Ramirez vs. Manila Banking Corporation

G.R. No. 198800.December 11, 2013.*JOSE T. RAMIREZ, petitioner, vs. THE MANILABANKING CORPORATION, respondent.

Remedial Law Special Civil Actions Foreclosure of MortgageNotice of Sale Unless the parties stipulate, personal notice to themortgagor in extrajudicial foreclosure proceedings is not necessarybecause Section 3 of Act No. 3135 only requires the posting of thenotice of sale in three public places and the publication of thatnotice in a newspaper of general circulation.In Carlos Lim, et al.v. Development Bank of the Philippines, 700 SCRA 210 (2013), weheld that unless the parties stipulate, personal notice to themortgagor in extrajudicial foreclosure proceedings is notnecessary because Section 3 of Act No. 3135 only requires theposting of the notice of sale in three public places and thepublication of that notice in a newspaper of general circulation. Inthis case, the parties stipulated in paragraph N of the real estatemortgage that all correspondence relative to the mortgageincluding notifications of extrajudicial actions shall be sent tomortgagor Ramirez at his given address. Respondent had nochoice but to comply with this contractual provision it has enteredinto with Ramirez. The contract is the law between them. Hence,we cannot agree with the bank that paragraph N of the realestate mortgage does not impose an additional obligation upon itto provide personal notice of the extrajudicial foreclosure sale tothe mortgagor Ramirez.

Same Same Same Same Act No. 3135 only requires (1) theposting of notices of sale in three public places, and (2) thepublication of the same in a newspaper of general circulation.Personal notice to the mortgagor is not necessary.As weexplained in Metropolitan Bank v. Wong, 359 SCRA 608 (2001),the banks violation of paragraph N of the real estate mortgage issufficient to invalidate the extrajudicial foreclosure sale: [A]contract is the law between the parties and absent any showingthat its provisions are wholly or in part contrary to law, morals,good customs, public order, or public policy, it shall be enforced tothe letter by the courts. Section 3, Act No. 3135 reads: Sec. 3.

Notice shall be given by posting notices of

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* FIRST DIVISION.

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Ramirez vs. Manila Banking Corporation, The

the sale for not less than twenty days in at least three publicplaces of the municipality or city where the property is situated,and if such property is worth more than four hundred pesos, suchnotice shall also be published once a week for at least threeconsecutive weeks in a newspaper of general circulation in themunicipality and city. The Act only requires (1) the posting ofnotices of sale in three public places, and (2) the publication of thesame in a newspaper of general circulation. Personal notice to themortgagor is not necessary. Nevertheless, the parties to themortgage contract are not precluded from exacting additionalrequirements. In this case, petitioner and respondent in enteringinto a contract of real estate mortgage, agreed inter alia: allcorrespondence relative to this mortgage, including demandletters, summonses, subpoenas, or notifications of any judicial orextrajudicial action shall be sent to the MORTGAGOR.Precisely, the purpose of the foregoing stipulation is to appriserespondent of any action which petitioner might take on thesubject property, thus according him the opportunity to safeguardhis rights. When petitioner failed to send the notice of foreclosuresale to respondent, he committed a contractual breach sufficientto render the foreclosure sale on November 23, 1981 null and void.

Same Costs Costs shall be allowed to the prevailing party asa matter of course unless otherwise provided in the Rules of Court.We agree, with the trial courts award of costs of suit toRamirez. Costs shall be allowed to the prevailing party as amatter of course unless otherwise provided in the Rules of Court.These costs Ramirez may recover are those stated in Section 10,Rule 142 of the Rules of Court. For instance, Ramirez may recoverthe lawful fees he paid in docketing his action for annulment ofsale before the trial court. We add thereto the amount of P3,530or the amount of docket and lawful fees paid by Ramirez for filingthis petition before this Court. We deleted the award of moral and

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exemplary damages hence, the restriction under Section 7, Rule142 of the Rules of Court would have prevented Ramirez torecover any cost of suit. But we certify, in accordance with saidSection 7, that Ramirezs action for annulment of sale involved asubstantial and important right such that he is entitled to anaward of costs of suit. Needless to stress, the purpose ofparagraph N of the real estate mortgage is to apprise themortgagor, Ramirez, of any action that the mortgageebank mighttake on the subject properties, thus according him the opportunityto safeguard his rights.

