G.R. No. 120859 . June 26, 2001.
METROPOLITAN BANK AND TRUST COMPANY, petitioner, vs. FRANCISCO Y. WONG, respondent.

FACTS

Sometime in 1976, Mindanao Grains, Inc. (MGI) applied for a credit accommodation with Metropolitan Bank and Trust Company (Metrobank). As security, respondent Francisco Y. Wong and his wife executed a real estate mortgage over a parcel of land registered in his name. Due to MGI’s failure to pay the obligation, Metrobank filed for extra-judicial foreclosure. A notice of foreclosure sale was published in a newspaper once a week for three consecutive weeks, but no notice was posted in the municipality or city where the mortgaged property was situated. The auction sale was initially postponed at MGI’s request. Despite MGI paying P20,000.00 on November 3, 1981, as agreed for a further postponement, the sheriff proceeded with the auction sale on November 23, 1981, where Metrobank was the highest bidder. A certificate of sale was issued and registered. After the redemption period, title was consolidated in Metrobank’s name. Respondent Wong discovered the foreclosure only when he later applied for a loan using the same property as collateral. He filed a complaint for reconveyance and damages, assailing the validity of the foreclosure sale for non-compliance with the posting and publication requirements of Section 3, Act No. 3135 . During the case’s pendency, Metrobank sold the property to a third party. The Regional Trial Court ruled in favor of Wong, awarding damages. The Court of Appeals affirmed with modifications, reducing the monetary awards. Metrobank filed the present petition.

ISSUE

1. Whether the foreclosure sale was legally infirm for non-compliance with the statutory requirements of posting and publication under Act No. 3135 .
2. Whether the award of damages and attorney’s fees to respondent Wong was proper.

RULING

1. Yes, the foreclosure sale was legally infirm. The Court affirmed the factual findings of the lower courts that there was non-compliance with the mandatory posting requirement under Section 3 of Act No. 3135 , which requires posting of notices in at least three public places in the municipality or city where the property is situated. While personal notice to the mortgagor is not statutorily required, the mortgage contract in this case contained a stipulation that all correspondence, including notifications of any judicial or extra-judicial action, shall be sent to the mortgagor at a specified address. Metrobank’s failure to send the notice of foreclosure sale to Wong pursuant to this contractual stipulation constituted a contravention of their agreement, which was binding as the law between them. This failure deprived Wong of the opportunity to safeguard his rights. The Court distinguished the cited case of Olizon v. Court of Appeals, noting the peculiar circumstances there were not present here.
2. The award of damages was proper but subject to modification. The Court upheld the award of moral and exemplary damages, finding that Metrobank acted in bad faith by proceeding with the auction sale despite receiving a payment agreed to postpone it, and by selling the property to a third party during the pendency of the reconveyance case, which frustrated Wong’s efforts to recover it. However, the Court found the amounts awarded by the Court of Appeals to be excessive. The decision was modified as follows: moral damages were reduced to P100,000.00; exemplary damages were reduced to P50,000.00; and the award of attorney’s fees was deleted. The award representing the fair market value of the property (P4,000,000.00) and costs of suit were affirmed.
The petition was DENIED. The Court of Appeals Decision was AFFIRMED with the stated modifications.