Metropolitan Bank and Trust Co. v. Gotesco Properties, Inc.

SECOND DIVISION

[G.R. No. 219470. June 16, 2021.]

METROPOLITAN BANK AND TRUST COMPANY, SUBSTITUTED BY KMC REALTY CORP., petitioner,vs. GOTESCO PROPERTIES, INC., respondent.

NOTICE

Sirs/Mesdames :

Please take notice that the Court, Second Division, issued a Resolution dated 16 June 2021which reads as follows:

"G.R. No. 219470 (Metropolitan Bank and Trust Company, substituted by KMC Realty Corp. vs. Gotesco Properties, Inc.). — For resolution is the petition for review on certiorari1 filed by petitioner Metropolitan Bank and Trust Company (Metrobank), as substituted by KMC Realty Corp. (KMC), seeking to set aside and reverse the Decision 2 dated December 16, 2014, rendered by the Court of Appeals in CA-G.R. CV No. 98030, entitled "Gotesco Properties, Inc. vs. Metropolitan Bank and Trust Company, substituted by KMC Realty Corporation, Atty. Edgardo J. Naoe, and the Register of Deeds of Calamba, Laguna."

Stripped of non-essentials, and insofar as they are relevant to the resolution of the instant petition, the facts are as follows:

On August 11, 1995, Solidbank Corporation (Solidbank) extended to respondent Gotesco Properties, Inc. (Gotesco) a loan in the amount of P300,000,000.00. To evidence the loan, the parties signed a Loan Agreement 3 of even date, even as Gotesco further executed three promissory notes 4 in favor of Solidbank. To secure the payment of said loans, Gotesco and Solidbank executed a Mortgage Trust Indenture 5 dated August 9, 1995 over five (5) properties of the former, covered by the following titles: (1) Transfer Certificate of Title (TCT) No. T-328261 of the Registry of Deeds for Calamba; (2) TCT No. T-328262 of the Registry of Deeds for Calamba; (3) TCT No. T-328238 of the Registry of Deeds for Calamba; (4) TCT No. T-341020 of the Registry of Deeds for Calamba; and, (5) TCT No. T-387381-R of the Registry of Deeds for San Fernando, Pampanga. Likewise, Solidbank and Gotesco signed a Mortgage Participation Certificate 6 in relation to said loan.

Gotesco failed to pay its obligations when they fell due. Thus, Solidbank sent to Gotesco a letter 7 dated June 7, 2000, demanding payment of the latter's outstanding obligation in the amount of P310,467,198.68 and interests, penalty charges and attorney's fees. In the same demand letter, Solidbank informed Gotesco that it had also considered the Mortgage Trust Indenture and Mortgage Participation Certificate as foreclosed.

For failure of Gotesco to pay its past due loans as demanded, Solidbank instituted foreclosure proceedings on Gotesco's four (4) properties in Calamba, Laguna. In connection therewith, Atty. Edgardo Naoe, a notary public, issued a Notice of Sale 8 that reads as follows:

Upon extra-judicial petition for sale under Act 3135 as amended by Act 4148, x x x, the undersigned Notary Public for the Province of Laguna will sell at PUBLIC AUCTION x x x on August 14, 2000 at 10:00 o'clock in the morning, or soon thereafter, in front of the Municipal Hall of Calamba, Laguna, the following described real properties x x x as described in the Mortgage Trust Indenture, to wit:

xxx xxx xxx

The undersigned further gives notice that if on August 14, 2000, the minimum requirements of two (2) bidders/buyers will not participate in the auction sale pursuant to the Supreme Court EN BANC Resolution embodied in Administrative Matter No. 99-10-05-0, the sale shall be postponed and re-scheduled on August 22, 2000, at the same time and place without republication.

On July 15, 22, and 29, 2000, the said notice of sale was published in the newspaper "Remate." In relation to said publication, Remate issued an Affidavit of Publication 9 which reads as follows:

I, Angeline E. Corro of legal age and a resident of 87 Lavander St., Ruby Park Victoria Homes, Muntinlupa City, Philippines, after having been duly sworn to an oath in accordance with law, depose and say:

That I am the Vice President Advertising (sic) of Remate, a newspaper of general circulation and printed and published in Manila, Philippines.

That a NOTICE OF SALE

xxx xxx xxx

A printed copy of which is attached was published in the said newspaper on July 15, 22, & 29, 2000.

The auction sale was conducted on August 22, 2000 due to the absence of at least two (2) bidders during the original date of auction on August 14, 2000. Solidbank was awarded the properties after offering the highest bid of P42,872,088.00 during auction. It was thereafter issued a Certificate of Sale 10 registered with the Registry of Deeds for Calamba, Laguna.