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612 SUPREME COURT REPORTS ANNOTATEDRamirez vs. Manila Banking Corporation, The

PETITION for review on certiorari of the decision andresolution of the Court of Appeals.The facts are stated in the opinion of the Court. Teodoro C. Alegro, Jr. for petitioner. Puyat, Jacinto & Santos for respondent.

VILLARAMA, JR.,J.:

We have consistently held that unless the partiesstipulate, personal notice to the mortgagor in extrajudicialforeclosure proceedings is not necessary because Section3[1] of Act No. 3135[2] only requires the posting of thenotice of sale in three public places and the publication ofthat notice in a newspaper of general circulation.[3]

Before us is a petition for review on certiorari underRule 45 of the Decision[4] dated November 26, 2010 andResolution[5] dated September 28, 2011 of the Court ofAppeals (CA) in CAG.R. CV No. 80616.

_______________[1] SEC.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 orcity where the property is situated, and if such property is worth morethan four hundred pesos, such notice shall also be published once a weekfor at least three consecutive weeks in a newspaper of general circulationin the municipality or city.

[2] AN ACT TO REGULATE THE SALE OF PROPERTY UNDER SPECIAL POWERSINSERTED IN OR ANNEXED TO REAL ESTATE MORTGAGES, approved on March 6,

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1924.[3] Carlos Lim, et al. v. Development Bank of the Philippines, G.R. No.

177050, July 1, 2013, 700 SCRA 210, 233.[4] Rollo, pp. 2539. Penned by Associate Justice Amelita G. Tolentino

with the concurrence of Associate Justices Normandie B. Pizarro andRuben C. Ayson.

[5] Id., at pp. 5455. Penned by Associate Justice Amelita G. Tolentinowith the concurrence of Associate Justices Normandie B. Pizarro andMarlene B. GonzalesSison.

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VOL. 712, DECEMBER 11, 2013 613Ramirez vs. Manila Banking Corporation, The

The facts of the case are as follows:Petitioner Jose T. Ramirez mortgaged two parcels of

land located at Bayanbayanan, Marikina City and coveredby Transfer Certificate of Title (TCT) Nos. N10722[6] andN23033[7] in favor of respondent The Manila BankingCorporation to secure his P265,000 loan. The real estatemortgage provides that all correspondence relative to themortgage including notifications of extrajudicial actionsshall be sent to petitioner Ramirez at his given address, towit:

N)All correspondence relative to this MORTGAGE, includingdemand letters, summons, subpoenas or notifications of anyjudicial or extrajudicial actions shall be sent to the MORTGAGORat the address given above or at the address that may hereafterbe given in writing by the MORTGAGOR to the MORTGAGEE,and the mere act of sending any correspondence by mail or bypersonal delivery to the said address shall be valid and effectivenotice to the MORTGAGOR for all legal purposes and the factthat any communication is not actually received by theMORTGAGOR, or that it has been returned unclaimed to theMORTGAGEE, or that no person was found at the address given,or that the address is fictitious or cannot be located, shall notexcuse or relieve the MORTGAGOR from the effects of suchnotice.[8]

Respondent filed a request for extrajudicial foreclosureof real estate mortgage[9] before Atty. Hipolito Saez on theground that Ramirez failed to pay his loan despitedemands. During the auction sale on September 8, 1994,

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respondent was the only bidder for the mortgagedproperties.[10] There

_______________[6] Id., at pp. 108110.[7] Id., at pp. 105107.[8] Id., at pp. 115116.[9] Id., at pp. 112A118.[10] Id., at pp. 122123.

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after, a certificate of sale[11] was issued in its favor as thehighest bidder.

In 2000, respondent demanded that Ramirez vacate theproperties.[12]

Ramirez sued respondent for annulment of sale andprayed that the certificate of sale be annulled on theground, among others, that paragraph N of the real estatemortgage was violated for he was not notified of theforeclosure and auction sale.[13]

In its answer, respondent claimed that the foreclosureproceedings were valid.

