SECTION 1 G.R. No. 169617 April 4, 2007 HEIRS OF ZOILO ESPIRITU AND PRIMITIVA ESPIRITU, Petitioners, vs.

SPOUSES MAXIMO LANDRITO AND PAZ LANDRITO, Represented by ZOILO LANDRITO, as their Attorney-in-Fact, Respondents. DECISION CHICO-NAZARIO, J.: This is a petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the Decision of the Court of Appeals,1 dated 31 August 2005, reversing the Decision rendered by the trial court on 13 December 1995. The Court of Appeals, in its assailed Decision, fixed the interest rate of the loan between the parties at 12% per annum, and ordered the Spouses Zoilo and Primitiva Espiritu (Spouses Espiritu) to reconvey the subject property to the Spouses Landrito conditioned upon the payment of the loan. Petitioners DULCE, BENLINDA, EDWIN, CYNTHIA, AND MIRIAM ANDREA, all surnamed ESPIRITU, are the only children and legal heirs of the Spouses Zoilo and Primitiva Espiritu, who both died during the pendency of the case before the Honorable Court of Appeals. 2 Respondents Spouses Maximo and Paz Landrito (Spouses Landrito) are herein represented by their son and attorney-in-fact, Zoilo Landrito. 3 On 5 September 1986, Spouses Landrito loaned from the Spouses Espiritu the amount of P350,000.00 payable in three months. To secure the loan, the Spouses Landrito executed a real estate mortgage over a five hundred forty (540) square meter lot located in Alabang, Muntinlupa, covered by Transfer Certificate of Title No. S-48948, in favor of the Spouses Espiritu. From the P350,000.00 that the Landritos were supposed to receive, P17,500.00 was deducted as interest for the first month which was equivalent to five percent of the principal debt, andP7,500.00 was further deducted as service fee. Thus, they actually received a net amount of P325,000.00. The agreement, however, provided that the principal indebtedness earns "interest at the legal rate."4 After three months, when the debt became due and demandable, the Spouses Landrito were unable to pay the principal, and had not been able to make any interest payments other than the amount initially deducted from the proceeds of the loan. On 29 December 1986, the loan agreement was extended to 4 January 1987 through an Amendment of Real Estate Mortgage. The loan was restructured in such a way that the unpaid interest became part of the principal, thus increasing the principal to P385,000. The new loan agreement adopted all other terms and conditions contained in first agreement. 5 Due to the continued inability of the Spouses Landritos to settle their

obligations with the Spouses Espiritu, the loan agreement was renewed three more times. In all these subsequent renewals, the same terms and conditions found in the first agreement were retained. On 29 July 1987, the principal was increased to P507,000.00 inclusive of running interest. On 11 March 1988, it was increased to P647,000.00. And on 21 October 1988, the principal was increased to P874,125.00. 6 At the hearing before the trial court, Zoilo Espiritu testified that the increase in the principal in each amendment of the loan agreement did not correspond to the amount delivered to the Spouses Landrito. Rather, the increase in the principal had been due to unpaid interest and other charges. 7 The debt remained unpaid. As a consequence, the Spouses Espiritu foreclosed the mortgaged property on 31 October 1990. During the auction sale, the property was sold to the Spouses Espiritu as the lone bidder. On 9 January 1991, the Sheriffs Certificate of Sale was annotated on the title of the mortgaged property, giving the Spouses Landrito until 8 January 1992 to redeem the property. 8 The Spouses Landrito failed to redeem the subject property although they alleged that they negotiated for the redemption of the property as early as 30 October 1991. While the negotiated price for the land started atP1,595,392.79, it was allegedly increased by the Spouses Espiritu from time to time. Spouses Landrito allegedly tendered two managers checks and some cash, totaling P1,800,000.00 to the Spouses Espiritu on 13 January 1992, but the latter refused to accept the same. They also alleged that the Spouses Espiritu increased the amount demanded to P2.5 Million and gave them until July 1992 to pay the said amount. However, upon inquiry, they found out that on 24 June 1992, the Spouses Espiritu had already executed an Affidavit of Consolidation of Ownership and registered the mortgaged property in their name, and that the Register of Deeds of Makati had already issued Transfer Certificate of Title No. 179802 in the name of the Spouses Espiritu. On 9 October 1992, the Spouses Landrito, represented by their son Zoilo Landrito, filed an action for annulment or reconveyance of title, with damages against the Spouses Espiritu before Branch 146 of the Regional Trial Court of Makati.9 Among the allegations in their Complaint, they stated that the Spouses Espiritu, as creditors and mortgagees, "imposed interest rates that are shocking to ones moral senses."10 The trial court dismissed the complaint and upheld the validity of the foreclosure sale. The trial court ordered in its Decision, dated 13 December 1995:11 WHEREFORE, all the foregoing premises considered, the herein complaint is hereby dismissed forthwith. Without pronouncements to costs. The Spouses Landrito appealed to the Court of Appeals pursuant to Rule 41 of the 1997 Rules of Court. In its Decision dated 31 August 2005, the Court of Appeals reversed the trial courts decision, decreeing that the five percent (5%) interest imposed by the Spouses Espiritu on the first month and the varying interest rates imposed for the succeeding months

contravened the provisions of the Real Estate Mortgage contract which provided that interest at the legal rate, i.e., 12% per annum, would be imposed. It also ruled that although the Usury Law had been rendered ineffective by Central Bank Circular No. 905, which, in effect, removed the ceiling rates prescribed for interests, thus, allowing parties to freely stipulate thereon, the courts may render void any stipulation of interest rates which are found iniquitous or unconscionable. As a result, the Court of Appeals set the interest rate of the loan at the legal rate, or 12% per annum.12 Furthermore, the Court of Appeals held that the action for reconveyance, filed by the Spouses Landrito, is still a proper remedy. Even if the Spouses Landrito failed to redeem the property within the one-year redemption period provided by law, the action for reconveyance remained as a remedy available to a landowner whose property was wrongfully registered in anothers name since the subject property has not yet passed to an innocent purchaser for value. 13 In the decretal portion of its Decision, the Court of Appeals ruled14: WHEREFORE, the instant appeal is hereby GRANTED. The assailed Decision dated December 13, 1995 of the Regional Trial Court of Makati, Branch 146 in Civil Case No. 92-2920 is hereby REVERSED and SET ASIDE, and a new one is hereby entered as follows: (1) The legal rate of 12% per annum is hereby FIXED to be applied as the interest of the loan; and (2) Conditioned upon the payment of the loan, defendants-appellees spouses Zoilo and Primitiva Espiritu are hereby ordered to reconvey Transfer Certificate of Title No. S-48948 to appellant spouses Maximo and Paz Landrito. The case is REMANDED to the Trial Court for the above determination. Hence, the present petition. The following issues were raised:15 I THE HONORABLE COURT OF APPEALS ERRED IN REVERSING AND SETTING ASIDE THE DECISION OF THE TRIAL COURT AND ORDERING HEREIN PETITIONERS TO RECONVEY TRANSFER CERTIFICATE OF TITLE NO. 18918 TO HEREIN RESPONDENTS, WITHOUT ANY FACTUAL OR LEGAL BASIS THEREFOR. II THE HONORABLE COURT OF APPEALS ERRED IN FINDING THAT HEREIN PETITIONERS UNILATERALLY IMPOSED ON HEREIN RESPONDENTS THE ALLEGEDLY UNREASONABLE INTERESTS ON THE MORTGAGE LOANS. III THE HONORABLE COURT OF APPEALS ERRED IN NOT CONSIDERING THAT HEREIN RESPONDENTS ATTORNEY-IN-FACT IS NOT ARMED WITH AUTHORITY TO FILE AND PROSECUTE THIS CASE. The petition is without merit. The Real Estate Mortgage executed between the parties specified that "the principal indebtedness shall earn interest at the legal rate." The

agreement contained no other provision on interest or any fees or charges incident to the debt. In at least three contracts, all designated as Amendment of Real Estate Mortgage, the interest rate imposed was, likewise, unspecified. During his testimony, Zoilo Espiritu admitted that the increase in the principal in each of the Amendments of the Real Estate Mortgage consists of interest and charges. The Spouses Espiritu alleged that the parties had agreed on the interest and charges imposed in connection with the loan, hereunder enumerated: 1. P17,500.00 was the interest charged for the first month and P7,500.00 was imposed as service fee. 2. P35,000.00 interest and charges, or the difference between the P350,000.00 principal in the Real Estate Mortgage dated 5 September 1986 and the P385,000.00 principal in the Amendment of the Real Estate Mortgage dated 29 December 1986. 3. P132,000.00 interest and charges, or the difference between the P385,000.00 principal in the Amendment of the Real Estate Mortgage dated 29 December 1986 and the P507,000.00 principal in the Amendment of the Real Estate Mortgage dated 29 July 1987. 4. P140,000.00 interest and charges, or the difference between the P507,000.00 principal in the Amendment of the Real Estate Mortgage dated 29 July 1987 and the P647,000.00 principal in the Amendment of the Real Estate Mortgage dated 11 March 1988. 5. P227,125.00 interest and charges, or the difference between the P647,000.00 principal in the Amendment of the Real Estate Mortgage dated 11 March 1988 and the P874,125 principal in the Amendment of the Real Estate Mortgage dated 21 October 1988. The total interest and charges amounting to P559,125.00 on the original principal of P350,000 was accumulated over only two years and one month. These charges are not found in any written agreement between the parties. The records fail to show any computation on how much interest was charged and what other fees were imposed. Not only did lack of transparency characterize the aforementioned agreements, the interest rates and the service charge imposed, at an average of 6.39% per month, are excessive. In enacting Republic Act No. 3765, known as the "Truth in Lending Act," the State seeks to protect its citizens from a lack of awareness of the true cost of credit by assuring the full disclosure of such costs. Section 4, in connection with Section 3(3)16 of the said law, gives a detailed enumeration of the specific information required to be disclosed, among which are the interest and other charges incident to the extension of credit. Section 617 of the same law imposes on anyone who willfully violates these provisions, sanctions which include civil liability, and a fine and/or imprisonment. Although any action seeking to impose either civil or criminal liability had already prescribed, this Court frowns upon the underhanded manner in which the Spouses Espiritu imposed interest and charges, in connection

with the loan. This is aggravated by the fact that one of the creditors, Zoilo Espiritu, a lawyer, is hardly in a position to plead ignorance of the requirements of the law in connection with the transparency of credit transactions. In addition, the Civil Code clearly provides that: Article 1956. No interest shall be due unless it has been stipulated in writing. The omission of the Spouses Espiritu in specifying in the contract the interest rate which was actually imposed, in contravention of the law, manifested bad faith. In several cases, this Court has been known to declare null and void stipulations on interest and charges that were found excessive, iniquitous, and unconscionable. In the case of Medel v. Court of Appeals,18 the Court declared an interest rate of 5.5% per month on a P500,000.00 loan to be excessive, iniquitous, unconscionable and exorbitant. Even if the parties themselves agreed on the interest rate and stipulated the same in a written agreement, it nevertheless declared such stipulation as void and ordered the imposition of a 12% yearly interest rate. In Spouses Solangon v. Salazar, 19 6% monthly interest on a P60,000.00 loan was likewise equitably reduced to a 1% monthly interest or 12% per annum. In Ruiz v. Court of Appeals, 20 the Court found a 3% monthly interest imposed on four separate loans with a total of P1,050,000.00 to be excessive and reduced the interest to a 1% monthly interest or 12% per annum. In declaring void the stipulations authorizing excessive interest and charges, the Court declared that although the Usury Law was suspended by Central Bank Circular No. 905, s. 1982, effective on 1 January 1983, and consequently parties are given a wide latitude to agree on any interest rate, nothing in the said Circular grants lenders carte blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their assets. 21 Stipulation authorizing iniquitous or unconscionable interests are contrary to morals, if not against the law. Under Article 1409 of the Civil Code, these contracts are inexistent and void from the beginning. They cannot be ratified nor the right to set up their illegality as a defense be waived.22 The nullity of the stipulation on the usurious interest does not, however, affect the lenders right to recover the principal of the loan.23 Nor would it affect the terms of the real estate mortgage. The right to foreclose the mortgage remains with the creditors, and said right can be exercised upon the failure of the debtors to pay the debt due. The debt due is to be considered without the stipulation of the excessive interest. A legal interest of 12% per annum will be added in place of the excessive interest formerly imposed. While the terms of the Real Estate Mortgage remain effective, the foreclosure proceedings held on 31 Ocotber 1990 cannot be given effect. In the Notice of Sheriffs Sale24 dated 5 October 1990, and in the

Certificate of Sale25 dated 31 October 1990, the amount designated as mortgage indebtedness amounted to P874,125.00. Likewise, in the demand letter26 dated 12 December 1989, Zoilo Espiritu demanded from the Spouses Landrito the amount of P874,125.00 for the unpaid loan. Since the debt due is limited to the principal of P350,000.00 with 12% per annum as legal interest, the previous demand for payment of the amount of P874,125.00 cannot be considered as a valid demand for payment. For an obligation to become due, there must be a valid demand. 27Nor can the foreclosure proceedings be considered valid since the total amount of the indebtedness during the foreclosure proceedings was pegged at P874,125.00 which included interest and which this Court now nullifies for being excessive, iniquitous and exorbitant. If the foreclosure proceedings were considered valid, this would result in an inequitable situation wherein the Spouses Landrito will have their land foreclosed for failure to pay an over-inflated loan only a small part of which they were obligated to pay. Moreover, it is evident from the facts of the case that despite considerable effort on their part, the Spouses Landrito failed to redeem the mortgaged property because they were unable to raise the total amount, which was grossly inflated by the excessive interest imposed. Their attempt to redeem the mortgaged property at the inflated amount of P1,595,392.79, as early as 30 October 1991, is reflected in a letter, which creditor-mortgagee Zoilo Landrito acknowledged to have received by affixing his signature herein.28 They also attached in their Complaint copies of two checks in the amounts of P770,000.00 and P995,087.00, both dated 13 January 1992, which were allegedly refused by the Spouses Espiritu.29 Lastly, the Spouses Espiritu even attached in their exhibits a copy of a handwritten letter, dated 27 January 1994, written by Paz Landrito, addressed to the Spouses Espiritu, wherein the former offered to pay the latter the sum of P2,000,000.00. 30 In all these instances, the Spouses Landrito had tried, but failed, to pay an amount way over the indebtedness they were supposed to pay i.e., P350,000.00 and 12% interest per annum. Thus, it is only proper that the Spouses Landrito be given the opportunity to repay the real amount of their indebtedness. Since the Spouses Landrito, the debtors in this case, were not given an opportunity to settle their debt, at the correct amount and without the iniquitous interest imposed, no foreclosure proceedings may be instituted. A judgment ordering a foreclosure sale is conditioned upon a finding on the correct amount of the unpaid obligation and the failure of the debtor to pay the said amount. 31 In this case, it has not yet been shown that the Spouses Landrito had already failed to pay the correct amount of the debt and, therefore, a foreclosure sale cannot be conducted in order to answer for the unpaid debt. The foreclosure sale conducted upon their failure to payP874,125 in 1990 should be nullified since the amount demanded as the outstanding loan was overstated; consequently it has not been shown that the mortgagors the Spouses Landrito, have failed to pay their outstanding obligation. Moreover, if the proceeds of the sale together with its reasonable rates of interest were

applied to the obligation, only a small part of its original loans would actually remain outstanding, but because of the unconscionable interest rates, the larger part corresponded to said excessive and iniquitous interest. As a result, the subsequent registration of the foreclosure sale cannot transfer any rights over the mortgaged property to the Spouses Espiritu. The registration of the foreclosure sale, herein declared invalid, cannot vest title over the mortgaged property. The Torrens system does not create or vest title where one does not have a rightful claim over a real property. It only confirms and records title already existing and vested. It does not permit one to enrich oneself at the expense of another.32 Thus, the decree of registration, even after the lapse of one (1) year, cannot attain the status of indefeasibility. Significantly, the records show that the property mortgaged was purchased by the Spouses Espiritu and had not been transferred to an innocent purchaser for value. This means that an action for reconveyance may still be availed of in this case.33 Registration of property by one person in his or her name, whether by mistake or fraud, the real owner being another person, impresses upon the title so acquired the character of a constructive trust for the real owner, which would justify an action for reconveyance. 34 This is based on Article 1465 of the Civil Code which states that: Art. 1465. If property acquired through mistakes or fraud, the person obtaining it is, by force of law, considered a trustee of an implied trust for benefit of the person from whom the property comes. The action for reconveyance does not prescribe until after a period of ten years from the date of the registration of the certificate of sale since the action would be based on implied trust.35 Thus, the action for reconveyance filed on 31 October 1992, more than one year after the Sheriffs Certificate of Sale was registered on 9 January 1991, was filed within the prescription period. It should, however, be reiterated that the provisions of the Real Estate Mortgage are not annulled and the principal obligation stands. In addition, the interest is not completely removed; rather, it is set by this Court at 12% per annum. Should the Spouses Landrito fail to pay the principal, with its recomputed interest which runs from the time the loan agreement was entered into on 5 September 1986 until the present, there is nothing in this Decision which prevents the Spouses Espiritu from foreclosing the mortgaged property. The last issue raised by the petitioners is whether or not Zoilo Landrito was authorized to file the action for reconveyance filed before the trial court or even to file the appeal from the judgment of the trial court, by virtue of the Special Power of Attorney dated 30 September 1992. They further noted that the trial court and the Court of Appeals failed to rule on this issue.36 The Special Power of Attorney37 dated 30 September 1992 was executed by Maximo Landrito, Jr., with the conformity of Paz Landrito, in connection with the mortgaged property. It authorized Zoilo Landrito:

2. To make, sign, execute and deliver corresponding pertinent contracts, documents, agreements and other writings of whatever nature or kind and to sue or file legal action in any court of the Philippines, to collect, ask demands, encash checks, and recover any and all sum of monies, proceeds, interest and other due accruing, owning, payable or belonging to me as such owner of the afore-mentioned property. (Emphasis provided.) Zoilo Landritos authority to file the case is clearly set forth in the Special Power of Attorney. Furthermore, the records of the case unequivocally show that Zoilo Landrito filed the reconveyance case with the full authority of his mother, Paz Landrito, who attended the hearings of the case, filed in her behalf, without making any protest. 38She even testified in the same case on 30 August 1995. From the acts of Paz Landrito, there is no doubt that she had authorized her son to file the action for reconveyance, in her behalf, before the trial court. IN VIEW OF THE FOREGOING, the instant Petition is DENIED. This Court AFFIRMS the assailed Decision of the Court of Appeals, promulgated on 31 August 2005, fixing the interest rate of the loan between the parties at 12% per annum, and ordering the Spouses Espiritu to reconvey the subject property to the Spouses Landrito conditioned upon the payment of the loan together with herein fixed rate of interest. Costs against the petitioners. SO ORDERED. MINITA V. CHICO-NAZARIO Associate Justice

G.R. No. 167500

October 17, 2008

K-PHIL., INC., SOO MYUNG PARK and NETWORK DEVELOPMENT HOLDING CORP., petitioners, vs. METROPOLITAN BANK & TRUST COMPANY, REGALADO E. EUSEBIO, in his capacity as Clerk of Court VI and ExOfficio Sheriff, and REYNALDO R. CAMERINO, in his capacity as Sheriff IV, Regional Trial Court of Imus, Cavite, respondents. DECISION CORONA, J.: This petition1 seeks the reversal of the March 16, 2005 decision2 of the Court of Appeals (CA) in CA-G.R. CV No. 80787. In October 1996, respondent Metropolitan Bank & Trust Company (Metrobank) extended to petitioner K-Phil., Inc. (K-Phil) various loans and credit accommodations. These loans were secured by a mortgage 3 over two lots owned by petitioner Network Development Holding Corporation (Network) and occupied by K-Phil.4 In addition, K-Phil also executed a deed of chattel mortgage 5 over its machineries and equipment. Because of petitioners alleged violation of the terms and conditions of

the loans, Metrobank filed a petition for extrajudicial foreclosure of real estate and chattel mortgage with the Office of the Clerk of Court and exofficiosheriff (respondent Regalado E. Eusebio) of the Regional Trial Court (RTC) of Imus, Cavite on June 25, 2002. 6 On July 1, 2002, upon approval by RTC Executive Judge Lucenito N. Tagle7 of Imus, Cavite, respondent sheriff Reynaldo R. Camerino issued a notice of extrajudicial sale setting the date of the public auction sale on August 8, 2002. 8 On August 2, 2002, petitioners filed a complaint for breach of contract and damages with application for a writ of preliminary injunction and/or temporary restraining order (TRO) in the RTC, Branch 20 of Imus, Cavite docketed as Civil Case No. 2634-01. They claimed that the foreclosure of mortgages was premature and in contravention of a restructuring agreement of the loans and obligations of K-Phil. In addition, the petition for extrajudicial foreclosure was defective because it indicated the wrong amount and failed to implead and notify Network, an indispensable party as owner-mortgagor of the subject lots. Furthermore, the venue of the auction sale in Imus, Cavite was inconsistent with the express stipulation of the real estate mortgage that the auction sale was to be held at the capital of the province, Trece Martires City, or in the city where the property is located, Dasmarias, Cavite.9 On August 5, 2002, the RTC issued an ex parte TRO enjoining respondents from proceeding with the scheduled public auction. 10 After hearing the parties, the RTC granted petitioners a writ of preliminary injunction further enjoining respondents from continuing with the auction sale upon the filing of a P2,000,000 bond. 11 On October 18, 2002, K-Phil moved for authority to sell the spinning machines/accessories, the subject of the chattel mortgage, for US$228,000. The RTC granted the motion and ordered that the proceeds of the sale be delivered directly to Metrobank as partial payment of KPhils obligations.12 After trial, the RTC rendered its decision dated November 19, 2003 dismissing petitioners complaint. It held that there was no infirmity whatsoever in the petition because Networks name, though not appearing in the caption, was clearly stated and identified in the body of the petition. The RTC further ruled that mere irregularities in the petition or in the notice of sale which did not prejudice any of the parties did not justify the setting aside of the foreclosure sale. Besides, petitioners were duly notified of the venue of the sale and the sale was within the territorial jurisdiction of the court. The RTC also found no basis to award damages because no wrongful act was committed by Metrobank as mortgagee.13 Aggrieved, petitioners elevated the case to the CA. Meanwhile, in its

exercise of residual jurisdiction, the RTC ordered the parties to refrain from continuing with the public auction. 14 In its decision,15 the CA agreed with the RTC that the failure to include the name of Network in the caption of the petition for foreclosure was not a fatal error. It was sufficient that Network was identified as the owner of the mortgaged real properties in the body of the petition (which was the controlling portion of said pleading) and that, in the notice, the name of Network was clearly stated in the caption as mortgagor. However, the CA noted Metrobanks admission that the balance due on the principal amount was P143,335,891, subject to 6% interest, and that petitioners had in the meantime made payments on their loans.16 Therefore, the payments should have been deducted from the principal of P143,335,891. Considering this, the CA observed that the petition and notice were pegged differently at P159,026,257.49. The CA also pronounced that, under the law and the stipulations provided in the mortgage contract, the auction sale should be held either in Dasmarias, Cavite, where the mortgaged properties are located, or in Trece Martires City, the capital city of the province of Cavite, not in Imus, Cavite. Because of the variance in the amount of the outstanding indebtedness stated in the petition and that in the notice, as well as the improper venue of the auction sale, the CA held: WHEREFORE, premises considered, the Notice of Extra-Judicial Sale is hereby SET ASIDE. The Office of the Sheriff of the [RTC] of Imus, Cavite is hereby ordered to issue, publish and serve, in accordance with law, a new Notice of Extra-Judicial Sale correcting all the inaccuracies and inadequacies pointed out in the decision of the Court. Foreclosure proceedings shall thereafter proceed in the manner provided by law, under the control of the Executive Judge of the Imus, Cavite RTC.17 Unsatisfied with this ruling, petitioners filed this petition raising the following issues: (1) whether the petition for extrajudicial foreclosure was null and void for its failure to implead Network and to state the correct amount of indebtedness;18 (2) whether it was proper to order the issuance of a new notice with the necessary corrections and (3) whether Metrobank was liable for damages. Petitioners contend that the CA erred when it upheld the validity of the petition despite the incorrect amount stated therein and the omission of Network as a party. They also assert that the duty to alter, modify or amend the petition rests on Metrobank, not on respondent sheriffs whose duty to issue the notice based on the petition is ministerial. Hence, it was an error for the CA to order respondent sheriffs to issue a new notice to amend the inaccuracies of the petition. Moreover, petitioners insist that they are entitled to damages and attorneys fees as they have established Metrobanks bad faith when it prematurely filed the petition against K-Phil.

