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Page 1 of 23 Discussion on EJF Act 3135, as amended 1

Extrajudicial Foreclosure of Mortgage Law


An act to regulate the sale of property under special powers
inserted in or annexed to real estate mortgages
Act No. 3135 (approved March 6, 1924), as amended by Act
No. 4118 (1933), Sec. 6, RA 7353 (1992) , Sec. 18, RA 7906
(1995), and Sec. 47, RA 8791 (2000).

1. What is the purpose of the law? (Sec.1)

The purpose of the law is to regulate the manner in


which the extrajudicial foreclosure and redemption of real
estate mortgages may be made.

2. Could a creditor /mortgagee foreclose a mortgage extra-


judicially even in the absence of a stipulation to that effect
in the mortgage deed?

No, the creditor/mortgagee cannot unless the authority to


foreclose, although not mentioned in the deed itself, is
attached to the mortgaged deed. The special power of
attorney authorizing the extrajudicial foreclosure of the real
property must either be inserted into or attached to the
deed of real estate mortgage. (Sec.1) SC Admin. Matter No.
99-10-05-0. Lawyer’s Review June 30, 2002.

3. Registration of Mortgage; how effected.

Refer to Section 61 Act 496 as amended by PD 1529

 The Mortgage Deed is filed together with Owner’s


Duplicate Certificate of Title with the RD, City/Province
where the land lies.

 RD enters upon the original certificate of Title and the


Owner’s Duplicate Certificate a memorandum of the
purport of the mortgage deed, time of filing, file
number of the deed, signing the memorandum after
the entry.

 RD also notes down upon the mortgage deed the time


of filing and a reference to the volume and page of the
registration book where it is registered.

4. What is the purpose that the Owner’s Certificate of Title


must be submitted to the RD for the registration of
mortgage? How about in foreclosure sale, is it necessary for
Page 2 of 23 Discussion on EJF Act 3135, as amended 2

the Owner’s Duplicate to be submitted to RD for the


annotation?

 Pursuant to Sections 52, 53,54, 60 and 61 of PD 1529

The annotation of the final Certificate of Sale in the Original


Certificate of Title, even without the presentation of
petitioner’ duplicate, was valid. To rule otherwise would
result in a situation in which a purchaser in a foreclosure
sale can never consolidate his title to the property even
after the lapse of the redemption period, because of the
sheer refusal or failure of the former owner to submit to the
latter’s duplicate certificate of title. The mortgagee-
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 387

5. Which should prevail, the unregistered buyer’s rights of


ownership or the registered mortgage rights of a
bank/financing institution?

The buyer’s right of ownership, albeit, unregistered are


superior to the registered mortgage rights of a financing
institution; provided that the contract of sale was executed
ahead of the mortgage agreement.

Read : Dela Merced v. GSIS 365 SCRA 1

6. Is a mortgage annotated on a void title valid or void?

The rule is that a mortgage annotated on a void title is valid


if the mortgagee registered the mortgage in good faith.

7. Could a creditor/mortgagee foreclose a mortgage extra-


judicially even in the absence of a stipulation to that effect
in the mortgage deed?

No, the creditor/mortgagee cannot unless the authority to


foreclose, although not mentioned in the deed itself, is
attached to the mortgage deed. The special power of
attorney authorizing the extrajudicial foreclosure of the real
Page 3 of 23 Discussion on EJF Act 3135, as amended 3

property must either be inserted into or attached to the


deed of real estate mortgage (Sec.1)

8. Where should the application for EJF of mortgage be


filed?

With the Executive Judge through the Clerk of Court (who is


also the Ex-Officio Sheriff). After the receipt of the
application, the COC shall:

i. examine the same to ensure that the SPA


authorizing the EJF of the real property is either
inserted into or attached to the deed of real estate
mortgage;

ii. raffle the application among the Sheriffs, and


iii. cause the posting and /or publication of the
notice of sale.(Secs. 1 to 4)

9. Where should the sale of the mortgaged real estate be


conducted? (Sec.2)

The sale must be made in the province where the property


to be sold is located. Sale outside the province is 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; if the place of sale in the
municipality was not stipulated, in the municipal building of
the municipality in which the property or part thereof is
situated.

10. What happen to the foreclosure sale if the mortgagor is


not the owner of the property foreclosed?

