Metropolitan Bank and Trust Company, Inc. vs. Peñafiel

A newspaper of general circulation, for purposes of extrajudicial foreclosure under Act No. 3135, must not only be published for the dissemination of local news and general information, have a bona fide subscription list of paying subscribers, and be published at regular intervals, but must also be available to the public in general — not just to a select few chosen by the publisher — and must be circulated in the municipality or city where the property is located. The affidavit of publication must distinctly state that the newspaper is generally circulated in the place where the property is located.

Respondent Erlinda Peñafiel and the late Romeo Peñafiel were the registered owners of two parcels of land in Mandaluyong City covered by TCT No. (350937) 6195 and TCT No. 0085, both issued by the Register of Deeds of Mandaluyong City. On August 1, 1991, the spouses mortgaged their properties in favor of petitioner Metropolitan Bank and Trust Company, Inc. The mortgage deed was amended on various dates as the amount of the loan covered by said deed was increased. The spouses subsequently defaulted on their loan obligation, prompting petitioner to institute extrajudicial foreclosure proceedings under Act No. 3135.

Respondent Erlinda Peñafiel and the late Romeo Peñafiel were the registered owners of two parcels of land covered by TCT No. (350937) 6195 and TCT No. 0085, both issued by the Register of Deeds of Mandaluyong City. On August 1, 1991, the spouses mortgaged their properties in favor of petitioner Metropolitan Bank and Trust Company, Inc. The mortgage deed was amended on various dates as the amount of the loan covered by said deed was increased.

The spouses defaulted in the payment of their loan obligation. On July 14, 1999, petitioner instituted an extrajudicial foreclosure proceeding under Act No. 3135 through Diego A. Alleña, Jr., a notary public. Respondent Erlinda Peñafiel received the Notice of Sale, stating that the public auction was to be held on September 7, 1999 at ten o'clock in the morning, at the main entrance of the City Hall of Mandaluyong City. The Notice of Sale was published in Maharlika Pilipinas on August 5, 12, and 19, 1999, as attested to by its publisher in his Affidavit of Publication. Copies of the said notice were also posted in three conspicuous places in Mandaluyong City.

At the auction sale, petitioner emerged as the sole and highest bidder. The subject lots were sold to petitioner for ₱6,144,000.00, and a certificate of sale was subsequently issued in its favor. On August 8, 2000, respondent Erlinda Peñafiel, through her attorney-in-fact, Eugenio Peñafiel, filed a Complaint praying that the extrajudicial foreclosure be declared null and void, seeking to enjoin petitioner and the Register of Deeds from consolidating ownership, to enjoin petitioner from taking possession of the properties, and to recover attorney's fees.

To prove that Maharlika Pilipinas was not a newspaper of general circulation in Mandaluyong City, respondents presented a Certification dated December 7, 2001 from the Chief of the Business Permit and Licensing Office of Mandaluyong City attesting that Maharlika Pilipinas did not have a business permit in Mandaluyong City, and a List of Subscribers showing no subscribers from Mandaluyong City. Respondents also presented the publisher, Mr. Raymundo Alvarez, who testified that the newspaper was published in Marikina City and Quezon City, had a mayor's permit only from Quezon City, had no office in Mandaluyong City, circulated in Rizal and Cavite, and that while the newspaper was offered to persons other than its subscribers, they "do not just offer it to anybody."

• Newspaper of General Circulation: Petitioner insisted that Maharlika Pilipinas is a newspaper of general circulation since it is published for the dissemination of local news and general information, has a bona fide subscription list of paying subscribers, and is published at regular intervals. It asserted that the publisher's Affidavit of Publication attesting to this fact is sufficient evidence.
• Absence of Subscribers Not Dispositive: Petitioner argued that the absence of subscribers in Mandaluyong City does not necessarily mean that Maharlika Pilipinas is not circulated therein, since the publisher testified that the newspaper is offered to persons other than its subscribers. The publisher's statement that the newspaper is circulated in Rizal and Cavite was in response to a question about where else it was circulated and does not conclusively show it is not circulated in Mandaluyong City.
• RTC Accreditation: Petitioner entreated the Court to consider that the Executive Judge of the RTC of Mandaluyong City approved the application for accreditation of Maharlika Pilipinas as one of the newspapers authorized to participate in the raffle of judicial notices effective March 2, 1998, though it admitted this was raised for the first time only in its Motion for Reconsideration with the CA.
• Inapplicability of P.D. No. 1079: Petitioner argued that the CA, in effect, applied P.D. No. 1079 when it cited Fortune Motors, and that the general reference to "judicial notices" in P.D. No. 1079, particularly Section 2 thereof, shows the law applies only to extrajudicial foreclosure proceedings conducted by a sheriff, not by a notary public, and only to notices arising from court litigation.

