METROPOLITAN BANK AND TRUST COMPANY v. FRANCISCO WONG[G.R. No. 120859.  June 26, 2001] THIRD DIVISION SANDOVAL-GUTIERREZ, J.:

Precisely, the purpose of the earlier stipulation is to apprise Wong of any action which the Bank might take on the subject property, thus according him the opportunity to safeguard his rights. When the Bank failed to send the notice of foreclosure sale to respondent, he committed a contractual breach sufficient to render the foreclosure sale on November 23, 1981 null and void.

The contention of defendant bank that the erroneous date of the REM as published in the Pagadian Times was merely a clerical error would not cure the fatal defect and invalidity of that published notice.

Sometime in 1976, the Mindanao Grains, Inc. (MGI for brevity), through its officers Wenceslao Buenaventura and Faustino Go, applied for a credit accommodation with the Metropolitan Bank and Trust Company (the Bank) to finance its rice and corn warehousing business.  As a security for such credit accommodation, respondent Francisco Y. Wong (Wong), and his wife Betty C.  Wong executed in favor of the Bank a real estate mortgage over a parcel of land located at Campo 7, Molave, Zamboanga del Sur.

Due to MGI’s failure to pay the obligation secured by the real estate mortgage, The Bank filed an application for extra-judicial foreclosure under Act No. 3135.  A notice of foreclosure sale was published in Pagadian Times once, for three consecutive weeks (May 18-25, 1980, May 26-June 2, 1980 and June 2-8, 1980), setting the auction sale of the mortgaged property on June 5, 1980.  No notice was posted in the municipality or city where the mortgaged property was situated.

As a consequence, MGI, through its president, Simeon Chang (Chang), requested petitioner to postpone the scheduled auction sale from June 5, 1980 to July 7, 1980.  The Bank granted the request. Thereafter, Chang and the Bank agreed that should MGI pay P20,000.00 on or before the scheduled auction sale, the same would be postponed for a period of 60 days.  Chang paid the amount on November 3, 1981.  Despite such payment, Sheriff Deo Bontia proceeded with the auction sale on November 23, 1981.  The Bank was adjudged the sole and highest bidder.  Thus, a certificate of sale was issued to the Bank.  The sale was registered with the Registry of Deeds on the same day.  After the expiration of the one (1) year redemption period, ownership over the property was consolidated and TCT No. T-17853 was correspondingly issued in the name of the Bank.

Wong, unaware of the foregoing developments, applied for a credit accommodation with the Producers Bank of the Philippines (Producers

Bank), using as security his TCT No. 11758. It was only then when he learned that his property was already foreclosed by the Bank and no longer in his name.

Feeling aggrieved, Wong filed with the RTC a complaint for reconveyance and damages against the Bank and the Register of Deeds.  Wong assailed the validity of the extra-judicial foreclosure sale basically on the ground that the Bank did not comply with the requirements of Section 3, Act No. 3135 that “notice shall be given by posting notices of the sale for not less than twenty days in at least three public places of the municipality or city where the property is situated, and if such property is worth more than four hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality and city.”

During the pendency of the case, the Bank sold the disputed property to a certain Betty Ong Yu (Yu). The RTC ruled in favor of Wong which was affirmed by the Court of Appeals. Hence, this petition.

ISSUES: 1. Whether personal notice to Spouses Wong a condition sine qua non to

the validity of the foreclosure proceedings2. Whether the the Bank’s non-compliance with the posting requirement

under Section 3, Act No. 3135 fatal to the validity of the foreclosure proceedings

HELD: Petition

In resolving the first query, we resort to the fundamental principle that a contract is the law between the parties and, that absent any showing that its provisions are wholly or in part contrary to law, morals, good customs, public order, or public policy, it shall be enforced to the letter by the courts.  Section 3, Act No. 3135 reads:

“Sec. 3. Notice shall be given by posting notices of the sale for not less than twenty days in at least three public places of the municipality or city where the property is situated, and if such property is worth more than four hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality and city.”

The Act only requires (1) the posting of notices of sale in three public places, and (2) the publication of the same in a newspaper of general circulation.  Personal notice to the mortgagor is not necessary. Nevertheless, the parties to the mortgage contract are not precluded from exacting additional requirements. In this case, the Bank and

respondent in entering into a contract of real estate mortgage, agreedinter alia:

“all correspondence relative to this mortgage, including demand letters, summonses, subpoenas, or notifications of any judicial or extra-judicial action shall be sent to the MORTGAGOR at 40-42 Aldeguer St. Iloilo City, or at the address that may hereafter be given in writing by the MORTGAGOR to the MORTGAGEE.”