Foreclosure sale is void. Foreclosure sale though essentially


a “forced sale”, is still sale in accordance with Art 1458,
under which the seller is obliged to transfer ownership to
the highest bidder who, in turn , is obliged to pay the bid
price . Cavite Development Bank v. Lim 324 SCRA 347

11. Is there a notice requirement? (Sec.3)

Yes. As a rule, notices of sale shall be posted for not


less than 20 days in at least 3 public places in the city or
municipality where the property is situated. If the property
Page 4 of 23 Discussion on EJF Act 3135, as amended 4

is worth more than P400, the notice of sale shall also be


published once a week for 3 consecutive weeks in a
newspaper of general circulation in the city or municipality.
Unless otherwise stipulated by the parties to the mortgage
contract, the debtor/mortgagor need not be personally
served a copy of the notice of EJF ( Sec.4[b][1], Guidelines)

12. Is there an exception to the requirement of newspaper


publication even if the mortgaged property is worth more
than P400?

Yes. For real estate mortgage covering loans not


exceeding P100,000, exclusive of interests due and unpaid,
granted by rural banks or thrift banks, publication in a
newspaper shall be dispensed with, it being sufficient that
the notice of foreclosure are posted for a period of 60 days
immediately preceding the public auction in the most
conspicuous areas a the premises of the rural bank or thrift
bank, as the case may be, and at the municipal building,
municipal public market, barangay hall, and barangay
public market, if any, where the land is situated. ( Sec. 6, RA
7353; Sec. 18 RA 7906; and Sec. 4[b][1], Guidelines )

Foreclosure proceedings of mortgage of delinquent


accounts, as defined under RA 9507 ( Act to Establish a
Socialized 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 date and place of auction sale for at
least 20 days in at least three conspicuous public places in
the city or municipality where the property is situated.
( Sec. 2, a Rule V, IRR of RA 9507)

 What is the purpose of Notice?

Cited in the case of BPI v. Sps. Castro G.R. No. 195272


January 14, 2015

In Century Savings Bank v. Samonte18 citing Olizon v. Court


of Appeals,19 the Court reiterated the purpose of the rule on
notice, to wit:

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
Page 5 of 23 Discussion on EJF Act 3135, as amended 5

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. 20

The mistakes and omissions referred to in the above-cited


ruling which would invalidate notice pertain to those which:
1) are calculated to deter or mislead bidders, 2) to
depreciate the value of the property, or 3) to prevent it from
bringing a fair price.

As regards the designation of Guellerma Malabanan asthe


mortgagor, we agree with the reference made by the Court
of Appeals to the case of Langkaan Realty Dev’t Inc. v.
UCPB which ruled that the erroneous designation of an
entity as the mortgagor does not invalidate the notice of
sale.22

The notice rule was complied with when the Notice of


Sheriff’s Sale was published in Philippine Recorder, a
national newspaper of general circulation once a week for
three consecutive weeks or on 29 July, 5 and 12 August
1996. As a matter of fact, the foreclosure procedure
undertaken by Prudential Bank was supported by the
following documents: Affidavit or Publication, 23 Notice of
Sheriffs Sale,24 Sheriffs Certificate or Sale,25 Affidavit of
Posting,26and Minutes of the Auction Sale. 27 Indubitably,
these documents evidenced the regular and lawfull conduct
or the foreclosure proceedings.

18
G.R. No. 176212, 20 October 2010, 634 SCRA 261, 276.
19
Supra note 12.
20
Id. at 156.
22
400 Phil. 1349, 1360 (2000) citing Olizon v. Court of
Appeals, supra note 12 at 154-155.
23
Folder of Exhibits, p. 23.
24
Id. at 24.
25
Id. at 26.
26
Id. at 31.
27
Id. at 32.
Page 6 of 23 Discussion on EJF Act 3135, as amended 6

13. How should the EJF sale be conducted? (Sec.4)

The sale shall be made by public auction or bidding


made through sealed bids which must be submitted to the
Sheriff who shall conduct the sale between the hours of 9 to
4 of the date of the auction. The property mortgaged shall
be awarded to the party submitting the highest bid and, in
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 5 days from notice (Sec. 5[a], Guidelines)

14. Could the creditor be barred from participating in the


bidding?

Yes, if so provided in the mortgage deed.

