PHILIPPINE SAVINGS BANK vs. SPOUSES DIONISIO GERONIMO and CARIDAD GERONIMO G.R. No.

170241 , April 19, 2010, SECOND DIVISION, CARPIO, J. Spouses Dionisio and Caridad Geronimo (respondents) obtained a loan from Philippine Savings Bank (petitioner) in the amount of P3,082,000, secured by a mortgage on respondents land situated in Barrio Talipapa, Caloocan City. Geronimo defaulted on their loan, prompting PSB to initiate the extra-judicial foreclosure of the real estate mortgage. At the auction sale, the mortgaged property was sold to PSB being the highest bidder, for P3,000,000. Consequently, a Certificate of Sale was issued in favor of PSB. The Geronimos filed with the trial court a complaint for the annulment of the extrajudicial foreclosure claiming that the extrajudicial foreclosure was void for non-compliance with the law, particularly the publication requirement. The Affidavit of Publication, although formally offered by petitioner PSB, was excluded by the trial court for being hearsay. Petitioner PSB never challenged the exclusion of the affidavit of publication. Instead, petitioner relies solely on the testimony of Deputy Sheriff Alberto Castillo to prove compliance with the publication requirement under Section 3 of Act No. 3135. PSB presented the testimony of Deputy Sheriff Alberto Castillo who stated that he caused the publication of the Notice of Sale in a newspaper of general circulation. It is in this relation that the trial court cited the presumption of regularity in the performance of official duty. The trial court found that respondents, as plaintiffs, failed to discharge their burden of proving petitioner PSBs alleged non-compliance with the requisite publication. The trial court stated that the testimony of respondents witness, a newsstand owner, "that he has never sold Ang Pinoy newspaper can never lead to the conclusion that such publication does not exist." The trial court sustained the validity of the extrajudicial foreclosure. The Court of Appeals reversed and set aside the decision of the lower court declaring that the Extrajudicial Foreclosure of Mortgage conducted on 29 March 1996 as NULL and VOID. ISSUE: Whether or not the extra-judicial foreclosure is void for non-compliance with the statutory requirement of publication of the notice of sale under Section 3 of Act No. 3135. HELD: Petition DENIED. It is settled that for the purpose of extrajudicial foreclosure of mortgage, the party alleging noncompliance with the requisite publication has the burden of proving the same. In this case, Geronimos presented the testimony of a newsstand owner to prove that Ang Pinoy is not a newspaper of general circulation. However, this particular evidence is unreliable, as the same witness testified that he sells newspapers in Quezon City, not in Caloocan City, and that he is unaware of Ang Pinoy newspaper simply because he is not selling the same and he had not heard of it. Notwithstanding, petitioner PSB could have easily produced the affidavit of publication and other competent evidence (such as the published notices) to refute respondents claim of lack of publication of the notice of sale. In Spouses Pulido v. Court of Appeals, the Court held: While it may be true that the party alleging non-compliance with the requisite publication has the burden of proof, still negative allegations need not be proved even if essential to ones cause of action or defense if they constitute a denial of the existence of a document the custody of which belongs to the other party. In relation to the evidentiary weight of the affidavit of publication, the Court ruled in China Banking Corporation v. Spouses Martir that the affidavit of publication executed by the account executive of the newspaper is prima facie proof that the newspaper is generally circulated in the place where the properties are located.

Petitioner merely relied on the testimony of Deputy Sheriff Alberto Castillo to prove compliance with the publication requirement under Section 3 of Act No. 3135. However, there is nothing in such testimony to clearly and convincingly prove that petitioner complied with the mandatory requirement of publication. When Sheriff Castillo was asked how he knew that the notice of sale was published, he simply replied that "during the auction sale the mortgagee bank presented the affidavit of publication." Evidently, such an answer does not suffice to establish petitioners claim of compliance with the statutory requirement of publication. On the contrary, Sheriff Castillos testimony reveals that he had no personal knowledge of the actual publication of the notice of sale, much less the extent of the circulation of Ang Pinoy. Moreover, the Court notes that Ang Pinoy is a newspaper of general circulation printed and published in Manila, not in Caloocan City where the mortgaged property is located, as indicated in the excluded Affidavit of Publication. This is contrary to the requirement under Section 3 of Act No. 3135 pertaining to the publication of the notice of sale in a newspaper of general circulation in the city where the property is situated. Hence, even if the Affidavit of Publication was admitted as part of petitioners evidence, it would not support petitioners case as it does not clearly prove petitioners compliance with the publication requirement. Petitioners invocation of the presumption of regularity in the performance of official duty on the part of Sheriff Castillo is misplaced. While posting the notice of sale is part of a sheriffs official functions, the actual publication of the notice of sale cannot be considered as such, since this concerns the publishers business. Simply put, the sheriff is incompetent to prove that the notice of sale was actually published in a newspaper of general circulation. The Court further notes that the Notice of Extra-Judicial Sale, prepared and posted by Sheriff Castillo, does not indicate the newspaper where such notice would be published. The space provided where the name of the newspaper should be was left blank, with only the dates of publication clearly written. This omission raises serious doubts as to whether there was indeed publication of the notice of sale. Once again, the Court stresses the importance of the notice requirement, as enunciated in Metropolitan Bank and Trust Company, Inc. v. Peafiel, thus: 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 [sale] of the property. 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. In addition, the Court reminds mortgagees of their duty to comply faithfully with the statutory requirements of foreclosure. In Metropolitan Bank v. Wong, the Court declared: 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. In sum, petitioner failed to establish its compliance with the publication requirement under Section 3 of Act No. 3135. Consequently, the questioned extrajudicial foreclosure of real estate mortgage and sale are void.

