In the Philippines, the publication of a Notice of Sale in an extrajudicial foreclosure is deemed sufficient if the publication is circulated within the city where the property is located. This ruling ensures that the notice reaches potential bidders in the relevant locale, balancing the need for broad dissemination with practical considerations of newspaper circulation. The Supreme Court’s decision emphasizes that the critical factor is not where the newspaper is printed but whether it is generally circulated in the area where the property is situated. This interpretation aims to provide adequate publicity, allowing interested parties to be informed about the upcoming sale.

Foreclosure Fights: When Does a Notice Reach Enough People?

The case of Gotesco Properties, Inc. v. Solidbank Corporation, now Metropolitan Bank and Trust Company, revolved around a disputed foreclosure proceeding. Gotesco Properties, Inc. (Gotesco) sought to annul the foreclosure initiated by Solidbank Corporation (Solidbank) on a property in San Fernando, Pampanga. The central legal question was whether Solidbank complied with the publication requirements for the Notice of Sale, particularly if publication in a Metro Manila-based newspaper, Remate, sufficed for a property located in Pampanga. Gotesco argued that the notice should have been published in a local Pampanga newspaper.

The factual backdrop involved a term loan obtained by Gotesco from Solidbank, secured by a Mortgage Trust Indenture (Indenture) that included the San Fernando property. When Gotesco faced financial difficulties, it proposed a loan restructuring, which Solidbank allegedly impliedly accepted. However, Solidbank later demanded additional collateral due to a perceived decrease in the value of the mortgaged properties. Gotesco’s failure to provide additional security led Solidbank to file for extrajudicial foreclosure. Gotesco then contested the foreclosure, claiming premature action and non-compliance with jurisdictional requirements under Act No. 3135. The trial court dismissed Gotesco’s complaint, and the Court of Appeals affirmed this decision, leading to the present petition before the Supreme Court.

Gotesco raised several issues, including the lack of notice of default, the alleged premature foreclosure due to a pending restructuring agreement, and the invalidity of the mortgage due to the timing of its execution relative to the promissory notes. However, the Supreme Court addressed the key issue of whether the publication of the Notice of Sale in Remate, a newspaper of general circulation in Metro Manila but not printed in Pampanga, satisfied the requirements of Act No. 3135. The court also considered whether Solidbank properly notified Gotesco of the default and whether Gotesco was indeed in default.

Addressing Gotesco’s argument that the publication was defective, the Supreme Court referenced Section 3 of Act No. 3135, which stipulates that notice shall be given by posting notices of the sale for not less than twenty days in at least three public places of the municipality or city where the property is situated, and if such property is worth more than four hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city. Citing Fortune Motors (Phils.), Inc. v. Metropolitan Bank and Trust Co., the Court rejected the interpretation that the newspaper must be printed in the same city as the property, deeming it overly restrictive.

Were the interpretation of the trial court (sic) to be followed, even the leading dailies in the country like the ‘Manila Bulletin,’ the ‘Philippine Daily Inquirer,’ or ‘The Philippine Star’ which all enjoy a wide circulation throughout the country, cannot publish legal notices that would be honored outside the place of their publication. But this is not the interpretation given by the courts. 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.

The Court emphasized that the crucial factor is the newspaper’s circulation within the city where the property is located, rather than its place of printing. A newspaper of general circulation is defined as one published for the dissemination of local news and general information, with a bona fide subscription list of paying subscribers and published at regular intervals. The Court further noted that Remate was an accredited publication by the Regional Trial Court of Pampanga, implying that it met the criteria for a newspaper of general circulation in the area. This perspective ensures that the notice reaches a broad audience, fulfilling the purpose of informing potential bidders.

Additionally, the Supreme Court affirmed the Court of Appeals’ ruling that Gotesco defaulted on its obligations. Gotesco failed to provide additional collateral as demanded by Solidbank, which constituted an event of default under the Indenture. The Court also noted that Gotesco was duly notified of the default through a demand letter, as evidenced by a return card. The Supreme Court also dismissed Gotesco’s arguments regarding Mr. Go’s authority to appoint Solidbank-Trust Division as an attorney-in-fact, stating that it was an integral part of the loan agreement and that this issue was raised late in the proceedings.

Concerning the alleged defect in the posting requirement, where Gotesco claimed the Notice of Sale was posted for less than the required 20 days, the Court found that this issue was raised for the first time before the Supreme Court. Therefore, it would not be considered, as raising new issues on appeal violates due process. Even if considered, the Court noted that the posting was only four days short of the requirement, which did not invalidate the notice, as the object of a Notice of Sale is to inform the public of the nature and condition of the property and the terms of the auction sale.

In conclusion, the Supreme Court denied Gotesco’s petition, affirming the Court of Appeals’ decision. The Court held that the publication of the Notice of Sale in Remate was valid because the newspaper was of general circulation in San Fernando, Pampanga. This decision clarifies the requirements for publication of foreclosure notices, emphasizing the importance of reaching potential bidders in the relevant locality, regardless of where the newspaper is printed. Moreover, the case underscores the binding nature of contractual obligations and the consequences of default, further solidifying the legal framework for foreclosure proceedings in the Philippines.

FAQs

What was the key issue in this case?	The key issue was whether the publication of a Notice of Sale in a newspaper circulated in the city where the foreclosed property is located, even if the newspaper is not printed in that city, complies with the requirements of Act No. 3135. The Supreme Court ruled that it does, emphasizing the importance of circulation over the place of printing.
Why did Gotesco argue the foreclosure was invalid?	Gotesco argued that the foreclosure was invalid because it claimed there was a pending loan restructuring agreement, it was not properly notified of the default, and the publication of the Notice of Sale was defective since it was not published in a local Pampanga newspaper.
What is a “newspaper of general circulation”?	A newspaper of general circulation is defined as one that 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. The newspaper does not need to have the largest circulation as long as it is of general circulation in the area.
What did the Mortgage Trust Indenture (Indenture) require of Gotesco?	The Indenture required Gotesco to maintain the sound value of the collateral at a level equal to that provided for in the agreement. If the value was impaired, Gotesco was obligated to provide additional collateral or replace existing ones upon Solidbank’s demand.
How did Gotesco default on its obligations?	Gotesco defaulted by failing to pay the loan according to the terms of the promissory notes and by failing to provide additional collateral when the value of the mortgaged properties decreased. These breaches constituted events of default under the Indenture.
Was Gotesco notified of its default?	Yes, the Supreme Court ruled that Solidbank provided sufficient evidence, including a return card, showing that Gotesco received a demand letter dated June 7, 2000, notifying it of the default.
What is the significance of Act No. 3135 in this case?	Act No. 3135, the law governing extrajudicial foreclosure, sets out the requirements for valid foreclosure proceedings, including the posting and publication of the Notice of Sale. The case revolved around the interpretation and compliance with the publication requirements under this law.
What did the Court say about the Writ of Possession?	The Court stated that once the foreclosure sale is complete, the issuance of a Writ of Possession is a ministerial duty of the trial court. Since Gotesco was occupying the property, not a third party with adverse claims, the Writ of Possession was properly issued to Solidbank.

This case clarifies an important aspect of foreclosure law in the Philippines, providing guidance on what constitutes sufficient publication of a Notice of Sale. Understanding this ruling is crucial for both lenders and borrowers involved in mortgage agreements.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: GOTESCO PROPERTIES, INC. VS. SOLIDBANK CORPORATION (NOW METROPOLITAN BANK AND TRUST COMPANY), G.R. No. 209452, July 26, 2017