Title
Rural Bank of San Mateo, Inc. vs. Intermediate Appellate Court
Case
G.R. No. L-66936
Decision Date
Dec 12, 1986
Auction sale dispute over mortgaged land; petitioner's bid rejected for including non-auctioned machinery; Supreme Court upheld Sheriff's actions, ruling bid improper and registration valid.
rural bank
san mateo
intermediate appellate court
A

Case Summary (G.R. No. L-66936)

Procedural History and Material Dates

In December 1975, petitioner filed a petition for Extra-Judicial Foreclosure and Sale of the land, invoking its real estate mortgage over the parcel under TCT No. T-19927, which was issued in the name of Mariano Manuel. The auction sale was set and conducted on March 8, 1976. The sheriff’s certificate of sale was registered on November 22, 1976. Petitioner filed an initial civil action for annulment in Isabela but it was dismissed without prejudice due to wrong venue, and petitioner later filed the correct case in Quirino on March 17, 1979. The trial court ruled in petitioner’s favor, but the IAC reversed in toto and dismissed the complaint. Petitioner came to the Supreme Court with two assignments of error, and the petition was denied.

Undisputed Facts Concerning the Mortgages and Auction

The IAC found that Mariano Manuel mortgaged the land to petitioner using TCT No. T-19927 as collateral. The trial and appellate records also showed that Mariano Manuel executed, in addition, a chattel mortgage in favor of petitioner for a hand tractor. The IAC recorded the loan obligations: for the real estate mortgage, petitioner’s computation of principal and interest as of December 8, 1975 amounted to P18,597.27; for the chattel mortgage, petitioner’s computation as of December 9, 1975 amounted to P22,997.29; and the total of both obligations was P41,594.56.

The IAC further found that the sheriff’s sale was preceded by the required publication of the Notice of Extra-Judicial Foreclosure and Sale. At the auction on March 8, 1976, petitioner, through its representative, submitted a bid for P41,594.56 for the lot and machinery. Santos L. Pilotin submitted a bid of P10,000.00. Benjamin V. Sanidad, acting as deputy provincial sheriff, awarded the bid to Pilotin for P10,000.00, while petitioner’s bid of P41,594.56 was treated as “lost and unprevailing.” After the auction, petitioner received a copy of the proceedings and later protested the outcome, requesting that the award be reconsidered in view of petitioner’s bid.

The IAC also found that Pilotin caused the registration of the sheriff’s certificate of sale on November 22, 1976, without presenting the owner’s duplicate copy of the title, which petitioner allegedly possessed. Petitioner later litigated for the surrender of the owner’s duplicate but a hearing was held in abeyance due to a prejudicial question raised by petitioner. The annulment case proceeded only after petitioner’s wrong-venue dismissal.

Trial Court’s Decision in Favor of Petitioner

The trial court set aside the auction sale conducted on March 8, 1976 and declared the certificate of sale in favor of Pilotin without force and effect. It ordered the cancellation of Entry No. 4878 annotated at the back of TCT No. T-19927, directed the return of the bid of P10,000.00 to Pilotin, and ordered payment of costs. The dispositive portion thus treated the sheriff’s sale and its registration as infirm in a manner warranting annulment and restitution.

IAC’s Reversal and Its Key Findings

The IAC reversed in toto. It held that all steps required for extra-judicial foreclosure sale of land were followed, and that the sheriff’s authority extended to the sale of the land, not to any machinery. It reasoned that Pilotin’s winning bid reflected a mismatch with petitioner’s bid for “lot and machinery,” and that imposing on the sheriff a duty to clarify or require postponement would be untenable, particularly because petitioner’s representative had the opportunity to explain at the auction.

The IAC also addressed petitioner’s theory that the sheriff should have acted to protect petitioner’s interests by clarifying petitioner’s bid and by informing petitioner of other bids offered before the sale. The IAC rejected this, finding that petitioner’s bid was clear as submitted and that petitioner, through its representative, had the best opportunity to explain its meaning. It also treated as immaterial petitioner’s contention that Pilotin’s winning bid was much less than the obligation secured by the real estate mortgage because the sheriff’s duty was to sell to the highest bidder.

With respect to the alleged irregularity in the registration of the sheriff’s certificate of sale due to the absence of the owner’s duplicate title, the IAC found merit in the appellants’ argument and ruled that the claim failed. It treated the sheriff’s certificate as an involuntary document and concluded that presentation of the owner’s duplicate copy at the time of registration was not required for validity.

On prescription and laches, the IAC held that between the auction sale on March 8, 1976 and registration on November 22, 1976, only about eight months had elapsed, which was hardly sufficient for laches. It also held that from registration to the filing of the complaint on March 19, 1979, less than about three years had elapsed, and thus the claim was not barred. It treated the action as one for injury not based on contract, governed by the four-year prescriptive period under Article 1146, No. 1 of the Civil Code of the Philippines. The IAC concluded that the complaint should be dismissed.

Petitioner’s Assignments of Error

In the Supreme Court, petitioner assigned two errors. First, petitioner argued that the IAC erred in not concluding that respondents Mercado and Sanidad, as sheriff’s officers who conducted the sale, had a duty to protect petitioner’s interest by clarifying petitioner’s bid and informing petitioner of all other bids before the actual sale. Second, petitioner argued that the IAC erred in concluding that petitioner was obligated to foreclose not only the real estate mortgage but also the chattel mortgage.

The Supreme Court’s Disposition

The Supreme Court denied the petition for lack of merit. It affirmed the IAC’s reversal in toto. The Court held that petitioner’s assigned errors did not justify disturbing the IAC’s findings and conclusions.

Legal Basis and Reasoning

On the claimed duty of the sheriff to clarify petitioner’s bid and to inform petitioner of other bids, the Supreme Court ruled that there was nothing to clarify because petitioner’s bid offer clearly showed that it was for the “lot and machinery.” The Court noted that the foreclosure petition sought extra-judicial foreclosure of a parcel of land covered by TCT No. T-19927, and it recorded that the foreclosure petition did not mention that foreclosure of the chattel mortgage was also sought. The sheriff’s authority, therefore, extended only to selling the land, and not any machinery. The Supreme Court also relied on the IAC’s factual determination that the regularity of the extra-judicial foreclosure sale was not disputed by petitioner.

The Supreme Court further held that petitioner’s theory that the law required the sheriff to inform it of all other bids was unsupported. It stated that a reading of Act No. 3135, as amended by Act No. 4118, showed no provision imposing such a duty on the auctioning sheriff. It also reasoned that informing petitioner of other bids was not necessary because petitioner was represented during the auction by Mr. Virgilio Asper, who had a full opportunity to explain to the sheriff the meaning of petitioner’s bid. The Court treated petitioner’s own bid and the bank president’s admissions as confirming that the bid was not divisible in the manner claimed. It quoted the bid notation describing “Manuel Mariano (Lot and Machinery)” in the amount of P41,594.56, and it referred to the admission by petitioner’s president that the bid was for “the lot and machinery,” thereby undermining the assertion that the bid was divisible.

On the second assignment regarding the chattel mortgage, the Supreme Court held that petitioner misread the IAC’s reasoning. It stated that the IAC did not declare that petitioner was under an obligation to foreclose b

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