Robles vs. Yapcinco

In a judicial foreclosure, non-registration of the certificate of sale is not fatal, and the absence of judicial confirmation does not invalidate the foreclosure or give the mortgagor or successors a right to reclaim the property where they were bound by the foreclosure and failed to exercise the equity of redemption. The purchaser may retain the property despite the lack of confirmation, although title is not fully vested until confirmation.

Rolando Robles claims the land through Apolinario Cruz, the purchaser at the judicial foreclosure sale, while the Yapcinco heirs claim it as part of Fernando Yapcinco’s estate. The dispute concerns the effect under the Rules of Court then in force of the absence of registration and judicial confirmation of a judicial foreclosure sale, and the scope of the mortgagor’s equity of redemption.

The land in dispute was originally registered under TCT No. 20458 of the Registry of Deeds of Tarlac in the name of Fernando F. Yapcinco, married to Maxima Alcedo. On May 4, 1944, Yapcinco constituted a mortgage on the property in favor of Jose C. Marcelo to secure an obligation, and on October 24, 1944, Marcelo transferred his rights as mortgagee to Apolinario Cruz. When Yapcinco did not pay, Cruz brought an action for judicial foreclosure in the CFI of Tarlac. Yapcinco died during the pendency of the action and was substituted by Patrocinio Y. Kelly, administratrix of his estate. On July 27, 1956, the CFI rendered judgment ordering Kelly to pay Cruz ₱6,000 plus 8% interest per annum from May 4, 1944, and, if the obligation remained unpaid after 90 days from finality, ordering the mortgaged property sold at public auction.

At the public auction held on March 18, 1959, Apolinario Cruz was adjudged the highest bidder, and a certificate of absolute sale was issued in his favor. He took possession of the property in due course but did not register the certificate of sale, and no judicial confirmation of the sale was issued. On September 5, 1972, Cruz donated the property to his grandchildren Carlos C. de la Rosa, Apolinario Bernabe, Ferdinand Cruz, and petitioner Rolando Robles.

On August 29, 1991, Apolinario Bernabe falsified a deed of absolute sale making it appear that Yapcinco had sold the property to him, Ma. Teresita Escopete, Orlando Santos, and Oliver Puzon. The Register of Deeds cancelled Yapcinco’s TCT No. 20458 and issued TCT No. 243719 in their names as co-vendees. The sale was annotated on TCT No. 20458, and another instrument dated August 28, 1991 was annotated on the same title purportedly releasing and cancelling the mortgage; both instruments were annotated on February 11, 1992.

On February 3, 1993, Carlos C. de la Rosa and Ferdinand Cruz, the other donees, filed a complaint for nullification of the contract of sale, cancellation of title, and reconveyance against Apolinario Bernabe and his co-vendees, but the case was not aggressively pursued because the parties were first-degree cousins. On January 2, 2000, the respondents, all heirs of the Spouses Yapcinco, sued Apolinario Bernabe and his co-vendees in the RTC of Tarlac City for annulment of TCT No. 243719, document restoration, reconveyance, and damages. They claimed that although the property had been mortgaged, the mortgage had not been foreclosed judicially or extrajudicially; that the property was released from the mortgage per Entry No. 32-2182 in the Memorandum of Incumbrances; and that the deed of absolute sale between Fernando Yapcinco and Bernabe, et al. was void because the Spouses Yapcinco had already been dead as of the date of the sale. The defendants were declared in default.

On September 13, 2001, the RTC, Branch 64, in Tarlac City declared TCT No. 243719 and the deed of absolute sale dated August 28, 1991 null and void, cancelled TCT No. 243719, and restored TCT No. 20458 in Yapcinco’s name. On December 17, 2002, Rolando Robles filed Civil Case No. 9436 against the respondents for nullification of document, cancellation of title, reconveyance, and damages. He averred that the Yapcinco heirs had acted in bad faith in causing the issuance of TCT No. 354061 because they knew the property had long been excluded from Yapcinco’s estate by the CFI decision of July 27, 1956, which the CA affirmed on April 25, 1958; that a certificate of absolute sale had been issued in Cruz’s name as early as 1959; and that he had a vested right under the September 5, 1972 deed of donation. The respondents countered that TCT No. 20458 contained an annotation that the property had been released from the mortgage by an instrument dated August 28, 2001, and that the certificate of absolute sale and the deed of donation were not inscribed in TCT No. 20458.

