, according as they receive monthly or daily compensation shall have the
privilege of buying lots in the Barrio.
5.
Only residential houses shall be built in the
Barrio.
x x x x x x x x x
7.
The lots shall be paid for at a price to be
fixed by the Appraisal Committee within ten years in 120 equal monthly
installments, and shall be mortgaged in favor of the City to guarantee payment
of the entire price: Provided, That
non-payment of six consecutive installments shall be considered sufficient
cause for the forfeiture of the laborer’s right to purchase and of all the
installments previously paid.
8.
The awarding of lots shall be done by lot.”
(Underscoring supplied)
In Citizens’ Surety and Insurance Co., Inc. v. Judge Ricardo
C. Puno, et al.,[9]
Maria Barcelon, owner of a piece of land in Barrio Obrero, mortgaged the land
to Citizens’ Surety and Insurance Co., Inc. (Citizens’) to secure a loan. Citizens’ foreclosed the mortgage
extrajudicially when the loan was not paid.
Citizens’ bought the land at the foreclosure sale and, after expiration
of the period of redemption, sought to consolidate its ownership. The Register of Deeds of Manila refused to
register the consolidation. Citizens’
then brought suit against the Register of Deeds and the City of Manila, praying
that Resolution No. 542 of the City of Manila be declared null and void and the
Register of Deeds ordered to register the consolidation
of title. The trial Judge
dismissed the suit. The Court, in
affirming the decision of the trial court, held that Citizens’ being a
corporate entity, was not
qualified to acquire the lot and hence not competent to raise the question of
invalidity of Resolution No. 542. In
effect, the Court held that only persons qualified under paragraph 4 of
Resolution No. 542 (quoted above) could acquire ownership of a Barrio Obrero
lot whether the sale be a voluntary one or a forced sale on execution.
Remedios Soriano invokes and relies upon the Citizens’ Surety
case. Upon the other hand, Masantol
Bank, a juridical entity licensed by the Central Bank to operate as a rural
bank, in effect asks us to re-examine and overrule Citizens’ Surety and
to hold that paragraph 4 of Resolution No. 542 is not applicable to a subsequent
purchaser in an auction sale of a mortgaged Barrio Obrero lot.
We believe that the rule in Citizens’ Surety should be
re-affirmed. As noted earlier,
Resolution No. 542, amended Resolution No. 168, as previously amended by
deleting paragraph 6 from Resolution No. 168, which deleted paragraph read as
follows:
“6. No lot shall be
transferred, leased, mortgaged or otherwise encumbered without the express
approval of the Mayor of the City of Manila.
The mortgage or other encumbrance shall not be for an amount greater
than the original purchase price nor for a period of more than five (5)
years: Provided, however, that in case
of foreclosure or auction sale, the City of Manila reserves the right to
redeem the lot so foreclosed at not more than the price of its original
acquisition excluding necessary costs and expenses.”
Clearly, the deleted paragraph 6 had
imposed onerous limitations in respect of mortgages established on Barrio
Obrero lots: (a) the Mayor of the City
of Manila had to approve transfers, leases or mortgages of a Barrio Obrero lot;
(b) a loan secured by the mortgage could not exceed the original purchase price
of the lot nor could the life of the mortgage exceed five (5) years; and (c) in
case of a foreclosure or auction sale, the City of Manila had a right to redeem
the lot at not more than the original selling price to the mortgagor. Deletion of paragraph 6 thus indicated an
intent on the part of the
Municipal Board to mitigate the restrictions attaching to Barrio Obrero
lots. By the same token, however, the
Municipal Board had the opportunity to exclude foreclosures or auction sales
from the application of paragraph 4; the Municipal Board did not, however,
choose to do so and did not go beyond deleting paragraph 6. The Court is aware that the rule in Citizens’ Surety does not
necessarily make good economic or financial sense. It is
not even necessarily good for the Filipino laborers or lowly- paid
employees themselves who must expect to find difficulties in securing bank
credit since banks would naturally be reluctant to accept Barrio Obrero lots as
collateral if the banks cannot bid for such lots even to save themselves from
loss in case of default. Moreover, there
realistically would not be many Filipino laborers resident in Manila whose
wages do not exceed P180.00 a
month or P6.00 a day (or, perhaps, the current minimum daily wage of
P118.00) who would be in a position to bid for and purchase a Barrio Obrero lot
in a foreclosure sale. We believe,
however, that further modification of Resolution No. 168 as amended by
Resolution No. 542 should be left to the Municipal Board of Manila, that the
Municipal Board should be given the opportunity to correct the difficulty posed
by the unqualified language of paragraph 4, just as the Board corrected some of
the difficulties created by the
restrictions in the original paragraph 6 of Resolution No. 168.
