L.

Loan Function
A. Basic Concepts (Secs.39 to 43, 46, 48, 49, 55 GBL; Sec.106 NCBA; Secs.2, 4, 6 RA 3765 Truth
in Lending Act)
REPUBLIC ACT NO. 8791
Section 39. Grant and Purpose of Loans and Other Credit Accommodations. - A bank shall grant
loans and other credit accommodations only in amounts and for the periods of time essential for
the effective completion of the operations to be financed. Such grant of loans and other credit
accommodations shall be consistent with safe and sound banking practices. (75a) The purpose of
all loans and other credit accommodations shall be stated in the application and in the contract
between the bank and the borrower. If the bank finds that the proceeds of the loan or other credit
accommodation have been employed, without its approval, for purposes other than those agreed
upon with the bank, it shall have the right to terminate the loan or other credit accommodation and
demand immediate repayment of the obligation. (77)
Section 40. Requirement for Grant Of Loans or 0ther Credit Accommodations. - Before granting a
loan or other credit accommodation, a bank must ascertain that the debtor is capable of fulfilling his
commitments to the bank. Toward this end, a bank may demand from its credit applicants a
statement of their assets and liabilities and of their income and expenditures and such information
as may be prescribed by law or by rules and regulations of the Monetary Board to enable the bank
to properly evaluate the credit application which includes the corresponding financial statements
submitted for taxation purposes to the Bureau of Internal Revenue. Should such statements prove
to be false or incorrect in any material detail, the bank may terminate any loan or other credit
accommodation granted on the basis of said statements and shall have the right to demand
immediate repayment or liquidation of the obligation. In formulating rules and regulations under this
Section, the Monetary Board shall recognize the peculiar characteristics of micro financing, such
as cash flow-based lending to the basic sectors that are not covered by traditional collateral. (76a)
Section 41. Unsecured Loans or Other Credit Accommodations. - The Monetary Board is hereby
authorized to issue such regulations as it may deem necessary with respect to unsecured loans or
other credit accommodations that may be granted by banks. (n)
Section 42. Other Security Requirements for Bank Credits. - The Monetary Board may, by
regulation, prescribe further security requirements to which the various types of bank credits shall
be subject, and, in accordance with the authority granted to it in Section 106 of the New Central
Bank Act, the Board may by regulation, reduce the maximum ratios established in Sections 36 and
37 of this Act, or, in special cases, increase the maximum ratios established therein. (78)
Section 43. Authority to Prescribe Terms and Conditions of Loans and Other Credit
Accommodations. - The Monetary Board, may, similarly in accordance with the authority granted to
it in Section 106 of the New Central Bank Act, and taking into account the requirements of the
economy for the effective utilization of long-term funds, prescribe the maturities, as well as related
terms and conditions for various types of bank loans and other credit accommodations. Any
change by the Board in the maximum maturities, as well as related terms and conditions for
various types of bank loans and other credit accommodations. Any change by the Board in the
maximum maturities shall apply only to loans and other credit accommodations made after the
date of such action. The Monetary Board shall regulate the interest imposed on micro finance
borrowers by lending investors and similar lenders such as, but not limited to, the unconscionable
rates of interest collected on salary loans and similar credit accommodations. (78a)
Section 46. Development Assistance Incentives. - The Bangko Sentral shall provide incentives to
banks which, without government guarantee, extend loans to finance educational institutions
cooperatives, hospitals and other medical services, socialized or low-cost housing, local
government units and other activities with social content. (n)
Section 48. Renewal or Extension of Loans and Other Credit Accommodations. - The Monetary
Board may, by regulation, prescribe the conditions and limitations under which a bank may grant
extensions or renewals of its loans and other credit accommodations. (81)