Gotesco failed to redeem the subject properties, and consequently, titles thereto were consolidated in the name of Metrobank, Solidbank's successor-in-interest. TCT Nos. T-328261, T-328262, T-328238, and T-341020 were thereafter cancelled and in lieu thereof, TCT Nos. T-512107, T-512105, T-512104, and T-512106 were issued in its favor, respectively. 11

On November 22, 2001, Gotesco filed in the Regional Trial Court (RTC) of Calamba City an action for Annulment of Foreclosure Proceedings/Sale, Specific Performance and Damages against Metrobank. 12 Docketed as Civil Case No. 3194-01-C, the complaint was raffled to Branch 92 of said court.

In its complaint, Gotesco claimed that Metrobank proceeded to foreclose on the properties despite previously agreeing to restructure its loan. Gotesco added that the foreclosure proceedings were prematurely concluded since there had been no compliance first with the terms and conditions mentioned in Section 5.02 of the Mortgage Trust Indenture. Likewise, Gotesco disputed the validity of the foreclosure proceedings, alleging that Metrobank failed to comply with the publication requirements mandated by Section 3 of Act No. 3135, and the payment of the filing fees relative to its petition for foreclosure.

On April 5, 2002, Metrobank filed its Answer with Counterclaim, 13 asserting that it fully complied with all the requisites of Act No. 3135 and other administrative circulars, particularly on the mandatory publication of the notice of sale, the posting requirements, and the payment of relevant fees.

To show compliance with said law, Metrobank presented the following: (1) Petition for Foreclosure of Mortgage Trust Indenture under Act No. 3135, as amended on June 13, 2000; 14 (2) Notice of Sale dated July 11, 2000; 15 (3) Affidavit of Publication; 16 (4) Certificate of Posting dated August 14, 2000; 17 and (5) Certificate of Sale dated September 15, 2000. 18

Metrobank sought to recover from Gotesco a deficiency balance in the amount of P70,924,782.17, compensatory damages in the amount of P500,000.00, exemplary damages in the amount of P300,000.00 and attorney's fees in the amount of P300,000.00.

During trial, KMC was substituted as party-defendant after Metrobank sold to it its rights and interests over the disputed properties.

RULING OF THE REGIONAL TRIAL COURT

On August 12, 2010, the RTC rendered its Decision, 19 the decretal portion of which reads as follows:

WHEREFORE, judgment is rendered in favor of the defendant, as follows:

1. the plaintiff's complaint is hereby dismissed for lack of merit;

2. On the counterclaim, plaintiff is hereby ordered to pay defendant KMC Realty Corporation the following amounts:

a. the deficiency claim in the amount of P70,924,782.17 as of June 30, 2001, plus interest thereon at the rate of twenty four per cent (24%) interest (sic) per annum from June 30, 2001 until the amount is fully paid;

b. the amount of P300,000.00 as reasonable attorney's fees;

c. the costs of suit.

SO ORDERED. 20

In finding for KMC, the court a quo ruled that it was able to prove its right to foreclose on the mortgages pursuant to the provisions of the Mortgage Trust Indenture. According to the RTC, Gotesco was properly served the demand letter with notice of foreclosure and hence, it cannot claim that there was a violation of the provisions of said agreement.

The court a quo upheld the validity of the foreclosure proceedings made pursuant to the provisions of Act No. 3135, noting that Gotesco has not adduced any scintilla of evidence contradicting the indubitable proofs of the defendant.

Insofar as the deficiency balance is concerned, the RTC ruled that KMC was able to establish its right thereto based on the documentary evidence and the testimony of its witness, Jaime Estalilia, Jr., who testified on the difference between the proceeds of the auction sale and the expenses incurred in the conduct of the foreclosure proceedings, inclusive of attorney's fees, commission on sale, docket fees and other expenses, amounting to a total of P70,924,782.17 as of June 30, 2001.

From said decision, Gotesco filed a motion for reconsideration. 21 Said motion was based on issues previously raised during trial, except that it now claimed that the foreclosure sale was void due to a couple of flaws in the notice of sale and publication as required under Act No. 3135. It pointed out that first, there was no publication of the actual auction sale held on August 22, 2000 and second, the publication of the notice of sale in the newspaper Remate did not meet the requirements of Act No. 3135.

On the first issue, Gotesco made reference to the Notice of Sale 22 dated July 11, 2000 issued by Atty. Edgardo J. Naoe, a notary public. The pertinent portion of said notice provided as follows:

The undersigned hereby further gives notice that if on August 14, 2000, the minimum requirements of two (2) bidders/buyers will not participate in the auction sale pursuant to the Supreme Court EN BANC Resolution embodied in Administrative Matter No. 99-10-05-0 dated December 14, 1999, which became effective on January 15, 2000, the sale shall be postponed and re-scheduled on August 22, 2000 at the same time and place without publication. (Emphasis in original copy) 23

According to Gotesco, there was no actual publication of the auction sale held on August 22, 2000. The only publication made previous to the sale was that of the notice of sale cited above which, according to Gotesco, did not live up to the requirements of Act No. 3135. Citing the cases of Tambunting vs. Court of Appeals24 and Philippine National Bank vs. Nepomuceno Productions, 25 it asserted that republication of the Notice of Sale after postponement of the first scheduled sale, was necessary to validate such subsequent sale.