The trial court ruled that the extrajudicial foreclosureproceedings were null and void and the certificate of sale isinvalid. The fallo of the Decision[14] dated June 30, 2003 ofthe Regional Trial Court, Branch 193, Marikina City, inCivil Case No. 2001701MK reads:

Premises considered, judgment is hereby rendered in favor ofthe plaintiff [Ramirez] and against the defendant [bank], whosecounterclaim is hereby dismissed, declaring the Certificate of Saleof the properties covered by TCT Nos. N10722 and N23033, asnull and void and ordering the defendant [bank] to pay thefollowing:

1)One Hundred Thousand (P100,000.00) Pesos as moraldamages

2)Fifty Thousand (P50,000.00) Pesos as exemplary damages3)Fifty Thousand (P50,000.00) Pesos as Attorneys fees and4)Costs of suit.

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_______________[11] Id., at pp. 127128.[12] Id., at p. 124.[13] Id., at pp. 5658.[14] Id., at pp. 7585. Penned by Judge Alice C. Gutierrez.

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SO ORDERED.[15]

The CA reversed the trial courts decision and ruled thatabsence of personal notice of foreclosure to Ramirez asrequired by paragraph N of the real estate mortgage is nota ground to set aside the foreclosure sale.[16] The fallo ofthe assailed CA Decision reads:

WHEREFORE, the appealed decision dated June 30, 2003 ofthe Regional Trial Court of Marikina, Branch 193 is herebyREVERSED and SET ASIDE, and a new one is enteredAFFIRMING the validity of the Certificate of Sale of theproperties covering TCT Nos. N10722 and N23033.

SO ORDERED.[17]

Ramirezs motion for reconsideration was denied in theassailed CA Resolution.

Hence, this petition raising a lone issue:What is the legal effect of violating paragraph N of

the deed of mortgage which requires personal noticeto the petitionermortgagor by the respondentmortgagee bank?[18]

Ramirez insists that the auction sale as well as thecertificate of sale issued to respondent are null and voidsince no notice of the foreclosure and sale by public auctionwas personally given to him in violation of paragraph N ofthe real estate mortgage which requires personal notice tohim of said extrajudicial foreclosure.[19]

_______________[15] Id., at pp. 8485.[16] Id., at pp. 3031.[17] Id., at p. 37.

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[18] Id., at p. 13.[19] Id., at p. 14.

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In its comment, respondent counters that under Section3 of Act No. 3135, no personal notice to the mortgagor isrequired in case of a foreclosure sale. The bank claims thatparagraph N of the real estate mortgage does not imposean additional obligation to it to provide personal notice tothe mortgagor Ramirez.[20]

We agree with Ramirez and grant his petition.The CA erred in ruling that absence of notice of

extrajudicial foreclosure sale to Ramirez as required byparagraph N of the real estate mortgage will not invalidatethe extrajudicial foreclosure sale. We rule that whenrespondent failed to send the notice of extrajudicialforeclosure sale to Ramirez, it committed a contractualbreach of said paragraph N sufficient to render theextrajudicial foreclosure sale on September 8, 1994 nulland void. Thus, we reverse the assailed CA Decision andResolution.

In Carlos Lim, et al. v. Development Bank of thePhilippines,[21] we held that unless the partiesstipulate, personal notice to the mortgagor in extrajudicialforeclosure proceedings is not necessary because Section 3of Act No. 3135 only requires the posting of the notice ofsale in three public places and the publication of that noticein a newspaper of general circulation. In this case, theparties stipulated in paragraph N of the real estatemortgage that all correspondence relative to the mortgageincluding notifications of extrajudicial actions shall be sentto mortgagor Ramirez at his given address. Respondenthad no choice but to comply with this contractual provisionit has entered into with Ramirez. The contract is the lawbetween them. Hence, we cannot agree with the bank thatparagraph N of the real estate mortgage does not imposean additional obligation upon it to provide personal noticeof the extrajudicial foreclosure sale to the mortgagorRamirez.


