China Banking Corporation vs. Sps. Martir

An extrajudicial foreclosure sale is valid where the notice of sale was published in a newspaper of general circulation, even if that newspaper was not accredited by the court, when accreditation was not yet a legal requirement at the time of the foreclosure; and the right of redemption is lost where the mortgagor fails to make an actual tender of the full redemption price within the prescribed period, a mere offer to redeem being insufficient.

Spouses Wenceslao and Marcelina Martir were borrowers who obtained a credit line from China Banking Corporation, secured by real estate mortgages over three parcels of land in General Santos City. The governing statute for extrajudicial foreclosure was Act No. 3135, as amended, which prescribed posting and publication requirements for notices of sale. At the time of the foreclosure in May 1998, Presidential Decree No. 1079 governed the publication of judicial and legal notices in newspapers of general circulation. Court accreditation of newspapers for purposes of publishing legal notices was imposed only in 2001 through A.M. No. 01-1-07-SC, after the subject foreclosure had already been conducted.

In 1994, spouses Wenceslao and Marcelina Martir executed real estate mortgages in favor of China Banking Corporation over three parcels of land covered by TCT No. 50485, OCT No. (P-29452) (P-11287) P-1897, and OCT No. P-2754, as security for a credit line in the amount of P1,800,000.00. The loan was released in tranches, and for every amount released, the spouses executed the corresponding promissory note.

On September 12, 1997, respondents failed to pay the monthly interests on the promissory notes. A demand letter dated October 8, 1997 was sent reminding them of their obligation, but they still failed to pay; consequently, the promissory notes and the credit line were no longer renewed. A final demand letter dated December 29, 1997 was sent through registered mail by petitioner's counsel, at which time respondents' total obligation amounted to P1,705,000.00.

On May 20, 1998, upon the application of petitioner, the mortgaged properties were extrajudicially foreclosed and sold at public auction for P2,400,000.00, with petitioner as the sole bidder. A Certificate of Sale was issued on May 21, 1998, and registered with the Register of Deeds on June 6, 1998. The notice of sale had been posted in the barangay hall and Hall of Justice of General Santos City for fourteen days, from May 6 to May 20, 1998, and published in Sun Star General Santos, a local newspaper.

From March to May 1999, respondents sent a series of letters to petitioner inquiring about the amount of loan availed from the credit line and the amount needed to redeem the foreclosed properties, but petitioner failed to respond. In a letter dated May 11, 1999, respondents formally offered to pay P1,300,000.00, based on petitioner's October 8, 1997 letter stating that the principal obligation amounted to P1,300,000.00. The letter was expressed as a "formal tender of redemption" but was not accompanied by an actual payment or consignation of the amount.

On May 17, 1999, respondents filed a complaint for nullification of the foreclosure proceedings, alleging non-compliance with jurisdictional requirements of publication, posting, registration, payment of filing and sheriff fees, and failure to report the proceedings to the Executive Judge. Respondents also imputed bad faith on the part of petitioner, claiming it prevented them from redeeming their properties. The RTC found the foreclosure valid but granted respondents an alternative remedy of redemption, reasoning that the expiration of the redemption period was caused by the bank. The CA reversed, invalidating the foreclosure on the ground that posting fell short of the mandated twenty-day period and that Sun Star General Santos was not an accredited newspaper of general circulation.

• Accreditation Not Required: Petitioner argued that the appellate court erred in holding the extrajudicial foreclosure sale void on the ground that the newspaper of publication was not "accredited," because accreditation was not a requirement under existing laws and jurisprudence at the time of the foreclosure.
• Substantial Compliance: Petitioner maintained that there was substantial compliance with both the posting and publication requirements, the notice having been published in a newspaper of general circulation by the foreclosing notary public.

• Non-Compliance with Posting and Publication: Respondents contended that the notice of extrajudicial foreclosure and sale was posted for only fourteen days in violation of the mandated twenty-day period, and that publication in Sun Star General Santos was invalid because the newspaper was not accredited as a newspaper of general circulation pursuant to P.D. No. 1079.
• Bad Faith Preventing Redemption: Respondents imputed bad faith on petitioner for failing to respond to their inquiries regarding the loan amount and redemption price, which allegedly prevented them from redeeming their properties.

• Validity of Publication: Whether the extrajudicial foreclosure sale was void on the ground that the newspaper where the notice of auction sale was published was not an "accredited newspaper."
• Substantial Compliance with Notice Requirements: Whether there was substantial compliance with the posting and publication requirements for the notice of extrajudicial foreclosure sale.
• Right of Redemption: Whether respondents could redeem their properties on the basis of the alleged bad faith of petitioner in failing to provide information needed to determine the redemption price.