Gotesco pointed out that there was nothing in Administrative Matter No. 99-10-05-0 (AM No. 99-10-05-0) 26 that authorizes a mortgagee to dispense with the notice requirement of the second or subsequent schedule of the auction sale, as it merely provides in Section 5 thereof that:

Section 5. No auction sale shall be held unless there are at least two (2) participating bidders, otherwise the sale shall be postponed to another date. If on the·new date set for the sale there shall not be at least two bidders, the sale shall then proceed. The names of the bidders shall be reported by the ·sheriff or the notary public who conducted the sale to the Clerk of Court before the issuance of the certificate of sale.

Gotesco further pointed out that the publication of the said notice of sale in Remate was not in keeping with Section 1 of Presidential Decree No. 1079, 27 which pertinent portion provides:

Section 1. All notices of auction sales in extra-judicial foreclosure of real estate mortgage under Act No. 3135 as amended, judicial notices such as notices of sale on execution of real properties, notices in special proceedings, court orders and summonses and all similar announcements arising from court litigation required by law to be published in a newspaper or periodical of general circulation in particular provinces and/or cities shall be published in newspapers or publications published, edited and circulated in the same city and/or province where the requirement of general circulation applies; x x x.

Gotesco insisted that there had been no faithful compliance with the aforementioned requirement as in the Affidavit of Publication 28 issued by Angeline E. Corro, Vice President of Advertising of Remate, she attested to the fact that Remate is a "newspaper of general circulation and printed and published in Manila, Philippines." Gotesco pointed out that the statement indeed proved that Remate was being published, edited and circulated in Manila and not in the Province of Laguna, particularly in Calamba, where the auction sale was held.

Finally, Gotesco disputed the award of the deficiency sum on the ground that the RTC allegedly did not acquire jurisdiction over said issue. It cited Metrobank's non-payment of docket fees regarding such counterclaim, which payment was necessary, considering that said counterclaim was permissive in character.

In its Order 29 dated December 16, 2010, the court a quo denied Gotesco's motion for reconsideration. Thus, Gotesco filed an appeal before the Court of Appeals (CA). Docketed as CA-G.R. CV No. 98030, the appeal raised the same issues covered in Gotesco's motion for reconsideration and anchored on substantially the same arguments.

For its part, KMC argued that under OCA Circular No. 7-2002 30 which was issued on January 22, 2002, in case the original scheduled auction would not push through, no republication of the Notice of Sale is necessary if the subsequent date of the auction sale is already mentioned in said notice. The circular, in material part, provides that:

Section 4. The Sheriff to whom the application for extra-judicial foreclosure of mortgage was raffled shall do the following:

a. Prepare a Notice of Extra-judicial Sale using the following form:

"NOTICE OF EXTRA-JUDICIAL SALE"

"Upon extra-judicial petition for sale under Act 3135/1508 filed _______________ against (name and address of Mortgagor/s) to satisfy the mortgage indebtedness which as of __________ amounts to P_______________, excluding penalties, charges, attorney's fees and expenses of foreclosure, the undersigned or his duly authorized deputy will sell at public auction on (date of sale) _______________ at 10:00 A.M. or soon thereafter at the main entrance of the _______________ (place of sale) to the highest bidder, for cash or manager's check and in Philippine Currency, the following property with all its improvements, to wit:

"(Description of Property)"

"All sealed bids must be submitted to the undersigned on the above stated time and date."

"In the event the public auction should not take place on the said date, it shall be held on _______________, _______________ without further notice.''

________

SHERIFF

In support of its argument, KMC quoted a portion of Development Bank of the Philippines vs. Court of Appeals (DBP), 31 thus:

The last paragraph of the prescribed notice allows the holding of a rescheduled auction sale without reposting or republication of the notice. However, the rescheduled auction sale will only be valid if the rescheduled date of auction is clearly specified in the prior notice of sale. The absence of this information in the prior notice of sale will render the rescheduled auction sale void for lack of reposting or republication. If the notice of auction sale contains this particular information, whether or not the parties agreed to such rescheduled date, there is no more need for reposting or republication of the notice of the rescheduled auction sale.

