G.R. No. 189669 - Pilipinas Shell Petroleum Corp. vs. Romars International Gases Corp.

Case Summary (G.R. No. 189669)

Key Dates and Chronology (pertinent factual and procedural dates)

Sale by Joaquin to Pastora: November 5, 1951.
PNB P16,000 crop loan and mortgage: November 12, 1951.
Special Power of Attorney and P5,000 loan/mortgage: September 19–30, 1952 (execution/mortgage documents).
Notice of extrajudicial sale published and posted: July–August 1954; auction: August 19, 1954; redemption period expired August 19, 1955.
Offers to purchase and extension requests: August–December 1955; extension by bank’s BOD to December 31, 1955.
Deposit by Valenton and deeds of sale/confirmation: January 3–6, 1956.
Complaint filed by petitioners: August 1, 1958.
Trial court dismissal: January 27, 1968.
Court of Appeals decision affirming dismissal: March 24, 1975.

Procedural History and Relief Sought

Petitioners sought review by the Supreme Court via Rule 45 from the Court of Appeals’ affirmance of the trial court’s dismissal of their complaint and dismissal of defendants’ counterclaim. Petitioners asserted multiple grounds contesting the extrajudicial foreclosure, the validity of the sale and title transfers, the alleged merger of two mortgages into one indivisible obligation, defects in publication/posting and conduct of the sale, unconscionable price, pactum commissorium, and denial of leave to amend pleadings.

Factual Background (essential facts the courts relied upon)

Pastora was mortgagor of three parcels (TCT No. NT-10423) under a P16,000 mortgage (Nov. 12, 1951). A separate P5,000 loan secured by a distinct mortgage was procured under a Special Power of Attorney executed Sept. 19/30, 1952. Extrajudicial foreclosure procedures were initiated for the P5,000 mortgage, with notice published and posted in mid–1954; auction occurred Aug. 19, 1954, with PNB as sole bidder (P5,524.40). Redemption period lapsed and petitioners sought extensions and made offers, but failed to redeem by the extended deadline. PNB acquired title through foreclosure, later sold to Valenton (deeds and registry transfer executed Jan. 1956). Petitioners filed suit in 1958 challenging these transactions.

Issues Presented

The principal legal issues framed in the petition were: (1) whether publication and posting requirements for the extrajudicial foreclosure were met; (2) whether the auction sale was void due to being held on a declared holiday, lack of sheriff authority, or unconscionably low price; (3) whether the two mortgages merged into a single indivisible mortgage such that foreclosure of the P5,000 portion could not vest title; (4) whether PNB’s failure to foreclose the P16,000 mortgage and subsequent sale constituted pactum commissorium; (5) whether PNB could validly transfer title to Valenton despite an annotated but allegedly unforeclosed mortgage; and (6) procedural questions including denial of leave to amend.

Burden of Proof on Notice, Publication and Posting; Court’s Findings

The Supreme Court reiterated that compliance with statutory publication and posting requirements for extrajudicial foreclosure is a question of fact and that the party challenging compliance bears the burden of proof. The Court accepted the editor’s affidavit of publication, supported by testimony (e.g., letter carrier, local official) and a certificate of posting and deputy sheriff’s testimony, as sufficient prima facie proof of publication and posting. The petitioners failed to overcome that prima facie showing; reliance on prior naturalization cases concerning the paper’s status as a paper of general circulation (Tan Ten Koc, Tan Sen, Tan Khe Shing) was inapposite because the purpose of publication in extrajudicial foreclosure differs from that in naturalization proceedings.

Authority of the Sheriff, Sale on Holiday, and Adequacy of Price

The Court treated the sheriff’s authority and related contentions as factual matters resolved against petitioners by the trial court and Court of Appeals based on the Minutes of Auction Sale and Certificate of Sale. Regarding the sale date falling on a declared holiday, the Court held that Section 31 of the Revised Administrative Code (pretermission for acts falling on holidays) does not automatically invalidate an auction fixed by an officer on a given day; the statute’s pretermission rule applies to days or periods fixed by law, not to officer-fixed dates for auction sales. On the adequacy of price, the Court reaffirmed the settled rule that alleged inadequacy is immaterial where a right of redemption exists — a low price does not vitiate sale because redemption remains available to the mortgagor.

