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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. (Act. No. 3135)

1. Paguyo vs. Gatbunton


Spouses Danilo Paguyo, Sr. and Adoracion Paguyo, by way of security for a loan of P20,000.00 which they obtained from
Jeanlyns Lending Investor, executed in favor of the latter a Deed of Real Estate Mortgag over their residential property
located in Mariveles, Bataan.
An application for the extrajudicial foreclosure of the aforesaid mortgage pursuant to Act 3135, as amended, was filed
with the Regional Trial Court, Branch 4, Balanga, Bataan by the spouses Celso Garcia and Jenelita Garcia, owners and
operators of Jeanlyns Lending Investor, it being alleged thereunder that the Paguyo spouses defaulted in the payment of
their loan obligation and the interests due thereon.Thereafter, a Notice of Sheriffs Sale was issued by the respondent,
therein setting the public auction sale of the mortgaged realty.
Complainant Adoracion Paguyo claimed that the respondent sheriff has no authority to extrajudicially foreclose the
mortgage because no special power of attorney is attached to or incorporated in the Deed of Real Estate Mortgage
authorizing the extrajudicial foreclosure of the mortgage pursuant to Act 3135, as amended.
HELD:
Proceedings for the extrajudicial foreclosure of real estate mortgage are governed by Act 3135, as amended, entitled An
Act To Regulate The Sale of Property Under Special Powers Inserted In or Annexed to Real Estate Mortgages. Under
Section 1 of the Act, extrajudicial foreclosure sales are proper only when so provided under a special power inserted in or
attached to the mortgage contract.
While the Deed of Real Estate Mortgage in this case contains no special power authorizing the Garcia spouses as
mortgagees to extrajudicially foreclose the mortgage in case the Paguyos defaulted in their loan obligation, nonetheless,
the respondent sheriff cannot be held administratively liable for proceeding with the extrajudicial foreclosure of the
mortgage in question.
Concededly, it is provided for in Administrative Order No. 3 series of 1984 (re: Procedure in Extrajudicial Foreclosure of
Mortgage) that it is the sheriffs duty to examine if the application for extrajudicial foreclosure of real estate mortgage has
complied with the requirements under Section 4 of Act 3135, as amended. However, amendments had already been
introduced to Administrative Order No. 3 by making it the specific duty of the Clerk of Court to examine applications for
extrajudicial foreclosure of mortgages. The very recent amendment is now provided for in Circular No. 7-200213 issued
on January 22, 2002 and which became effective on April 22, 2002. Sections 1 and 2(a) of said Circular specifically state
that:
Sec. 1. All applications for the extrajudicial foreclosure of mortgage whether under the direction of the Sheriff or
a notary public pursuant to Act No. 3135, as amended, and Act No. 1508, as amended shall be filed with the
Executive Judge, through the Clerk of Court, who is also the Ex-Officio Sheriff. (A.M. No. 99-10-05-0, as
amended, March 1, 2001).
Sec. 2. Upon receipt of the application, the Clerk of Court shall:
a. Examine the same to insure that the special power of attorney authorizing the extrajudicial
foreclosure of the real property is either inserted into or attached to the deed of real estate
mortgage. (Act No. 3135, Sec. 1, as amended)
Cases on Extrajudicial Foreclosure of Real Estate Mortgage

A. MARONILLA (2014)

We note that in this case, the application for extrajudicial foreclosure was filed on February 11, 2003, obviously after the
amendment of Administrative Order No. 3. Hence, the duty to examine said application to determine whether the deed of
mortgage contains or incorporates a special power authorizing the spouses Garcia to extrajudicially foreclose the
mortgage in the event of nonpayment of the loan by the Paguyos devolved upon the Clerk of Court, not on the respondent

2. Heirs of Zoilo Espiritu vs. Landrito


Spouses Landrito obtained a loan from the Spouses Espiritu. To secure the loan, the Spouses Landrito executed a real
estate mortgage over a five hundred forty (540) square meter lot located in Alabang, Muntinlupa in favor of the Spouses
Espiritu.
After three months, when the debt became due and demandable, the Spouses Landrito were unable to pay the principal,
and had not been able to make any interest payments other than the amount initially deducted from the proceeds of the
loan. The loan agreement was extended through an Amendment of Real Estate Mortgage. The loan was restructured in
such a way that the unpaid interest became part of the principal. The new loan agreement adopted all other terms and
conditions contained in first agreement.
Due to the continued inability of the Spouses Landritos to settle their obligations with the Spouses Espiritu, the loan
agreement was renewed three more times. The debt remained unpaid. As a consequence, the Spouses Espiritu foreclosed
the mortgaged property. During the auction sale, the property was sold to the Spouses Espiritu as the lone bidder.
The Spouses Landrito failed to redeem the subject property although they alleged that they negotiated for the redemption
of the property. While the negotiated price for the land started at P1,595,392.79, it was allegedly increased by the Spouses
Espiritu from time to time. They also alleged that the Spouses Espiritu increased the amount demanded to P2.5 Million.
However, upon inquiry, they found out that on the Spouses Espiritu had already executed an Affidavit of Consolidation of
Ownership and registered the mortgaged property in their name, and that the Register of Deeds of Makati had already
issued a Transfer Certificate of Title in the name of the Spouses Espiritu.
The Spouses Landrito, represented by their son Zoilo Landrito, filed an action for annulment or reconveyance of title, with
damages against the Spouses Espiritu before Branch 146 of the Regional Trial Court of Makati.
HELD:
The last issue raised by the petitioners is whether or not Zoilo Landrito was authorized to file the action for reconveyance
filed before the trial court or even to file the appeal from the judgment of the trial court, by virtue of the Special Power of
Attorney. They further noted that the trial court and the Court of Appeals failed to rule on this issue The Special Power of
Attorney was executed by Maximo Landrito, Jr., with the conformity of Paz Landrito, in connection with the mortgaged
property. It authorized Zoilo Landrito:
2. To make, sign, execute and deliver corresponding pertinent contracts, documents, agreements and other
writings of whatever nature or kind and to sue or file legal action in any court of the Philippines, to collect, ask
demands, encash checks, and recover any and all sum of monies, proceeds, interest and other due accruing,
owning, payable or belonging to me as such owner of the afore-mentioned property.
Zoilo Landritos authority to file the case is clearly set forth in the Special Power of Attorney. Furthermore, the records of
the case unequivocally show that Zoilo Landrito filed the reconveyance case with the full authority of his mother, Paz
Landrito, who attended the hearings of the case, filed in her behalf, without making any protest. She even testified in the
same case. From the acts of Paz Landrito, there is no doubt that she had authorized her son to file the action for
reconveyance, in her behalf, before the trial court.

