Baclig vs. The Rural Bank of Cabugao, Inc.

An extrajudicial foreclosure sale is void for lack of jurisdiction if the notice of sale is not published in a newspaper of general circulation when the property's value exceeds ₱400.00, as mandated by Section 3 of Act No. 3135.

In 1972, the parents of petitioner Antonio Baclig and his siblings obtained a ₱1,000.00 loan from respondent Rural Bank of Cabugao, Inc., secured by a real estate mortgage over a parcel of land and a house. Upon the borrowers' default, the Bank initiated extrajudicial foreclosure. The property was sold at public auction to the Bank as the sole bidder. After the redemption period lapsed, the Bank consolidated ownership. The borrowers (later substituted by their heirs, the petitioners) filed a complaint for annulment of the foreclosure and auction sale, alleging lack of personal notice and unconscionable inadequacy of the sale price.

• Nature of the Action: The case originated as a complaint for Annulment of Foreclosure and Auction Sale filed by the borrowers (later substituted by their heirs) against the Bank.
• The Foreclosure: The borrowers' ₱1,000.00 loan was secured by a real estate mortgage. Upon default, the Bank foreclosed extrajudicially. A Notice of Extra-Judicial Sale was posted but not published in a newspaper. The Bank was the sole bidder at the auction.
• Lower Court Findings: The RTC dismissed the complaint, ruling that inadequacy of price is not a ground to nullify a sale, personal notice to the mortgagor is not required, and laches had set in. The CA affirmed, adding that publication was unnecessary because the loan did not exceed ₱50,000.00.
• Procedural Complication: The CA decision became final after its records division found no timely motion for reconsideration was filed. Petitioners' counsel claimed a mistake in mailing the wrong pleading, which the CA rejected.
• Supreme Court's Factual Determination: The Court found the subject property (land and house) had a combined market value exceeding ₱400.00 based on tax declarations. The Bank never denied the non-publication of the notice.

• Relaxation of Procedural Rules: Petitioner argued that the failure to file the correct Motion for Reconsideration was an honest, excusable mistake by counsel, and strict application of the rules would result in outright deprivation of property.
• Violation of Constitutional Provision: Petitioner contended the CA's assailed Resolution violated Section 14, Article VIII of the Constitution, which requires decisions to clearly state facts and law.
• Newly-Discovered Evidence: Petitioner claimed a newly-discovered promissory note proved the Bank foreclosed the wrong obligation.
• Invalidity of Sale: Petitioner maintained the sale was void due to lack of personal notice, inadequacy of price, prescription, and the need for courts to protect indigent parties under Article 24 of the Civil Code.

• Burden of Proof: The Bank argued that the burden to prove non-compliance with publication requirements lay with the petitioners.
• Compliance with Law: The Bank maintained it observed all requirements under Act No. 3135.
• Laches and Estoppel: The Bank asserted that laches and estoppel had already set in against the petitioners' claims.

• Procedural Relaxation: Whether the Court should relax procedural rules and admit the belated Motion for Reconsideration to prevent a miscarriage of justice.
• Constitutional Requirement: Whether the CA violated the constitutional requirement for clearly stated decisions.
• Newly-Discovered Evidence: Whether newly-discovered evidence could be considered in a Rule 45 petition.
• Validity of Foreclosure Sale: Whether the extrajudicial foreclosure sale was void for failure to publish the notice of sale as required by Section 3 of Act No. 3135.
• Remaining Grounds for Annulment: Whether the sale was invalid due to lack of personal notice, inadequacy of price, prescription, or the application of Article 24 of the Civil Code.