• Validity of Publication: No. The foreclosure was not void for lack of accreditation. P.D. No. 1079, the governing law at the time, required only that the notice be published in a newspaper of general circulation; it did not require accreditation. The accreditation requirement was imposed only in 2001 through A.M. No. 01-1-07-SC and could not be applied retroactively.

• Substantial Compliance with Notice Requirements: Yes. Jurisprudence holds that publication of the notice of sale in a newspaper of general circulation alone is more than sufficient compliance with the notice-posting requirements of the law. The Affidavit of Publication executed by the account executive of Sun Star General Santos expressly stated that the newspaper is of general circulation in General Santos City, constituting prima facie proof thereof.

• Right of Redemption: No. A valid redemption requires an actual and simultaneous tender of the full redemption price, not merely a statement of intention to redeem. Respondents' May 11, 1999 letter was only a formal offer unaccompanied by actual payment. The filing of an action to annul the foreclosure sale does not suspend the running of the redemption period.

• Validity of Publication: The appellate court invalidated the foreclosure on the ground that Sun Star General Santos was not an accredited newspaper of general circulation, relying on a certification from the RTC Clerk of Court that the newspaper's petition for accreditation was still pending. However, P.D. No. 1079, the law in force at the time of the foreclosure in May 1998, requires only that notices be published in newspapers of general circulation published, edited, and circulated in the same city or province; it does not require accreditation. The accreditation requirement was introduced only in 2001 through A.M. No. 01-1-07-SC, which cannot be applied retroactively as it would impair petitioner's rights. Moreover, as held in Metrobank vs. Peñafiel, accreditation by the presiding judge is not conclusive proof that a newspaper is of general circulation; each case must be decided on its own merits and evidence. The Affidavit of Publication executed by the account executive of Sun Star General Santos expressly stated that the newspaper is of general circulation and is published in General Santos City, constituting prima facie proof. Respondents did not claim the newspaper was not generally circulated in the city, but only that it was not accredited. Hence, there was valid publication.

• Substantial Compliance with Notice Requirements: Jurisprudence has established that newspaper publications have more far-reaching effects than posting on bulletin boards, and that publication of the notice of sale in a newspaper of general circulation alone is more than sufficient compliance with the notice-posting requirement of the law. The object of a notice of sale is to inform the public of the nature and condition of the property to be sold and of the time, place, and terms of the sale, to secure bidders and prevent a sacrifice of the property. Because publication in a newspaper of general circulation achieves reasonably wide publicity, the purpose of the law is subserved even if the posting period fell short of the statutory twenty days.

• Right of Redemption: The general rule in redemption is that a mere manifestation of desire to redeem is insufficient; the statement of intention must be accompanied by an actual and simultaneous tender of payment of the full redemption price. Respondents' May 11, 1999 letter was only a formal offer to redeem, unaccompanied by actual tender of the redemption price. As held in Bodiongan vs. Court of Appeals, the redemption price consists of the purchase price paid at auction, interest of 1% per month thereon, amounts paid for assessments or taxes, and interest on those assessments. Article 1616 of the Civil Code provides that the vendor cannot repurchase without returning the price of the sale. Respondents could have examined the Certificate of Sale registered with the Register of Deeds to verify the purchase price, or moved for a computation of the redemption price and consigned the amount to the court. Their repeated requests for information and the bank's failure to respond did not invalidate the foreclosure or excuse the failure to redeem. Furthermore, the institution of an action to annul a foreclosure sale does not suspend the running of the redemption period. Because respondents failed to redeem in the manner and within the period prescribed by law, they lost all right or interest over the subject properties.

• Sufficiency of Publication over Posting — Publication of the notice of sale in a newspaper of general circulation alone constitutes more than sufficient compliance with the notice-posting requirements of Act No. 3135, because newspaper publications have more far-reaching effects than posting on bulletin boards, thereby achieving reasonably wide publicity and subserving the purpose of the law.

• Accreditation Not Conclusive of General Circulation — Accreditation by the presiding judge is not conclusive proof that a newspaper is of general circulation; the court before which a case is pending is bound to resolve the issue based on the evidence on record. An Affidavit of Publication stating that a newspaper is of general circulation constitutes prima facie proof thereof.

