Professional Documents
Culture Documents
Special Commercial Law Cases
Special Commercial Law Cases
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
election 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. (Act. No. 3135)
A. MARONILLA (2014)
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
A. MARONILLA (2014)
A. MARONILLA (2014)
A. MARONILLA (2014)
A mortgage and a note secured by it are deemed parts of one transaction and are construed together, thus, an
ambiguity is created when the notes provide for the payment of a penalty but the mortgage contract does
not. Construing the ambiguity against the petitioner, it follows that no penalty was intended to be covered by
the mortgage. The mortgage contract consisted of three pages with no less than seventeen conditions in fine
print; it included provisions for interest and attorneys fees similar to those in the promissory notes; and it even
provided for the payment of taxes and insurance charges. Plainly, the petitioner can be as specific as it wants to
be, yet it simply did not specify nor even allude to, that the penalty in the promissory notes would be secured by
the mortgage. This can then only be interpreted to mean that the petitioner had no design of including the penalty
in the amount secured.
A. MARONILLA (2014)
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, 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.
A. MARONILLA (2014)
Where the parties stipulated in their credit agreements, mortgage contracts and promissory notes that the
mortgagee is authorized to foreclose the mortgaged properties in case of default by the mortgagors, the mortgagee
has a clear right to foreclosure in case of default, making the issuance of a Writ of Preliminary Injunction
improper. x x x.
In addition, the default of SBI and MFII to pay the mortgage indebtedness disqualifies them from availing of the equitable
relief that is the injunctive writ. A debtors various and constant requests for deferment of payment and restructuring of
loan, without actually paying the amount due, are clear indications that said debtor was unable to settle his obligation.
SBIs default or failure to settle its obligation is a breach of contractual obligation which tainted its hands and
disqualified it from availing of the equitable remedy of preliminary
injunction.
As SBI is not entitled to the issuance of a writ of preliminary injunction, so is MFII. The accessory follows the principal.
The accessory obligation of MFII as accommodation mortgagor and surety is tied to SBIs principal obligation to CBC
and arises only in the event of SBIs default. Thus, MFIIs interest in the issuance of the writ of preliminary injunction is
necessarily prejudiced by SBIs wrongful conduct and breach of contract.
SECTION 2. Said sale cannot be made legally outside of the province in which the property sold is situated; and in case
the place within said province in which the sale is to be made is subject to 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. (Act. No. 3135)
A. MARONILLA (2014)
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.
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, 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. 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. 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. 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. 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 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, placing the municipalities
of Imus, Dasmarinas and Kawit within the territorial jurisdiction of the RTC of Imus. On the other hand, Section 2 of Act
3135 refers to the venue of an extra-judicial foreclosure sale.
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), 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. Much less can the private respondent invoke Supreme Court
administrative issuances 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. Notwithstanding the foregoing, however, this Court
finds the extra-judicial foreclosure sale held at the RTC of Imus to be valid and legal.
A. MARONILLA (2014)
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. (Act No. 3135)
A. MARONILLA (2014)
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 noncompliance with the posting requirement, even if true, will not justify the setting aside of the sale.
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. 5939 , as well as on the cases of Roxas v. Court of Appeals, Pulido
v. Court of Appeals and Tambunting v. Court of Appeals, 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. (see Section 3)
Unlike in the amended provisions of Section 5, R.A. No. 720, nowhere in Section 3 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.
A. MARONILLA (2014)
complaint, assailed the validity of the extra-judicial foreclosure sale basically on the ground that petitioner did not comply
with the requirements of Section 3, Act No. 3135.
HELD:
Succinct and unmistakable is the consistent pronouncement of this Court that it is not a trier of facts. And wellentrenched 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 extra-judicial foreclosure is a factual issue. The
resolution thereof by the lower courts is binding and conclusive upon this Court.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 noncompliance 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.
