FACTS:

The consolidated cases involve the nullification of extrajudicial foreclosure sales and interest rates imposed by petitioner Security Bank Corporation. Security Bank granted spouses Rodrigo and Erlinda Mercado a revolving credit line in the amount of P1,000,000.00 with certain terms and conditions, including interest rates and late payment charges. To secure the credit line, the spouses Mercado executed real estate mortgages over their properties. However, the spouses Mercado defaulted on their payment and Security Bank filed petitions for extrajudicial foreclosure. The foreclosure sales were conducted, and Security Bank was adjudged as the winning bidder for the properties. The spouses Mercado then offered to redeem the foreclosed properties, but Security Bank allegedly refused. Consequently, the spouses Mercado filed a complaint for annulment of foreclosure sale, damages, injunction, specific performance, and accounting with the Regional Trial Court (RTC) of Batangas City.

The spouses Mercado executed a series of promissory notes in favor of Security Bank amounting to P10,000,000 secured by real estate mortgages over several parcels of land. Due to the spouses' failure to settle their obligations, Security Bank initiated foreclosure proceedings and eventually acquired the properties through consolidation of titles. The spouses Mercado filed a complaint questioning the validity of the foreclosure sale and the interest rates imposed by Security Bank. The RTC declared the foreclosure sales void due to defective publication and invalidated the interest rates as they were based solely on the will of Security Bank. The RTC also determined the spouses' true and correct obligation to be P8,000,000. Security Bank filed a motion for reconsideration, but the RTC modified its decision, declaring only the foreclosure sales in Batangas City and San Jose, Batangas as void and reducing the spouses' obligation to P7,500,000. The RTC also imposed a 6% interest rate on the obligation. The CA affirmed with modifications, agreeing that the foreclosure sales were invalid and the interest rates were violative of the principle of mutuality of contracts. The CA adjusted the amount of the spouses' outstanding obligation to P7,516,880 and imposed a 12% interest rate from the date of extrajudicial demand. Security Bank filed consolidated petitions questioning the CA's rulings on the foreclosure sale and interest rates.

The case involves the validity of foreclosure sales of properties in Batangas City and San Jose, Batangas. The spouses Mercado raised the issue that the foreclosure sales were invalid due to non-compliance with the publication requirement of the notice of sale. They argue that Act No. 3135, as amended, requires the notice of sale to be published once a week for at least three consecutive weeks in a newspaper of general circulation when the value of the property reaches a certain threshold. They assert that failure to comply with this requirement renders the foreclosure sales void.

On the other hand, Security Bank, the purchaser in the foreclosure sales, argues that the notice is inconsequential or minor as it only pertains to a letter and number in the technical description of the property. They invoke Office of the Court Administrator (OCA) Circular No. 14, which they claim does not require the complete technical description of the property to be published.

The spouses Mercado also questioned the provisions on interest rate in the revolving credit line agreement and its addendum, claiming that they are void for being violative of the principle of mutuality of contracts. They argue that the interest rate is determined by market forces and are not subject to their discretion.

The issue of whether interest and penalties are due and demandable from the date of auction sale until the finality of the judgment declaring the foreclosure void was also raised. The spouses Mercado claim that under the doctrine of operative facts, the interest and penalty were already considered paid through the auction sale.

Ultimately, the Supreme Court denies the petitions and declares the foreclosure sales of the properties void for non-compliance with the publication requirement of the notice of sale. They emphasize the importance of the notice of sale and its publication in order to give wide publicity to the foreclosure sale and secure bidders. Any substantial error or omission in the notice renders the sale voidable. Minor errors or omissions do not invalidate the notice.

In this case, the errors in the notice of sale consist of misidentifying the lot numbers and omitting the exact locations of the properties. The notice stated TCT No. T-33150 as "Lot 952-C-1" instead of "Lot 952-C-1-B" and TCT No. T-89822 as "Lot 1931, Cadm- 164-D" instead of "Lot 1931 Cadm 464-D." Additionally, the notice did not provide information about the properties' locations. Although these errors may seem inconsequential, they are actually important data for prospective bidders to determine whether to acquire any of the properties announced for auction. The misidentified lot numbers effectively referred to other lots, while the omitted locations left prospective buyers clueless about the type of neighborhood and conforming areas they may be buying into. As a result, the properties' sizes and probable market prices are compromised. These errors significantly affect the public's decision to participate in the auction and can deter or mislead bidders, depreciate the value of the properties, or prevent the process from fetching a fair price.

ISSUES:

1. Whether the foreclosure sales of the parcels of land in Batangas City and San Jose, Batangas are valid.

2. Whether the provisions on interest rates in the revolving credit line agreement and its addendum are void for being violative of the principle of mutuality of contracts.

3. Whether interest and penalty are due and demandable from the date of the auction sale until finality of the judgment declaring the foreclosure void under the doctrine of operative facts.

RULING:

1. The foreclosure sales of the properties in Batangas City and San Jose, Batangas are void for non-compliance with the publication requirement of the notice of sale under Act No. 3135, as amended.

2. The provisions on interest rates in the revolving credit line agreement and its addendum are void for being violative of the principle of mutuality of contracts.

3. Interest and penalty are due and demandable from the date of the extrajudicial demand, which is March 31, 1999.

PRINCIPLES:

1. Compliance with Statutory Requirements: Strict adherence to statutory requirements for foreclosure notices, including accurate publication, is necessary to give proper notice to the public and ensure a fair sale.

2. Mutuality of Contracts: A stipulation giving one party the unilateral authority to impose or change interest rates without the consent of the other party violates the principle of mutuality of contracts.

3. Legal Interest and Penalty: In the absence of a stipulated interest rate, legal interest is imposed from the time of default. Penalty charges may be reduced if deemed iniquitous or unconscionable.

4. Doctrine of Operative Facts: Legal interest and penalties are computed from the time of default or extrajudicial demand, not from the finality of the judgment.