The petition lacks merit. Networks name was indeed omitted from the caption of the application/petition for extrajudicial foreclosure. However, this omission was not fatal to Metrobanks application as it was not in violation of Act 3135.19 Moreover, the application included Network in its body. It is the allegations in the body of the petition that control and not the heading or caption.20 The notice clearly identified Network as the mortgagor. Such identification in the notice of extrajudicial sale was what counted under the rules of procedure in extrajudicial foreclosure of mortgage. 21 As for the amount of indebtedness, Metrobank alleged the amount of P159,026,257.49 in its petition; it was only in the course of the proceedings that it agreed to the amount of P143,335,891. Consequently, the notice (which was based on the petition) also stated P159,026,257.49 as the amount of indebtedness. It is a well-settled rule that statutory provisions22 governing publication of notice of mortgage foreclosure sales must be strictly complied with and that even slight deviations therefrom will invalidate the notice. 23 The reason was explained in Olizon v. CA:24 The object of a notice of sale is to inform the public of the nature and condition of the property to be sold, and of the time, place and terms of the sale. Notices are given for the purpose of securing bidders and to prevent a sacrifice of the property. If these objects are attained, immaterial errors and mistakes will not affect the sufficiency of the notice; but if mistakes or omissions occur in the notices of sale, which are calculated to deter or mislead bidders, to depreciate the value of the property, or to prevent it from bringing a fair price, such mistakes or omissions will be fatal to the validity of the notice, and also to the sale made pursuant thereto. 25 The validity of a notice of sale is not affected by immaterial errors;26 only substantial errors will invalidate it.27Unless it was calculated to deter or mislead bidders, to depreciate the value of the property or to prevent it from bringing a fair price, the discrepancy between the amount of the obligation as reflected in the notice of sale and the amount actually due and collected during the bidding does not constitute a substantial error that should invalidate the notice.28 While there may be a discrepancy in the amount of indebtedness stated in the notice and that actually owed by petitioners, such discrepancy tends to appreciate, rather than depreciate, 29 the value of the mortgaged properties. It cannot be reasonably considered to have prevented the estimation of a fair price. Therefore, the CAs order for the sheriff to issue, publish and serve a new notice of extrajudicial sale correcting the inaccuracies and inadequacies of the prior notice was sufficient to remedy the discrepancies. There are no findings that support the grant of damages to petitioners.

The CA and RTC did not see any taint of bad faith on the part of Metrobank. Thus, we decline to award the same. WHEREFORE, the petition is hereby DENIED. Costs against petitioners. SO ORDERED.

2003.4 However, instead of the auction sale being held on April 11, 2003, as announced, the same was actually conducted by the respondent on December 1, 2003 with Jenelita Garcia emerging as the highest bidder.5 Claiming that the conduct by the respondent sheriff of the extrajudicial foreclosure proceedings against their property was highly irregular and patently illegal, complainant Adoracion Paguyo filed with the Office of the Court Administrator (OCA) the basic sworn letter-complaint6 in this case, charging respondent with grave abuse of authority and/or gross ignorance of the law. In said letter-complaint, docketed as OCA IPI No. 052281, complainant Adoracion Paguyo essentially alleged that the loan obligation secured by the real estate mortgage in question, including all interest due, was already fully paid by her and her husband even before the Garcia spouses filed the application for extrajudicial foreclosure; that the respondent sheriff has no authority to extrajudicially foreclose the mortgage because no special power of attorney is attached to or incorporated in the Deed of Real Estate Mortgage authorizing the extrajudicial foreclosure of the mortgage pursuant to Act 3135, as amended; and the extrajudicial foreclosure, assuming it could be done, was nonetheless fatally defective since there was no republication of the sheriffs Notice of Sale vis-a-vis the auction conducted on December 1, 2003. In his Comment7 to the complaint, the respondent sheriff denied the charges against him, claiming that it is his ministerial duty to proceed with the auction sale of the mortgaged property because it has already been approved by the Ex-Officio Provincial Sheriff and Acting Clerk of Court, Priscilla S. Salazar. He added that the application for extrajudicial foreclosure was sufficient in form and substance since it is stated therein that the Paguyos violated the conditions of the mortgage contract by defaulting in the payment of their loan obligation. As regards the auction sale having been conducted on December 1, 2003 and not on the date it was originally set, respondent explained that after the posting and publication of the Notice of Sheriffs Sale which set the auction on April 11, 2003, the spouses Garcia requested him for the deferment of the auction to enable the Paguyos to settle their loan obligation but nonetheless failed; that thereafter the Garcias asked him to proceed with the auction sale but he relented and gave the Paguyos a 15-day grace period to settle their obligation but still failed, prompting him to reschedule and conduct the auction on December 1, 2003, after reposting the Notice of Sheriffs Sale and informing the Paguyos about it. In its Report8 of January 4, 2006, the OCA finds no basis to hold the respondent liable for his failure to check if the deed of real estate mortgage in question incorporates a Special Power of Attorney authorizing the mortgagee to extrajudicially foreclose the mortgage in case the debtor fails to pay the obligation upon its maturity. On the same breath, however, the OCA faults the respondent sheriff for conducting the auction sale of the mortgaged property on December 1, 2003 without republishing the Notice of Sheriffs Sale with the corresponding change in

A.M. No. P-06-2135 May 25, 2007 (Formerly OCA I.P.I. No. 05-2281-P) ADORACION PAGUYO, Complainant, vs. CHARLIE S. GATBUNTON, Respondent. D E C I S I ON GARCIA, J.: This is an administrative complaint for grave abuse of authority and/or gross ignorance of the law filed by complainant Adoracion Paguyo against the herein respondent Charlie S. Gatbunton, Sheriff IV of the Regional Trial Court (RTC), Branch 4, Balanga, Bataan. The complaint stemmed from respondents alleged irregular extrajudicial foreclosure of a real estate mortgage constituted on the property of complainant Adoracion Paguyo and her husband Danilo S. Paguyo, Sr. As culled from the record, the antecedent facts are as follows: On September 9, 2002, the spouses Danilo Paguyo, Sr. and Adoracion Paguyo, by way of security for a loan ofP20,000.00 which they obtained from Jeanlyns Lending Investor, executed in favor of the latter a Deed of Real Estate Mortgage 1 over their residential property located in Mariveles, Bataan. On February 11, 2003, an application for the extrajudicial foreclosure 2 of the aforesaid mortgage pursuant to Act 3135, as amended, was filed with the Regional Trial Court, Branch 4, Balanga, Bataan by the spouses Celso Garcia and Jenelita Garcia, owners and operators of Jeanlyns Lending Investor, it being alleged thereunder that the Paguyo spouses defaulted in the payment of their loan obligation and the interests due thereon since January 9, 2003. Thereafter, a Notice of Sheriffs Sale3 was issued by the respondent, therein setting the public auction sale of the mortgaged realty on April 11, 2003. The notice was posted on February 24, 2003 and subsequently published in Sierra Pacific News in its issues of March 12, 15 and 19,

the date of the auction. The OCA thus recommended the re-docketing of the case as a regular administrative matter and that respondent be penalized to pay a fine of P10,000 for gross ignorance of the law with a warning that repetition of the same or similar offense shall be dealt with more severely. In its Resolution of March 6, 2006,9 the Court ordered the re-docketing of the case as an administrative matter, and, via a separate resolution of the same date, required the parties to manifest if they are willing to submit the case for resolution based on the pleadings on record. In their respective manifestations,10 the parties agreed. We partly concur with the OCA. Proceedings for the extrajudicial foreclosure of real estate mortgage are governed by Act 3135, as amended, entitled "An Act To Regulate The Sale of Property Under Special Powers Inserted In or Annexed to Real Estate Mortgages." Under Section 1 of the Act, extrajudicial foreclosure sales are proper only when so provided under a special power inserted in or attached to the mortgage contract. While the Deed of Real Estate Mortgage in this case contains no special power authorizing the Garcia spouses as mortgagees to extrajudicially foreclose the mortgage in case the Paguyos defaulted in their loan obligation, nonetheless, the respondent sheriff cannot be held administratively liable for proceeding with the extrajudicial foreclosure of the mortgage in question. Concededly, it is provided for in Administrative Order No. 3 series of 1984 (re: Procedure in Extrajudicial Foreclosure of Mortgage)11 that it is the sheriffs duty to examine if the application for extrajudicial foreclosure of real estate mortgage has complied with the requirements under Section 4 of Act 3135, as amended. However, amendments had already been introduced to Administrative Order No. 3 by making it the specific duty of the Clerk of Court to examine applications for extrajudicial foreclosure of mortgages.12 The very recent amendment is now provided for in Circular No. 7-200213 issued on January 22, 2002 and which became effective on April 22, 2002. Sections 1 and 2(a) of said Circular specifically state that: Sec. 1. All applications for the extrajudicial foreclosure of mortgage whether under the direction of the Sheriff or a notary public pursuant to Act No. 3135, as amended, and Act No. 1508, as amended shall be filed with the Executive Judge, through the Clerk of Court, who is also the ExOfficio Sheriff. (A.M. No. 99-10-05-0, as amended, March 1, 2001).1awphi1.nt Sec. 2. Upon receipt of the application, the Clerk of Court shall: a. Examine the same to insure that the special power of attorney authorizing the extrajudicial foreclosure of the real property is either inserted into or attached to the deed of real estate mortgage. (Act No. 3135, Sec. 1, as amended) (Emphasis ours)

We note that in this case, the application for extrajudicial foreclosure was filed on February 11, 2003, obviously after the amendment of Administrative Order No. 3. Hence, the duty to examine said application to determine whether the deed of mortgage contains or incorporates a special power authorizing the spouses Garcia to extrajudicially foreclose the mortgage in the event of nonpayment of the loan by the Paguyos devolved upon the Clerk of Court, not on the respondent sheriff. Hence, respondent cannot be held administratively liable for proceeding with the foreclosure sale. However, for his having conducted the auction sale of the mortgaged property on December 1, 2003 without causing the republication of Notice of Sheriffs Sale with the new auction date, the Court holds the respondent sheriff liable, not for "gross ignorance of the law" as recommended by the OCA because there is no such administrative offense, but for inefficiency and incompetence in the performance of his official duties under Section 52(A)(16) of the Revised Uniform Rules on Administrative Cases in the Civil Service. Section 4(b) of the same Circular 7-2002 is explicit that the sheriff shall cause the publication of the Notice of Sheriffs Sale in a newspaper of general circulation in the municipality or city where the property is situated. In full, said Section 4(b) states: Sec. 4. The sheriff to whom the application for extrajudicial foreclosure of mortgage was raffled shall do the following: a. x x x b. (1) In case of foreclosure of real estate mortgage, cause the publication of the notice of sale by posting it for not less than twenty (20) days in at least three (3) public places in the municipality or city where the property is situated and if such property is worth more than four hundred (P400.00) pesos, by having such notice published once a week for at least three (3) consecutive weeks in a newspaper of general circulation in the municipality or city (Sec. 3, Act No. 3135, as amended). xxx In Development Bank of the Philippines v. Court of Appeals, 14 the Court emphasized the need for the republication of the Notice of Sheriffs Sale of a postponed extrajudicial sale for the latters validity. In that case, we held, citing Ouano v. CA:15 x x x republication in the manner prescribed by Act No. 3135 is necessary for the validity of a postponed extrajudicial foreclosure sale. Another publication is required in case the auction sale is rescheduled, and the absence of such republication invalidates the foreclosure sale. xxx xxx xxx 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. Here, the only Notice of Sheriffs Sale which was published in Sierra Pacific News refers to the scheduled sheriffs sale on April 11, 2003. Nowhere is there any record to show that a new Notice of Sheriffs Sale for the December 1, 2003 auction sale was actually published. Likewise, while respondent sheriff explained the reason for his deferment of the auction sale on the originally scheduled date, none whatsoever was proffered by him regarding his failure to publish a new notice for the rescheduled date of the auction. Time and time again, this Court has reminded sheriffs that, as court employees, they must conduct themselves with propriety and decorum their actions must be above suspicion at all times. As we emphasized in Tagaloguin v. Hingco, Jr.:16 x x x the conduct and behavior of everyone connected with an office charged with the dispensation of justice, from the presiding judge to the sheriff down to the lowliest clerk should be circumscribed with the heavy burden of responsibility. Their conduct, at all times, must be characterized with propriety and decorum, but above all else, must be above and beyond suspicion. For every employee of the judiciary should be an example of integrity, uprightness and honesty. Thus, for failing to do what was incumbent upon him under the law, which was to publish in a newspaper of general circulation the notice of the rescheduled auction sale of the mortgaged real property, we find respondent sheriff to have been inefficient and incompetent in the performance of his official duties, an offense punishable under Section 52(A)(16) of the Revised Uniform Rules on Administrative Cases in the Civil Service (Civil Service Commission Resolution No. 991936) with suspension of six (6) months and one (1) day to one (1) year for the first offense. WHEREFORE, respondent Charlie S. Gatbunton, Sheriff IV of the RTC, Branch 4, Balanga, Bataan, is administratively found GUILTY of inefficiency and incompetence in the performance of his official duties and meted the penalty of SUSPENSION for six (6) months and one (1) day without pay with a stern WARNING that a repetition of the same or similar act shall be dealt with more severely. SO ORDERED. CANCIO C. GARCIA Associate Justice

SECTION 4 G.R. No. 171201 June 18, 2010

SPOUSES BENEDICT and MARICEL DY TECKLO, Petitioners, vs. RURAL BANK OF PAMPLONA, INC. represented by its President/Manager, JUAN LAS, Respondent. DECISION CARPIO, J.: The Case This is a petition for review1 of the 17 May 2005 Decision2 and the 14 December 2005 Resolution3 of the Court of Appeals in CA-G.R. CV No. 59769. In its 17 May 2005 Decision, the Court of Appeals affirmed with modification the 22 May 1998 Decision4 of the Regional Trial Court (Branch 61) of Naga City in Civil Case No. RTC 96-3521. In its 14 December 2005 Resolution, the Court of Appeals denied petitioners motion for reconsideration. The Antecedent Facts On 20 January 1994, spouses Roberto and Maria Antonette Co obtained from respondent Rural Bank of Pamplona, Inc. a P100,000.00 loan5 due in three months or on 20 April 1994. The loan was secured by a real estate mortgage6 on a 262-square meter residential lot owned by spouses Co located in San Felipe, Naga City and covered by Transfer Certificate of Title (TCT) No. 24196. The mortgage was registered in the Register of Deeds of Naga City on 21 January 1994 and duly annotated on the TCT of the mortgaged property as Entry No. 58182. 7 One of the stipulations in the mortgage contract was that the mortgaged property would also answer for the future loans of the mortgagor. Pursuant to this provision, spouses Co obtained on 4 March 1994 a second loan8 from respondent bank in the amount of P150,000.00 due in three months or on 2 June 1994.

Petitioners, spouses Benedict and Maricel Dy Tecklo, meanwhile instituted an action for collection of sum of money against spouses Co. The case, docketed as Civil Case No. 94-3161, was assigned to the Regional Trial Court (Branch 25) of Naga City. In the said case, petitioners obtained a writ of attachment on the mortgaged property of spouses Co. The notice of attachment was annotated on the TCT of the mortgaged property as Entry No. 58941. 9 When the two loans remained unpaid after becoming due and demandable, respondent bank instituted extrajudicial foreclosure proceedings. In its 5 September 1994 petition for extrajudicial foreclosure, respondent bank sought the satisfaction solely of the first loan although the second loan had also become due. 10 At the public auction scheduled on 19 December 1994, respondent bank offered the winning bid of P142,000.00, which did not include the second loan.11 The provisional certificate of sale to respondent bank was annotated on the TCT of the mortgaged property as Entry No. 60794. 12 Petitioners then exercised the right of redemption as successors-ininterest of the judgment debtor. Stepping into the shoes of spouses Co, petitioners tendered on 9 August 1995 the amount of P155,769.50, based on the computation made by the Office of the Provincial Sheriff, as follows: Bid price .................................................. ... Interest on the bid price from December 19, 1994 to August 9, 1995 at 1% per month ........................................ Expenses incurred in connection with the registration of the Provisional Certificate of Sale .................................... Interest on the expenses ........................... 10,934.00 P142,000. 00

the interest rate should only be 12% per annum. Respondent bank then sought annulment of the redemption, injunction, and damages in the Regional Trial Court (Branch 61) of Naga City docketed as Civil Case No. RTC 96-3521. The Ruling of the Trial Court The trial court ruled, among others, that the second loan, not having been annotated on the TCT of the mortgaged property, could not bind third persons such as petitioners. Applying the 24% per annum interest rate fixed in the mortgage, the trial court computed the redemption price as follows: Bid price ........................................................... .... Interest rate on the bid price for 233 days .......... Expenses of registration of the Prov. Sale........... Interest on the expenses for 211 days..................... P142,000.0 0 22,057.33 2,647.00 372.24 P 167,076.5 713 In its 22 May 1998 Decision, the trial court dismissed respondent banks complaint for annulment of redemption and ordered petitioners to pay respondent bank the deficiency of P11,307.07 on the redemption amount, to wit: WHEREFORE, premises considered, this Civil Case No. RTC-96-3521 is hereby dismissed and defendants Dy Tecklos are hereby ordered to pay herein plaintiff the insufficiency of the redemption price in the amount ofP11,307.07, and thereafter, upon receipt of said amount, the Rural Bank of Pamplona is also ordered to surrender to said defendants Dy Tecklos TCT No. 24196. No pronouncement as to costs. 14 Respondent bank elevated the case to the Court of Appeals insisting that the foreclosed mortgage also secured the second loan of P150,000.00. The Ruling of the Court of Appeals The appellate court ruled that the redemption amount should have included the second loan even though it was not annotated on the TCT of the mortgaged property. In its 17 May 2005 Decision, the Court of Appeals affirmed the trial courts decision with the modification that petitioners pay respondent bank the deficiency amountingP204,407.18, with interest at the rate of 24% per annum from 22 May 1998 until fully paid, thus:

2,647.00 188.50 P155,769. 50

Respondent bank objected to the non-inclusion of the second loan. It also claimed that the applicable interest rate should be the rate fixed in the mortgage, which was 24% per annum plus 3% service charge per annum and 18% penalty per annum. However, the Provincial Sheriff insisted that