Estoppel and Ratification by Seeking Extension of Redemption

The Court applied estoppel principles: petitioners’ request for an extension to redeem (and the bank’s grant of extension by board resolution) amounted to a ratification or affirmation of the transaction and the foreclosure process. By seeking and accepting the period of extension and entering into negotiated arrangements, petitioners were estopped from later challenging the regularity of the foreclosure sale.

Merger Doctrine and Extinguishment of Mortgage Obligations

The Court examined the merger doctrine (Art. 1275, New Civil Code): merger extinguishes an obligation when the characters of creditor and debtor are united in the same person. The Court accepted the factual finding that the P16,000 mortgage and the P5,000 mortgage were separate instruments. Because PNB, as purchaser at the auction of the property subject to one mortgage, was also the principal creditor on the other mortgage, the purchase by PNB resulted in the merger of creditor and debtor rights in the person of PNB. That merger operated to extinguish the mortgagor’s encumbrance rights as to the senior mortgage; annotations were thereby effectively discharged by operation of law according to the Court’s reasoning and the factual findings of the lower courts.

Choice to Foreclose, Pactum Commissorium, and Mortgagee’s Prerogative

The Court rejected petitioners’ characterization of PNB’s conduct as pactum commissorium. Pactum commissorium refers to an agreement that ownership vests automatically in the mortgagee without foreclosure; here PNB executed an extrajudicial foreclosure and conducted an a

Case Syllabus (G.R. No. 189669)

Case Caption, Procedural Posture and Relief Sought

G.R. No. L-41621; Decision of the Supreme Court penned by Justice Purisima; reported at 362 Phil. 616; dated February 18, 1999.
Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court seeking review of the Court of Appeals decision (dated March 24, 1975) which affirmed the dismissal by the Court of First Instance of Cabanatuan City, Branch III (Decision dated January 27, 1968) in Civil Case No. 2950.
Plaintiffs-appellants (petitioners before the Supreme Court): Pastora Valmonte, Jose de Leon, and Joaquin Valmonte.
Defendants-appellees/respondents: The Court of Appeals, Philippine National Bank (PNB), Artemio Valenton, and Areopagita J. Joson.
Relief sought by petitioners: reversal of the rulings below, annulment of extrajudicial foreclosure and subsequent transfer of title, and restoration of petitioners’ rights in the subject properties.

