RAOUL S.V. BONNEVIE AND HONESTO V. BONNEVIE, PETITIONERS, VS. THE HONORABLE COURT OF APPEALS AND THE PHILIPPINE BANK OF COMMERCE, RESPONDENTS.

Petition for review on certiorari seeking the reversal of the decision of the defunct Court
of Appeals, now Intermediate Appellate Court, in CA-G.R. No. 61193-R, entitled
“Honesto Bonnevie vs. Philippine Bank of Commerce, et al.,”
promulgated August 11, 1978^[1]
as well as the Resolution denying the motion for reconsideration.

The complaint filed on January 26, 1971 by petitioner Honesto
Bonnevie with the Court of First Instance of Rizal against respondent
Philippine Bank of Commerce sought the annulment of the Deed of Mortgage dated
December 6, 1966 executed in favor of the Philippine Bank of Commerce by the
spouses Jose M. Lozano and Josefa P. Lozano as well as the extrajudicial
foreclosure made on September 4, 1968. It alleged among others that (a) the
Deed of Mortgage lacks consideration and (b) the mortgage was executed by one
who was not the owner of the mortgaged property. It further alleged that the
property in question was
foreclosed pur­suant to Act No. 3135 as amended, without, however, complying
with the condition imposed for a valid foreclosure. Granting the validity of
the mortgage and the extrajudicial foreclosure, it finally alleged that
respondent Bank should have accepted petitioner’s offer to redeem the property
under the principle of equity and justice.

On the other hand, the answer of defendant Bank, now private
respondent herein, specifically denied most of the allegations in the complaint
and raised the following affirmative defenses: (a) that the defendant has not
given its consent, much less the requisite written consent, to the sale of the
mortgaged property to plaintiff and the assumption by the latter of the loan
secured thereby; (b) that the demand letters and notice of foreclosure were
sent to Jose Lozano at his address; (c) that it was notified for the first time
about the alleged sale after it had foreclosed the Lozano mortgage; (d) that
the law on contracts requires
defendant’s consent before Jose Lozano can be released from his bilateral
agreement with the former and doubly so, before plaintiff may be substituted
for Jose Lozano and Alfonso Lim; (e)
that the loan of P75,000.00 which was secured by
mortgage, after two renewals remain unpaid despite countless reminders and
demands; (f) that the property in question remained registered in the name of
Jose M. Lozano in the land records of Rizal and there was no entry, notation or
indication of the alleged sale to plaintiff; (g) that it is an established
banking practice that payments against accounts need not be personally made by
the debtor himself; and (h) that it is not true that the mortgage, at the time of its execution and
registration, was without consideration as alleged because the execution and
registration of the securing mortgage, the signing and delivery of the promis­sory
note and the disbursement of the proceeds of the loan are mere implementation
of the basic consensual contract of loan.

After petitioner Honesto V. Bonnevie had rested his case,
petitioner Raoul S.V. Bonnevie filed a motion for intervention. The
intervention was premised on the Deed of Assignment executed by petitioner
Honesto Bonnevie in favor of petitioner Raoul S.V. Bonnevie covering the rights
and interests of petitioner Honesto Bonnevie over the sub­ject property. The
intervention was ultimately granted in order that all issues be resolved in one
proceeding to avoid multiplicity of suits.

On March 29, 1976, the lower court rendered its decision, the
dispositive portion of which reads as follows:

“WHEREFORE, all the foregoing premises considered, judgment is hereby rendered dis­missing the
complaint with costs against the plaintiff and the intervenor.”

After the motion for reconsideration of the lower court’s
decision was denied, petitioners appealed to respondent Court of Appeals
assigning the following errors:

1. The lower court
erred in not finding that the real estate mortgage executed by Jose Lozano was null and void;

2. The lower court
erred in not finding that the auction sale made on August 19, 1968 was null and
void;

3. The lower court
erred in not allowing the plaintiff and the intervenor to redeem the property;

4. The lower court
erred in not finding that the defendant acted in bad faith; and

5. The lower court
erred in dismissing the complaint.

On August 11, 1978, the respondent court promulgated its decision
affirming the decision of the lower court, and on October 3, 1978 denied the
motion for reconsideration.
Hence, the present petition for review.

