PHILIPPINE SUPREME
COURT
DECISIONS
FIRST DIVISION
DARIA GONZALES
VDA.
DE TOLEDO,
Petitioner,
G.R.
No.
149465
December 8, 2003
-versus-
ANTONIO TOLEDO,
LELITA
TOLEDO,
MAURO SUMULONG,
OLIVA SUMULONG,
PILAR TEVES, AS
PRESIDENT AND MANAGER,
RURAL BANK OF CARMEN
(CEBU), INC.,
Respondents.
D E C I S I O N
YNARES-SANTIAGO, J.:chanroblesvirtuallawlibrary
The property under
litigation is a residential land with improvements thereon, consisting
of 167 square meters, situated in Poblacion, Danao City, and covered by
Tax Declaration No. 34951.[1]chanrobles virtuallaw libraryred
On December 26, 1973,
petitioner Daria Gonzales Vda. de Toledo executed a Special Power of
Attorney
authorizing her stepson, Antonio Toledo, to obtain loan from a bank and
mortgage the subject property as security therefor.[2]
On January 4, 1974, Spouses Antonio and Lelita Toledo obtained a loan
from
Rural Bank of Carmen (Cebu) Inc. in the amount of P2,467.80 secured by
a real estate mortgage constituted on subject property.[3]chanrobles virtuallaw libraryred
The Toledo spouses failed
to pay their loan to the Bank despite several demands.[4]
Hence, on July 6, 1981, the Bank extrajudicially foreclosed the
mortgage.
Accordingly, the property was sold at public auction, with the Bank as
the sole and highest bidder. Correspondingly, the Bank was issued a
Certificate
of Sale[5]
upon satisfaction of the obligations of spouses Toledo in the amount of
P5,014.00, including interests, penalty, attorney's fees and
miscellaneous
expenses.[6]
The sale was registered with the Register of Deeds of Danao City on
September
23, 1981. chanrobles virtuallaw libraryred
Spouses Toledo failed
to redeem the subject property, thus the Bank caused the consolidation
of ownership and the execution of the final deed of sale in its favor
on
November 16, 1983.[7]
On August 23, 1985, the Bank sold the said parcel of land to Spouses
Mauro
and Oliva Sumulong.[8]
However, petitioner remained on the property together with spouses
Toledo.chanrobles virtuallaw libraryred
On February 18, 1986,
petitioner filed a complaint against the Spouses Toledo and the Rural
Bank
of Carmen (Cebu), Inc., and the Spouses Sumulong, for Declaration of
Nullity
of Extrajudicial Foreclosure of Mortgage and Sales, Reconveyance with
Damages
before the Regional Trial Court of Cebu, Branch XXV, docketed as Civil
Case No. DNA-48.[9]
She alleged that the Toledo spouses preconceived a malicious, sinister
and scheming idea to induce her to execute a Special Power of Attorney
to mortgage her property to the Bank and, thereafter, connived with the
Sumulongs in foreclosing the mortgage. It appears that previously, or
on
November 18, 1985, petitioner deposited P5,200.00 with the Bank in
order
to redeem the subject property.[10]chanrobles virtuallaw libraryred
On June 11, 1993, the
trial court rendered a decision[11]
declaring the extra-judicial foreclosure proceedings of the subject
property
a total nullity. Consequently, the Certificate of Sale, Consolidation
of
Ownership and Final Deed of Sale and the Deed of Absolute Sale executed
by the Bank in favor of the Sumulong spouses were declared null and
void,
thus:[12]chanrobles virtuallaw libraryred
WHEREFORE,
premises considered, judgment is hereby rendered declaring the
Extra-Judicial
Foreclosure proceedings of plaintiff's property a total nullity,
consequently,
the Certificate of Sale (Exh. "7-Bank"), Consolidation of Ownership and
Final Deed of Sale (Exh. "8"-Bank), and the Deed of Sale executed by
defendant
Rural Bank of Carmen in favor of defendants spouses Mauro Sumulong and
Oliva Sumulong (Exh. "9"-Bank) are hereby declared null and void, and
for
which reason, the defendants spouses Mauro and Oliva Sumulong are
hereby
directed to reconvey the property subject of the foreclosure sale and
the
Deed of Absolute Sale (Exh. "9"-Bank) in favor of the plaintiff by
directing
the defendant Rural Bank of Carmen to return to said defendants-spouses
the amount of P5,000.00 as consideration thereof and, in turn,
accepting
the deposit of P5,200.00 made by plaintiff with said defendant Bank
(Exh.
