G.R. No. 85302, 31 March 1989
FACTS:
Juan de Jesus was the owner of a parcel of land. He executed a Special Power of Attorney in favor of his son, Jose de Jesus, to negotiate, mortgage his real property in any bank preferably in the Bicol Savings Bank. By virtue thereof, Jose de Jesus obtained a loan from petitioner bank and executed a deed of mortgage on the real property. Juan de Jesus died at an unknown date. By reason of his failure to pay the loan obligation even during his lifetime, petitioner bank caused the mortgage to be extrajudicially foreclosed. In the subsequent public auction, the mortgaged property was sold to the bank as the highest bidder. Jose de Jesus failed to redeem the property. Nonetheless, Jose still negotiated for the repurchase of the property but was unsuccessful despite offers and counter-offers. He then filed a complaint with the trial court, praying for the annulment of the deed of sale but the complaint was dismissed ruling that the deed became absolute.
Upon appeal, the CA reversed the ruling. CA applied Article 1879 of the Civil Code and stated that since the special power to mortgage granted to Jose de Jesus did not include the power to sell, it was error for the lower Court not to have declared the foreclosure proceedings, and the auction sale held in null and void because the Special Power of Attorney given by Juan de Jesus to Jose de Jesus was merely to mortgage his property, and not to extrajudicially foreclose the mortgage and sell the mortgaged property in the said extrajudicial foreclosure.
ISSUE:
Whether or not the extrajudicial foreclosure sale was valid.
RULING:
Yes. The right of the mortgagee bank to extrajudicially foreclose the mortgage after the death of the mortgagor Juan de Jesus, acting through his attorney-in-fact, Jose de Jesus, did not depend on the authorization in the deed of mortgage executed by the latter. That right existed independently of said stipulation and is clearly recognized in Section 7, Rule 86 of the Rules of Court.
The sale proscribed by a special power to mortgage under Article 1879 is a voluntary and independent contract, and not an auction sale resulting from extrajudicial foreclosure, which is precipitated by the default of a mortgagor. Absent that default, no foreclosure results. The stipulation granting an authority to extrajudicially foreclose a mortgage is an ancillary stipulation supported by the same cause or consideration for the mortgage and forms an essential or inseparable part of that bilateral agreement. The power to foreclose is not an ordinary agency that contemplates exclusively the representation of the principal by the agent but is primarily an authority conferred upon the mortgagee for the latter’s own protection. That power survives the death of the mortgagor. It matters not that the authority to extrajudicially foreclose was granted by an attorney-in fact and not by the mortgagor personally. The stipulation in that regard, although ancillary, forms an essential part of the mortgage contract and is inseparable therefrom.
Petitioner bank, therefore, in effecting the extrajudicial foreclosure of the mortgaged property, merely availed of a right conferred by law. The auction sale that followed in the wake of that foreclosure was but a consequence thereof.
*Case digest by Krishianne Louise C. Labiano, JD – 4, Andres Bonifacio College, SY 2019 – 2020