In the case of Bank of the Philippine Islands v. Puzon, the Supreme Court addressed the requirements for a valid extrajudicial foreclosure sale, emphasizing the significance of publication and the presumption of regularity in such proceedings. The Court reversed the Court of Appeals’ decision, ruling that the foreclosure sale was valid because the bank had sufficiently proven compliance with the statutory requirements for posting and publication of the notice of sale. This decision reinforces the importance of adhering to procedural requirements in foreclosure sales, while also acknowledging the presumption that public officials perform their duties regularly.

Mortgage Default to Auction Dispute: Did BPI Follow the Rules in Foreclosing Puzon’s Property?

Evangeline L. Puzon obtained a loan from Citytrust Banking Corporation, secured by a real estate mortgage on her property. Upon Puzon’s failure to pay, Citytrust initiated extrajudicial foreclosure proceedings. Puzon then filed a petition to annul the foreclosure, alleging irregularities in the posting and publication of the notice of sale, as required by Act No. 3135 and Presidential Decree No. 1079. The trial court initially ruled in favor of Puzon, declaring the foreclosure sale void, a decision which the Court of Appeals affirmed. However, the Supreme Court reversed these decisions, finding that Citytrust, now Bank of the Philippine Islands (BPI), had indeed complied with the necessary legal requirements.

The core of the dispute revolved around whether BPI had adequately complied with the requirements for posting and publishing the notice of the auction sale. Act No. 3135 governs extrajudicial foreclosure sales, mandating that notice be posted for at least twenty days in at least three public places in the municipality or city where the property is located. If the property’s value exceeds four hundred pesos, the notice must also be published once a week for at least three consecutive weeks in a newspaper of general circulation. Furthermore, PD 1079 regulates the publication of judicial notices, including notices of auction sales, requiring them to be published in newspapers circulated in the same city or province where the general circulation requirement applies.

The Court of Appeals focused on the Sheriff’s Certificate of Posting, which stated that the notice of sale was posted in three “conspicuous places” rather than “public places.” The appellate court deemed this insufficient proof of compliance. However, the Supreme Court disagreed, emphasizing the presumption of regularity in the performance of official duties. Section 3(m), Rule 131 of the Rules of Court establishes this presumption, which holds that official duty has been regularly performed unless contradicted by evidence. Since Puzon failed to provide evidence demonstrating that the “conspicuous places” were not, in fact, public places, the Court held that the presumption of regularity should prevail.

Building on this principle, the Supreme Court referenced the case of Development Bank of the Philippines v. Aguirre, which established that failure to post a notice does not invalidate a foreclosure sale if the notice is duly published in a newspaper of general circulation. Therefore, even if the posting were deficient, the publication of the notice in “The Guardian” newspaper could be considered sufficient compliance.

The Court of Appeals also questioned the qualification of “The Guardian” newspaper to publish the notice, suggesting that BPI failed to prove the newspaper’s accreditation as required by PD 1079. To counter this, BPI presented evidence including the Notice of Sheriff’s Sale, copies of “The Guardian” showing the publication, and an affidavit from the newspaper’s General Manager attesting to its publication and circulation. Moreover, BPI submitted a certification from the Clerk of Court of the Regional Trial Court of Quezon City, confirming that “The Guardian” was duly accredited to publish judicial notices during the relevant period.

The Court found that this evidence sufficiently proved compliance with the publication requirements. It emphasized that the burden of proof lies with the party alleging non-compliance, in this case, Puzon. Since Puzon presented no evidence to disprove either the publication itself or the qualification of “The Guardian” newspaper, the Court concluded that BPI had met its burden of demonstrating compliance with the statutory requirements. The Supreme Court stated, “In extrajudicial foreclosure of mortgage, the party alleging non-compliance with the publication requirement has the burden of proving the same.”

The ruling underscores the importance of adhering to the statutory requirements for posting and publication in extrajudicial foreclosure sales. It also highlights the significance of the presumption of regularity in the performance of official duties. Mortgagees must ensure meticulous compliance with these procedural rules to avoid potential challenges to the validity of foreclosure sales. Conversely, mortgagors challenging a foreclosure sale bear the burden of presenting concrete evidence to overcome the presumption of regularity and demonstrate non-compliance with the legal requirements.

FAQs

What was the key issue in this case?	The key issue was whether the bank complied with the statutory requirements for posting and publication of the notice of auction sale in an extrajudicial foreclosure.
What are the requirements for posting notice of sale?	Act 3135 requires posting notices of the sale for at least 20 days in at least three public places of the municipality or city where the property is located.
What are the requirements for publishing notice of sale?	If the property is worth more than four hundred pesos, notice must be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city.
What is the presumption of regularity?	The presumption of regularity is a legal principle that assumes public officials perform their duties correctly, unless proven otherwise by sufficient evidence.
Who has the burden of proof in challenging a foreclosure sale?	The party challenging the foreclosure sale has the burden of proving non-compliance with the legal requirements.
What is the effect of failure to post the notice of sale?	The Supreme Court has ruled that failure to post the notice does not invalidate the sale if the notice is duly published in a newspaper of general circulation.
What evidence did the bank present to prove compliance?	The bank presented the Notice of Sheriff’s Sale, copies of the newspaper showing the publication, an affidavit from the newspaper’s General Manager, and a certification from the Clerk of Court attesting to the newspaper’s accreditation.
What was the final ruling of the Supreme Court?	The Supreme Court ruled that the extrajudicial foreclosure sale was valid, reversing the Court of Appeals’ decision and upholding the bank’s actions.

This case serves as a reminder of the importance of adhering to procedural requirements in foreclosure sales and the significance of the presumption of regularity. While mortgagees must ensure meticulous compliance, mortgagors challenging a sale bear the burden of proving non-compliance with concrete evidence.

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: BANK OF THE PHILIPPINE ISLANDS VS. EVANGELINE L. PUZON, G.R. No. 160046, November 27, 2009