7/31/2019 SPCL-KPhil

1/2

K-PHIL., INC., SOO MYUNG PARK and NETWORK DEVELOPMENT HOLDING CORP., v.METROPOLITAN BANK & TRUST COMPANY, REGALADO EUSEBIO, in his capacity as

Clerk of Court VI and Ex-Officio Sheriff, and REYNDALDO R. CAMERINO, in hiscapacity as Sheriff IV, Regional Trial Court of Imus, Cavite

G.R. No. 167500 October 17, 2008 CORONA, J.:

Respondent Metropolitan Bank & Trust Company (Metrobank) extended to petitioner K-Phil, Inc. (K-Phil) various loans and credit accommodations, which were secured by amortgage over two lots, owned by petitioner Network Development Holding Corporation(Network) and occupied by K-Phil. In addition, K-Phil also executed a deed of chattelmortgage over its machineries and equipments.

Because of petitioners alleged violation of the terms and conditions of the loans,Metrobank filed a petition for extrajudicial foreclosure of real estate and chattel mortgagewith the Office of the Clerk of Court and ex-officio sherriff (respondent Regalado Eusebio) ofthe Regional Trial Court of Imus, Cavite.

Upon approval by RTC Executive Judge Lucenito Tagle, respondent sheriff ReynaldoCamerino issued a notice of extrajudicial sale setting the date of the public auction sale.Consequently, the petitioners filed a complaint for breach of contract and damages withapplication for a writ of preliminary injunction and/or temporary restraining order in the RTCof Imus, Cavite. The petitioners raised the following claims:

(a.) that the foreclosure of mortgages was premature and contrary to the agreement ofthe loans and obligations of K-Phil;(b.) that the petition for extrajudicial foreclosure was defective because it indicated thewrong amount and failed to implead and notify Network, an indispensable party asowner-mortgagor;(c.) that the venue of the auction sale in Imus, Cavite was inconsistent with the

express stipulation of the real estate mortgage that the auction sale was to be held atthe capital of the province, Trece Martires City, or in the city where the property islocated, Dasmarinas, Cavite.

RTC issued an ex parteTRO enjoining the respondents from proceeding with thescheduled public auction. After hearing the parties, it also granted the writ of preliminaryinjunction upon filing of P2,000,000 bond. K-Phil moved for authority to sell the spinningmachines/accessories, subject of the chattel mortgage for US$228,000. RTC granted themotion and ordered that the proceeds of the sale be delivered directly to Metrobank aspartial payment for K-Phils obligations. After trial, RTC rendered its decision dismissingpetitioners complaint. It ruled that there was no infirmity in the petition because eventhough the name of Network did not appear on the caption, it was clearly stated in the bodyof the petition. It further held that mere irregularities in the petition or notice of the sale didnot prejudice any of the parties and that the venue of the sale was within the territorial

jurisdiction of the court.

Petitioners elevated the case to the Court of Appeals. Meanwhile, in its exercise ofresidual jurisdiction, RTC ordered the parties to refrain from continuing with the publicauction. The CA agreed with the RTC that the failure to include the name of the Network inthe caption of the petition was not a fatal error. However, as to the venue, it held that, underthe law and the stipulations provided in the mortgage contract, the auction sale should beheld either in Dasmarinas (where the mortgaged properties are located) or in Trece Martires(the capital city of the province of Cavite

), not in Imus, Cavite.

CA also noted Metrobanks admission that the balance due on the principal amountwas P143,335,891 subject to interest and that petitioners had in the meantime madepayments on their loans. Therefore, the payments should have been deducted to the

7/31/2019 SPCL-KPhil

2/2

principal amount. It also observed that the petition and notice were pegged differently atP159,026,257.49. Because of such variance in the amount the outstanding indebtednessstated in the notice and that in the petition, as well as improper venue, the CA set aside theNotice of Extra-Judicial Sale and ordered the Office of the Sheriff to issue, publish, and serve anew Notice of Extra-Judicial Sale correcting all the inaccuracies. Foreclosure proceedings shallthereafter proceed.

Hence, petitioners filed this petition.

ISSUE:a. Whether the petition for extrajudicial foreclosure was null and void for its failure to

implead Network and to state the correct amount of indebtedness.b. Whether it was proper to order the issuance of a new notice with the necessary

corrections.

HELD:Petition is DENIED.Networks name was indeed omitted from the caption of the application/petition for

extrajudicial foreclosure but such omission was not fatal to Metrobanks application as

it was not in violation of Act 3135.The name was included in its body.It is theallegations in the body of the petition that control and not the heading or caption.The notice also clearly identified Network as mortgagor.

As for the amount of indebtedness, Metrobank alleged the amount of P159,026,257.49in its petition; it was only in the course of the proceedings that it agreed to the amount ofP143,335,891. Consequently, the notice also stated P159,026,257.49 as the amount ofindebtedness. It is well-setteled rule that statutory provisions governing publication andnotice of mortgage foreclosure sales must be strictly complied with. The reason wasexplained in Olizon v. CA:

The object of a notice of sale is to inform the public of the nature and conditionof the property to be sold, and of the time, place and terms of the sale.

Notices are given for the purpose of securing bidders and to prevent a sacrifice of theproperty. If these objects are attained, immaterial errors and mistakes willnot affect the sufficiency of the notice; but if mistakes or omissions occur inthe notices of sale, which are calculated to deter or mislead bidders, todepreciate the value of the property, or to prevent it from bringing a fairprice, such mistakes or omissions will be fatal to the validity of the notice,and also to the sale made pursuant thereto.

The validity of a notice of sale is not affected by immaterial errors; onlysubstantial errors will invalidate it.

While there may be discrepancy in the amount of indebtedness stated in the notice and thatactually owed by petitioners, such discrepancy tends to appreciate, rather thandepreciate the value of the mortgaged properties.The CAs order for the sheriff toissue, publish, and serve a new Notice of Extra-Judical sale correcting the inaccuraciesof the prior notice was sufficient to remedy the discrepancies.