The RTC found that the respondents could not claim ignorance that the property was no longer part of Fernando Yapcinco’s estate; one of them had substituted the late Fernando Yapcinco in the judicial foreclosure proceedings and even appealed the adverse decision to the CA; they could not argue that they were not bound by the foreclosure because registration of the certificate of sale was not a requisite for the validity of the foreclosure as between the parties; and they did not redeem the property until the present. The CA, on the other hand, found that Patrocinio Yapcinco Kelly, the administratrix of the estate, and respondent Patrocinio B. Yapcinco were two different persons, and held that Patrocinio Yapcinco’s knowledge of Cruz’s interest was not equivalent to registration.

• Non-Registration of Certificate of Sale: Petitioner argued that the CA erred in holding that Apolinario Cruz never acquired title merely because the certificate of sale was not registered; the rules on registration apply only to extrajudicial foreclosure, where registration is the reckoning point for redemption, and in judicial foreclosure registration is superfluous.
• Binding Effect of Foreclosure: Petitioner maintained that the respondents were aware of the auction sale and participated in the foreclosure proceedings, never exercised their equity of redemption, and as successors-in-interest of the mortgagor were bound by the final foreclosure judgment; whether Patrocinio Yapcinco Kelly and Patrocinio Yapcinco were the same person was irrelevant.
• Laches and Possession: Petitioner argued that the respondents’ claims were barred by laches because the Cruz family had occupied the property for more than 40 years from the foreclosure sale and the respondents should not be allowed to recover the lot on the basis of non-registration.
• Indefeasibility of Torrens Title: Petitioner argued that the doctrine of indefeasibility of Torrens title is not absolute and should yield to the right of another person based on equitable principles of laches.

• No Valid Transfer: Respondents maintained that they were lawfully entitled to the property because there was no registration of the certificate of sale and no confirmation from the court; even the deed of donation executed by Apolinario Cruz was not registered; the issue was whether there was a valid transfer of ownership.
• Release of Mortgage: Respondents countered that the release of mortgage was validly registered in the Registry of Deeds of Tarlac on February 11, 1992, rendering the title free from liens and encumbrances, so they had the right to transfer the property in their names.
• Lack of Knowledge of Foreclosure: Respondents insisted that the RTC erred in finding that they were aware of the foreclosure proceedings and that they could not be bound by a foreclosure of which they had no knowledge.

• Registration of the Certificate of Sale: Whether the CA erred in holding that Apolinario Cruz, as purchaser in a judicial foreclosure sale, never acquired title merely because the certificate of sale was not registered.
• Judicial Confirmation of the Sale: Whether the absence of judicial confirmation of the foreclosure sale invalidated the sale or gave the mortgagor’s successors-in-interest the right to reclaim the property.
• Better Right to the Property: Whether the respondents, as heirs and successors-in-interest of the mortgagor who failed to exercise the equity of redemption, had a better right to the property than Apolinario Cruz and his successors-in-interest.
• Laches: Whether the respondents’ claim was barred by laches in view of the Cruz family’s more than 40 years of possession.

• Registration of the Certificate of Sale: No. Registration of the certificate of sale is required only in extrajudicial foreclosure, where it marks the reckoning point for redemption; in judicial foreclosure it is superfluous because only the equity of redemption is granted, except in mortgages with banking institutions.
• Judicial Confirmation of the Sale: No. The lack of judicial confirmation prevented title from being transferred to Apolinario Cruz, but it did not invalidate the foreclosure or the sale and did not give the mortgagor or respondents a right to take back the property.
• Better Right to the Property: No. Respondents had no better right; as successors-in-interest of the mortgagor, they were bound by the foreclosure and sale, and their failure to exercise the equity of redemption divested them of the property.
• Laches: Yes. The SC held that, given the failure to redeem and the unquestioned possession by Cruz and his successors since the foreclosure sale, the respondents could not assert any better right to the property.

