G.R. No. 138592 - Spouses Tagunicar vs. Lorna Express Credit Corp.

Case Summary (G.R. No. 138592)

Factual Background

On October 19, 1994, petitioners, spouses Elsa and Emerson Tagunicar, secured a loan of P60,000.00 from respondent Lorna Express Credit Corporation. To secure the loan, petitioners executed a deed of mortgage over two unregistered lots with improvements: Lot 14 and Lot 16, Block 175, Zone 4, Upper Bicutan, Taguig, Metro Manila.

When petitioners failed to pay the stipulated monthly installment, they proposed a restructuring scheme. Respondent initially agreed to a restructuring. Petitioners then offered to pay P100,000.00 in cash to cover their loan and accrued interest, but respondent refused to accept the proposed payment. Instead, respondent filed in the RTC of Makati City a complaint for sum of money for P223,057.34, docketed as Civil Case No. 96-777.

On August 7, 1997, the RTC dismissed the complaint due to respondent’s failure to prosecute. In the meantime, respondent, because petitioners could not pay the loan, which had ballooned to P740,254.87, proceeded with extra-judicial foreclosure through the Office of the Sheriff of Taguig, Metro Manila under Act No. 3135, as amended.

The Notice of Auction Sale was issued on September 29, 1997 by the Office of Notary Public Wilfredo T. Albarico of Pasig City. The notice was both posted and published. Specifically, it was posted at three public places in the municipalities of Taguig and Pasig, and it was published once a week for three consecutive weeks—October 4, 11, and 18, 1997—in Bongga, with the auction set for October 24, 1997 at ten o’clock in the morning at the main entrance of the Taguig Municipal Hall.

RTC Prohibition Case and Temporary Restraining Order

Petitioners filed with the RTC, Branch 68, Pasig City, a petition for prohibition with prayer for issuance of a temporary restraining order and a writ of preliminary injunction, docketed as Civil Case No. SCA-1501. Petitioners sought to enjoin Notary Public Wilfredo Albarico and Sheriff Carlos G. Maog from proceeding with the auction sale. Their principal allegations were that the notice was not published in a newspaper of general circulation and that the auction sale was scheduled after only the first publication rather than after the third publication, which they asserted violated Section 3 of Act No. 3135, as amended.

The RTC acted on the petition by issuing a temporary restraining order in an Order dated November 5, 1997. The petition for a writ of preliminary injunction was set for hearing on November 20, 1997. On the same day, the RTC rendered a decision denying the petition for prohibition. Petitioners filed a motion for reconsideration, but the RTC denied it in its Resolution dated December 8, 1997.

Court of Appeals Review

Petitioners then sought review with the Court of Appeals, contesting the validity of the extra-judicial foreclosure sale upheld by the RTC. On November 11, 1998, the Court of Appeals denied the petition and affirmed the trial court’s finding that the notice complied with the publication requirement under Section 3 of Act No. 3135, as amended. The Court of Appeals also held that Bongga was a newspaper of general circulation. Petitioners’ motion for reconsideration was denied on May 4, 1999, in a Resolution issued by the Court of Appeals.

Issues Raised on Certiorari

In the Supreme Court, petitioners assigned two errors. First, they argued that the Court of Appeals erred in holding that the twenty (20) day period for the conduct of the auction sale should be counted from the date the notices were posted in three conspicuous public places, and not from the date of the last publication. Petitioners maintained that because the auction took place on October 24, 1997, it should have been conducted only after the third publication on October 18, 1997.

Second, petitioners argued that the Court of Appeals erred in rejecting their position that the applicable law for extra-judicial foreclosure required observance of Supreme Court Administrative Order No. 3 (Series of 1984), such that foreclosure proceedings conducted before a notary public were null and void.

The Court’s Ruling on the Notice and Publication Requirements

The Supreme Court denied petitioners’ first assigned error. It quoted Section 3 of Act No. 3135, as amended, which provides that notice of sale must be given by posting notices of the sale for not less than twenty days in at least three public places of the municipality or city where the property is situated. The provision further requires that, for properties worth more than four hundred pesos, the notice must also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city.

The Court held that the statutory language was clear and left no room for interpretation. It noted that records showed the notice of auction sale was posted in three public places in Taguig and Pasig, and that the notice was published once a week for three consecutive weeks—October 4, 11, and 18, 1997—in Bongga, which the lower tribunals had found to be a newspaper of general circulation. The Court sustained the conclusion that the mandatory requirements of notice and publication were complied with.

