G.R. No. 150852 - Guanco vs. Antolo

Case Summary (G.R. No. 150852)

Factual Background

Antolo applied for a P600.00 loan from RBS. To secure payment, he executed a real estate mortgage over the parcel covered by TCT No. N-10216 on July 19, 1976, with the deed annotated on the title. He also executed a promissory note dated July 24, 1976, due and demandable on April 21, 1977. After obtaining the loan, Antolo transferred his residence to Bacolod City and did not leave a forwarding address to RBS.

RBS sent a reminder letter dated March 5, 1977 to Antolo that the loan matured on April 21, 1977, with the registry return receipt indicating receipt by Mrs. Nelna Jaranilla. Antolo did not pay the loan on maturity. RBS sent further demands, including a letter dated May 10, 1977 and another dated June 21, 1977 warning that legal action would be taken and that the mortgage could be foreclosed if payment was not made within the stipulated period.

Years later, Antolo inquired in December 1983 about the loan balance to “redeem” his title. RBS replied on December 20, 1983 that Antolo’s loan account had already been paid on August 29, 1977, evidenced by Official Receipt No. 5280, and that the owner’s duplicate of the title had already been released. In response, Antolo wrote again in January 1984 denying knowledge of the supposed payment and the release of the owner’s duplicate, and he likewise submitted his letter to the Central Bank of the Philippines. The Office of the Special Assistant to the Central Bank Governor later informed him by letter dated March 28, 1986 that verification showed his account had been paid on August 29, 1977 for P705.88, covering principal, interest, and litigation expenses, and that the collateral document had been released.

Antolo then claimed that despite that alleged payment and release, the title had been lost through an execution-related sale. Through an inquiry with the Register of Deeds, he learned that his TCT No. N-10216 had been cancelled pursuant to a Certificate of Sale executed by the Provincial Sheriff (through Deputy Sheriff Alvior). The Certificate of Sale stated that his property was sold at public auction at 10:00 a.m. on August 19, 1977 at the Provincial Capitol, San Jose, Antique, in favor of Luisa Guanco for P775.00, purportedly as the sole bidder. A Final Deed of Sale was executed on August 28, 1978 for P930.00, and the deed was annotated on the dorsal portion of TCT No. N-10216 on September 5, 1978. Eventually, on October 9, 1978, TCT No. N-10216 was cancelled and replaced by TCT No. 12131 in the name of Luisa Guanco. She declared the property for taxation and paid the realty taxes.

Antolo’s Complaint and Theories

On November 4, 1986, Antolo filed a civil complaint against Luisa Guanco and Leonardo Guanco, Provincial Sheriff Alvior, and the RBS, for annulment of the sheriff’s sale, recovery of ownership, and damages. Antolo alleged that although the loan was secured by the real estate mortgage, the mortgage was foreclosed without the proper notice and without the required petition for foreclosure. He asserted that the foreclosure and sale instruments were void ab initio, and that they were the result of falsification and criminal acts, which allegedly deprived the Guanco spouses of any right or title. He further contended that the mortgage could not have been validly foreclosed on the alleged sale date because he claimed that RBS itself later admitted the loan had been fully paid on August 29, 1977 through Official Receipt No. 5280.

Antolo invoked his lack of knowledge of any foreclosure proceedings and claimed that while he offered to pay the loan once he learned of the situation, the bank still proceeded with the auction sale and the execution of the final deed. He prayed for the declaration of nullity and the ordering of reconveyance, vacating of the premises, and payment of moral damages, exemplary damages, attorney’s fees, and other provable amounts.

Defenses Raised by the Guanco Spouses and RBS

The Guanco spouses denied wrongdoing and insisted that Luisa Guanco was a purchaser in good faith. They argued that Antolo was estopped from assailing the foreclosure and sale because he delayed filing suit for years, invoking laches in response to the belated complaint.

RBS responded that, based on its records, Antolo’s loan secured by the mortgage had already been fully paid, and that therefore the title had been released. RBS stated that its manager did not clearly remember whether payment occurred before or after the auction, but it alleged that all foreclosure requirements had been complied with, and it denied that any falsification or criminal act was committed by its officials.

Trial Court Proceedings and RTC Ruling

Antolo testified that he had inherited the subject property from his aunt Maria Combong, that he executed an affidavit of self-adjudication as her sole heir, and that the Register of Deeds issued TCT No. N-10216 on June 22, 1976. He also claimed that he never received any notice from the Provincial Sheriff regarding the extrajudicial foreclosure and sale. He added that the deputy sheriff was a close friend and that his financial condition prevented him from paying the loan at the time it matured.

