G.R. No. 173976 - Metropolitan Bank and Trust Co. vs. Penafiel

Case Summary (G.R. No. 173976)

Factual Background

The properties at issue comprised two parcels of land registered under Transfer Certificate of Title Nos. (350937) 6195 and 0085 issued by the Register of Deeds of Mandaluyong City, owned by Erlinda and the late Romeo Penafiel. On August 1, 1991, the Penafiel spouses mortgaged the properties to Metropolitan Bank and Trust Company, Inc. The mortgage was amended as the loan increased. After default, petitioner instituted an extrajudicial foreclosure proceeding under Act No. 3135 through a notary public. A notice of sale dated and served to respondent Erlinda Penafiel set the auction for September 7, 1999 at the main entrance of the City Hall of Mandaluyong City. The notice was published in Maharlika Pilipinas on August 5, 12 and 19, 1999 and posted in three conspicuous places in Mandaluyong City. At the auction, petitioner was the sole and highest bidder and obtained a certificate of sale.

Trial Court Proceedings

Respondent Erlinda Penafiel, through her attorney-in-fact, filed a complaint on August 8, 2000 seeking annulment of the extrajudicial foreclosure sale, injunctive relief to prevent consolidation of title and possession by petitioner, and attorney’s fees. The Regional Trial Court of Mandaluyong City rendered judgment on June 30, 2003 in favor of Metropolitan Bank and Trust Company, Inc., declaring the extrajudicial foreclosure valid and dismissing the counterclaims for insufficiency of evidence.

Court of Appeals Ruling

Respondents appealed to the Court of Appeals which reversed the RTC in a Decision dated July 29, 2005. The CA held that publication under Section 3, Act No. 3135 must be in a newspaper of general circulation in the municipality or city where the property is situated. On the evidence, the CA found that Maharlika Pilipinas was not shown to be in general circulation in Mandaluyong City and declared the extrajudicial foreclosure sale null and void. The CA denied petitioner’s motion for reconsideration by Resolution dated July 31, 2006.

Issues Presented to the Supreme Court

Metropolitan Bank and Trust Company, Inc. presented the following principal issues: whether the CA erred in applying the publication requirements of P.D. No. 1079 to an extrajudicial foreclosure by a notary public; whether Maharlika Pilipinas was a newspaper of general circulation in Mandaluyong City; and whether the CA erred in reversing the RTC and declaring the foreclosure sale null and void.

Parties’ Contentions on Publication

Petitioner maintained that Maharlika Pilipinas met the criteria of a newspaper of general circulation because it was published for dissemination of local news and general information, was issued at regular intervals, and had a bona fide subscription list of paying subscribers; petitioner also relied on the publisher’s Affidavit of Publication and on an RTC order accrediting Maharlika Pilipinas for judicial raffle. Petitioner argued that absence of listed subscribers from Mandaluyong City did not prove absence of circulation there. Respondents countered with a certification from the Mandaluyong City Business Permit and Licensing Office showing no business permit for Maharlika Pilipinas in Mandaluyong City, a subscriber list showing no subscribers from Mandaluyong City, and the testimony of the publisher, Mr. Raymundo Alvarez, that the paper was published in Marikina and Quezon City, circulated in Rizal and Cavite, had no office in Mandaluyong City, and was offered only to selected persons rather than to the public at large.

Burden of Proof and Evidentiary Record

The Court noted the settled rule that the party alleging noncompliance with the statutory publication requirement bears the burden of proving that noncompliance. The record contained the publisher’s affidavit of publication, the subscriber list, the Mandaluyong City certification regarding business permits, and Mr. Alvarez’s testimony under oath. The Court treated these items as the evidentiary basis for deciding whether publication met the dual requirement of being in a newspaper of general circulation and being circulated in the municipality or city where the property was located.

Statutory Requirement Under Act No. 3135

Section 3, Act No. 3135 requires posting of notices of sale in at least three public places in the municipality or city where the property is situated for not less than twenty days and, if the property is worth more than PHP 400, publication once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city. The Court emphasized that the statute mandates both that the paper be one of general circulation and that it be circulated in the locality where the property is located.

