‘Sinema eke ack go, ob nas z Eacraludicial Foreclosure of Mortgage Law "An att to regulate the sale of property under special powers insétted in ot annexed to real estate mortgages. ‘ActWNe, 3138 feDpréved March 6,.1524), a5 amended by Act No. 412 (1983), Sec. 6, RA 7353 (1882) , Sec. 18, RA 7906 (2098), and Sec, 47, RAB791 (2000). 1 What the purpose ofthe law? (Sec.4} ‘The Purpose of the law is to:regolate the miumner in which the extrajudicial foreclosure and redéniption of real estate mongages may be made, ‘2. Could a.creditor /reortgagee foreclose a mortgage extra-judicially even in the absence of a stipulation to that effect in the rnartgige deed? No, the ereditor/ morgage. cannot -untess the authority 10 foreclose, although not mentioned in the deed itsel, is attached ta the mortgage deed. The special power of attorney authorizing the extrajudicial foreclosure of the real property: must either be inserted into or attached to fie depo real cone morgegd (Ses SE Adie NRE NG. PEM: ‘0. Lawyer's Review June 30, 3 Registration of Mortgage; how effected, Refer to Section 1 Act 496 as amended by PID 1529 * The Mortgage Deed is filed together with Owner's Duplicace ‘Cenificate of Title with the RD, City’ Province where the land lies. * RID-eiters upon the original certificate of Titte and the Owaer's ‘Duplicate Certificate a memarandem of the purporcet the “mortgage deed, time of filing, file number of the deed, signing the ‘memorandum after the entry. * RD also notes down pion the mortgage deed the time of filing and. a reference to the: volume and page of the registration book where it is registered, A. What ls the purndse that the Owner: Certificate oF Tle must be submitted to, the RD for the registration of mortgage? How about in Yoreciosure sate, is It necessary for the Gwner’s Duplicate te be submitted to ‘RO for the annotation? i ‘The antiolation of the final Cerificate of Sale iw the Original Cenificare of ‘Tithe, even without the presentation of petiGoner’ duplicate, was valid. To ‘rule otherwise wowld result in a situation in-which a purchaser in & foreclosure sale can never consolidate his title to the propersy even after the fapse of the redemption period, betause Of the sheer refusal or failure ‘of the former Owner to submit to the fatice’s duplicate certificate of ttle, ‘The morgagee-purchaser would then be at the mercy of the mortgagor, if ‘the latter without just cause withholds such duplicate. Asuncion San Juan v. CA, GR-No..110055, Aug: 20, 2001 363 SCRA as? anieont (2): BA THN Thi Banks ext | APR peanet hom puesta amount ofa, eect5, Which should prevail, the unregistered buyer's rights.of ownership or the tagistered mortgage rights of a bani/fnancing institution? ‘The buyer's right of ownership, albeit, unregistered are superior to-the feqostered morgage rights of e financing institution; provided that the caniract of sake was executed ahead ofthe mortgage aygeement. Read: Dala Merced voGSI5 365 SCRA 1 G-is'a mortgage annotated ona vald tite valid or veld? ‘The rule is that a/mongnge annotated on a yoid title is, valid if the morigagee registered the mortgage in good faith. 7. Could a creditnr/morteaged foreclose a mortgage extra-judicially even In the absence of a stipulation to that effect In the mortgage deed? No) the cteditor’mongagee cannot uniess the: authority wo foreclose, although not mentioned in the deed itself, is attached to the mortgage deed. Tae special power of attorney authorizing. the extrajudicial foreclosvre.of the real property must either be inserted into or attached to the deed-of real estate mortgage (See. 1) 8. Where should the application for EJF of mortgage be fied? ‘With the Executive Judge through the Clerk of Court {who 38 also the Ext ‘Officio Sherif). Aster the receipt of the application, the COC shall: i. examine the same to ensure that the SPA authorizing the [EXE of the real property is either insested into or attached to the deed of real estate mortgage; {i ratthe the appltcasion among the Sheriffs, and ili, cause the. pasting and “or publication of the notice of sale (Secs. 1 10 4} 18. Where should the gale of the mortgaged real extate be conducted? (Sec:2) ‘The ale mist be made in dhe pxOvinde whete the property to be'sold is Ineated, Sale