Foreclosure Sales Strict Compliance With Publication Requirements

The Supreme Court has long held that the statutory requirements for publication in extrajudicial foreclosure sales are not mere formalities—they are jurisdictional. In Caubang v. Crisologo (G.R. No. 174581, February 4, 2015), the Court reaffirmed this principle and imposed personal liability on a notary public who failed to verify that the newspaper used for publication was one of general circulation. The case serves as a critical reminder that strict compliance with the notice requirements under Act No. 3135 is mandatory, and any deviation can invalidate the foreclosure sale.

The Facts of the Case

In December 1993 and January 1994, spouses Jesus and Nanette Crisologo obtained two loans from PDCP Development Bank, Inc., secured by a real estate mortgage over their property covered by TCT No. T-181103. After paying only a few installments, the spouses defaulted on their amortizations starting August 1994. Despite demands, they failed to settle their obligation.

The spouses attempted to negotiate, proposing to pay the loan in full if the bank waived interest and penalties. They even offered to deposit P1,500,000.00 on condition that the bank return their title. The bank eventually denied the counter-offer and demanded payment of the loan, which had ballooned to over P3 million.

On March 20, 1998, PDCP Bank filed a petition for extrajudicial foreclosure. Atty. Leo Caubang, as notary public, prepared the Notices of Sale and caused their posting in three public places: the Barangay Hall of Matina, the Davao City Hall, and the Bangkerohan Public Market. Publication was made in the Oriental Daily Examiner, a local newspaper in Davao City.

At the auction on July 15, 1998, the bank was the only bidder, acquiring the property for P1,331,460.00—leaving a deficiency of P2,207,349.97. The spouses later learned of the sale and filed a complaint to nullify the foreclosure.

The Issue

The central issue was whether the extrajudicial foreclosure sale was valid despite the alleged failure to comply with the publication requirement under Section 3 of Act No. 3135.

The Ruling

The Supreme Court denied Caubang's petition and affirmed the rulings of the lower courts nullifying the foreclosure sale. The Court found that Caubang never made any effort to verify whether the Oriental Daily Examiner was indeed a newspaper of general circulation. Evidence showed that the newspaper was not on the list of accredited publications for legal notices in the Davao RTC's Office of the Clerk of Court, had no paying subscribers, and only published when there were customers.

Strict Compliance Is Mandatory

Section 3 of Act No. 3135 requires that notice of sale be given by posting for not less than twenty days in at least three public places of the municipality or city where the property is situated. If the property is worth more than four hundred pesos, the notice must also be published 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 principal object of a notice of sale 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.

Statutory provisions governing publication of notice of mortgage foreclosure sales must be strictly complied with, and slight deviations will invalidate the notice and render the sale, at the very least, voidable. The Court cited PNB v. Nepomuceno Productions, Inc. (442 Phil. 635 [2002]) in support of this principle.

Failure to Publish Is a Jurisdictional Defect

The Court ruled that the statutory requirements of posting and publication are mandated and imbued with public policy considerations. Failure to advertise a mortgage foreclosure sale in compliance with the statutory requirements constitutes a jurisdictional defect, and any substantial error in a notice of sale will render the notice insufficient and consequently vitiate the sale.

Because there was no proper publication, the spouses and the general public were never informed that the property was about to be foreclosed. This allowed the bank to become the sole bidder and acquire the property at a very low price, then pursue the spouses for a larger deficiency amount.

Liability of the Notary Public

The Court also upheld the award of attorney's fees and litigation expenses against Caubang. Since it was he who caused the improper publication, which compelled the spouses to litigate to protect their interest in the property, he was held liable for their litigation expenses and attorney's fees.

Practical Takeaways

• Verify the newspaper's status. Before publishing a notice of foreclosure sale, confirm that the chosen newspaper is actually one of general circulation and is accredited to publish legal notices in the relevant court.
• Strict compliance is non-negotiable. Even slight deviations from the posting and publication requirements under Act No. 3135 can invalidate a foreclosure sale.
• Publication protects the mortgagor and the public. The purpose is to attract bidders and prevent the property from being sold at a sacrifice price.
• Notaries public face personal liability. A notary who fails to ensure proper publication may be held personally liable for damages, attorney's fees, and litigation expenses.
• A defective sale is voidable or void. Failure to comply with publication requirements is a jurisdictional defect that can nullify the foreclosure and the subsequent certificate of sale.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.