WHEREFORE, premises considered, in continued exercise of liberality in redemption, the dismissal of Civil Case No. RTC-96-3521 is AFFIRMED and defendants Dy Tecklo are hereby ordered to pay plaintiff the deficiency of the redemption price in the amount of P204,407.18 with interest at the rate of 24% per annum from May 22, 1998 until fully paid. Upon receipt of the full amount inclusive of interest the Rural Bank of Pamplona, Inc. is ordered to surrender to defendants-spouses Dy Tecklo the owners duplicate of TCT No. 24196. 15 Aggrieved, petitioners filed a motion for reconsideration, which the Court of Appeals denied. Hence, the present petition for review. The Issue The sole issue is whether the redemption amount includes the second loan in the amount of P150,000.00 even if it was not included in respondent banks application for extrajudicial foreclosure. The Courts Ruling The Court finds the petition meritorious. Petitioners pointed out that the second loan was not annotated as an additional loan on the TCT of the mortgaged property. Petitioners argued that the second loan was just a private contract between respondent bank and spouses Co, which could not bind third parties unless duly registered. Petitioners stressed that respondent banks application for extrajudicial foreclosure referred solely to the first loan. Respondent bank insisted that the mortgage secured not only the first loan but also future loans spouses Co might obtain from respondent bank. According to respondent bank, this was specifically provided in the mortgage contract. Respondent bank contended that petitioners, as redemptioner by virtue of the preliminary attachment they obtained against spouses Co, should assume all the debts secured by the mortgaged property. The mortgage contract in this case contains the following blanket mortgage clause: 1. That as security for the payment of the loan or advance in the principal sum of ONE HUNDRED THOUSAND PESOS ONLY (P100,000.00) PESOS, Philippine Currency, and such other loans or advances already obtained and/or still to be obtained by the MORTGAGOR/S, either as MAKER/S, CO-MAKER/S, SURETY/IES OR GUARANTOR/S from the MORTGAGEE payable on the date/s stated in the corresponding promissory note/s and subject to the payment of interest, other bank charges, and to other conditions mentioned thereon, x x x.16(Emphasis supplied) A blanket mortgage clause, which makes available future loans without need of executing another set of security documents, has long been recognized in our jurisprudence. It is meant to save time, loan closing charges, additional legal services, recording fees, and other costs. A

blanket mortgage clause is designed to lower the cost of loans to borrowers, at the same time making the business of lending more profitable to banks. Settled is the rule that mortgages securing future loans are valid and legal contracts. 17 Presidential Decree No. 1529, otherwise known as the Property Registration Decree, mandates: SEC. 51. Conveyance and other dealings by registered owner. x x x x The act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned, and in all cases under this Decree, the registration shall be made in the office of the Register of Deeds for the province or city where the land lies. SEC. 52. Constructive notice upon registration. Every conveyance, mortgage, lease, lien, attachment, order, judgment, instrument, or entry affecting registered land shall, if registered, filed, or entered in the office of the Register of Deeds for the province or city where the land to which it relates lies, be constructive notice to all persons from the time of such registering, filing, or entering. It is the act of registration which creates a constructive notice to the whole world and binds third persons. By definition, registration is the ministerial act by which a deed, contract, or instrument is inscribed in the records of the office of the Register of Deeds and annotated on the back of the TCT covering the land subject of the deed, contract, or instrument.18 A person dealing with registered land is not required to go beyond the TCT to determine the liabilities attaching to the property. He is only charged with notice of such burdens on the property as are duly annotated on the TCT. To require him to do more is to defeat one of the primary objects of the Torrens system. 19 As to whether the second loan should have been annotated on the TCT of the mortgaged property in order to bind third parties, the case of Tad-Y v. Philippine National Bank20 is in point. The case involved a mortgage contract containing a provision that future loans would also be secured by the mortgage. This Court ruled that since the mortgage contract containing the blanket mortgage clause was already annotated on the TCT of the mortgaged property, subsequent loans need not be separately annotated on the said TCT in order to bind third parties. We quote the pertinent portion of this Courts discussion in Tad-Y v. Philippine National Bank: 21 Petitioner-appellant advances the argument that the latter loans should have also been noted on TCT 2417. But We believe there was no necessity for such a notation because it already appears in the said title that aside from the amount of P840 first borrowed by the mortgagors, other obligations would also be secured by the mortgage. As already stated, it was incumbent upon any subsequent mortgagee or

encumbrancer of the property in question to have examined the books or records of the PNB, as first mortgagee, the credit standing of the debtors.22 Records of the present case show that the mortgage contract, containing the provision that future loans would also be secured by the mortgage, is duly annotated on the TCT of the mortgaged property. This constitutes sufficient notice to the world that the mortgage secures not only the first loan but also future loans the mortgagor may obtain from respondent bank. Applying the doctrine laid down in Tad-Y v. Philippine National Bank,23 the second loan need not be separately annotated on the said TCT in order to bind third parties such as petitioners. However, we note the curious fact that respondent banks petition for extrajudicial foreclosure was solely for the satisfaction of the first loan although the second loan had also become due and demandable. 24 In its Appellants Brief filed in the Court of Appeals, respondent bank even admitted that the second loan was not included in its bid at the public auction sale. To quote from page 5 of the Appellants Brief filed by respondent bank: For failure to pay the first loan, the mortgage was foreclosed and the property covered by TCT No. 24196 was sold at public auction on December 19, 1994, for P142,000, which was the bid of the mortgagee bank. The bank did not include in its bid the second loan of P150,000.25 (Emphasis supplied) For its failure to include the second loan in its application for extrajudicial foreclosure as well as in its bid at the public auction sale, respondent bank is deemed to have waived its lien on the mortgaged property with respect to the second loan. Of course, respondent bank may still collect the unpaid second loan, and the interest thereon, in an ordinary collection suit before the right to collect prescribes. After the foreclosure of the mortgaged property, the mortgage is extinguished and the purchaser at auction sale acquires the property free from such mortgage.26 Any deficiency amount after foreclosure cannot constitute a continuing lien on the foreclosed property, but must be collected by the mortgagee-creditor in an ordinary action for collection. In this case, the second loan from the same mortgage deed is in the nature of a deficiency amount after foreclosure. In order to effect redemption, the judgment debtor or his successor -ininterest need only pay the purchaser at the public auction sale the redemption amount composed of (1) the price which the purchaser at the public auction sale paid for the property and (2) the amount of any assessment or taxes which the purchaser may have paid on the property after the purchase, plus the applicable interest. 27 Respondent banks demand that the second loan be added to the actual amount paid for the property at the public auction sale finds no basis in law or jurisprudence. Coming now to the computation of the redemption amount, Section 78 of Republic Act No. 337, otherwise known as the General Banking Act,

governs in cases where the mortgagee is a bank. 28 It provides: Sec. 78. x x x In the event of foreclosure, whether judicially or extrajudicially, of any mortgage on real estate which is security for any loan granted before the passage of this Act or under the provisions of this Act, the mortgagor or debtor whose real property has been sold at public auction, judicially or extrajudicially, for the full or partial payment of an obligation to any bank, banking or credit institution, within the purview of this Act shall have the right, within one year after the sale of the real estate as a result of the foreclosure of the respective mortgage, to redeem the property by paying the amount fixed by the court in the order of execution, or the amount due under the mortgage deed, as the case may be, with interest thereon at the rate specified in the mortgage, and all the costs, and judicial and other expenses incurred by the bank or institution concerned by reason of the execution and sale and as a result of the custody of said property less the income received from the property. x x x x (Emphasis supplied) Applying Section 78 of the General Banking Act, the 24% per annum interest rate specified in the mortgage should apply. Thus, the redemption amount should be computed as follows: P 142,000.00 P 2,647.00 19 Dec. 1994 - 9 Aug. 1995 12 Jan. 1995 - 9 Aug. 1995 P142,000.00 x 24% x 233/360 2,647.00 x 24% x 211/360 = = = = winning bid at auction sale registration expenses for provisional certificate of sale 233 days from date of auction to date of tender 211 days from date of registration of provisional sale to date of tender P 22,057.3 3 372.35 P 22,429.6 8 Plus winning bid Plus registration expenses Total 142,000.0 0 2,647.00 P 167,07 6.68

= =

After deducting petitioners tender of P155,769.50, there is a deficiency of P11,307.18 on the redemption amount, as computed above.

Petitioners should thus pay respondent bank the deficiency amounting to P11,307.18, with interest at the rate of 24% per annum from 22 May 1998 until fully paid. WHEREFORE, we GRANT the petition. We SET ASIDE the 17 May 2005 Decision and the 14 December 2005 Resolution of the Court of Appeals in CA-G.R. CV No. 59769. Petitioners Benedict and Maricel Dy Tecklo are ordered to pay respondent Rural Bank of Pamplona, Inc. the deficiency of P11,307.18 on the redemption amount, with interest at the rate of 24% per annum from 22 May 1998 until fully paid. Upon receipt of the full amount inclusive of interest, respondent Rural Bank of Pamplona, Inc. is ordered to surrender to petitioners Benedict and Maricel Dy Tecklo the owners duplicate of TCT No. 24196. No pronouncement as to costs. SO ORDERED. ANTONIO T. CARPIO Associate Justice

As culled in the Decision of the Court of Appeals sought for review, the facts of the case that matter are, as follows: . . . On November 5, 1951, plaintiff-appellant Joaquin Valmonte sold to his daughter co-appellant Pastora, three (3) parcels of land, situated in the Municipality of Jaen, Province of Nueva Ecija, containing a total area of 70.6 hectares (Exhs. 31-Bank, 1Valenton). A few days later, or on Nov. 12, 1951, plaintiffappellant Pastora obtained a crop loan of P16,000.00 from defendant-appellee Philippine National Bank and as security for payment thereof, she executed a Real Estate Mortgage, dated November 12, 1951, in favor of appellee bank involving the same parcels of land (Exh. J) as covered by Transfer Certificate of Title No. NT-10423 in the name of said appellant Pastora (Exh. Q-1). On September 19, 1952, appellant Pastora, then single, executed a Special Power of Attorney in favor of one Virginia V. del Castelo for the purpose of borrowing money in the amount of P5,000.00 from appellee bank with authority to mortgage the same parcels of land hereinabove mentioned (Exh. A). As a result thereof, a loan of P5,000.00 payable on demand was granted by appellee bank and Virginia Castelo executed a Real Estate Mortgage in its favor (Exhs. 6 and 7-Bank, and B). On June 14, 1954, appellee bank sent a "Notice of Extra-Judicial Sale of Mortgaged Properties" to the Provincial Sheriff of Nueva Ecija for publication (Exh. 39-Bank). On June 20, 1954, appellant Pastora executed a Deed of Sale in favor of her father co-appellant Joaquin Valmonte selling unto the latter the same three (3) parcels of land covered by TCT No. NT10423 with the following condition: These lands are at present mortgaged to the Philippine National Bank, and this obligation shall be the subject of future arrangement between the vendor and vendee herein on the one hand and the Philippine National Bank on the other before this deed of Sale shall be operative. (Exh. 2-Valenton) On July 19, 26 and August 2, 1954, the notice of extrajudicial sale on Augerst 19, 1954 to be held in the City Hall of Cabanatuan City, for the satisfaction of appellant Pastora's debt of P5,000.00 plus interests due thereon, was published in a newspaper called Nueva Era (Exh. 56-Bank). The same notice was posted in three (3) public and conspicuous places in the City of Cabanatuan where the scheduled auction sale will take place and in three (3) public and conspicuous places in the Municipality of Jaen, Nueva Ecija where the properties are located (Exh. 38-Bank). On August 19, 1954, the auction sale was conducted and appellee bank was the sole and only bidder for P5,524.40. On the same date, the Provincial Sheriff Ex-Officio issued the

G.R. No. L-41621 February 18, 1999 PASTORA VALMONTE, JOSE DE LEON, AND JOAQUIN VALMONTE, petitioners, vs. THE HON. COURT OF APPEALS, PHILIPPINE NATIONAL BANK, ARTEMIO VALENTON, AND AREOPAGITA J. JOSON, renpondents. PURISIMA, J.: At bar is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court seeking a review of the Decision 1 of the Court of Appeals which affirmed the decision of the then Court of First Instance of Cabanatuan City, Branch III 2 in Civil Case No. 2950, entitled "Pastora Valmonte, Jose de Leon and Joaquin Valmonte versus Philippine National Bank, Artemio Valenton and Areopagita J. Joson", dismissing plaintiffs' complaint as well as defendants' counterclaim.

corresponding Minutes of Auction Sale and Certificate of Sale (Exh.C, 55 and 54-Bank). The period of redemption expired on August 19, 1955 (Exh. 65Bank). Appellee bank received a letter-offer, dated August 31, 1955 from a certain Jose Talens to purchase the properties in question for P27,000.00, P4,000.00 down and the balance payable in five (5) yearly amortizations (Exh. 40-Bank). In a letter dated September 28, 1955, appellee Artemio Valenton offered to purchase said properties for P35,000.00 payable upon execution of the contract in his favor and deposited P1,000.00 as earnest money therefor (Exh. 41-Bank, 7-Valenton). On October 10, 1955, appellant Joaquin Valmonte sent a letter-request to appellee bank for additional time within which he may repurchase the properties in question for P35,000.00 (Exh 33-Bank; 8-Valenton). In view thereof and by reason of the request of Congressman Celestino C. Juan, appellants were given up to December 31, 1955, to purchase in cash the properties concerned in the amount of the bank's total claim. As of September 7, 1955, the Bank's total claims amounted to P26,926.38, including the P16,000.00 loan obtained by appellant Pastora in 1951 (Exhs. 66Bank and 9-Valenton; J; 43-Bank and 58-Valenaon). On December 7, 1955, appellant Pastora designated her father, co-appellant Joaquin Valmonte as her attorney-in-fact for the purpose of repurchasing the land from the appellee bank (Exh. H). Appellants failed to purchase the properties on or before December 31, 1955. Hence, on January 3, 1956, appellee Valenton deposited the balance of P34,000.00 which the bank accepted [Exhs 47-B (Bank) and 62-B (Valenton)]. On Jan. 4, 1956, appellee bank executed the Deed of Absolute Sale in favor of appellee Valenton (Exhs. 47-Bank, 11-Valenton and 47-C (Bank) as well as an Affidavit of Consolidation of Ownership (Exh. D-1). To enable the registration of the properties in the name of appellee Valenton, appellee Bank, as attorney-in-fact of the mortgagor under the Real Estate Mortgagor, dated September 30, 1952 (Exh. B), had to execute a Deed of Sale in its favor on January 5, 1956 (Exh. E). On January 6, 1956, a "Deed of Confirmation of Sale" was executed by appellee bank for the main purpose of asserting that the existing certificate of title covering the parcels of land in question at that time was TCT No. - NT 18899 of the land registry of Nueva Ecija in the name of appellee bank (Exh. F). Appellee Valenton obtained the cancellation of TCT No. NT 18899 and the issuance of the Registry of Deeds of Nueva Ecija of TCT No. NT-18901 in his name (Exhs. S and S-1). xxx xxx xxx . . . The present complaint was filed on August 1, 1958; and, after

joining the issues and trial on the merits, the complaint was dismissed on January 27, 1968. 3 The trial court of origin, as earlier alluded to, dismissed the entire case, disposing, thus: PREMISES CONSIDERED, judgment is hereby rendered in favor of the defendants against the plaintiffs, dismissing the complaint with costs against the said plaintiffs. The counterclaims of the defendants are hereby dismissed. SO ORDERED. 4 Therefrom, plaintiffs Pastora Valmonte, Jose de Leon and Joaquin Valmonte appealed to the Court of Appeals, which came out with a judgment of affirmance promulgated on March 24, 1975. Undaunted, the said plaintiffs found their way to this court via the present Petition, theorizing that: A THIS IS AS CLEAR A CASE AS ANY WHERE PERSONS HAVE BEEN DEPRIVED OF THEIR PROPERTY WITHOUT DUE PROCESSOF LAW. B THE RESPONDENT COURT OF APPEALS COMMITTED A GRAVE ERROR WHEN IT HELD, AS DID THE TRIAL COURT, THAT THE TWO MORTGAGES (P16,000.00 AND P5,000.00) WERE SEPARATE AND DISTINCT FROM ONE ANOTHER; WORSE STILL, THAT ONE WAS "JUNIOR"AND THE OTHER WAS "SENIOR"; THAT THE "MERGER" CAME ABOUT AFTER THE FORECLOSURE OF THE P5,000.00 PORTION OF THE MORTGAGE SUCH THAT THE PNB BECAME CREDITOR AND DEBTOR AT THE SAME TIME. C THE RESPONDENT COURT OF APPEALS COMMITTED A GRAVE ERROR WHEN IT DID NOT HOLD THAT, FROM THE VERY EXPRESS PROVISIONS OF THE TWO DOCUMENTS THE P16,000.00 MORTGAGE, EXH. 'J", AND THE P5,000.00 MORTGAGE, EXH. "B" THE TWO MORTGAGES MUTUALLY AND IMMEDIATELY MERGED INTO EACH OTHER AS SECURITY FOR THE SAME TOTALITY OF ALL OF PETITIONERS' OBLIGATIONS TO RESPONDENT PNB AT THE MOMENT THE LATER DOCUMENT WAS EXECUTED ON SEPTEMBER 30, 1952, SO THAT THE RESULT WAS AN INDIVISIBLE, INSEPARABLE, SINGLE MORTGAGE WHICH CANNOT BE FORECLOSED PARTIALLY; HENCE FORECLOSURE OF THE P5,000.00 MORTGAGE ALONE DID NOT VEST TITLE OVER THE PROPERTY IN THE PNB. D THE RESPONDENT COURT OF APPEALS COMMITTED A GRAVE ERROR WHEN IT GAVE ITS IMPRIMATUR TO THE TRANSFER FROM RESPONDENT PNB TO RESPONDENTS VALENTON OF PASTORA'S PROPERTY WHICH HAD NOT BEEN VALIDLY FORECLOSED. E THE RESPONDENT COURT OF APPEALS COMMITTED A GRAVE

ERROR WHEN IT FAILED TO HOLD THAT THE EXTRA JUDICIAL FORECLOSURE OF THE P5,000.00 PORTION OF THE MORTGAGE WAS NULL AND VOID BECAUSE OF FATAL DEFECTS IN THE PUBLICATION OF THE NOTICE OF FORECLOSURE, THE DAY OF THE FORECLOSURE, THE PLACE OF THE FORECLOSURE, THE AUTHORITY OF THE PERSON CONDUCTING FORECLOSURE, AND THE REALITY OF THE FORECLOSURE SALE. F THE RESPONDENT COURT OF APPEALS ERRED IN UPHOLDING THE TRIAL COURT'S DENIAL OF THE PETITIONERS MOTION FOR LEAVE TO AMEND COMPLAINT TO CONFORM TO THE EVIDENCE AND FOR ADMISSION OF THIRD AMENDED COMPLAINT. The petition is not impressed with merit. To begin with, succinct and unmistakable is the consistent pronouncement that the Supreme Court is not a trier of facts. And well entrenched is the doctrine that pure questions of fact may not be the proper subject of appeal bycertiorari under Rule 45 of the Revised Rules of Court, as this mode of appeal is generally confined to questions of law. 5 Anent the first error, petitioners theorize: (1) That there was insufficient publication of the notice of sale; (2) That the posting of the notice was not in accordance with law; (3) That the price obtained during the auction sale was unconscionably low; (4) That the Sheriff who conducted the sale had no authority to do so; and (5) That the auction sale was void as it was conducted on a declared holiday. It is well-settled that non-compliance with the notice and publication requirements of an extrajudicial foreclosure sale is a factual issue. Compliance with the statutory requirements is a proven fact and not a matter of presumption. A mortgagor who alleges absence of any of such requisites has the burden of establishing thefactum probandum. 6 Following the ruling in Sadang vs. GSIS 7, the Court of Appeals upheld the validity of the publication of the notice of extrajudicial foreclosure, holding that the customary affidavit of the editor of a newspaper, duly introduced in evidence, is a prima facie proof of said fact. The party alleging non-compliance with the requisite publication theonus probandi. Absent any proof to the contrary, lack of publication has not been substantiated. What is more, the affidavit of the editor of Nueva Era, to the effect that the notice of sale had been published in said newspaper of general circulation once a week for three (3) consecutive weeks, and what Basilio Castro (letter carrier in the province of Nueva Ecija) and Eugenio de Guzman (former Justice of the Peace and Mayor of Jaen) testified and attested to constitute enough evidence of publication. 8 Petitioners' reliance on the cases of Tan Ten Koc vs. Republic 9; Tan Sen vs. Republic 10 and Tan Khe Shing vs. Republic 11 is misplaced. In the said cases, in ruling that Nueva Era was not shown to be a newspaper of general circulation, the Court considered the failure of the applicants to come forward with positive evidence other than the editor's affidavit. As

they were naturalization cases, the purpose of the publication requirement was to inform the officers concerned and the public in general of the filing of subject petitions, to the end that the Solicitor General or the Provincial Fiscal (now provincial prosecutor) could be furnished whatever derogatory information and evidence there may be against the applicants or petitioners. There is no such objective in the publication requirement for extrajudicial foreclosures. Consequently, the petitioners here cannot rely on the aforecited cases of different nature to buttress their stance. The alleged failure to comply with the posting requirement in that: (1) it was not posted in three (3) public conspicuous places, and (2) the posting was not in the municipality where the properties involved or part thereof are located, was negated by the certificate of posting, dated July 15, 1954, and the testimony of Deputy Sheriff Jose N. Mendoza. (Exh. 38 Bank; pp. 561-563, t.s.n., Feb. 22, 1963) 12 On the issue of unconscionably low price paid by the bank for the mortgaged properties, the purchase price of P5,524.40 was found by the respondent court to suffice. It is well settled that when there is a right to redeem, inadequacy of price of no moment for the reason that the judgment debtor has always the chance to redeem and reacquire the property. In fact, the property may be sold for less than its fair market value precisely because the lesser the price the easier for the owner to effect a redemption. 13 Petitioners further theorized that the foreclosure sale in question should be invalidated since it was conducted on a holiday. They rely on Section 31 of the Revised Administrative Code, which provides that where the act required or permitted by law falls on a holiday, the act may be done on the next succeeding business day. In the case under scrutiny, the auction sale was made on August 19, 1954, which was declared a holiday by the late Pres. Ramon Magsaysay. In upholding the validity of the sale, the Court of Appeals opined "that since the law used the word 'may', it is merely discretionary and cannot be given a prohibitive meaning." 14 The Court is of the same conclusion on the validity of the sale. Said the court in the case of Rural Bank of Caloocan, Inc. vs. Court of Appeals 15, in holding that Section 31 of the Revised Administrative Code is not applicable to auction sales: . . . The pretermission of a holiday applies only where the day or the last day for doing any act required or permitted by law falls on a holiday, or when the last day of a given period for doing an act falls on a holiday. It does not apply to a day fixed by an office or officer of the government for an act to be done, as distinguished from a period of time within which an act should be done, which may be on any day within that specified period. For example, if a party is required by law to file his answer to a complaint, within fifteen (15) days from receipt of the summons and the last day falls on a holiday, the last day is deemed moved to the next succeeding business day. But, if the court fixes the