oliside ‘the: pecyince 4s illegal. In case the mortgage deed “specified a place in a municipality in the province where the sale would be ‘made, such sale shall be made in such place or; ifthe place of'sale in the municipality was 00t stipulated, im the monicipal buifding of the municipality in which the property Or part thereof is situated, 410, What happen to the forectosire-sae ifthe mortgagor is not the ownet ot the property foreciesed?, Foreclosure sale is void. Foreclosure sale though essentially » “forced sale”, is still sale in accordance with Art 1458, under which the seller is. obliged co transfer ownetship to the highest bidder who , in wm. is bed top the Bd prion» Cavite rveemment any, Lim 24 SCRASeid cigt os Ow Act sg8, apne 3 14. lnthera a notice requirement? (See.3) Yes, AR a rile; notiees OT Sale’ shall be posted tor not tess. cham 20 days in at least 3 public places in the city-or municipality where the property is situated. Ifthe property is worth more than P400, the notice of sale shall also be published once a week for 3 consecutive weeks ina newspaper of general circulation in the city ar municipality, Unless. ‘otherwise stipuladd by the ‘partes to the mortgage contract, the debtor/ mortgagor need not be personally served a copy’ of the notice of EIT (Sec4[) UM, Guidelines} 42 is there-an exception to the requirement of nevispapet publication ever’ if the mortgaged property is worth mare than P4007 Yes. For eal estate morgage ‘covering loans not exceeding 160,000, exclusive of interests due anc Unpaid, granted by rural banks.or Usnlt Banks, publication in a newspaper shall be dispensed with, it being ‘uRliciene Mat the notice of foreclosure are posted for a period of 6) days. immediately preceding the public aucuon in the mest conspicuous areas 4 the premises ofthe hil bark, asthe ease may be, and ar the r Hnangaly I, dl a ay public muulet, tfamy, where theiland is situated, (See. 8, RA 7333; See. 18 RA 7906; and Sec. 4[b)[I]. Guidelines} Foreclosure. proceedings of mortgage of delinquent accovints, as ‘Sétiied under RA 9SOT (Act to Establish a Sociatized and Low-Cost Housing Loan Restructuring and Condonation Program). shall be exempt from publication in newspapers of general circulation, subject only to the ‘posting of notice of the dale and place of auction sale for at least 20 days in at Teast three: conspicuous pablic places in the Gty.or municipality where the property is situated, ( Sec. 2, a Rule V, IRR of RA 9507) 48, How shuld the EsF sale be conducted? (see.4) ‘The:sale shail be made by public auction or bidding made through seated bids which mist be submitted to the Sherif who shall conduct the sale between the hours of 9 to.4 of the dae of the auction, ‘The property rmirigaged shall be awarded to the party submitting the highest bid-and, ra case of a tie, an open bidding shall be conducted between the highest bidders. Payment of the winning bid shall be made either in cash or in ‘manager's check, in Philippine currency, within $ days from notice (Sec. fa], Guidelines) “12, Could the creditor Be batted from participating in the bidding? ‘Yes, if so provided in the mortgage deed, 15, Who may redeem the foreclosed property? (Sec. 6) {a) the debsor, or {b) His sucoessor in interest (e.g. his heirs) sor () Atiy judicial eréditoe ox judgement creditor of the debtor or (@) Any person Baving a lien on the property. subsequent to the mortgage under which the propery is sol (c.g a junior mortgagee). Comment [5]: a Pros ett Bons actot Tiesexrrel bor tiechan crnoxet \con-qreteang rrerels ue ongeeac Pipgdae om Lancktoneoued in 60 ‘wraea ices ait] reve wn rsDisc Scum ti er Sik as Aecicka, 4 ‘16. Within witat period should the redemption of the foreclosed property be made? ‘The foreclosed property shall be tedeemed within | year from and after the date of sale (See,6}, The aforementioned date of sale has been construed by the SC 49: jen the date uf eexistrasion of the. shen ite Ol, fokeetosure sale. in the OMhied of Uo Ropivtht of Dh Konecened (Reves'y,. Neblefts, wtal. GR, No: L239), Now. 75, 196 However, under Section 47 of the General Ranking Law of 2000 ,where the mortgagor is-a juridical person whose property has been siarigaged in favor of a bank, quasijodicial bank or trust