GR 177050; (July, 2013) (Digest)
G.R. No. 177050; July 01, 2013
CARLOS LIM, CONSOLACION LIM, EDMUNDO LIM, CARLITO LIM, SHIRLEY LEODADIA DIZON, AND ARLEEN LIM FERNANDEZ, PETITIONERS, vs. DEVELOPMENT BANK OF THE PHILIPPINES, RESPONDENT.
FACTS
Petitioners obtained two loans from respondent Development Bank of the Philippines (DBP) in 1969 and 1970, secured by a real estate mortgage over several properties. Due to armed conflict in Mindanao, their cattle ranch business collapsed, leading to loan default. In 1978, they made a substantial partial payment. Over the following years, petitioners repeatedly requested updated statements of account and proposed various modes of settlement, including dacion en pago and installment plans. DBP provided statements stamped “Errors & Omissions Excepted/Subject to Audit,” which showed ballooning amounts, and at one point proposed a restructuring agreement under new guidelines.
Despite ongoing negotiations and petitioners’ payments to postpone foreclosure, DBP caused the publication of a notice of foreclosure sale. The notice was published in a newspaper based in General Santos City, but the properties mortgaged were located in the municipalities of Tupi and Polomolok, South Cotabato. Petitioners filed an action for injunction with damages, arguing the foreclosure was void due to improper publication. The trial court ruled in favor of DBP, a decision affirmed by the Court of Appeals.
ISSUE
Whether the extrajudicial foreclosure of the mortgage was valid despite the publication of the notice of sale in a newspaper of general circulation in General Santos City, instead of in the municipalities where the mortgaged properties were situated.
RULING
No, the foreclosure was void. The Supreme Court reversed the lower courts’ decisions. Act No. 3135, as amended, governing extrajudicial foreclosure, mandates strict compliance with its publication requirements. Section 3 requires publication of the notice of sale in a newspaper of general circulation in the “municipality or city where the property is situated.” The law is clear and mandatory.
The mortgaged properties were located in Tupi and Polomolok, South Cotabato. The notice was published only in the “Mindanao Observer,” a newspaper published and circulated in General Santos City. General Santos City is a distinct political unit from the municipalities of Tupi and Polomolok. Publication in a newspaper circulating in a different locality, even if nearby, does not satisfy the legal requirement. The purpose of the law—to inform the public and potential bidders in the locality where the property lies—is defeated. Since DBP failed to comply with this indispensable requirement, the foreclosure proceedings were null and void. The Court emphasized that the bank’s right to foreclose must be exercised in strict accordance with the law’s mandate.