Globe Corp. obtained on various dates several loans from the Bank. The loan was secured by a real estate mortgage over a condominium unit. Due to financial reverses Globe Corp. failed to pay its outstanding obligations.
Despite demands made upon it for the payment of its outstanding loans, Globe Corp. failed and refused to pay the Bank the loans which are all past due.
The Bank thereafter caused the extrajudicial foreclosure of the mortgaged property.
It requested the Clerk of Court of the RTC of Makati City to cause the sale at public auction of the property pursuant to Act 3135 as amended.
Days before the date of the auction sale, Globe Corp. filed a complaint for annulment of extrajudicial foreclosure proceedings, damages and injunction with application for TRO and/or writ of preliminary injunction.
In its petition, Globe Corp. claimed that the Bank’s failure to serve personal notice upon the former of the foreclosure proceedings renders the said proceedings null and void. It asked the trial court to issue a writ of injunction to prevent the Bank from proceeding with the scheduled auction sale of Global Corp.’s condominium unit.
Q: Is Globe Corp. entitled to be notified of the foreclosure proceedings pursuant to provisions of the real estate mortgage contract?
A: Yes. A contract is the law between the parties and, that absent any showing that its provisions are wholly or in part contrary to law, morals, good customs, public order, or public policy, it shall be enforced to the letter by the courts.
Paragraph 14 of the parties’ real estate mortgage contract is clear that all correspondence relative to this mortgage, including demand letters, summonses, subpoenas or notifications of any judicial or extrajudicial actions shall be sent to the mortgagor at the address hereinabove given or at the address that may hereafter be given in writing by it.
Clearly, the general rule is that personal notice to the mortgagor in extrajudicial foreclosure proceedings is not necessary, and posting and publication will suffice.
Sec. 3 of Act 3135 governing extra-judicial foreclosure of real estate mortgages, as amended by Act 4118, requires only posting of the notice of sale in three public places and the publication of that notice in a newspaper of general circulation.
The exception is when the parties stipulate that personal notice is additionally required to be given the mortgagor. Failure to abide by the general rule, or its exception, renders the foreclosure proceedings null and void.
Q: Can the Bank unilaterally disavow its contractual obligation not to personally notify the Globe Corp. of the foreclosure proceedings?
A: No. A party should not, after having its opportunity to enjoy the benefits of an agreement, be allowed to later disown the arrangement when the terms thereof ultimately would prove to operate against its hopeful expectations.
Q: May the fact that Global Corp. received a notice of sheriff’s sale from the Office of the Clerk of Court cure the Bank’s failure of personally notifying Global Corp.?
A: No. The object of a notice of sale in a foreclosure of mortgage is not for the mortgagor’s benefit, but for the public or third persons; on the other hand, the undertaking in a mortgage deed to notify the mortgagor of all judicial or extrajudicial actions relative to the mortgage is especially for the mortgagors benefit, so that he may safeguard his rights.
Q: Is Global Corp. entitled to the writ of preliminary injunction?
A: Yes. Global Corp.’s right to be furnished with personal notice of the extrajudicial foreclosure proceedings has been established. Thus, to continue with the extrajudicial sale without proper notice would render the proceedings null and void; injunction is proper to protect Global Corp.’s rights and to prevent unnecessary injury that would result from the conduct of an irregular sale.
It is beyond question that a writ of preliminary injunction is issued to prevent an extrajudicial foreclosure, upon a clear showing of a violation of the mortgagors unmistakable right.
(Sources: Global Holiday Ownership Corp vs. Metropolitan Bank and Trust Co., G.R. No. 184081, June 19, 2009; Metropolitan Bank and Trust Company v. Wong, G.R. No. 120859, June 26, 2001, 359 SCRA 608.)
Ma. Soledad Deriquito-Mawis is currently the Dean for the Lyceum of the Philippines University; president of the Philippines Association of Law Schools; and Senior Partner, Gatchalian Castro & Mawis Law Office