In Atty. Leo N. Caubang v. Jesus G. Crisologo and Nanette B. Crisologo, the Supreme Court ruled that failure to strictly comply with publication requirements in extrajudicial foreclosure sales invalidates the sale. The Court emphasized that notices must be published in a newspaper of general circulation to properly inform the public, and failure to do so constitutes a jurisdictional defect. This decision protects borrowers by ensuring transparency and preventing lenders from taking undue advantage during foreclosure proceedings.

Transparency or Trap? Questioning Foreclosure Publication Practices

The case revolves around a dispute concerning the extrajudicial foreclosure of a property owned by respondents spouses Jesus and Nanette Crisologo. The spouses had obtained loans from PDCP Development Bank Inc., secured by a mortgage on their property. After defaulting on their loan payments, the bank initiated foreclosure proceedings, with Atty. Leo N. Caubang acting as the notary public who prepared the notices of sale. The critical issue arose when the Spouses Crisologo challenged the validity of the foreclosure, alleging that the publication of the notice of sale did not comply with the requirements of Act No. 3135, which governs extrajudicial foreclosures.

Specifically, the law mandates that if the property’s value exceeds four hundred pesos, the notice of sale must be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city where the property is located. The Spouses Crisologo argued, and the lower courts agreed, that the Oriental Daily Examiner, the newspaper used for publication, did not qualify as a newspaper of general circulation. This discrepancy formed the crux of the legal battle, raising questions about the adequacy of notice to the public and the fairness of the foreclosure process. The controversy highlights the critical importance of adhering to procedural requirements in foreclosure proceedings to protect the rights of property owners.

The central legal question was whether the publication of the notice of sale in the Oriental Daily Examiner satisfied the requirement of publication in a newspaper of general circulation as mandated by Section 3 of Act No. 3135. The petitioner, Atty. Caubang, argued that the publication was valid, while the respondents contended that the newspaper did not meet the legal standard. The Regional Trial Court (RTC) and the Court of Appeals (CA) sided with the Spouses Crisologo, declaring the extrajudicial foreclosure sale null and void due to improper publication. The Supreme Court was then tasked with resolving this issue.

In its analysis, the Supreme Court delved into the purpose of the publication requirement in extrajudicial foreclosure sales. The Court emphasized that the principal object of a notice of sale is not merely to notify the mortgagor but to inform the public generally of the nature and condition of the property to be sold, and of the time, place, and terms of the sale. This is to secure bidders and prevent a sacrifice of the property. The Court then quoted Section 3 of Act No. 3135, which states:

Section 3. Notice of sale; posting; when publication required. – 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 notices shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city.

Building on this principle, the Supreme Court underscored that the statutory provisions governing publication of notice of mortgage foreclosure sales must be strictly complied with. Any slight deviations from these requirements invalidate the notice and render the sale, at the very least, voidable. The Court noted that Atty. Caubang failed to ascertain whether the Oriental Daily Examiner was indeed a newspaper of general circulation. Evidence presented showed that the newspaper was not on the list of newspapers accredited to publish legal notices in the Davao RTC’s Office of the Clerk of Court. It also lacked paying subscribers and only published when it had customers.

The Supreme Court emphasized that the failure to properly publish the notice of sale prejudiced the Spouses Crisologo and the general public. Without proper publication, potential bidders were unaware of the foreclosure, resulting in PDCP Bank becoming the sole bidder. This allowed the bank to bid for a very low price and pursue the spouses for a larger deficiency. This situation highlighted the importance of strict compliance with publication requirements to ensure fairness and transparency in foreclosure proceedings.

Furthermore, the Court affirmed the CA’s decision to hold Atty. Caubang liable for the Spouses Crisologo’s litigation expenses and attorney’s fees. The Court reasoned that Caubang’s improper publication of the notices forced the Spouses Crisologo to litigate to protect their property rights, thereby incurring expenses. The Court, therefore, found it just and equitable that Caubang should bear the costs associated with the litigation. This aspect of the ruling underscores the responsibility of notaries public and other professionals involved in foreclosure proceedings to ensure compliance with legal requirements.

The ruling reinforces the importance of strictly adhering to the requirements of Act No. 3135 to protect the rights of mortgagors and ensure fairness in foreclosure proceedings. It serves as a reminder to lenders and those involved in foreclosure sales to verify that all publication requirements are met to avoid potential legal challenges. The case highlights that even seemingly minor procedural lapses can have significant consequences, potentially invalidating the entire foreclosure process. The implication is that foreclosure sales must be conducted with utmost diligence and transparency.

Moreover, this decision has broader implications for the real estate and banking industries. It underscores the need for institutions involved in foreclosure to exercise due diligence in ensuring compliance with all legal requirements. Failure to do so can result in costly litigation and the potential invalidation of foreclosure sales, leading to financial losses and reputational damage. The case also serves as a cautionary tale for notaries public, reminding them of their duty to ensure the accuracy and validity of the documents they prepare and the procedures they oversee.

FAQs

What was the key issue in this case?	The key issue was whether the publication of the notice of sale in the Oriental Daily Examiner satisfied the requirement of publication in a newspaper of general circulation as mandated by Act No. 3135.
What is Act No. 3135?	Act No. 3135 is a law that regulates the sale of property under special powers inserted in or annexed to real-estate mortgages. It outlines the requirements for extrajudicial foreclosure sales, including the publication of notices.
What does “newspaper of general circulation” mean?	A “newspaper of general circulation” is a publication that is widely read by the public in the area where it is published. It typically has a substantial number of paying subscribers and is recognized as a source of news and information.
Why is proper publication important in foreclosure sales?	Proper publication is crucial because it informs the public about the foreclosure sale, allowing potential bidders to participate and ensuring a fair price for the property. It also protects the rights of the mortgagor by giving them an opportunity to redeem the property.
What happens if the publication requirement is not met?	If the publication requirement is not met, the foreclosure sale can be declared null and void. This means the sale is invalid, and the property may revert to the original owner, subject to the mortgage.
Who is responsible for ensuring proper publication?	The responsibility for ensuring proper publication typically falls on the mortgagee (the lender) or their representative, such as the notary public or attorney handling the foreclosure.
What was Atty. Caubang’s role in this case?	Atty. Caubang was the notary public who prepared the notices of sale and oversaw the publication. He was found liable for failing to ensure that the publication was done in a newspaper of general circulation.
What damages were awarded to the Spouses Crisologo?	The Court of Appeals ordered Atty. Caubang to pay the Spouses Crisologo P41,500.00 as attorney’s fees and P30,248.50 as litigation expenses.
Can this ruling affect future foreclosure sales?	Yes, this ruling serves as a reminder to strictly comply with the publication requirements outlined in Act No. 3135 to ensure fairness and transparency in foreclosure proceedings.

In conclusion, the Supreme Court’s decision in Caubang v. Crisologo underscores the critical importance of adhering to procedural requirements in extrajudicial foreclosure sales. The ruling serves as a cautionary tale for lenders and those involved in foreclosure proceedings, emphasizing the need for strict compliance with publication requirements to protect the rights of borrowers and ensure fairness in the process.

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: Atty. Leo N. Caubang v. Jesus G. Crisologo and Nanette B. Crisologo, G.R. No. 174581, February 04, 2015