Precisely, the purpose of the foregoing stipulation is to apprise respondent of any action which the Bank might take on the subject property, thus according him the opportunity to safeguard his rights. When the Bank failed to send the notice of foreclosure sale to respondent, he committed a contractual breach sufficient to render the foreclosure sale on November 23, 1981 null and void.

The publication in the case at bar was defective.  Not only did it fail to conform with the requirement that the notice must be published once a week for at least three consecutive weeks in a newspaper of general circulation, but also, there were substantial errors in the notice of sale published in the Pagadian Times as found by the scrutinizing eyes of the trial court, thus:“As maybe noted, the published notice bespeaks of a Deed of Mortgage allegedly executed by Mindanao Grains, Inc., signed by Faustino Go, Francisco Y. Wong, Wensceslao Buenaventura and Betty C. Wong on May 9, 1978 in favor of defendant bank. The evidence, however showed that plaintiff never executed a Real Estate Mortgage (REM) on May 9, 1978.  Neither plaintiff had executed any REM whereby his co-mortgagors are MGI, Faustino Go, Wensceslao Buenaventura and his wife Betty C. Wong.  What plaintiff had actually executed were two REMS dated January 18, 1977 and March 23, 1977 respectively.  In other words the REM adverted to in the published notice is a non-existent document, for there was no REM of the property in question actually executed and dated May 9, 1978.The contention of defendant bank that the erroneous date of the REM as published in the Pagadian Times was merely a clerical error would not cure the fatal defect and invalidity of that published notice. No further evidence was shown that the glaring error was corrected in the subsequent notice of publication.  The court is in accord with the argument of the plaintiff that the order in the date of the REM published in the Pagadian Times is not a harmless error.  It did not give proper notice to the public the correct nature of the REM which cover the properties being sold at public auction.  Considering the sizable amount of the properties being sold, over half a million pesos, a very big amount to businessmen based in the Province of Zamboanga del Sur, nobody would dare to buy such properties without first carefully scrutinizing the pertinent documents, foremost of which is the REM allegedly violated by the plaintiff-mortgagor

which gave rise to the foreclosure proceedings.  Simply stated, serious prospective bidders just backed off upon knowing the non-existence of that REM published in the Pagadian Times.  For who would participate in the auction sale of the properties covered by REMS which are non-existing?  It is not surprising, therefore, to note that the defendant bank was the winning bidder, for the reason that it was the lone bidder.

While the law recognizes the right of a bank to foreclose a mortgage upon the mortgagor’s failure to pay his obligation, it is imperative that such right be exercised according to its clear mandate.  Each and every requirement of the law must be complied with, lest, the valid exercise of the right would end.  It must be remembered that the exercise of a right ends when the right disappears, and it disappears when it is abused especially to the prejudice of others.

JOSE P. TAMBUNTING v. COURT OF APPEALS, ESTANISLAWA PANER, et al

[G.R. No. 135786.  July 23, 2004] SECOND DIVISION AUSTRIA-MARTINEZ, J.:

there is all the more reason that the alias writ of execution issued by the MTC, affirmed by both the RTC and the CA, be declared null and void because the writ purports to execute the alleged non-payment of rentals that accrued after the one-year period agreed upon by the parties and for still occupying the property beyond the one-year period which is not the subject of the original case for ejectment and the compromise agreement therein entered into by the parties. 

In the ejectment case filed by respondent Estanislaw Paner (Paner) against petitioner Jose P. Tambunting (Tambunting), parties entered into a Compromise Agreement. A year later, upon motion for execution filed by Paner, the MTC issued a Writ of Execution.

Tambunting questioned the same in the RTC which the latter dismissed upon subsequent Manifestation and Motion, dated March 9, 1993, filed by petitioner alleging that he had vacated the subject premises.  Objecting to the dismissal of the case, on the ground that she intends to pursue her counterclaim against Tambunting, Paner assailed the dismissal with the CA which affirmed the dismissal order.  During the time that the case was pending and before Tambunting finally vacated the area he was claiming that the MTC order is a patent nullity on the ground that it modified the tenor of the judgment based on the compromise agreement executed by the parties. Tambunting went up to the RTC in a petition for certiorari with prayer for the issuance of a writ of preliminary injunction which was denied. He then filed a motion to show that the MTC Judge committed grave abuse of discretion in the issuance of the alias writ of execution but was dismissed and it was affirmed by the Court of Appeals. Hence, this petition.

ISSUES:

1.)     Whether the Alias Writ of Execution can go beyond the provisions of the Original Writ of Execution and the Compromise Agreement;

2.)     Whether Tambunting will not suffer a grave and irreparable injury from the enforcement of a clearly void Alias Writ of Execution.