Cases on Extrajudicial Foreclosure of Real Estate Mortgage

A. MARONILLA (2014)

3. Development Bank of the Philippines vs. Ruben Go and Angelita Go


Private respondents entered into a contract of loan with petitioner DBP. The contract was evidenced by two (2)
promissory notes; such promissory notes were secured by a mortgage contract over both the real and personal properties
of private respondents.
A provision of the contract required all mortgagors to insure all real and personal properties mortgaged with the DBP Pool
of Accredited Insurance Companies. In this case, private respondents were made to insure their real and personal
properties with the DBP Pool of Accredited Insurance Companies.
DBP extra-judicially foreclosed on (sic) the mortgaged properties of private respondents, claiming that private
respondents had defaulted on their loan contract and the Sheriff sold private respondents mortgaged properties at [a]
public auction sale to DBP, the highest bidder.
Private respondents commenced suit to nullify the extrajudicial foreclosure and sale at public auction of private
respondents mortgaged properties.
The RTC rendered its Decision in favor of the plaintiff spouses Go as against defendant DBP.
Petitioner prayed that said the dispositive portion be amended to read as follows:
6. The plaintiffs-appellees are hereby ordered to pay defendant-appellant DBP the P494,000.00 principal amount
of their loan with 18% interest per annum from the date the loan was granted up to full payment, (plus 8% per
annum penalty charge as provided in paragraph 2, supra,) and the total amount of insurance premiums and other
charges (as provided in paragraph 3, supra,) less payments already made, within ninety (90) days from the
finality of this decision, otherwise, the defendant-appellant DBP shall be entitled to a writ of execution to
finally judicially foreclose the mortgaged properties and sell the same at public auction to satisfy the loan.
HELD:
As to the petitioners prayer seeking to amend the dispositive portion to include entitlement to a writ of execution to
judicially foreclose the mortgaged properties, we find no basis to grant the same.
The mortgage contract states that petitioner may resort to either judicial or extrajudicial foreclosure in case of default.
Petitioner opted for extrajudicial foreclosure. However, both the trial court and the CA declared the extrajudicial
foreclosure void for being premature. For all intents and purposes, there has been no foreclosure. Therefore, this Court, or
any other court for that matter, cannot issue a writ of execution to judicially foreclose the property.
If and when private respondents default on their obligation subject of this decision, then petitioner, once again, shall have
the option to resort to either judicial or extrajudicial foreclosure. Should it opt to judicially foreclose the mortgage, it
should follow the procedure in Rule 68 of the Rules of Court. We cannot allow the petitioner to resort to short-cuts in the
procedure for judicial foreclosure even in the guise of avoiding multiplicity of suits through the mere expediency of
amending a duly-promulgated decision of the appellate court.

Cases on Extrajudicial Foreclosure of Real Estate Mortgage

A. MARONILLA (2014)

4. Viola vs. Equitable PCI Bank, Inc.


Via a contract denominated as CREDIT LINE AND REAL ESTATE MORTGAGE AGREEMENT FOR PROPERTY
LINE (Credit Line Agreement), Leo-Mers Commercial, Inc., as the Client, and its officers spouses Leopoldo and
Mercedita Viola (petitioners) obtained a loan through a credit line facility from the Philippine Commercial International
Bank (PCI Bank), which was later merged with Equitable Bank and became known as Equitable PCI Bank, Inc.
(respondent).
The Credit Line Agreement stipulated that the loan would bear interest at the prevailing PCIBank lending rate per
annum on the principal obligation and a penalty fee of three percent (3%) per month on the outstanding amount.
To secure the payment of the loan, petitioners executed a Real Estate Mortgage in favor of PCIBank over their two
parcels of land.
Petitioners availed of the full amount of the loan. Subsequently, they made partial payments. By respondents claim,
petitioner had made no further payments and despite demand, they failed to pay their outstanding obligation.
Respondent thus extrajudicially foreclosed the mortgage before the Office of the Clerk of Court & Ex-Officio Provincial
Sheriff of the Regional Trial Court (RTC) of Marikina City.
More than five months later or on October 8, 2003, petitioners filed a complaint for annulment of foreclosure sale,
accounting and damages before the Marikina RTC that, among others, the parties never agreed and stipulated in the real
estate mortgage contract that the 15% interest per annum on the principal loan and the 3% penalty fee per month on the
outstanding amount would be covered or secured by the mortgage;
HELD:
A mortgage must sufficiently describe the debt sought to be secured, which description must not be such as to mislead or
deceive, and an obligation is not secured by a mortgage unless it comes fairly within the terms of the mortgage.
In the case at bar, the parties executed two separate documents on March 31, 1997 the Credit Line Agreement granting
the Client a loan through a credit facility, and the Real Estate Mortgage contract securing the payment thereof.
Undisputedly, both contracts were prepared by respondent and written in fine print, single space.
The provision of the mortgage contract does not specifically mention that, aside from the principal loan obligation, it also
secures the payment of a penalty fee of three percent (3%) per month of the outstanding amount to be computed from the
day deficiency is incurred up to the date of full payment thereon, which penalty as the above-quoted portion of the Credit
Line Agreement expressly stipulates.
Since an action to foreclose must be limited to the amount mentioned in the mortgage and the penalty fee of 3% per
month of the outstanding obligation is not mentioned in the mortgage, it must be excluded from the computation of the
amount secured by the mortgage.
The ruling of the Court of Appeals in its assailed Decision that the phrase including the interest and bank charges in
the mortgage contract refers to the penalty charges stipulated in the Credit Line Agreement is unavailing.
Respondents contention that the absence in the mortgage contract of a stipulation securing the payment of the 3% penalty
fee per month on the outstanding amount is of no consequence, the deed of mortgage being merely an accessory
contract that must take its bearings from the principal Credit Line Agreement, fails. Such absence is significant as it
creates an ambiguity between the two contracts, which ambiguity must be resolved in favor of petitioners and against
respondent who drafted the contracts. Again, as stressed by the Court in Philippine Bank of Communications:
There is also sufficient authority to declare that any ambiguity in a contract whose terms are susceptible of
different interpretations must be read against the party who drafted it.
Cases on Extrajudicial Foreclosure of Real Estate Mortgage