The Court’s Ruling on Notarial Conduct of the Auction

The Supreme Court likewise denied petitioners’ second assigned error. Petitioners invoked Supreme Court Administrative Order No. 3 (Series of 1984) to contend that an auction conducted by a notary public rendered the foreclosure void. The Court rejected the argument by referencing Section 4 of Act No. 3135, as amended. Under Section 4, the sale at public auction is conducted between nine in the morning and four in the afternoon and is conducted under the direction of the sheriff, or a justice or auxiliary justice of the peace (now municipal or auxiliary municipal judge), or a notary public of the municipality, who may collect a fee in addition to expenses. The Court read this as clear statutory authority for notary publics to direct or conduct the public auction.

The Court also pointed to Administrative Matter No. 99-10-05-0, which set out procedural guidance for extrajudicial foreclosure of mortgage. It required that applications for extrajudicial foreclosure

Case Syllabus (G.R. No. 138592)

Parties and Procedural Posture

Elsa Tagunicar and Emerson Tagunicar petitioned for review on certiorari to assail the Court of Appeals Decision dated November 11, 1998 and Resolution dated May 4, 1999 in CA-G.R. SP No. 46378.
Lorna Express Credit Corp. was the respondent in the petition before the Court of Appeals and the respondent before the Supreme Court.
The Court of Appeals affirmed the RTC, Branch 68, Pasig City Decision and Resolution that had upheld the validity of the extra judicial foreclosure sale.
The controversy began when petitioners filed a petition for prohibition with prayer for a temporary restraining order and a writ of preliminary injunction to stop the auction sale.

Key Factual Antecedents

Petitioners Elsa and Emerson Tagunicar obtained a loan of P60,000.00 from Lorna Express Credit Corporation on October 19, 1994.
As security, petitioners executed a deed of mortgage over two unregistered lots with improvements identified as Lot 14 and Lot 16, Block 175, Zone 4, Upper Bicutan, Taguig, Metro Manila.
After petitioners failed to pay the monthly installment, they proposed a restructuring scheme, but the respondent refused to accept petitioners’ later offer of P100,000.00 as cash payment for the loan and accrued interest.
Respondent filed a complaint for sum of money amounting to P223,057.34 before the RTC of Makati City, docketed as Civil Case No. 96-777.
The RTC issued an Order dismissing the complaint on August 7, 1997, due to respondent’s failure to prosecute.
Because of petitioners’ inability to pay, respondent initiated extra judicial foreclosure under Act No. 3135, as amended.
Respondent, through counsel, filed with the Office of the Sheriff of Taguig, Metro Manila an application for extra judicial foreclosure.
On September 29, 1997, the Notice of Auction Sale was issued and was required to be both posted and published.
The notice was posted at three public places in Taguig and Pasig and was published once a week for three consecutive weeks on October 4, 11 and 18, 1997 in Bongga.
The auction sale was scheduled for October 24, 1997 at ten o’clock in the morning at the main entrance of the Taguig Municipal Hall.

Petition for Prohibition and RTC Rulings

Petitioners filed with the RTC, Branch 68, Pasig City a petition for prohibition with prayer for temporary restraining order and writ of preliminary injunction, docketed as Civil Case No. SCA-1501.
Petitioners alleged that the notice of auction sale was defective because it was not published in a newspaper of general circulation.
Petitioners further alleged that the auction sale was set after the first publication and not after the third publication, which they claimed violated Section 3 of Act No. 3135, as amended.
The RTC issued a temporary restraining order on November 5, 1997.
After a hearing, the RTC rendered a Decision denying the petition on November 20, 1997.
The RTC denied petitioners’ motion for reconsideration in a Resolution dated December 8, 1997.

Court of Appeals Review

Petitioners elevated the case to the Court of Appeals to review the RTC’s ruling upholding the validity of the extra judicial foreclosure sale.
The Court of Appeals held that the publication requirement under Section 3 of Act No. 3135, as amended was satisfied.
The Court of Appeals held that Bongga was a newspaper of general circulation.
The Court of Appeals denied petitioners’ petition for review by Decision dated November 11, 1998.
The Court of Appeals denied petitioners’ motion for reconsideration in its Resolution dated May 4, 1999.

Issues Raised on Certiorari

Petitioners argued that the foreclosure sale was void because it was conducted on October 24, 1997, which they claimed was after only the first publication rather than after the third publication.
Petitioners contended that the applicable rule required conducting the auction sale after the completion of the three consecutive weekly publications un