Supreme Court’s Legal Reasoning

The Court held that petitioner failed to prove compliance with Section 3, Act No. 3135. The publisher’s affidavit did not state that Maharlika Pilipinas was circulated in Mandaluyong City. The absence of Mandaluyong subscribers, the publisher’s admission that the paper had no office or mayor’s permit in Mandaluyong City, and his statement that the paper was not offered to just anybody supported the inference that the newspaper was not available to the public in general in Mandaluyong City. The Court reiterated jurisprudence that a newspaper of general circulation must be published for dissemination of local news and general information, have a bona fide subscription list, and be published at regular intervals, but must also be available to the public at large and not directed solely to a particular class or limited circle. The Court observed that accreditation by a presiding judge for raffle purposes is not conclusive proof of general circulation in a particular city for purposes of Act No. 3135. The Court further explained that the CA’s citation of P.D. No. 1079 cases did not mean that P.D. No. 1079 was applied to change the standard; rather, the cited authorities merely reinforced that the critical inquiry is actual general circulation in the locality where the property is situated.

On the Relevance of P.D. No. 1079 and Prior Authorities

The Court rejected petitioner’s contention that P.D. No. 1079 applies only to judicial notices or to extrajudicial sales by a sheri

Case Syllabus (G.R. No. 173976)

Parties and Procedural Posture

Metropolitan Bank and Trust Company, Inc. was the petitioner and mortgagee that conducted an extrajudicial foreclosure sale under Act No. 3135.
Eugenio Penafiel, for himself and as attorney-in-fact of Erlinda Penafiel, were the respondents and mortgagors who sought nullification of the foreclosure sale.
The Regional Trial Court of Mandaluyong City rendered judgment in favor of petitioner validating the foreclosure sale.
The Court of Appeals reversed the trial court and declared the foreclosure sale null and void.
The case reached the Supreme Court by a petition for review on certiorari by petitioner challenging the CA decision and denial of reconsideration.

Key Facts

Respondents were registered owners of two parcels of land covered by TCT No. (350937) 6195 and TCT No. 0085 issued by the Register of Deeds of Mandaluyong City.
The Penafiels mortgaged the properties to petitioner on August 1, 1991, and later defaulted on the loan.
Petitioner instituted an extrajudicial foreclosure on July 14, 1999, and set a public auction for September 7, 1999.
The Notice of Sale was published in Maharlika Pilipinas on August 5, 12 and 19, 1999, and notices were posted in three public places in Mandaluyong City.
Petitioner was the sole and highest bidder at the sale and purchased the properties for P6,144,000.00, and a certificate of sale issued in its favor.
Respondents filed suit on August 8, 2000 to annul the foreclosure sale and to enjoin consolidation of title and possession.

Statutory Framework

Section 3, Act No. 3135 required posting notices of sale in at least three public places in the municipality or city where the property is situated for at least twenty days and, if the property is worth more than PHP 400, publication once a week for at least three consecutive weeks in a newspaper of general circulation in that municipality or city.
P.D. No. 1079 concerned the accreditation and distribution of judicial notices and was cited in argument and prior jurisprudence but was not applied literally by the Court in this case.

Procedural History

The RTC of Mandaluyong City, Branch 208, ruled on June 30, 2003 that the extrajudicial foreclosure was valid and dismissed respondents' counterclaim.
Respondents appealed to the Court of Appeals which, in its Decision dated July 29, 2005, reversed the RTC and declared the foreclosure sale null and void.
The CA denied petitioner's motion for reconsideration on July 31, 2006.
Petitioner filed a petition for review on certiorari to the Supreme Court contesting the CA's reliance on the publication requirement.

Issue Presented

The principal issue was whether petitioner complied with the publication requirement under Section 3, Act No. 3135 by publishing the Notice of Sale in Maharlika Pilipinas.

Contentions of the Parties

Petitioner contended that Maharlika Pilipinas was a newspaper of general circulation because it disseminated local news, had a bona fide subscription list, was published regularly, and was accredited by the Executive Judge for raffle of judicial notices.
Respondents contended that the publication requirement was not met because Maharlika Pilipinas was not circulated in Mandaluyong City and had no subscribers there and no business permit in Mandaluyong City.
Petitioner argued that the CA erred b