HELD: Petition GRANTED

Clearly therefrom, Paner had successfully obtained from the MTC and affirmed by the RTC and the CA the execution of a judgment of the MTC including those unpaid rentals that accrued after the one-year period agreed upon by the parties which, by its very nature, is not covered by the compromise agreement.  Indeed, as aptly claimed by petitioner, the unpaid rentals after the lapse of the one-year period agreed upon by the parties in their compromise agreement, constitute another cause of action which may not be demanded and awarded in the same case where the compromise agreement was approved.  It is for this reason that the Court dismissed the earlier petition for certiorari filed by Paner without prejudice to her taking appropriate action with respect to her compulsory counterclaim for moral damages and attorney’s fees.  The Court refers to an appropriate action, not to a mere motion for execution.

As the Court held in Lao Lim vs. Court of Appeals,[15] “while the compromise agreement may be res judicata as far as the cause of action and issues in the first ejectment case is concerned, any cause of action that arises from the application or violation of the compromise agreement cannot be said to have been settled in said first case.  The compromise agreement was meant to settle, as it did only settle, the first case.  It did not, as it could not, cover any cause of action that might arise thereafter. Thus, claims for damages, whether actual or moral and attorney’s fees are new causes of action that cannot be recovered in Civil Case No. 2794.

Significantly, it is noted that in the first motion for a writ of execution, Paner never claimed that the rentals due during the one-year period agreed upon by the parties in the Compromise Agreement have not been paid by Tambunting; what Paner prayed for was only the eviction of Tambunting from the premises, not any unpaid rentals.  Thus, there is all the more reason that the alias writ of execution issued by the MTC, affirmed by both the RTC and the CA, be declared null and void because the writ purports to execute the alleged non-payment of rentals that accrued after the one-year period agreed upon by the parties and for still occupying the property beyond the one-year period which is not the subject of the original case for ejectment and the compromise agreement therein entered into by the parties.  Indeed, it is for the best

interest of orderly administration of justice that causes of action that arise after the period mentioned in the compromise agreement may be ventilated, awarded and enforced in a proper action for damages for unlawful occupation of the property after January 16, 1992.

In fine, the CA and the RTC, as appellate courts, seriously erred in affirming the patently void alias writ of execution issued by the MTC.

DEVELOPMENT BANK OF THE PHILIPPINES  v. VERONICA AGUIRRE and THE HONORABLE COURT OF APPEALS (Ninth Division)

[G.R. No. 144877.  September 7, 2001] SECOND DIVISIONMENDOZA, J.:

However, although the notice of foreclosure sale was duly published, the sale did not take place as scheduled on September 25, 1985.  Instead, it was held more than two months after the published date of the sale or on January 7, 1986.  This renders the sale void.

In 1980, petitioner DBP granted a loan to Veronica Aguirre (Aguirre) in the amount of P99,500.00, with interest at 14% per annum, payable in 25 years at monthly installments of P1,147.92. To secure the loan, respondent Aguirre executed a mortgage over a 180-square meter lot in Parañaque and issued two promissory notes covering the amount of the loan.  As respondent Aguirre defaulted, DBP took steps in 1982 to foreclose the mortgage. Upon request of respondent Aguirre,  DBP offered to restructure her loan upon payment of P25,333.79, or, in the alternative, upon payment of at least 10% of the arrears coupled with the execution of additional collateral to cover the remaining obligation.  Aguirre was given seven days to accept or reject the offer. As Aguirre did not respond to the offer, DBP proceeded with the foreclosure of the mortgage. Respondent Aguirre made two payments on September 24 and October 10, 1986 in the amounts of P9,000.00 and P22,000.00, respectively, which DBP deducted from respondent’s outstanding balance.

The notice for the foreclosure sale, to be held on September 25, 1985 in the municipal building of the Parañaque, was published in Mabuhay, a newspaper of general circulation in Bulacan and Metro Manila, in its issues of August 25, September 1, and 8, 1985.  For some reason, however, the foreclosure sale scheduled on September 25, 1985 did not take place on the said date but on January 7, 1986, during which DBP was the highest bidder for P99,300.00.  As of the time of the sale, Aguirre’s total outstanding

obligation was P247,740.70.  The certificate of sale was registered in the Office of the Registrar of Parañaque on July 16, 1987.