15. Who may redeem the foreclosed property? (Sec. 6)

(a) the debtor; or


(b) His successor in interest (e.g. his heirs) ; or
(c) Any judicial creditor or judgment creditor of the
debtor; or
(d) Any person having a lien on the property
subsequent to the mortgage under which the
property is sold (e.g. a junior mortgagee).

16. Within what period should the redemption of the


foreclosed property be made?

The foreclosed property shall be redeemed within 1


year from and after the date of sale (Sec.6). The
aforementioned date of sale has been construed by the SC
to mean the date of registration of the sheriff’s certificate of
foreclosure sale in the office of the Register of Deeds
concerned (Reyes v. Noblejas, et al., G.R. No. L-23691, Nov.
25, 1967). However, under Section 47 of the General
Banking Law of 2000, where the mortgagor is a juridical
person whose property has been mortgaged in favor of a
bank, quasi-judicial bank or trust entity, the 1 year period of
redemption is not available if the foreclosure is done
extrajudicially. In 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 in no case shall be more than 3 months after the
foreclosure, whichever is earlier. The purchaser at the
Page 7 of 23 Discussion on EJF Act 3135, as amended 7

foreclosure sale shall file with the Register of Deeds his


sworn statement attesting to the fact of the non-redemption;
whereupon the Register of Deeds shall issue a new
certificate of title in favor or the purchaser after the
owner’s duplicate certificate has been previously delivered
and cancelled. (Land Registration Authority Circular No. 11-
2000, dated August 17,2000)

Foreclosure is proper when the debtors are in default of the


payment of their obligation. (Selegna Management v. United
Coconut Planters Bank, GR No. 165662, May 3,2006)

The purchaser in a foreclosure sale may apply for a writ of


possession during the redemption period by filing for that
purpose an ex parte motion under oath, in the case of a
property with torrens title. Upon the filing of such motion
motion and the approval of the corresponding bond, the
court is expressly directed to issue the writ.

This Court has consistently held that the duty of the trial
court to grant a writ of possession is ministerial. Such writ
issues as a matter of course upon the filling of the proper
motion and the approval of the corresponding bond. No
discretion is left to the trial court. Any question regarding
the regularity and validity of the sale, as well as the
consequent cancellation of the writ, is to be determined in a
subsequent proceeding as outlined in Section 8 of Act 3135.
Such question cannot be raised to oppose the issuance of
the writ, since the proceeding is ex parte. The recourse is
available even before the expiration of the redemption
period provided by law and the Rules of Court.

The purchaser, who has a right to possession that extends


after the expiration of the redemption period, becomes the
absolute owner of the property when no redemption is
made. Hence, at any time following the consolidation of
ownership and the issuance of a new transfer certificate of
title in the name of the purchaser, he or she is even more
entitled to possession of the property. In such a case, the
bond required under Section 7 of Act 3135 is no longer
necessary, since possession becomes an absolute right of
the purchaser as the confirmed owner. (Spouses Samson v.
Judge Mauricio M. Rivera, GR No. 154355, May 20,2004)

A party may petition for the setting aside of a foreclosure


sale and for the cancellation of a writ of possession in the
same proceedings where the writ of possessions was
Page 8 of 23 Discussion on EJF Act 3135, as amended 8

requested. (Spouses Samson v. Judge Mauricio M. Rivera,


GR No. 154355, May 20, 2004)

Is action to foreclose subject to prescription?

Yes. The right of action to foreclose prescribes after ten (10)


years according to Article 1142 of the Civil Code.

(Note: Sec. 46 of Act 496(Section 47 PD 1529) “No title to


registered land in derogation to that of the registered
owner shall be acquired by prescription or adverse
possession)

The important effect of the registration of mortgage is to


bind third parties, it does not go further as to make the
action to foreclose it imprescriptible. (Buhat, et al., vs.
Besana, et al., 95 Phil. 721)

16. Is the purchaser of foreclosed property automatically


entitled to the possession thereof during the redemption
period?

No. He must petition the Regional Trial Court of the


province or city where the property is situated to give him
possession thereof during the redemption period. He must
also put up a bond equivalent in value to the use if the
property for a period of 12 months to indemnify the debtor
in case it is shown that the sale was made without
complying with the requirements of Act No. 3135 or that
there was no violation of the mortgage deed.

On the basis of Sec. 47, supra, it would appear that the


purchaser could immediately enter and take possession and
administer the mortgaged property after the date of the
confirmation of the auction sale within the redemption
period. But a caveat must be emphasized that the same
section provides with the qualification that it must be made
in accordance with law.