• Non-Compliance with Publication Requirement: Respondents countered that Maharlika Pilipinas was not a newspaper of general circulation in Mandaluyong City, presenting a certification from the Mandaluyong City Business Permit and Licensing Office that the newspaper had no business permit there, a list of subscribers showing none from Mandaluyong City, and the publisher's own testimony that the newspaper had no office in Mandaluyong City and was not freely offered to the public.

• Applicability of P.D. No. 1079: Whether the Court of Appeals erred in applying the provisions on publication of judicial notices under Section 1 of P.D. No. 1079 to the extrajudicial foreclosure conducted by a notary public.
• Newspaper of General Circulation: Whether the Court of Appeals erred in ruling that Maharlika Pilipinas is not a newspaper of general circulation in Mandaluyong City.
• Validity of the Foreclosure Sale: Whether the Court of Appeals erred in reversing the RTC decision and declaring the extrajudicial foreclosure sale null and void.

• Applicability of P.D. No. 1079: No. The CA did not apply P.D. No. 1079 to the present case; it cited Fortune Motors merely to emphasize that what is important is that the newspaper is actually in general circulation in the place where the properties to be foreclosed are located. There is no distinction in the publication requirement between extrajudicial foreclosures conducted by a sheriff and those conducted by a notary public.
• Newspaper of General Circulation: No. Maharlika Pilipinas was not a newspaper of general circulation in Mandaluyong City. The publisher's testimony that they "do not just offer [it] to anybody," taken in conjunction with the absence of subscribers in Mandaluyong City, demonstrated that the newspaper was not available to the public in general in that city.
• Validity of the Foreclosure Sale: No. The CA correctly reversed the RTC and declared the extrajudicial foreclosure sale null and void, the publication requirement under Section 3 of Act No. 3135 not having been satisfied.

• Applicability of P.D. No. 1079: The Court found that the CA did not apply P.D. No. 1079 to the present case but merely cited Fortune Motors to underscore the principle that what matters is general circulation of the newspaper in the place where the property is located. In Fortune Motors, the Court rejected a literal interpretation of P.D. No. 1079's requirement that the newspaper be "published, edited and circulated in the same city and/or province," holding that even leading national dailies would fail such a test yet are clearly qualified to publish legal notices. Accordingly, there is no distinction as to the publication requirement in extrajudicial foreclosure sales conducted by a sheriff or a notary public — the key element in both cases is general circulation of the newspaper in the place where the property is located.
• Newspaper of General Circulation: While a newspaper of general circulation need only be published for the dissemination of local news and general information, have a bona fide subscription list of paying subscribers, and be published at regular intervals, it must also be available to the public in general and not just to a select few chosen by the publisher. The publisher's testimony that they "do not just offer [Maharlika Pilipinas] to anybody" implied that the newspaper was not available to the public in general. This, combined with the absence of subscribers in Mandaluyong City, convinced the Court that the newspaper was not in fact circulated in Mandaluyong City. Moreover, the Affidavit of Publication nowhere stated that Maharlika Pilipinas was in circulation in Mandaluyong City, whereas in prior cases where the publisher's affidavit was deemed sufficient, the affidavit distinctly stated that the newspaper was generally circulated in the place where the property was located. The accreditation of the newspaper by the RTC Executive Judge was not decisive, as the Court is not bound to adopt the Presiding Judge's determination in that regard.
• Validity of the Foreclosure Sale: 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, thereby securing bidders and preventing a sacrifice of the property. Publication in a newspaper of general circulation is required to achieve "reasonably wide publicity." Because Maharlika Pilipinas was not a newspaper of general circulation in Mandaluyong City, the publication requirement under Section 3 of Act No. 3135 was not satisfied, and the extrajudicial foreclosure sale was properly declared null and void.

