Foreclosure Validity: Proper Notice and Publication in Extrajudicial Sales

The validity of an extrajudicial foreclosure sale often hinges on strict compliance with notice requirements. In Perez v. Perez (G.R. No. 143768, March 28, 2005), the Supreme Court clarified what constitutes sufficient posting and publication of auction notices under Act No. 3135. The ruling provides practical guidance for both mortgagees and mortgagors on the essential steps that make a foreclosure sale legally effective.

The Facts of the Case

In 1973, the Perezes mortgaged their property in Morong, Bataan to the Development Bank of the Philippines (DBP) as security for a P6,500 agricultural loan. After the borrowers defaulted without paying a single amortization, DBP instituted extrajudicial foreclosure proceedings in 1978 under Act No. 3135.

The deputy sheriff posted the notice of sale at three public places in Morong and published it for three consecutive weeks in the Olongapo News. At the auction, Democrito Perez emerged as the winning bidder. When the mortgagors failed to redeem the property, a new title was issued in his name.

Years later, the original mortgagors filed suit to annul the sale, arguing that the posting was defective and that the Olongapo News was not a newspaper of general circulation in Bataan.

The Issue

The sole issue was whether the essential requirements for a valid sheriff's auction sale under Act No. 3135, governing the extrajudicial foreclosure of real estate mortgage, had been observed.

The Court's Ruling

The Supreme Court affirmed the validity of the foreclosure sale, finding full compliance with the statutory requirements.

Posting of Notices

Section 3 of Act No. 3135 requires posting notices of sale for not less than twenty days in at least three public places of the municipality or city where the property is situated. The petitioners argued that because the puericulture center was beside the municipal hall, the deputy sheriff effectively posted notices at only two distinct locations.

The Court rejected this argument, holding that a puericulture center and a municipal building are separate public places despite their proximity. The Court also noted that the deputy sheriff enjoys the presumption of regular performance of official duty, and the petitioners presented no evidence to overcome this presumption.

Publication in a Newspaper of General Circulation

Under Section 1 of Presidential Decree No. 1079, notices of auction sales in extrajudicial foreclosure of real estate mortgage must be published in newspapers published, edited, and circulated in the same province or city where the property is located. However, if no such newspaper exists in the locality, publication may be made in a newspaper published, edited, and circulated in the nearest city or province.

The Court found that the Olongapo News qualified as a newspaper of general circulation. It was published for the dissemination of local news and general information, had a bona fide subscription list of paying subscribers, was published at regular intervals, and was not devoted to the interests of a particular class or profession.

Significantly, the petitioners' own witness testified that the Olongapo News was the only newspaper in general circulation in Bataan at the time. Since no newspaper was published in Morong itself, publication in the Olongapo News—the nearest available publication—satisfied the requirements of P.D. No. 1079.

Practical Takeaways

• Posting locations matter. Notices must be posted in at least three distinct public places in the municipality or city where the property is located. Two buildings in close proximity, such as a municipal hall and a puericulture center, are still separate public places.

• The presumption of regularity applies. Sheriffs are presumed to have regularly performed their official duties in posting notices. A party challenging a foreclosure sale bears the burden of presenting evidence to rebut this presumption.

• "Newspaper of general circulation" is defined by substance, not size. A newspaper qualifies if it disseminates local news and general information, has paying subscribers, publishes at regular intervals, and does not cater to a particular class or interest. It need not have the largest circulation.

• Publication can be in a nearby locality. If no newspaper is published in the locality where the property is situated, publication may be made in a newspaper published, edited, and circulated in the nearest city or province.

• Constructive notice binds the mortgagor. Compliance with posting and publication requirements gives the mortgagor constructive notice of the foreclosure proceedings, even if actual notice was not received.

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