_______________[20] Id., at p. 96.[21] Supra note 3.

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As we explained in Metropolitan Bank v. Wong,[22] thebanks violation of paragraph N of the real estate mortgageis sufficient to invalidate the extrajudicial foreclosure sale:

[A] contract is the law between the parties and absent anyshowing that its provisions are wholly or in part contrary to law,morals, good customs, public order, or public policy, it shall beenforced to the letter by the courts. Section 3, Act No. 3135 reads:

Sec.3.Notice shall be given by postingnotices of the sale for not less than twentydays in at least three public places of themunicipality or city where the property issituated, and if such property is worth morethan four hundred pesos, such notice shall alsobe published once a week for at least threeconsecutive weeks in a newspaper of generalcirculation in the municipality and city.

The Act only requires (1) the posting of notices of sale in threepublic places, and (2) the publication of the same in a newspaperof general circulation. Personal notice to the mortgagor is notnecessary. Nevertheless, the parties to the mortgage contract arenot precluded from exacting additional requirements. In this case,petitioner and respondent in entering into a contract of real estatemortgage, agreed inter alia:

all correspondence relative to thismortgage, including demand letters,summonses, subpoenas, or notifications of anyjudicial or extrajudicial action shall be sent tothe MORTGAGOR.

Precisely, the purpose of the foregoing stipulation is to appriserespondent of any action which petitioner might take on thesubject property, thus according him the opportunity to safeguardhis rights. When petitioner failed to send the notice of foreclosuresale to respondent,


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[22] 412 Phil. 207, 216217 359 SCRA 608, 614615 (2001).

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he committed a contractual breach sufficient to render theforeclosure sale on November 23, 1981 null and void.

We reiterated the Wong ruling in Global HolidayOwnership Corporation v. Metropolitan Bank and TrustCompany[23] and recently, in Carlos Lim, et al. v.Development Bank of the Philippines.[24] Notably, all thesecases involved provisions similar to paragraph N of the realestate mortgage in this case.

On another matter, we note that the trial court awardedmoral and exemplary damages, attorneys fees and costs ofsuit to Ramirez. In granting said monetary awards, thetrial court noted that if the bank followed strictly theprocedure in the extrajudicial foreclosure of the real estatemortgage and had not filed prematurely an unlawfuldetainer case against Ramirez, he would not have beenforced to litigate and incur expenses.[25]

We delete aforesaid monetary awards, except the awardof costs of suit. Nothing supports the trial courts award ofmoral damages. There was no testimony of any physicalsuffering, mental anguish, fright, serious anxiety,besmirched reputation, wounded feelings, moral shock,social humiliation, and similar injury[26] suffered byRamirez. The award of moral damages must be anchoredon a clear showing that Ramirez actually experiencedmental anguish, besmirched reputation, sleepless nights,wounded feelings or similar injury.[27] Rami

_______________[23] G.R. No. 184081, June 19, 2009, 590 SCRA 188, 196197.[24] Supra note 3, at pp. 1617 p. 233.[25] Rollo, p. 84.[26]CIVIL CODE, Article 2217. Moral damages include physical suffering,

mental anguish, fright, serious anxiety, besmirched reputation, woundedfeelings, moral shock, social humiliation, and similar injury....

[27]Philippine Savings Bank v. Maalac, Jr., G.R. No. 145441, April

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26, 2005, 457 SCRA 203, 222.

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rezs testimony[28] is also wanting as to the moral damageshe suffered.

Similarly, no exemplary damages can be awarded sincethere is no basis for the award of moral damages and thereis no award of temperate, liquidated or compensatorydamages.[29] Exemplary damages are imposed by way ofexample for the public good, in addition to moral,temperate, liquidated or compensatory damages.[30]

We likewise delete the trial courts award of attorneysfees since the trial court failed to state in the body of itsdecision the factual or legal reasons for said award.[31]

Indeed, even the instant petition[32] does not offer anysupporting fact or argument for us to affirm the award ofmoral and exemplary damages and attorneys fees.

However, we agree, with the trial courts award of costsof suit to Ramirez. Costs shall be allowed to the prevailingparty as a matter of course unless otherwise provided inthe Rules of Court.[33] These costs Ramirez may recoverare those stated in Section 10, Rule 142 of the Rules ofCourt.[34] For instance,

_______________[28] Rollo, pp. 7879.[29]Gatmaitan v. Dr. Gonzales, 525 Phil. 658, 672 492 SCRA 591, 605

606 (2006).[30] CIVIL CODE, Article 2229. Exemplary or corrective damages are

imposed, by way of example or correction for the public good, in additionto the moral, temperate, liquidated or compensatory damages.

