GR 125838; (June, 2003) (Digest)
G.R. No. 125838; June 10, 2003
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS and EMERALD RESORT HOTEL CORPORATION, respondents.
FACTS
Emerald Resort Hotel Corporation (ERHC) obtained a loan from the Development Bank of the Philippines (DBP), secured by mortgages on its real and personal properties. After DBP approved a conditional restructuring of the loan, it later cancelled the agreement due to ERHC’s alleged non-compliance with the conditions. DBP subsequently initiated extrajudicial foreclosure proceedings. The sheriffs issued notices for the public auction but failed to execute the required certificates of posting for these notices. The auction of the personal properties proceeded. For the real properties, the initial auction date was postponed at ERHC’s request, and the sale was rescheduled. DBP did not republish the notice for this new date, relying on an agreement to postpone signed by a representative of ERHC, whose authority ERHC later disputed.
ERHC filed a complaint to annul the foreclosure sales, arguing the proceedings were void for non-compliance with statutory posting and publication requirements and that the foreclosure was premature as the restructured loan was not yet due. The Regional Trial Court declared both foreclosure sales null and void, a decision affirmed by the Court of Appeals.
ISSUE
Whether the extrajudicial foreclosure sales of the mortgaged properties were valid.
RULING
No, the foreclosure sales were null and void. The Supreme Court affirmed the lower courts’ decisions, emphasizing strict compliance with the procedural requisites for extrajudicial foreclosure. For the foreclosure of the real estate mortgage under Act No. 3135, the law mandates posting of notices in public places and publication in a newspaper of general circulation. The sheriffs’ failure to execute certificates of posting, which serve as the only proof that the posting requirement was fulfilled, constituted a fatal defect. The Court ruled that without such proof, the posting—a mandatory step—is deemed not to have been complied with, rendering the sale void.
Regarding the rescheduled auction of the real properties, the Court held that a postponement to a later date constitutes a new sale, necessitating a new publication of notice. DBP’s failure to republish the notice for the new date was a clear violation of the publication requirement under Act No. 3135. The agreement to postpone, even if binding, did not dispense with this mandatory republication. Consequently, the foreclosure of the real properties was also invalid. The Court found no merit in DBP’s claim of a perfected restructuring agreement that ERHC breached, as the core issue was the jurisdictional defect in the foreclosure proceedings themselves, which could not be waived.