As Aguirre failed to redeem the property, DBP consolidated its title and advertised the sale of the foreclosed lot through a public auction scheduled on December 6, 1988. On the day of the bidding, Aguirre brought suit against DBP in the Regional Trial Court to enjoin the scheduled auction sale and to annul the extrajudicial sale of January 7, 1986. Aguirre claimed that her loan was not yet due because it had been restructured and that she had not been personally notified of the foreclosure sale. DBP denied Aguirre’s contention that the loan had been restructured and claimed that it had personally notified her of the sale. It contended that Aguirre failed to redeem the property, for which reason it consolidated its title. The RTC ruled in favor of DBP noting that it complied with the publication requirement in the foreclosure of the mortgage in question and that Aguirre failed to overcome the presumption of regularity of performance of official duty with regard to the posting of the notice of sale; that Aguirre had defaulted in the payment of its loan; and that although there were negotiations for the restructuring of Aguirre’s loan, no agreement was reached by the parties. Upon appeal, the Court of Appeals reversed the decision on the ground that DBP’s failure to present proof of posting of the notice of sale rendered the foreclosure proceedings invalid. Hence this petition of DBP.  

ISSUE: Whether CA erred when it declared null and void the extra-judicial proceeding initiated by DBP on the ground that it did not comply with the required proof of posting.

HELD: Petition DENIED

Under Act No. 3135, §3, if the value of the property subject of the foreclosure is more than P400.00, the notice of sale must be posted and published.  The failure to post a notice is not per se a ground for invalidating the sale provided that the notice thereof is duly published in a newspaper of general circulation.  As this Court explained in Olizon v. Court of Appeals:[4]

[N]ewspaper publications have more far-reaching effects than posting on bulletin boards in public places.  There is a greater probability that an announcement or notice published in a newspaper of general circulation, which is distributed nationwide, shall have a readership of more people than that posted in a public bulletin board, no matter how strategic its location may be, which caters only to a limited few. Hence, the publication of the notice of sale in the newspaper of general circulation alone is more than sufficient compliance with the notice-posting requirement of the law.  By such publication, a reasonably wide publicity had been effected such that those interested might attend the public sale, and the purpose of the law had been thereby subserved.

In this case, a notice of extrajudicial foreclosure sale was published on August 25, September 1, and 8, 1985 in a newspaper of general circulation in Metro Manila in accordance with §3.  

However, although the notice of foreclosure sale was duly published, the sale did not take place as scheduled on September 25, 1985.  Instead, it was held more than two months after the published date of the sale or on January 7, 1986.  This renders the sale void.  As held in Masantol Rural Bank, Inc. v. Court of Appeals, in which the foreclosure sale likewise took place several months after the date indicated in the published notice of sale ¾

Act. No. 3135, as amended, which governs the extrajudicial foreclosure of mortgages on real property specifies the following publication requirements:

“Sec. 3. Notice shall be given by posting notices of the sale for not less than twenty days in at least three public places of the municipality or city where the property is situated, and if such property is worth more than four hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city.”

[In this case, n]otice of the first auction sale scheduled for 20 October 1977 had been duly published as required by Section 3 of Act No. 3135, as amended.  No auction sale, however, took place on that day.  The auction sale during which Masantol Bank bought the property as sole bidder was conducted eight (8) months later, on 22 June 1978.  Masantol Bank alleged that there was re-publication of the notice of the 22 June 1978 auction sale; Remedios B. Soriano contends otherwise.

The evidence submitted by Masantol Bank as tending to prove its compliance with the publication requirement in respect of the 22 June 1978 auction sale consisted simply of the testimony of Atty. Venancio Viray and a provisional receipt of payment of the alleged publication expenses signed by a stenographer of the newspaper Economic Monitor.  Remedios Soriano, upon the other hand, presented a solicitor of the Economic Monitor¾where the notice of auction sale was supposed to have been published¾who testified that he had not seen from their records any document indicating that the notice of auction sale was in fact published.

It is settled doctrine that failure to publish the notice of auction sale as required by the statute constitutes a jurisdictional defect which invalidates the sale.  The Court is not persuaded either that the evidence presented by Masantol Bank sufficiently established its compliance with the statutory requirement of notice, or that the testimony of Remedios Soriano’s witness showed non-compliance with such requirement.

The foregoing ruling squarely applies in this case. Although the lack of republication of the notice of sale has not been raised in this case, this Court is possessed of ample power to look into a relevant issue, such as the lack of jurisdiction to hold the foreclosure sale.

Considering that her loan remains unpaid, Aguirre should be ordered to pay her outstanding obligation in the amount of P247,740.70 with interest at the rate stipulated in the contract of loan to be computed as of January 7, 1986, subject to the right of DBP to foreclose the mortgage upon Aguirre’s failure to settle her obligation.

