A.M. No. RTJ-93-1031 - Supena vs. Dela Rosa

Case Summary (A.M. No. RTJ-93-1031)

Factual Background

On April 1, 1993, BAID elected to foreclose extrajudicially a real estate mortgage executed by mortgagor PQL Realty Incorporated (PQL) and petitioned the Ex-Officio Sheriff of Manila to proceed with sale. The sheriff issued a Notice of Extrajudicial Sale dated April 21, 1993, scheduling a public auction for May 26, 1993 at the City Hall Building, Manila, and caused publication on May 4, 11, and 19, 1993. On May 25, 1993, PQL filed an ex parte Motion to Hold Auction Sale in Abeyance alleging, inter alia, that the parties agreed to hold foreclosure proceedings in Makati and that a P500,000.00 payment had not been credited. Respondent judge issued an Order on May 25, 1993 holding the auction in abeyance and setting a hearing for June 16, 1993; BAID received a copy of the Order only on May 31, 1993.

Procedural History

Petitioner filed a verified administrative complaint on June 16, 1993 charging respondent with gross ignorance of the law for issuing the May 25, 1993 Order on the basis of an ex parte motion and without notice, hearing, or injunction bond. Respondent filed a comment asserting that the May 25 Order was issued to resolve whether venue was improperly laid in Manila in light of a venue clause in the Loan Agreement designating Makati, and to ascertain the veracity of the P500,000.00 payment claim. The Supreme Court, First Division, resolved the administrative complaint, found respondent guilty of gross ignorance of the law, and imposed disciplinary sanctions.

The Parties' Contentions

Petitioner contended that the Order was an unlawful and indefinite restraining order issued without a proper case, notice, hearing, or injunction bond, and that venue of the extrajudicial sale was governed by Act No. 3135, which required the sale to be held in the province and locality where the property lies; thus respondent had no basis to hold the sale in abeyance. Respondent maintained that he acted to determine whether the venue stipulation in the Loan Agreement — clause 14 providing that actions be instituted in the proper courts of Makati — rendered the scheduled sale in Manila improper, and that he acted also to investigate the mortgagor’s claim regarding the P500,000.00 payment, invoking principles of fair play, equity, and substantial justice.

Issues Presented

The Court addressed whether respondent committed gross ignorance of the law by issuing the May 25, 1993 Order holding the extrajudicial sale in abeyance; whether venue for an extrajudicial foreclosure sale is governed by Act No. 3135, as amended, rather than by the general venue provisions of the Rules of Court; whether a contractual stipulation as to venue in the Loan Agreement could lawfully displace the statutory venue scheme for extrajudicial sale; and whether an ex parte motion to hold an auction in abeyance was a proper remedy.

Ruling of the Supreme Court

The Court held respondent judge administratively liable for gross ignorance of the law for issuing the May 25, 1993 Order and imposed a fine of P2,000.00 to be deducted from any retirement benefits payable to him. The Court concluded that respondent had no valid basis to hold the extrajudicial foreclosure sale in abeyance and that his reliance on the provisions of Rule 4 of the Rules of Court and on the Loan Agreement’s venue clause was mistaken.

Legal Basis and Reasoning

The Court first distinguished the three types of sales: ordinary execution sales under Rule 39, judicial foreclosure sales under Rule 68, and extrajudicial foreclosure sales governed by Act No. 3135, as amended by Act No. 4118. It emphasized that Section 2 of Act No. 3135 expressly provides that an extrajudicial sale cannot be made outside the province where the property is situated and, where the place within the province is stipulated, the sale shall be made in that place or in the municipal building where the property is located. Because the mortgaged parcel lay in Manila, the sale lawfully had to be held in Manila. The Court further observed that the mortgage itself contained a provision specifying the locale for sale under Act No. 3135, reinforcing that venue for extrajudicial sale was fixed by the special law and the parties’ mortgage stipulation consistent with that law. The Court rejected respondent’s reliance on Rule 4 of the Rules of Court because those provisions govern the venue of judicial “actions” and Rule 4 is inapplicable where a specific statute provides otherwise; an extrajudicial foreclosure is not an action commenced in a court of justice but a procedure initiated with the sheriff under Act No. 3135. The Court explained that even if an extrajudicial foreclosure were treated as an action, contractual venue stipulations are generally permissive rather than exclusive under the Polytrade line of cases, citing Polytrade Corporation v. Blanco, Lamis Enterprises v. Lagamon, Western Minolco v. Court of Appeals, and subsequent decisions, and applying the principle Renuntiatio non praesumitur. The Court noted that earlier contrary decisions (notably Bautista v. de Borja and Hoechst Philippines, Inc. v. Torres) were rendered obsolete by more recent jurisprudence. Finally, the Court held that the mortgagor’s remedy, if the P500,000.00 payment was disputed, was to file a proper court action and seek temporary restraining order or injunction with bond; an ex parte Motion to Hold Auction Sale in Abeyance was not a proper process to stop an extrajudicial sale and evidence of a scheme to circumvent proper procedure.