Chronology and Core Facts

November 5, 1951: Joaquin Valmonte sold three parcels (total 70.6 hectares) in Jaen, Nueva Ecija to his daughter Pastora (Exhs. 31-Bank, 1-Valenton).
November 12, 1951: Pastora obtained a crop loan of P16,000.00 from PNB and executed a Real Estate Mortgage in favor of PNB covering same parcels (Exh. J; TCT No. NT-10423 in Pastora’s name — Exh. Q-1).
September 19, 1952: Pastora (single then) executed a Special Power of Attorney in favor of Virginia V. del Castelo to borrow P5,000.00 from PNB and mortgage same parcels (Exh. A). A P5,000 loan payable on demand was granted and Virginia Castelo executed a Real Estate Mortgage (Exhs. 6 and 7-Bank, and B).
June 14, 1954: PNB sent a “Notice of Extra-Judicial Sale of Mortgaged Properties” to the Provincial Sheriff of Nueva Ecija for publication (Exh. 39-Bank).
June 20, 1954: Pastora executed a Deed of Sale back to her father Joaquin with express condition acknowledging the Philippine National Bank mortgage and stating arrangements must be made before the deed becomes operative (Exh. 2-Valenton).
July 19, 26 and August 2, 1954: Notice of extrajudicial sale (for Aug. 19, 1954) published in the newspaper Nueva Era (Exh. 56-Bank).
Posting: Notice posted in three public and conspicuous places in Cabanatuan City and three in Jaen, Nueva Ecija (Exh. 38-Bank).
August 19, 1954: Auction conducted; PNB was sole bidder and purchased for P5,524.40; Minutes of Auction Sale and Certificate of Sale issued by Provincial Sheriff Ex-Officio (Exhs. C, 55 and 54-Bank).
Redemption period expired August 19, 1955 (Exh. 65-Bank).
August 31, 1955: Jose Talens offered to buy properties for P27,000.00 (P4,000 down; balance in five yearly amortizations) (Exh. 40-Bank).
September 28, 1955: Artemio Valenton offered to purchase for P35,000.00 payable upon contract and deposited P1,000.00 earnest money (Exh. 41-Bank; 7-Valenton).
October 10, 1955: Joaquin Valmonte requested additional time to repurchase properties for P35,000.00 (Exh. 33-Bank; 8-Valenton).
PNB’s Board of Directors, by Resolution No. 1096, extended the redemption period to December 31, 1955 for appellants to purchase in cash the amount of the bank’s total claim.
September 7, 1955: PNB’s total claims amounted to P26,926.38, including the P16,000.00 loan (Exhs. 66-Bank and 9-Valenton; J; 43-Bank and 58-Valenton).
December 7, 1955: Pastora designated Joaquin as attorney-in-fact to repurchase land (Exh. H).
Appellants failed to purchase by December 31, 1955.
January 3, 1956: Artemio Valenton deposited balance of P34,000.00, accepted by PNB (Exhs. 47-Bank and 62-B (Valenton)).
January 4, 1956: PNB executed Deed of Absolute Sale to Valenton and Affidavit of Consolidation of Ownership (Exhs. 47-Bank, 11-Valenton, 47-C (Bank), and D-1).
January 5, 1956: To permit registration, PNB, as attorney-in-fact of the mortgagor under SPA dated Sept. 30, 1952 (Exh. B), executed a Deed of Sale in its favor (Exh. E).
January 6, 1956: PNB executed “Deed of Confirmation of Sale” asserting that certificate of title then was TCT No. NT-18899 in bank’s name (Exh. F).
Valenton obtained cancellation of TCT No. NT-18899 and issuance of TCT No. NT-18901 in his name (Exhs. S and S-1).
August 1, 1958: Petitioners filed the present complaint. After trial, trial court dismissed complaint (January 27, 1968). Court of Appeals affirmed (March 24, 1975). Petitioners elevated matter to the Supreme Court.

Claims and Assignments of Error Advanced by Petitioners

A: Petitioners allege deprivation of property without due process of law.
B: The Court of Appeals erred in treating the two mortgages (P16,000 and P5,000) as separate and distinct and in characterizing one as junior and the other as senior; petitioners assert the mortgages merged into an indivisible single mortgage so foreclosure of P5,000 alone could not vest title in PNB.
C: Court of Appeals erred by not holding that the two mortgages were mutually and immediately merged upon execution of the later document (Sept. 30, 1952), creating an inseparable mortgage.
D: Court of Appeals wrongly sanctioned PNB’s transfer of Pastora’s property to Valenton, which petitioners contend was not validly foreclosed.
E: The extrajudicial foreclosure of P5,000 was null and void due to defects in publication, posting, date, place, authority of the sheriff, and reality of sale.
F: Trial court erred in denying petitioners’ motion for leave to amend complaint to conform to evidence and to admit third amended complaint.

Standard of Review and Scope of the Supreme Court’s Examination

The Supreme Court reiterated that it is not a trier of facts; Rule 45 appeals are generally confined to questions of law. Pure questions of fact are ordinarily not proper subjects of review under certiorari (citing Far East Bank & Trust Company vs. Court of Appeals, 256 SCRA 15).
Findings of fact by trial court, affirmed by the Court of Appeals, are binding unless clearly shown to be without evidentiary support.

Court’s Analysis — Publication and Posting of Notice of Sale

Legal position: Compliance with statutory publication