Dear PAO,
My uncle disclosed to me that his farmland was sold at a public auction. He mortgaged the land to a lending company, and he failed to pay his loan. The lending company extrajudicially foreclosed the mortgage and auctioned the property. The foreclosure proceedings happened without his knowledge because no notices were sent to him. When he raised the lack of notice to the lending company, the latter allegedly claimed that notice to him is not required. My uncle would like to ask if the lack of personal notice to him would invalidate the foreclosure or sale.
Wilson
Dear Wilson,
In general, the creditor has a cause of action against the debtor for non-payment of the debt. His remedy was reiterated in the case of Pineda v. De Vega, GR 233774, April 10, 2019, where Associate Justice Alfredo Benjamin Caguioa stated:
“For non-payment of a note secured by mortgage, the creditor has a single cause of action against the debtor. This single cause of action consists in the recovery of the credit with execution of the security. In other words, the creditor in his action may make two demands, the payment of the debt and the foreclosure of the mortgage. But both demands arise from the same cause, the non-payment of the debt, and, for that reason, they constitute a single cause of action. Xxx”
Yet, the debtor-mortgagor is still entitled to certain rights prior to the levy on his or her property. This includes notices, which are inherent in legal proceedings as part of due process. In extrajudicial foreclosure of real estate mortgage, the notice requirement is found under Section 3 of Act 3135 or “An Act to Regulate the Sale of Property Under Special Powers Inserted in or Annexed to Real Estate Mortgages,” as amended, viz.:
“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.”
Correlative thereto, AM 99-10-05-0 dated Aug. 7, 2001, known as the “Procedure in Extrajudicial Foreclosure of Mortgage,” also states:
“3. The notices of auction sale in extrajudicial foreclosure for publication by the sheriff or by a notary public shall be published in a newspaper of general circulation pursuant to Section 1, Presidential Decree No. 1079, dated January 2, 1977, and non-compliance therewith shall constitute a violation of Section 6 thereof.”
Clearly, the aforecited provisions of the law and rule require no personal notice to the mortgagor. The only instance where a mortgagor will be given personal notice is when there is a clear provision requiring it in the real estate mortgage or loan contract. This finds support in the case of Baclig vs. The Rural Bank of Cabugao, Inc., et al., GR 230200, July 3, 2023, where the Supreme Court, speaking through Associate Justice Ramon Paul Hernando, stated:
“First, is it (sic) settled that unless stipulated by the parties, personal notice to the mortgagor in extrajudicial foreclosure proceedings is not necessary, viz.:
“In Carlos Lim, et al. v. Development Bank of the Philippines, we held that unless the parties stipulate, personal notice to the mortgagor in extrajudicial foreclosure proceedings is not necessary because Section 3 of Act No. 3135 only requires the posting of the notice of sale in three public places and the publication of that notice in a newspaper of general circulation. (Citation and original emphasis omitted)
“As Baclig et al. have not shown that there was a stipulation on personal notice, the lack thereof is not a ground to invalidate the sale.”
Applying the above-quoted decision in your situation, personal notice to the mortgagor in the extrajudicial sale of the property furnished as a security for the loan is not necessary. What is required is the posting of the notice of sale in three public places and publication in a newspaper of general circulation. The only instance when personal notice will be sent to the mortgagor is when this is clearly provided in the contract of loan/real estate mortgage signed by the creditor and debtor. Thus, the lack of personal notice to you regarding the foreclosure proceedings undertaken by the lending company will not affect the validity of the foreclosure sale of your property.
We hope that we were able to answer your queries. This advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated on.
Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to dearpao@manilatimes.net
