Fiestan vs. Court of Appeals, and Developmentt Bank of the Philippines
185 SCRA 751
May 1990
FACTS:
For failure of petitioner spouses Dionisio Fiestan and Juanita Arconada (spouses Fiestan) to pay their mortgage indebtedness to respondent Development Bank of the Philippines (DBP), the latter was able to acquire at a public auction sale on August 6, 1979 the parcel of land (Lot No. 2-B covered by TCT No. T-13218) that the spouses Fiestan owned in Ilocos Sur after extrajudicial foreclosure of said property. The Provincial Sheriff issued a certificate of sale that same day which was registered on September 28 in the Office of the Register of Deeds of Ilocos Sur. Earlier, or on September 26, spouses Fiestan also executed a Deed of Sale in favor of DBP which was likewise registered on September 28, 1979. When spouses Fiestan failed to redeem their parcel of land within the 1 year period which expired on September 28, 1980, the Register of Deeds cancelled their title over the subject property and issued TCT No. T-19077 to DBP upon the latter’s duly executed affidavit of consolidation of ownership.
On April 13, 1982, the DBP sold the lot to Francisco Peria, so the Register of Deeds of Ilocos Sur cancelled DBP’s title over said property and issued TCT No. T-19229 to Peria’s name, who later secured a tax declaration for said lot and accordingly paid the taxes due thereon. He thereafter mortgaged said lot to the PNB-Vigan Branch as security for his loan of P115,000.00. Since the spouses Fiestan were still in possession of the property, the Provincial Sheriff ordered them to vacate the premises, but instead of leaving, they filed a complaint in the RTC of Vigan, Ilocos Sur for annulment of sale, mortgage and cancellation of transfer certificates of title against the DBP-Laoag City, PNB-Vigan Branch, Ilocos Sur, Francisco Peria and the Register of Deeds of Ilocos Sur.
The lower court dismissed said complaint, declaring valid the extrajudicial foreclosure sale of the mortgaged property in favor of the DBP and its subsequent sale to Francisco Peria as well as the real estate mortgage constituted in favor of PNB-Vigan. The Court of Appeals likewise affirmed said decision. The spouses Fiestan herein seek to annul the extrajudicial foreclosure sale of the mortgaged property on the ground that the Provincial Sheriff conducted the foreclosure without first effecting a levy on said property before selling the same at the public auction sale.
ISSUE:
Who has the right to acquire by purchase the subject property?
COURT RULING:
In denying the petition, the Supreme Court reiterated that the formalities of a levy, which the Provincial Sheriff of Ilocos Sur allegedly failed to comply with, are not basic requirements before an extrajudicially foreclosed property can be sold at public auction. The spouses Fiestan insisted that what prevails over the case are par. (2) of Article 1491 and par. (7) of Article 1409 of the Civil Code which prohibits agents from acquiring by purchase, even at a public or judicial auction either in person or through the mediation of another, the property whose administration or sale may have been entrusted to them unless the consent of the principal has been given. However, the Supreme Court ruled that the power to foreclose is not an ordinary agency that contemplates exclusively the representation of the principal by the agent but is primarily an authority conferred upon the mortgagee for the latter's own protection, as provided under Section 5 of Act No 3135, as amended, which is a special law that must prevail over the Civil Code which is a general law. Even in the absence of statutory provision, there is authority to hold that a mortgagee, and in this case the DBP, may purchase at a sale under his mortgage to protect his own interest or to avoid a loss to himself by a sale to a third person at a price below the mortgage debt.
