Facts:
The complaint
filed on January 26, 1971 by petitioner Honesto Bonnevie with CFI Rizal against
respondent Philippine Bank of Commerce sought the annulment of the Deed of
Mortgage dated December 6, 1966 executed in favor of the Philippine Bank of
Commerce by the spouses Jose M. Lozano and Josefa P. Lozano as well as the
extrajudicial foreclosure made on September 4, 1968. It alleged among others
that (a) the Deed of Mortgage lacks consideration and (b) the mortgage was
executed by one who was not the owner of the mortgaged property. It further
alleged that the property in question was foreclosed pursuant to Act No. 3135
as amended, without, however, complying with the condition imposed for a valid
foreclosure. Granting the validity of the mortgage and the extrajudicial
foreclosure, it finally alleged that respondent Bank should have accepted
petitioner's offer to redeem the property under the principle of equity said
justice.
PBC
specifically denied most of the allegations in the complaint and raised the
following affirmative defenses: (a) that the defendant has not given its
consent, much less the requisite written consent, to the sale of the mortgaged
property to plaintiff and the assumption by the latter of the loan secured
thereby; (b) that the demand letters and notice of foreclosure were sent to
Jose Lozano at his address; (c) that it was notified for the first time about
the alleged sale after it had foreclosed the Lozano mortgage; (d) that the law
on contracts requires defendant's consent before Jose Lozano can be released
from his bilateral agreement with the former and doubly so, before plaintiff
may be substituted for Jose Lozano and Alfonso Lim; (e) that the loan of
P75,000.00 which was secured by mortgage, after two renewals remain unpaid
despite countless reminders and demands; of that the property in question
remained registered in the name of Jose M. Lozano in the land records of Rizal
and there was no entry, notation or indication of the alleged sale to
plaintiff; (g) that it is an established banking practice that payments against
accounts need not be personally made by the debtor himself; and (h) that it is
not true that the mortgage, at the time of its execution and registration, was
without consideration as alleged because the execution and registration of the
securing mortgage, the signing and delivery of the promissory note and the
disbursement of the proceeds of the loan are mere implementation of the basic
consensual contract of loan.
After
petitioner Honesto V. Bonnevie had rested his case, petitioner Raoul SV
Bonnevie filed a motion for intervention. The intervention was premised on the
Deed of Assignment executed by petitioner Honesto Bonnevie in favor of
petitioner Raoul SV Bonnevie covering the rights and interests of petitioner
Honesto Bonnevie over the subject property. The intervention was ultimately
granted in order that all issues be resolved in one proceeding to avoid
multiplicity of suits.
The lower
court dismissed the complaint. Petitioners appealed to the CA but the decision
of the CFI was affirmed. MR was also denied.
Issue:
Whether the
real estate mortgage executed by the spouses Lozano in favor of respondent bank
was validly and legally executed.
Whether the
extrajudicial foreclosure of the said mortgage was validly and legally
effected.
Whether
petitioners had a right to redeem the foreclosed property.
Granting that
petitioners had such a right, whether respondent was justified in refusing
their offers
to repurchase
the property.
Held:
No.
The mortgage
deed was executed for and on condition of the load granted to the Lozano
spouses.
A contract of
loan being a consensual contract, the herein contract of loan was perfected at
the same time the contract of mortgage was executed. The promissory note
executed on December 12, 1966 is only an evidence of indebtedness and does not
indicate lack of consideration of the mortgage at the time of its execution.
Petitioners
admit that they did not secure the consent of respondent Bank to the sale with
assumption of mortgage. Coupled with the fact that the sale/assignment was not
registered so that the title remained in the name of the Lozano spouses,
insofar as respondent Bank was concerned, the Lozano spouses could rightfully
and validly mortgage the property. Respondent Bank had every right to rely on
the certificate of title. It was not bound to go behind the same to look for
flaws in the mortgagor's title, the doctrine of innocent purchaser for value
being applicable to an innocent mortgagee for value. Petitioners voluntarily
assumed the mortgage when they entered into the Deed of Sale with Assumption of
Mortgage. They are, therefore, estopped from impugning its validity whether on
the original loan or renewals thereof.
Petitioners
next assail the validity and legality of the extrajudicial foreclosure on the
following grounds:
a) petitioners were never notified of the foreclosure sale.
b) The notice of auction sale was not posted for the period required by
law.
c) publication of the notice of auction sale in the Luzon Weekly Courier
was not in accordance with law.
