China Banking Corp. v. Martir
REITERATIONFacts
The Antecedents: Respondents, Spouses Wenceslao and Marcelina Martir, executed real estate mortgages in favor of petitioner China Banking Corporation over three parcels of land as security for a credit line of P1,800,000.00. Respondents failed to pay monthly interests, leading to the non-renewal of the credit line and a final demand letter for their total obligation of P1,705,000.00. The properties were extrajudicially foreclosed and sold at public auction for P2,400,000.00, with petitioner as the sole bidder. A Certificate of Sale was issued and registered. Procedural History: Respondents sent letters inquiring about the loan and redemption amounts, and formally offered to pay P1,300,000.00. They filed a complaint for nullification of the foreclosure proceedings, alleging non-compliance with publication, posting, registration, and reporting requirements, and imputing bad faith. The Regional Trial Court (RTC) upheld the validity of the foreclosure but granted respondents the alternative remedy of redemption, finding that petitioner caused their failure to redeem. The Court of Appeals (CA) reversed the RTC, invalidated the foreclosure, and ordered the cancellation of the Certificate of Sale, but directed respondents to pay their loans with interest. Petitioner's motion for reconsideration was denied. The Petition: Petitioner assailed the CA's decision, arguing that the appellate court erred in holding the foreclosure void based on the newspaper not being an "accredited newspaper" and in failing to appreciate substantial compliance with posting and publication requirements.
Issue(s)
Whether the extra-judicial foreclosure sale was void based on the ground that the newspaper where the notice of auction sale was published was not an "accredited newspaper," and whether there was substantial compliance in the posting and publication of the notice of extra-judicial foreclosure sale. Whether respondents can redeem their properties on the basis of the alleged bad faith of petitioner.
Ruling
The petition is meritorious. The Court reversed and set aside the decision of the Court of Appeals, reinstating and affirming the decision of the Regional Trial Court upholding the validity of the extra-judicial foreclosure sale, with the modification that respondents are no longer allowed to redeem their properties.
Ratio Decidendi
On the validity of the publication and accreditation of the newspaper and substantial compliance: The Court held that the publication of the notice of sale in a newspaper of general circulation alone is more than sufficient compliance with the notice-posting requirements of Act No. 3135, as amended. The Court noted that Presidential Decree 1079, the governing law at the time, required publication in a newspaper of general circulation but did not require accreditation. The requirement of accreditation was imposed by A.M. No. 01-1-07-SC in 2001, which cannot be applied retroactively. The affidavit of publication by the account executive of Sun Star General Santos, stating it is of general circulation and published in General Santos City, constitutes prima facie proof. Respondents' claim was based solely on the lack of accreditation, not on the lack of general circulation. Therefore, there was valid publication, and the extrajudicial foreclosure and sale were valid. The Court reiterated that newspaper publications have far-reaching effects and are more than sufficient compliance with notice-posting requirements. The object of notice is to inform the public and secure bidders. Immaterial errors do not affect sufficiency unless they are calculated to mislead or deter bidders. In this case, the Court found that the publication in Sun Star General Santos, a newspaper of general circulation, satisfied the purpose of the law, even if it was not accredited. On the right to redeem and tender of payment: The Court ruled that respondents could not redeem their properties. In effecting redemption, the mortgagor has the duty of tendering payment before the redemption period expires. A mere offer to redeem, unaccompanied by an actual tender of payment of the redemption price, is ineffectual. The respondents' letter dated May 11, 1999, was merely a formal offer to redeem and did not constitute an actual tender of payment. Bona fide redemption necessarily implies a reasonable and valid tender of the entire repurchase price. The respondents' repeated requests for information and the bank's failure to respond did not invalidate the foreclosure, as respondents could have ascertained the redemption price through other means, such as examining the Certificate of Sale or consigning the amount in court. The institution of an action to annul a foreclosure sale does not suspend the running of the redemption period.
Main Doctrine
The publication of the notice of sale in a newspaper of general circulation alone is more than sufficient compliance with the notice-posting requirements of Act No. 3135, as amended. Furthermore, an offer to redeem must be accompanied by an actual and simultaneous tender of payment of the redemption price; a mere statement of intention or an offer without tender is ineffectual.