trial of a case on a certain day but the said date is subsequently declared a public holiday, the trial thereof is not automatically transferred to the next succeeding business day. Since April 10, 1961 was not the day or the last day set by law for the extrajudicial foreclosure sale, nor the last day of a given period, but a date fixed by the deputy sheriff, the aforesaid sale cannot legally be made on the next succeeding business day without the notices of the sale on that day being posted as prescribed in Sec. 9, Act. No. 3135. 16 Conformably, the extrajudicial foreclosure conducted on August 19, 1954 was valid, notwithstanding the fact that the said date was declared a public holiday. Act 3135 merely requires that sufficient publication and posting of the notice of sale be caused, as required by law. The issue concerning the authority of the sheriff to conduct the sale is factual. This Court is bound by the findings by the trial court, and affirmed by the respondent court, that the signing by Provincial Sheriff of the Minutes of Auction Sale (Exh. 55-Bank) and the Certificate of Sale evinced that the auction sale was conducted by the Deputy Sheriff under the direction of the Provincial Sheriff. 17 Another basis for the Court to uphold the regularity of the extrajudicial foreclosure under controversy is the equitable principle of estoppel. Petitioners's admission that as mortgagors, they had asked for an extension of time to redeem subject properties estopped them from impugning the regularity of the conduct of the sale. It bears stressing that on October 10, 1955, appellant Joaquin Valmonte (one of the herein petitioners) sent a letter-request to the appellee bank for additional time within which to exercise the right of redemption over the properties at P35,000.00 (Exh. 33-Bank; 8-Valenton). In view of such request and of the similar request from Congressman Celestino C. Juan, the Bank, through its Board of directors (BOD) Resolution No. 1096, extended the redemption period until December 31, 1955 for the appellants (the petitioners here) to purchase in cash their properties in the amount of the total claim of the bank. 18 Did the aforesaid act of seeking an extension of the redemption period constitute an act of ratification within legal contemplation, thus rendering the petitioners in estoppel? The answer to this important and pertinent question is in the affirmative. If a party in interest enters into a law agreement, stipulation, compromise or arrangement calculated to benefit him in connection with a mortgage foreclosure sale, he inevitably affirms thereby the validity, force and effect of the sale. Similarly, a party cannot later on rely upon the supposed defects of the sale. 19 The act of plaintiffs in asking for an extension of time to redeem the foreclosed properties estopped them from questioning the foreclosure sale thereafter. 20 Since the findings by the trial court are supported by the evidence and the law and the party theorizing upon the alleged irregularities afflicting the extrajudicial foreclosure sale was unable to prove their imputation;

affirmance of the finding of respondent court is indicated. Neither is there any sustainable basis for the second assignment of errors relied upon by petitioners. Petitioners contend that the respondent court erred in applying the principle of merger. Mortgagors averred that the two loans should be considered as one mortgage credit inasmuch as they were constituted between the same parties and on the same properties. Being a single and indivisible obligation, the foreclosure sale in connection with the P5,000.00 loan necessarily included the other loan of P16,000.00. Therefore, there was no outstanding mortgage credit for the P16,000.00 loan, and PNB being the purchaser at the auction sale, was not subrogated to answer for any encumbrance on subject properties. The Court of Appeals erred not on the application of the principle of merger. Merger as one of the means of extinguishing an obligation has the following elements: (1) the merger of the characters of the creditor and debtor must be in the same person; (2) it must take place in the person of either the principal creditor or the principal debtor; and (3) it must be complete and definite. As can be gleaned from the attendant facts and circumstances, there were two mortgages constituted on subject properties by the appelants. The first mortgage was for a loan of P16,000.00 and the second one was for a loan of P5,000.00, by and between petitioners and the PNB. What the Bank did was to foreclose the second mortgage embodied in a separate mortgage contract. Under ordinary circumstances, if a person has a mortgage credit over a property which was sold in an auction sale, the only right left to him was to collect its mortgage credit from the purchaser thereof during the sale conducted. This is so because a mortgage directly and immediately subjects the property on which it is constituted, whoever its possessor may be, to the fulfillment of the obligation for the security of which it was created. 21 However, these steps need not be taken in the present case because PNB was the purchaser of subject properties and it did so with full knowledge that it has a mortgage thereon. Obligations are extinguished by the merger of the rights of the creditor and debtor. In the case under consideration, the merger took place in the person of PNB, the principal creditor in the case. The merger was brought about during the auction sale, PNB purchased the properties on which it had another subsisting mortgage credit. This court is bound by the finding of respondent court that the two loans referred to are separate and distinct and the mere allegation by petitioners that said loans constitute a single indivisible obligation should be stricken off as the said is not supported by evidence. In effect, the mortgage for the P16,000.00 loan was deemed extinguished. While it is true that there was still an annotation on the Transfer Certificate of Title issued to respondent Artemio Valenton, the said annotation or encumbrance was already discharged by operation of

law. Consequently, petitioners' contention that said title issued to Valenton was not valid by reason of the said annotation, is devoid of any legal basis. As aptly held by respondent court: . . . The purchaser in the extrajudicial sale is appellee bank itself. As such purchaser, it acquired the right to pay off the claim of the senior mortgage. However, the senior mortgagee is also appellee bank. In such a case, Art. 1275 of the New Civil Code as invoked by defendants-appellees in their respective briefs, to wit: Art. 1275. The obligation is extinguished from the time characters of creditor and debtor are merged in the same person. applies. The rights pertaining to the personalities of the debtor (mortgagor) and of the creditor (mortgagee) are merged and therefor, in case where the mortgagees of both the senior and junior mortgages are one and the same (herein appellee bank), and especially where the mortgagors of said encumbrances are also one and the same (herein appellant Pastora Valmonte de Leon), the sale to appellee bank operated to divest the rights of the mortgagor (appellant Pastora) of her rights and to vest her rights with respect to the senior mortgage, in the purchaser (appellee bank), subject to such rights of redemption as may be required by law. Records show however that appellant mortgagor failed to redeem the property within the one-year period provided by Act No. 3135, as amended. 22 With respect to the third assignment of errors, untenable is petitioners' contention that the failure of PNB to foreclose the first mortgage for the loan of P16,000.00 was in actuality a pactum commissorium, which is prohibited by law, and the subsequent transfer by PNB to Valenton of the said property is a nullity. Pactum Commissorium takes place when in a mortgage contract, it is stipulated that the ownership of the property would automatically pass to the vendee in case no redemption is made within a given period, thus enabling the mortgagee to acquire ownership of the mortgaged property without need of foredosure. 23 It is not so in the present case where there was foreclosure of the mortgage. When PNB opted to foreclose only the second mortgage for the loan of P5,000.00, it was well within its right to do so. The only condition the law requires in extrajudicial foreclosure is that the loan is already due and demandable and there was failure on the part of mortgagor to pay the mortgage debt. The law does not prohibit a mortgagee from choosing which of the mortgages in his favor to foreclose. It msut be borne in mind that the power to decide whether to foreclose or not resides in the mortgagee. 24 The next pivotal issue to resolve is whether PNB could transfer a valid title to respondent Artemio Valenton despite the existence of a duly

annotated unforeclosed mortgage between PNB and the appellants. The court resolves this issue in the affirmative. Since the appellants failed to redeem within the redemption period and during the extension agreed upon, the effect of such failure to redeem was to vest absolute ownership over subject properteis purchased. 25 The annotation of the unforeclosed mortgage even if appearing on the title of Artemio Valenton did not in any way affect the sale between the latter and PNB. In fact, since there was merger on the part of PNB prior to the sale to said Valenton, any lien which the petitioners were claiming as subsisting was already extinguished. Granting ex gratia argumenti that there was no merger and the unforeclosed mortgage subsisted, PNB still had the right to sell subject properties and the party who purchased the same shall only be subjected to the said encumbrance. Indubitably, petitioners are not the proper parties to insist that there be a foreclosure because as earlier stated, the prerogative to decide whether or not to foreclose is the mortgagee and not with the mortgagor. In light of the foregoing, it is decisively obvious that PNB did not acquire the mortgaged properties by pactum commissorium, but for failure of the petitioners to redeem the same. As to the lien which, they claim, should have hindered the transfer of the certificate of title to the name of Artemio Valenton, the merger of rights on the part of PNB extinguished whatever encumbrance there was over the deeded out and there is no more lien to speak of. The transfer of the certificate of title to Artemio Valenton who was a purchaser for value was valid and the petitioners cannot effectively defeat the title of Artemio Valenton by claiming otherwise. WHEREFORE, for lack of merit, the petition is DENIED and the decision of the Court of Appeals AFFIRMED. No pronouncement as to costs. SO ORDERED. Romero, Vitug, Panganiban and Gonzaga-Reyes, JJ. concur.

of ABACORP. Garcia defaulted in his payments hence ABACORP initiated extrajudicial foreclosure proceedings. The public auction however was suspended on several occasions upon request of Garcia. But, despite several accommodations, Garcia still failed to pay. Hence ABACORP initiated anew extrajudicial foreclosure and public auction sale wherein ABACORP emerged as the sole and winning bidder. Before a certificate of sale could be issued in favor of ABACORP, Garcia filed a complaint for Annulment of Sale with Injunction and Damages [3] with the Regional Trial Court of Legaspi City. The Decision of the trial court not being satisfactory to respondent Garcia, he appealed to the Court of Appeals which reversed the court a quo 1. Declaring null and void the auction sale of the subject properties on December 2, 1991 (should be 1971); 2. Ordering herein defendants to desist from further proceeding with the extrajudicial foreclosure and auction sale of all the twenty-six (26) parcels of land and particularly from issuing and registering the certificate of sale with the Register of Deeds of Albay in favor of defendant-appellee mortgagee ABACA CORPORATION OF THE PHILIPPINES.[4] Contending that the Decision of the Court of Appeals is contrary to law, ABACORP now comes to us with these assigned errors: (a) Respondent Court of Appeals seriously erred when it concluded in its questioned Decision that Sec. 21, Rule 39, of the Revised Rules of Court on execution sale is applicable in the present case; (b) Respondent Court of Appeals seriously erred when it set aside the sale due to alleged inadequacy of the bid price; and, (c) Having had the opportunity to correct the glaring error committed in its questioned Decision, respondent Court of Appeals seriously erred in denying petitioner's motion for reconsideration of 19 December 1994. [5] We find merit in the petition. There are three (3) types of sales arising from failure to pay a mortgage debt, namely, the extrajudicial foreclosure sale, the judicial foreclosure sale and the ordinary execution sale. These in turn are governed by three (3) different laws. Act No. 3135 governs extrajudicial foreclosure sale, Rule 68 of the Rules of Court deals with judicial foreclosure sale, while Rule 39 covers ordinary execution sale. Act No. 3135 or An Act to Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real Estate Morgage applies to the case at bar. In the Real Estate Mortgage executed by respondent Garcia on 25 October 1961 it was provided that Act No. 3135 was to be applied and ABACORP was particularly designated as attorney-in-fact. Thus That if at any time the mortgagor shall fail or refuse to pay the obligations herein secured, or to comply with any of the conditions and stipulations herein agreed, or shall during the time this mortgage is in force, institute insolvency proceedings or involuntarily declared insolvent,

[G.R. No. 118408. May 14, 1997] THE ABACA CORPORATION OF THE PHILIPPINES represented by the Board of Liquidators, petitioner, vs. MARTIN O. GARCIA, and the COURT OF APPEALS, respondents. DECISION BELLOSILLO, J.: THE ABACA CORPORATION OF THE PHILIPPINES (ABACORP), in this petition for review on certiorari pursuant to Rule 45 of the Rules of Court, seeks the reversal of the Decision of respondent Court of Appeals in CAG.R. No. CV-204104 promulgated 30 June 1994 as well as its Resolution of 19 December 1994 denying reconsideration thereof, and praying for the reinstatement of the Decision of the Regional Trial Court - Br. 10, Legaspi City, dated 29 November 1988 holding that Defendant ABACORP or the Board of Liquidators is allowed to proceed with foreclosure proceedings and auction sale of all the 26 parcels of plaintiff included in this case, based on the new balance which includes legal interests, newspaper publication and sheriff's fee. Plaintiff is further ordered to reimburse defendant ABACORP, through the Board of Liquidators, the litigation expenses of P30,224.22 representing the travel expense of the different lawyers who came to Legaspi to attend to this case.[1] The evidence shows that on 25 September 1961 private respondent Martin O. Garcia was granted a loan of P25,000.00 by ABACORP. To secure payment of his obligation Garcia executed a promissory note and a real estage mortgage [2] over his twenty-six (26) parcels of land in favor

or shall use the proceeds of this loan for purposes other than those specified herein or if this mortgage cannot be recorded in the corresponding Registry of Deeds, then all the obligations of the mortgagor secured by this mortgage shall immediately become due, payable and defaulted and the mortgagee may immediately foreclose this mortgage judicially in accordance with the Rules of Court or extrajudicially in accordance with the Act No. 3135 as amended and under Act 2612 as amended. That it is the essence of this contract that effective upon the breach of any condition of this mortgage and in addition to the remedies herein stipulated, the mortgagee is hereby likewise appointed Attorney-in-fact of the mortgagor with full powers and authority, with the use of force, if necessary, to take actual possession of the mortgaged property without the necessity of any judicial order or any permission or power, to collect rents, to eject tenants, to lease or sell the mortgaged property, or any part thereof, at a private sale without previous notice or advertisement of any kind and execute the corresponding bills of sale, lease or other agreement that may be deemed convenient and perform any other act which the mortgagee may deem convenient for the proper administration of the mortgaged property. [6] It was therefore error on the part of respondent Court of Appeals to invoke Rule 39 which applies only to ordinary execution sale. If at all, Rule 39 applies to extrajudicial foreclosure sale but only on the manner of redemption and computation of interest. But the manner of redemption and computation of interest were never raised as issues in the case before us. From the very beginning, it was clear that what was involved was an extrajudicial foreclosure sale. Rule 39 is a rule of procedure with general application, while Act No. 3135 is a specific legislative enactment particularly applicable to the present case. A careful review of the records reveals no irregularity in the conduct of the extrajudicial foreclosure sale. That the entire property was sold was no error at all. Act No. 3135 does not require mortgaged properties to be sold by lot or only so much of the mortgaged property as to cover only the obligation. The levy requirement mentioned by private respondent is mandated by Rule 39 only and not by Act No. 3135. In Fiestan v. Court of Appeals,[7] a case in point, we ruled Levy, as understood under Section 15, Rule 39 of the Rules of Court in relation to execution of money judgments, has been defined by this Court as the act whereby a sheriff sets apart or appropriates for the purpose of satisfying the command of the writ, a part of the whole of the judgmentdebtor's property. In extrajudicial foreclosure of mortgage, the property sought to be foreclosed need not be identified or set apart by the sheriff from the

whole mass of property of the mortgagor for the purpose of satisfying the mortgage indebtedness. For, the essence of a contract of mortgage indebtedness is that a property has been identified or set apart from the mass of the property of the debtor-mortgagor as security for the payment of money or the fulfillment of an obligation to answer the amount of indebtedness, in case of default of payment. By virtue of the special power inserted or attached to the mortgage contract, the mortgagor has authorized the mortgagee-creditor or any other person authorized to act for him to sell said property in accordance with the formalities required under Act No. 3135, as amended (underscoring supplied). The gross inadequacy of price would neither nullify the sale. As we held in Tiongco v. Philippine Veterans Bank[8] While in ordinary sales for reason of equity a transaction may be invalidated on the ground of inadequacy of price, or when such inadequacy shocks one's conscience as to justify the courts to interfere, such does not follow when the law gives the owner the right to redeem as when a sale is made at public auction, upon the theory that the lesser the price the easier it is for the owner to effect redemption (underscoring supplied). WHEREFORE, the decision of the Court of Appeals promulgated 30 June 1994 as well as its Resolution of 19 December 1994 denying reconsideration thereof is REVERSED and SET ASIDE. The Decision of the Regional Trial Court - Br. 10, Legaspi City, of 29 November 1988 allowing defendant Abaca Corporation of the Philippines (petitioner herein) or the Board of Liquidators to proceed with the foreclosure proceedings and the auction sale of all the twenty-six (26) parcels of land based on the new balance, and ordering plaintiff Martin O. Garcia (private respondent herein) to reimburse defendant ABACORP through the Board of Liquidators the litigation expenses of P30,224.22 is REINSTATED. Costs against private respondent Martin O. Garcia. SO ORDERED. Padilla, (Chairman), Vitug, Kapunan, and Hermosisima, Jr., JJ., concur.

G.R. No. 159118

June 28, 2004

VICTOR B. CUADA and HEDY V. CUADA, petitioners, vs. HON. RAY ALAN T. DRILON as Presiding Judge of the RTC, Br. 41, Bacolod City, and PLANTERS PRODUCTS, INC., respondents. RESOLUTION TINGA, J.: In a verified Request for Correction addressed to the Clerk of Court of the Second Division and the Deputy Clerk/Chief, Judicial Records Office, dated April 2, 2004, petitioner spouses Victor B. Cuada and Hedy V. Cuada requested the addressees to "check the records to make the necessary correction in order that we may avoid a manifest failure or a serious miscarriage of justice in this case." According to them, on November 11, 2003, or one (1) day before the expiration of the prescribed fifteen (15)day period, they filed a Motion for Reconsideration, with an attached Amended Petition, of this Courts Resolution dated September 17, 2003, dismissing the petitioners Petition for Certiorari dated June 11, 2003, and noting without action their Motion to Admit Supplemental Pleading dated July 16, 2003. From the record, it appears that the Motion for Reconsideration was posted with the Bacolod City Post Office on November 11, 2003 but it was received by the Court only on March 15, 2004. It appearing that petitioners seasonably filed the Motion for Reconsideration, the R E S O L U T I O N of September 17, 2003 dismissing petitioners Petition for Certiorari has never attained finality. Consequently, theEntry of Judgment made on November 12, 2003 should be recalled. The Motion for Reconsideration, however, should be denied, there being neither cogent reason nor substantial argument to warrant reconsideration. We dismissed the Petition for Certiorari on September 17, 2003 for failure of petitioners to submit a verified statement of the material dates, for being a wrong remedy evidently used, as it was, in place of the lost remedy of appeal, and for disregard of judicial hierarchy. The material date requirement is found in Section 4, Rule 651 in relation to the second paragraph of Section 3, Rule 462 of the Rules of Court. The

last paragraph of Section 3, Rule 46 further provides that "(t)he failure of the petitioner to comply with any of the foregoing requirements shall be sufficient ground for the dismissal of the petition." The Court reiterated in SC Circular No. 1-88,3 in particular No. 4 thereof, that "(a) petition shall, in all cases contain a verified statement of the date when notice of the judgment, order or resolution subject thereof was received, when a motion for reconsideration, if any, was filed, and when notice of the denial thereof was received; otherwise, the petition may be dismissed." Petitioners failure to state the required material dates constitutes sufficient ground for outright dismissal of the petition. Petitioners sought to cure the defect in their petition by filing an Amended Petition containing the pertinent dates. Subsequent compliance, however, does not warrant reconsideration. 4 So, the Amended Petition cannot be acted upon and must only be noted without action. The Petition for Certiorari was dismissed for being a wrong remedy. Petitioners should have appealed the decision of the trial court before the Court of Appeals, since the assailed decision constitutes a final determination of the rights of the parties. Section 1 of Rule 65 explicitly lays down the rule that a special civil action for certiorari is proper only if there is no appeal or any plain, speedy and adequate remedy in the ordinary course of law. Certiorari is not available where the proper remedy is an appeal in due course. 5 There is no reason for the Court to depart from the foregoing principle and sanction petitioners wrong choice. Petitioners also violated the doctrine of judicial hierarchy in filing the petition before this Court. The Supreme Courts original jurisdiction to issue writs of certiorari is not exclusive, as it is shared with the Regional Trial Courts and the Court of Appeals. This concurrence of jurisdiction does not mean, however, that litigants have free reign as to the choice of court to which the petition for certiorari may be filed. Petitions for the issuance of a writ of certiorari against a first level court should be filed with the Regional Trial Court, and those against the latter, before the Court of Appeals. A direct resort to the Supreme Court for the issuance of the writ is allowed only when there are special and important reasons therefor, clearly and specifically set out in the petition. 6 In the petition before us, there are no exceptional and compelling circumstances which would justify a disregard of this rule. These considerations are more than sufficient cause for the dismissal of the petition at bar. Even assuming that a petition for certiorari is the proper remedy, the facts as established by the trial court do not show any grave abuse of discretion on its part in its assessment of the case at hand. The case had its inception on February 11, 1981. Private respondent Planters Products, Inc. filed an action before the Regional Trial Court,

Branch 41, Bacolod City for the recovery of the deficiency on the proceeds of the extrajudicial foreclosure of the mortgage executed by the petitioners in favor of private respondent. Petitioner Victor Cuada represented himself and his wife in the case. Pre-trial was terminated on March 29, 1982. Plaintiff rested its case on February 10, 1986. In their defense, petitioner Victor Cuada testified on direct examination on October 29, 1991 and November 4, 1991. With his testimony on direct examination not yet concluded, no further hearing was held. The lower court set the case for resumption of hearing on February 12, 1992, April 29, 1992, June 8, 1992, July 23, 1992, September 17, 1992 and December 7, 1992. Petitioner Victor Cuadas secretary refused to receive the notice of hearing on February 12, 1992, informing the process server that petitioners were out of the country and their return was uncertain. The subsequent notices of hearing were likewise not served as petitioners had not yet returned from the United States.7 On December 7, 1992, the trial court issued an Order to strike out from the record the testimony of petitioner Victor Cuada because he never completed his testimony. The trial court considered petitioner spouses to have waived further presentation of evidence and the case was deemed submitted for decision.8 By then, several judges had presided over the case. On October 15, 2001, the trial court rendered judgment in favor of respondent Planters Products. 9 Petitioners moved for new trial or reconsideration but this was denied in the Order of April 23, 2003.10 The trial court rendered its decision on the basis only of the evidence presented by the plaintiff, as petitioner Victor Cuada failed to complete his testimony, and the same was properly stricken off by the lower court.11Petitioner Victor Cuada failed to appear at the subsequent hearings during which he could have finished his testimony and the prosecution allowed to cross-examine him. But the direct examination could not be completed as petitioners remained overseas and the notices of hearing could not be properly served upon them. Petitioner Victor Cuada had the duty to complete his testimony and make himself available for cross examination in accordance with fair play and due process. As his oral testimony remained incomplete, the same could not be the subject of cross-examination. It was therefore rendered incompetent and inadmissible in evidence and as such properly stricken off.12 Petitioners claim there was a denial of due process when the trial court issued the order striking off petitioner Victor Cuadas testimony and rendering the assailed decision because it allegedly did so despite absence of valid service of the notices of hearing and other processes upon petitioners. The Court cannot sustain this proposition.