Section 49. Provisions for Losses and Write-Offs. - All debts due to any bank on which interest is
past due and unpaid for such period as may be determined by the Monetary Board, unless the
same are welt-secured and in the process of collection shall be considered bad debts within the
meaning of this Section. The Monetary Board may fix, by regulation or by order in a specific case,
the amount of reserves for bad debts or doubtful accounts or other contingencies. Writing off of
loans, other credit accommodations, advances and other assets shall be subject to regulations
issued by the Monetary Board. (84a)
Section 55. Prohibited Transactions.
55.1. No director, officer, employee, or agent of any bank shall (a) Make false entries in any bank report or statement or participate in any fraudulent transaction,
thereby affecting the financial interest of, or causing damage to, the bank or any person;
(b) Without order of a court of competent jurisdiction, disclose to any unauthorized person any
information relative to the funds or properties in the custody of the bank belonging to private
individuals, corporations, or any other entity: Provided, That with respect to bank deposits, the
provisions of existing laws shall prevail;
(c) Accept gifts, fees, or commissions or any other form of remuneration in connection with the
approval of a loan or other credit accommodation from said bank;
(d) Overvalue or aid in overvaluing any security for the purpose of influencing in any way the
actions of the bank or any bank; or
(e) Outsource inherent banking functions.
55.2. No borrower of a bank shall (a) Fraudulently overvalue property offered as security for a loan or other credit accommodation
from the bank;
(b) Furnish false or make misrepresentation or suppression of material facts for the purpose of
obtaining, renewing, or increasing a loan or other credit accommodation or extending the period
thereof;
(c) Attempt to defraud the said bank in the event of a court action to recover a loan or other credit
accommodation; or
(d) Offer any director, officer, employee or agent of a bank any gift, fee, commission, or any other
form of compensation in order to influence such persons into approving a loan or other credit
accommodation application.
55.3 No examiner, officer or employee of the Bangko Sentral or of any department, bureau, office,
branch or agency of the Government that is assigned to supervise, examine, assist or render
technical assistance to any bank shall commit any of the acts enumerated in this Section or aid in
the commission of the same. (87-Aa)
The making of false reports or misrepresentation or suppression of material facts by personnel of
the Bangko Sental ng Pilipinas shall be subject to the administrative and criminal sanctions
provided under the New Central Bank Act.
55.4. Consistent with the provisions of Republic Act No. 1405, otherwise known as the Banks
Secrecy Law, no bank shall employ casual or non regular personnel or too lengthy probationary
personnel in the conduct of its business involving bank deposits.
REPUBLIC ACT No. 7653

Section 106. Required Security Against Bank Loans. - In order to promote liquidity and solvency of
the banking system, the Monetary Board may issue such regulations as it may deem necessary
with respect to the maximum permissible maturities of the loans and investments which the banks
may make, and the kind and amount of security to be required against the various types of credit
operations of the banks.
REPUBLIC ACT No. 3765
Section 2. Declaration of Policy. It is hereby declared to be the policy of the State to protect its
citizens from a lack of awareness of the true cost of credit to the user by assuring a full disclosure
of such cost with a view of preventing the uninformed use of credit to the detriment of the national
economy.
Section 4. Any creditor shall furnish to each person to whom credit is extended, prior to the
consummation of the transaction, a clear statement in writing setting forth, to the extent applicable
and in accordance with rules and regulations prescribed by the Board, the following information:
(1) the cash price or delivered price of the property or service to be acquired;
(2) the amounts, if any, to be credited as down payment and/or trade-in;
(3) the difference between the amounts set forth under clauses (1) and (2);
(4) the charges, individually itemized, which are paid or to be paid by such person in connection
with the transaction but which are not incident to the extension of credit;
(5) the total amount to be financed;
(6) the finance charge expressed in terms of pesos and centavos; and
(7) the percentage that the finance bears to the total amount to be financed expressed as a simple
annual rate on the outstanding unpaid balance of the obligation.
Section 6. (a) Any creditor who in connection with any credit transaction fails to disclose to any
person any information in violation of this Act or any regulation issued thereunder shall be liable to
such person in the amount of P100 or in an amount equal to twice the finance charged required by
such creditor in connection with such transaction, whichever is the greater, except that such liability
shall not exceed P2,000 on any credit transaction. Action to recover such penalty may be brought
by such person within one year from the date of the occurrence of the violation, in any court of
competent jurisdiction. In any action under this subsection in which any person is entitled to a
recovery, the creditor shall be liable for reasonable attorney's fees and court costs as determined
by the court.
(b) Except as specified in subsection (a) of this section, nothing contained in this Act or any
regulation contained in this Act or any regulation thereunder shall affect the validity or enforceability
of any contract or transactions.
(c) Any person who willfully violates any provision of this Act or any regulation issued thereunder
shall be fined by not less than P1,00 or more than P5,000 or imprisonment for not less than 6
months, nor more than one year or both.
(d) No punishment or penalty provided by this Act shall apply to the Philippine Government or any
agency or any political subdivision thereof.
(e) A final judgment hereafter rendered in any criminal proceeding under this Act to the effect that a
defendant has willfully violated this Act shall be prima facie evidence against such defendant in an
action or proceeding brought by any other party against such defendant under this Act as to all
matters respecting which said judgment would be an estoppel as between the parties thereto.