"A") and returning the balance of P200.00 to the plaintiff; ordering
the
City Assessor of Danao City to cancel Tax Declaration No. 02391 (Exh.
"2"-Sumulong)
in the name of Spouses Oliva Sumulong and Mauro Sumulong and issue
another
tax declaration, in lieu thereof, in the name of plaintiff Daria G.
Toledo;
ordering finally, the defendants to pay, jointly and severally, to the
plaintiff the sums of P20,000.00 as moral damages, P20,000.00 as
exemplary
damages and P10,000.00 as attorney's fees, and to pay the costs of the
suit.chanrobles virtuallaw libraryred
The counterclaims are
hereby dismissed.[13]chanrobles virtuallaw libraryred
Defendants appealed to
the Court of Appeals which rendered a decision on July 24, 2001, the
dispositive
portion of which reads:chanroblesvirtuallawlibrary
WHEREFORE,
premises above considered and pursuant to applicable law and
jurisprudence
on the matter and evidence on hand, judgment is hereby rendered
granting
the appeal. The assailed decision of court a quo is hereby REVERSED and
SET ASIDE and a new one entered dismissing the complaint filed before
the
trial court by plaintiff-appellee against defendants-appellants in
Civil
Case No. DNA-448. No costs.[14]chanrobles virtuallaw libraryred
Hence, the instant
petition
for review on the following assignment of errors:chanroblesvirtuallawlibrarychanrobles virtuallaw libraryred
1. THE
COURT
OF APPEALS APPLIED WRONGLY THE PROVISIONS OF SECTION 3, ACT 3135 AS
AMENDED
TO THE SITUATION PREVAILING IN THE CASE. chanrobles virtuallaw libraryred
2. THE COURT OF
APPEALS
WRONGLY APPLIED SECTION 5, R.A. NO. 720 AS AMENDED TO THE SITUATION
PREVAILING
IN THE CASE.
chanrobles virtuallaw libraryred
3. THE COURT OF
APPEALS
ERRED IN DISREGARDING THE FAILURE OF RESPONDENT RURAL BANK OF CARMEN,
CEBU
TO COMPLY WITH SEC. 3305.1 OF THE CENTRAL BANK MANUAL OF REGULATIONS
BOOK
III.chanrobles virtuallaw libraryred
4. THE COURT OF
APPEALS
ERRED IN NOT CONSIDERING THAT THE DEED OF ABSOLUTE SALE EXECUTED BY THE
PRESIDENT/MANAGER OF RESPONDENT RURAL BANK OF CARMEN, CEBU IN FAVOR OF
RESPONDENTS SPOUSES MAURO AND OLIVA SUMULONG WAS NULL AND VOID BECAUSE
IT DID NOT SHOW THAT ITS BOARD OF DIRECTORS GAVE HER AUTHORITY TO DO SO.[15]chanrobles virtuallaw libraryred
chanrobles virtuallaw libraryred
We find merit in the
petition.
At the outset, we noted
that for failure to submit proof of service,[16]
petitioner's motion for extension of thirty (30) days from August 15,
2001
within which to file the petition was denied. Thus, when petitioner
filed
the instant petition on September 13, 2001, it was filed out of time.
This
procedural lapse on the part of petitioner would have warranted the
outright
dismissal of the petition. However, in Sebastian and Cardenas v.
Morales,
et al.,[17]
we held:chanroblesvirtuallawlibrary
chanrobles virtuallaw libraryred
Under Rule 1, Section
6 of the 1997
Rules of Civil Procedure, liberal construction of the Rules is the
controlling principle to effect substantial justice. Thus, litigations
should, as much as possible, be decided on their merits and not on
technicalities.