It is not disputed that trial commenced with the full participation of petitioners and they were given the opportunity to present evidence in their defense. Far from being denied the right to be heard, petitioners were given the opportunity to present their evidence but they squandered the opportunity as they failed to complete their evidence. Moreover, the case had been pending before the same trial court for ten (10) years, during which time it was presided by several judges. As petitioners themselves eviscerated their right to present evidence, their invocation of due process appears to be nothing but a desperate maneuver to postpone the execution of the judgment which is in favor of the private respondent, as it should be, under the facts on record and the applicable law. Indeed, even if petitioners were to complete their evidence, still they could not legitimately expect a change in the decision of the trial court. Petitioners only defense is that the law does not allow deficiency judgment in extrajudicial foreclosure of mortgage. This argument must fail, as the lower court correctly held, since it is now well-settled that the creditor is allowed to recover the deficiency from the sale of the property. In a number of cases, this Court held that where the proceeds of the sale are insufficient to cover the debt in an extrajudicial foreclosure of mortgage, the mortgagee is entitled to claim the deficiency from the debtor.13 While Act No. 3135, as amended, does not discuss the mortgagees right to recover the deficiency, neither does it contain any provision expressly or impliedly prohibiting recovery. If the legislature had intended to deny the creditor the right to sue for any deficiency resulting from the foreclosure of a security given to guarantee an obligation, the law would expressly so provide. Absent such a provision in Act. No. 3135, as amended, the creditor is not precluded from taking action to recover any unpaid balance on the principal obligation simply because he chose to extrajudicially foreclose the real estate mortgage. 14 WHEREFORE, in view of the foregoing, the Entry of Judgment on November 12, 2003 is RECALLED. However, the Motion for Reconsideration is DENIED with FINALITY, no compelling reason and no substantial argument having been adduced to warrant the reconsideration sought. Accordingly, the Amended Petition is NOTED WITHOUT ACTION. Let Entry of Judgment be made in the ordinary course. SO ORDERED. Puno, Quisumbing, Austria-Martinez, and Callejo, Sr., concur.

Regional Trial Court of Kalookan City for the issuance of a writ of possession in his favor. The petition was docketed as LRC Case No. C-3462 and assigned to Branch 131, presided over by public respondent. G.R. No. 119247 February 17, 1997 CESAR SULIT, petitioner, vs. COURT OF APPEALS and ILUMINADA CAYCO, respondents. REGALADO, J.: The primary issue posed before the Court, in this appeal by certiorari from a decision 1 of the Court of Appeals, is whether or not the mortgagee or purchaser in an extrajudicial foreclosure sale is entitled to the issuance of a writ of possession over the mortgaged property despite his failure to pay the surplus proceeds of the sale to the mortgagor or the person entitled thereto. Secondarily, it calls for a resolution of the further consequences of such non-payment of the full amount for which the property was sold to him pursuant to his bid. The material facts, as found by respondent court, are not disputed: It appears from the record that on 9 June 1992 petitioner (herein private respondent) Iluminada Cayco executed a Real Estate Mortgage (REM) over Lot 2630 which is located in Caloocan City and covered by TCT No. (23211) 11591 in favor of private respondent (herein petitioner) Cesar Sulit, to secure a loan of P4 Million. Upon petitioner's failure to pay said loan within the stipulated period, private respondent resorted to extrajudicial foreclosure of the mortgage as authorized in the contract. Hence, in a public auction conducted by Notary Public Felizardo M. Mercado on 28 September 1993 the lot was sold to the mortgagee, herein private respondent, who submitted a winning bid of P7 Million. As stated in the Certificate of Sale executed by the notary public (Annex B, petition), the mortgaged property was sold at public auction to satisfy the mortgage indebtedness of P4 Million. The Certificate further states as follows: IT IS FURTHER CERTIFIED, that the aforementioned highest bidder/buyer, CESAR SULIT, being the petitioner/mortgagee thereupon did not pay to the undersigned Notary Public of Kalookan City the said sum of SEVEN MILLION PESOS (P7,000,000.00), Philippine Currency, the sale price of the above-described real estate property together with all improvements existing thereon, which amount was properly credited to the PARTIAL satisfaction of the mortgage debt mentioned in the said real estate mortgage, plus interests, attorney's fees and all other incidental expenses of foreclosure and sale (par. 2, Annex B, petition). On 13 December 1993 private respondent petitioned the On 17 January 1994 respondent Judge issued a decision (should have been denominated as order), the dispositive part of which reads: WHEREFORE, finding the subject petition to be meritorious, the same is hereby GRANTED. As prayed for, let a Writ of Possession be issued in favor of herein petitioner, Cesar Sulit, upon his posting of an indemnity bond in the amount of One Hundred Twenty Thousand (P120,000.00) Pesos (Annex C, petition). On 28 March 1994 petitioner filed a Motion to have the auction sale of the mortgaged property set aside and to defer the issuance of the writ of possession. She invited the attention of the court a quoto some procedural infirmities in the said proceeding and further questioned the sufficiency of the amount of bond. In the same Motion petitioner prayed as an alternative relief that private respondent be directed to pay the sum of P3 Million which represents the balance of his winning bid of P7 Million less the mortgage indebtedness of P4 Million (Annex D, petition). This Motion was opposed by private respondent who contended that the issuance of a writ of possession upon his filing of a bond was a ministerial duty on the part of respondent Judge (Annex E), to which Opposition petitioner submitted a Reply (Annex F, petition). On 11 May 1994 respondent Judge denied petitioner's Motion and directed the issuance of a writ of possession and its immediate enforcement by deputy sheriff Danilo Norberte (Annex G, petition)." 2(Emphasis words supplied for clarity). From the aforesaid orders of the court a quo, herein private respondent Iluminada Cayco filed on May 26, 1994 a petition for certiorari with preliminary injunction and/or temporary restraining order before respondent Court of Appeals, which immediately issued a status quo order restraining the respondent judge therein from implementing his order of January 17, 1994 and the writ of possession issued pursuant thereto. Subsequently, respondent court rendered judgment on November 11, 1994, as follows: IN JUDGMENT, We grant the writ of certiorari and the disputed order of 17 January 1994 which precipitately directed the issuance of a writ of possession in favor of private respondent and the subsequent order of 11 May 1994 which denied petitioner's Motion for Reconsideration are hereby SET ASIDE. Accordingly, private respondent is ordered to pay unto petitioner, through the notary public, the balance or excess of his bid of P7

Million after deducting therefrom the sum of P4,365,280 which represents the mortgage debt and interest up to the date of the auction sale (September 23, 1993), as well as expenses of foreclosure based on receipts which must be presented to the notary public. In the event that private respondent fails or refuses to pay such excess or balance, then the auction sale of 28 September 1993 is deemed CANCELLED and private respondent may foreclose the mortgage anew either in a judicial or extrajudicial proceeding as stipulated in the mortgage contract. Corollary to the principal issue earlier stated, petitioner asserts that respondent Court of Appeals gravely erred when it failed to appreciate and consider the supposed legal significance of the bouncing checks which private respondent issued and delivered to petitioner as payment for the agreed or stipulated interest on the mortgage obligation. He likewise avers that a motion for reconsideration or an appeal, and not certiorari, is the proper remedy available to herein private respondent from an order denying her motion to defer issuance of the writ of possession. Moreover, it is claimed that any question regarding the propriety of the sale and the issuance of the writ of possession must be threshed out in a summary proceeding provided for in Section 8 of Act 3135. There is no merit in petitioner's contention that the dishonored checks amounting to a total of P1,250,000.00, allegedly representing interest of 5% per month from June 9, 1992 to December 9, 1992, were correctly considered by the trial court as the written agreement between the parties. Instead, we find the explanation of respondent court in rejecting such postulate, on the basis of Article 1956 of the Civil Code, 3 to be more logical and plausible, to wit: It is noteworthy that the Deed of Real Estate Mortgage executed by the parties on 9 June 1992 (Annex A, Petition) does not contain any stipulation for payment of interest. Private respondent who maintains that he had an agreement with petitioner for the payment of 5% monthly interest did not produce any other writing or instrument embodying such a stipulation on interest. It appears then that if any such agreement was reached by the parties, it was merely a verbal one which does not conform to the aforequoted statutory provision. Certainly, the dishonored checks claimed to have been issued by petitioner in payment of interest could not have been the written stipulation contemplated in Article 1956 of the Code. Consequently, in the absence of a written stipulation for the imposition of interest on the loan obtained by petitioner, private respondent's assessment thereof has no legal basis. 4 It is elementary that in the absence of a stipulation as to interest, the loan due will now earn interest at the legal rate of 12% per annum 5 which, according to respondent court, is equivalent to P365,280.000.00 computed from December 10, 1992, after private

respondent's obligation became due, until September 23, 1993, the date of the auction sale. It is this amount which should further be deducted from the purchase price of P7,000,000.00, together with any other expenses incurred in connection with the sale, such as the posting and publication of notices, notarial and documentary fees, and assessments or taxes due on the disputed property. It baffles this Court, therefore, why petitioner has continually failed up to the present to submit documentary evidence of the alleged expenses of the foreclosure sale, and this in spite of the express requirement therefor in the certificate of sale 6 issued by the notary public for the purpose of computing the actual amount payable by the mortgagor or redemptioner in the event of redemption. It may thus be safely presumed that such evidence having been willfully suppressed, it would be adverse if produced. 7 Coming now to the main issue in this case, petitioner argues that it is ministerial upon the court to issue a writ of possession after the foreclosure sale and during the period of redemption, invoking in support thereof Sections 7 and 8 of Act 3135 which conjointly provide: Sec. 7. In any sale made under the provisions of this Act, the purchaser may petition the Court of First Instance of the province or place where the property or any part thereof is situated, to give him possession thereof during the redemption period, furnishing bond in an amount equivalent to the use of the property for a period of twelve months, to indemnify the debtor in case it be shown that the sale was made without violating the mortgage or without complying with the requirements of this Act. Such petition shall be made under oath and filed in form of an ex parte motion in the registration or cadastral proceedings if the property is registered, or in special proceedings in the case of property registered under the Mortgage Law or under section one hundred and ninety-four of the Administrative Code, or of any other real property encumbered with a mortgage duly registered in the office of any register of deeds in accordance with any existing law, and in each case the clerk of the court shall, upon the filing of such petition, collect the fees specified in paragraph eleven of section one hundred and fourteen of Act Numbered Twenty-eight hundred and sixty-six, and the court shall, upon approval of the bond, order that a writ of possession issue, addressed to the sheriff of the province in which the property is situated, who shall execute said order immediately. Sec. 8. The debtor may, in the proceedings in which possession was requested, but not later than thirty days after the purchaser was given possession, petition that the sale be set aside and the writ of possession cancelled, specifying the damages suffered by him, because the mortgage was not violated or the sale was not made in accordance with the provisions hereof, and the Court shall take cognizance of this petition in accordance with the

summary procedure provided for in section one hundred and twelve of Act Number Four hundred and ninety-six; and if it finds the complaint of the debtor justified, it shall dispose in his favor of all or part of the bond furnished by the person who obtained possession. Either of the parties may appeal from the order of the judge in accordance with section fourteen of Act Numbered Four hundred and ninety-six; but the order of possession shall continue in effect during the pendency of the appeal. The governing law thus explicitly authorizes the purchaser in a foreclosure sale to apply for a writ of possession during the redemption period by filing an ex parte motion under oath for that purpose in the corresponding registration or cadastral proceeding in the case of property with Torrens title. Upon the filing of such motion and the approval of the corresponding bond, the law also in express terms directs the court to issue the order for a writ of possession. No discretion appears to be left to the court. Any question regarding the regularity and validity of the sale, as well as the consequent cancellation of the writ, is to be determined in a subsequent proceeding as outlined in Section 8, and it cannot be raised as a justification for opposing the issuance of the writ of possession since, under the Act, the proceeding for this is ex parte. 8 Such recourse is available to a mortgagee, who effects the extrajudicial foreclosure of the mortgage, even before the expiration of the period of redemption provided by law and the Rules of Court. 9 The rule is, however, not without exception. Under Section 35, Rule 39 of the Rules of Court, which is made applicable to the extrajudicial foreclosure of real estate mortgages by Section 6 of Act 3135, the possession of the mortgaged property may be awarded to a purchaser in the extrajudicial foreclosure "unless a third party is actually holding the property adversely to the judgment debtor." 10 Thus, in the case of Barican, et al. vs. Intermediate Appellate Court, et al., 11 this Court took into account the circumstances that long before the mortgagee bank had sold the disputed property to the respondent therein, it was no longer the judgment debtor who was in possession but the petitioner spouses who had assumed the mortgage, and that there was a pending civil case involving the rights of third parties. Hence, it was ruled therein that under the circumstances, the obligation of a court to issue a writ of possession in favor of the purchaser in a foreclosure of mortgage case ceases to be ministerial. Now, in forced sales low prices are generally offered and the mere inadequacy of the price obtained at the sheriff's sale, unless shocking to the conscience, has been held insufficient to set aside a sale. This is because no disadvantage is caused to the mortgagor. On the contrary, a mortgagor stands to gain with a reduced price because he possesses the right of redemption. When there is the right to redeem, inadequacy of price becomes immaterial since the judgment debtor may reacquire the property or sell his right to redeem, and thus recover the loss he claims

to have suffered by reason of the price obtained at the auction sale.

12

However, also by way of an exception, in Cometa, et al. vs. Intermediate Appellate Court, et al. 13 where the properties in question were found to have been sold at an unusually lower price than their true value, that is, properties worth at least P500,000.00 were sold for only P57,396.85, this Court, taking into consideration the factual milieu obtaining therein as well as the peculiar circumstances attendant thereto, decided to withhold the issuance of the writ of possession on the ground that it could work injustice because the petitioner might not be entitled to the same. The case at bar is quite the reverse, in the sense that instead of an inadequacy in price, there is due in favor of private respondent, as mortgagor, a surplus from the proceeds of the sale equivalent to approximately 40% of the total mortgage debt, which excess is indisputably a substantial amount. Nevertheless, it is our considered opinion, and we so hold, that equitable considerations demand that a writ of possession should also not issue in this case. Rule 68 of the Rules of Court provides: Sec. 4. Disposition of proceeds of sale. The money realized from the sale of mortgaged property under the regulations hereinbefore prescribed shall, after deducting the costs of the sale, be paid to the person foreclosing the mortgage, and when there shall be any balance or residue, after paying off such mortgage or other incumbrances, the same shall be paid to the junior incumbrancers in the order of their priority, to be ascertained by the court, or if there be no such incumbrancers or there be a balance or residue after payment of such incumbrancers, then to the mortgagor or his agent, or to the person entitled to it. The application of the proceeds from the sale of the mortgaged property to the mortgagor's obligation is an act of payment, not payment by dation; hence, it is the mortgagee's duty to return any surplus in the selling price to the mortgagor. 14 Perforce, a mortgagee who exercises the power of sale contained in a mortgage is considered a custodian of the fund, and, being bound to apply it properly, is liable to the persons entitled thereto if he fails to do so. And even though the mortgagee is not strictly considered a trustee in a purely equitable sense, but as far as concerns the unconsumed balance, the mortgagee is deemed a trustee for the mortgagor or owner of the equity of redemption. 15 Commenting on the theory that a mortgagee, when he sells under a power, cannot be considered otherwise than as a trustee, the vicechancellor in Robertson vs. Norris (1 Giff . 421) observed: "That expression is to be understood in this sense: that with the power being given to enable him to recover the mortgage money, the court requires that he shall exercise the power of sale in a provident way, with a due regard to the rights and interests of the mortgagor in the surplus money to be produced by the sale." 16

The general rule that mere inadequacy of price is not sufficient to set aside a foreclosure sale is based on the theory that the lesser the price the easier it will be for the owner to effect the redemption. 17 The same thing cannot be said where the amount of the bid is in excess of the total mortgage debt. The reason is that in case the mortgagor decides to exercise his right of redemption, Section 30 of Rule 39 provides that the redemption price should be equivalent to the amount of the purchase price, plus one per cent monthly interest up to the time of the redemption, 18 together with the amount of any assessments or taxes which the purchaser may have paid thereon after purchase, and interest on such last-named amount at the same rate. 19 Applying this provision to the present case would be highly iniquitous if the amount required for redemption is based on P7,000.000.00, because that would mean exacting payment at a price unjustifiably higher than the real amount of the mortgage obligation. We need not elucidate on the obvious. Simply put, such a construction will undeniably be prejudicial to the substantive rights of private respondent and it could even effectively prevent her from exercising the right of redemption. Where the redemptioner chooses to exercise his right of redemption, it is the policy of the law to aid rather than to defeat his right. It stands to reason, therefore, that redemption should be looked upon with favor and where no injury will follow, a liberal construction will be given to our redemption laws, specifically on the exercise of the right to redeem. Conformably hereto, and taking into consideration the facts obtaining in this case, it is more in keeping with the spirit of the rules, particularly Section 30 of Rule 39, that we adopt such interpretation as may be favorable to the private respondent. Admittedly, no payment was made by herein petitioner, as the highest bidder, to the notary public who conducted the extrajudicial foreclosure sale. We are not unmindful of the rule that it is not necessary for the mortgagee to pay cash to the sheriff or, in this case, the notary public who conducted the sale. It would obviously serve no purpose for the sheriff or the notary public to go through the idle ceremony of receiving the money and paying it back to the creditor, under the truism that the lawmaking body did not contemplate such a pointless application of the law in requiring that the creditor must bid under the same conditions as any other bidder. 20 It bears stressing that the rule holds true only where the amount of the bid represents the total amount of the mortgage debt. In case of a surplus in the purchase price, however, there is jurisprudence to the effect that while the mortgagee ordinarily is liable only for such surplus as actually comes into his hands, but he sells on credit instead of for cash, he must still account for the proceeds as if the price were paid in cash, and in an action against the mortgagee to recover the surplus, the latter cannot raise the defense that no actual cash was received. 21 We cannot simply ignore the importance of surplus proceeds because by their very nature, surplus money arising from a sale of land under a

decree of foreclosure stands in the place of the land itself with respect to liens thereon or vested rights therein. They are constructively, at least, real property and belong to the mortgagor or his assigns. 22 Inevitably, the right of a mortgagor to the surplus proceeds is a substantial right which must prevail over rules of technicality. Surplus money, in case of a foreclosure sale, gains much significance where there are junior encumbrancers on the mortgaged property. Jurisprudence has it that when there are several liens upon the premises, the surplus money must be applied to their discharge in the order of their priority. 23 A junior mortgagee may have his rights protected by an appropriate decree as to the application of the surplus, if there be any, after satisfying the prior mortgage. His lien on the land is transferred to the surplus fund. 24 And a senior mortgagee, realizing more than the amount of his debt on a foreclosure sale, is regarded as a trustee for the benefit of junior encumbrancers. 25 Upon the strength of the foregoing considerations, we cannot countenance the apparent paltriness that petitioner persistently accords the right of private respondent over the surplus proceeds. It must be emphasized that petitioner failed to present the receipts or any other proof of the alleged costs or expenses incurred by him in the foreclosure sale. Even the trial court failed or refused to resolve this issue, notwithstanding the fact that this was one of the grounds raised in the motion filed by private respondent before it to set aside the sale. Since it has never been denied that the bid price greatly exceeded the mortgage debt, petitioner cannot be allowed to unjustly enrich himself at the expense of private respondent. As regards the issue concerning the alleged defect in the publication of the notice of the sale, suffice it to state for purposes of this discussion that a question of noncompliance with the notice and publication requirements of an extrajudicial foreclosure sale is a factual issue and the resolution thereof by the lower courts is binding and conclusive upon this Court, 26 absent any showing of grave abuse of discretion. In the case at bar, both the trial court and respondent Court of Appeals have found that the sale was conducted in accordance with law. No compelling reason exists in this case to justify a rejection of their findings or a reversal of their conclusions. There is likewise no merit in the argument that if private respondent had wanted to question the validity of the sale, she should have filed a petition to set the same aside and to cancel the writ of possession. These, it is argued, should have been disposed of in accordance with the summary procedure laid down in Section 112 of the Land Registration Act, provided the petition is filed not later than thirty days after the purchaser was given possession of the land. Considering, however, that private respondent has filed a motion to set aside the sale and to defer

the issuance of a writ of possession before the court where the ex parte petition for issuance of such writ was then pending, we deem the same to be substantial compliance with the statutory prescription. We, however, take exception to and reject the last paragraph in the dispositive portion of the questioned decision of respondent court, which we repeat: In the event that private respondent fails or refuses to pay such excess or balance, then the auction sale of 28 September 1993 is deemed CANCELLED and private respondent (petitioner herein) may foreclose the mortgage anew either in a judicial or extrajudicial proceeding as stipulated in the mortgage contract. for lack of statutory and jurisprudential bases. The quoted phrase "as stipulated in the mortgage contract" does not, of course, envision such contingency or warrant the suggested alternative procedure. Section 4 of Rule 64, hereinbefore quoted, merely provides that where there is a balance or residue after payment of the mortgage, the same shall be paid to the mortgagor. While the expedient course desired by respondent court is commendable, there is nothing in the cited provision from which it can be inferred that a violation thereof will have the effect of nullifying the sale. The better rule is that if the mortgagee is retaining more of the proceeds of the sale than he is entitled to, this fact alone will not affect the validity of the sale but simply gives the mortgagor a cause of action to recover such surplus. 27 This is likewise in harmony with the decisional rule that in suing for the return of the surplus proceeds, the mortgagor is deemed to have affirmed the validity of the sale since nothing is due if no valid sale has been made. 28 In the early case of Caparas vs. Yatco, etc., et al., 29 it was also held that where the mortgagee has been ordered by the court to return the surplus to the mortgagor or the person entitled thereto, and the former fails to do so and flagrantly disobeys the order, the court can cite the mortgagee for contempt and mete out the corresponding penalty under Section 3(b) of the former Rule 64 (now Rule 71) of the Rules of Court. WHEREFORE, the questioned decision of the Court of Appeals is MODIFIED by deleting the last paragraph of itsfallo, but its disposition of this case in all other respects is hereby AFFIRMED. SO ORDERED. Romero, Puno, Mendoza and Torres, Jr., JJ., concur.