The factual findings of respondent Court of Appeals being
conclusive upon this Court, We hereby adopt the facts found by the trial court
and found by the Court of Appeals to be consistent with the evidence adduced
during trial, to wit:

“It is not disputed that spouses Jose M. Lozano and Josefa P.
Lozano were the owners of the property which they mortgaged on December 6,
1966, to secure the payment of the loan in the principal amount of P75,000.00
they were about to obtain from defendant-appellee Philip­pine Bank of Commerce;
that on December 8, 1966, they executed in favor of plaintiff-appellant the
Deed of Sale with Assumption of Mortgage, for and in consideration of the sum
of P100,000.00, P25,000.00 of which amount being payable to the Lozano spouses
upon the execution of the document, and the balance of P75,000.00 being payable
to defendant-appellee; that on December 6, 1966, when the mortgage was executed
by the Lozano spouses in favor of defendant-appellee, the loan of P75,000.00
was not yet received by them, as it was on December 12, 1966 when they and
their co-maker Alfonso Lim signed the promissory note for that amount; that
from April 28, 1967 to July 12, 1968, plaintiff-appellant made pay­ments to
defendant-appellee on the mortgage in the total amount of P18,944.22; that on
May 4, 1968, plaintiff-appellant assigned all
his rights under the Deed of Sale with Assump­tion of Mortgage to his
brother, intervenor Raoul Bonnevie; that on June 10, 1968, defen­dant-appellee
applied for the foreclosure of the mortgage, and notice of sale was published
in the Luzon Weekly Courier on June 30, July 7, and July 14, 1968; that auction
sale was con­ducted on August 19, 1968, and the property was sold to
defendant-appellee for P84,387.00; and that offers from plaintiff-appellant to
repurchase the property failed, and on October 9, 1969, he caused an adverse
claim to be annotated on the title of
the property.” (Decision of the Court of Appeals, p. 5).

Presented for resolution
in this review are the following issues:

I

Whether the real estate
mortgage executed by the spouses Lozano in favor of respondent bank was validly
and legally executed.

II

Whether the
extrajudicial foreclosure of the said mortgage was validly and legally
effected.

III

Whether petitioners had a right to
redeem the foreclosed property.

IV

Granting that
petitioners had such a right, whether respondent was justified in refusing
their offers to repurchase the property.

As
clearly seen from the foregoing
issues raised, petitioners’ course of action is three-fold. They pri­marily
attack the validity of the mortgage executed by the Lozano spouses in favor of
respondent Bank. Next, they attack the validity of the extrajudicial
foreclosure and finally, appeal to justice and equity. In attacking the
validity of the deed of mortgage, they contended that when it was executed on
December 6, 1966, there was yet no principal obligation to secure as the loan
of P75,000.00 was not received by the Lozano spouses “so much so that in
the absence of a principal obligation, there is want of consideration in the accessory
contract, which consequently impairs its validity and fatally affects it very
existence.” (Petitioners’ Brief, par. 1, p. 7).

This contention is
patently devoid of merit. From the recitals of the mortgage deed itself, it is
clearly seen that the mortgage deed was executed for and on con­dition of the
loan granted to the Lozano spouses. The fact that the latter did not collect
from the respondent Bank the consideration of the mortgage on the date it was
executed is immaterial. A contract of loan being a con­sensual contract, the herein
contract of loan was per­fected at the same time the contract of mortgage was
executed. The promissory note executed on December 12, 1966 is only an evidence
of indebtedness and does not indicate lack of consideration of the mortgage at
the time of its execution.

Petitioners
also argued that granting the validity of the mortgage, the subsequent renewals
of the original loan, using as security the same
property which the Lozano spouses had already sold to petitioners, rendered the
mortgage null and void.

This argument failed to
consider the provision^[2] of the contract of mortgage which prohibits
the sale, disposition of, mortgage and encumbrance of the mortgaged properties,
without the written consent of the mortgagee, as well as the additional proviso
that if inspite of said stipulation, the mortgaged property is sold, the vendee
shall assume the mortgage in the terms and conditions under which it is
constituted. These provisions are expressly made part and parcel of the Deed of
Sale with Assumption of Mortgage.