A. MARONILLA (2014)

A mortgage and a note secured by it are deemed parts of one transaction and are construed together, thus, an
ambiguity is created when the notes provide for the payment of a penalty but the mortgage contract does
not. Construing the ambiguity against the petitioner, it follows that no penalty was intended to be covered by
the mortgage. The mortgage contract consisted of three pages with no less than seventeen conditions in fine
print; it included provisions for interest and attorneys fees similar to those in the promissory notes; and it even
provided for the payment of taxes and insurance charges. Plainly, the petitioner can be as specific as it wants to
be, yet it simply did not specify nor even allude to, that the penalty in the promissory notes would be secured by
the mortgage. This can then only be interpreted to mean that the petitioner had no design of including the penalty
in the amount secured.

5. K-Phil Inc. vs. Metropolitan Bank and Trust Company


Respondent Metropolitan Bank & Trust Company (Metrobank) extended to petitioner K-Phil., Inc. (K-Phil) various loans
and credit accommodations. These loans were secured by a mortgage over two lots owned by petitioner Network
Development Holding Corporation (Network) and occupied by K-Phil. In addition, K-Phil also executed a deed of chattel
mortgage over its machineries and equipment.
Because of petitioners alleged violation of the terms and conditions of the loans, Metrobank filed a petition for
extrajudicial foreclosure of real estate and chattel mortgage with the Office of the Clerk of Court and ex-officio sheriff
(respondent Regalado E. Eusebio) of the Regional Trial Cour respondent Metropolitan Bank & Trust Company
(Metrobank) extended to petitioner K-Phil., Inc. (K-Phil) various loans and credit accommodations. These loans were
secured by a mortgage over two lots owned by petitioner Network Development Holding Corporation (Network) and
occupied by K-Phil. In addition, K-Phil also executed a deed of chattel mortgage over its machineries and equipment.
Because of petitioners alleged violation of the terms and conditions of the loans, Metrobank filed a petition for
extrajudicial foreclosure of real estate and chattel mortgage with the Office of the Clerk of Court and ex-officio sheriff
(respondent Regalado E. Eusebio) of the Regional Trial Court (RTC) of Imus, Cavite.
Petitioners filed a complaint for breach of contract and damages with application for a writ of preliminary injunction
and/or temporary restraining order (TRO). They claimed that the foreclosure of mortgages was premature and in
contravention of a restructuring agreement of the loans and obligations of K-Phil. In addition, the petition for extrajudicial
foreclosure was defective because it indicated the wrong amount.
HELD:
As for the amount of indebtedness, Metrobank alleged the amount of P159,026,257.49 in its petition; it was only in the
course of the proceedings that it agreed to the amount of P143,335,891. Consequently, the notice (which was based on the
petition) also stated P159,026,257.49 as the amount of indebtedness.
It is a well-settled rule that statutory provisions governing publication of notice of mortgage foreclosure sales must be
strictly complied with and that even slight deviations therefrom will invalidate the notice.23[23] The reason was explained
in Olizon v. CA:
The object of a notice of sale is to inform the public of the nature and condition of the property to be sold, and of
the time, place and terms of the sale. Notices are given for the purpose of securing bidders and to prevent a
sacrifice of the property. If these objects are attained, immaterial errors and mistakes will not affect the
sufficiency of the notice; but if mistakes or omissions occur in the notices of sale, which are calculated to deter or
mislead bidders, to depreciate the value of the property, or to prevent it from bringing a fair price, such mistakes
or omissions will be fatal to the validity of the notice, and also to the sale made pursuant thereto.
The validity of a notice of sale is not affected by immaterial errors; only substantial errors will invalidate it. Unless it was
calculated to deter or mislead bidders, to depreciate the value of the property or to prevent it from bringing a fair price, the
discrepancy between the amount of the obligation as reflected in the notice of sale and the amount actually due and
collected during the bidding does not constitute a substantial error that should invalidate the notice.
Cases on Extrajudicial Foreclosure of Real Estate Mortgage

A. MARONILLA (2014)

While there may be a discrepancy in the amount of indebtedness stated in the notice and that actually owed by petitioners,
such discrepancy tends to appreciate, rather than depreciate, the value of the mortgaged properties. It cannot be reasonably
considered to have prevented the estimation of a fair price.
Therefore, the CAs order for the sheriff to issue, publish and serve a new notice of extrajudicial sale correcting the
inaccuracies and inadequacies of the prior notice was sufficient to remedy the discrepancies.