The Office of the Court Administrator issued Circular No. 7-2002 pursuant to the 14 December 1999 Resolution of this Court in A.M. NO. 99-10-05-0, as amended by the Resolutions of 30 January 2001 and 7 August 2001. The Court issued these Resolutions for two reasons:

First, the Court seeks to minimize the expenses which the mortgagee incurs in publishing the notice of extrajudicial sale. With the added information in the notice of sale, the mortgagee need not cause the reposting and republication of the· notice of the rescheduled auction sale. There is no violation of the notice requirements under Acts Nos. 3135 and 1508 precisely because the interested parties as well as the public are informed of the schedule of the next auction sale, if the first auction sale does not proceed. Therefore, the purpose of a notice of sale, which is to notify the mortgagor and the public of the foreclosure sale, is satisfied.

Second, the Court hopes to deter the practice of some mortgagors in requesting postponement of the auction sale of real properties, then later attacking the validity of the foreclosure for lack of publication. This practice will only force mortgagees to deny outright requests for postponement by mortgagors since it will only mean added publication expense on the part of the mortgagees. Such development will eventually work against mortgagors because mortgagees will hesitate to grant postponements to mortgagors. 32

KMC also defended the publication in Remate, asserting that it was a newspaper of general circulation and was being circulated nationwide and thus, citing the case of Olizon vs. Court of Appeals, 33 publication therein should suffice to meet the requirements prescribed by the law.

Finally, KMC contended that its prayer to recover from Gotesco the deficiency balance was a compulsory counterclaim and thus, the payment of docket fees was not mandatory for the court a quo to acquire jurisdiction over the same.

RULING OF THE COURT OF APPEALS

On December 16, 2014, the CA rendered its Decision, 34 the dispositive portion of which reads as follows:

WHEREFORE, the appeal is GRANTED. The Decision dated August 12, 2010 and the Order dated December 16, 2010 issued by the Regional Trial Court of Calamba City, Branch 92 in Civil Case No. 3194-01-C are REVERSED and SET ASIDE. Judgment is hereby rendered:

1. Declaring as NULL and VOID the Extra-Judicial Foreclosure of the Mortgage Trust Indenture over the properties covered (by) Transfer Certificates of Title Nos. T-512107, T-512105; T-512104; T-512106 of the Registry of Deeds for Calamba, Laguna issued under the name of METROPOLITAN BANK AND TRUST COMPANY;

2. Declaring as NULL and VOID the Certificate of Sale issued by Edgardo Naoe on September 15, 2000 in favor of SOLIDBANK CORPORATION;

3. Ordering the Registry of Deeds for Calamba, Laguna to cancel the aforementioned titles (Transfer Certificates of Title Nos. T-512107, T-512105, T-512104, T-512106), and to reinstate Transfer Certificates of Title Nos. T-328261, T-328262, T-328238, T-341020 in the name of GOTESCO PROPERTIES, INC.;

4. Ordering defendant-appellee METROPOLITAN BANK AND TRUST COMPANY to make a full accounting of the extent of the outstanding obligations of plaintiff-appellant GOTESCO PROPERTIES, INC. in the Mortgage Trust Indenture before any foreclosure proceedings are initiated;

5. Dismissing defendant-appellee's permissive counterclaims without prejudice to the filing of a separate action against plaintiff-appellant after the holding of a proper extra-judicial foreclosure sale.

SO ORDERED. 35

While it found for Gotesco, the CA emphasized that Metrobank was able to comply with the requisites of the Mortgage Trust Indenture after it was established that it (Gotesco) was served the demand letter dated June 7, 2000.

However, the court below found the foreclosure proceedings wanting in some other respects. It held that republication of the Notice of Sale was indeed required, noting that Circular No. 7-2002 took effect only on April 22, 2002, and thus should not be applied to the present auction sale which took place on August 22, 2000.

In support of its ruling, the CA quoted the DBP36 case, thus:

In the instant case, there is no information in the notice of auction sale of any date of a rescheduled auction sale. Even if such information were stated in the notice of sale, the reposting and republication of the notice of sale would still be necessary because Circular No. 7-2002 took effect only on 22 April 2002. There were no such guidelines in effect during the questioned foreclosure.

Clearly, DBP failed to comply with the publication requirement under Act No. 3135. There was no publication of the notice of the rescheduled auction sale of the real properties. Therefore, the extrajudicial foreclosure of the real estate mortgage is void.