Petitioners
admit that they did not secure the consent of respondent Bank to the sale with
assumption of mortgage. Coupled with the fact that the sale/assignment was not
registered so that the title remained in the name of the Lozano spouses,
insofar as respondent Bank was concerned, the Lozano
spouses could rightfully and validly mortgage the property. Respondent Bank had
every right to rely on the certificate of title. It was not bound to go behind
the same to look for flaws in the mortgagor’s title, the
doctrine of innocent purchaser for value being applicable to an innocent
mortgagee for value. (Roxas vs. Dinglasan, 28 SCRA 430; Mallorca vs. De Ocampo,
32 SCRA 48). Another argument for the respondent Bank is that a mortgage
follows the property whoever the possessor may be and subjects the fulfillment
of the obligation for whose security it was constituted. Finally, it can also
be said that petitioners voluntarily assumed the mortgage when they entered
into the Deed of Sale with Assumption of Mortgage. They are, therefore,
estopped from impugning its validity whether on the original loan or renewals
thereof.

Petitioners next assail
the validity and legality of the extrajudicial foreclosure on the following
grounds:

a) Petitioners were
never notified of the foreclosure sale.

b) The notice of
auction sale was not posted for the period required by law.

c) The publication of the notice of auction
sale in the Luzon Weekly Courier was not in accordance with law.

The lack of notice of the
foreclosure sale on peti­tioners is a flimsy ground. Respondent Bank not being
a party to the Deed of Sale with Assumption of Mortgage, it can validly claim
that it was not aware of the same and hence, it may not be obliged to notify
petitioners. Secondly, petitioner Honesto Bonnevie was not entitled to any
notice because as of May 14, 1968, he had transferred and assigned all his
rights and interests over the property in favor of intervenor Raoul Bonnevie
and respondent Bank was not likewise informed of the same. For the same reason,
Raoul Bonnevie is not entitled to notice. Most importantly, Act No. 3135 does
not require personal notice on the mortgagor. The requirement on notice is
that:

“Section 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 or city.”

In the case at bar, the notice of sale was published in the Luzon
Courier on June 30, July 7 and July 14, 1968 and notices of the sale were
posted for not less than twenty days in at least three (3) public places in the
Municipality where the property is located. Petitioners were thus placed on
constructive notice.

The case of Santiago vs. Dionisio, 92 Phil. 495, cited by petitioners is inapplicable
because said case involved a judicial foreclosure and the sale to the
vendee of the mortgaged property was duly registered making the mortgagee privy
to the sale.

As regards the claim that the period of publication of the notice
of auction sale was not in accordance with law, namely: once a week for
at least three consecutive weeks, the Court of Appeals ruled that the
publication of notice on June 30, July 7 and July 14, 1968 satisfies the publication requirement under Act No. 3135
notwithstanding the fact that June 30 to July 14 is only 14 days. We agree. Act
No. 3135 merely requires that “such notice shall be published once a week
for at least three conse­cutive weeks.” Such phrase, as interpreted by
this Court in Basa vs. Mercado, 61 Phil. 632, does not mean that notice should
be published for three full weeks.

The argument that the publication of the notice in the
“Luzon Weekly Courier” was not in accordance with law as said
newspaper is not of general circulation must like­wise be disregarded. The
affidavit of publication, executed by the publisher, business/advertising
manager of the Luzon Weekly Courier, states that it is “a newspaper of
general circulation in x x x Rizal; and that the Notice of Sheriff’s sale was
published in said paper on June 30, July
7 and July 14, 1968.” This constitutes prima facie evidence
of compliance with the requisite publication. (Sadang vs. GSIS, 18 SCRA 491).

To be a newspaper of
general circulation, it is enough that “it is published for the
dissemination of local news and general information; that it has a bona fide
subscription list of paying subscribers; that it is published at regular
intervals.” (Basa vs. Mercado, 61 Phil. 632). The newspaper need not have
the largest cir­culation so long as it is of general circulation. (Banta vs. Pacheco, 74 Phil. 67). The testimony of three wit­nesses that they do read the Luzon Weekly Courier is no proof
that said newspaper is not a newspaper of general circulation in the province
of Rizal.

Whether or not the notice
of auction sale was posted for the period required by law is a question of
fact. It can no longer be entertained by this Court. (see Reyes, et al. vs. CA,
et al., 107 SCRA 126). Nevertheless, the records show that copies of
said notice were posted in three conspicuous places in the municipality of
Pasig, Rizal namely: the Hall of Justice, the Pasig Municipal Market and Pasig
Municipal Hall. In the same manner, copies of said notice were also posted in
the place where
the property was located, namely: the Municipal Building of San Juan, Rizal;
the Municipal Market and on Benitez Street. The following statement of Atty.
Santiago Pastor, head of the legal department of respondent bank, namely:

“Q
–   How many days were the notices posted
in these two places, if you know?