6. Solid Builders, Inc. vs. China Banking Corporation


China Banking Corporation (CBC) granted several loans to Solid Builders, Inc. (SBI). To secure the loans, Medina Foods
Industries, Inc. (MFII) executed in CBCs favor several surety agreements and contracts of real estate mortgage over
parcels of land in the Loyola Grand Villas in Quezon City and New Cubao Central in Cainta, Rizal.
Subsequently, SBI proposed to CBC a scheme through which SBI would sell the mortgaged properties and share the
proceeds with CBC on a 50-50 basis until such time that the whole obligation would be fully paid. SBI also proposed that
there be partial releases of the certificates of title of the mortgaged properties without the burden of updating interests on
all loans.
In a letter addressed to CBC, SBI requested the restructuring of its loans, a reduction of interests and penalties and the
implementation of a dacion en pago of the New Cubao Central property.
In response, CBC sent SBI a letter stating that the loans had been completely restructured. On the aspect of interests and
charges, CBC suggested the updating of the obligation to avoid paying interests and charges.
This was followed by another communication from CBC to SBI reiterating, among others, that the loan has been
restructured effective upon issuance by SBI of promissory notes in favor of CBC.
Subsequently, in a letter, CBC demanded SBI to settle its outstanding account within ten days from receipt thereof.
Claiming that the interests, penalties and charges imposed by CBC were iniquitous and unconscionable and to enjoin CBC
from initiating foreclosure proceedings, SBI and MFII filed a Complaint To Compel Execution of Contract and for
Performance and Damages, With Prayer for Writ of Preliminary Injunction and Ex-Parte Temporary Restraining Order
in the Regional Trial Court (RTC) of Pasig City.
In its Answer and Opposition to the issuance of the writ of preliminary injunction, CBC alleged that to implement the
agreed restructuring of the loan, SBI executed ten promissory notes stipulating that the interest rate shall be at 18.5% per
annum. For its part, MFII executed third party real estate mortgage over its properties in favor of CBC to secure the
payment of SBIs restructured loan. As SBI was delinquent in the payment of the principal as well as the interest thereon,
CBC demanded settlement of SBIs account.
HELD:
As debtor-mortgagors, however, SBI and MFII do not have a right to prevent the creditor-mortgagee CBC from
foreclosing on the mortgaged properties simply on the basis of alleged usurious, exorbitant and confiscatory rate of
interest.30 First, assuming that the interest rate agreed upon by the parties is usurious, the nullity of the stipulation of
usurious interest does not affect the lenders right to recover the principal loan, nor affect the other terms thereof. Thus, in
a usurious loan with mortgage, the right to foreclose the mortgage subsists, and this right can be exercised by the
creditor upon failure by the debtor to pay the debt due.
Even assuming that SBI and MFII are correct in claiming their supposed right, it nonetheless disintegrates in the face of
the ten promissory notes in the total amount of P218,540,648.00, exclusive of interest and penalties, issued by SBI in
favor of CBC on March 1, 1999 which until now remain unpaid despite the maturity of the said notes on March 1, 2004
and CBCs repeated demands for payment. Foreclosure is but a necessary consequence of nonpayment of mortgage
indebtedness. As this Court held in Equitable PCI Bank, Inc. v. OJ-Mark Trading, Inc.:
Cases on Extrajudicial Foreclosure of Real Estate Mortgage

A. MARONILLA (2014)

Where the parties stipulated in their credit agreements, mortgage contracts and promissory notes that the
mortgagee is authorized to foreclose the mortgaged properties in case of default by the mortgagors, the mortgagee
has a clear right to foreclosure in case of default, making the issuance of a Writ of Preliminary Injunction
improper. x x x.
In addition, the default of SBI and MFII to pay the mortgage indebtedness disqualifies them from availing of the equitable
relief that is the injunctive writ. A debtors various and constant requests for deferment of payment and restructuring of
loan, without actually paying the amount due, are clear indications that said debtor was unable to settle his obligation.
SBIs default or failure to settle its obligation is a breach of contractual obligation which tainted its hands and
disqualified it from availing of the equitable remedy of preliminary
injunction.
As SBI is not entitled to the issuance of a writ of preliminary injunction, so is MFII. The accessory follows the principal.
The accessory obligation of MFII as accommodation mortgagor and surety is tied to SBIs principal obligation to CBC
and arises only in the event of SBIs default. Thus, MFIIs interest in the issuance of the writ of preliminary injunction is
necessarily prejudiced by SBIs wrongful conduct and breach of contract.

SECTION 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. (Act. No. 3135)

7. Langkaan Realty Development, Inc. vs. UCPB


Petitioner Langkaan Realty Development Corporation (LANGKAAN, for brevity) was the registered owner of a parcel of
land located at Langkaan, Dasmarinas, Cavite.
LANGKAAN executed a Real Estate Mortgage over the property in favor of private respondent United Coconut Planters
Bank (UCPB) as a security for a loan obtained from the bank by Guimaras Agricultural Development, Inc.
(GUIMARAS). LANGKAAN and GUIMARAS agreed to share in the total loan proceeds that the latter may obtain from
UCPB. Subsequently, another loan was obtained by GUIMARAS. The loan was fully secured by the real estate mortgage
which covered all obligations obtained from UCPB by either GUIMARAS or LANGKAAN before, during or after the
constitution of the mortgage.
GUIMARAS defaulted in the payment of its loan obligation. Private respondent UCPB filed a Petition for Sale under Act
No. 3135. The mortgaged property was sold for at public auction to private respondent UCPB as the highest bidder, and a
corresponding Certificate of Sale was issued in favor of the bank. As petitioner LANGKAAN failed to redeem the
foreclosed property within the redemption period, the title of the property was consolidated in the name of UCPB.
LANGKAAN filed a Complaint for Annulment of Extra-judicial Foreclosure and Sale, and of TCT No. 232040 with
Damages. The sole issue in this case, as stated by the petitioner in its Memorandum, is whether or not the extra-judicial
foreclosure sale is valid and legal on account of the alleged non-compliance with the provisions of Act No. 3135 on
venue, posting and publication of the Notice of Sale, and of the alleged defects in such Notice.
HELD:
In ascertaining whether or not the venue of the extra-judicial foreclosure sale was improperly laid, it is imperative to
consult Act No. 3135, as amended, the law applicable to such a sale. (see Section 2)
Thus, the extra-judicial foreclosure sale cannot be held outside the province where the property is situated. Should a place
within the province be a subject of stipulation, the sale shall be held at the stipulated place or in the municipal building of
the municipality where the property or part thereof is situated.