• Registration of the Certificate of Sale: The SC clarified that Apolinario Cruz’s failure to register the certificate of sale was of no consequence. Registration of the sale is required only in extrajudicial foreclosure because the date of registration is the reckoning point for the exercise of the right of redemption. In judicial foreclosure, registration is superfluous because only the equity of redemption is granted to the mortgagor, except in mortgages with banking institutions. The equity of redemption is the right of the defendant mortgagor to extinguish the mortgage and retain ownership of the property by paying the secured debt within the 90-day period after the judgment becomes final, or even after the foreclosure sale but prior to the confirmation of the sale. It was therefore patent error for the CA to declare that Cruz’s failure to register the certificate of absolute sale prevented the period of redemption from commencing to run.

• Judicial Confirmation of the Sale: The applicable rule on March 18, 1959, the date of the foreclosure sale, was Section 3, Rule 70 of the Rules of Court, which provided that the sale shall not affect the rights of persons holding prior incumbrances and that, when confirmed by an order of the court, it shall operate to divest the rights of all the parties to the action and vest their rights in the purchaser, subject to such rights of redemption as may be allowed by law. The records showed that no judicial confirmation of the sale was made despite the lapse of more than 40 years since the sale, so title was not fully vested in Apolinario Cruz. The SC, however, refused to deny the petition on that ground alone. Procedural rules are not to be belittled, but litigation is not a game of technicalities; courts may relax even mandatory rules to serve justice. The real issue was who between the parties had the better right to the property. The lack of judicial confirmation only prevented title from being transferred to Cruz; it did not give rise to any right in favor of the mortgagor or the respondents to take back property already validly sold at public auction, and it did not invalidate the foreclosure proceedings. To hold otherwise would render the judicial foreclosure and sale nugatory and disturb judicial stability.

• Better Right to the Property: Fernando Yapcinco did not pay his obligation, and his default led to the judicial foreclosure action in which he actively participated and was substituted by the administratrix of his estate. The decision in the foreclosure action ordered the public sale of the mortgaged property. Because the estate failed to exercise the equity of redemption, the property was sold at public auction and Apolinario Cruz was declared the highest bidder. The respondents, as successors-in-interest of Fernando Yapcinco, were fully bound by that decision and by the result of the foreclosure sale. Whether Patrocinio Yapcinco Kelly, the administratrix, and respondent Patrocinio Yapcinco were the same person was not necessary to resolve; even if they were not, both were bound as successors-in-interest of Fernando Yapcinco. Although the respondents admitted the existence of the mortgage, they denied knowledge of its foreclosure while relying on the entry dated February 11, 1992 concerning the release of mortgage inscribed on TCT No. 20458. The SC found this duplicity unacceptable. As heirs and successors-in-interest, they could not repudiate the foreclosure sale and its consequences. Given their position on the lack of judicial confirmation, they should have extinguished the mortgage by exercising their equity of redemption through paying the secured debt; they did not, and instead sought annulment of TCT No. 243719 and caused the issuance of another title in their name. Even assuming there was no foreclosure, the legal obligation to pay the mortgage indebtedness in favor of Apolinario Cruz devolved on them and the estate, and they could not rely on the release entry because there was no showing that they or the estate had settled the obligation. The petitioner did not explain Cruz’s failure to secure judicial confirmation, but reminded that Cruz and his successors had been in actual, notorious, public and uninterrupted possession of the property from the time of the foreclosure sale until the present. The non-transfer of title notwithstanding, Cruz as purchaser should not be deprived of the property purchased at the foreclosure sale. With the respondents fully aware of the mortgage, legally bound by the judicial foreclosure and public sale, and in view of the unquestioned possession by Cruz and his successors, the respondents could not assert any better right to the property. Consequently, Fernando Yapcinco and the respondents were divested of their right in the property because they did not duly exercise the equity of redemption decreed in the trial court’s decision; with Yapcinco having ceased to be the owner of the property sold, the property was taken out of the mass of the assets of Yapcinco upon the expiration of the equity of redemption.

• Laches: The SC resolved the laches issue through its better-right analysis. The respondents never exercised the equity of redemption, and Apolinario Cruz and his successors-in-interest had actual, notorious, public and uninterrupted possession of the property from the time of the foreclosure sale until the present. It would be the height of inequity to still permit the respondents to regain the property on the basis alone of the lack of judicial confirmation of the sale.