It is essential to note, however, that the application of the rule in Citizens’ Surety does
not in any way affect the validity or the enforceability of the mortgage lien
held by Masantol Bank; that mortgage lien continues to be good and valid and effective as against the debtor and the
whole world. The obligation secured by
the mortgage remained valid and enforceable and that obligation could be enforced
by foreclosure so long as the successful bidder is a person qualified under
paragraph 4 of Resolution No. 542.
There is another reason why the sale in favor of the mortgagee
Masantol Bank must be set aside:
Masantol Bank failed to comply with the requirements of
publication. Act No. 3135, as amended,
which governs the extrajudicial foreclosure of mortgages on real property specifies the
following publication requirements:
“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.” (Underscoring
supplied)
Republic Act No. 720, as amended, the
Rural Banks Act, provides for exemption of foreclosures of mortgages securing
loans granted by rural banks in the case of
loans not exceeding P10,000.00 (including interest due and
unpaid). The loans secured by the
mortgage on the Obrero lot in
favor of Masantol Bank were well in excess of P10,000.00. Notice of the first auction sale scheduled
for 20 October 1977 had been duly published as required by Section 3 of Act No.
3135, as amended. No auction sale,
however, took place on that day. The
auction sale during which Masantol Bank bought the property as sole bidder was
conducted eight (8) months later, on 22 June 1978. Masantol Bank alleged that there was
re-publication of the notice of the 22 June 1978 auction sale; Remedios B.
Soriano contends otherwise.
The evidence submitted by Masantol Bank as tending to prove its
compliance with the publication requirement in respect of the 22 June 1978
auction sale, consisted simply of the testimony of Atty. Venancio Viray[10]
and a provisional receipt of payment of the alleged publication expenses signed
by a stenographer of the newspaper Economic Monitor.[11]
Remedios Soriano, upon the other hand, presented a solicitor of the Economic
Monitor — where the notice of auction sale was supposed to have been published
— who testified that he had not seen from their records any document indicating that the notice of auction
sale was in fact published.[12]
It is settled doctrine that failure
to publish the notice of auction sale as required by the statute
constitutes a jurisdictional defect which invalidates the sale.[13]
The Court is not persuaded either that the evidence presented by Masantol Bank
sufficiently established its compliance with the statutory requirement of
notice, or that the testimony of Remedios Soriano’s witness showed non?compliance
with such requirement. In Tambunting
v. Court of Appeals,[14]
this Court said:
“One issue of a newspaper of general circulation is not
substantial compliance with the required publication of once (1) a week
for at least three (3) consecutive weeks.
Petitioners claim the publisher’s affidavit of publication is merely
a customary proof, hence, it should not be considered as the sole evidence of
publication. This may be so in the
presence of equally convincing evidence.
In the case at bar, however, there is no such other proof of
publication. To show compliance, the
published notices and certificate of posting by the sheriff of the notice of
sale of 26 January 1968 should have been presented. They do not appear in the record. Neither can the sale be considered as an
adjournment of an earlier sale under Sec. 24 of Rule 39 of the Rules of
Court. As correctly posed by the Court
of Appeals, why was there one (1) publication of the notice of sale scheduled
on 26 January 1968? The presumption of
compliance with official duty has been rebutted by the failure to present proof of posting and
publication of the notice of sale of 26 January 1968.” (Underscoring supplied)
Masantol Bank argues that the issue on publication or re-publication of notice of auction sale
should not have been passed upon by the Court of Appeals, since that issue had not been admitted as such at
the pre-trial of the case. The pre-trial
order of the trial court dated 25 April 1985 had narrowed down the issues to
the following: (a) the validity of the
auction sale of 22 June 1978; (b) the applicability of Resolution No. 542,
Series of 1956, of the Municipal Board of the City of Manila; and (c) the
amount of damages each party may be entitled to claim from the other. While the issue of re-publication had not been
specifically identified and included in the above list of issues, that issue is
properly deemed included within the broader question relating to the validity
of the auction sale.
We turn to the question of suspension of the running or accruing
of interest on the loans of the Soriano spouses from Masantol Bank starting
from June 1980. In its questioned
decision, the Court of Appeals ruled that interest at the rate of twelve
percent (12%) per annum was due on each of the loans from the date they were obtained
and until June 1980, when Remedios Soriano first asked for an accounting
of the loan, at the same time offering to pay the same.
A mere offer to pay, not accompanied or promptly followed
by consignation in court of the amount tendered but refused by the creditor, is
not sufficient to cause cessation of the running of interest. The applicable rule was stated by the Court
in State Investment House, Inc. v. Court of Appeals,[15] in the following manner:
“Where the creditor unjustly refuses to accept payment, the
debtor desirous of being released from his obligation must comply with two (2) conditions: (a) tender of payment; and (b) consignation
of the sum due. Tender of payment
must be accompanied or followed by consignation in order that the effects of payment may be produced. Thus, in Llamas vs. Abaya, the Supreme
Court stressed that a written tender of payment alone, without consignation
in court of the sum due, does not suspend the accruing of regular or monetary
interest.