Cases on Extrajudicial Foreclosure of Real Estate Mortgage

A. MARONILLA (2014)

In the case at bar, the Real Estate Mortgage contract contains the following stipulation on the venue of the auction
sale, viz:
ARTICLE XX VENUE OF AUCTION SALE. It is hereby agreed that in case of foreclosure of this mortgage
under Act 3135, as amended, and Presidential Decree No. 385, the auction sale shall be held at the capital of the
province, if the property is within the territorial jurisdiction of the province concerned, or shall be held in the city,
if the property is within the territorial jurisdiction of the city concerned.
The foreclosed property is located in Dasmarinas, a municipality in Cavite. Dasmarinas is within the territorial
jurisdiction of the province of Cavite, but not within that of the provincial capital, Trece Martires City, nor of any other
city in Cavite. The territorial jurisdiction of Dasmarinas is covered by the RTC of Imus, another municipality in Cavite.
The petitioner contends that the extra-judicial foreclosure sale should have been held in Trece Martires City, the capital of
Cavite, following the above-quoted stipulation in the real estate mortgage contract; or, in the alternative, Section 2 of Act
3135 should have been applied, and the sale conducted at the municipal building of Dasmarinas where the property is
situated. On the other hand, the private respondent argues that the extra-judicial foreclosure sale was properly held at the
main entrance of the Office of the Clerk of Court and Ex-officio Sheriff of the RTC of Imus which has territorial
jurisdiction over Dasmarinas, as provided in the Supreme Court Administrative Order No. 7 (1983) issued pursuant to
Section 18 of B.P. Blg. 129. The private respondent further contends that Section 18 of B.P. Blg. 129 repealed the
provision on venue under Section 2 of Act 3135.
We agree with the petitioner that under the terms of the contract, the extra-judicial foreclosure sale could be held at Trece
Martires, the capital of the province which has territorial jurisdiction over the foreclosed property. The stipulation of the
parties in the real estate mortgage contract is clear, and therefore, should be respected absent any showing that such
stipulation is contrary to law, morals, good customs, public policy or public order. A contract is the law between the
parties. However, since the stipulation of the parties lack qualifying or restrictive words to indicate the exclusivity of the
agreed forum, the stipulated place is considered only as an additional, not a limiting venue. Therefore, the stipulated
venue and that provided under Act 3135 can be applied alternatively. Now, applying Act 3135, the venue of the sale
should be at the municipal building of Dasmarinas since the foreclosed property is located in the municipality of
Dasmarinas.
We cannot sustain the contention of the private respondent that the proper venue for the sale of the Dasmarinas property is
the RTC of Imus which has territorial jurisdiction thereon as provided under SC Administrative Order No. 7 issued
pursuant to Section 18 of B.P. Blg. 129, which allegedly repealed the venue provision under Section 2 of Act 3135.
Section 18 of B.P. Blg. 129 provides for the power of the Supreme Court to define the territorial jurisdiction of the
Regional Trial Courts. Pursuant thereto, the Supreme Court issued Administrative Order No. 7, placing the municipalities
of Imus, Dasmarinas and Kawit within the territorial jurisdiction of the RTC of Imus. On the other hand, Section 2 of Act
3135 refers to the venue of an extra-judicial foreclosure sale.
It is difficult to fathom how a general law such as B.P. Blg. 129 can repeal a special law like Act 3135. Aside from
involving two entirely different legal concepts such as jurisdiction (B.P. Blg. 129) and venue (Section 2 of Act 3135), this
proposition goes against a basic rule in statutory construction that the enactment of a later legislation which is a general
law cannot be construed to have repealed a special law. Much less can the private respondent invoke Supreme Court
administrative issuances as having amended or repealed Section 2 of Act 3135. A statute is superior to an administrative
issuance, and the former cannot be repealed or amended by the latter. Notwithstanding the foregoing, however, this Court
finds the extra-judicial foreclosure sale held at the RTC of Imus to be valid and legal.

Cases on Extrajudicial Foreclosure of Real Estate Mortgage

A. MARONILLA (2014)

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. (Act No. 3135)