[31] Ledda v. Bank of the Philippine Islands, G.R. No. 200868,November 21, 2012, 686 SCRA 285, 296297.

[32] Rollo, pp. 1320.[33] RULES OF COURT, Rule 142, Section 1. Costs ordinarily follow results

of suit.Unless otherwise provided in these Rules, costs shall be allowedto the prevailing party as a matter of course.

[34] Id., SEC. 10. Costs in Regional Trial Courts.In an action orproceeding pending in a Regional Trial Court, the prevailing party may

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recover the following costs, and no other:(a)For the complaint or answer, fifteen pesos

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Ramirez may recover the lawful fees he paid in docketinghis action for annulment of sale before the trial court. Weadd thereto the amount of P3,530 or the amount of docketand lawful fees paid by Ramirez for filing this petitionbefore this Court.[35] We deleted the award of moral andexemplary damages hence, the restriction under Section 7,Rule 142 of the Rules of Court[36] would have preventedRamirez to recover any cost of suit. But we certify, inaccordance with said Section 7, that Ramirezs action forannulment of sale involved a substantial and importantright such that he is entitled to an award of costs of suit.Needless to stress, the purpose of paragraph N of the realestate mortgage is to apprise the mortgagor, Ramirez, ofany action that the mortgageebank might

_______________(b)For his own attendance, and that of his attorney, down to and

including final judgment, twenty pesos(c) For each witness necessarily produced by him, for each days

necessary attendance of such witness at the trial, two pesos, and hislawful traveling fees

(d)For each deposition lawfully taken by him, and produced inevidence, five pesos

(e)For original documents, deeds, or papers of any kind produced byhim, nothing

(f)For official copies of such documents, deeds, or papers, the lawfulfees necessarily paid for obtaining such copies

(g) The lawful fees paid by him in entering and docketing the actionor recording the proceedings, for the service of any process in action, andall lawful clerks fees paid by him.

[35] Id., SEC.11.Costs in Supreme Court.In an action orproceeding pending in the Supreme Court, the prevailing party mayrecover the following costs, and no other:

x x x x(c)All lawful fees charged against him by the clerk x x x of the

Supreme Court, in entering and docketing the action.


[36] Id., SEC.7.Restriction of costs.If the plaintiff in any actionshall recover a sum not exceeding ten pesos as debt or damages, he shallrecover no more costs than debt or damages, unless the court shall certifythat the action involved a substantial and important right to the plaintiffin which case full costs may be allowed.

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take on the subject properties, thus according him theopportunity to safeguard his rights.[37]

WHEREFORE, we GRANT the petition, REVERSEand SET ASIDE the Decision dated November 26, 2010and Resolution dated September 28, 2011 of the Court ofAppeals in CAG.R. CV No. 80616. The extrajudicialforeclosure proceedings and auction sale conducted by Atty.Hipolito Saez on September 8, 1994 and the Certificate ofSale over the mortgaged properties covered by TCT Nos. N10722 and N23033, issued in favor of respondent TheManila Banking Corporation, are hereby DECLAREDNULL and VOID.

Costs against respondent The Manila BankingCorporation.

SO ORDERED.

Sereno (CJ., Chairperson), LeonardoDe Castro,Bersamin and Reyes, JJ., concur.

Petition granted, judgment and resolution reversed andset aside.

Notes.Unless the parties stipulate, personal notice tothe mortgagor in extrajudicial foreclosure proceedings is notnecessary because Section 3 of Act 3135 only requires theposting of the notice of sale in three public places and thepublication of that notice in a newspaper of generalcirculation. (Lim vs. Development Bank of the Philippines,700 SCRA 210 [2013])

Development Bank of the Philippines (DBPs) failure tosend a notice of the foreclosure sale to petitioners and itsimposition of additional interest and penalties do notconstitute bad faith. There is no showing that these


contractual breaches were done in bad faith or in a wanton,reckless, or oppressive manner. (Id.)

o0o

_______________[37] See Global Holiday Ownership Corporation v. Metropolitan Bank

and Trust Company, supra note 23, at p. 198.

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