Foreclosure Notice Requirements: BPI v. Puzon on Posting, Publication, and Presumption of Regularity

The Supreme Court's 2009 decision in Bank of the Philippine Islands v. Puzon (G.R. No. 160046) clarifies the rules on notice requirements in extrajudicial foreclosure sales. The case is instructive for both lenders and borrowers because it settles how courts should evaluate compliance with posting and publication requirements under Act No. 3135, as amended. The Court ruled that the presumption of regularity in favor of foreclosure proceedings stands unless the party challenging the sale presents clear evidence to rebut it.

The Facts of the Case

Evangeline Puzon obtained a ₱4.2 million loan from Citytrust Banking Corporation in April 1990, secured by a First Real Estate Mortgage over her residential lot in La Vista, Quezon City. When Puzon defaulted, Citytrust applied for extrajudicial foreclosure. The Notice of Sheriff's Sale, dated 29 January 1992, scheduled the auction for 26 February 1992. The notice was published in "The Guardian" newspaper for three consecutive weeks in February 1992. The sheriff also issued a Certificate of Posting stating that copies of the notice were posted in three "conspicuous places" in Quezon City.

Citytrust Realty Corporation emerged as the highest bidder. When Puzon failed to redeem the property, title was consolidated in the buyer's name. Puzon later filed an action to annul the foreclosure, claiming irregularities in the notice requirements.

The Issue

The central question was whether Citytrust complied with the statutory requirements on posting and publication of the notice of auction sale under Act No. 3135 and Presidential Decree No. 1079.

The Ruling

The Supreme Court ruled in favor of the bank, holding that the foreclosure sale was valid. The Court found that both the trial court and the Court of Appeals erred in declaring the sale void based mainly on the wording of the Sheriff's Certificate of Posting.

Posting Requirements and the Presumption of Regularity

Section 3 of Act No. 3135 requires that notice of sale be posted 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 ₱400, the notice must also be published once a week for at least three consecutive weeks in a newspaper of general circulation.

The Certificate of Posting stated that the notices were posted in three "conspicuous places" rather than "public places." The lower courts treated this wording as fatal. The Supreme Court disagreed. Under Section 3(m), Rule 131 of the Rules of Court, there is a presumption that official duty has been regularly performed. Foreclosure proceedings enjoy the presumption of regularity, and the party challenging them bears the burden of rebutting that presumption.

Puzon presented no evidence that the "conspicuous places" were not "public places." The Court also noted that the Notice of Sheriff's Sale was dated 29 January 1992 — more than twenty days before the 26 February 1992 auction — which supported compliance with the posting period.

Publication Is Sufficient Even Without Posting

The Court went further. Citing Development Bank of the Philippines v. Aguirre, it held that even if the notices were not posted in public places, the foreclosure sale would not be invalidated as long as the notice was duly published in a newspaper of general circulation. Publication alone is sufficient compliance with the statutory notice-posting requirement.

Publication Requirements Under PD 1079

The Court of Appeals also questioned whether "The Guardian" was qualified to publish the notice under PD 1079, which requires that the newspaper be published, edited, and circulated in the same city or province, and that it has been regularly published for at least one year.

The bank presented substantial evidence of compliance: the Notice of Sheriff's Sale stating its publication dates, actual copies of "The Guardian" issues containing the notice, and an Affidavit of Publication from the newspaper's General Manager. The bank also submitted a Certification from the Office of the Clerk of Court of the Regional Trial Court of Quezon City confirming that "The Guardian" was duly accredited to participate in the raffle of judicial notices, including extrajudicial foreclosure notices, for the relevant period.

Burden of Proof on the Challenging Party

The Court reiterated that in extrajudicial foreclosure, the party alleging non-compliance with publication requirements has the burden of proving that non-compliance. The records contained no evidence that Citytrust failed to comply with the publication requirements, nor any evidence disproving "The Guardian's" qualification.

Practical Takeaways

• Presumption of regularity applies to foreclosure proceedings. A sheriff's certificate of posting is presumed correct unless the borrower presents clear evidence to the contrary.
• Publication can cure defects in posting. Under prevailing jurisprudence, publication of the notice of sale in a newspaper of general circulation is sufficient compliance with the notice requirement, even if posting was defective.
• Wording matters, but not conclusively. A certificate stating "conspicuous places" instead of "public places" does not automatically invalidate a sale, especially when the certificate also states compliance with Act 3135.
• Borrowers challenging a foreclosure must present evidence. Allegations of irregularity, without supporting proof, will not overcome the presumption of regularity.
• Banks should keep complete records. The bank prevailed because it preserved copies of the newspaper, the affidavit of publication, and the court certification of the newspaper's accreditation.

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