• Non-Registration of Certificate of Sale in Judicial Foreclosure — In judicial foreclosure, the certificate of sale need not be registered; registration is required only in extrajudicial foreclosure because the date of registration is the reckoning point for the right of redemption. The SC applied this to hold that Cruz’s failure to register the 1959 certificate did not prevent him from acquiring the property or entitle the Yapcinco heirs to reclaim it, except that title was not fully vested without confirmation.
• Equity of Redemption — The right of the defendant mortgagor to extinguish the mortgage and retain ownership by paying the secured debt within 90 days after the judgment becomes final, or even after the foreclosure sale but before confirmation. The SC held that the Yapcinco heirs failed to exercise this right, so they were divested of the property upon its expiration.
• Effect of Lack of Judicial Confirmation — Judicial confirmation operates to divest the rights of all parties to the action and vest them in the purchaser, subject to redemption. Without confirmation, title is not fully transferred to the purchaser, but the foreclosure and sale remain valid; the mortgagor and successors acquire no right to take back the property already sold.
• Successors-in-Interest Bound by Foreclosure — Heirs and successors-in-interest of the mortgagor are bound by the final judgment in the judicial foreclosure and by the resulting public sale; they cannot repudiate the sale and its consequences. The SC applied this even without deciding whether the administratrix and respondent Patrocinio Yapcinco were the same person.
• Liberal Construction of Procedural Rules — Rules of procedure are to be liberally construed to promote a just, speedy, and inexpensive disposition; courts may relax even mandatory rules to serve justice. The SC invoked this to avoid denying relief solely because Cruz never obtained judicial confirmation and to resolve the real issue of who had the better right.
• Failure to Redeem and Long Possession — A mortgagor’s successors who fail to redeem cannot reclaim property sold at a valid judicial foreclosure sale merely because the purchaser did not obtain judicial confirmation, especially where the purchaser and his successors have possessed the property publicly and uninterruptedly for more than 40 years. The SC applied this to deny the Yapcinco heirs’ claim.

• "The registration of the sale is required only in extrajudicial foreclosure sale because the date of the registration is the reckoning point for the exercise of the right of redemption. In contrast, the registration of the sale is superfluous in judicial foreclosure because only the equity of redemption is granted to the mortgagor, except in mortgages with banking institutions." — This distinguishes judicial from extrajudicial foreclosure and explains why Cruz’s non-registration did not defeat his purchase.
• "Being the heirs and successors-in-interest of the late Fernando F. Yapcinco, they could not repudiate the foreclosure sale and its consequences, and escape such consequences that bound and concluded their predecessor-in-interest whose shoes they only stepped into." — This makes the Yapcinco heirs bound by the foreclosure despite their claim of lack of knowledge.
• "It would be the height of inequity to still permit them to regain the property on the basis alone of the lack of judicial confirmation of the sale." — This captures the SC’s equitable reason for not letting the heirs reclaim the property after failing to redeem.

• Barnes vs. Padilla, G.R. No. 160753, June 28, 2005, 461 SCRA 533, 539 — Cited as authority for the liberal construction of procedural rules and the relaxation of even mandatory rules to serve the ends of justice.
• DKC Holdings Corporation vs. Court of Appeals, G.R. No. 118248, April 5, 2000, 329 SCRA 666, 674 — Cited to support the rule that heirs and successors-in-interest are bound by the foreclosure sale and its consequences.

• Section 3, Rule 70, Rules of Court (1940) — Provided that a foreclosure sale shall not affect prior incumbrances and that, when confirmed by court order, it shall operate to divest the rights of all parties to the action and vest them in the purchaser, subject to redemption. The SC applied it to hold that without confirmation, title was not fully vested in Cruz, but the sale and foreclosure remained valid.
• Section 6, Rule 1, Rules of Court — Requires liberal construction of the Rules to promote a just, speedy, and inexpensive disposition. The SC invoked it to relax procedural rules and resolve the real issue of better right rather than deny the petition solely for lack of judicial confirmation.
• Section 2, Rule 68, Rules of Court (1997) — Gives the defendant-mortgagor a period of not less than 90 days nor more than 120 days from entry of judgment to exercise the equity of redemption. The SC used the equity of redemption concept to explain that the Yapcinco heirs’ failure to pay the secured debt divested them.
• Section 2, Rule 70, Rules of Court (1940) — Under the old rule, the equity of redemption was available within a period not less than 90 days from service of the order. The SC referred to this historical rule in defining the redemption period applicable to the judicial foreclosure.