In the instant case, respondent spouses Aquino, while they are
properly regarded as having made a written tender of payment to petitioner
State, failed to consign in court the amount due at the time of the maturity of
Account No. IF-82-0904-AA. It follows
that their obligation to pay principal-cum-regular or monetary interest
under the terms and conditions of Account No. IF-82-0904-AA was not
extinguished by such tender of payment alone.
For the respondent spouses to continue in possession of the
principal of the loan amounting to P110,000.00 and to continue to use the same after maturity of the loan
without payment of regular or monetary interest, would constitute unjust
enrichment on the part of the respondent spouses at the expense of
petitioner State even though the spouses
had not been guilty of mora. It is
precisely this unjust enrichment which Article 1256 of the Civil Code prevents
by requiring, in addition to tender of payment, the consignation of the amount
due in court which amount would thereafter be deposited by the Clerk of Court
in a bank and earn interest to which the creditor would be entitled.”
(Underscoring supplied)
Both Remedios Soriano and Antonio Soriano had failed to consign
in court the amount due to Masantol Bank.
Accordingly, regular or monetary interest did not cease to run or accrue
in respect of the loans granted to the Soriano spouses, and it was reversible
error for the Court of Appeals to have held otherwise.
Remedios Soriano asks us to restore the award for moral and
exemplary damages made by the trial court;
but we see no reason for overturning the Decision of the Court of
Appeals deleting such award.
WHEREFORE, the Decision dated 8 April 1985 and the
Resolution dated 9 May 1985 of the then Intermediate Appellate Court in
A.C.-G.R. SP No. 04821 as well as the Decision dated 23 August 1990 and the
Resolution dated 23 January 1991 of the Court of Appeals in C.A.-G.R. CV No.
21337 are hereby SET ASIDE. A new
judgment is hereby rendered providing as follows:
(1) Declaring null and void: (a) the auction sale held on 22 June 1978;
(b) the sale of the property located in 3392 J.C. Cruz, Barrio Obrero, Tondo,
Manila to Masantol Bank; (c) Transfer Certificate of Title No. 136368 issued in
the name of Masantol Bank; and (d) the writ of possession granted by the land
registration court.
(2) Ordering the Register of Deeds of Manila to
cancel Transfer Certificate of Title No. 136368 issued in the name of Masantol
Bank and to reinstate Transfer Certificate of Title No. 22324 in the names of
the spouses Antonio Soriano and Remedios Soriano and to annotate thereon the
mortgage lien of Masantol Bank;
(3) Requiring Antonio Soriano and/or Remedios
Soriano to pay forthwith Masantol Bank the principal amount of their obligation
which is P25,000.00, or so much thereof as has remained unpaid, plus interest
thereon at the rate of twelve percent (12%) per annum computed from the time
each of the loans were obtained and until full actual payment thereof. After full payment, the mortgage lien of
Masantol Bank shall be cancelled;
(4) Declaring Masantol Bank as entitled, in case
of failure of the spouses Antonio and Remedios Soriano to pay in full their
obligation with interest as above stated within sixty (60) days from notice
hereof, to foreclose its mortgage on the Barrio Obrero property, after due compliance
with publication requirements, at a public auction sale where only persons
qualified under Resolution No. 168 as amended by Resolution No. 542, dated 29
November 1956, of the Municipal Board of the City of Manila, shall be allowed
to bid for and purchase the mortgaged property.
No pronouncement as to costs.
SO ORDERED.
Narvasa, C.J., (Chairman), Cruz, Griño-Aquino, and Medialdea, JJ., concur.
[1]
Record in G.R. No. 97132, pp. 194-198.
[2]
Id., p. 201.
[3]
Id., p. 202.
[4]
Rollo in G.R. No. 70937,
pp. 51-53.
[5]
Id., pp. 47-48.
[6]
Id., pp. 69-71.
[7]
Record in G.R. No. 97132, pp. 244-253.
[8]
Memorandum for the Petitioner, G.R. No. 97132, p. 11.
[9]
119 SCRA 215 (1982).
[10]
TSN, 28 January 1986, p. 5.
[11]
Record in G.R. No. 97132, p. 200.
[12]
TSN, 17 June 1986, pp. 3-4.
[13]
Borja v. Addison, 44 Phil. 895 (1922); Campomanes v. Bartolome
and Germann & Co., 38 Phil. 808 (1918).
See also Cortes v. Intermediate Appellate Court, 175 SCRA 545
(1989); Government Service Insurance System v. Court of Appeals, 170
SCRA 533 (1989); Bonnevie v. Court of Appeals, 125 SCRA 122 (1983).
[14]
167 SCRA 16 (1988).
[15]
G.R. No. 90676, 19 June 1991.