SECTION 3 G.R. NO. 144435 February 6, 2007

and refused to vacate the same. Hence, Eulogio and the heirs of Salud filed a Petition for the issuance of a writ of possession with the RTC of Pasig. The case was docketed as Case No. R-3457. Subsequently, the trial court issued an order granting the writ of possession. However, before Eulogio and the heirs of Salud could take possession of the property, Baluyut filed an action for annulment of mortgage, extrajudicial foreclosure and sale of the subject property, as well as cancellation of the title issued in the name of Eulogio and the heirs of Salud, plus damages. The case was docketed as Civil Case No. 52268 and was subsequently consolidated with Case No. R-3457. In the meantime, Eulogio died and was substituted by his heirs. After trial on the merits, the trial court issued a Decision on September 13, 1995 dismissing Baluyuts complaint.8 Aggrieved by the trial courts Decision, herein petitioner filed an appeal with the CA. On December 21, 1999, the CA promulgated the presently assailed Decision affirming the judgment of the trial court. 9 Petitioner filed a Motion for Reconsideration but the same was denied in a Resolution issued by the CA on August 4, 2000. 10 Hence, the present petition with the following assignment of errors: I The decision and the resolution are both palpably infirm in holding that no prior demand to pay is necessary for a loan to mature when there is conflict between the date of maturity of the loan as stated in the Deed of Real Estate Mortgage and the Promissory Note on the one hand and the real date of its maturity on the other. II The decision and the resolution are both palpably infirm in holding that the sheriff who conducted the foreclosure proceedings should be presumed to have regularly performed his duty in conducting the foreclosure proceedings despite the inability of the Office of the Provincial Sheriff who had been ordered by the trial court to produce the records of the foreclosure in question and show that there was compliance with the required posting of notices in three public places and with the required publication for three consecutive weeks in a newspaper of general circulation. III That the Decision and Resolution are legally infirm in holding that because the Petitioner-Appellant failed to invoke her right to be sent an Assessment Notice by the highest bidder thirty days before the expiration of the right of legal redemption during the trial and on appeal, it should be deemed that she had waived her right to this benefit under the law despite a clear showing that the said mandatory requirement should have been strictly observed before title could be consolidated in favor of the highest

GUILLERMINA BALUYUT, Petitioner, vs. EULOGIO POBLETE, SALUD POBLETE and THE HON.COURT OF APPEALS, Respondents. DECISION AUSTRIA-MARTINEZ, J.: Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to reverse the Decision1 of the Court of Appeals (CA) dated December 21, 1999 and its Resolution2 of August 4, 2000 in CA-G.R. CV No. 51534. The assailed CA Decision affirmed the Decision of the Regional Trial Court (RTC) of Pasig, Branch 167 which dismissed herein petitioners Complaint in Civil Case No. 52268, while the questioned Resolution denied petitioners Motion for Reconsideration. The facts of the case are as follows: On July 20, 1981, herein petitioner, Guillermina Baluyut (Baluyut), loaned from the spouses Eulogio and Salud Poblete the sum of P850,000.00. As evidence of her indebtedness, Baluyut signed, on even date, a promissory note for the amount borrowed3 . Under the promissory note, the loan shall mature in one month. To secure the payment of her obligation, she conveyed to the Poblete spouses, by way of a real estate mortgage contract, a house and lot she owns, covered by Transfer Certificate of Title (TCT) No. 137129 and located in Barrio Mapuntod, then Municipality of Mandaluyong, Province of Rizal.4 Upon maturity of the loan, Baluyut failed to pay her indebtedness. The Poblete spouses subsequently decided to extrajudicially foreclose the real estate mortgage. On August 27, 1982, the mortgaged property was sold on auction by the Provincial Sheriff of Rizal to the Poblete spouses who were the highest bidders, as evidenced by a Certificate of Sale issued pursuant thereto.5 Baluyut failed to redeem the subject property within the period required by law prompting Eulogio Poblete to execute an Affidavit of Consolidation of Title.6 Subsequently, TCT No. 43445 was issued in the name of Eulogio and the heirs of Salud, who in the meantime, died.7 However, Baluyut remained in possession of the subject property

bidder as provided for in the certificate of sale issued by the sheriff.11 In her first assigned error, petitioner contends that herein private respondents witness, a certain Atty. Edwina Mendoza, is a competent witness and that her testimony, that the maturity of the loan is one year, is acceptable proof of the existence of collateral agreements which were entered into by the parties who executed the Promissory Note and the Real Estate Mortgage prior, contemporaneous and subsequent to the execution of these documents. Petitioner also argues that the issue of the real date of the maturity of the loan can be settled only by a formal letter of demand indicating the sum due and the specific date of payment which is the duty of the private respondents to give; that absent said letter of demand, the loan may not be considered to have matured; that, as a consequence, the property given as a collateral may not be foreclosed and the subsequent consolidation of title over the subject property should be annulled. Petitioner further contends that even if the issue on the term of the loan was first brought up in petitioners Addendum to the Motion for Reconsideration filed with the CA, the appellate court may still properly consider this issue in the interest of justice and equity considering that this is a matter of record and has some bearing on the other issues submitted for resolution. Anent her second assignment of error, petitioner contends that the CA erred in relying on the rule on presumption of regularity in the sheriffs performance of his duties relative to the foreclosure of the questioned property absent any evidence presented by petitioner to prove that the sheriff failed to comply with the legal requirements in the sale of the foreclosed properties. Petitioner argues that under the law, the sheriff is required to submit an Affidavit of Posting of Notices to the clerk of court and to the judge before he is allowed to schedule an auction sale. However, per letter from the Office of the Clerk of Court, there are no records of the foreclosure proceedings involving the subject property. Based on this premise, petitioner concludes that since the existence of these documents is supposed to be in the custody of the sheriffs office and that the private respondents are supposed to have copies of these documents, being the ones who prosecuted the foreclosure proceedings, petitioners contention that there was non-compliance with the legal requirements for the validity of the foreclosure proceedings partakes of a negative allegation which she need not prove. Petitioner argues that in the absence of documents evidencing the foreclosure proceedings over the subject property, the lower court should have acted judiciously by annulling the foreclosure and ordering the repeat of the proceedings. As to her third assigned error, petitioner asserts that despite the fact that she is entitled under the law to an Assessment Notice or Notice of Redemption coming from the highest bidder 30 days before the expiration of the period to redeem apprising her of the principal amount, the interest, taxes and other lawful fees due in case she opts to exercise her right of redemption, she did not receive any notice of this kind. Petitioner contends that her right to this notice is not subject to waiver

and that her failure to invoke the same during trial and on appeal does not preclude her from invoking such right in her motion for reconsideration filed with the CA and in the present petition. In their Motion to Dismiss, which the Court treated as their comment on the petition, private respondents contend that the petition should be dismissed on the ground that no question of law was raised therein. Private respondents argue that the issue as to the supposed conflict between the date of maturity of the loan as stated in the Deed of Real Estate Mortgage and the Promissory Note, on one hand, and the real date of maturity as agreed upon by the parties, on the other, as well as the question of whether or not the sheriff who conducted the foreclosure proceedings involving the subject property complied with the legal requirements of posting and publication are questions of fact which are not proper subjects of a petition for review on certiorari. Furthermore, private respondents also assert in their Memorandum that the questions of fact being raised by petitioner had already been ruled upon by the RTC and the CA in favor of private respondents; that the findings of fact of the RTC and the CA are binding on this Court. The Court finds the petition without merit. Petitioner admits that the issue regarding the date of maturity of the loan which she incurred from the Poblete spouses was first brought up only in her Addendum to the Motion for Reconsideration filed before the CA. In an effort to clothe her argument with merit, petitioner contends that the CA should have properly considered this issue in the interest of justice and equity. The Court is not persuaded. It is settled that an issue not raised during trial could not be raised for the first time on appeal as to do so would be offensive to the basic rules of fair play, justice, and due process.12 Contrary to petitioners contention, it would be the height of injustice if the CA allowed her to raise an issue at a very late stage of the proceedings. It would be unfair to the adverse party who would have no opportunity to present evidence in contra to the new theory, which it could have done had it been aware of it at the time of the hearing before the trial court.13 It is true that this rule admits of exceptions as in cases of lack of jurisdiction, where the lower court committed plain error, where there are jurisprudential developments affecting the issues, or when the issues raised present a matter of public policy. 14 However, the Court finds that none of these exceptions are present in the instant case. In addition, the issue regarding the date of maturity of the loan is factual and settled is the rule that only questions of law may be raised in a petition for review on certiorari under Rule 45 of the Rules of Court, as the Supreme Court is not a trier of facts. 15 It is not the function of this Court to review, examine and evaluate or weigh the probative value of the evidence presented. 16 While there are also exceptions to this rule such as when the factual findings of the trial court and the CA are contradictory; when the inference made by the CA is manifestly mistaken or absurd; when the judgment of the CA is premised on its misapprehension of facts; and, when the CA failed to resolve relevant

facts which, if properly considered, would justify a modification or reversal of the decision of the appellate court, 17 this Court finds that the present case does not fall under any of these exceptions. Even if petitioner had properly raised the issue regarding the real date of maturity of the loan, it is a long-held cardinal rule that when the terms of an agreement are reduced to writing, it is deemed to contain all the terms agreed upon and no evidence of such terms can be admitted other than the contents of the agreement itself.18 In the present case, the promissory note and the real estate mortgage are the law between petitioner and private respondents. It is not disputed that under the Promissory Note dated July 20, 1981, the loan shall mature in one month from date of the said Promissory Note. Petitioner makes much of the testimony of Atty. Edwina Mendoza that the maturity of the loan which petitioner incurred is one year. However, evidence of a prior or contemporaneous verbal agreement is generally not admissible to vary, contradict or defeat the operation of a valid contract.19 While parol evidence is admissible to explain the meaning of written contracts, it cannot serve the purpose of incorporating into the contract additional contemporaneous conditions which are not mentioned at all in writing, unless there has been fraud or mistake. 20In the instant case, aside from the testimony of Atty. Mendoza, no other evidence was presented to prove that the real date of maturity of the loan is one year. In fact there was not even any allegation in the Complaint and in the Memorandum filed by petitioner with the trial court to the effect that there has been fraud or mistake as to the date of the loans maturity as contained in the Promissory Note of July 20, 1981. Moreover, during her cross-examination, petitioner herself never claimed that the loan shall mature in one year despite being questioned regarding its maturity. She testified thus: Q You said that you borrowed P850,000.00 to [sic] Mrs. Poblete, is that correct? A Yes sir. Q In fact, you signed a Real Estate Mortgage marked as Exhibit "B"? A Yes sir. Q When you signed this Deed of Real Estate Mortgage, you also signed a Promisory [sic] Note, is that correct? RECORD: Witness did not answer. Q Did you sign or not a Promisory [sic] note in relation to this Real Estate Mortgage. A I dont remember sir. Q You dont remember. I am showing to you a Promisory Note with your signature, did you not sign this dated July 20, 1981? A Yes sir. Q Now, according to this Promisory [sic] Note, the loan is for one (1) month from July 20, 1981, did you pay for that loan on its maturity date? A I did not sir. Q Up to now, you have not paid that loan? A I have not sir.

Q What happen [sic] to the mortgage when you did not paid [sic] that loan from one (1) month after July 20, 1981? A None sir.21 In sum, petitioner failed to present clear and convincing evidence to prove her allegation that the real agreement of the parties is for the loan to mature in one year. As to the second assigned error, the prevailing jurisprudence is that foreclosure proceedings have in their favor the presumption of regularity and the burden of evidence to rebut the same is on the petitioner.22 Moreover, the Court agrees with the CA that a mortgagor who alleges absence of a requisite has the burden of establishing that fact.23 Petitioner failed in this respect as she did not present any evidence to prove her allegations. Moreover, the fact that the records of the foreclosure proceedings involving the subject property could not be found does not necessarily mean that the legal requirements of posting and publication had not been complied with. Private respondents were able to present the Affidavit of Publication24 executed by the publisher of Nuevo Horizonte, a newspaper of general circulation, together with a clipping25 of the published notice attached thereto, to prove that notices of the sale of the subject property were validly published in accordance with law. The affidavit of publication executed by the publisher of a newspaper stating therein that said newspaper is of general circulation and that the requisite notice of foreclosure sale was published in said paper in accordance with law constitutes prima facie evidence of compliance with the required publication.26 As to the alleged lack of posting of the notices of sale in at least three public places, herein petitioner failed to discharge her burden of proving by convincing evidence her allegation that there was actually no compliance with the posting requirement. Hence, in the absence of contrary evidence, the presumption prevails that the sheriff performed his official duty of posting the notices of sale.27 The Courts ruling in Olizon v. Court of Appeals,28 insofar as posting and publication requirements in mortgage foreclosure sales are concerned, is instructive: We take judicial notice of the fact that newspaper 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 [a] 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. The object of a notice of sale is to inform the public of the nature and condition of the property to be sold, and of the time, place and terms of the sale. Notices are given for the purpose of securing bidders and to prevent a sacrifice of the property. If these objects are attained, immaterial errors and mistakes will not affect the sufficiency of the notice; but if mistakes or omissions occur in the notices of sale, which are calculated to deter or mislead bidders, to depreciate the value of the property, or to prevent it from bringing a fair price, such mistakes or omissions will be fatal to the validity of the notice, and also to the sale made pursuant thereto. In the instant case, the aforesaid objective was attained since there was sufficient publicity of the sale through the newspaper publication. There is completely no showing that the property was sold for a price far below its value as to insinuate any bad faith, nor was there any showing or even an intimation of collusion between the sheriff who conducted the sale and respondent bank. This being so, the alleged non-compliance with the posting requirement, even if true, will not justify the setting aside of the sale.29 In the present case, there was sufficient evidence to prove that notices of the foreclosure sale of the subject property were published in accordance with law and that there was no allegation, much less proof, that the property was sold for a price which is considerably lower than its value as to show collusion between the sheriff and herein private respondents. Hence, even granting that the sheriff failed to post the notices of foreclosure in at least three public places, such failure, pursuant to Olizon, is not a sufficient basis in nullifying the auction sale and the subsequent issuance of title in favor of private respondents. As to petitioners argument that the sheriff in charge of the auction sale is required to execute an affidavit of posting of notices, the Court agrees with private respondents contention that petitioners reliance on the provisions of Section 5, Republic Act (R.A.) No. 720, as amended by R.A. No. 593930 , as well as on the cases ofRoxas v. Court of Appeals,31 Pulido v. Court of Appeals32 and Tambunting v. Court of Appeals,33 is misplaced as the said provision of law refers specifically and exclusively to the foreclosure of mortgages covering loans granted by rural banks. In the present case, the contracts of loan and mortgage are between private individuals. The governing law, insofar as the extrajudicial foreclosure proceedings are concerned, is Act No. 3135, as amended by Act No. 4118. 34 Section 3 of the said law reads as follows: 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. Unlike in the amended provisions of Section 5, R.A. No. 720, nowhere in the above-quoted provision of Act No. 3135, as amended, or in any Section thereof, is it required that the sheriff must execute an affidavit to prove that he published notices of foreclosure in accordance with the requirements of law. As to the last assigned error, suffice it to say that the Court agrees with the findings of the CA that the issue regarding petitioners right to receive an Assessment Notice or Notice of Redemption from private respondents as the highest bidders during the auction sale was raised only in her Addendum to Motion for Reconsideration of the Decision of the CA. The Court reiterates the rule that points of law, theories, issues and arguments not brought to the attention of the lower court need not be, and ordinarily will not be, considered by a reviewing court, as these cannot be raised for the first time on appeal.35 Moreover, like the issue regarding the date of maturity of the loan, the question of whether or not petitioner received a copy of an Assessment Notice or Notice of Redemption from private respondents is also factual. As earlier explained, questions of fact are not proper subjects of appeal by certiorari under Rule 45 of the Rules of Court as this mode of appeal is confined to questions of law.36 Besides, there is nothing under Act No. 3135 which requires the highest bidder or purchaser to furnish the mortgagor or redemptioner an Assessment Notice or Notice of Redemption prior to the expiration of the period of redemption. Even the pertinent provisions of Section 30, Rule 3937 of the old Rules of Court, which are the rules applicable in the present case, do not require that the mortgagor or redemptioner be furnished by the purchaser notice of any assessments or taxes which the latter may have paid after the purchase of the auctioned property, thus: Sec. 30. Time and manner of, and amounts payable on, successive redemptions, notice to be given and filed. The judgment debtor or redemptioner may redeem the property from the purchaser at any time within twelve (12) months after the sale, on paying the purchaser the amount of his purchase with one per centum per month interest thereon in addition, up to the time of redemption, together with the amount of any assessments or taxes which the purchaser may have paid thereon after purchase and interest on such last named amount at the same rate; and if the purchaser be also a creditor having a prior lien to that of the redemptioner, other than the judgment under which such purchase was made, and the amount of such other lien, with interest. Property so redeemed may again be redeemed within sixty (60) days after the last redemption upon payment of the sum paid on the last redemption, with two per centum thereon in addition, and the amount of any assessments or taxes which the last redemptioner may have paid thereon after redemption by him, with interest of such last-named amount, and in addition, the amount of any liens held by said last redemptioner prior to

his own, with interest. The property may be again, and as often as a redemptioner is so disposed, redeemed from any previous redemptioner within sixty (60) days after the last redemption, on paying the sum paid on the last previous redemption, with two per centum thereon in addition, and the amounts of any assessments or taxes which the last previous redemptioner paid after the redemption thereon, with interest thereon, and the amount of any liens held by the last redemptioner prior to his own, with interest. Written notice of any redemption must be given to the officer who made the sale and a duplicate filed with the Registrar of Deeds of the province, and if any assessment of taxes are paid by the redemptioner or if he has or acquires any lien other than that upon which the redemption was made, notice thereof must in like manner be given to the officer and filed with the Registrar of Deeds; if such notice be not filed, the property may be redeemed without paying such assessments, taxes, or liens. (emphasis supplied) Hence, even granting, for the sake of argument, that private respondents failed to comply with the directive in the Certificate of Sale issued by the Ex-Officio Provincial Sheriff of Rizal and the Deputy Sheriff In-Charge by giving a copy of statements of the amount of assessments or taxes which they may have paid on account of the purchase of the subject property, such failure would not invalidate the auction sale and the subsequent transfer of title over the subject property in their favor. It bears to note that the purpose for requiring the purchaser to furnish copies of the amounts of assessments or taxes which he may have paid is to inform the mortgagor or redemptioner of the actual amount which he should pay in case he chooses to exercise his right of redemption. If no such notice is given, the only effect is that the property may be redeemed without paying such assessments or taxes. 38 In fact, it would have been beneficial on the part of herein petitioner if private respondents failed to submit to the office of the sheriff and furnish her a copy of the statements of the taxes and assessments they paid because in such a case petitioner would have been excused from reimbursing such assessments and taxes if she redeemed the property. The fact remains, however, that petitioner failed to redeem the subject property. WHEREFORE, the instant petition is DENIED and the assailed Decision and Resolution of the Court of Appeals are AFFIRMED in toto. Costs against petitioner. SO ORDERED. MA. ALICIA AUSTRIA-MARTINEZ Associate Justice