PHILIPPINE NATIONAL BANK v. NEPOMUCENO PRODUCTIONS, INC, et al

[G.R. No. 139479.  December 27, 2002] SECOND DIVISIONAUSTRIA-MARTINEZ, J.:

Nowhere in the records was it shown that respondents purposely sought re-scheduling of the sale without need of republication and reposting of the notice of sale.  To request postponement of the sale is one thing; to request it without need of compliance with the statutory requirements is another.

In addition, the “Agreement to Postpone Sale” signed by respondents was obviously prepared solely by PNB. A scrutiny of the agreement discloses that it is in a ready-made form and the only participation of respondents is to affix or “adhere” their signature thereto.  It therefore partakes of the nature of a contract of adhesion

Petitioner Philippine National Bank (PNB) granted respondents a 4 Million Pesos (P4,000,000.00) credit line to finance the filming of the movie “Pacific Connection.” The loan was secured by mortgages on respondents’ real and personal properties referred to as the Malugay property; the Forbes property; and several motion picture equipments. The credit line was later increased to 7.5 Million Pesos.

Respondents defaulted in their obligation. PNB sought foreclosure of the mortgaged properties with the Sheriff’s Office of Pasig, Rizal.  Initially scheduled on August 12, 1976, the auction sale was re-scheduled several times without need of republication of the notice of sale, as stipulated in the Agreement to Postpone Sale, until finally, the auction sale proceeded on December 20, 1976, with PNB as the highest bidder in the amount of P10,432,776.97.

Aggrieved, respondents filed with the Regional Trial Court an action for annulment of foreclosure sale and damages with injunction. Respondents contended that the foreclosure sale is null and void because: (1) the obligation is yet to mature as there were negotiations for an additional loan amount of P5,000,000.00; (2) lack of publication; (3) the purchase price was grossly inadequate and unconscionable; and (4) the foreclosure proceedings

were initiated by PNB in bad faith. The RTC ruled in favor of the Respondents on the ground that there was lack of publication of the notice of sale. Upon appeal, the Court of Appeal, affirmed the decision in toto. Hence, this petition.

ISSUE: Whether the parties to the mortgage can validly waive the posting and publication requirements mandated by Act No. 3135.

HELD: Petition DENIED

On this score, it is well settled that what Act No. 3135 requires is: (1) the posting of notices of sale in three public places; and, (2) the publication of the same in a newspaper of general circulation. Failure to publish the notice of sale constitutes a jurisdictional defect, which invalidates the sale.

While it is established that rights may be waived, Article 6 of the Civil Code explicitly provides that such waiver is subject to the condition that it is not contrary to law, public order, public policy, morals, or good customs, or prejudicial to a third person with a right recognized by law.

The principal object of a notice of sale in a foreclosure of mortgage is not so much to notify the mortgagor as to inform the public generally of the nature and condition of the property to be sold, and of the time, place, and terms of the sale. Notices are given to secure bidders and prevent a sacrifice of the property. Clearly, the statutory requirements of posting and publication are mandated, not for the mortgagor’s benefit, but for the public or third persons.  In fact, personal notice to the mortgagor in extrajudicial foreclosure proceedings is not even necessary, unless stipulated. As such, it is imbued with public policy considerations and any waiver thereon would be inconsistent with the intent and letter of Act No. 3135.

We also cannot accept PNB’s argument that respondents should be held in estoppel for inducing the former to re-schedule the sale without need of republication and reposting of the notice of sale.

Records show that respondents, indeed, requested for the postponement of the foreclosure sale. That, however, is all that respondents sought.  Nowhere in the records was it shown that respondents purposely sought re-scheduling of the sale without need of republication and reposting of the notice of sale.  To request postponement of the sale is one thing; to request it without need of compliance with the statutory requirements is another.  Respondents, therefore, did not commit any act that would have estopped them from questioning the validity of the foreclosure sale for non-compliance with Act No. 3135.

In addition, the “Agreement to Postpone Sale” signed by respondents was obviously prepared solely by PNB. A scrutiny of the agreement discloses that it is in a ready-made form and the only participation of respondents is to affix or “adhere” their signature thereto.  It therefore partakes of the nature of a contract of adhesion, i.e., one in which one of the contracting parties imposes a ready-made form of contract which the other party may accept or reject, but cannot modify. One party prepares the stipulation in the contract, while the other party merely affixes his signature or his “adhesion” thereto, giving no room for negotiation, and depriving the latter of the opportunity to bargain on equal footing. As such, their terms are construed strictly against the party who drafted it.

ALFREDO M. OUANO v. COURT OF APPEALS, and HEIRS OF JULIETA M. OUANOG.R. No. 129279            March 4, 2003 FIRST DIVISION

AZCUNA, J.:

Publication, therefore, is required to give the foreclosure sale a reasonably wide publicity such that those interested might attend the public sale. To allow the parties to waive this jurisdictional requirement would result in converting into a private sale what ought to be a public auction.