Luisa Guanco testified that she purchased the property from Maria Combong under a contract of sale with right to repurchase dated August 6, 1974, and that houses were constructed on the land in 1972 and 1974. She testified that in August 1975, additional consideration was received by the seller through Antolo as her nephew, and that the repurchase period was extended to August 1980. She stated that sometime in July 1977, Antolo’s wife handed her a demand letter from RBS demanding payment within ten days, and that the wife suggested she buy the property directly from RBS. Luisa claimed that she went to see Deputy Sheriff Alvior, who advised her to buy from RBS before the auction sale the following month. She asserted that she paid RBS an amount of P930.00, allegedly the auction price, but she also stated that she was not issued any receipt by RBS for that payment.

RBS produced evidence that Antolo allegedly failed to redeem within one year from registration of the certificate of sale. RBS also testified that it did not have a copy of the petition for extrajudicial foreclosure, nor a copy of the certificate of sale. It further claimed that it did not execute a deed of release of mortgage, and that it had only a machine copy of the final deed of sale. In addition, RBS ledger entries indicated that the amount covered by Official Receipt No. 5280 was P705.88, which was issued after the foreclosure of the mortgage.

Despite the issues raised on notice, the RTC dismissed Antolo’s complaint. The RTC held that the foreclosure sale and the certificate of sale were valid and that Antolo’s action was barred by laches. The RTC also ruled that although Antolo raised the claim of lack of notice and posting requirements under the law, such claim was not sufficient to invalidate the sale because Antolo received the demand letter dated March 5, 1977, and therefore he had sufficient awareness of the foreclosure context.

Issues Raised on Appeal and the CA’s Ruling

Antolo appealed, arguing that the RTC erred in upholding the validity of the foreclosure sale and its instruments. He specifically alleged that notice of the foreclosure sale was not published in accordance with Act No. 3135 as amended by Act No. 4118, and he also challenged the validity of both the certificate of sale and the final deed of sale.

On June 7, 2001, the CA reversed. It declared the certificate of sale dated August 19, 1977 and the final deed of sale dated August 28, 1978 null and void. It ordered the Guanco spouses to reconvey the lot to Antolo upon the latter’s payment of P930.00 without interest. The CA made no pronouncement as to costs. The Guanco spouses’ motion for reconsideration was denied for lack of merit, leading to the petition before the Court.

Petitioners’ Contentions in the Supreme Court

In the petition, the Guanco spouses insisted that the mortgage was extrajudicially foreclosed and that the property was sold at public auction on August 19, 1977. They maintained that petitioner Luisa had paid the loan account on August 29, 1977 as evidenced by Official Receipt No. 5280, and that Antolo failed to prove he was not notified of the foreclosure and auction sale. They invoked the presumption of regularity in the performance of official duties by the deputy sheriff.

They further argued that Antolo was estopped from assailing the foreclosure proceedings and the subsequent issuance of title in 1978 because he filed the complaint only on November 4, 1986. They maintained that Luisa was a purchaser in good faith and asserted there was no evidence that she knew of defects in the auction. They also argued that it was unfair for Antolo to retrieve the property after the Guanco spouses allegedly paid amounts corresponding to the loan and the purchase, and they claimed the respondent benefited twice from the property.

Respondent’s Position

Antolo maintained that the CA’s judgment was in accord with law and evidence. He attacked the validity of the foreclosure-related instruments primarily on the ground that the statutory requirements for notice and posting were not complied with. He relied on the bank’s later admissions and documentary communications showing that his account had already been paid before the alleged foreclosure-related steps. He likewise attacked the alleged auction, certificate of sale, and final deed as being unsupported by the true factual and legal circumstances.

Legal Basis and Reasoning

The Court rejected the petition and affirmed the CA’s nullification of the certificate of sale and final deed of sale, and its order of reconveyance. Central to the Court’s reasoning were four interrelated grounds, each supported by the facts as narrated.

First, the Court held that the requirements under Section 5 of Republic Act No. 720, as amended by Republic Act No. 7939, we

Case Syllabus (G.R. No. 150852)

Parties and Procedural Posture

Luisa Guanco, assisted by her husband Leonardo Guanco, filed a petition for review on certiorari assailing the Court of Appeals (CA) judgment that reversed the trial court and declared void the sheriff’s sale instruments, with a corresponding order of reconveyance.
Isidro Antolo brought the underlying action in the Regional Trial Court (RTC), Branch 11 of Antique, for annulment of sheriff’s sale and recovery of ownership with damages, impleading the Guanco spouses, the Provincial Sheriff (through Deputy Sheriff Bonifacio L. Alvior), and the Rural Bank of Sibalom (Antique), Inc. (RBS).
The RTC dismissed Antolo’s complaint and upheld the validity of the foreclosure sale, the certificate of sale, and the final deed of sale.
The CA reversed the RTC, declared the certificate of sale and final deed of sale null and void, and ordered the Guanco spouses to reconvey the lot to Antolo upon the payment of P930.00 without interest.
The Guanco spouses moved for reconsideration, but the CA denied the motion for lack of merit, prompting the petition before the Court.

