G.R. No. 73678 July 21, 1989
GUILLERMO CORTES and FLORENCIA P. CORTES, petitioners, vs. THE INTERMEDIATE APPELLATE COURT, ARSENIO REYES, DEVELOPMENT BANK OF THE PHILIPPINES and THE SHERIFF OF KALOOKAN CITY, respondents.

FACTS

Petitioners obtained a loan from respondent Development Bank of the Philippines (DBP) secured by a real estate mortgage. Upon default, DBP initiated extrajudicial foreclosure under Act No. 3135. The foreclosure sale was conducted after the requisite posting and publication of notices, and the property was sold to respondent Arsenio Reyes as the highest bidder. Petitioners claimed they had no knowledge of the sale and, in 1968, constructed a new house on the property, allegedly unaware that title had already been consolidated in Reyes’s name. Upon learning of the foreclosure via a writ of possession, petitioners filed an action to annul the sale, seeking reconveyance and damages, arguing lack of personal notice.

ISSUE

The primary issues were: (1) whether the extrajudicial foreclosure was invalid due to lack of personal notice to the mortgagors; (2) whether petitioners should be allowed to redeem the property; and (3) whether petitioners are entitled to ownership of the house they built or to rights as builders in good faith under Article 448 of the Civil Code.

RULING

The Supreme Court denied the petition and affirmed the Intermediate Appellate Court’s decision. On the first issue, the Court held that Act No. 3135, which governed the foreclosure, only requires posting and publication of the notice of sale, not personal notice to the mortgagor. The Court rejected the argument that a stipulation in the mortgage deed for sending correspondence created an obligation for personal notice, ruling that such a general stipulation cannot override the specific statutory procedure invoked by the parties within the same contract. The factual finding that statutory posting and publication were complied with was deemed conclusive.
On the second issue, the right of redemption was extinguished upon consolidation of title after the lawful foreclosure sale. The Court found no basis to extend the redemption period, as the Perez v. PNB case cited by petitioners was inapplicable, having involved a lack of the statutory notice required by Act 3135, which was not present here.
On the third issue, the Court upheld the appellate court’s factual finding that petitioners failed to substantiate their claim of building a new house in 1968. The alleged construction was unsupported by evidence such as tax declarations or DBP’s consent, which was required under the mortgage contract. Consequently, the issue of applying Article 448 on builders in good faith did not arise. Even assuming good faith, the option under Article 448 belongs to the landowner, not the builder. The petition was denied for lack of merit.