More importantly, the waiver being void for being contrary to the express mandate of Act No. 3135, such cannot be ratified by estoppel. Estoppel cannot give validity to an act that is prohibited by law or one that is against public policy. Neither can the defense of illegality be waived.

Respondent Julieta M. Ouano (Julieta), now deceased, obtained a loan from the Philippine National Bank (PNB) in the amount of P104,280.00. As security for said loan, she executed a real estate mortgage over two parcels of land located at Opao, Mandaue City. She defaulted on her obligation. Subsequently, PNB filed a petition for extrajudicial foreclosure with the City Sheriff.

The sheriff prepared a notice of sale setting the date of public auction of the two parcels of land on December 5, 1980 at 9:00 a.m. to 4:00 p.m. He caused the notice to be published in the Cebu Daily Times, a newspaper of general circulation in Mandaue City, in its issues of November 13, 20 and 27, 1980. He likewise posted copies thereof in public places in Mandaue City and in the place where the properties are located. However, the sale as scheduled and published did not take place as the parties, on four separate dates, executed Agreements to Postpone Sale (Agreements). These Agreements were addressed to the sheriff, requesting the latter to defer the auction sale to another date at the same time and place, "without any further republication of the Notice." On December 3, 1980, two days prior to the date of the sale as published, the parties executed and filed with the sheriff the Agreement to Postpone Sale moving the date of sale from December 5, 1980 to February 5, 1981. On February 5, 1981, however, no sale occurred. Eight days later, the parties executed and filed for the second time a similar agreement moving the date of sale but no sale occurred. In all these postponements, no new notice of sale was issued, nor was there any republication or reposting of notice for the rescheduled dates. Finally, on May 29, 1981, the sheriff conducted the auction sale, awarding the two parcels of land to PNB, the only bidder. He executed a Certificate of Sale certifying the sale for and in consideration of P195, 510.50. As Julieta failed to redeem the properties within the one year period from registration of sale, PNB consolidated its title and conveyed the properties to herein petitioner Alfredo Ouano, the brother of Julieta, under a Deed of Promise to Sell payable in five years.

Thereafter, Julieta sent demand letters to PNB and Alfredo, pointing out irregularities in the foreclosure sale.  Julieta filed a complaint with the Regional Trial Court (RTC) for the nullification of the foreclosure sale. The RTC ruled in favor of Julieta holding that the lack of republication rendered the foreclosure sale void. Upon appeal, the Court of Appeals affirmed the trial court's ruling on the same ground that there was no compliance with the mandatory requirements of posting and publication of notice of sale. Hence, this petition.

ISSUE:

Whether the postponed auction sale of subject properties held on may 29, 1981 upon written agreement of the parties was null and void for lack of publication of notice of sale on the said date although the requirements of publication of notice of sale on the originally intended date [were] fully complied with.

HELD: Petition DENIED.

It is a well-settled rule that statutory provisions governing publication of notice of mortgage foreclosure sales must be strictly complied with, and that even slight deviations therefrom will invalidate the notice and render the sale at least voidable.26 In a number of cases, we have consistently held that failure to advertise a mortgage foreclosure sale in compliance with statutory requirements constitutes a jurisdictional defect invalidating the sale.27Consequently, such defect renders the sale absolutely void and no title passes.28

Petitioner and respondents have absolutely no right to waive the posting and publication requirements of Act No. 3135.

Publication, therefore, is required to give the foreclosure sale a reasonably wide publicity such that those interested might attend the public sale.32 To allow the parties to waive this jurisdictional requirement would result in converting into a private sale what ought to be a public auction.

Moreover, assuming arguendo that the written waivers are valid, we find noticeable flaws that would nevertheless invalidate the foreclosure proceedings. First, the Agreements, as worded, only waived "further republication of the notice of sale." Nothing in the Agreements indicates that the parties likewise dispensed with the reposting of the notices of sale. As there was no reposting of notice of the May 29, 1981 sale, the foreclosure fell short of the requirements of Act No. 3135. Second, we observe that the Agreements were executed and filed with the sheriff several days after each rescheduled date. As stated in the facts, the first agreement was timely filed, two days prior to the originally scheduled sale on December 5, 1980. The second agreement, however, was executed and filed eight days after the rescheduled sale on February 5, 1981. The third agreement was executed and filed ten days after the rescheduled sale on February 28, 1981. The fourth agreement was timely executed, but was filed with the sheriff one month after the rescheduled sale on March 30, 1981. On the rescheduled dates, therefore, no public sale occurred, nor was there any request to postpone filed with the sheriff, except for the first one. In short, the Agreements are clearly defective for having been belatedly executed and filed with the sheriff. The party who may be said to be at fault for this failure, and who should bear the consequences, is no other than PNB, the mortgagee in the case at bar. It is the mortgagee who causes the mortgaged property to be sold, and the date of sale is fixed upon his instruction. The Court has held that the mortgagee's right to foreclose a mortgage must be exercised according to the clear mandate of the law. Every requirement of the law must be complied with, lest the valid exercise of the right would end. PNB's inaction on the scheduled date of sale and belated filing of requests to postpone may be deemed as an abandonment of

