Metropolitan Bank & Trust Co. vs. Nikko Sources International Corp.

Republication and reposting of the notice of sale are required when an extrajudicial foreclosure sale does not proceed on the date originally intended, because statutory publication requirements are strictly mandated for the benefit of the public to secure bidders and prevent a sacrifice of the property, and slight deviations therefrom will invalidate the notice and render the sale voidable.

Respondent Supermax Philippines, Inc. obtained loans totaling ₱24,600,000 from petitioner Metropolitan Bank and Trust Company in 1999, secured by a mortgage on a parcel of land owned by co-respondent Nikko Sources International Corporation. Upon Supermax's default, petitioner initiated extrajudicial foreclosure proceedings before a notary public in Cavite. The auction sale was rescheduled twice: first upon petitioner's request from August 4, 2000 to November 7, 2000, and second upon respondents' request to November 14, 2000. Four days before the final auction date, respondents filed a complaint to nullify the notice of sale and enjoin the auction, alleging unilateral imposition of increased interest rates and petitioner's failure to comply with posting and publication requirements for the rescheduled sale.

• The Loans and Mortgage: In 1999, respondent Supermax obtained loans from petitioner bank totaling ₱24,600,000. To secure the loans, co-respondent Nikko mortgaged a parcel of land covered by TCT No. T-763001 in its name.
• Default and Foreclosure: Supermax failed to pay the loans upon maturity. Petitioner filed a petition for extrajudicial foreclosure of the mortgage before a notary public in Cavite.
• Rescheduling of Auction Sale: A Notice of Sale was originally scheduled for August 4, 2000. Petitioner requested a reset to November 7, 2000, and respondents subsequently requested a final reset to November 14, 2000.
• Injunction Suit: On November 10, 2000, four days before the final auction date, respondents filed a complaint against petitioner and the notary public, seeking to nullify the notice of sale, contest the unilateral increase in interest rates, and enjoin the auction sale, alleging non-compliance with posting and publication requirements for the rescheduled dates.
• Dismissal of Main Case: The RTC subsequently dismissed Civil Case No. BCV-2000-146 for respondents' failure to appear at pre-trial. Respondents appealed the dismissal, and the RTC gave due course to their Notice of Appeal.

• Effect of Dismissal on Injunction: Petitioner maintained that the dismissal of Civil Case No. BCV-2000-146 for failure to appear at pre-trial caused the writ of preliminary injunction to ipso facto cease to exist.
• Prospective Application of Republication Requirement: Petitioner argued that prior to the effectivity of Circular No. 7-2002 on April 22, 2002, and the promulgation of Philippine National Bank v. Nepomuceno Productions, Inc. on December 27, 2002, there was no statute or judicial pronouncement requiring republication and reposting of a notice of sale when a foreclosure did not proceed on the originally intended date. Because the auction was scheduled for November 14, 2000, imposing a republication requirement would improperly apply these rules retroactively.

• Validity of Injunction: Respondent countered that their Notice of Appeal of the dismissal of the main case was given due course by the trial court, hence the writ of preliminary injunction remains valid and stands.
• Non-Compliance with Statutory Requirements: Respondent argued that petitioner failed to comply with the requirements of Act No. 3135 and Circular No. 7-2002 regarding the reposting and republication of the notice of sale for the rescheduled auction date.

• Effect of Dismissal on Injunction: Whether the dismissal of the main civil case for failure to appear at pre-trial rendered the writ of preliminary injunction ipso facto ceased to exist.
• Republication of Notice of Sale: Whether republication and reposting of the notice of sale are required when an extrajudicial foreclosure sale is rescheduled to a date different from the originally intended date, even if the rescheduling occurred prior to the effectivity of Circular No. 7-2002 and the ruling in PNB v. Nepomuceno Productions, Inc.

• Effect of Dismissal on Injunction: The petition was resolved on the merits of the republication issue, implicitly rejecting petitioner's contention that the injunction ceased to exist. Because respondents' appeal of the dismissal was given due course, the writ was maintained.
• Republication of Notice of Sale: Republication and reposting of the notice of sale are required when a foreclosure does not proceed on the date originally intended. The statutory requirements of posting and publication are mandated for the benefit of the public or third persons, not merely the mortgagor, to secure bidders and prevent a sacrifice of the property. These requirements must be strictly complied with, and slight deviations will invalidate the notice and render the sale voidable at the very least. The rule requiring republication is rooted in Act No. 3135 itself, and the subsequent issuance of Circular No. 7-2002 and the promulgation of PNB v. Nepomuceno Productions, Inc. merely affirmed this statutory mandate, thus applying regardless of the dates of their effectivity relative to the scheduled auction.

• Strict Compliance with Publication Requirements in Extrajudicial Foreclosure — Statutory requirements of posting and publication of notice of sale in extrajudicial foreclosure are mandated for the benefit of the public or third persons to secure bidders and prevent a sacrifice of the property, not for the mortgagor's benefit. These requirements must be strictly complied with; slight deviations will invalidate the notice and render the sale at the very least voidable.
• Necessity of Republication for Rescheduled Foreclosure Sales — When an extrajudicial foreclosure sale does not proceed on the date originally intended, republication and reposting of the notice of sale are required under Act No. 3135.

• "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. Notices are given to secure bidders and prevent a sacrifice of the property."
• "Clearly, the statutory requirements of posting and publication are mandated, not for the mortgagor’s benefit, but for the public or third persons. In fact, personal notice to the mortgagor in extrajudicial foreclosure proceedings is not even necessary, unless stipulated. As such, it is imbued with public policy considerations and any waiver thereon would be inconsistent with the intent and letter of Act No. 3135."
• "Moreover, statutory provisions governing publication of notice of mortgage foreclosure sales must be strictly complied with and slight deviations therefrom will invalidate the notice and render the sale at the very least voidable."

• Philippine National Bank v. Nepomuceno Productions, Inc., 394 SCRA 405 (2002) — Applied. Held that under Act No. 3135, republication and reposting of the notice of sale is required if the foreclosure does not proceed on the date originally intended. The Court rejected petitioner's argument that this ruling should not apply prospectively, affirming that the requirement is rooted in the statute itself.
• Development Bank of the Philippines v. Aguirre, 417 Phil. 235 (2001) — Followed. A foreclosure sale held more than two months after the published date of sale was considered void for lack of republication, reinforcing the strict compliance rule.

• Section 3, Act No. 3135 — Requires notice of sale to be given by posting for not less than twenty days in at least three public places and, if the property is worth more than four hundred pesos, published once a week for at least three consecutive weeks in a newspaper of general circulation. Applied to mandate strict compliance with publication for the benefit of the public, requiring republication when the sale is rescheduled.
• Supreme Court Circular No. 7-2002 — Guidelines for extrajudicial foreclosure, providing a form for the notice of sale which includes the phrase "In the event the public auction should not take place on the said date, it shall be held on [date] without further notice." While the Circular took effect after the scheduled auction in this case, the underlying principle of republication under Act 3135 was held to already require it.

Leonardo A. Quisumbing (Chairperson), Antonio T. Carpio, Lucas P. Bersamin, Roberto A. Abad