[G.R. No. 139437. December 8, 2000] LANGKAAN REALTY DEVELOPMENT, INC., petitioner, vs. UNITED COCONUT PLANTERS BANK, and HON. COURT OF APPEALS, respondents. DECISION GONZAGA-REYES, J.: This is a Petition for Review on Certiorari under Rule 45 seeking to set aside the decision of the Court of Appeals in CA-G.R. No. CV 53514 which affirmed the decision of the Regional Trial Court of Imus, Cavite, Branch 20, in Civil Case No. 360-89, and the Resolution of the Court of Appeals denying the petitioners Motion for Reconsideration. The antecedent facts are as follows: Petitioner Langkaan Realty Development Corporation (LANGKAAN, for brevity) was the registered owner of a 631,693 square meter parcel of land covered by Transfer Certificate of Title No. 111322, and located at Langkaan, Dasmarinas, Cavite. On April 8, 1983, petitioner LANGKAAN executed a Real Estate Mortgage over the above-mentioned property in favor of private respondent United Coconut Planters Bank (UCPB) as a security for a loan obtained from the bank by Guimaras Agricultural Development, Inc. (GUIMARAS) in the amount of P3,000,000.00. [1] LANGKAAN and GUIMARAS agreed to share in the total loan proceeds that the latter may obtain from UCPB.[2] Subsequently, another loan of P2,000,000.00 was obtained by GUIMARAS, totaling its obligation to the bank to P5,000,000.00. The loan was fully secured by the real estate mortgage which covered all obligations obtained from UCPB by either GUIMARAS or LANGKAAN before, during or after the constitution of the mortgage. [3] Also provided in the mortgage agreement is an acceleration clause stating that any default in payment of the secured obligations will render all such obligations due and payable, and that UCPB may immediately foreclose the mortgage. [4] GUIMARAS defaulted in the payment of its loan obligation. [5] On July 28, 1986, private respondent UCPB filed a Petition for Sale under Act No. 3135 [6], as amended, with the Office of the Clerk of Court and Ex-officio Sheriff of RTC of Imus, Cavite. The petition was given due course, and a Notice of Extra-judicial Sale of LANGKAANs property was issued by Acting Clerk of Court II and Ex-officio Sheriff Regalado Eusebio on August

4, 1986, setting the sale on August 29, 1986 at the main entrance of the Office of the Clerk of Court of RTC of Imus. [7] The Notice of Extra-judicial Sale was published in the Record Newsweekly, [8] and was certified by Court Deputy Sheriff Nonilon A. Caniya to have been duly posted. [9] On August 29, 1986, the mortgaged property was sold for P3,095,000.00 at public auction to private respondent UCPB as the highest bidder, and a corresponding Certificate of Sale was issued in favor of the bank. As petitioner LANGKAAN failed to redeem the foreclosed property within the redemption period, the title of the property was consolidated in the name of UCPB on December 21, 1987, and a new Transfer Certificate of Title with no. T-232040 was issued in the latters favor. On March 31, 1989, LANGKAAN, through counsel, Atty. Franco L. Loyola wrote UCPB a letter offering to buy back the foreclosed property for P4,000,000.00. [10] This offer was rejected by the bank in a letter dated May 22, 1989, stating that the current selling price for the property was already P6,500,000.00. [11] On May 30, 1989, petitioner LANGKAAN filed a Complaint for Annulment of Extra-judicial Foreclosure and Sale, and of TCT No. 232040 with Damages, with the RTC of Imus, Cavite, docketed as Civil Case No. 360-89. After trial, the RTC of Imus ruled in favor of private respondent UCPB, and dismissed the petition of LANGKAAN for lack of merit. On appeal, the Court of Appeals affirmed en toto the decision of the RTC of Imus. The petitioner filed a Motion for Reconsideration which was denied by the Court of Appeals in a Resolution dated July 28, 1999. Hence this petition. The sole issue in this case, as stated by the petitioner in its Memorandum, is whether or not the extra-judicial foreclosure sale is valid and legal on account of the alleged non-compliance with the provisions of Act No. 3135 on venue, posting and publication of the Notice of Sale, and of the alleged defects in such Notice. [12] At the outset, it must be stated that only questions of law may be raised before this Court in a Petition for Review under Rule 45 of the Revised Rules of Civil Procedure.[13] This Court is not a trier of facts, and it is not the function of this Court to re-examine the evidences submitted by the parties.[14] After a careful analysis of the issue set forth by the petitioner, we find the same not to involve a pure question of law[15] It has been our consistent ruling that the question of compliance or non-compliance with notice and publication requirements of an extra-judicial foreclosure sale is a factual issue binding on this Court.[16] In the case of Reyes vs. Court of Appeals, we declined to entertain the petitioners argument as to lack of compliance with the requirements of notice and publication prescribed in Act No. 3135, for being factual. [17] Hence, the matter of sufficiency of posting and publication of a notice of foreclosure sale need not be resolved by this Court, especially since the findings of the Regional Trial Court thereon were sustained by the Court of Appeals. Well-established is the rule that factual findings of the Court of Appeals are conclusive on the parties and carry even more weight when the said court affirms the

factual findings of the trial court. [18] The RTC found the posting of the Notice of Sale to have been duly complied with, thus: As regards the posting of the notices of sale, Deputy Sheriff Nonilon Caniya has categorically declared that he posted the same in three conspicuous places, to wit: (1) Municipal Hall of Dasmarinas, Cavite, (2) Barangay Hall of Langkaan, and (3) in the place where the property is located (Exh. 6). He added gratuitously that he even posted it at the Dasmarinas Public Market. Such being the case, the negative testimony of Virgilio Mangubat, a retired sheriff of Trece Martires City, to the effect that he did not see any notice posted in the Bulletin Board of Dasmarinas, Cavite cannot prevail over the positive testimony of Deputy Sheriff Caniya. In like manner, the general denial advanced by Barangay Captain Benjamin Sangco of Langkaan that no notice was posted at the bulletin board of said barangay in August, 1986 cannot take precedence over the positive declaration of Deputy Sheriff Caniya who is presumed to have performed his duties as such. Credence is generally accorded the testimonies of (sic) sheriff who is presumed to have performed their (sic) duties in regular manner. xxx xxx xxx xxx xxx In another case, Bonnevie vs. Court of Appeals, 125 SCRA 122, it was even ruled that a single act of posting satisfies the requirement of law.[19] Due publication was likewise found by the RTC to have been effected. It is beyond dispute that notice of Sheriffs Sale was published in Record Newsweekly, a newspaper of general circulation in the Province of Cavite after a raffle among the accredited newspaper thereat. No evidence was adduced by plaintiff to disprove this fact. Its claim that said newspaper has no subscribers in Cavite is without merit and belied by the Affidavit of Publication executed by the Publisher of Records Newsweekly (Exh. 5) and by the Clerk of Court and Ex-Oficio Sheriff of the Multiple Sala of Imus, Cavite. As held in the case of Olizon vs. Court of Appeals, 236 SCRA 148, personal notice to the mortgagor in extrajudicial foreclosure proceedings is not necessary. Sec. 3 of Act No. 3135 governing extra-judicial foreclosure of real estate mortgages, as amended by Act No. 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. Hence, the lack of personal notice to the mortgagors is not a ground to set aside the foreclosure sale. It was further held thereat (ibid) that publication of the notice alone in the newspaper of general circulation is more than sufficient compliance with the noticeposting requirement of the law.[20] On appeal, the findings of the RTC were sustained by the Court of Appeals, to wit: Next, appellant contends that the notice of sale was posted, at the very least, at only one [1] public place the Municipal Building of Dasmarinas, Cavite contrary to and in violation of the requirement in Act No. 3135, as amended, that said notice shall be posted in at least three [3] public places. Deputy Sheriff Nonilon Caniya, however, has categorically declared that he had posted Notices of Sale in four public places;

namely: (1) Municipal Hall of Dasmarinas, Cavite, (2) Barangay Hall of Langkaan, (3) in the place where the property is located and (4) at the Dasmarinas Public Market (t.s.n., January 12, 1994, pp. 6-11). We give credence to said Sheriffs testimony and accord his actions with the presumption of regularity of performance, having come from a public officer to whom no improper motive to testify has been attributed. At any rate, even if it were true that the Notice of Sale was not posted in three public places as required, this would not invalidate the foreclosure conducted. As explained in Olizon vs. Court of Appeals, 238 SCRA 148, 155-156 Furthermore, unlike the situation in previous cases where the foreclosure sales were annulled by reason of failure to comply with the notice requirement under Section 3 of Act 3135, as amended, what is allegedly lacking here is the posting of the notice in three public places, and not the publication thereof in a newspaper of general circulation. We take judicial notice of the fact that newspaper 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. The object of a notice of sale is to inform the public of the nature and condition of the property to be sold, and of the time, place and terms of the sale. Notices are given for the purpose of securing bidders and to prevent a sacrifice of the property. If these objects are attained, immaterial errors and mistakes will not affect the sufficiency of the notice; but if mistakes or omissions occur in the notices of sale which are calculated to deter or mislead bidders, to depreciate the value of the property, or to prevent it from bringing a fair price, such mistakes or omissions will be fatal to the validity of the notice, and also to the sale made pursuant thereto. In the case at bench, this objective was attained considering that there was sufficient publicity of the sale through the Record Newsweekly. Appellant next charges that the certificate of posting executed by Deputy Sheriff Caniya is a falsified document resulting from the unlawful intercalations made thereon, calculated to change the import and meaning of said certificate; and contains untruthful statements of facts. A certificate of posting is however not a statutory requirement and as such, is not considered indispensable for the validity of a foreclosure sale under Act 3135 (see Bohanan vs. Court of Appeals, 256 SCRA 355) Again, We accord a presumption of regularity in the conduct of the raffle whereby publication of the Notice of Sale was awarded to the Record Newsweekly. As to the erroneous designation of Guimaras Agricultural Development,

Inc. as a mortgagor as well as the mistakes in the technical description of the subject property, both appearing in the Notice of Sale, We find these immaterial errors and mistakes which do not affect the sufficiency of the Notice (Olizon vs. Court of Appeals, supra.) xxx [21] We refuse to disturb the factual findings of the lower courts. The notice of the extra-judicial foreclosure sale was duly published and posted, and clerical errors therein are not sufficient to invalidate the notice and nullify the sale. We are left with the issue on the legal propriety of the venue of the extra-judicial foreclosure sale which we deem proper for determination. In ascertaining whether or not the venue of the extra-judicial foreclosure sale was improperly laid, it is imperative to consult Act No. 3135, as amended, the law applicable to such a sale. [22] Act 3135 provides, insofar as pertinent, as follows: SECTION 1. When a sale is made under a special power inserted in or attached to any real estate mortgage hereafter made as security for the payment of money or the fulfillment of any other obligation, the provisions of the following sections shall govern as to the manner in which the sale and redemption shall be effected, whether or not provision for the same is made in the power. SEC. 2. Said sale cannot be made legally outside of the province which the property sold is situated; and in case the place within said province in which the sale is to be made is the subject of stipulation, such sale shall be made in said place or in the municipal building of the municipality in which the property or part thereof is situated. Thus, the extra-judicial foreclosure sale cannot be held outside the province where the property is situated. Should a place within the province be a subject of stipulation, the sale shall be held at the stipulated place or in the municipal building of the municipality where the property or part thereof is situated. In the case at bar, the Real Estate Mortgage contract contains the following stipulation on the venue of the auction sale, viz: ARTICLE XX VENUE OF AUCTION SALE It is hereby agreed that in case of foreclosure of this mortgage under Act 3135, as amended, and Presidential Decree No. 385, the auction sale shall be held at the capital of the province, if the property is within the territorial jurisdiction of the province concerned, or shall be held in the city, if the property is within the territorial jurisdiction of the city concerned.[23] The foreclosed property is located in Dasmarinas, a municipality in Cavite. Dasmarinas is within the territorial jurisdiction of the province of Cavite, but not within that of the provincial capital, Trece Martires City, nor of any other city in Cavite. The territorial jurisdiction of Dasmarinas is covered by the RTC of Imus,[24] another municipality in Cavite. The petitioner contends that the extra-judicial foreclosure sale should have been held in Trece Martires City, the capital of Cavite, following the above-quoted stipulation in the real estate mortgage contract; or, in the alternative, Section 2 of Act 3135 should have been applied, and the sale conducted at the municipal building of Dasmarinas

where the property is situated. [25] On the other hand, the private respondent argues that the extra-judicial foreclosure sale was properly held at the main entrance of the Office of the Clerk of Court and Ex-officio Sheriff of the RTC of Imus which has territorial jurisdiction over Dasmarinas, as provided in the Supreme Court Administrative Order No. 7 (1983) issued pursuant to Section 18 of B.P. Blg. 129. [26] The private respondent further contends that Section 18 of B.P. Blg. 129 repealed the provision on venue under Section 2 of Act 3135. We agree with the petitioner that under the terms of the contract, the extra-judicial foreclosure sale could be held at Trece Martires, the capital of the province which has territorial jurisdiction over the foreclosed property. The stipulation of the parties in the real estate mortgage contract is clear, and therefore, should be respected absent any showing that such stipulation is contrary to law, morals, good customs, public policy or public order. A contract is the law between the parties.[27] However, since the stipulation of the parties lack qualifying or restrictive words to indicate the exclusivity of the agreed forum, the stipulated place is considered only as an additional, not a limiting venue. [28] Therefore, the stipulated venue and that provided under Act 3135 can be applied alternatively. Now, applying Act 3135, the venue of the sale should be at the municipal building of Dasmarinas since the foreclosed property is located in the municipality of Dasmarinas. We cannot sustain the contention of the private respondent that the proper venue for the sale of the Dasmarinas property is the RTC of Imus which has territorial jurisdiction thereon as provided under SC Administrative Order No. 7 issued pursuant to Section 18 of B.P. Blg. 129, which allegedly repealed the venue provision under Section 2 of Act 3135. Section 18 of B.P. Blg. 129[29] provides for the power of the Supreme Court to define the territorial jurisdiction of the Regional Trial Courts. Pursuant thereto, the Supreme Court issued Administrative Order No. 7[30], placing the municipalities of Imus, Dasmarinas and Kawit within the territorial jurisdiction of the RTC of Imus. [31] On the other hand, Section 2 of Act 3135 refers to the venue of an extra-judicial foreclosure sale.[32] It is difficult to fathom how a general law such as B.P. Blg. 129 can repeal a special law like Act 3135. Aside from involving two entirely different legal concepts such as jurisdiction (B.P. Blg. 129) and venue (Section 2 of Act 3135), [33] this proposition goes against a basic rule in statutory construction that the enactment of a later legislation which is a general law cannot be construed to have repealed a special law. [34] Much less can the private respondent invoke Supreme Court administrative issuances[35] as having amended or repealed Section 2 of Act 3135. A statute is superior to an administrative issuance, and the former cannot be repealed or amended by the latter.[36] Notwithstanding the foregoing, however, this Court finds the extrajudicial foreclosure sale held at the RTC of Imus to be valid and legal. Well-known is the basic legal principle that venue is waivable. Failure of any party to object to the impropriety of venue is deemed a waiver of his right to do so. In the case at bar, we find that

such waiver was exercised by the petitioner. An extra-judicial foreclosure sale is an action in rem, and thus requires only notice by publication and posting to bind the parties interested in the foreclosed property. No personal notice is necessary. As such, the due publication and posting of the extra-judicial foreclosure sale of the Dasmarinas property binds the petitioner, and failure of the latter to object to the venue of the sale constitutes waiver. In the testimony of the President of LANGKAAN, Alfredo Concepcion, the latter admitted that he was informed sometime in 1986 by GUIMARAS President Antonio Barredo about the foreclosure sale of the Dasmarinas property held on August 6, 1986, viz: COURT: Q: ATTORNEY CONCEPCION, YOU SAID THAT YOU CAME TO KNOW THAT THE PROPERTY OF YOUR CORPORATION WAS SOLD BY COCONUT PLANTERS BANK ONLY IN 1989? A: At or about the date when Atty. Loyola made that written offer to the bank. Q: IN THE YEAR 1989 OR PRIOR TO THAT DATE ATTY. LOYOLA: I think 1986, Your Honor. COURT: 1986 WHEN HE LEARNED ABOUT THE SALE? ATTY. LOYOLA: Yes, Your Honor. xxx xxx xxx ATTY CATUBAY: xxx xxx xxx Q: So you talked to Ex-Justice Barredo? A: I did. Q: And of course he informed you about the proposal that took place on August 6, 1986? A: He told me that he is aware. Q: And you were also aware of the Certificate of Sale executed by the Sheriff, isnt it? (sic) A: At that point there was a foreclosure sale and that it was the mortgagee bank that was the highest bidder. Q: After you were informed there was a foreclosure sale, you did not do anything about it, isnt it? (sic) A: Well, at that point when I was so informed, I did not take any step yet but on the first opportunity, I consulted Atty. Loyola. Q: And that was in 1986 also? A: 1986, correct.[37] From 1986 to April 1989, despite knowledge of the foreclosure sale of their property, the President of petitioner LANGKAAN did not take any step to question the propriety of the venue of the sale. It was only on May 30, 1989 that the petitioner filed a Complaint for Annulment of the foreclosure sale, and only after its offer to repurchase the foreclosed property, the title to which had been consolidated in the name of private respondent UCPB, had been rejected by the bank. In the letter denominated as Offer to Reacquire by Langkaan Realty

Development, Inc. Without Prejudice, petitioner LANGKAAN, through its counsel Atty. Franco L. Loyola, who is likewise the petitioners counsel in this case, acknowledged that the title to the property then registered under the name of LANGKAAN has been consolidated under the name of UCPB, which was the highest bidder in the extra-judicial foreclosure sale conducted by the sheriff.[38] Nowhere can it be found that the petitioner objected to or opposed the holding of the sale at the RTC of Imus. By neglecting to do so, petitioner LANGKAAN is deemed to have waived its right to object to the venue of the sale, and cannot belatedly raise its objection in this petition filed before us. WHEREFORE, premises considered, the petition is hereby DENIED. SO ORDERED. Melo, (Chairman), Vitug, and Panganiban, JJ., concur.

[G.R. No. 120859. June 26, 2001] METROPOLITAN BANK AND TRUST COMPANY, petitioner, vs. FRANCISCO Y. WONG, respondent. DECISION SANDOVAL-GUTIERREZ, J.: It is bad enough that the mortgagor has no choice but to yield his

property in a foreclosure proceeding. It is infinitely worse, if prior thereto, he was denied of his basic right to be informed of the impending loss of his property. This is another instance when law and morals echo the same sentiment. This is a petition for review on certiorari seeking the reversal and setting aside of the decision dated June 13, 1994 and resolution dated June 14, 1995 of the Court of Appeals in CA-G.R. CV No. 35615 entitled Francisco Y. Wong versus Metropolitan Bank and Trust Company. [1] The essential antecedents are: 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 (herein petitioner) to finance its rice and corn warehousing business. As a security for such credit accommodation, respondent Francisco Y. Wong, and his wife Betty C. Wong executed in favor of petitioner a real estate mortgage over a parcel of land consisting of 31, 292 square meters located at Campo 7, Molave, Zamboanga del Sur and registered in respondents name under Transfer Certificate of Title (TCT) No. 11758. On April 11, 1980, due to MGIs failure to pay the obligation secured by the real estate mortgage, petitioner filed an application for extrajudicial foreclosure under Act No. 3135. A notice of foreclosure sale was published in Pagadian Times once, for three consecutive weeks (May 1825, 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. Petitioner granted the request. Thereafter, Chang and petitioner 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. Petitioner was adjudged the sole and highest bidder. Thus, a certificate of sale was issued to petitioner. 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 petitioner. Respondent, unaware of the foregoing developments, applied for a credit accommodation with the Producers Bank of the Philippines, Iloilo City, using as security his TCT No. 11758. It was only then when he learned that his property was already foreclosed by petitioner and no longer in his name. Feeling aggrieved, respondent filed with the Regional Trial Court, Branch 18, Pagadian City a complaint for reconveyance and damages against petitioner and the Register of Deeds of Zamboanga del Sur. Respondent, in his complaint, assailed the validity of the extrajudicial foreclosure sale basically on the ground that petitioner 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, petitioner sold the disputed property to a certain Betty Ong Yu. After hearing, the trial court decreed: WHEREFORE, IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered sentencing defendant Metropolitan Bank and Trust Company to pay plaintiff the following amounts: 1. Ten Million, Five Hundred Thousand (P10,500,000.00) Pesos representing the fair market value of the property as of the promulgation of this decision, with interest of twenty four (24%) percent per annum thereof until fully paid; 2. Moral damages of Two million (P2,000,000.00) Pesos; 3. Exemplary damages of Ten million (P10,000,000.00) Pesos; 4. Attorneys fee of Two Hundred Thousand (P200,000.00) Pesos, plus Five Hundred (P500.00) Pesos for every hearing or court proceeding actually attended by plaintiffs counsel; and 5. Costs of suit. No monetary judgment can be rendered against defendant Register of Deeds of Zamboanga del Sur in view of the absence of monetary claim in the complaint. Defendant banks counterclaim is hereby DISMISSED for lack of merit. SO ORDERED. [2] On appeal by petitioner, the Court of Appeals affirmed the RTC decision with modification in the sense that the monetary awards were reduced, thus: "WHEREFORE, the judgment appealed from is hereby MODIFIED, directing the appellant to pay appellees the following amounts: 1. Four Million (P4,000,000.00) Pesos representing the fair market value of the subject property; 2. Moral damages of Five Hundred Thousand (P500,000.00) Pesos; 3. Exemplary damages of One Million (P1,000,000.00) Pesos; 4. Attorney's fees of Two Hundred Thousand (P200,000.00) Pesos, plus Five Hundred (P500.00) Pesos for every hearing or court proceeding actually attended by plaintiff's counsel; and 5. Costs of suit. SO ORDERED." Twice thwarted, petitioner now comes before us imputing the following errors to the Court of Appeals: I THE RESPONDENT COURT OF APPEALS ERRED IN RULING THAT THE FORECLOSURE SALE CONDUCTED ON NOVEMBER 23, 1981 WAS LEGALLY INFIRM FOR NON COMPLIANCE WITH THE STATUTORY REQUIREMENTS OF POSTING AND PUBLICATION AS