B. Terms and Conditions (Secs. 44 to 45 GBL; Arts. 1930, 1956 Civil Code)
1.
2.
3.
4.

Amortization
Pre-payment
Interest
Restructuring

REPUBLIC ACT NO. 8791

Section 44. Amortization on Loans and Other Credit Accommodations. - The amortization schedule
of bank loans and other credit accommodations shall be adapted to the nature of the operations to
be financed. In case of loans and other credit accommodations with maturities of more than five (5)
years, provisions must be made for periodic amortization payments, but such payments must be
made at least annually: Provided, however, That when the borrowed funds are to be used for
purposes which do not initially produce revenues adequate for regular amortization payments
therefrom, the bank may permit the initial amortization payment to be deferred until such time as
said revenues are sufficient for such purpose, but in no case shall the initial amortization date be
later than five (5) years from the date on which the loan or other credit accommodation is granted.
(79a) In case of loans and other credit accommodations to micro finance sectors, the schedule of
loan amortization shall take into consideration the projected cash flow of the borrower and adopt
this into the terms and conditions formulated by banks. (n)
Section 45. Prepayment of Loans and Other Credit Accommodations. - A borrower may at any time
prior to the agreed maturity date prepay, in whole or in part, the unpaid balance of any bank loan
and other credit accommodation, subject to such reasonable terms and conditions as may be
agreed upon between the bank and its borrower. (80a)
REPUBLIC ACT NO. 386
Article 1930. The agency shall remain in full force and effect even after the death of the principal, if
it has been constituted in the common interest of the latter and of the agent, or in the interest of a
third person who has accepted the stipulation in his favor. (
Article 1956. No interest shall be due unless it has been expressly stipulated in writing. (1755a)
C. Single Borrowers Limit (Secs.24, 35 GBL)
1. Ceilings
2. What is included in the ceilings
3. Sanctions
REPUBLIC ACT NO. 8791
Section 24. Equity Investments of a Universal Bank. - A universal bank may, subject to the
conditions stated in the succeeding paragraph, invest in the equities of allied and non-allied
enterprises as may be determined by the Monetary Board. Allied enterprises may either be
financial or non-financial. Except as the Monetary Board may otherwise prescribe:
24.1. The total investment in equities of allied and non-allied enterprises shall not exceed fifty
percent (50%) of the net worth of the bank; and
24.2. The equity investment in any one enterprise, whether allied or non-allied, shall not exceed
twenty-five percent (25%) of the net worth of the bank.
As used in this Act, "net worth" shall mean the total of the unimpaired paid-in capital including paidin surplus, retained earnings and undivided profit, net of valuation reserves and other adjustments
as may be required by the Bangko Sentral.