Disciplinary Considerations

The Court found that respondent’s failure to apply the specific statute controlling extrajudi

Case Syllabus (A.M. No. RTJ-93-1031)

Parties and Posture

RODRIGO B. SUPENA filed a verified complaint dated June 16, 1993 charging Judge Rosalio G. de la Rosa with gross ignorance of the law.
BPI Agricultural Development Bank (BAID) acted as mortgagee initiating an extrajudicial foreclosure of a real estate mortgage executed by PQL Realty Incorporated (PQL).
The Ex-Officio Sheriff of Manila issued a Notice of Extrajudicial Sale scheduling a public auction on May 26, 1993 which was published in the People’s Journal Tonight on May 4, 11, and 19, 1993.
Judge Rosalio G. de la Rosa issued an Order dated May 25, 1993 holding the scheduled auction in abeyance upon receipt of an ex-parte Motion to Hold Auction Sale in Abeyance filed by PQL.
BAID received a copy of the respondent’s May 25, 1993 Order only on May 31, 1993 and thereafter filed the present administrative complaint.
The respondent justified the May 25, 1993 Order as a measure to determine the proper venue under a stipulation in the Loan Agreement and to investigate an alleged uncredited payment of PHP 500,000.00.

Key Facts

The mortgaged property subject of the extrajudicial sale was situated on Felix Huertas Street, Sta. Cruz, Manila, and was covered by TCT No. 112644 of the Registry of Deeds of Manila.
The extrajudicial foreclosure was initiated by BAID on April 1, 1993 and the sheriff’s notice fixing May 26, 1993 as auction date was issued on April 21, 1993.
PQL filed an ex-parte motion to hold the auction in abeyance on the eve of the sale, and Judge de la Rosa granted the motion without a formal case, notice, hearing, or injunction bond.
The respondent scheduled a hearing for June 16, 1993 to address venue and the alleged PHP 500,000.00 payment, but the hearing did not transpire as recounted in the record.

Issues

Whether the respondent judge committed gross ignorance of the law in issuing the May 25, 1993 Order holding the extrajudicial auction in abeyance.
Whether venue stipulations in the Loan Agreement or Deed of Real Estate Mortgage could displace the specific venue rule applicable to extrajudicial foreclosure sales under Act No. 3135, as amended by Act No. 4118.
Whether an ex-parte motion to hold an extrajudicial sale in abeyance was a proper remedy to resolve the mortgagor’s claims concerning alleged uncredited payments.

Parties' Contentions

Petitioner contended that the May 25, 1993 Order operated as an indefinite restraining order issued without proper case, notice, hearing, or injunction bond and that venue for an extrajudicial sale is fixed by law and not by stipulation.
Respondent contended that the Order sought to determine whether venue was improperly laid in Manila in light of a Loan Agreement stipulation selecting Makati and to determine the veracity of PQL’s allegation regarding the PHP 500,000.00 payment.

Applicable Law

Act No. 3135, as amended by Act No. 4118 governs extrajudicial foreclosure sales of real estate mortgages and provides that such sales cannot be legally made outside the province in which the property is situated and that stipulated local places control where provided.
Rule 4 and other provisions of the Rules of Court govern venue of actions, while Rule 39 and Rule 68 govern