endiwy, the 1 year period of redemption is not available if the foreclosuee is done extrajudicially, tn such a case, the redemption period shall made until, but not after, the registration “of the certificate of foreclosure sale with the applicable Register of Deeds which 11 no case shall be more tham 3 months after the foreclosure, whichever 1s earlier The purchaser at the foreclosure sale ‘hall file with the Register of Deeds his swam statement attesting to the fact of the noo-redempoon; whereupon the Register-of Deeds shall tue a new certificate of titke in favor or the purchaser after the: owner's duplicate certificate has been previously delivered and cancelled. (I_and Registration Authority Circular No. 11-2000, dated August 17,2000) Foreclosure ie proper'whea the debtor’ are in default of che payment of their obligation. (Selegna Management v. United Coconut Planters Bi GR No, 165662, May-3,2006) ‘The purchaser ina forectostire sale may apply for a writ of possession suring the redemption perio by liking for that purpose an ex parte motion, under aah, in the ease of a property with torrens ttle. pon the filing of such. motion mation and the approval of the corresponding bond, the ‘court is expressly directed to isse the weil. ‘This Court has consistently held that the duty. of the tial court to grant-a wenit of possession is ministerial. Such writ issues ax @ mares of course: upon the filling of the proper_motion and the -approval of tbe Corresponding bond, No dissretion is left 10 the wal court, Any question regarding the regularity. and. validity of the sale, a3 well asthe consequent Gancellation of the writ, js to be determined in.a/subsequent proceeding at ‘ouilined in Section & of Act 3135, Such question ‘cannot be raised to: ‘Oppose the issuance -of dhe writ, since. the proceeding i ex parte, ThE secouise.1¢ available cvén before the expiration of the redemption period provided by law aad the Rules of Court, ‘The purchaser, who has: @ night co possession that extends after. tke expiration of the redeesption pesiod, beonmes the abtolute owner of the properly when no redemption is made, Hence, at any time following the Consolidation of ownership and the issuance of a new transfer certificate ‘of title im the ame of the purchaser, he or she is even more entitled to possession of the property. 1a such a.case, the bond required under Section 7 off Act 3135 is no longer necessary, since possession becomes an absolute right of the purchaser as the confirmed owner. (Sponses Samson w. Judge Mauricio M. Rivera, GR No, 154353, May 20,2004) ‘A party may petition for the setting aside of a foreclosure fale and for the Cancellation. of writ of possession in the same proceedings where the writESS, eiicir dienes ead 2 cof possessions. was requested, (Spouses Samson v. Judge Mauricio M. ‘Rivera, GR No. 154355, May 20, 2004), ts betion te foreclose rubject to preseription? No, The ‘right ‘of ‘action’ tw foreclose prescribes after ten (10) yeare according to Article 142 of the Civil Code, (Note: Sée. 46.0f Act 496Section 47 PD 1529)"No title to registered land in derogation t that of the registered owner shall be acquired by prescription or adverse possession) “The important effect of the registiation of mortgage is to bind third panies, it dots not go further as to make the action (0 foreclose itimprescrptibte, (Bubat, et, ws Besama, e¢ al, 95 Phil. 721) 46. ts the purchaser of foreclosed property automaticaly entitied to the oseession thereof during the redemption parlod? NO, He must petition the Regional Thal Court of the province or city where dhe property is situated to give him possession thereof duriog the redemption period, He must also pat up a bond equivatent in value to the use ifthe property for a period of 12 months ta indemnify the debtor in ase it is shown that the sale was made without complying with the requirements of Act No. 3133 or that there was no vielagion of the mortgage deed. (On the basis of Sec. 47, aupra, it would appear that the purchaser can immedinely enter and take possession and administer the mompaged. property after the date of the coalimusion of the auction sale within the redemption period. Bul a caveat must be emphasized that the same section provides with the