The acquisition of such equity or equities is subject to the prior approval of the Monetary Board
which shall promulgate appropriate guidelines to govern such investments.
Section 35. Limit on Loans, Credit Accommodations and Guarantees
35.1 Except as the Monetary Board may otherwise prescribe for reasons of national interest, the
total amount of loans, credit accommodations and guarantees as may be defined by the Monetary
Board that may be extended by a bank to any person, partnership, association, corporation or
other entity shall at no time exceed twenty percent (20%) of the net worth of such bank. The basis
for determining compliance with single borrower limit is the total credit commitment of the bank to
the borrower.
35.2. Unless the Monetary Board prescribes otherwise, the total amount of loans, credit
accommodations and guarantees prescribed in the preceding paragraph may be increased by an
additional ten percent (10%) of the net worth of such bank provided the additional liabilities of any
borrower are adequately secured by trust receipts, shipping documents, warehouse receipts or
other similar documents transferring or securing title covering readily marketable, non-perishable
goods which must be fully covered by insurance.
35.3 The above prescribed ceilings shall include (a) the direct liability of the maker or acceptor of
paper discounted with or sold to such bank and the liability of a general endorser, drawer or
guarantor who obtains a loan or other credit accommodation from or discounts paper with or sells
papers to such bank; (b) in the case of an individual who owns or controls a majority interest in a
corporation, partnership, association or any other entity, the liabilities of said entities to such bank;
(c) in the case of a corporation, all liabilities to such bank of all subsidiaries in which such
corporation owns or controls a majority interest; and (d) in the case of a partnership, association or
other entity, the liabilities of the members thereof to such bank.
35.4. Even if a parent corporation, partnership, association, entity or an individual who owns or
controls a majority interest in such entities has no liability to the bank, the Monetary Board may
prescribe the combination of the liabilities of subsidiary corporations or members of the
partnership, association, entity or such individual under certain circumstances, including but not
limited to any of the following situations: (a) the parent corporation, partnership, association, entity
or individual guarantees the repayment of the liabilities; (b) the liabilities were incurred for the
accommodation of the parent corporation or another subsidiary or of the partnership or association
or entity or such individual; or (c) the subsidiaries though separate entities operate merely as
departments or divisions of a single entity.
35.5. For purposes of this Section, loans, other credit accommodations and guarantees shall
exclude: (a) loans and other credit accommodations secured by obligations of the Bangko Sentral
or of the Philippine Government: (b) loans and other credit accommodations fully guaranteed by
the government as to the payment of principal and interest; (c) loans and other credit
accommodations covered by assignment of deposits maintained in the lending bank and held in
the Philippines; (d) loans, credit accommodations and acceptances under letters of credit to the
extent covered by margin deposits; and (e) other loans or credit accommodations which the
Monetary Board may from time to time, specify as non-risk items.
35.6. Loans and other credit accommodations, deposits maintained with, and usual guarantees by
a bank to any other bank or non-bank entity, whether locally or abroad, shall be subject to the limits
as herein prescribed.
35.7. Certain types of contingent accounts of borrowers may be included among those subject to
these prescribed limits as may be determined by the Monetary Board.
D. DOSRI Accounts (Sec.36 GBL; Sec.26 NCBA)1
REPUBLIC ACT NO. 8791
1

Coverage (persons/transactions); Ceilings (individual/aggregate); Requirements (procedural/reportorial);

Sanctions

Section 36. Restriction on Bank Exposure to Directors, Officers, Stockholders and Their Related
Interests. - No director or officer of any bank shall, directly or indirectly, for himself or as the
representative or agent of others, borrow from such bank nor shall he become a guarantor,
endorser or surety for loans from such bank to others, or in any manner be an obligor or incur any
contractual liability to the bank except with the written approval of the majority of all the directors of
the bank, excluding the director concerned: Provided, That such written approval shall not be
required for loans, other credit accommodations and advances granted to officers under a fringe
benefit plan approved by the Bangko Sentral. The required approval shall be entered upon the
records of the bank and a copy of such entry shall be transmitted forthwith to the appropriate
supervising and examining department of the Bangko Sentral. Dealings of a bank with any of its
directors, officers or stockholders and their related interests shall be upon terms not less favorable
to the bank than those offered to others. After due notice to the board of directors of the bank, the
office of any bank director or officer who violates the provisions of this Section may be declared
vacant and the director or officer shall be subject to the penal provisions of the New Central Bank
Act. The Monetary Board may regulate the amount of loans, credit accommodations and
guarantees that may be extended, directly or indirectly, by a bank to its directors, officers,
stockholders and their related interests, as well as investments of such bank in enterprises owned
or controlled by said directors, officers, stockholders and their related interests. However, the
outstanding loans, credit accommodations and guarantees which a bank may extend to each of its
stockholders, directors, or officers and their related interests, shall be limited to an amount
equivalent to their respective unencumbered deposits and book value of their paid-in capital
contribution in the bank: Provided, however, That loans, credit accommodations and guarantees
secured by assets considered as non-risk by the Monetary Board shall be excluded from such limit:
Provided, further, That loans, credit accommodations and advances to officers in the form of fringe
benefits granted in accordance with rules as may be prescribed by the Monetary Board shall not be
subject to the individual limit. The Monetary Board shall define the term "related interests." The limit
on loans, credit accommodations and guarantees prescribed herein shall not apply to loans, credit
accommodations and guarantees extended by a cooperative bank to its cooperative shareholders.
REPUBLIC ACT No. 7653
Section 26. Bank Deposits and Investments. - Any director, officer or stockholder who, together
with his related interest, contracts a loan or any form of financial accommodation from: (1) his
bank; or (2) from a bank (a) which is a subsidiary of a bank holding company of which both his
bank and the lending bank are subsidiaries or (b) in which a controlling proportion of the shares is
owned by the same interest that owns a controlling proportion of the shares of his bank, in excess
of five percent (5%) of the capital and surplus of the bank, or in the maximum amount permitted by
law, whichever is lower, shall be required by the lending bank to waive the secrecy of his deposits
of whatever nature in all banks in the Philippines. Any information obtained from an examination of
his deposits shall be held strictly confidential and may be used by the examiners only in connection
with their supervisory and examination responsibility or by the Bangko Sentral in an appropriate
legal action it has initiated involving the deposit account.