The CA likewise upheld the position of Gotesco on the issue of Remate's qualification to carry out the publication. On this point, the court below ruled that the Affidavit of Publication constituted prima facie proof that said newspaper was generally being circulated in Manila and not in Calamba where the properties were located. To support such ruling, the CA relied on the pronouncement of this Court in the case of Metropolitan Bank and Trust Company, Inc. vs. Eugenio Peñafiel, 37 where it was held that:

Noticeably, in the Affidavit of Publication, Mr. Alvarez attested that he was the 'Publisher of Maharlika Pilipinas, a newspaper of general circulation, published every Thursday.' Nowhere is it stated in the affidavit that Maharlika Pilipinas is in circulation in Mandaluyong City. To recall, Sec. 3 of Act No. 3135 does not only require that the newspaper must be of general circulation; it also requires that the newspaper be circulated in the municipality or city where the property is located. Indeed, in the cases wherein the Court held that the affidavit of the publisher was sufficient proof of the required publication, the affidavit of the publisher therein distinctly stated that the newspaper was generally circulated in the place where the property was located.

Finally, the court below ruled that KMC's counterclaim was indeed permissive, and thus the court a quo, for the reasons cited by Gotesco, could not be said to have acquired jurisdiction over the same.

KMC filed a motion for reconsideration 38 but it was denied by the CA in its Resolution 39 dated July 30, 2015. KMC thereafter filed the present petition for review on certiorari, anchored on the following grounds:

1) The findings of the CA are contrary to the findings of the trial court that the notice of sale was in compliance with Act No. 3135, as amended, and the Resolutions of the Supreme Court in AM No. 99-10-05-0 dated December 14, 1999, as amended on March 1 and August 7, 2001, and Circular No. 72002 dated January 22, 2002.

2) The CA manifestly overlooked or disregarded certain relevant and undisputed facts that, if properly considered, would justify a different conclusion.

3) The CA applied as a doctrine a mere obiter dictum of the Honorable Court and thus erred in its conclusion that the notice of sale was not in compliance with the publication requirement under Section 3 of Act No. 3135, as amended. 40

KMC asserts that the notice of extra-judicial sale issued by notary public Atty. Edgardo Naoe was in consonance with AM No. 99-10-05-0, as said rule became effective on January 15, 2000. Since the auction sale took place on August 22, 2000, or during the effectivity of said rule, then its provisions should be held to govern the foreclosure proceedings in the instant case.

According to KMC, Atty. Naoe considered said rule as dispensing of any republication requirement and that his interpretation of Section 5 thereof was correct, as confirmed by the Court Administrator when he issued Circular No. 7-2002.

KMC further contends that the CA should not have relied on the pronouncement of this Court in the DBP case since the foreclosure issue involved therein was concluded before the effectivity of AM No. 99-10-05-0. And though Circular No. 7-2002 was issued after the conduct of the sale, it nevertheless contained mere guidelines which should not be taken to have suspended the effectivity of AM No. 99-10-05-0.

On the same subject matter, KMC points out that the CA erred in relying on the said pronouncement in the DBP case since it was a mere obiter dictum and thus has no jurisprudential value.

Anent the publication carried out in Remate, KMC reiterates that it was qualified to publish the same, adding that Gotesco, as found by the court a quo, failed to offer any proof as to its disqualification.

Finally, KMC stands pat on its contention that its counterclaim to recover deficiency judgment was mandatory.

In its Comment 41 to the Petition, Gotesco refutes KMC's claim anent the obiter dictum character of this Court's pronouncement in the DBP case, maintaining that since there was in fact no guidelines at the time of the foreclosure proceedings in question, then the holding in said case should be considered as forming part of a Supreme Court decision and, consequently, part of the country's legal system.

On the issues regarding the qualification of Remate and the character of KMC's counterclaims, Gotesco said that both had been adjudicated profoundly and correctly by the CA, hence, there is no reason to disturb its holdings thereon.

OUR RULING

We find merit in the petition.

At the outset, this Court finds it not really necessary to rule on whether or not the pronouncement in question in the DBP case was really an obiter dictum. To the mind of this Court, what is more important in resolving the present petition is to determine whether or not AM No. 99-10-05-0 should be made applicable to the foreclosure proceedings involved herein.

It should be noted that AM No. 99-10-05-0 was already in effect at the time of the holding of the foreclosure proceedings in the instant case. On that note alone, the same should have been observed in the conduct of said proceedings.

AM No. 99-10-05-0 does not require republication in case the original schedule for the auction should not push through due to the absence of at least two (2) bidders. This is clear from the same DBP case relied upon by the CA when it rendered the decision now under review. We are quoting from said case at length to clarify the matter once and for all:

ERHC indeed requested postponement of the auction sale scheduled on 12 August 1986. However, the records are bereft of any evidence that ERHC requested the postponement without need of republication of the notice of sale. In Philippine National Bank v. Nepomuceno Productions, Inc., the Court held that:

x x x To request postponement of the sale is one thing; to request it without need of compliance with the statutory requirements is another. Respondents, therefore, did not commit any act that would have estopped them from questioning the validity of the foreclosure sale for non-compliance with Act No. 3135. x x x.