8. Baluyut vs. Poblete


Guillermina Baluyut (Baluyut), loaned from the spouses Eulogio and Salud Poblete the sum of P850,000.00. As evidence
of her indebtedness, Baluyut signed a promissory note for the amount borrowed. To secure the payment of her obligation,
she conveyed to the Poblete spouses, by way of a real estate mortgage contract, a house and lot she owns, located in
Barrio Mapuntod, then Municipality of Mandaluyong, Province of Rizal. Upon maturity of the loan, Baluyut failed to pay
her indebtedness. The Poblete spouses subsequently decided to extrajudicially foreclose the real estate mortgage. The
mortgaged property was sold on auction by the Provincial Sheriff of Rizal to the Poblete spouses who were the highest
bidders. Baluyut failed to redeem the subject property within the period required by law prompting Eulogio Poblete to
execute an Affidavit of Consolidation of Title. Subsequently, TCT No. 43445 was issued in the name of Eulogio and the
heirs of Salud, who in the meantime, died. However, Baluyut remained in possession of the subject property and refused
to vacate the same. Hence, Eulogio and the heirs of Salud filed a Petition for the issuance of a writ of possession with the
RTC of Pasig. Subsequently, the trial court issued an order granting the writ of possession. However, before Eulogio and
the heirs of Salud could take possession of the property, Baluyut filed an action for annulment of mortgage, extrajudicial
foreclosure and sale of the subject property, as well as cancellation of the title issued in the name of Eulogio and the heirs
of Salud, plus damages. In the meantime, Eulogio died and was substituted by his heirs. After trial on the merits, the trial
court issued a Decision dismissing Baluyuts complaint.
Petitioner asserts that despite the fact that she is entitled under the law to an Assessment Notice or Notice of Redemption
coming from the highest bidder 30 days before the expiration of the period to redeem apprising her of the principal
amount, the interest, taxes and other lawful fees due in case she opts to exercise her right of redemption, she did not
receive any notice of this kind. Petitioner contends that her right to this notice is not subject to waiver and that her failure
to invoke the same during trial and on appeal does not preclude her from invoking such right in her motion for
reconsideration filed with the CA and in the present petition.
HELD:
As to the alleged lack of posting of the notices of sale in at least three public places, herein petitioner failed to discharge
her burden of proving by convincing evidence her allegation that there was actually no compliance with the posting
requirement. Hence, in the absence of contrary evidence, the presumption prevails that the sheriff performed his official
duty of posting the notices of sale.
The Courts ruling in Olizon v. Court of Appeals, insofar as posting and publication requirements in mortgage foreclosure
sales are concerned, is instructive:
We take judicial notice of the fact that newspaper publications have more far-reaching effects than posting on
bulletin boards in public places. There is a greater probability that an announcement or notice published in a
newspaper of general circulation, which is distributed nationwide, shall have a readership of more people than that
posted in a public bulletin board, no matter how strategic its location may be, which caters only to a limited few.
Hence, the publication of the notice of sale in [a] newspaper of general circulation alone is more than
sufficient compliance with the notice-posting requirement of the law. By such publication, a reasonably wide
publicity had been effected such that those interested might attend the public sale, and the purpose of the law had
been thereby subserved.
The object of a notice of sale is to inform the public of the nature and condition of the property to be sold, and of
the time, place and terms of the sale. Notices are given for the purpose of securing bidders and to prevent a
sacrifice of the property. If these objects are attained, immaterial errors and mistakes will not affect the
sufficiency of the notice; but if mistakes or omissions occur in the notices of sale, which are calculated to deter or
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mislead bidders, to depreciate the value of the property, or to prevent it from bringing a fair price, such mistakes
or omissions will be fatal to the validity of the notice, and also to the sale made pursuant thereto.
In the instant case, the aforesaid objective was attained since there was sufficient publicity of the sale
through the newspaper publication. There is completely no showing that the property was sold for a price
far below its value as to insinuate any bad faith, nor was there any showing or even an intimation of
collusion between the sheriff who conducted the sale and respondent bank. This being so, the alleged noncompliance with the posting requirement, even if true, will not justify the setting aside of the sale.
In the present case, there was sufficient evidence to prove that notices of the foreclosure sale of the subject property were
published in accordance with law and that there was no allegation, much less proof, that the property was sold for a price
which is considerably lower than its value as to show collusion between the sheriff and herein private respondents. Hence,
even granting that the sheriff failed to post the notices of foreclosure in at least three public places, such failure, pursuant
to Olizon, is not a sufficient basis in nullifying the auction sale and the subsequent issuance of title in favor of private
respondents.
As to petitioners argument that the sheriff in charge of the auction sale is required to execute an affidavit of posting of
notices, the Court agrees with private respondents contention that petitioners reliance on the provisions of Section 5,
Republic Act (R.A.) No. 720, as amended by R.A. No. 5939 , as well as on the cases of Roxas v. Court of Appeals, Pulido
v. Court of Appeals and Tambunting v. Court of Appeals, is misplaced as the said provision of law refers specifically and
exclusively to the foreclosure of mortgages covering loans granted by rural banks. In the present case, the contracts of
loan and mortgage are between private individuals. The governing law, insofar as the extrajudicial foreclosure
proceedings are concerned, is Act No. 3135, as amended by Act No. 4118. (see Section 3)
Unlike in the amended provisions of Section 5, R.A. No. 720, nowhere in Section 3 of Act No. 3135, as amended, or in
any Section thereof, is it required that the sheriff must execute an affidavit to prove that he published notices of
foreclosure in accordance with the requirements of law.

