Newspaper Circulation and Foreclosure: Ensuring Public Notice in Property Sales

The Supreme Court has ruled that a foreclosure sale is void if the notice of sale is published in a newspaper that is not of general circulation in the place where the property is located. This decision protects property owners from defective foreclosure proceedings and reminds banks and other lenders that strict compliance with publication rules is mandatory.

The Facts of the Case

The Peñafiel spouses owned two parcels of land in Mandaluyong City. In 1991, they mortgaged these properties to Metropolitan Bank and Trust Company (Metrobank). When the spouses defaulted on their loan, Metrobank initiated extrajudicial foreclosure proceedings under Act No. 3135.

The Notice of Sale was published in a newspaper called Maharlika Pilipinas on three consecutive weeks in August 1999. The notice was also posted in three public places in Mandaluyong City. At the auction, Metrobank emerged as the highest bidder and was issued a certificate of sale.

The Peñafiels later filed a complaint to nullify the foreclosure, arguing that the publication requirement was not complied with because Maharlika Pilipinas was not a newspaper of general circulation in Mandaluyong City.

The Issue

The central question was whether Metrobank complied with Section 3 of Act No. 3135, which requires that the notice of sale be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city where the property is situated.

The Ruling

The Supreme Court denied Metrobank's petition and affirmed the Court of Appeals' decision nullifying the foreclosure sale. The Court held that Maharlika Pilipinas was not a newspaper of general circulation in Mandaluyong City.

The publisher of Maharlika Pilipinas testified that the newspaper had no office in Mandaluyong City, had no business permit there, and had no subscribers from that city. More importantly, the publisher admitted that the newspaper was not offered to just anybody — it was only offered to a select group of people chosen by the publisher.

The Court emphasized that a newspaper of general circulation must be available to the public in general, not just to a select few. The purpose of the publication requirement is to achieve "reasonably wide publicity" of the auction sale, to inform the public of the nature and condition of the property to be sold, and to secure bidders to prevent a sacrifice of the property.

The Court also noted that while the publisher's affidavit stated that Maharlika Pilipinas was a newspaper of general circulation, it did not state that the newspaper was circulated in Mandaluyong City. This was a critical omission.

The Accreditation Argument

Metrobank argued that the Executive Judge of the RTC of Mandaluyong City had accredited Maharlika Pilipinas as one of the newspapers authorized to publish judicial notices. The Court rejected this argument, stating that such accreditation is not decisive of whether a newspaper is of general circulation in a particular place. The court before which a case is pending must resolve the issue based on the evidence on record.

No Distinction Between Sheriff and Notary Public

The Court also clarified that there is no distinction in the publication requirement whether the extrajudicial foreclosure is conducted by a sheriff or a notary public. The key element in both cases is the general circulation of the newspaper in the place where the property is located.

Practical Takeaways

• Publication is mandatory, not optional. Under Section 3 of Act No. 3135, the notice of sale must be published once a week for at least three consecutive weeks in a newspaper of general circulation in the city or municipality where the property is located.

• "General circulation" means available to the public. A newspaper is not of general circulation if it is only offered to a select group of people chosen by the publisher. It must be available to the public in general.

• Circulation in the right place matters. The newspaper must be circulated in the specific city or municipality where the property is located, not just anywhere in the country.

• The publisher's affidavit must state the right facts. An affidavit of publication that merely states the newspaper is of general circulation, without stating that it is circulated in the place where the property is located, may not be sufficient.

• Accreditation is not conclusive. A court's accreditation of a newspaper for judicial notices does not automatically prove that the newspaper is of general circulation in a particular place.

• Non-compliance can void the sale. Failure to comply with the publication requirement can result in the nullification of the foreclosure sale, even if the lender was the highest bidder and a certificate of sale was already issued.

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