Sempio v. CA

G.R. No. 115953 (October 28, 1996)

SC nullified DBP's foreclosure on Sempio and Ligot due to lack of notice and legal compliance.

Facts:

The case involves a parcel of land owned by spouses Bernardo Sempio and Genoveva Ligot, located in San Miguel, Bulacan, which was mortgaged to the Development Bank of the Philippines (DBP) to secure a loan of P116,700.00. Following the spouses' failure to meet their loan obligations, DBP extrajudicially foreclosed the mortgage and emerged as the highest bidder at a public auction sale, subsequently receiving a Certificate of Sale.

On March 8, 1990, the Sempio spouses filed a complaint for Annulment of Foreclosure, Reconveyance of Title, and Damages, arguing that they were not notified of the foreclosure sale and that DBP failed to comply with the requirements of Act No. 3135 regarding notice, posting, and publication. They contended that the auction sale was invalid as it was held in a location other than that agreed upon in the mortgage contract and was conducted by the Provincial Sheriff of Nueva Ecija instead of the Provincial Sheriff of Bulacan, where the property was situated.

DBP, in its answer, claimed that legal notices were made and that the Sempio spouses were estopped from questioning the auction's location since they had prior knowledge of it and even sought a postponement of the sale.

During the litigation, Bernardo Sempio passed away, and his heirs substituted him. The pre-trial conference was set multiple times, but DBP's counsel failed to appear on several occasions, leading the court to declare DBP in default and allowing the Sempios to present their evidence ex parte. DBP later filed a motion to set aside the order of default, which the court granted, allowing DBP to present its evidence.

The trial court ultimately ruled in favor of the Sempios, declaring the foreclosure and subsequent sale null and void due to DBP's failure to comply with the stipulations in the mortgage contract and the provisions of Act No. 3135. DBP's motion for reconsideration was denied, prompting DBP to seek relief from the Court of Appeals.

Legal Issues:

  1. Whether the extrajudicial foreclosure and auction sale conducted by DBP were valid given the alleged non-compliance with the requirements of Act No. 3135.
  2. Whether DBP was denied due process due to the trial court's declaration of default.
  3. Whether the Court of Appeals erred in granting DBP's petition for certiorari despite the availability of an appeal.

Arguments:

  • Petitioners (Sempios): They argued that DBP failed to notify them of the foreclosure sale and did not comply with the legal requirements regarding the location of the auction and the sheriff conducting the sale. They maintained that the auction sale was null and void due to these violations and that they were unaware of the foreclosure proceedings, as they continued to make payments on the loan.

  • Respondent (DBP): DBP contended that it complied with the legal requirements for the foreclosure and that the Sempios were estopped from questioning the auction sale's validity since they had prior knowledge of it and sought a postponement. DBP also argued that the trial court's declaration of default was unjust and that it was denied due process.

Court's Decision and Legal Reasoning:

The Supreme Court reversed the Court of Appeals' decision, affirming the trial court's ruling that declared the foreclosure and auction sale null and void. The Court emphasized that the auction sale was conducted in violation of the mortgage contract, which stipulated that the sale should occur in the city or capital of the province where the property was located. The Court also noted that the auction was conducted by the Provincial Sheriff of Nueva Ecija, which was not in accordance with the law, as the sheriff of the province where the property is situated must conduct the sale.

The Court found that DBP had multiple opportunities to present its case but failed to do so, leading to the trial court's declaration of default. The Court ruled that DBP could not claim denial of due process, as it was granted several chances to participate in the proceedings.

Furthermore, the Court clarified that certiorari could not be used as a substitute for an appeal when the latter was available. DBP's failure to pursue an appeal after the trial court's decision indicated that it could not seek relief through certiorari.

Significant Legal Principles Established:

  1. The strict compliance with the stipulations in a mortgage contract is essential for the validity of foreclosure proceedings.
  2. The auction sale must be conducted by the sheriff of the province where the property is located, as mandated by law.
  3. A party cannot claim denial of due process if it has been given multiple opportunities to present its case but fails to do so.
  4. Certiorari cannot be used as a substitute for an appeal when the latter is available, and the two remedies are mutually exclusive.