PROCEDURE FOR EXTRAJUDICIAL FORECLOSURE OF BOTH REAL ESTATE

MORTGAGE UNDER ACT NO. 3135 AND CHATTEL MORTGAGE UNDER ACT
NO. 1508 (A.M. N0. 99-10-05-0; January 15, 2000) (ARC-DINREA)
Filing of application before the Executive Judge through the Clerk of Court,
whether under the direction of the sheriff or a notary public.
1.

Clerk of Court will examine whether the requirement of the law have been
complied with, that is, whether the notice of sale has been posted for not less
than 20 days in at least 3 public places of the municipality or city where the
property is situated, and if the same is worth more than P400.00, that such
notice has been published once a week for at least 3 consecutive weeks in a
newspaper of general circulation in the city or municipality
2.

3.

the certificate of sale must be approved by the Executive Judge

in extrajudicial foreclosure of real mortgages in different locations covering

one indebtedness, only one filing fee corresponding to such debt shall be
collected
4.

the Clerk of Court shall issue certificate of payment indicating the amount of
indebtedness, the filing fees collected, the mortgages sought to be foreclosed,
the description of the real estates and their respective locations
5.

6.

the notice of sale shall be published in a newspaper of general circulation

7.

the application shall be raffled among all sheriffs

after the redemption period has expired, the Clerk of Court shall archive the
records
8.

no auction sale shall be held unless there are at least 2 participating bidders,
otherwise the sale shall be postponed to another date. If on the new date there
shall not be at least 2 bidders, the sale shall then proceed. The names of the
bidders shall be reported to the Sheriff of the Notary Public, who conducted the
sale to the Clerk of Court before the issuance of the certificate of sale.
9.

STIPULATION OF UPSET PRCIE VOID OR TIPO

A stipulation of upset price, or the minimum price at which the property shall be
sold to become operative in the event of a foreclosure sale at public auction, is null
and void.
RIGHT OF MORTGAGEE TO RECOVER DEFICIENCY
Mortgagee is entitled to recover deficiency.
If the deficiency is embodied in a judgment, it is referred to as deficiency
judgment.
3) Action for recovery of deficiency may be filed even during redemption period.
4) Action to recover prescribes after 10 years from the time the right of action
accrues.
1)
2)

Additional Notes in Foreclosure of Mortgage with Recent Rules

EFFECT OF INADEQUACY OF PRICE IN FORECLOSURE SALE
1.

Where there is right to redeem

GR: Inadequacy of price is immaterial because the judgment debtor may
redeem the property
Exception: the price is so inadequate as to shock the conscience of the
court taking into consideration the peculiar circumstances

Property may be sold for less than its fair market value upon the theory that
the lesser the price the easier for the owner to redeem
2.

The value of the mortgaged property has no bearing on the bid price at the
public auction, provided that the public auction was regularly and honestly
conducted
3.

Note: If the judgment obligor redeems he must make the same payments as are
required to effect a redemption by a redemptioner, whereupon, no further
redemption shall be allowed and he is restored to his estate. The person to whom
the redemption payment is made must execute and deliver to him a certificate of
redemption acknowledged before a notary public or other officer authorized to take
acknowledgments of conveyances of real property. Such certificate must be filed
and recorded in the registry of deeds of the place in which the property is situated
and the registrar of deeds must note the record thereof on the margin of the record
of the certificate of sale. The payments mentioned in this and the last preceding
sections may be made to the purchaser or redemptioner, or for him to the officer
who made the sale. [Section 29, Rule 39 of ROC]
WAIVER OF SECURITY BY CREDITOR
Mortgagee may waive right to foreclose his mortgage and maintain a
personal action for recovery of the indebtedness. There is no statutory provision in
our jurisdiction prohibiting a personal action to recover a sum of money even
though a mortgage has been given as security for the payment of the same. (Hijos
de I. de la Rama vs. Sajo, 45 Phil. 703 [1924]; Solomon and Lachica vs. Dantes,
63 Phil. 522 [1937]).
1.

Mortgagee cannot have both remedies. He has only one cause of action, i. e.,
nonpayment of the mortgage debt; hence, he cannot split up his cause of action by
filing a complaint for payment of the debt and another complaint for foreclosure.
(Caltex Phils. Vs. Intermediate Appellate Court, 176 SRCA 741 [1989]).
2.

INDEPENDENT AND MUTUALLY EXCLUSIVE REMEDIES IN CASE OF DEATH

OF DEBTOR
To waive the mortgage and claim the entire debt from the estate of the
mortgagor as an ordinary claim
1.

To foreclose the mortgage judicially and prove any deficiency as an ordinary

claim; and
2.

To rely on the mortgage exclusively, foreclosing the same at any time before
it is barred by prescription without right to file a claim for any deficiency
3.