Jurisprudence:

During the period of redemption the mortgagor is entitled


to remain in possession of the property and to collect rents
and profits therefrom.1 Under Sections 7 and 9 of Act 3135
it was also stated that the purchaser, if he so desire, may
take over with the proper authority from the court, which
1
Gorospe v. Gochangco, G.R. L- 12735, Oct. 30, 1959; 58 OG 21,p4189, May 21, 1962, 106 Phil. 425.
Page 9 of 23 Discussion on EJF Act 3135, as amended 9

may be granted upon petition filed in the original


registration proceedings and furnishing a bond in an
amount equivalent to the use of the property, to indemnify
the debtor in case the sale is set aside or in case the
property is redeemed after the purchaser has been given
possession. As a matter of fact, even after the period of
redemption has expired, possession of the property may be
asked by the purchaser upon motion for a writ of possession
in the same action. It is not necessary to institute a regular
action in order to secure possession of the property. 2

In extra-judicial foreclosure of mortgage, once a bond is


filed and approved under Section 7 of Act 3135, as amended
by Act 4118, the court has no discretion to refuse the
issuance of the writ of possession in favor of the purchaser
in the public auction sale, or to set it aside on motion of the
adverse party attacking the court’s jurisdiction to issue the
same.3 It was also held that under the same section, the
purchaser is entitled to the possession of the property
during the redemption period, provided that a proper
motion has been filed, a bond approved, and no third person
is involved.4

In an extrajudicial foreclosure sale of a mortgaged property,


after the redemption 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 purchaser who is now the owner of
the foreclosed property would be unreasonable if not
illogical for if there are any rights to be protected, they are
those of the purchaser who as owner has a superior right
over said property s against all other persons. Besides
under Sec.35, Rule 39 of the Revised Rules of Court the
purchaser or his assignee is entitled to possession if no
redemption is made within 12 months after the sale. 5

 What is the nature of the function of the Court in the


issuance of Writ of Possession?

 After the Foreclosure Sale and During the Period of


Redemption – Ministerial Upon the Court via ex-parte
filing of Motion for Writ of Possession by the purchaser

2
IFC Service Leading and Acceptance Corp. v. Nera, 19 SCRA 181, Barrameda v. Gontang, et al., 125
Phil.787
3
Gracia v. san Jose, et al., 94 Phil.623
4
Banco Filipino Savings & Mortgage Bank v. IAC, L-68878, April 8, 1986, 142 SCRA 44-48
5
UCPB v. Reyes, G.R. 95095, Feb.7, 1991, 193 SCRA 756
Page 10 of 23 Discussion on EJF Act 3135, as amended 10

(highest bidder) in the public auction and approval of the


corresponding bond. Section 7, Act 3135, as amended;

 After Consolidation of Ownership and Issuance of New


Transfer Certificate of Title – Writ of Possession is issued
as a matter of course even without the filling and
approval of a bond. (Sulit v. CA 335 Phil 914,924 (1997,
Penson v. Maranan, G.R. 148630 20 June 2006 491 SCRA
396, 405)

 Exception (DBP v. Prime Neighborhood Association G.R.


Nos. 175728 & 178914, May 8, 2009)

 A third party is actually holding the property adversely


to the judgment debtor. Under Section 35 (now Section
33), Rule 39 of the Rules of Court, which is made
suppletory to the extrajudicial foreclosure of real
estate mortgages by Section 6 of Act 3135, as
amended, the possession of the mortgaged property
may be awarded to a purchaser in the extrajudicial
foreclosure unless a third party is actually holding the
property adversely to the judgment debtor. Thus, in the
cited case of Philippine National Bank v. Court of
Appeals,32 the Court held that the obligation of a court
to issue an ex parte writ of possession in favor of the
purchaser in an extrajudicial foreclosure sale ceases to
be ministerial once it appears that there is a third
party in possession of the property who is claiming a
right adverse to that of the debtor/mortgagor. 33 This is
substantiated by the Civil Code which protects the
actual possessor of a property. The discussion
in Philippine National Bank on this matter is
informative:

17. SC Rulings:

(a) Lazo vs. Republic Surety, 31 SCRA 329 (1970) –


The Court ruled that the one-year period of
redemption provided under Act No. 3135 could be
extended by the parties as the same is only
directory.