• Newspaper of General Circulation — A newspaper of general circulation is one published for the dissemination of local news and general information, with a bona fide subscription list of paying subscribers, published at regular intervals, and available to the public in general — not just to a select few chosen by the publisher. It must not be devoted solely to the interests, or published for the entertainment, of a particular class, profession, trade, calling, race, or religious denomination. It need not have the largest circulation so long as it is of general circulation. In this case, the Court applied the doctrine by holding that Maharlika Pilipinas failed this test because the publisher's admission that they "do not just offer [it] to anybody" showed the newspaper was not available to the general public, and the absence of subscribers in Mandaluyong City showed it was not circulated there.
• Publication Requirement in Extrajudicial Foreclosure — Under Section 3, Act No. 3135, where the property is worth more than four hundred pesos, the notice of sale must be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city where the property is situated. The affidavit of publication must distinctly state that the newspaper is generally circulated in the place where the property is located. The requirement applies equally to extrajudicial foreclosures conducted by a sheriff and those conducted by a notary public; no distinction exists between the two.

• "Over and above all these, the newspaper must be available to the public in general, and not just to a select few chosen by the publisher. Otherwise, the precise objective of publishing the notice of sale in the newspaper will not be realized." — This passage articulates the Court's expanded formulation of the newspaper-of-general-circulation test, adding the availability-to-the-public-in-general requirement beyond the traditional elements of regular publication, bona fide subscribers, and dissemination of general information.
• "Therefore, as it stands, there is no distinction as to the publication requirement in extrajudicial foreclosure sales conducted by a sheriff or a notary public. The key element in both cases is still general circulation of the newspaper in the place where the property is located." — This statement resolves the petitioner's argument that P.D. No. 1079 applies only to sheriff-conducted foreclosures, establishing that the publication standard is uniform regardless of who conducts the foreclosure.
• "For what is important is that a paper should be in general circulation in the place where the properties to be foreclosed are located in order that publication may serve the purpose for which it was intended." — Quoted from Fortune Motors, this formulation of the governing principle was adopted by the Court as the controlling standard for evaluating compliance with the publication requirement.

• Fortune Motors (Phils.) Inc. vs. Metropolitan Bank and Trust Co., 332 Phil. 844 (1996) — Controlling precedent on the publication requirement. The Court cited it for the principle that what is important is that the newspaper be in general circulation in the place where the properties to be foreclosed are located, and that a literal interpretation of P.D. No. 1079's requirement that the newspaper be "published, edited and circulated in the same city and/or province" is too narrow. The Court also distinguished it on the affidavit point: in Fortune Motors and Bonnevie, the publisher's affidavit distinctly stated the newspaper was generally circulated in the place where the property was located, unlike in the present case.
• Perez vs. Perez, G.R. No. 143768, March 28, 2005, 454 SCRA 72 — Cited for the traditional definition of a newspaper of general circulation: published for dissemination of local news and general information, with a bona fide subscription list, and published at regular intervals; and for the rule that the newspaper must not be devoted solely to the interests of a particular class, profession, trade, calling, race, or religious denomination.
• Olizon vs. Court of Appeals, G.R. No. 107075, September 1, 1994, 236 SCRA 148 — Cited for the purpose of the notice of sale — to inform the public of the nature and condition of the property, the time, place, and terms of the sale, to secure bidders, and to prevent a sacrifice of the property — and for the principle that the Court has taken judicial notice of the "far-reaching effects" of publishing the notice of sale in a newspaper of general circulation.
• Bonnevie vs. Court of Appeals, 210 Phil. 100 (1983) — Cited alongside Fortune Motors as a case where the publisher's affidavit was sufficient proof of the required publication because the affidavit distinctly stated the newspaper was generally circulated in the place where the property was located.
• Ruiz vs. Sheriff of Manila, 145 Phil. 111 (1970) — Cited for the rule that the party alleging non-compliance with the requisite publication has the burden of proving the same.

• Section 3, Act No. 3135 — Requires that notice of sale in extrajudicial foreclosure be given by posting notices 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, by publication once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city. The Court applied this provision to hold that publication in Maharlika Pilipinas did not satisfy the requirement because it was not a newspaper of general circulation in Mandaluyong City.
• Section 2, Presidential Decree No. 1079 — Provides for the designation by the executive judge of a regular working day and time for distribution of judicial notices or advertisements for publication to qualified newspapers or periodicals by raffle. The Court held that the CA did not apply P.D. No. 1079 to the present case and that, in any event, no distinction exists between sheriff-conducted and notary-public-conducted foreclosures regarding the publication requirement.

Justice Leonardo A. Quisumbing, Justice Antonio T. Carpio, Justice Conchita Carpio Morales, and Justice Minita V. Chico-Nazario (Acting Chairperson) concurred.