9. Metropolitan Bank and Trust Company vs. Wong


The Mindanao Grains, Inc. (MGI for brevity), through its officers Wenceslao Buenaventura and Faustino Go, applied for
a credit accommodation with the Metropolitan Bank and Trust Company (herein petitioner) to finance its rice and corn
warehousing business. As a security for such credit accommodation, respondent Francisco Y. Wong, and his wife Betty
C. Wong executed in favor of petitioner a real estate mortgage over a parcel of land located at Campo 7, Molave,
Zamboanga del Sur and registered in respondents name.
Due to MGIs failure to pay the obligation secured by the real estate mortgage, petitioner filed an application for extrajudicial foreclosure under Act No. 3135. A notice of foreclosure sale was published in Pagadian Times once, for three
consecutive weeks, setting the auction sale of the mortgaged property. No notice was posted in the municipality or city
where the mortgaged property was situated.
As a consequence, MGI, through its president, Simeon Chang (Chang), requested petitioner to postpone the scheduled
auction sale. Petitioner granted the request. Thereafter, Chang and petitioner agreed that should MGI pay P20,000.00 on
or before the scheduled auction sale, the same would be postponed for a period of 60 days. Chang paid the
amount. Despite such payment, Sheriff Deo Bontia proceeded with the auction sale on. Petitioner was adjudged the sole
and highest bidder. Thus, a certificate of sale was issued to petitioner. The sale was registered with the Registry of Deeds
on the same day. After the expiration of the one (1) year redemption period, ownership over the property was
consolidated and TCT No. T-17853 was correspondingly issued in the name of petitioner.
Respondent, unaware of the foregoing developments, applied for a credit accommodation with the Producers Bank of the
Philippines, Iloilo City, using as security his TCT over the parcel of land. It was only then when he learned that his
property was already foreclosed by petitioner and no longer in his name.
Feeling aggrieved, respondent filed with the Regional Trial Court, Branch 18, Pagadian City a complaint for
reconveyance and damages against petitioner and the Register of Deeds of Zamboanga del Sur. Respondent, in his
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complaint, assailed the validity of the extra-judicial foreclosure sale basically on the ground that petitioner did not comply
with the requirements of Section 3, Act No. 3135.
HELD:
Succinct and unmistakable is the consistent pronouncement of this Court that it is not a trier of facts. And wellentrenched is the doctrine that pure questions of fact may not be the subject of appeal by certiorari under Rule 45 of the
1997 Rules of Civil Procedure, as this mode of appeal is generally confined to questions of law. Corollarily, noncompliance with the requirements of notice and publication in an extra-judicial foreclosure is a factual issue. The
resolution thereof by the lower courts is binding and conclusive upon this Court.Thus, disregarding all factual issues
which petitioner interjected in his petition, the only crucial legal queries in this case are: first, is personal notice to
respondent a condition sine qua non to the validity of the foreclosure proceedings? and, second, is petitioners noncompliance with the posting requirement under Section 3, Act No. 3135 fatal to the validity of the foreclosure
proceedings?
In resolving the first query, we resort to the fundamental principle that a contract is the law between the parties and, that
absent any showing that its provisions are wholly or in part contrary to law, morals, good customs, public order, or public
policy, it shall be enforced to the letter by the courts.
The Act only requires (1) the posting of notices of sale in three public places, and (2) the publication of the same in a
newspaper of general circulation. Personal notice to the mortgagor is not necessary. Nevertheless, the parties to the
mortgage contract are not precluded from exacting additional requirements. [5] In this case, petitioner and respondent in
entering into a contract of real estate mortgage, agreedinter alia:
all correspondence relative to this mortgage, including demand letters, summonses, subpoenas, or notifications of any
judicial or extra-judicial action shall be sent to the MORTGAGOR at 40-42 Aldeguer St. Iloilo City, or at the address that
may hereafter be given in writing by the MORTGAGOR to the MORTGAGEE.
Precisely, the purpose of the foregoing stipulation is to apprise respondent of any action which petitioner might take on
the subject property, thus according him the opportunity to safeguard his rights. When petitioner failed to send the notice
of foreclosure sale to respondent, he committed a contractual breach sufficient to render the foreclosure sale on November
23, 1981 null and void.
The second query must be answered in the affirmative. An incisive scrutiny of Olizon shows that this Court has not
actually dispensed with the posting requirement under Section 3 of Act No. 3135, thus:
Neither can the supposed failure of respondent bank to comply with the posting requirement as provided under
the aforesaid Section 3, under the factual ambiance and circumstances which obtained in this case, be considered
a sufficient ground for annulling the aforementioned sale. We are not unaware of the rulings in some cases
that, under normal situations, the statutory provisions governing publication of notice of extra-judicial foreclosure
sales must be strictly complied with and that failure to publish the notice of auction sale as required by the statute
constitutes a jurisdictional defect which invalidates the sale. However, the unusual nature of the attendant facts
and the peculiarity of the confluent circumstances involved in this case require that we rule otherwise.
Petitioners' cited authority on the requisite publication of notices is not so all-embracing as to deny justified
exceptions thereto under appropriate situations. x x x
Furthermore, unlike the situation in previous cases where the foreclosure sales were annulled by reason of failure to
comply with the notice requirement under Section 3 of Act No. 3135, as amended, what is allegedly lacking here is the
posting of the notice in three public places, and not the publication thereof in a newspaper of general circulation.
We take judicial notice of the fact that newspaper publications have more far-reaching effects than posting on bulletin
boards in public places. There is a greater probability that an announcement or notice published in a newspaper of general
circulation, which is distributed nationwide, shall have a readership of more people than that posted in a public bulletin
board, no matter how strategic its location may be, which caters only to a limited few. Hence, the publication of the
notice of sale in the newspaper of general circulation alone is more than sufficient compliance with the notice-posting
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requirement of the law. By such publication, a reasonably wide publicity had been effected such that those interested
might attend the public sale, and the purpose of the law had been thereby subserved.
Obviously, as correctly pointed out by respondent, what prompted the Court to dispense with the posting requirement is
the unusual nature of the attendant facts and the peculiarity of the confluent circumstances involved in Olizon. It bears
stressing that in the said case, the extra-judicial foreclosure sale sought to be annulled was conducted more than 15 years
ago, thus, even on the equitable ground of laches, the Olizons action for annulment of foreclosure proceedings and
certificate of sale was bound to fail.
Unlike in Olizon where there was a valid publication of the notice of foreclosure sale, the publication in the case at bar
was defective. Not only did it fail to conform with the requirement that the notice must be published once a week for at
least three consecutive weeks in a newspaper of general circulation, but also, there were substantial errors in the notice of
sale published in the Pagadian Times as found by the scrutinizing eyes of the trial court,
The contention of defendant bank that the erroneous date of the REM as published in the Pagadian Times was merely a
clerical error would not cure the fatal defect and invalidity of that published notice. No further evidence was shown that
the glaring error was corrected in the subsequent notice of publication. The court is in accord with the argument of the
plaintiff that the order in the date of the REM published in the Pagadian Times is not a harmless error. It did not give
proper notice to the public the correct nature of the REM which cover the properties being sold at public
auction. Considering the sizable amount of the properties being sold, over half a million pesos, a very big amount to
businessmen based in the Province of Zamboanga del Sur, nobody would dare to buy such properties without first
carefully scrutinizing the pertinent documents, foremost of which is the REM allegedly violated by the plaintiffmortgagor which gave rise to the foreclosure proceedings. Simply stated, serious prospective bidders just backed off upon
knowing the non-existence of that REM published in the Pagadian Times. For who would participate in the auction sale
of the properties covered by REMS which are non-existing? It is not surprising, therefore, to note that the defendant bank
was the winning bidder, for the reason that it was the lone bidder.

