G.R. No. 97132 & G.R. No. 70937, December 10, 1991
MASANTOL RURAL BANK, INC., petitioner, vs. THE HON. COURT OF APPEALS and REMEDIOS B. SORIANO, respondents. and SPS. ANTONIO SORIANO and REMEDIOS B. SORIANO, petitioners, vs. HON. INTERMEDIATE APPELLATE COURT, et al., respondents.

FACTS

The spouses Antonio and Remedios Soriano obtained three loans totaling P25,000 from Masantol Rural Bank, secured by a real estate mortgage over their property in Tondo, Manila. The mortgage contained a special power of attorney for extrajudicial foreclosure. Upon the spouses’ default, the bank foreclosed the property. An auction sale, initially scheduled for October 2, 1977, was eventually held on June 22, 1978, where the bank was the sole bidder. After the redemption period lapsed, the bank consolidated its ownership and obtained a new title. It then secured a writ of possession from the land registration court.
The Soriano spouses contested the writ of possession, leading to G.R. No. 70937. Separately, and while that case was pending, Remedios Soriano filed an action to annul the foreclosure sale and the resulting title, arguing the sale was void for non-compliance with legal requirements. The trial court in that annulment case (Branch 26, RTC Manila) declared the foreclosure sale null and void ab initio, a decision affirmed by the Court of Appeals, leading to G.R. No. 97132 filed by the bank.

ISSUE

The core issue consolidated in these petitions is whether the extrajudicial foreclosure sale conducted by Masantol Bank was valid, which determines the validity of the subsequent title and writ of possession.

RULING

The Supreme Court declared the foreclosure sale null and void. The legal logic rests on the bank’s failure to comply with mandatory publication requirements for the auction sale. The notice of sale was published only once in a newspaper of general circulation, which is insufficient under Act No. 3135 , as amended, which requires publication once a week for at least three consecutive weeks. This defect is jurisdictional; non-compliance renders the sale void, not merely voidable. Consequently, all acts stemming from the void sale—the certificate of sale, the deed of assignment, the new transfer certificate of title, and the writ of possession—are also void and produce no legal effect.
However, the Court did not extinguish the underlying loan obligation. The nullity of the sale merely restores the parties to their pre-foreclosure status: the mortgage lien is reinstated on the property, and the Soriano spouses are ordered to pay their loan of P25,000 with 12% interest per annum. Should they fail to pay within 60 days, the bank is entitled to foreclose the mortgage anew, this time in strict compliance with all legal requisites, including the proper publication of notice. The consolidated decision set aside the assailed Court of Appeals rulings and ordered the reinstatement of the spouses’ original title with the mortgage lien annotated.