A
–   We posted them only once in one
day.” (TSN, p. 45, July 25, 1973)

is
not a sufficient countervailing evidence to prove that there was no compliance
with the posting requirement in the absence of proof or even of
allegation that the notices were removed before the expiration of the
twenty-day period. A single act of posting (which may even extend beyond the
period required by law) satisfies the requirement of law. The burden of proving
that the posting requirement was not complied with is now shifted to the one
who alleges non­-compliance.

On the question of
whether or not the petitioners had a right to redeem the property, We hold that
the Court of Appeals did not err in ruling that they had no right to redeem. No
consent having been secured from respondent Bank to the sale with assumption of
mortgage by petitioners, the latter were not validly substituted as debtors. In fact, their rights were never
recorded and hence, respon­dent Bank is charged with the obligation to recognize
the right of redemption only of the Lozano spouses. But even granting that as purchaser or assignee of the property, as the case may be, the
petitioners had acquired a right to redeem the property, petitioners failed to exercise said right within the period granted by law. The
certificate of sale in favor of appellee was registered on September 2, 1968
and the one year redemption period expired on September 3, 1969. It was not until
September 29, 1969 that petitioner Honesto Bonnevie first wrote respondent and offered to redeem the property. Moreover,
on Sep­tember 29, 1969, Honesto had at that time already trans­ferred his
rights to intervenor Raoul Bonnevie.

On the question of
whether or not respondent Court of Appeals erred in holding that respondent Bank
did not act in bad faith, petitioners rely on Exhibit
“B” which is the letter of Jose Lozano to respondent Bank dated December 8, 1966
advising the latter that Honesto Bonnevie was authorized to make payments for the amount secured
by the mortgage on the subject property, to receive acknowledgment of payments, obtain the Release of the Mortgage
after full payment of the obligation and to take delivery of the title of said property. On the
assumption that said letter was received by respondent Bank, a careful reading of the same shows that the
plaintiff was merely authorized to do acts mentioned therein and does not
mention that petitioner is the
new owner of the property nor request that all correspondence and notice should
be sent to him.

The claim of appellants that the collection of interests on the
loan up to July 12, 1968 extends the maturity of said loan up to said date and
accordingly on June 10, 1968
when defendant applied for the foreclosure of the mortgage, the loan was not
yet due and demandable, is totally incorrect and misleading. The undeniable
fact is that the loan matured on
December 26, 1967. On June 10, 1968, when respondent Bank applied for
foreclosure, the loan was already six months overdue. Petitioners’ payment of
interest on July 12, 1968 does not thereby make the earlier act of respondent
Bank inequitous nor does it ipso facto result in the renewal of
the loan. In order that renewal of a loan may be effected, not only the payment
of the accrued interest is necessary
but also the payment of interest for the proposed period of renewal as well.
Besides, whether or not a loan may be renewed does not solely depend on the
debtor but more so on the discretion of the bank. Respondent Bank may not be,
therefore, charged of bad faith.

WHEREFORE, the appeal being devoid of merit, the decision
of the Court of Appeals is hereby
AFFIRMED. Costs against petitioners.

SO ORDERED.

Aquino, J., concur.

Makasiar, (Chairman), Abad Santos, and Escolin, JJ., in the result.

Concepcion, Jr., J., no part.

De Castro, J., on leave.

^[1]
Third Division, Reyes, L.B., J., ponente; Busran and Nocon, JJ.,
concurring.

^[2]
“4. The
MORTGAGOR shall not sell, dispose of, mortgage, nor in any manner encumber the mortgaged
properties without the written con­sent of MORTGAGEE. If in spite of this
stipula­tion, a mortgaged property is sold, the Vendee shall assume the
mortgaged in the terms and con­ditions under which it is constituted, it being
understood that the assumption of the Vendee (does) not release the Vendor of
his obligation to the MORTGAGEE;
on the
contrary, both the Vendor and the Vendee shall be jointly and severally liable
for said mortgage obligation. x x x”