E. Collateral Security (Secs. 37, 38, 47, 52 GBL; Art. 2047 Civil Code; Rule 68 Rules of Court; Act
3135 as amended)
1. Unsecured loans
2. Joint and Solidary Signature (JSS)
3. Loans secured by chattels or intangible property
4. Loans secured by real estate mortgage
a. Limits
b. Mortgagee in good faith v. mortgagee in bad faith
c. Acquisition of property by way of satisfaction of claims
5. Foreclosure of REMs
a. Types of foreclosure

b. Right and period of redemption

i. Natural persons v. juridical persons
ii. How exercised
iii. Extension of redemption period
iv. Tolling of redemption period
v. Payment of CGT and DST
c. Redemption price

d. Possession
e. Injunction and bond
REPUBLIC ACT NO. 8791
Section 37. Loans and Other Credit Accommodations Against Real Estate. - Except as
Monetary Board may otherwise prescribe, loans and other credit accommodations against
estate shall not exceed seventy-five percent (75%) of the appraised value of the respective
estate security, plus sixty percent (60%) of the appraised value of the insured improvements,
such loans may be made to the owner of the real estate or to his assignees. (78a)

the
real
real
and

Section 38. Loans And Other Credit Accommodations on Security of Chattels and Intangible
Properties. - Except as the Monetary Board may otherwise prescribe, loans and other credit
accommodations on security of chattels and intangible properties such as, but not limited to,
patents, trademarks, trade names, and copyrights shall not exceed seventy-five percent (75%) of
the appraised value of the security, an such loans and other credit accommodation may be made
to the title-holder of the chattels and intangible properties or his assignees. (78a)
Section 47. Foreclosure of Real Estate Mortgage. - In the event of foreclosure, whether judicially or
extra-judicially, of any mortgage on real estate which is security for any loan or other credit
accommodation granted, the mortgagor or debtor whose real property has been sold for the full or
partial payment of his obligation shall have the right within one year after the sale of the real estate,
to redeem the property by paying the amount due under the mortgage deed, with interest thereon
at rate specified in the mortgage, and all the costs and expenses incurred by the bank or institution
from the sale and custody of said property less the income derived therefrom. However, the
purchaser at the auction sale concerned whether in a judicial or extra-judicial foreclosure shall
have the right to enter upon and take possession of such property immediately after the date of the
confirmation of the auction sale and administer the same in accordance with law. Any petition in
court to enjoin or restrain the conduct of foreclosure proceedings instituted pursuant to this
provision shall be given due course only upon the filing by the petitioner of a bond in an amount
fixed by the court conditioned that he will pay all the damages which the bank may suffer by the
enjoining or the restraint of the foreclosure proceeding. Notwithstanding Act 3135, juridical persons
whose property is being sold pursuant to an extrajudicial foreclosure, shall have the right to
redeem the property in accordance with this provision until, but not after, the registration of the
certificate of foreclosure sale with the applicable Register of Deeds which in no case shall be more
than three (3) months after foreclosure, whichever is earlier. Owners of property that has been sold
in a foreclosure sale prior to the effectivity of this Act shall retain their redemption rights until their
expiration.
Section 52. Acquisition of Real Estate by Way of Satisfaction of Claims. - Notwithstanding the
limitations of the preceding Section, a bank may acquire, hold or convey real property under the
following circumstances:
52.1. Such as shall be mortgaged to it in good faith by way of security for debts;

