G.R. No. 189577 - Philippine National Bank vs. Spouses Rivera

In September 1995, the Spouses Victoriano and Jovita Faricia Rivera executed a real estate mortgage in favor of the Philippine National Bank (PNB) to secure housing loans and a revolving credit line.
The mortgage, covering a parcel of land under TCT No. 288169 registered in Marikina City, eventually underwent foreclosure, resulting in the property being sold at public auction.

On December 28, 2005, the Spouses Rivera initiated legal proceedings by filing a Complaint for Annulment of Sheriff’s Sale with Damages against PNB and the auctioneer, Julia Coching Sosito.
The Complaint alleged that:

The property had been mortgaged to PNB.
The land was sold by Sosito, the RTC Branch 272 sheriff, on September 9, 2004.
There was a failure in proper notification because the notice of auction sale was sent to an incorrect address, despite PNB’s knowledge of the correct one.
Had they been properly notified, they would have informed Sosito that their mortgage obligation had already been fully paid.

The Regional Trial Court (RTC), Branch 272, Marikina City, dismissed the Complaint on October 25, 2006, ruling that the proper notice of the auction sale had been given, hence finding no cause of action.
Following the dismissal, the Spouses Rivera’s subsequent Motion for Reconsideration was denied on January 9, 2007.
The respondents then appealed this decision to the Court of Appeals (CA).

In its Decision dated June 19, 2009, the CA set aside the RTC’s dismissal orders and remanded the case to the trial court for further proceedings.
The CA held that the Complaint sufficiently alleged a cause of action by emphasizing contradictory facts:

The allegation that the auction notice was sent to an incorrect address.
The assertion of full payment of the mortgage obligation, which, if true, negated the basis for foreclosure.

The CA criticized the trial court for considering extraneous issues such as PNB’s assertion of proper notice and the general banking practices governing extrajudicial foreclosures.

The Spouses Rivera failed to meet the essential elements of a valid cause of action by not establishing a legal right or duty that PNB violated.
Their own conduct was in strict compliance with long-standing banking practices and the statutory requirements under Act No. 3135 regarding extrajudicial foreclosure.
The allegation of full payment on the part of the respondents did not, by itself, constitute a sufficient ground for annulment of the sheriff’s sale.
No personal notice was required in extrajudicial foreclosures, as the law mandates only posting and publication of notices unless the parties have stipulated otherwise.

The mortgage contract contained a stipulation that all correspondence—including notifications of judicial or extra-judicial actions—be sent to a specific address (40-42 Aldeguer St., Iloilo City).
This contractual provision was intended to ensure that the mortgagor was duly informed of any actions affecting the property.
Failure by PNB to follow this contractual requirement was alleged to amount to a breach that could render the foreclosure sale void if it prevented proper notification.

Whether the Court of Appeals erred in setting aside the RTC’s dismissal order and remanding the case to the trial court for further proceedings.
Whether, based on the allegations contained in the Complaint, the respondents sufficiently stated a cause of action for annulment of the sheriff’s sale, particularly concerning:

The failure to receive proper notice of the auction sale.
The allegation that full payment of the mortgage loan had been accomplished, thereby negating any basis for foreclosure.

Whether PNB’s reliance on the statutory provisions of Act No. 3135, which do not require personal notice, is sufficient to dismiss the Complaint despite the contractual stipulation on notification.