The form of the notice of extra-judicial sale is now prescribed in Circular No. 7-2002 26 issued by the Office of the Court Administrator on 22 January 2002. Section 4(a) of Circular No. 7-2002 provides that:

Sec. 4. The Sheriff to whom the application for extra-judicial foreclosure of mortgage was raffled shall do the following:

a. Prepare a Notice of Extra-judicial Sale using the following form:

"NOTICE OF EXTRA-JUDICIAL SALE"

"Upon extra-judicial petition for sale under Act 3135/1508 filed __________ against (name and address of Mortgagor/s) to satisfy the mortgage indebtedness which as of __________ amounts to P__________ excluding penalties, charges, attorney's fees and expenses of foreclosure, the undersigned or his duly authorized deputy will sell at public auction on (date of sale) __________ at 10:00 A.M. or soon thereafter at the main entrance of the __________ (place of sale) to the highest bidder, for cash or manager's check and in Philippine Currency, the following property with all its improvements, to wit:

"(Description of Property")

"All sealed bids must be submitted to the undersigned on the above stated time and date."

"In the event the public auction should not take place on the said date, it shall be held on __________ without further notice."

__________

"SHERIFF"

The last paragraph of the prescribed notice of sale allows the holding of a rescheduled auction sale without reposting or republication of the notice. However, the rescheduled auction sale will only be valid if the rescheduled date of auction is clearly specified in the prior notice of sale. The absence of this information in the prior notice of sale will render the rescheduled auction sale void for lack of reposting or republication. If the notice of auction sale contains this particular information, whether or not the parties agreed to such rescheduled date, there is no more need for the reposting or republication of the notice of the rescheduled auction sale.

The Office of the Court Administrator issued Circular No. 7-2002 pursuant to the 14 December 1999 Resolution of this Court in A.M. No. 99-10-05-0, as amended by the Resolutions of 30 January 2001 and 7 August 2001. The Court issued these Resolutions for two reasons.

First, the Court seeks to minimize the expenses which the mortgagee incurs in publishing the notice of extrajudicial sale. With the added information in the notice of sale, the mortgagee need not cause the reposting and republication of the notice of the rescheduled auction sale. There is no violation of the notice requirements under Acts Nos. 3135 and 1508 precisely because the interested parties as well as the public are informed of the schedule of the next auction sale, if the first auction sale does not proceed. Therefore, the purpose of a notice of sale, which is to notify the mortgagor and the public of the foreclosure sale, is satisfied.

Second, the Court hopes to deter the practice of some mortgagors in requesting postponement of the auction sale of real properties, then later attacking the validity of the foreclosure for lack of republication. This practice will only force mortgagees to deny outright requests for postponement by mortgagors since it will only mean added publication expense on the part of mortgagees. Such development will eventually work against mortgagors because mortgagees will hesitate to grant postponements to mortgagors.

In the instant case, there is no information in the notice of auction sale of any date of a rescheduled auction sale. Even if such information were stated in the notice of sale, the reposting and republication of the notice of sale would still be necessary because Circular No. 7-2002 took effect only on 22 April 2002. There were no such guidelines in effect during the questioned foreclosure.

Clearly, DBP failed to comply with the publication requirement under Act No. 3135. There was no publication of the notice of the rescheduled auction sale of the real properties. Therefore, the extrajudicial foreclosure of the real estate mortgage is void. 42 (Emphasis Ours)

Our pronouncement in the case cited above, to the effect that the guidelines set forth in Circular No. 7-2002 should not be observed in said case, does not find application to the petition at bar. It should be noted that the auction sale involved in the DBP case transpired at a time when neither the guidelines nor AM No. 99-10-05-0 was already effective. For this reason alone, the CA erred when it singularly cited that particular pronouncement and made it applicable to the case then pending before it. It completely ignored the fact that the auction sale involved in the present case took place in 2000, at a time that AM No. 99-10-05-0 was already in effect.

As clearly stated in the aforesaid DBP case, the "14 December 1999 Resolution of this Court in AM No. 99-10-05-0, as amended by the Resolutions of 30 January 2001 and 7 August 2001, x x x were issued for two reasons," namely, to minimize the expenses of the foreclosing mortgagee and to eradicate the practice of some mortgagors who request postponement of the auction sale and later on question its validity. There can be no misinterpreting the objective of this Court in implementing said Resolutions which, toward achieving a valid objective, do away with any republication requirement.

It should be emphasized that the resolutions dispensing with republication under certain conditions became effective even without the guidelines issued by the Office of the Court Administrator. As pointed out by KMC, to rule otherwise would give the Office of the Court Administrator the authority to override the functions of this Court as it would be able to suspend the effectivity of resolutions of this Court by refusing or neglecting to issue such guidelines. The guidelines, being merely directory or procedural in character, may thus be said to have retroactive effect up until the time of the issuance of the resolutions.