qualification that it must be made in accordance swith law, Juriapreidence! ‘During the period of regemption the morgagor ix entitles to remain in posicision of the pioperty and (o eollect rents and profits therefom,’ ‘Under Sees. 7 and 9 oF Act 3135 it was also stated thal the purchaser if he $0 desire, may take over. with the panpur autharity from the exits, Which ‘nay be granted upon petition filed in the original registration proceedings and fummishing a bond in an amount equivalent to the use of the praperty. to indemnify the debtor in case the sale is set aside or in case the property is redeemed after the purchaser has been given pessession, As a matter of fact, even after the period of redemption has expired, possession of the property may be asked by the pufehaser upon motion for a writ of possession in the same action, IC is nol necessary oo institute a regular achon in onder to secure possession of the property.” In extra-judicial foreciosare of marwgage. once a bend is filed and approved under Section 7 of Act 3135, as amended by Act 4118, the court hay no discretion to refiyce the issuance of the writ of possession in favor of Pool 3 HBC Service Ladin mid Adan Cop. ¥ Kirn, 10 SCRE 81, Raina Cnn tal, 125 Phil 747 -¥ Geckangoo GR La 12735, Oct 38, 1959, $8 OG 21,ptI89, May 21,1962, 106Dred leds on tar acy 9. an emer 6 the purchaser in the poblic auction sale,or to #¢t it aside-on motion of the adverse party attacking the cours jurisdiction to issue the same.” It was also held that under the same section, the purchaser is entitied to the possession of the property during the redemption period. pravided that a proper motion has been filed, a Bond approved, and no ties person is involved." ‘In an extrajudicial foreclosuce sale of a mortgaged property. alter the fedemption period has expired, an ex parte motion for a writ of possession may be filed without the necessity. of filing a bond anent Sec.70.of Act 3135, as amended. To impose a bond upon the parchaser who is naw the ‘owner of the foreclosed property would be unreasonable if not illogleal tor i there are any sights to be protected, they are these of the purchaser who ‘ak owner has & superior right over said peoperty « agaiast all other persons, ‘Besides under Sec.35, Rule 39 of the Revised Rules of Court the purchaser ‘or his assignee is entiGed 0 possession if no redemption is made within, 12 ‘months afler the sale.” a7 scRulings: (a) Lazo vs, Republic Surety, 31 SCRA 320 (1970) — The Court ruled tbat the one-year period of redemption. provided under ‘Act No.3135 could be extended by the parties ax the same is only dinsctary, (>) Caltex Philippines vs_1AC, et al. G.R.No. 74730, August 25, 1984- Where a debt is secured by a mortgage and there: is default in payment in the part of the mortgagor, the mortgagee has a choice of one of two remedies but he cannot have both, ‘The mortgage may (ij. foreclose the morgage, or (ii) file an ‘erdinary action to collect the debt. When the mortgagee shooses the foreclosure of the morgage as a remedy, he enforces his len by the sale on forecksore of tbe mortgaged property. The proceeds of the tale will be applied to the salisfaction of the debi. With this remedy he bas a prior en oa the propery. In case of a deficiency. the morigagee has the right to claim for the deficiency, On the othet hand, if the -mongagee resorts to an acon to collect the debt, he thereby ‘waives his mortgage lien, He will have no more priority over the mortgaged property. If the judgment in the action to collect 4 favorable to him, and it becomes final and exeeutory, he can ‘enforce suid judgment by execution. He can even tevy execution On the dame mortgaged property, but he will not ‘bave priority over the latter‘and there may he other creditors who have betier lien on the properties of the morigagor. (a eee va. CA, ct al, G.R. No, L-41621, Febmary 18, @ We is.