the petition to foreclose it filed with the sheriff. Consequently, its right to foreclose the mortgage based on said petition lapsed.

At the outset, distinction should be made of the three different kinds of sales under the law, namely: an ordinary execution sale, a judicial foreclosure sale, and an extrajudicial foreclosure sale. An ordinary execution sale is governed by the pertinent provisions of Rule 39 of the Rules of Court. Rule 68 of the Rules of Court applies in cases of judicial foreclosure sale. On the other hand, Act No. 3135, as amended by Act No. 4118 otherwise known as "An Act to Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real Estate Mortgages" applies in cases of extrajudicial foreclosure sale. A different set of law applies to each class of sale mentioned.37 The cited provision in the Rules of Court hence does not apply to an extrajudicial foreclosure sale.

Moreover, even assuming that the aforecited provision applies, all it authorizes is the adjournment of the execution sale by agreement of the parties. Nowhere does it state that republication and reposting of notice for the postponed sale may be waived. Thus, it cannot, by any means, sanction the waiver in the case at bar.

More importantly, the waiver being void for being contrary to the express mandate of Act No. 3135, such cannot be ratified by estoppel. Estoppel cannot give validity to an act that is prohibited by law or one that is against public policy. Neither can the defense of illegality be waived.

GLOBAL HOLIDAY OWNERSHIP CO. v. METROPOLITAN BANK & TRUST CO. G.R. No. 184081 19 June 2009 THIRD DIVISION YNARES-SANTIAGO, J.:

Thus, we restate: the general rule is that personal notice to the mortgagor in extrajudicial foreclosure proceedings is not necessary, and posting and publication will suffice.  Sec. 3 of Act 3135 governing extra-judicial foreclosure of real estate mortgages, as amended by Act 4118, requires only posting of the notice of sale in three public places and the publication of that notice in a newspaper of general circulation.  The exception is when the parties stipulate that personal notice is additionally required to be given the mortgagor.  Failure to abide by the general rule, or its exception, renders the foreclosure proceedings null and void.

Global Holiday Ownership Corporation (Global) obtained on various dates several loans from Metrobank in the total principal amount of P5,700,000.00 secured by a real estate mortgage over a condominium unit under Condominium Certificate of Title No. 29774 of the Registry

of Deeds for Makati City. Upon default in the payment of the loan, Global requested for a restructuring of its loan in the total principal amount of P6,375,000.00 as of September 3, 2001. (Metrobank) acceded to its request.

 Global defaulted in the payment of its loan, it requested for another restructuring which was likewise granted by the bank. Hence, a Debt Settlement Agreement was executed by the parties detailing a schedule of payment of the principal obligation of P6,375,000.00 within a 3-year period as well he interest on the principal, payable quarterly based on the prevailing market rates beginning December 2, 2001 and every 90 days thereafter, without need of notice or demand, the full payment of which shall be on or before August 29, 2002. Global failed to comply with the terms and conditions of the Debt Settlement Agreement. Despite demands made upon it for payment on December 22, 2005 and May 18, 2006, it still failed and refused to pay Metrobank the loans which are all past due. Metrobank requested the Clerk of Court to cause the sale at public auction pursuant to Act 3135 as amended. The sale was scheduled on July 10, 2006 at 10:00 a.m. per notice of sheriff’s sale. Four (4) days before the date of the auction sale or on July 6, 2006, Global filed the instant complaint for annulment of extrajudicial foreclosure proceedings. Metrobank stresses that in view of Global’s admission that it failed to pay its loan, the latter has definitely no right in esse to be protected as it was clearly provided in the deed of real estate mortgage and in the Debt Settlement Agreement that the mortgage can be foreclosed by Metrobank in case of default.

  The appellate court found that Global had no legal right to an

injunction; that Metrobank had the undeniable right to foreclose on the real estate mortgage in view of Global’s default in the settlement of its obligation to the bank; that Global had not shown any legal justification to enjoin it from enforcing this right; that it is not required that Global be personally informed of the foreclosure of its mortgaged property, since personal notice is not necessary; the applicable law – Act 3135 – requires only notice by publication and posting. Hence, this petition.

