METROBANK v WONG (personal notice; defective publication)G. R. No. 120859June 26, 2001 DOCTRINE:Personal notice to the mortgagor is not necessary, but the parties to the mortgage contract are not precluded from exacting additional requirements.— The Act only requires (1) the posting of notices of sale in three public places, and (2) the publication of the same in a newspaper of general circulation. Personal notice to the mortgagor is not necessary. Nevertheless, the parties to the mortgage contract are not precluded from exacting additional requirements.

FACTS:Mindanao Grains, Inc. (MGI), through its officers, applied for a CREDIT

ACCOMMODATION with METROBANK to finance its rice and corn warehousing business. As a security, respondent (WONG) executed a REAL ESTATE MORTGAGE over a parcel of land located in Zambaonga del Sur. [IMPORTANT!!] In this contract of real estate, there was a stipulation to the effect that the MORTGAGEE MUST RECEIVE ALL CORRESPONDENCE RELATIVE TO THE MORTGAGE (demand, letters, judicial or extrajudicial action, etc.) in his home address.

MGI defaulted on the payment of the credit accommodation, which prompted METROBANK to file an application for extrajudicial foreclosure. Pursuant to such action, a NOTICE OF FORECLOSURE SALE was published in Pagadian Times, once, for three consecutive weeks. No notice was posted in the municipality or city where the mortgaged property was situated.

The President of MGI sought to postpone the scheduled auction sale. METROBANK agreed, provided that MGI will pay P20,000 on or before the scheduled sale. The President complied; however, the SHERIFF proceeded with the auction sale and signed a certificate of sale in favor of METROBANK as the highest bidder. Its title was consolidated after the expiration of the redemption period.

Unaware of these facts, WONG applied for a CREDIT ACCOMMODATION with PCIB in Zamboanga and used the same parcel of land as security. It was then that he found out that the property was already foreclosed and no longer in his name.

Aggrieved, WONG filed a complaint before the RTC. During the pendency of the case, METROBANK sold the lot to YU.

The Regional Trial Court rendered a decision in favor of the SPOUSES WONG, which was affirmed by the Court of Appeals.

Prepared by Ma. Jillian C. Gandingco 1

ISSUES: (1) Whether or not personal notice to the respondents is a condition sine qua non

to the validity of foreclosure proceedings? (2) Whether or not METROBANK’s non-compliance with the posting

requirement is fatal to the validity of the foreclosure proceedings?

HELD: (1) NO, but the parties may so stipulate as an additional requirement in their

contract. Section 3 of Act No. 3135 only requires the following:

o Positing of notices of sale in 3 public places; and,o Publication of the same in a newspaper of general circulation.

Generally, PERSONAL NOTICE to the mortgagor is not necessary. Nevertheless, the parties to the contract are not precluded from exacting

additional requirements. In the case at bar, the stipulation in the mortgage contract sought to

protect respondent’s property. Thus, when petitioner failed to send the notice of the foreclosure sale to respondent, the same proceedings are rendered NULL AND VOID.

(2) YES. The Supreme Court has never disposed of the posting requirement. Moreover, the publication in the case at bar is defective for the following

reasons: o It failed to conform with requirement that the notice must be

published once a week for at least three consecutive weeks in a newspaper of general circulation; and,

o Substantial errors in the notice of sale published (as in, the REM adverted to in the published notice is a nonexistent document.

There was also collusion between the SHERIFF and METROBANK. As well as between METROBANK and YU.

As a consequence of the foregoing, moral damages were awarded to WONG.

Prepared by Ma. Jillian C. Gandingco 2