This does not mean, however that procedural rules are to be ignored or
disdained at will to suit the convenience of a party. Procedural law
has
its own rationale in the orderly administration of justice, namely, to
ensure the effective enforcement of substantive rights by providing for
a system that obviates arbitrariness, caprice, despotism, or
whimsically
in the settlement of disputes. Hence, it is a mistake to suppose that
substantive
law and procedural law are contradictory to each other, or as often
suggested,
that enforcement of procedural rules should never be permitted if it
would
result in prejudice to the substantive rights of the litigants.chanrobles virtuallaw libraryred
x x x Hence, rules
of procedure must be faithfully followed except only when for
persuasive
reasons, they may be relaxed to relieve a litigant of an injustice not
commensurate with his failure to comply with the prescribed
procedure
x x xchanrobles virtuallaw libraryred
In the instant case,
we recognize the need to relax the rules of procedure to relieve the
petitioner
of an injustice not commensurate with her failure to comply with the
rules.
For this reason, the case shall be decided on the merits.chanrobles virtuallaw libraryred
Section 3, Act 3135,
as amended provides:chanrobles virtual law library
Notice shall be given
by posting notices of sale for not less than twenty days in at least
three
public places in the municipality where the property is situated, and
if
such property is worth more than four hundred pesos, such notice shall
be published once a week for at least three consecutive weeks in a
newspaper
of general circulation in the municipality or city. (Emphasis
Supplied)
chanrobles virtuallaw libraryred
Corollary thereto, Section
5 of Republic Act No. 720 as amended by Republic Act No. 5939[18]
reads:chanroblesvirtuallawlibrarychanrobles virtuallaw libraryred
chanrobles virtuallaw libraryred
The
foreclosure
of mortgages covering loans granted by rural banks shall be exempt from
the publication in newspapers where the total amount of the loan,
including
interests due and unpaid, does not exceed three thousand pesos. It
shall
be sufficient publication in such cases if the notices of foreclosure
are
posted in at least three of the most conspicuous public places in the
municipality
and barrio where the land mortgaged is situated during the period of
sixty
days immediately preceding the public auction. Proof of publication as
required herein shall be accomplished by affidavit of the sheriff or
officer
conducting the foreclosure sale and shall be attached with the records
of the case: x x x (Emphasis supplied) chanrobles virtuallaw libraryred
chanrobles virtuallaw libraryred
The foregoing
provision,
in exempting foreclosures by rural banks from the publication
requirement
when the total amount of the loan including interests due and unpaid
does
not exceed three thousand pesos (P3,000.00), clearly refers to the
total
amount of the loan along with interests and not merely the balance
thereof.
chanrobles virtuallaw libraryred
At the time of
foreclosure
in the case at bar, the total amount of petitioners' loan including
interests
due and unpaid with the Bank was P4,652.80.[19]
Clearly, therefore, publication of notices of auction sale in
newspapers
of general circulation in the city or municipality where the property
is
situated was necessary.
chanrobles virtuallaw libraryred
Undisputedly, the Bank
did not publish the notices of auction sale in a newspaper of general
circulation.
It merely posted the notices of auction sale in three conspicuous
places
including where the property was located. Considering that the auction
sale of the subject property to the Bank is void, no valid title passed
in its favor. Consequently, the sale of the same property to spouses
Sumulong
is also a nullity. Nemo dat quod non habet. One cannot give what one
does
not have.[20]chanrobles virtuallaw libraryred
In Lucena and Parales
v. Court of Appeals, Rural Bank of Naujan, et al.,[21]
this Court ruled that failure to comply with statutory requirements as
to publication of notice of auction sale constitutes a jurisdictional
defect
which invalidates the sale. Even slight deviations therefrom are not
allowed. chanrobles virtuallaw libraryred
The Sumulong spouses,
nevertheless, argue that assuming the Bank's title over the contested
property
is a nullity, they were nevertheless innocent purchasers for value who
have better rights than the petitioner. One is considered an innocent
purchaser
who acquired the property for a valuable consideration not knowing that
the
title of the vendor or grantor was null and void.[22]chanrobles virtuallaw libraryred
The evidence on record
shows that the Sumulong spouses are not purchasers in good faith.