PROVIDED FOR IN ACT 3135, AS AMENDED. II THE RESPONDENT COURT OF APPEALS ERRED IN AWARDING DAMAGES AND ATTORNEYS FEES TO RESPONDENT WONG. Petitioner places excessive reliance on the case of Olizon v. Court of Appeals[3] in justifying its claims: (a) that its failure to comply with the posting requirement under Section 3 of Act No, 3135 did not necessarily result in the nullification of the foreclosure sale since it complied with the publication requirement; and (b) that personal notice of the foreclosure proceedings to respondent is not a condition sine qua non for its validity. In assailing the monetary awards to respondent, petitioner claims it was not guilty of bad faith in selling the disputed property to Betty Ong Yu, the sale having been perfected even before respondent filed his action for reconveyance and damages with the trial court. For its part, respondent argues that the unusual nature of the attendant facts and the peculiarity of the confluent circumstances involved in Olizon are not present in the instant case. The petition is bereft of merit. Succinct and unmistakable is the consistent pronouncement of this Court that it is not a trier of facts. And well-entrenched is the doctrine that pure questions of fact may not be the subject of appeal by certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as this mode of appeal is generally confined to questions of law. Corollarily, noncompliance with the requirements of notice and publication in an extrajudicial foreclosure is a factual issue. The resolution thereof by the lower courts is binding and conclusive upon this Court. [4] Thus, disregarding all factual issues which petitioner interjected in his petition, the only crucial legal queries in this case are: first, is personal notice to respondent a condition sine qua non to the validity of the foreclosure proceedings? and, second, is petitioners non-compliance with the posting requirement under Section 3, Act No. 3135 fatal to the validity of the foreclosure proceedings? 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: Se. 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. [5] 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. The second query must be answered in the affirmative. An incisive scrutiny of Olizon shows that this Court has not actually dispensed with the posting requirement under Section 3 of Act No. 3135, thus: Neither can the supposed failure of respondent bank to comply with the posting requirement as provided under the aforesaid Section 3, under the factual ambiance and circumstances which obtained in this case, be considered a sufficient ground for annulling the aforementioned sale. We are not unaware of the rulings in some cases that, under normal situations, the statutory provisions governing publication of notice of extra-judicial foreclosure sales must be strictly complied with and that failure to publish the notice of auction sale as required by the statute constitutes a jurisdictional defect which invalidates the sale. However, the unusual nature of the attendant facts and the peculiarity of the confluent circumstances involved in this case require that we rule otherwise. Petitioners' cited authority on the requisite publication of notices is not so all-embracing as to deny justified exceptions thereto under appropriate situations. x x x xxx Furthermore, unlike the situation in previous cases where the foreclosure sales were annulled by reason of failure to comply with the notice requirement under Section 3 of Act No. 3135, as amended, what is allegedly lacking here is the posting of the notice in three public places, and not the publication thereof in a newspaper of general circulation. We take judicial notice of the fact that newspaper 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.(Underlining added) Obviously, as correctly pointed out by respondent, what prompted the Court to dispense with the posting requirement is the unusual

nature of the attendant facts and the peculiarity of the confluent circumstancesinvolved in Olizon. It bears stressing that in the said case, the extra-judicial foreclosure sale sought to be annulled was conducted more than 15 years ago, thus, even on the equitable ground of laches, the Olizons action for annulment of foreclosure proceedings and certificate of sale was bound to fail. Unlike in Olizon where there was a valid publication of the notice of foreclosure sale, 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. And lastly, not to be glossed over is the fact that there was no evidence in Olizon insinuating bad faith or collusion among the Sheriff who conducted the sale, the Register of Deeds and the bank. In the present case, collusion is evident in the precipitate manner the foreclosure sale was conducted by Sheriff Bontia as well as in the sale

made by petitioner to Betty Ong Yu during the pendency of the case. To stress that Olizon is an exception rather than the rule, this Court in the same case held: x x x We are not unaware of the rulings in same cases that, under normal situations, the statutory provisions governing publication of notice of extrajudicial foreclosure sales must be strictly complied with and that failure to publish the notice of auction sale as required by the statute constitutes a jurisdictional defect which invalidates the sale. However, the unusual nature of the attendant facts and the peculiarity of the confluent circumstances involved in this case require that we rule otherwise. While the law recognizes the right of a bank to foreclose a mortgage upon the mortgagors 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.[6] Anent the award of moral damages, both the trial court and the Court of Appeals found that petitioner acted in bad faith in extra-judicially foreclosing the real estate mortgage and in selling the mortgaged property during the pendency of the case in the trial court. To be sure, petitioner banks bad faith caused serious anxiety, mental anguish and wounded feelings to its client, respondent herein. He is thus entitled to moral damages. The Court of Appeals made a commendable ratiocination on the fact that petitioner acted in bad faith, thus: There is no dispute that during the pendency of the reconveyance case, appellant sold the subject property to one Betty Yu. In this regard, the trial courts observation is worth mentioning: Conversely,defendant banks most eloquent manifestation of bad faith, deception, and fraud is its sale of the mortgaged property subject of the reconveyance action while this case was already under trial. That sale was without leave of court nor the knowledge of the plaintiff. At the stage of the court proceedings when the defendants were in the process of presenting their evidence, defendant bank sold the property in litigation to Betty Yu of Molave, Zamboanga del Sur on August 8, 1984 (Exhibits FF, FF-1,FF-2 & FF-3). Accordingly, the title of defendant bank was cancelled and a new title, TCT No. T-19,350, was issued in the name of Betty Ong Yu (Exhibits HH & HH-1). The transfer of ownership over the mortgaged property to the third person (Betty Ong Yu) who is not a party in this case rendered moot and academic the reconveyance aspect of this case, clearly to the prejudice of the plaintiff. Appellants contention that there was no need for them to secure leave of court for the sale of the property because there was no notice of lis pendens annotated in the title of appellant nor was there a restraining order issued by the court enjoining them from conveying or transferring the property deserves scant consideration. A notice of lis pendens is an announcement to the whole world that a particular real property is in litigation, serving as a warning that one who

acquires an interest over the said property does so at his own risk, or that he gambles on the result of the litigation over said property (People vs. Regional Trial Court of Manila, 178 SCRA 299). The absence of a notice of lis pendens on the title of the appellant will not save the day for the appellant. The latter and the Register of Deeds are being sued with regard to the property. x x x. Note too that no less than the deputy Register of Deeds Ramon Balinton refused to register the property subject matter of the controversy because of the pending case as evidenced by the letter addressed to the Register of Deeds. Even when directed by the Register of Deeds Pedro Jamero, he made a handwritten annotation in the document which reads: Register per instruction of the Acting register of deeds this 31st day of August 1984. The manner by which appellant deprived appellee of his property through irregular foreclosure proceedings and its wellorchestrated scheme to frustrate reconveyance of the property by selling the same to a third person during the pendency of the case entitles appellee to moral damages. But while the amount of moral damages is a matter left largely to the sound discretion of the trial court, the same when found excessive, should be reduced to more reasonable amounts considering the attendant facts and circumstances. Moral damages, though incapable of pecuniary estimation, are in the category of an award designed to compensate the claimant for actual injury suffered and not to impose a penalty on the wrongdoer. Moral damages are not intended to enrich a complainant at the expense of a defendant. They are awarded only to enable the injured party to obtain means, diversion or amusements that will serve to alleviate the moral sufferings he has undergone by reason of the defendants culpable action. The award of moral damages must be proportionate to the sufferings inflicted. [7] Taking into consideration the attending circumstances here, we are convinced that the amount awarded by the Court of Appeals is exorbitant. Likewise, we find the exemplary damages and attorneys fees quite excessive. WHEREFORE, the instant petition is hereby DENIED. The assailed Decision of the Court of Appeals is AFFIRMED subject to the MODIFICATION that the awards of moral damages be reduced to P100,000.00 and the exemplary damages to P50,000.00. The award of attorneys fees is deleted. SO ORDERED. Melo, (Chairman), Vitug, Panganiban, and Gonzaga-Reyes, JJ., concur.

METROPOLITAN BANK AND TRUST COMPANY, INC., Petitioner,

G.R. No. 173976 Present: QUISUMBING,* J., CARPIO, ** CARPIO MORALES,*** CHICO-NAZARIO, **** Acting Chairperson, and NACHURA, JJ.

- versus -

EUGENIO PEAFIEL, for himself and as Attorney-in-Fact of ERLINDA PEAFIEL, Promulgated: Respondents. February 27, 2009 x------------------------------------------------------------------------------------x DECISION NACHURA, J.: This is a petition for review on certiorari of the Decision [1] of the Court of Appeals (CA) dated July 29, 2005 and Resolution dated July 31, 2006. The assailed decision nullified the extrajudicial foreclosure sale of respondents properties because the notice of sale was published in a newspaper not of general circulation in the place where the properties were located.

Respondent Erlinda Peafiel and the late Romeo Peafiel are the registered owners of two parcels of land covered by Transfer Certificate of Title (TCT) No. (350937) 6195 and TCT No. 0085, both issued by the Register of Deeds of Mandaluyong City. On August 1, 1991, the Peafiel spouses mortgaged their properties in favor of petitioner Metropolitan Bank and Trust Company, Inc. The mortgage deed was amended on various dates as the amount of the loan covered by said deed was increased. The spouses defaulted in the payment of their loan obligation. On July 14, 1999, petitioner instituted an extrajudicial foreclosure proceeding under Act No. 3135 through Diego A. Allea, Jr., a notary public. Respondent Erlinda Peafiel received the Notice of Sale, stating that the public auction was to be held on September 7, 1999 at ten oclock in the morning, at the main entrance of the City Hall of Mandaluyong City. The Notice of Sale was published in Maharlika Pilipinas on August 5, 12 and 19, 1999, as attested to by its publisher in his Affidavit of Publication. [2] Copies of the said notice were also posted in three conspicuous places in Mandaluyong City.[3] At the auction sale, petitioner emerged as the sole and highest bidder. The subject lots were sold to petitioner for P6,144,000.00. A certificate of sale[4] was subsequently issued in its favor. On August 8, 2000, respondent Erlinda Peafiel, through her attorney-in-fact, Eugenio Peafiel, filed a Complaint[5] praying that the extrajudicial foreclosure of the properties be declared null and void. They likewise sought (a) to enjoin petitioner and the Register of Deeds from consolidating ownership, (b) to enjoin petitioner from taking possession of the properties, and (c) to be paid attorneys fees. On June 30, 2003, the Regional Trial Court (RTC) rendered judgment in favor of petitioner: ACCORDINGLY, judgment is hereby rendered as follows: 1. The extrajudicial foreclosure of real estate mortgage instituted by defendants Metrobank and Notary Public Diego A. Allea, Jr. over the two parcels of land covered by TCT Nos. (350937) 6195 and TCT No. 0085 is hereby declared VALID; and 2. The counterclaim of herein defendants are hereby DISMISSED for insufficiency of evidence. SO ORDERED.[6] Respondents appealed to the CA, raising, among others, the issue of whether petitioner complied with the publication requirement for an extrajudicial foreclosure sale under Act No. 3135.

On this issue, the CA agreed with respondents. The CA noted that the law requires that publication be made in a newspaper of general circulation in the municipality or city where the property is situated. Based on the testimony of the publisher of Maharlika Pilipinas, it concluded that petitioner did not comply with this requirement, since the newspaper was not circulated in Mandaluyong City where the subject properties were located. Thus, in its Decision dated July 29, 2005, the CA reversed the RTC Decision, thus: WHEREFORE, the appealed decision is REVERSED and SET ASIDE. A new one is hereby entered declaring the extrajudicial foreclosure sale of the properties covered by TCT Nos. (350937) 6195 and 0085 NULL and VOID. SO ORDERED. [7] Petitioner filed a motion for reconsideration [8] of the decision which the CA denied on July 31, 2006. Petitioner now brings before us on certiorari, raising the following issues: this petition for review

I. WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN IT RULED TO APPLY THE PROVISIONS ON THE PUBLICATION OF JUDICIAL NOTICES UNDER SECTION 1 OF P.D. NO. 1079 TO THE EXTRAJUDICIAL FORECLOSURE OF THE MORTGAGE BY NOTARY PUBLIC OVER THE PROPERTIES COVERED BY TCT NO. (350927) 6195 AND TCT NO. 0085. II. WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN IT RULED THAT MAHARLIKA PILIPINAS IS NOT A NEWSPAPER OF GENERALCIRCULATION IN MANDALUYONG CITY. III. WHETHER OR NOT THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED WHEN IT REVERSED AND SET ASIDE THE DECISION DATED JUNE 30, 2003 ISSUED BY THE REGIONAL TRIAL COURT OF MANDALUYONG CITY, BRANCH 208 AND DECLARED THE EXTRAJUDICIAL FORECLOSURE SALE OF THE PROPERTIES COVERED BY TCT NO. (350937) 6195 AND TCT NO. 0085 NULL AND VOID.[9] This controversy boils down to one simple issue: whether or not petitioner complied with the publication requirement under Section 3, Act No. 3135, which provides: SECTION 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.[10] We hold in the negative. Petitioner insists that Maharlika Pilipinas is a newspaper of general circulation since it is published for the dissemination of local news and general information, it has abona fide subscription list of paying subscribers, and it is published at regular intervals. It asserts that the publishers Affidavit of Publication attesting that Maharlika Pilipinasis a newspaper of general circulation is sufficient evidence of such fact. [11] Further, the absence of subscribers in Mandaluyong City does not necessarily mean that Maharlika Pilipinas is not circulated therein; on the contrary, as testified to by its publisher, the said newspaper is in fact offered to persons other than its subscribers. Petitioner stresses that the publishers statement that Maharlika Pilipinas is also circulated in Rizal and Cavite was in response to the question as to where else the newspaper was circulated; hence, such testimony does not conclusively show that it is not circulated in Mandaluyong City.[12] Petitioner entreats the Court to consider the fact that, in an Order[13] dated April 27, 1998, the Executive Judge of the RTC of Mandaluyong City approved the application for accreditation of Maharlika Pilipinas as one of the newspapers authorized to participate in the raffle of judicial notices/orders effective March 2, 1998. Nonetheless, petitioner admits that this was raised for the first time only in its Motion for Reconsideration with the CA.[14] The accreditation of Maharlika Pilipinas by the Presiding Judge of the RTC is not decisive of whether it is a newspaper of general circulation in Mandaluyong City. This Court is not bound to adopt the Presiding Judges determination, in connection with the said accreditation, that Maharlika Pilipinas is a newspaper of general circulation. The court before which a case is pending is bound to make a resolution of the issues based on the evidence on record. To prove that Maharlika Pilipinas was not a newspaper of general circulation in Mandaluyong City, respondents presented the following documents: (a) Certification [15]dated December 7, 2001 of Catherine de Leon Arce, Chief of the Business Permit and Licensing Office of Mandaluyong City, attesting that Maharlika Pilipinas did not have a business permit in Mandaluyong City; and (b) List of Subscribers[16] of Maharlika Pilipinas showing that there were no subscribers from Mandaluyong City. In addition, respondents also presented Mr. Raymundo Alvarez, publisher of Maharlika Pilipinas, as a witness. During direct examination, Mr. Alvarez testified as follows:

Atty. Mendoza: And where is your principal place of business? Where you actually publish. Witness:At No. 80-A St. Mary Avenue, Provident Village, Marikina City. Atty. Mendoza: Do you have any other place where you actually publish Maharlika Pilipinas? Witness: At No. 37 Ermin Garcia Street, Cubao, Quezon City. Atty. Mendoza: And you have a mayors permit to operate? Witness: Yes. Atty. Mendoza: From what city? Witness: Originally, it was from Quezon City, but we did not change anymore our permit. Atty. Mendoza: And for the year 1996, what city issued you a permit? Witness: Quezon City. Atty. Mendoza: What about this current year? Witness: Still from Quezon City. Atty. Mendoza: So, you have no mayors permit from Marikina City? Witness: None, its only our residence there. Atty. Mendoza: What about for Mandaluyong City? Witness: We have no office in Mandaluyong City. Atty. Mendoza: Now, you said that you print and publish Maharlika Pilipinas in Marikina and Quezon City? Witness: Yes. Atty. Mendoza: Where else do you circulate your newspaper? Witness: In Rizal and in Cavite. Atty. Mendoza: In the subpoena[,] you were ordered to bring the list of subscribers. Witness: Yes. xxxx Atty. Mendoza: Witness: Atty. Mendoza: Witness: Atty. Mendoza: Witness: How do these subscribers listed here in this document became (sic) regular subscribers? They are friends of our friends and I offered them to become subscribers. Other than this list of subscribers, you have no other subscribers? No more. Do you offer your newspaper to other persons other than the subscribers listed here? Yes, but we do not just offer it to anybody.[17] (Emphasis supplied.)

It bears emphasis that, for the purpose of extrajudicial foreclosure of mortgage, the party alleging non-compliance with the requisite publication has the burden of proving the same.[18] Petitioner correctly points out that neither the publishers statement that Maharlika Pilipinas is being circulated in Rizal and Cavite, nor his admission that there are no subscribers in Mandaluyong City proves that said newspaper is not circulated in Mandaluyong City. Nonetheless, the publishers testimony that they do not just offer [Maharlika Pilipinas] to anybody implies that the newspaper is not available to the public in general. This statement, taken in conjunction with the fact that there are no subscribers in Mandaluyong City, convinces us that Maharlika Pilipinas is, in fact, not a newspaper of general circulation in Mandaluyong City. The object of a notice of sale is to inform the public of the nature and condition of the property to be sold, and of the time, place and terms of the sale. Notices are given for the purpose of securing bidders and to prevent a sacrifice of the property.[19] The goal of the notice requirement is to achieve a reasonably wide publicity of the auction sale. This is why publication in a newspaper of general circulation is required. The Court has previously taken judicial notice of the far-reaching effects of publishing the notice of sale in a newspaper of general circulation. [20] True, to be a newspaper of general circulation, it is enough that it is published for the dissemination of local news and general information, that it has a bona fidesubscription list of paying subscribers, and that it is published at regular intervals. [21] Over and above all these, the newspaper must be available to the public in general, and not just to a select few chosen by the publisher. Otherwise, the precise objective of publishing the notice of sale in the newspaper will not be realized. In fact, to ensure a wide readership of the newspaper, jurisprudence suggests that the newspaper must also be appealing to the public in general. The Court has, therefore, held in several cases that the newspaper must not be devoted solely to the interests, or published for the entertainment, of a particular class, profession, trade, calling, race, or religious denomination. The newspaper need not have the largest circulation so long as it is of general circulation. [22] Thus, the Court doubts that the publication of the notice of sale in Maharlika Pilipinas effectively caused widespread publicity of the foreclosure sale. Noticeably, in the Affidavit of Publication, Mr. Alvarez attested that he was the Publisher of Maharlika Pilipinas, a newspaper of general circulation, published every Thursday. Nowhere is it stated in the affidavit that Maharlika Pilipinas is in circulation in Mandaluyong City. To recall, Sec. 3 of Act No. 3135 does not only require that the newspaper

must be of general circulation; it also requires that the newspaper be circulated in the municipality or city where the property is located. Indeed, in the cases[23]wherein the Court held that the affidavit of the publisher was sufficient proof of the required publication, the affidavit of the publisher therein distinctly stated that the newspaper was generally circulated in the place where the property was located. Finally, petitioner argues that the CA, in effect, applied P.D. No. 1079[24] when it cited Fortune Motors (Phils.) Inc. v. Metropolitan Bank and Trust Company,[25] which involved an extrajudicial foreclosure sale by a sheriff. Petitioner avers that the general reference to judicial notices in P.D. No. 1079, particularly Section 2[26] thereof, clearly shows that the law applies only to extrajudicial foreclosure proceedings conducted by a sheriff, and not by a notary public. [27] P.D. No. 1079 allegedly applies only to notices and announcements that arise from court litigation. [28] The Court does not agree with petitioner that the CA applied P.D. 1079 to the present case. The appellate court cited Fortune Motors merely to emphasize that what is important is that the newspaper is actually in general circulation in the place where the properties to be foreclosed are located. In any case, petitioners concern that the CA may have applied P.D. 1079 to the present case is trifling. While P.D. No. 1079 requires the newspaper to be published, edited and circulated in the same city and/or province where the requirement of general circulation applies, the Court, in Fortune Motors, did not make a literal interpretation of the provision. Hence, it brushed aside the argument that New Record, the newspaper where the notice of sale was published, was not a newspaper of general circulation inMakati since it was not published and edited therein, thus: The application given by the trial court to the provisions of P.D. No. 1079 is, to our mind, too narrow and restricted and could not have been the intention of the said law. Were the interpretation of the trial court (sic) to be followed, even the leading dailies in the country like the Manila Bulletin, the Philippine Daily Inquirer, or The Philippine Star which all enjoy a wide circulation throughout the country, cannot publish legal notices that would be honored outside the place of their publication. But this is not the interpretation given by the courts. For what is important is that a paper should be in general circulation in the place where the properties to be foreclosed are located in order that publication may serve the purpose for which it was intended. [29] Therefore, as it stands, there is no distinction as to the publication requirement in extrajudicial foreclosure sales conducted by a sheriff or a

notary public. The key element in both cases is still general circulation of the newspaper in the place where the property is located. WHEREFORE, premises considered, the petition is DENIED. The Court of Appeals Decision dated July 29, 2005 and Resolution dated July 31, 2006 in CA-G.R. CV No. 79862 are AFFIRMED. SO ORDERED.