Indeed, the retroactive application of remedial or procedural rules has already been recognized in our jurisprudence, one of which is the case of Zulueta vs. Asia Brewery, Inc., 43 where it was held that:

Petitioner avers that the Makati RTC's February 13, 1997 and May 19, 1997 Orders consolidating the two cases could no longer be assailed. Allegedly, respondent's Petition for Certiorari was filed with the CA beyond the reglementary sixty-day period prescribed in the 1997 Revised Rules of Civil Procedure, which took effect on July 1, 1997. Hence, the CA should have dismissed it outright.

xxx xxx xxx

On the other hand, respondent insists that its Petition was filed on time, because the reglementary period before the effectivity of the 1997 Rules was ninety days. It theorizes that the sixty-day period under the 1997 Rules does not apply.

As a general rule, laws have no retroactive effect. But there are certain recognized exceptions, such as when they are remedial or procedural in nature. This Court explained this exception in the following language:

'It is true that under the Civil Code of the Philippines, "(l)aws shall have no retroactive effect, unless the contrary is provided. But there are settled exceptions to this general rule, such as when the statute is CURATIVE or REMEDIAL in nature or when it CREATES NEW RIGHTS.

xxx xxx xxx

On the other hand, remedial or procedural laws, i.e., those statutes relating to remedies or modes of procedure, which do not create new or take away vested rights, but only operate in furtherance of the remedy or confirmation of such rights, ordinarily do not come within the legal meaning of a retrospective law, nor within the general rule against the retrospective operation of statutes.' (Italics in the original copy)

xxx xxx xxx

Clearly, the designation of a specific period of sixty days for the filing of an original action for certiorari under Rule 65 is purely remedial or procedural in nature. It does not alter or modify any substantive right of respondent, particularly with respect to the filing of petitions for certiorari. Although the period for filing the same may have been effectively shortened, respondent had not been unduly prejudiced thereby considering that he was not at all deprived of that right.

It is a well-established doctrine that rules of procedure may be modified at any time to become effective at once, so long as the change does not affect vested rights. Moreover, it is equally axiomatic that there are no vested rights to rules of procedure. (Citations omitted)

Thus, the aforesaid amendment, being merely procedural in character, should be given retroactive effect and be applied to the foreclosure proceedings in question.

Respondent Gotesco cannot be heard to complain about the failure to republish the auction sale because the publication of the first notice of sale, having included both the original and subsequent dates, is held to be in complete compliance with the requirements of the law. The second and actual date of the sale, having been announced to the public, satisfied the publication requirement under our foreclosure statutes.

We likewise rule in favor of KMC on Remate's qualification to publish the Notice of Sale. In this regard, We agree with the court a quo that Gotesco had the obligation to prove non-compliance with the publication requirements and that it failed to discharge this burden.

The CA, citing the case of Metropolitan Bank and Trust Company, Inc. vs. Peñafiel (Metrobank), 44 held the statement in the Affidavit of Publication — stating that Remate is a "newspaper of general circulation and printed and published in Manila, Philippines" — sufficient to establish that said newspaper was not being circulated in Calamba, Laguna. However, a more careful reading of said Metrobank case would reveal that much more is needed to make that conclusion.

As this Court actually ruled in said Metrobank case:

It bears emphasis that, for the purpose of extrajudicial foreclosure of mortgage, the party alleging non-compliance with the requisite publication has the burden of proving the same. Petitioner correctly points out that neither the publisher's statement that Maharlika Pilipinas is being circulated in Rizal and Cavite, nor his admission that there are no subscribers in Mandaluyong City proves that said newspaper is not circulated in Mandaluyong City.

Nonetheless, the publisher's testimony that they 'do not just offer [Maharlika Pilipinas] to anybody' implies that the newspaper is not available to the public in general. This statement, taken in conjunction with the fact that there are no subscribers in Mandaluyong City, convinces us that Maharlika Pilipinas is, in fact, not a newspaper of general circulation in Mandaluyong City.

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. Notices are given for the purpose of securing bidders and to prevent a sacrifice of the property. The goal of the notice requirement is to achieve a "reasonably wide publicity" of the auction sale. This is why publication in a newspaper of general circulation is required. The Court has previously taken judicial notice of the "far-reaching effects" of publishing the notice of sale in a newspaper of general circulation.

True, to be a newspaper of general circulation, it is enough that it is published for the dissemination of local news and general information, that it has a bona fide subscription list of paying subscribers, and that it is published at regular intervals. 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.

xxx xxx xxx

Thus, the Court doubts that the publication of the notice of sale in Maharlika Pilipinas effectively caused widespread publicity of the foreclosure sale.