Key Factual Background

Isidro Antolo obtained a P600.00 loan from RBS and executed a Real Estate Mortgage dated July 19, 1976 over a parcel of land covered by TCT No. N-10216.
The mortgage deed was annotated on the title on July 19, 1976, and Antolo executed a promissory note dated July 24, 1976, due and demandable on April 21, 1977.
Antolo later transferred his residence to North Baybay, Barangay Pahanocoy, Bacolod City, and the records showed he left no forwarding address to RBS.
RBS sent a reminder letter dated March 5, 1977 requiring Antolo to pay on April 21, 1977, and the registry return receipt showed receipt by Mrs. Nelna Jaranilla.
Antolo did not pay on the maturity date, and RBS sent further letters, including a May 10, 1977 request to pay on pain of foreclosure and a June 21, 1977 threat of legal action unless payment was made within ten (10) days.
In December 1983, Antolo inquired how much he owed to “redeem” his title, and RBS replied on December 20, 1983 that Antolo’s loan account had been paid on August 29, 1977, as shown by Official Receipt No. 5280, and that the owner’s duplicate had already been released.
Antolo responded in January 10, 1984 that he had no knowledge of such payment and release of the title duplicate, which he conveyed to the Central Bank of the Philippines.
The Central Bank verification later showed that Antolo had indeed paid on August 29, 1977 for P705.88, covering principal, interest, and litigation expenses, after the account was transferred to Items in Litigation on July 21, 1977, and that the collateral document had been released to him.
In April 28, 1986, Antolo complained to the Central Bank that RBS released the owner’s duplicate to a third party not authorized by him.
Antolo discovered through the Register of Deeds that TCT No. N-10216 had been cancelled, and a Certificate of Sale and Final Deed of Sale were executed, reflecting a foreclosure-related transaction in favor of Luisa Guanco.
The record showed the certificate of sale reflected an auction on August 19, 1977 at 10:00 a.m. in San Jose, Antique, and the final deed of sale was executed on August 28, 1978, with subsequent cancellation of TCT No. N-10216 by TCT No. 12131 on October 9, 1978.
Luisa Guanco then declared the property in her name and paid realty taxes under a tax declaration in connection with her acquisition.

Claims in the Complaint

Antolo filed a complaint on November 4, 1986 seeking to annul the sheriff’s sale, recover ownership, and obtain damages against Luisa Guanco, Leonardo Guanco, Provincial Sheriff Alvior, and RBS.
Antolo alleged that his mortgage was foreclosed without proper notice, without the required foreclosure petition, and despite his loan being already fully paid on August 29, 1977.
Antolo claimed that the certificate of sale and final deed of sale were executed without required notice under the Rules of Court, hence were null and void ab initio.
Antolo further asserted that because the loan had been paid and the mortgage could not validly be foreclosed, the foreclosure instruments constituted falsification and did not transfer title.
Antolo prayed for a declaration of nullity of the certificate of sale and final deed of sale, reconveyance, vacation of the premises, and payment of moral damages, exemplary damages, attorney’s fees, and costs.

Defenses Raised

The Guanco spouses asserted that Luisa Guanco was a purchaser in good faith.
The Guanco spouses invoked estoppel against Antolo for assailing the foreclosure because Antolo allegedly tared for years before filing suit.
RBS alleged that its records showed Antolo’s loan was fully paid, the title was consequently released, and that there was compliance with foreclosure requirements as supported by its file.
RBS denied that its officials committed any falsification or criminal act.
Antolo testified that he inherited the property and caused issuance of TCT No. N-10216 in his name, and he insisted that he never received sheriff notice of extrajudicial foreclosure and the public auction.
Antolo also testified about his financial inability to pay and stated that the deputy sheriff was a close friend.

Evidence on Record

Luisa Guanco testified that in August 1974 she received a contract of sale with right to repurchase from Maria Combong, and that she constructed houses on the property in 1972 and 1974.
Guanco testified that additional consideration of P200.00 was received by Antolo’s family in August 1975 under the same arrangement, and she claimed the repurchase period was extended to August 1980.
Luisa Guanco testified that sometime in July 1977, Florencia Jordan handed her the demand letter from RBS seeking payment within ten (10) days.
Guanco testified that Jordan suggested that she buy directly from RBS, and that she then consulted Deputy Sheriff Alvior, who advised her to purchase before the auction sale the following month.
On cross-examination, Guanco declared she never filed any petition for consolidation of her title.
Guanco testified that she paid P930.00 to RBS, allegedly the auction price, but she also testified that she was not issued any receipt by RBS for the amount.
RBS presented evidence that Antolo failed to redeem within