Well-settled
is the rule that the person who asserts the status of a purchaser in
good
faith and for value has the burden of proving such assertion.[23]
The Sumulongs failed to discharge this burden.chanrobles virtuallaw libraryred
It appears that the
Sumulongs did not make any reasonable inquiry regarding the status of
the
land in question, despite being aware that the property was still in
the
possession of the petitioner and respondent spouses Toledo. Indeed,
petitioner
and spouses Toledo occupied the same house on the subject property. The
Sumulongs did not exert any effort to communicate directly with
petitioner.chanrobles virtuallaw libraryred
All that the Sumulongs
did was to rely on the title of the Bank. They, however, had notice
that
possession of the property was with a person other than the vendor
bank.
It was thus incumbent upon them to look beyond the title to the subject
property and make the necessary inquiries. This they neglected to do.
chanrobles virtuallaw libraryred
A purchaser cannot
close his eyes to facts which should put a reasonable man upon his
guard,
and then claim that he acted in good faith under the belief that there
was no defect in the title of the vendor. His mere refusal to believe
that
such defect exists, or his willful closing of his eyes to the
possibility
of the existence of a defect in his vendor's title, will not make him
an
innocent purchaser for value, if it afterwards develops that the title
was in fact defective, and it appears that he had such notice of the
defect
as would have led to its discovery had he acted with that measure of
precaution
which may reasonably be required of a prudent man in a like situation.[24]chanrobles virtuallaw libraryred
In De Guzman, Jr. v.
Court of Appeals,[25]
we held that the failure of appellees to take the ordinary precautions
which a prudent man would have taken under the circumstances, specially
in buying a piece of land in the actual, visible and public possession
of another person, other than the vendor, constitutes gross negligence
amounting to bad faith. One who purchases real property which is in the
actual possession of another should, at least make some inquiry
concerning
the right of those in possession. The actual possession by a person
other
than the vendor should, at least put the purchaser upon inquiry. He can
scarcely, in the absence of such inquiry, be regarded as a bona fide
purchaser
as against such possessors.[26]chanrobles virtuallaw libraryred
Having arrived at the
conclusion that the petitioner is still entitled to reconveyance of the
subject property, we find it no longer necessary to pass upon the third
and fourth issues raised by the petitioner.chanrobles virtuallaw libraryred
All told, the auction
sale of the subject property is null and void for failure of Rural Bank
of Carmen (Cebu) Inc. to comply with the statutory requirements on
publication
of the notices of sale. The Bank did not acquire title over the said
property
and it transferred no valid title to Spouses Mauro and Oliva Sumulong
who
were not bona fide purchasers thereof. The property not having passed
to
innocent purchasers for value, reconveyance is still available.[27]
chanrobles virtuallaw libraryred
With respect to the
damages awarded, the trial court correctly held that there is no
convincing
proof to support petitioner's allegation that she incurred P3,000.00 as
actual damages. In determining actual damages, the court cannot rely on
mere assertions, speculations, conjectures or guesswork but must depend
on competent evidence and on the best evidence obtainable regarding the
actual loss.[28]
Likewise, the trial court soundly exercised its discretion when it
awarded
moral damages in the amount of P20,000.00, based on the circumstances
of
the case at bar.[29]
However, there is no factual basis for the award of exemplary damages.