Noticeably, in the Affidavit of Publication, Mr. Alvarez attested that he was the "Publisher of Maharlika Pilipinas, a newspaper of general circulation, published every Thursday." Nowhere is it stated in the affidavit that Maharlika Pilipinas is in circulation in Mandaluyong City. To recall, Sec. 3 of Act No. 3135 does not only require that the newspaper must be of general circulation; it also requires that the newspaper be circulated in the municipality or city where the property is located. Indeed, in the cases wherein the Court held that the affidavit of the publisher was sufficient proof of the required publication, the affidavit of the publisher therein distinctly stated that the newspaper was generally circulated in the place where the property was located. 45 (Citations omitted)

Truly then, Gotesco should have come up with a much stronger evidence to show that the publication made in Remate does not live up to the publication requisites mandated by Act No. 3135 or even PD No. 1079. However, except for the Affidavit of Publication — which the CA erroneously ruled to be sufficient — Gotesco offered no other proof to support its allegation. To reiterate, aside from the statement in the affidavit, much more is required of Gotesco, as pointed out by the jurisprudence cited above, to arrive at a conclusion that indeed Remate is not being circulated in Calamba, Laguna.

Finally, this Court also finds for KMC anent its prayer for deficiency judgment. Its counterclaim is compulsory, thus there is no need for payment of docket fees for the court a quo to acquire jurisdiction over the same.

A counterclaim is compulsory when it (1) arises out of (or is necessarily connected with) the transaction or occurrence that is the subject matter of the opposing party's claim; (2) it does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction; and (3) the court has jurisdiction to entertain the claim.

We agree with KMC's argument that all three aforementioned requisites are present in the instant case. Indeed, the demand for the deficiency arose or is necessarily connected with the real estate mortgage and its subsequent foreclosure, the validity of which is now being questioned in the case at bar. The amount claimed as deficiency is within the jurisdiction of the court a quo. And, finally, its adjudication does not require the presence of third parties.

WHEREFORE, premises considered, the instant petition is hereby GRANTED. The Decision of Branch 92 of the Regional Trial Court of Calamba City is hereby REINSTATEDin toto.

SO ORDERED. (J. Lopez, J., designated additional member per Special Order No. 2822 dated 7 April 2021.)

By authority of the Court:

(SGD.) TERESITA AQUINO TUAZONDivision Clerk of Court

 

Footnotes

1.Rollo, pp. 8-53.

2. Penned by Associate Justice Ramon A. Cruz with Associate Justices Hakim S. Abdulwahid and Romeo F. Barza, concurring; rollo, pp. 57-74.

3. Records, pp. 162-203.

4.Id. at 26-28.

5.Id. at 29-89.

6.Id. at 268-271.

7.Id. at 526.

8.Id. at 514-516.

9.Id. at 517.

10.Id. at 519-521.

11.Id. at 339-342.

12.Id. at 1-21.

13.Id. at 145-156.

14.Id. at 508-513.

15.Id. at 514-516.

16.Id. at 517.

17.Id. at 518.

18.Id. at 519-521.

19. Penned by Presiding Judge Alberto F. Serrano of Branch 92, RTC Calamba City, id. at 582-596.

20.Id. at 596.

21.Id. at 600-614.

22.Id. at 514-516.

23.Id. at 515.

24. 249 Phil. 16 (1988).

25. 442 Phil. 655 (2002).

26. SC AM No. 99-10-05-0 (Re: Procedure in Extra-Judicial Foreclosure of Mortgages), promulgated on December 14, 1998.

27. Entitled "REVISING AND CONSOLIDATING ALL LAWS AND DECREES REGULATING PUBLICATION OF JUDICIAL NOTICES, ADVERTISEMENTS FOR PUBLIC BIDDINGS, NOTICES OF AUCTION SALES AND OTHER SIMILAR NOTICES," effective January 28, 1977.

28. Records, p. 517.

29.Id. at 655.

30. Entitled "Guidelines for the Enforcement of Supreme Court Resolution of December 14, 1999 in Administrative Matter No. 99-10-05-0 re: Procedure in Extra-judicial Foreclosure of Mortgage), as Amended by the Resolution Dated January 30, 2001 and August 7, 2001," approved on January 22, 2002.

31. 451 Phil. 563, 577-578 (2003).

32.Id. at 577-578

33. 306 Phil. 162, 172 (1994).

34.Rollo, pp. 57-74.

35.Id. at 73.

36.Supra note 31 at 578-579.

37. 599 Phil. 511, 520 (2009).

38.Rollo, pp. 96-116.

39.Id. at 77-78.

40.Id. at 33.

41.Rollo, pp. 184-196.

42.Development Bank of the Philippines v. Court of Appeals, supra note 31, at 576-579.

43. 406 Phil. 543, 550-552 (2001).

44.Supra note 37.

45.Id. at 518-520.