52.2. Such as shall be conveyed to it in satisfaction of debts previously contracted in the course of
its dealings, or
52.3. Such as it shall purchase at sales under judgments, decrees, mortgages, or trust deeds held
by it and such as it shall purchase to secure debts due it.
Any real property acquired or held under the circumstances enumerated in the above paragraph
shall be disposed of by the bank within a period of five (5) years or as may be prescribed by the
Monetary Board: Provided, however, That the bank may, after said period, continue to hold the
property for its own use, subject to the limitations of the preceding Section.
REPUBLIC ACT NO. 386
Article 2047. By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the
obligation of the principal debtor in case the latter should fail to do so.
If a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter 3,
Title I of this Book shall be observed. In such case the contract is called a suretyship. (1822a)
RULE 68
Foreclosure of Real Estate Mortgage
Section 1.
Complaint in action for foreclosure. In an action for the foreclosure of a mortgage
or other encumbrance upon real estate, the complaint shall set forth the date and due execution of
the mortgage; its assignments, if any; the names and residences of the mortgagor and the
mortgagee; a description of the mortgaged property; a statement of the date of the note or other
documentary evidence of the obligation secured by the mortgage, the amount claimed to be unpaid
thereon; and the names and residences of all persons having or claiming an interest in the property
subordinate in right to that of the holder of the mortgage, all of whom shall be made defendants in
the action. (1a)
Section 2.
Judgment on foreclosure for payment or sale. If upon the trial in such action the
court shall find the facts set forth in the complaint to be true, it shall ascertain the amount due to
the plaintiff upon the mortgage debt or obligation, including interest and other charges as approved
by the court, and costs, and shall render judgment for the sum so found due and order that the
same be paid to the court or to the judgment obligee within a period of not less than ninety (90)
days nor more than one hundred twenty (120) days from the entry of judgment, and that in default
of such payment the property shall be sold at public auction to satisfy the judgment. (2a)
Section 3.
Sale of mortgaged property; effect. When the defendant, after being directed to
do so as provided in the next preceding section, fails to pay the amount of the judgment within the
period specified therein, the court, upon motion, shall order the property to be sold in the manner
and under the provisions of Rule 39 and other regulations governing sales of real estate under
execution. Such sale shall not affect the rights of persons holding prior encumbrances upon the
property or a part thereof, and when confirmed by an order of the court, also upon motion, it shall
operate to divest the rights in the property of all the parties to the action and to vest their rights in
the purchaser, subject to such rights of redemption as may be allowed by law.
Upon the finality of the order of confirmation or upon the expiration of the period of redemption
when allowed by law, the purchaser at the auction sale or last redemptioner, if any, shall be entitled
to the possession of the property unless a third party is actually holding the same adversely to the
judgment obligor. The said purchaser or last redemptioner may secure a writ of possession, upon
motion, from the court which ordered the foreclosure. (3a)
Section 4.
Disposition of proceeds of sale. The amount realized from the foreclosure sale of
the mortgaged property shall, after deducting the costs of the sale, be paid to the person
foreclosing the mortgage, and when there shall be any balance or residue, after paying off the
mortgage debt due, the same shall be paid to junior encumbrancers in the order of their priority, to
be ascertained by the court, or if there be no such encumbrancers or there be a balance or residue

after payment to them, then to the mortgagor or his duly authorized agent, or to the person entitled
to it. (4a)
Section 5.
How sale to proceed in case the debt is not all due. If the debt for which the
mortgage or encumbrance was held is not all due as provided in the judgment as soon as a
sufficient portion of the property has been sold to pay the total amount and the costs due, the sale
shall terminate; and afterwards as often as more becomes due for principal or interest and other
valid charges, the court may, on motion, order more to be sold. But if the property cannot be sold in
portions without prejudice to the parties, the whole shall be ordered to be sold in the first instance,
and the entire debt and costs shall be paid, if the proceeds of the sale be sufficient therefor, there
being a rebate of interest where such rebate is proper. (5a)
Section 6.
Deficiency judgment. If upon the sale of any real property as provided in the next
preceding section there be a balance due to the plaintiff after applying the proceeds of the sale, the
court, upon motion, shall render judgment against the defendant for any such balance for which, by
the record of the case, he may be personally liable to the plaintiff, upon which execution may issue
immediately if the balance is all due at the time of the rendition of the judgment; otherwise; the
plaintiff shall be entitled to execution at such time as the balance remaining becomes due under
the terms of the original contract, which time shall be stated in the judgment. (6a)
Section 7.
Registration. A certified copy of the final order of the court confirming the sale
shall be registered in the registry of deeds. If no right of redemption exists, the certificate of title in
the name of the mortgagor shall be cancelled, and a new one issued in the name of the purchaser.
Where a right of redemption exists, the certificate of title in the name of the mortgagor shall not be
cancelled, but the certificate of sale and the order confirming the sale shall be registered and a
brief memorandum thereof made by the registrar of deeds upon the certificate of title. In the event
the property is redeemed, the deed of redemption shall be registered with the registry of deeds,
and a brief memorandum thereof shall be made by the registrar of deeds on said certificate of title.
If the property is not redeemed, the final deed of sale executed by the sheriff in favor of the
purchaser at the foreclosure sale shall be registered with the registry of deeds; whereupon the
certificate of title in the name of the mortgagor shall be cancelled and a new one issued in the
name of the purchaser. (n)
Section 8.
Applicability of other provisions. The provisions of sections 31, 32 and 34 of Rule
39 shall be applicable to the judicial foreclosure of real estate mortgages under this Rule insofar as
the former are not inconsistent with or may serve to supplement the provisions of the latter. (8a)
ACT NO. 3135
Section 1. When a sale is made under a special power inserted in or attached to any real-estate
mortgage hereafter made as security for the payment of money or the fulfillment of any other
obligation, the provisions of the following election shall govern as to the manner in which the sale
and redemption shall be effected, whether or not provision for the same is made in the power.
Sec. 2. Said sale cannot be made legally outside of the province in which the property sold is
situated; and in case the place within said province in which the sale is to be made is subject to
stipulation, such sale shall be made in said place or in the municipal building of the municipality in
which the property or part thereof is situated.
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 or city.
Sec. 4. The sale shall be made at public auction, between the hours or nine in the morning and
four in the afternoon; and shall be under the direction of the sheriff of the province, the justice or
auxiliary justice of the peace of the municipality in which such sale has to be made, or a notary