-well settled that there is a-right to:redeem inadequacy of the price is of no moment for the Gmelin sin le, eta, 94 Pa 2 *fhmaco Hiipion Séxingsdk Mosgags UA, L687, Apel H 19H6, 142 SCA 468 PUCTB «Rover, RIS, Feb 7, 1981, LY SCRA. 756 Comment (fw 20-81 ao ot Hee) Gare 3! Ceart DescBocusmow an err act 3186, aa/amances 7 nreasga that the“ debtor has always the chance to redeem and teacquire the property. In fact, the property may be sold for fess than is fair market ‘value precisely because the lesser the price, the easier for the owner to effect.a redemption. (i) ‘The fact that the foreclosure:salé took place on holiday does nos affect the validity thereaf, (i). Tha person has 9 moetpage credie over a property ‘which was sold in an auction sale, the only right le to him was w collect its morgage credit from the purchaser thereo! during. the immediately subjects the property on which it is constinuted. whoever its peasessor may be, to the fulfillment of the obligation for the security of which it was created. (iv) The only: condition the Law’ sequires in extrajudicial foreclosure is that the loan is alfcady due and demandabie and there was failure on the part of the morigagot i pay the mortgage debe, The law does not prohibit 2 monigagee from choosing which of the morhtages is bis favor to foreclose. It raise borne in mind that the power ta decide whether to foreclose ‘or not resides in the mortgagee. (@) Thaar Rural Bank vs, CA, et al, GR. 123817, December 17, 1999 — The Court ruled that an extension for the one-year petiod made’ by tbe Sheriff unilaterally and without the prior consent of the parties, particularly the mortgagee bank, could ‘nonetheless be binding on the morigagee bank where the later had actual and constructive notice of the extension of the redemption pering. and did not abject to such extension until after the mortgagor tried 10 exercise its redemption right after a. year from the sale of the momgaged property. (© Hioemta Atha, Retort Ine: vs. CA, et al. GIR. No. 128567, September 1, 2000: In distinguishing the petitioner's equity of cedemption fiom the sight of sedemption, the Court quoted extensively fom its decision in the case of Limpin, et al. vs. TAG, etal, GR. No. 70987, September 29, 1988; ‘The equity of redemption 15, t be-sure; different from-and should nol be confased with the right OF redemption. ‘The right OF redemption in relation to a mortgage — understood in the sense of a prerogative to re-aoquire mortgaged property after the registration of the foreclosure sate- exis only in the ‘ease of the extzasjadicial foreclosure of the mortgage. 10 wel tight is wongnarcdé in a judicill fonecionure except oaly where ‘the mortgagee it the PNB ova bank or banking ineityson Where a mongige 5 foreclosed exersjudieiilly, ACT 3135 ants the mortgagor the right of redemption wichin one (1) year form. the egisiration of the sheriff: cenificate of foreclosure sale.Where the foreclosure ix judicially elected, however, no: equivalent right of redemption exits, The law declares that a Judicial foreclosure sale , “when confirmed by an order of the ‘SouAt.. shall operate to divest the rights of all the parties to the aecion and wp vest dheir rights in the purchaser , subject fo such rights of redemption as may be’allowed By law.” Such rights exceptionally “ allowed by law” (fe. even after confirmation by an onder of the court} are those granted by the charter of the PNB (Acts 2747 and 2948) , and the General Banking Act(RA 337) [Sec. 47 of RA’ 8791, otherwise known as the GBL of 2001). These laws confer on the mortgagor, his successors in interest or any judgment creditor of the mortgagor, the right to: redeem: the property sold on foreclesure- after confirmation by the court of the foreclosure sale- which right may be exercised ‘within a period of one (1) year, counted from the dale of registration of the certificate of sale in the Registry of Property, But, f0 repeat, no such right of redemption exis ia cage of Judicial foreclosure of a mongage if the mongagee is not the PNB or a bank of banking insttution, In such a case, che foseelosure sale , ~ whew contieaed by an order of the cpork shall operave lw divest the rights cif all. heipatties &o alse ation angi to vest their rights in the pueclurser.” ‘Theme then exists oaly what is known as the equity of tedempeion, This is simply the night of the defendunt morigagor io extinguish. the morgane aid retain dtaership of the proparty by paying the secured debt within OO-day period vafter the jadgment becimes final stncotdance with Rule 68. or even alter Uie fsnéctonute sale bul prior to its confirmation.