 The 3rd option includes extrajudicial foreclosure which bars any

subsequent deficiency claim against the estate of the deceased.
MEANING OF REDEMPTION
REDEMPTION
It is a transaction by which the mortgagor reacquires the property which may have
passed under the mortgage or divests the property of the lien which the mortgage
may have created1.
KINDS OF REDEMPTION
Equity of redemption: Right of the mortgagor to redeem the mortgaged
property after his default in the performance of the conditions of the mortgage but
before the sale of the mortgaged property or confirmation of sale; applies to
judicial foreclosure of real mortgage and chattel mortgage foreclosure
a)

NOTE: redemption of the banking institutions is allowed within 1 year from

confirmation of sale
Right of redemption: Right of the mortgagor to redeem the property within a
certain period after it was sold for the satisfaction of the debt. applies only to
extrajudicial foreclosure of real mortgage
b)

NOTE: the right of redemption, as long as within the period prescribed, may
be exercised irrespective of whether or not the mortgagee has subsequently
conveyed the property to some other party (Sta. Ignacia Rural Bank,Inc
v. CA, 230 SCRA 513 [1994])
PERIOD OF REDEMPTION
1.

extra-judicial (Act No. 3135)

natural person 1 year from registration of the certificate of sale with
Registry of Deeds
a.

b.

juridical person same rule as natural person

juridical person (mortgagee is bank) 3 months after foreclosure or

before registration of certificate of foreclosure whichever is earlier (Sec.
117 of General Banking Law)
c.

2.

Judicial before confirmation of the sale by the court

NOTE: Allowing redemption after the lapse of the statutory period when the
buyer at the foreclosure sale does not object but even consents to the
redemption, will uphold the policy of the law which is to aid rather than
defeat the right of redemption (Ramirez v. CA, 219 SCRA 598 [1993])
AMOUNT PAYABLE
Mortgagee is not a bank (Act No. 3135 in relation to Sec. 28, Rule 39 of
Rules of Court)
1.

1 MEDIDA v CA: The rule up to now is that the right of a purchaser at a foreclosure sale is merely inchoate until after the period of
redemption has expired without the right being exercised. The title to land sold under mortgage foreclosure remains, in the
mortgagor or his grantee until the expiration of the redemption period and conveyance by the master's deed.

Purchase price of the property

1% interest per month on the purchase price
taxes paid and amount of purchasers prior lien, if any, with the same
rate of interest computed from the date of registration of sale, up to the
time of redemption
a.
b.
c.

2.

Mortgagee is a bank (GBL 2000)

a. Amount due under the mortgage deed
b. Interest
c. Cost and expenses

NOTE: Redemption price in this case is reduced by the income received from the
property
PERSONS ENTITLED TO EXERCISE RIGHT OF REDEMPTION
1.
2.
3.

Mortgagor or one in privity of title with mortgage

Successor-in-interest
Under the Rules of Court
a.
The judgment obligor; or his successor in interest in the whole
or any part of the property;
b.
A creditor having a lien by virtue of an attachment, judgment or
mortgage on the property sold, or on some part thereof, subsequent
to the lien under which the property was sold. Such redeeming
creditor is termed a redemptioner. [Section 27, Rule 39]

RIGHTS AND OBLIGATIONS OF MORTGAGEE IN POSSESSION

Similar to those of an antichresis creditor which is to retain such
possession until the indebtedness is satisfied and the property is redeemed.
b.
Without right to reimbursement for useful expenses.
VENDEES RIGHT TO POSSESSION OF MORTGAGED PROPERTY SOLD
WRIT OF POSSESSION/INDEPENDENT ACTION
a.

a. Contingent Before the expiration date of the redemption period, vendees

right of possession is contingent upon the failure of the mortgagor to redeem

Before lapse of redemption period, in cases of extra-judicial
foreclosure of REM, a purchaser may take possession upon filing of an
ex parte application and approval of bond.
Such duty of trial court to grant the writ of possession is ministerial
upon filing of bond.
b. Final After the redemption period is terminated, the right to redeem is
barred, and vendees right of possession is final.
After lapse of redemption period, with greater reason could such writ
of possession be issued by filing a petition for issuance of the writ.
REMEDY OF MORTGAGOR
The only remedy of the mortgagor is to question the validity of the sale by a
petition to set aside the sale and to cancel the writ of possession (summary
procedure).

WHERE MORTGAGED PROPERTY CLAIMED BY A THIRD PERSON

Claimants with interest adverse to mortgagor The possession of the

property sold may be given to the purchaser by the sheriff after the period of
redemption had expired, unless a third person is actually holding the
property adversely to the mortgagor or judgment debtor in which case an
ordinary action is necessary to recover possession from such third person.
b.
Successor-in-interest of mortgagor The purchaser is entitled to the
possession of the property bought and cannot be excluded therefrom by one
who merely claims tot be a successor-in-interest of the mortgagor and
whose possession is, therefore, not adverse to the mortgagor unless it is
adjudged that the alleged successor has a better right to the prooerty than
the purchaser.
c.
Lessee of agricultural land The agricultural lessees pre-emptive
right to buy the land he cultivates and his right to redeem the land if sold to
a third person without his knowledge, is superior to the mortgagee of land.
Remedy of mortgagee is against the mortgagor-landowner.
d.
Buyer of condominium unit Even with a valid mortgage on the lot,
the seller is still bound to redeemed said mortgage.
a.