GLOBAL HOLIDAY OWNERSHIP CORPORATION, petitioner, vs.

METROPOLITAN
BANK & TRUST COMPANY, respondent.

FACTS: Global Holiday Ownership Corporation obtained on various dates several loans
from Metrobank in the total principal amount of P5,700,000.00 secured by a real estate
mortgage over a condominium unit in Makati City. Upon default in the payment of the
loan, Global requested for a restructuring of its loan in the total principal amount of
P6,375,000.00 as of September 3, 2001. (Metrobank) acceded to its request. As Global
defaulted anew in the payment of its loan, it requested for another restructuring which
was likewise granted by the bank. Hence, a Debt Settlement Agreement was executed
by the parties detailing a schedule of payment of the principal obligation. Global failed to
comply with the terms and conditions. Despite demands made, it still failed and refused
to pay the loans which are all past due. Metrobank requested the Clerk of Court of the
RTC of Makati City to cause the sale at public auction of CCT No. 29774 pursuant to
Act 3135 as amended.
Global filed for annulment of extrajudicial foreclosure proceedings, damages and
injunction with application for TRO and/or writ of preliminary injunction. Respondent
judge granted Global's application for TRO then also granted WPI. Metrobank filed a
petition for certiorari arguing that Global is not entitled to injunctive relief because it has
not shown that it had a legal right that must be protected as it was clearly provided in
the deed of real estate mortgage and in the Debt Settlement Agreement that the
mortgage can be foreclosed in case of default. (Metrobank) contends that Global's claim
of not having been notified of the foreclosure proceedings is debunked by the
Certification issued by the Makati Central Post Office stating that a copy of the notice of
sheriff sale was sent to Global and was received by it.
Moreover, Metrobank's several demand letters to Global with a warning that in case of
failure to do, actions to protect the bank's interests will be initiated, more than satisfies
the requirement of notice. Additionally, (Metrobank) emphasizes that Sec. 14 of the real
estate mortgage was already superseded by Sec. 5 of the Debt Settlement Agreement
whereby Global waived its right to be personally notified in case of default. (Metrobank)
argues that no personal notice of the extrajudicial foreclosure is even required as said
proceeding is an action in rem where only notice by publication and posting is
necessary to bind the interested parties.
The law itself, Act No. 3135, does not require personal notice to the mortgagor. Only
notice by publication and posting are required. Global avers that after it defaulted in its
quarterly payment under the Debt Settlement Agreement, (Metrobank) informed it that
its account is being considered for transfer to a Special Purpose Vehicle under the SPV
Act of 2002. Within the period given to signify its conformity to the plan, Global wrote
(Metrobank) on July 4, 2003 informing (Metrobank) that it is amenable to its proposal.
However, (Metrobank) decided to proceed with the extrajudicial foreclosure of the
mortgaged property. Global claimed that it has not waived its right to be notified of the
foreclosure when it executed the Debt Settlement Agreement.
The statement "without need of demand" in the debt settlement agreement refers to the
payment of the principal and interest, which is different from notice of extrajudicial
foreclosure that is required to be given to a mortgagor.

ISSUE: Whether or not personal notice to the debtor-mortgagor of the extrajudicial

foreclosure is not necessary despite the parties' stipulation in their Real Estate
Mortgage contract requiring personal notice thereof
RULING: No.
Paragraph 14 of the real estate mortgage contract states that:
“All correspondence relative to this mortgage, including demand letters, summonses,
subpoenas or notifications of any judicial or extra-judicial actions shall be sent to the
Mortgagor at the address hereinabove given or at the address that may hereafter be
given in writing by the Mortgagor to the Mortgagee, and the mere act of sending any
correspondence by mail or by personal delivery to the said address shall be valid and
effective notice to the Mortgagor for all legal purposes, and the fact that any
communication is not actually received by the Mortgagor, or that it has been returned
unclaimed to the Mortgagee, or that no person was found at the address given, or that
the address is fictitious, or cannot be located, shall not excuse or relieve the Mortgagor
from the effect of such notice.”
This specific provision in the parties' real estate mortgage agreement is the same
provision involved in the case of Metropolitan Bank and Trust Company v. Wong: “The
fundamental principle that 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. Section 3,
Act No. 3135 reads: "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 or city where the
property is situated, and if such property is worth more than four hundred pesos, such
notice shall also be published once a week for at least three consecutive weeks in a
newspaper of general circulation in the municipality and city."
The Act only requires (1) the posting of notices of sale in three public places, and (2) the
publication of the same in a newspaper of general circulation. Personal notice to the
mortgagor is not necessary. Nevertheless, the parties to the mortgage contract are not
precluded from exacting additional requirements. In this case, petitioner and respondent
in entering into a contract of real estate mortgage, agreed inter alia: "all correspondence
relative to this mortgage, including demand letters, summonses, subpoenas, or
notifications of any judicial or extra-judicial action shall be sent to the MORTGAGOR at
40-42 Aldeguer St., Iloilo City, or at the address that may hereafter be given in writing
by the MORTGAGOR to the MORTGAGEE."
Precisely, the purpose of the foregoing stipulation is to apprise respondent of any action
which petitioner might take on the subject property, thus according him the opportunity
to safeguard his rights. When petitioner failed to send the notice of foreclosure sale to
respondent, he committed a contractual breach sufficient to render the foreclosure sale
on November 23, 1981 null and void.” In cases subsequent to Wong, we sustained the
same principle: that personal notice to the mortgagor in extrajudicial foreclosure
proceedings is not necessary, unless stipulated. Metrobank claims that Cortes v.
Intermediate Appellate Court 16 should be applied in the resolution of the present
controversy. But what is stated in Cortes no longer applies in light of the Court's rulings
in Wong and all the subsequent cases, which have been consistent.
Cortes has never been cited in subsequent rulings of the Court, nor has the doctrine
therein ever been reiterated. Its doctrinal value has been diminished by the policy
enunciated in Wong and the subsequent cases; that is, that in addition to Section 3 of
Act 3135, the parties may stipulate that personal notice of foreclosure proceedings may
be required. Act 3135 remains the controlling law, but the parties may agree, in addition
to posting and publication, to include personal notice to the mortgagor, the non-
observance of which renders the foreclosure proceedings null and void, since the
foreclosure proceedings become an illegal attempt by the mortgagee to appropriate the
property for itself.
Thus, we restate: 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.