HEIRS OF JOSE DE LARA, SR. VS. RURAL BANK OF JAEN

 HEIRS OF HERMINIO MARQUEZ represented by ALMA MARQUEZ vs. HEIRS OF EPIFANIA HERNANDEZ         

G.R. No. 236826. March 23, 2022

FACTS:

Jose, a farmer-beneficiary under P.D. 27 obtained a loan from respondent bank secured by a mortgage over the subject land. He failed to pay his obligation hence the mortgage was foreclosed. Respondent bank acquired the land through a public auction and the sale was registered with the Register of Deeds. A year passed but Jose nor his heirs redeemed the land thus respondent bank executed an Affidavit of Consolidation of ownership. Respondent filed a petition for cancellation of the TCT of the land before the PARAD which granted the petition. On appeal to the DARAB, the ruling was reversed. The CA reinstated the PARAD decision.

 

ISSUE:

Whether the foreclosure sale of the land to respondent bank is valid.

RULING:

No. The SC held that the facts of the case impel the Court to invalidate the foreclosure sale to respondent bank. Records show that the EP covering the subject land was issued in favor of Jose on November 20, 1998. At the time the foreclosure sale was held on February 27, 2003, only four years had passed from the time he acquired the said land in his name. While respondent bank's right to foreclose the mortgage over the subject land properly had its basis on Jose's failure to pay the loan, it arose within the 10-year period during which Jose was supposed to keep the subject land to his name. There was, therefore, a factual impediment to respondent's action to foreclose the mortgage, and a legal imperative to await the lapse of the 10-year retention period before pursuing his cause against Jose. Nonetheless, the foreclosure sale proceeded. This violated the provisions of PD 27 and RA 6657, as amended by RA 9700. Agreements that violate law and public policy are inexistent and void from the beginning. The Civil Code declares so, viz.: ART. 1409. The following contracts are inexistent and void from the beginning: (1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order, or public policy. These contracts cannot be ratified. Neither can the right to set up the defense of illegality be waived. All said, the sale of the subject land by foreclosure to herein bank being violative of the law and public policy embodied in PD 27 and RA 6657 as amended by RA 9700, is void ab initio. The extrajudicial foreclosure of real estate mortgage over the subject land was declared by the Supreme Court VOID AB INITIO.