 ISSUE: Whether Metrobank’s failure to serve personal notice upon Global of the foreclosure proceedings renders the same null and void 

HELD: Petition GRANTED

 First, is personal notice to respondent a condition sine qua non to the validity of the foreclosure proceedings? and, second, is petitioner’s

non-compliance with the posting requirement under Section 3, Act No. 3135 fatal to the validity of the foreclosure proceedings?

  The Act only requires (1) the posting of notices of sale in three

public places, and (2) the publication of the same in a newspaper of general circulation.  Personal notice to the mortgagor is not necessary.  Nevertheless, the parties to the mortgage contract are not precluded from exacting additional requirements. In this case, petitioner and respondent in entering into a contract of real estate mortgage, agreed inter alia:

 “all correspondence relative to this mortgage, including

demand letters, summonses, subpoenas, or notifications of any judicial or extra-judicial action shall be sent to the MORTGAGOR at 40-42 Aldeguer St., Iloilo City, or at the address that may hereafter be given in writing by the MORTGAGOR to the MORTGAGEE.”

 Precisely, the purpose of the foregoing stipulation is to

apprise respondent of any action which petitioner might take on the subject property, thus according him the opportunity to safeguard his rights.  When petitioner failed to send the notice of foreclosure sale to respondent, he committed a contractual breach sufficient to render the foreclosure sale on November 23, 1981 null and void. (Emphasis supplied)

 We do not see how a different outcome could have been expected in

the present case which involves the same contractual provision as that in the abovementioned case – not to mention the same mortgagee.  In cases subsequent to Wong, we sustained the same principle: that personal notice to the mortgagor in extrajudicial foreclosure proceedings is not necessary, unless stipulated.

  The business of banking is imbued with public interest.  It carries with

it a fiduciary duty that requires high standards of integrity and performance.  Our decision in Wong was not a mere declaration of what the law is on a given point; its underlying message is our acknowledgment that banks must play a compassionate role amidst these changing times.  That in the wake of huge profits being made from their operations, all that is required is for them to inform the borrower of the impending loss of his property when their covenants require it.  This is a valid argument when viewed within the context of the principle that any attempt to vest ownership of the encumbered property in the mortgagee without proper observance of the requirements of law is against public policy.

 

Paragraph 14 is clear that “all correspondence relative to this mortgage, including demand letters, summonses, subpoenas or notifications of any judicial or extrajudicial actions shall be sent to the mortgagor at the address hereinabove given or at the address that may hereafter be given in writing by (it).”  It must be recalled that the principal object of a notice of sale in a foreclosure of mortgage is not so much to notify the mortgagor as to inform the public generally of the nature and condition of the property to be sold, and of the time, place, and terms of the sale.  Notices are given to secure bidders and prevent a sacrifice of the property. Clearly, the statutory requirements of posting and publication are mandated, not for the mortgagor’s benefit, but for the public or third persons.[15]  Taking this into context, the stipulation in the mortgage agreement requiring notice to the mortgagor of extrajudicial actions to be taken operates as a contractual undertaking for the latter’s sole benefit, such that the mortgagee is mandated to strictly abide by the same.

 While the above stipulation points to a place (which, notably

was clearly stated) where all correspondence relative to the mortgage are to be sent, it does not specifically require that personal notice of foreclosure sale be given to petitioner. The said paragraph 10 presumes that a specific correspondence is made but does not definitely require which correspondence must be made. It would, therefore, be erroneous to say that notice of extrajudicial foreclosure to the petitioners is required for such is not the clear intention of the parties, and, thus, may not be pursued.

 Thus, we restate: the general rule is that personal notice to the

mortgagor in extrajudicial foreclosure proceedings is not necessary, and posting and publication will suffice.  Sec. 3 of Act 3135 governing extra-judicial foreclosure of real estate mortgages, as amended by Act 4118, requires only posting of the notice of sale in three public places and the publication of that notice in a newspaper of general circulation.  The exception is when the parties stipulate that personal notice is additionally required to be given the mortgagor.  Failure to abide by the general rule, or its exception, renders the foreclosure proceedings null and void.

 Global’s right to be furnished with personal notice of the extrajudicial

foreclosure proceedings has been established.  Thus, to continue with the extrajudicial sale without proper notice would render the proceedings null and void; injunction is proper to protect Global’s rights and to prevent unnecessary injury that would result from the conduct of an irregular sale.  It is beyond question that a writ of preliminary injunction is issued to prevent an extrajudicial foreclosure, upon a clear showing of a violation of the mortgagor’s unmistakable right. The trial court was thus correct in granting an injunction.