10. PNB vs. Nepomuceno Productions, Inc.


Petioner Philippine National Bank (PNB) granted respondents a 4 Million Pesos (P4,000,000.00) credit line to finance the
filming of the movie Pacific Connection. The loan was secured by mortgages on respondents real and personal
properties. The credit line was later increased to 6 Million Pesos and finally to 7.5 Million Pesos.
Respondents defaulted in their obligation. Petitioner sought foreclosure of the mortgaged properties with the Sheriffs
Office of Pasig, Rizal. Initially scheduled on August 12, 1976, the auction sale was re-scheduled several times without
need of republication of the notice of sale, as stipulated in the Agreement to Postpone Sale, until finally, the auction sale
proceeded with petitioner as the highest bidder.
Aggrieved, respondents filed an action for annulment of foreclosure sale and damages with injunction. Respondents
contended that the foreclosure sale is null and void because of, among others, lack of publication.
HELD:
The focal issue in this case is whether the parties to the mortgage can validly waive the posting and publication
requirements mandated by Act No. 3135.
We answer in the negative. Act. No. 3135, as amended, governing extrajudicial foreclosure of mortgages on real property
is specific with regard to the posting and publication requirements of the notice of sale. (See Section 3)
On this score, it is well settled that what Act No. 3135 requires is: (1) the posting of notices of sale in three public places;
and, (2) the publication of the same in a newspaper of general circulation. Failure to publish the notice of sale constitutes a
jurisdictional defect, which invalidates the sale.
Petitioner, however, insists that the posting and publication requirements can be dispensed with since the parties agreed in
writing that the auction sale may proceed without need of re-publication and re-posting of the notice of sale.
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We are not convinced. Petitioner and respondents have absolutely no right to waive the posting and publication
requirements of Act No. 3135.
In People v. Donato, the Court expounded on what rights and privileges may be waived, viz.:
x x x the doctrine of waiver extends to rights and privileges of any character, and, since the word 'waiver' covers
every conceivable right, it is the general rule that a person may waive any matter which affects his property, and
any alienable right or privilege of which he is the owner or which belongs to him or to which he is legally entitled,
whether secured by contract, conferred with statute, or guaranteed by constitution, provided such rights and
privileges rest in the individual, are intended for his sole benefit, do not infringe on the rights of others, and
further provided the waiver of the right or privilege is not forbidden by law, and does not contravene public
policy; and the principle is recognized that everyone has a right to waive, and agree to waive, the advantage of a
law or role made solely for the benefit and protection of the individual in his private capacity, if it can be
dispensed with and relinquished without infringing on any public right, and without detriment to the community
at large x x x.
Although the general rule is that any right or privilege conferred by statute or guaranteed by constitution may be
waived, a waiver in derogation of a statutory right is not favored, and a waiver will be inoperative and void if it
infringes on the rights of others, or would be against public policy or morals and the public interest may be
waived.
While it has been stated generally that all personal rights conferred by statute and guaranteed by constitution
may be waived, it has also been said that constitutional provisions intended to protect property may be waived,
and even some of the constitutional rights created to secure personal liberty are subjects of waiver.
While it is established that rights may be waived, Article 6 of the Civil Code explicitly provides that such waiver is
subject to the condition that it is not contrary to law, public order, public policy, morals, or good customs, or prejudicial to
a third person with a right recognized by law.
The principal object of a notice of sale in a foreclosure of mortgage is not so much to notify the mortgagor as to inform
the public generally of the nature and condition of the property to be sold, and of the time, place, and terms of the sale.
Notices are given to secure bidders and prevent a sacrifice of the property. Clearly, the statutory requirements of posting
and publication are mandated, not for the mortgagors benefit, but for the public or third persons. In fact, personal notice
to the mortgagor in extrajudicial foreclosure proceedings is not even necessary, unless stipulated. As such, it is imbued
with public policy considerations and any waiver thereon would be inconsistent with the intent and letter of Act No. 3135.
Moreover, statutory provisions governing publication of notice of mortgage foreclosure sales must be strictly complied
with and slight deviations therefrom will invalidate the notice and render the sale at the very least voidable.
"Where required by the statute or by the terms of the foreclosure decree, public notice of the place and time of the
mortgage foreclosure sale must be given, a statute requiring it being held applicable to subsequent sales as well as to the
first advertised sale of the property. It has been held that failure to advertise a mortgage foreclosure sale in compliance
with statutory requirements constitutes a jurisdictional defect invalidating the sale and that a substantial error or omission
in a notice of sale will render the notice insufficient and vitiate the sale."
Thus, in the recent case of Development Bank of the Philippines v. Aguirre, the foreclosure sale held more than two (2)
months after the published date of sale was considered void for lack of republication. Similarly, in the instant case, the
lack of republication of the notice of the foreclosure sale renders it void.
The right of a bank to foreclose a mortgage upon the mortgagors failure to pay his obligation must be exercised
according to its clear mandate, and every requirement of the law must be complied with, lest the valid exercise of the right
would end. The exercise of a right ends when the right disappears, and it disappears when it is abused especially to the
prejudice of others.

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