The lack of
notice of the foreclosure sale on petitioners is a flimsy ground. Respondent
Bank not being a party to the Deed of Sale with Assumption of Mortgage, it can
validly claim that it was not aware of the same and hence, it may not be
obliged to notify petitioners. Secondly, petitioner Honesto Bonnevie was not
entitled to any notice because as of May 14, 1968, he had transferred and
assigned all his rights and interests over the property in favor of intervenor
Raoul Bonnevie and respondent Bank not likewise informed of the same. For the
same reason, Raoul Bonnevie is not entitled to notice. Most importantly, Act
No. 3135 does not require personal notice on the mortgagor. The requirement on
notice is that:
Section 3. 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
The notice of
sale was published in the Luzon Courier on June 30, July 7 and July 14, 1968
and notices of the sale were posted for not less than twenty days in at least
three (3) public places in the Municipality where the property is located.
Petitioners were thus placed on constructive notice.
The case of
Santiago vs. Dionisio, 92 Phil. 495, cited by petitioners is inapplicable
because said case involved a judicial foreclosure and the sale to the vendee of
the mortgaged property was duly registered making the mortgaged privy to the
sale.
As regards the
claim that the period of publication of the notice of auction sale was not in
accordance with law, namely: once a week for at least three consecutive weeks,
the Court of Appeals ruled that the publication of notice on June 30, July 7
and July 14, 1968 satisfies the publication requirement under Act No. 3135
notwithstanding the fact that June 30 to July 14 is only 14 days. We agree. Act
No. 3135 merely requires that such notice shall be published once a week for at
least three consecutive weeks." Such phrase, as interpreted by this Court
in Basa vs. Mercado, 61 Phil. 632, does not mean that notice should be published
for three full weeks.
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; that it is published at regular
intervals." (Basa vs. Mercado, 61 Phil. 632). The newspaper need not have
the largest circulation so long as it is of general circulation. Banta vs.
Pacheco, 74 Phil. 67). The testimony of three witnesses that they do read the
Luzon Weekly Courier is no proof that said newspaper is not a newspaper of
general circulation in the province of Rizal.
Whether or not
the notice of auction sale was posted for the period required by law is a
question of fact. It can no longer be entertained by this Court. (see Reyes, et
al. vs. CA, et al., 107 SCRA 126). Nevertheless, the records show that copies
of said notice were posted in three conspicuous places in the municipality of
Pasig, Rizal namely: the Hall of Justice, the Pasig Municipal Market and Pasig
Municipal Hall. In the same manner, copies of said notice were also posted in
the place where the property was located, namely: the Municipal Building of San
Juan, Rizal; the Municipal Market and on Benitez Street. The following
statement of Atty. Santiago Pastor, head of the legal department of respondent
bank, namely:
Q How many days were the notices posted in these two places, if you know?
A We posted them only once in one day. (TSN, p. 45, July 25, 1973)
is not a
sufficient countervailing evidence to prove that there was no compliance with
the posting requirement in the absence of proof or even of allegation that the
notices were removed before the expiration of the twenty-day period. A single
act of posting (which may even extend beyond the period required by law)
satisfies the requirement of law. The burden of proving that the posting
requirement was not complied with is now shifted to the one who alleges
non-compliance.
CA did not err
in ruling that they had no right to redeem. No consent having been secured from
respondent Bank to the sale with assumption of mortgage by petitioners, the
latter were not validly substituted as debtors. In fact, their rights were
never recorded and hence, respondent Bank is charged with the obligation to
recognize the right of redemption only of the Lozano spouses. But even granting
that as purchaser or assignee of the property, as the case may be, the
petitioners had acquired a right to redeem the property, petitioners failed to
exercise said right within the period granted by law. Thru certificate of sale
in favor of appellee was registered on September 2, 1968 and the one year
redemption period expired on September 3, 1969. It was not until September 29,
1969 that petitioner Honesto Bonnevie first wrote respondent and offered to
redeem the property. Moreover, on September 29, 1969, Honesto had at that time
already transferred his rights to intervenor Raoul Bonnevie.
On the
assumption that the letter was received by respondent Bank, a careful reading
of the same shows that the plaintiff was merely authorized to do acts mentioned
therein and does not mention that petitioner is the new owner of the property
nor request that all correspondence and notice should be sent to him.
The claim of
appellants that the collection of interests on the loan up to July 12, 1968
extends the maturity of said loan up to said date and accordingly on June 10,
1968 when defendant applied for the foreclosure of the mortgage, the loan was
not yet due and demandable, is totally incorrect and misleading. The undeniable
fact is that the loan matured on December 26, 1967. On June 10, 1968, when
respondent Bank applied for foreclosure, the loan was already six months
overdue. Petitioners' payment of interest on July 12, 1968 does not thereby
make the earlier act of respondent Bank inequitous nor does it ipso facto
result in the renewal of the loan. In order that a renewal of a loan may be
effected, not only the payment of the accrued interest is necessary but also
the payment of interest for the proposed period of renewal as well. Besides,
whether or not a loan may be renewed does not solely depend on the debtor but
more so on the discretion of the bank. Respondent Bank may not be, therefore,
charged of bad faith.
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