• Actual Tender Required for Valid Redemption — A valid exercise of the right of redemption requires an actual and simultaneous tender of payment of the full redemption price; a mere offer or statement of intention to redeem, unaccompanied by actual payment or valid consignation, is ineffectual. The redemption price consists of the auction purchase price, 1% monthly interest thereon, assessments or taxes paid by the purchaser, and 1% monthly interest on those assessments.

• Non-Suspension of Redemption Period by Annulment Action — The institution of an action to annul a foreclosure sale does not suspend the running of the redemption period fixed by law.

• "The general rule in redemption is that it is not sufficient that a person offering to redeem manifests his desire to do so. The statement of intention must be accompanied by an actual and simultaneous tender of payment. This constitutes the exercise of the right to repurchase." — This passage articulates the core requirement for a valid redemption, distinguishing a mere offer from an effective exercise of the right, and is the controlling rationale for denying respondents' claim.

• "Redemption within the period allowed by law is not a matter of intent but a question of payment or valid tender of the full redemption price within said period." — This statement crystallizes the principle that the right of redemption is governed by strict compliance with payment requirements, not by the mortgagor's subjective willingness or diligence.

• "Presidential Decree 1079, however, does not require accreditation. The requirement of accreditation was imposed by the Court only in 2001, through A.M. No. 01-1-07-SC x x x. This circular cannot be applied retroactively to the case at bar as it will impair petitioner's rights." — This passage defines the temporal boundary of the accreditation requirement and establishes that retroactive application is impermissible, which was dispositive of the publication issue.

• Cristobal vs. Court of Appeals, 384 Phil. 807 (2000) — Cited for the proposition that publication of the notice of sale in a newspaper of general circulation alone is more than sufficient compliance with the notice-posting requirements of the law.

• Olizon vs. Court of Appeals, G.R. No. 107075, Sept. 1, 1994, 236 SCRA 148 — Cited for the principle that the object of a notice of sale is to inform the public and secure bidders, and that immaterial errors will not affect the sufficiency of the notice unless they are calculated to deter or mislead bidders.

• Metrobank vs. Peñafiel, G.R. No. 173976, Feb. 27, 2009 — Cited for the ruling that accreditation by the presiding judge is not conclusive proof that a newspaper is of general circulation, and that the court must resolve the issue based on evidence on record.

• Perez vs. Perez, 494 Phil. 68 (2005) — Cited for the definition of a newspaper of general circulation: published for dissemination of local news and general information, with a bona fide subscription list of paying subscribers, published at regular intervals, and not devoted to a particular class, profession, trade, race, or religious denomination.

• BPI Family Savings Bank, Inc. vs. Spouses Veloso, 479 Phil. 627 (2004) — Cited for the rule that redemption requires an actual and simultaneous tender of the full redemption price, and that a mere offer without payment is ineffectual.

• Bodiongan vs. Court of Appeals — Cited for the components of the redemption price: the auction purchase price, 1% monthly interest thereon, assessments or taxes paid by the purchaser, and 1% monthly interest on those assessments.

• Spouses Landrito vs. Court of Appeals, G.R. No. 133079, Aug. 9, 2005, 466 SCRA 107 — Cited for the principle that the institution of an action to annul a foreclosure sale does not suspend the running of the redemption period.

• Banco Filipino Savings and Mortgage Bank vs. Court of Appeals, G.R. No. 143896, July 8, 2005, 463 SCRA 64 — Cited for the requirement that a complaint for redemption must allege an actual tender of payment of the redemption price.

• Section 3, Act No. 3135, as amended — Requires that notice of extrajudicial foreclosure sale be given by posting for not less than twenty days in at least three public places of the municipality or city where the property is situated, and if the property is worth more than four hundred pesos, publication once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city. Applied to determine whether posting and publication requirements were met.

• Section 1, Presidential Decree No. 1079 — Requires that notices of auction sales in extrajudicial foreclosure be published in newspapers or publications published, edited, and circulated in the same city and/or province where the requirement of general circulation applies. Applied to establish that accreditation was not a statutory requirement at the time of the foreclosure.

• Article 1616, Civil Code of the Philippines — Provides that the vendor cannot avail of the right to repurchase without returning to the vendee the price of the sale. Applied to support the requirement that the full redemption price must be tendered or consigned.

Justice Minita V. Chico-Nazario, Justice Presbitero J. Velasco, Jr., Justice Antonio Eduardo B. Nachura, and Justice Diosdado M. Peralta concurred. No separate concurring opinions were written.