Petitioner failed to establish that the Bank colluded with the Toledo
spouses
and the Sumulong spouses in depriving her of the parcel of land in
question.chanrobles virtuallaw libraryred
WHEREFORE, the petition
is GRANTED. The July 24, 2001 Decision of the Court of Appeals is
REVERSED
and SET ASIDE. The July 11, 1993 Decision of the Regional Trial Court
of
Danao City, Branch 25 in Civil Case No. DNA-48, which found the
extra-judicial
foreclosure proceedings of the subject property a total nullity and
declared
the Certificate of Sale, Consolidation of Ownership and Final Deed of
Sale
and the Deed of Absolute Sale executed by the Rural Bank of Carmen
(Cebu)
Inc. in favor of spouses Mauro and Oliva Sumulong null and void, is
REINSTATED
with the MODIFICATION that the award of exemplary damages in favor of
the
petitioner is DELETED for lack of factual basis.chanrobles virtuallaw libraryred
SO ORDERED. chanrobles virtuallaw libraryred
Davide, Jr., C.J.,
Panganiban, Carpio and Azcuna, JJ., concur.chanrobles virtuallaw libraryred
____________________________
Endnotes:chanroblesvirtuallawlibrary
[1]
Records, p. 11.chanrobles virtuallaw libraryred
[2]
Id., p. 12.chanrobles virtuallaw libraryred
[3]
Id., p. 13.chanrobles virtuallaw libraryred
[4]
Annexes "L-N," Rollo, pp. 127, 129 and 131.chanrobles virtuallaw libraryred
[5]
Records, p. 14.chanrobles virtuallaw libraryred
[6]
Id., p. 398.chanrobles virtuallaw libraryred
[7]
Id., p. 391.chanrobles virtuallaw libraryred
[8]
Id., p. 393.chanrobles virtuallaw libraryred
[9]
Id., pp. 1–10.chanrobles virtuallaw libraryred
[10]
Id., p. 394.chanrobles virtuallaw libraryred
[11]
Penned by Judge Jose P. Soberano, Jr.chanrobles virtuallaw libraryred
[12]
Records, p. 427.chanrobles virtuallaw libraryred
[13]
Rollo, pp. 98–99.chanrobles virtuallaw libraryred
[14]
Id., pp. 111–112.chanrobles virtuallaw libraryred
[15]
Id., p. 21.chanrobles virtuallaw libraryred
[16]
Specifically the affidavit of the party serving the petition which is
required
under Section 13, Rule 13, 1997 Rules of Civil Procedure.chan
robles virtual law librarychan robles virtual law library
[17]
G.R. No. 141116, 17 February 2003.chanrobles virtuallaw libraryred
[18]
An Act Providing for the Creation, Organization and Operation of Rural
Banks, and for other purposes.chanrobles virtuallaw libraryred
[19]
P2,467.80 as principal, interest of P300.00 and past due interest of
P1,815.00.chanrobles virtuallaw libraryred
[20]
Philippine Bank of Communications v. Court of Appeals, et al., G.R.
120109,
366 SCRA 324 (2001).chanrobles virtuallaw libraryred
[21]
G.R. No. L-77468, 313 SCRA 47 (1999), see also Borja v. Addison, 44
Phil.
895 (1922) and Campomanes v. Bartolome, et al., 38 Phil. 808 (1918).chanrobles virtuallaw libraryred
[22]
River v. Moran, 48 Phil. 836 (1926).chanrobles virtuallaw libraryred
[23]
Mathay v. Court of Appeals, G.R. No. 115788, 295 SCRA 556, 575 (1998).chanrobles virtuallaw libraryred
[24]
Leung Yee v. Strong Machinery Co., 37 Phil. 644, 651 (1918).chanrobles virtuallaw libraryred
[25]
G.R. No. L-46435, 156 SCRA 701 (1987).chanrobles virtuallaw libraryred
[26]
Conspecto v. Fruto, 31 Phil. 144 (1915).chanrobles virtuallaw libraryred
[27]
Clemente v. Lukban, 53 Phil. 93 (1929).chanrobles virtuallaw libraryred
[28]
Barzaga v. Court of Appeals, G.R. No. 115129, 268 SCRA 105, 113–114.chanrobles virtuallaw libraryred
[29]
Singson v. Court of Appeals, 282 SCRA 149, 163.chanrobles virtuallaw libraryred
chanroblesvirtualawlibrary
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