Title
Ouano vs. Court of Appeals
Case
G.R. No. 129279
Decision Date
Mar 4, 2003
Julieta Ouano defaulted on a PNB loan, leading to foreclosure. The sale was postponed without republication of notices, rendering it void. The Supreme Court ruled strict compliance with Act No. 3135 is mandatory, and republication cannot be waived.
foreclosure sale
cancellation of titles
auction sale
A

Case Summary (G.R. No. 129279)

Factual Background

The mortgagor, Julieta M. Ouano, obtained a loan from the Philippine National Bank in the amount of P104,280.00 on June 8, 1977 and executed a real estate mortgage over two parcels in Opao, Mandaue City. Upon default, PNB filed a petition for extrajudicial foreclosure with the City Sheriff of Mandaue City on September 29, 1980. The sheriff published the notice of sale in the Cebu Daily Times on November 13, 20 and 27, 1980 and posted notices in public places. The sale was scheduled for December 5, 1980. The parties, however, executed four successive Agreements to Postpone Sale that moved the sale first to February 5, 1981, then to February 28, 1981, then to March 30, 1981, and finally to May 29, 1981. The agreements expressly requested postponement “without any further republication of the notice of sale.” Many of these agreements were filed with the sheriff after the rescheduled dates. On May 29, 1981 the sheriff conducted the auction and awarded both parcels to PNB for P195,510.50. Julieta did not redeem within the statutory period, and PNB consolidated title on February 12, 1983. PNB thereafter conveyed the properties to Alfredo M. Ouano under successive instruments.

Trial Court Proceedings

After sending demand letters and filing an adverse claim with the Register of Deeds, Julieta M. Ouano initiated an action in April 1983 to nullify the May 29, 1981 foreclosure sale. The Regional Trial Court of Cebu rendered judgment on January 29, 1990 declaring the foreclosure sale, the Certificate of Sale, the deeds by which PNB acquired and later transferred title, and the subsequent titles in petitioner’s name null and void for failure to comply with statutory posting and publication requirements. The trial court ordered cancellation and reinstatement of titles and directed a new auction strictly complying with Act No. 3135, among other reliefs.

Proceedings in the Court of Appeals

PNB and petitioner appealed to the Court of Appeals. The Court of Appeals, in a decision dated February 17, 1997, affirmed the trial court’s ruling, holding that the statutory requirements for posting and publication were not complied with and that the foreclosure sale was void. The CA denied petitioner’s motion for reconsideration on April 15, 1997. PNB’s separate petition to the Supreme Court was dismissed for tardiness and lack of certification against forum-shopping.

Issues Presented

The dispositive issue was whether the May 29, 1981 foreclosure sale complied with Act No. 3135, as amended, particularly Section 3 governing posting and publication of notice, so as to vest valid title. Subsidiary issues were whether the parties could waive republication and reposting by written agreement; whether Rule 39, Sec. 24, Rules of Court authorized adjournment without republication; whether Julieta M. Ouano was estopped from challenging the sale; and whether laches barred her claim.

Parties' Contentions

Petitioner argued that there was substantial compliance because the notice was published and posted for the originally intended date. He asserted that the Agreements to Postpone Sale were voluntary waivers of republication. He further contended that Rule 39, Sec. 24 permitted adjournment by written consent of the parties without republication. Petitioner also maintained that Julieta M. Ouano was estopped from attacking the sale because she requested postponements and signed the written agreements, and that her suit was barred by laches because it was filed nearly two years after the sale.

Legal Analysis and Reasoning

The Court recognized that extrajudicial foreclosures are governed by Act No. 3135, as amended by Act No. 4118, and that Section 3 requires posting of notices for not less than twenty days in at least three public places and publication once a week for three consecutive weeks when the property value exceeds P400. The Court reiterated the settled rule that statutory publication requirements for mortgage foreclosure sales must be strictly complied with and that failure to comply constitutes a jurisdictional defect rendering the sale void. The Court relied on prior decisions, including Tambunting v. Court of Appeals and Philippine National Bank v. Nepomuceno Productions, Inc., to hold that republication in the form required by Act No. 3135 is necessary for the validity of a postponed extrajudicial sale. The Court rejected petitioner’s waiver argument. It held that posting and publication requirements are mandated not for the mortgagor’s private benefit but for the public at large; thus the requirements are imbued with public policy considerations and cannot be waived by the parties. The Court observed defects in the Agreements to Postpone Sale: they waived only “further republication” and did not address reposting; several agreements were executed and filed after the rescheduled dates so that no timely request to postpone was on the record at those dates; and the agreements were in PNB’s standard form, indicating adhesion and entitling strict construction against the drafter. The Court also found that PNB’s inaction and belated requests to postpone evidenced an abandonment of its petition to foreclose and a lapse of its right to foreclose based on that petition. The Court rejected petitioner’s reliance on Rule 39, Sec. 24, Rules of Court, explaining that the provision governs ordinary execution sales, not extrajudicial foreclosure sales governed by Act No. 3135, and that even if the provision applied it authorizes adjournment only and does not sanction waiver of republication and reposting. The estoppel argument likewise failed because requesting a postponement is distinct from requesting postponement without compliance with statutory notice requirements; a party’s signature to a bank-drafted standard form did not amount to an effective waiver of public requirements. The Court held that estoppel cannot validate acts contrary to law or public policy, citing New Civil Code, Art. 1409. Finally, the Court found that the delay in filing was not unreasonable. Julieta M. Ouano acted promptly upon consultation with counsel, filed an adverse claim, sent demand letters, and instituted suit shortly after discovering the irregularity; consequently laches did not apply, and the

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