The Importance of Proper Publication in Extrajudicial Foreclosure

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G.R. No. 115068, November 28, 1996

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Imagine losing your property due to a foreclosure you weren’t properly notified about. This scenario highlights the critical importance of due process in extrajudicial foreclosures. The case of Fortune Motors (Phils.) Inc. vs. Metropolitan Bank and Trust Company delves into the specifics of what constitutes valid notice and publication in such proceedings, ensuring fairness and protecting the rights of mortgagors. The core issue revolves around whether the bank properly notified Fortune Motors of the foreclosure proceedings, specifically focusing on the validity of the newspaper publication and the receipt of notices.

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Legal Framework for Extrajudicial Foreclosure

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Extrajudicial foreclosure is a process where a lender can seize and sell a mortgaged property outside of court to recover unpaid debt. This process is governed primarily by Act No. 3135, as amended, which outlines the requirements for notice and publication. Strict compliance with these requirements is crucial to ensure the validity of the foreclosure. The purpose of these requirements is to inform potential bidders and the mortgagor about the sale, thereby maximizing the chances of a fair price and protecting the mortgagor’s right of redemption.

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Act No. 3135, Section 3 states:

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“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.”

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A “newspaper of general circulation” is defined as a newspaper published for the dissemination of local news and general information, with a bona fide subscription list of paying subscribers, and published at regular intervals. It doesn’t necessarily need the largest circulation, but it must be accessible to the general public in the area.

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For example, if a homeowner in Quezon City defaults on their mortgage, the bank must publish the notice of foreclosure in a newspaper widely read in Quezon City, like the Philippine Daily Inquirer, and post notices in public places like the City Hall and the local Register of Deeds.

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The Fortune Motors Case: A Detailed Look

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Fortune Motors obtained several loans from Metropolitan Bank and Trust Company, securing them with a real estate mortgage. When Fortune Motors defaulted, the bank initiated extrajudicial foreclosure proceedings. The critical points of contention were:

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• Validity of Publication: Fortune Motors argued that the