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, agreedinter alia:
all correspondence relative to this mortgage, including demand letters, summonses, subpoenas, or notifications of any
judicial or extra-judicial action shall be sent to the MORTGAGOR at 40-42 Aldeguer St. Iloilo City, or at the address that
may hereafter be given in writing by the MORTGAGOR to the MORTGAGEE.
Precisely, the purpose of the foregoing stipulation is to apprise respondent of any action which 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
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
Cases on Extrajudicial Foreclosure of Real Estate Mortgage
A. MARONILLA (2014)
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.
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 circumstances involved 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,
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 plaintiffmortgagor 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.
A. MARONILLA (2014)
We are not convinced. Petitioner and respondents have absolutely no right to waive the posting and publication
requirements of Act No. 3135.
In People v. Donato, the Court expounded on what rights and privileges may be waived, viz.:
x x x the doctrine of waiver extends to rights and privileges of any character, and, since the word 'waiver' covers
every conceivable right, it is the general rule that a person may waive any matter which affects his property, and
any alienable right or privilege of which he is the owner or which belongs to him or to which he is legally entitled,
whether secured by contract, conferred with statute, or guaranteed by constitution, provided such rights and
privileges rest in the individual, are intended for his sole benefit, do not infringe on the rights of others, and
further provided the waiver of the right or privilege is not forbidden by law, and does not contravene public
policy; and the principle is recognized that everyone has a right to waive, and agree to waive, the advantage of a
law or role made solely for the benefit and protection of the individual in his private capacity, if it can be
dispensed with and relinquished without infringing on any public right, and without detriment to the community
at large x x x.
Although the general rule is that any right or privilege conferred by statute or guaranteed by constitution may be
waived, a waiver in derogation of a statutory right is not favored, and a waiver will be inoperative and void if it
infringes on the rights of others, or would be against public policy or morals and the public interest may be
waived.
While it has been stated generally that all personal rights conferred by statute and guaranteed by constitution
may be waived, it has also been said that constitutional provisions intended to protect property may be waived,
and even some of the constitutional rights created to secure personal liberty are subjects of waiver.
While it is established that rights may be waived, Article 6 of the Civil Code explicitly provides that such waiver is
subject to the condition that it is not contrary to law, public order, public policy, morals, or good customs, or prejudicial to
a third person with a right recognized by law.
The principal object of a notice of sale in a foreclosure of mortgage is not so much to notify the mortgagor as to inform
the public generally of the nature and condition of the property to be sold, and of the time, place, and terms of the sale.
Notices are given to secure bidders and prevent a sacrifice of the property. Clearly, the statutory requirements of posting
and publication are mandated, not for the mortgagors benefit, but for the public or third persons. In fact, personal notice
to the mortgagor in extrajudicial foreclosure proceedings is not even necessary, unless stipulated. As such, it is imbued
with public policy considerations and any waiver thereon would be inconsistent with the intent and letter of Act No. 3135.
Moreover, statutory provisions governing publication of notice of mortgage foreclosure sales must be strictly complied
with and slight deviations therefrom will invalidate the notice and render the sale at the very least voidable.
"Where required by the statute or by the terms of the foreclosure decree, public notice of the place and time of the
mortgage foreclosure sale must be given, a statute requiring it being held applicable to subsequent sales as well as to the
first advertised sale of the property. It has been held that failure to advertise a mortgage foreclosure sale in compliance
with statutory requirements constitutes a jurisdictional defect invalidating the sale and that a substantial error or omission
in a notice of sale will render the notice insufficient and vitiate the sale."
Thus, in the recent case of Development Bank of the Philippines v. Aguirre, the foreclosure sale held more than two (2)
months after the published date of sale was considered void for lack of republication. Similarly, in the instant case, the
lack of republication of the notice of the foreclosure sale renders it void.
The right of a bank to foreclose a mortgage upon the mortgagors failure to pay his obligation must be exercised
according to its clear mandate, and every requirement of the law must be complied with, lest the valid exercise of the right
would end. The exercise of a right ends when the right disappears, and it disappears when it is abused especially to the
prejudice of others.
A. MARONILLA (2014)