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DIONISIO FIESTAN v. CA

FACTS:

The petitioners in this case, spouses Dionosio Fiestan and Juanita Arconado, mortgaged their land to the Development Bank of the Philippines (DBP) to secure a loan. Due to their failure to make payments, the DBP foreclosed the property and acquired it as the highest bidder in a public auction. The DBP obtained a certificate of sale and the petitioners executed a Deed of Sale in favor of the DBP. However, the petitioners were unable to redeem the property within the specified period, leading to the consolidation of the DBP's title over the land. The DBP subsequently sold the land to Francisco Peria, who obtained a tax declaration and mortgaged the property to the PNB-Vigan Branch.

In response, the petitioners filed a complaint before the RTC seeking the annulment of the sale and mortgage, as well as the cancellation of the transfer certificates of title. However, the RTC dismissed their complaint, a decision which was affirmed by the Court of Appeals.

ISSUES:

  1. Whether the extrajudicial foreclosure sale conducted by the Provincial Sheriff without first effecting a levy on the mortgaged property is null and void.

  2. Whether the subsequent sale of the property by the Development Bank of the Philippines (DBP) to Francisco Peria and the real estate mortgage constituted by Peria in favor of the Philippine National Bank (PNB) are also null and void.

RULING:

  1. The Supreme Court held that the extrajudicial foreclosure sale is valid even without a valid levy on the property. The formalities of a levy are not basic requirements before an extrajudicially foreclosed property can be sold at public auction. The Court distinguished the different kinds of sales under the law and explained that Act No. 3135, as amended, which governs extrajudicial foreclosure sales, does not require a levy as a prerequisite for the sale.

  2. The subsequent sale of the property by DBP to Francisco Peria and the real estate mortgage constituted by Peria in favor of PNB are valid. Since the extrajudicial foreclosure sale is valid, the DBP acquired ownership of the property as the highest bidder, and therefore had the right to sell it. Peria, as the buyer, also acquired legitimate title to the property and can create valid mortgages on it.

PRINCIPLES:

  • The formalities of a levy are not required for the validity of an extrajudicial foreclosure sale.

  • Act No. 3135, as amended, governs extrajudicial foreclosure sales.

  • The buyer in an extrajudicial foreclosure sale acquires ownership of the property and has the right to sell it.

  • A subsequent buyer in a valid extrajudicial foreclosure sale acquires legitimate title to the property and can create valid mortgages on it.