• Procedural Relaxation: The rule on the 15-day reglementary period was relaxed. The exceptional circumstances—the grave irregularity in the foreclosure and the risk of outright property deprivation—warranted setting aside the Entry of Judgment and admitting the Motion for Reconsideration to serve substantial justice.
• Constitutional Requirement: No violation occurred. The assailed Resolution was a minute resolution disposing of an incidental matter, not a "decision" within the meaning of Section 14, Article VIII of the Constitution.
• Newly-Discovered Evidence: The argument was rejected. The invocation of newly-discovered evidence is procedurally improper in a Rule 45 petition and was belatedly raised. The evidence could have been discovered earlier with reasonable diligence.
• Validity of Foreclosure Sale: The auction sale was declared void. The property's value exceeded ₱400.00, triggering the mandatory publication requirement under Section 3 of Act No. 3135. Failure to publish constitutes a jurisdictional defect that invalidates the sale. The Bank's failure to produce an affidavit of publication confirmed the non-compliance.
• Remaining Grounds for Annulment: These grounds lacked merit. Personal notice to the mortgagor is not required unless stipulated; the petitioners admitted default; prescription had not set in; and Article 24 of the Civil Code does not mandate deciding cases in favor of the disadvantaged party irrespective of the merits. The prayer for damages was unsubstantiated.

• Jurisdictional Defect in Foreclosure for Non-Publication — The publication of the notice of sale in a newspaper of general circulation is a jurisdictional requirement for the validity of an extrajudicial foreclosure sale when the property is worth more than ₱400.00. Failure to comply with this statutory mandate renders the sale void, as it is imbued with public policy to secure bidders and prevent a sacrifice of the property. The requirement must be strictly complied with, and even slight deviations will invalidate the sale.
• Relaxation of Procedural Rules for Substantial Justice — While the negligence of counsel generally binds the client, exceptions exist where the counsel's gross negligence deprives the client of due process, results in outright deprivation of liberty or property, or where the interests of justice require relief. Courts may also relax the doctrine of immutability of final judgments when special or compelling circumstances exist, the merits of the case warrant it, and the review is not merely dilatory.

• "Failure to advertise a mortgage foreclosure sale in compliance with statutory requirements constitutes a jurisdictional defect which invalidates the sale. This jurisdictional requirement may not be waived by the parties; to allow them to do so would convert the required public sale into a private sale." — Citing Security Bank Corporation v. Spouses Mercado, emphasizing the mandatory nature of publication.
• "The principal object of a notice of sale in a foreclosure of mortgage is not so much to notify the mortgagor as to inform the public generally of the nature and condition of the property to be sold, and of the time, place, and terms of the sale." — Citing Caubang v. Spouses Crisologo, explaining the purpose of publication.

• Security Bank Corporation v. Spouses Mercado, 834 Phil. 286 (2018) — Controlling precedent establishing that failure to publish the notice of sale is a jurisdictional defect that invalidates the foreclosure sale.
• Caubang v. Spouses Crisologo, 753 Phil. 92 (2015) — Followed to underscore the public policy rationale behind the publication requirement and the strictness of its application.
• Philippine Savings Bank v. Spouses Geronimo, 632 Phil. 378 (2010) — Applied to shift the burden to the mortgagee-bank to produce proof of publication when non-publication is alleged, as the evidence lies within its custody.
• Ramirez v. The Manila Banking Corporation, 723 Phil. 674 (2013) — Cited for the rule that personal notice to the mortgagor is not required in extrajudicial foreclosure unless stipulated by the parties.

• Section 3, Act No. 3135 ("An Act to Regulate the Sale of Property Under Special Powers Inserted in or Annexed to Real-Estate Mortgages") — The provision mandates that if the property is worth more than ₱400.00, the notice of sale must be published once a week for at least three consecutive weeks in a newspaper of general circulation. The Court held this requirement was not met, rendering the sale void.
• Section 1, Rule 52 of the Rules of Court — Provides the 15-day period for filing a motion for reconsideration. The Court relaxed this rule based on exceptional circumstances.
• Section 14, Article VIII of the 1987 Constitution — Requires courts to clearly and distinctly state the facts and the law on which their decisions are based. The Court held this applies to decisions, not to resolutions on incidental matters.

Zalameda, J., Rosario, J., and Marquez, J. concur. Gesmundo, C.J. was on official leave.

N/A. The decision was unanimous among the participating justices.