(b) Caltex Philippines vs. IAC, et al., G.R. No. 74730,


August 25, 1989- Where a debt is secured by a
mortgage and there is default in payment on the
part of the mortgagor, the mortgagee has a choice of
Page 11 of 23 Discussion on EJF Act 3135, as amended 11

one of two remedies but he cannot have both. The


mortgagee may (i) foreclose the mortgage, or (ii) file
an ordinary action to collect the debt. When the
mortgagee chooses the foreclosure of the mortgage
as a remedy, he enforces his lien by the sale on
foreclosure of the mortgaged property. The proceeds
of the sale will be applied to the satisfaction of the
debt. With this remedy he has a prior lien on the
property. In case of a deficiency, the mortgagee has
the right to claim for the deficiency. On the other
hand, if the mortgagee resorts to an action 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 is
favorable to him, and it becomes final and executory,
he can enforce said judgment by execution. He can
even levy execution on the same mortgaged
property, but he will not have priority over the latter
and there may be other creditors who have better
lien on the properties of the mortgagor.

(c) Valmonte, et al. vs. CA, et al., G.R. No. L-41621,


February 18, 1999 –

(i) It is well settled that there is a right to


redeem inadequacy of the price is of no
moment for the reason that the judgment
debtor has always the chance to redeem and
reacquire the property. In fact, the property
may be sold for less than its fair market
value precisely because the lesser the price,
the easier for the owner to effect a
redemption.

(ii) The fact that the foreclosure sale took place


on a holiday does not affect the validity
thereof.

(iii) If a person has a mortgage credit over a


property which was sold in an auction sale,
the only right left to him was to collect its
mortgage credit from the purchaser thereof
during the immediately subjects the property
on which it is constituted, whoever its
possessor may be, to the fulfillment of the
obligation for the security of which it was
created.
Page 12 of 23 Discussion on EJF Act 3135, as amended 12

(iv) The only condition the law requires in


extrajudicial foreclosure is that the loan is
already due and demandable and there was
failure on the part of the mortgagor to pay
the mortgage debt. The law does not prohibit
a mortgagee from choosing which of the
mortgages is his favor to foreclose. It must
borne in mind that the power to decide
whether to foreclose or not resides in the
mortgagee.

(d) Ibaan Rural Bank vs. CA, et al., G.R. 123817,


December 17, 1999 – The Court ruled that an
extension for the one-year period made by the
Sheriff unilaterally and without the prior consent of
the parties, particularly the mortgagee bank, could
nonetheless be binding on the mortgagee bank
where the latter had actual and constructive notice
of the extension of the redemption period and did
not object to such extension until after the
mortgagor tried to exercise its redemption right
after a year from the sale of the mortgaged property.

(e) Huerta Alba Resort Inc. vs. CA, et al., G.R. No.
128567, September 1, 2000 – In distinguishing the
petitioner’s equity of redemption from the right of
redemption, the Court quoted extensively from its
decision in the case of Limpin, et al. vs. IAC, et al.,
G.R. No. 70987, September 29, 1988:

The equity of redemption is, to be sure, different


from and should not be confused with the right of
redemption.

The right of redemption in relation to a mortgage –


understood in the sense of a prerogative to re-
acquire mortgaged property after the registration of
the foreclosure sale- exists only in the case of the
extra-judicial foreclosure of the mortgage. No such
right is recognized in a judicial foreclosure except
only where the mortgagee is the PNB or a bank or
banking institution.

Where a mortgage is foreclosed extra-judicially, ACT


3135 grants the mortgagor the right of redemption
Page 13 of 23 Discussion on EJF Act 3135, as amended 13

within one (1) year form the registration of the


sheriffs certificate of foreclosure sale.

Where the foreclosure is judicially effected,


however, no equivalent right of redemption exits.
The law declares that a judicial foreclosure sale ,
“when confirmed by an order of the court…
shall operate to divest the rights 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.” Such rights exceptionally “ allowed
by law” (i.e. even after confirmation by an order of
the court) are those granted by the charter of the
PNB (Acts 2747 and 2938), and the General Banking
Act (RA 337) [Sec. 47 of RA 8791, otherwise known
as the GBL of 2000]. 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 foreclosure- after
confirmation by the court of the foreclosure sale-
which right may be exercised within a period of one
(1) year, counted from the date of registration of the
certificate of sale in the Registry of Property.