SPOUSES ANTONIO E.A. CONCEPCION and MANUELA S. CONCEPCION vs. HON. COURT OF APPEALS, HOME SAVINGS BANK AND TRUST COMPANY et al. G.R. No. 122079, June 27, 1997, FIRST DIVISION, VITUG, J. The Home Savings Bank and Trust Company (now Insular Life Savings and Trust Company) granted to the spouses Antonio E.A. Concepcion and Manuela S. Concepcion a loan amounting to P1,400,000.00. The Concepcions, in turn, executed in favor of the bank a real estate mortgage over their property located at 11 Albany St., Greenhills, San Juan, Metro Manila. The mortgage contract stipulated that
"All correspondence relative to this Mortgage, including demand letters, summons, subpoenas, or notifications of any judicial or extrajudicial actions shall be sent to the Mortgagor at the address given above or at the address that may hereafter be given in writing by the Mortgagor to the Mortgagee, and the mere act of sending any correspondence by mail or by personal delivery to the said address shall be valid and effective notice to the Mortgagor for all legal purposes, and fact that any communication is not actually received by the Mortgagor, or that it has been returned unclaimed to the Mortgagee, or that no person was found at the address given, or that the address is fictitious or cannot be located, shall not excuse or relieve Mortgagor from the effects of such notice."

When the Concepcions failed to pay, the bank finally filed with the Office of the Provincial Sheriff of Pasig City a petition for extrajudicial foreclosure of the real estate mortgage. A notice of sale was issued setting the public auction sale on 11 June 1986. The notice was published in the newspaper "Mabuhay." A copy of the notice was sent to the Concepcions at 59 Whitefield St., White Plains Subdivision, Quezon City and/or at 11 Albany St., Greenhills Subdivision, San Juan, Metro Manila. The public auction sale went on as scheduled with the bank emerging as the highest bidder. A Certificate of Sale was issued in favor of the bank. The Concepcions were unable to exercise their right of redemption within the one-year period provided under Act No. 3135. The bank thus consolidated its title over the property and, after the cancellation of the title in the name of the Concepcions, a new transfer certificate of title was issued in the name of Home Savings Bank and Trust Company. The Concepcions filed an action against Home Savings Bank and Trust Company, the Sheriff of San Juan, Metro Manila, and the Register of Deeds of San Juan, Metro Manila, for the cancellation of the foreclosure sale on the ground of non-compliance with the statutory requirement on notice under Section 3 of Act No. 3135. The Concepcions contended that they have been denied their contractually stipulated right to be personally notified of the foreclosure proceedings on the mortgaged property. ISSUE: Whether or not personal notice is required if there is a stipulation thereto. HELD: Petition PARTIALLY GRANTED. The Section 3 of Act No. 3135 only requires (1) the posting of notices of sale in three public places, and (2) the publication of the same in a newspaper of general circulation. Personal notice to the mortgagor is not necessary. Nevertheless, the parties to the mortgage contract are not precluded from exacting additional requirements. In the case at bar, the mortgage contract stipulated that "all correspondence relative to the Mortgage shall be sent to the Mortgagor at the address given above or at the address that may hereafter be given in writing by the Mortgagor to the Mortgagee xxx. The stipulation, not being contrary to law, morals, good customs, public order or public policy, is the law between the contracting parties and should be faithfully complied with. Private respondent bank maintains that the stipulation that "all correspondence relative to (the) Mortgage x x x shall be sent to the Mortgagor at the address given above or at the address that may hereafter be given in writing by the Mortgagor to the Mortgagee" gives the mortgagee an alternative to send its correspondence either at the old or the new address given. This stand is illogical. It could not have been

the intendment of the parties to defeat the very purpose of the provision referred to which is obviously to apprise the mortgagors of the bank's action that might affect the property and to accord to them an opportunity to safeguard their rights. The Court finds the bank's failure to comply with its agreement with petitioners an inexcusable breach of the mortgagee's covenant. Neither petitioners' subsequent opportunity to redeem the property nor their failed negotiations with the bank for a new schedule of payments, can be a valid justification for the breach. In sum, personal notice to the mortgagor in an extrajudicial foreclosure sale is not generally required where there is no contractual stipulation therefor.