public of said municipality, who shall be entitled to collect a fee of five pesos each day of actual
work performed, in addition to his expenses.
Sec. 5. At any sale, the creditor, trustee, or other persons authorized to act for the creditor, may
participate in the bidding and purchase under the same conditions as any other bidder, unless the
contrary has been expressly provided in the mortgage or trust deed under which the sale is made.
Sec. 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore
referred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of said
debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust
under which the property is sold, may redeem the same at any time within the term of one year
from and after the date of the sale; and such redemption shall be governed by the provisions of
sections four hundred and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil
Procedure, in so far as these are not inconsistent with the provisions of this Act.
Sec. 7. In any sale made under the provisions of this Act, the purchaser may petition the Court of
First Instance of the province or place where the property or any part thereof is situated, to give
him possession thereof during the redemption period, furnishing bond in an amount equivalent to
the use of the property for a period of twelve months, to indemnify the debtor in case it be shown
that the sale was made without violating the mortgage or without complying with the requirements
of this Act. Such petition shall be made under oath and filed in form of an ex parte motion in the
registration or cadastral proceedings if the property is registered, or in special proceedings in the
case of property registered under the Mortgage Law or under section one hundred and ninety-four
of the Administrative Code, or of any other real property encumbered with a mortgage duly
registered in the office of any register of deeds in accordance with any existing law, and in each
case the clerk of the court shall, upon the filing of such petition, collect the fees specified in
paragraph eleven of section one hundred and fourteen of Act Numbered Four hundred and ninetysix, as amended by Act Numbered Twenty-eight hundred and sixty-six, and the court shall, upon
approval of the bond, order that a writ of possession issue, addressed to the sheriff of the province
in which the property is situated, who shall execute said order immediately.
Sec. 8. The debtor may, in the proceedings in which possession was requested, but not later than
thirty days after the purchaser was given possession, petition that the sale be set aside and the
writ of possession cancelled, specifying the damages suffered by him, because the mortgage was
not violated or the sale was not made in accordance with the provisions hereof, and the court shall
take cognizance of this petition in accordance with the summary procedure provided for in section
one hundred and twelve of Act Numbered Four hundred and ninety-six; and if it finds the complaint
of the debtor justified, it shall dispose in his favor of all or part of the bond furnished by the person
who obtained possession. Either of the parties may appeal from the order of the judge in
accordance with section fourteen of Act Numbered Four hundred and ninety-six; but the order of
possession shall continue in effect during the pendency of the appeal.
Sec. 9. When the property is redeemed after the purchaser has been given possession, the
redeemer shall be entitled to deduct from the price of redemption any rentals that said purchaser
may have collected in case the property or any part thereof was rented; if the purchaser occupied
the property as his own dwelling, it being town property, or used it gainfully, it being rural property,
the redeemer may deduct from the price the interest of one per centum per month provided for in
section four hundred and sixty-five of the Code of Civil Procedure.