But, to repeat, no such right of redemption exists in


case of judicial foreclosure of a mortgage if the
mortgagee is not the PNB or a bank or banking
institution. In such a case, the foreclosure sale , “
when confirmed by an order of the court… shall
operate to divest the rights of all the parties to the
action and to vest their rights in the purchaser.”
There then exists only what is known as the equity
of redemption. This is simply the right of the
defendant mortgagor to extinguish the mortgage
and retain ownership of the property by paying the
secured debt within 90-day period after the
judgment becomes final, accordance with Rule 68,
or even after the foreclosure sale but prior to its
confirmation.

A. VALIDITY AND ENFORCEABILITY OF MORTGAGE


Page 14 of 23 Discussion on EJF Act 3135, as amended 14

The mere filling of a collection case is tantamount to


abandonment of the remedy to foreclose the real estate
mortgage constituted over the properties of the mortgagor.
This principle applies even though the mortgage was
constituted on the property of a third party mortgagor and
the collection suit was filed before foreign courts. Bank if
America, NT and SA vs. American Realty Corporation,
321 SCRA 659

If the mortgagor is not the owner of the property


foreclosed, the bank never acquired valid title to the
property because the foreclosure sale is void. A foreclosure
sale, though essentially a “force sale” is still a sale in
accordance with Art. 1458 of the Civil Code, under which
the forced seller becomes obliged to transfer ownership of
the thing sold to the highest bidder who, in turn, is obliged
to pay therefor the bid price in money or its equivalent.
Cavite Development Bank vs. Lim, 324 SCRA 347

The buyers's right of ownership, albeit unregistered,


are superior to the registered mortgage rights of a financing
institution; provided that the contract of sale was executed
ahead of the mortgage agreement . The unrecorded sale is
preferred for the reason that if the original owner had
parted with this ownership of the thing sold then he no
longer had ownership and free disposal of that thing so as
to be able to mortgage it again. Registration of the
mortgage is of no moment since it is understood to be
without prejudice to the better right of third parties.

The rule that the purchaser of the mortgagee of a land


is not required to look further than what appears in the face
of the title does not apply where the purchaser or
mortgagee is a financing institution. As a financing
institution, it is presumed that that is experienced in its
business. Ascertainment of the status and condition of
properties offered to it as security for the loans it extends
must be standard and indispensable part of its operations.
Dela Merced vs. GSIS, 365 SCRA 1

A property registered in the name of “Corazon G. Ruiz,


of legal age, married to Rogelio Ruiz, Filipinos” is
Page 15 of 23 Discussion on EJF Act 3135, as amended 15

paraphernal and may be alienated or mortgaged solely by


the wife even without the consent of the husband. The title
is registered in the name of Corazon alone because the
phrase “married to Rogelio Ruiz” is merely descriptive of
the civil status of Corazon and should not be construed to
mean that her husband is also the registered owner.
Furthermore, registration of the property in the name of
“Corazon G. Ruiz, of legal age, married to Rogelio Ruiz” is
not proof that such property was acquired during the
marriage, and thus, is presumed to be conjugal. The
property could have been acquired by Corazon while she
was still single, and registered only after her marriage to
Rogelio Ruiz. Acquisition of title and registration thereof are
two different acts. The presumption under Article 116 of the
Family Code that properties acquired during the marriage
are presumed to be conjugal applies only if it has been
established that the property was in fact acquired during
the marriage. Ruiz vs. Court of Appeals, 401 SCRA 410

The provision of Article 173 of the Civil Code giving


the wife 10 years during the marriage to annul any
alienation or encumbrance of conjugal property was not
carried over the Family Code. It is thus clear that any
alienation or encumbrance of conjugal partnership property
by the husband and without the consent of the wife, if made
after the Family Code took effect, is not only voidable but
null and void. Heirs of Reyes vs. Mijares, 410 SCRA 97

A sale (encumbrance) of conjugal property made by the


husband without the consent of the wife prior to the
effectivity of the Family Code shall be governed by the
provisions of the Civil Code. Under Article 166 of the Civil
Code, the husband cannot alienate or encumber any real
property of the conjugal partnership without the wife's
consent. This provisions, however, must be read in
conjunction with Article 173 of the same Code. The latter
states that an action to annul an alienation or encumbrance
may be instituted by the wife during the marriage and
within 10 years from the transaction questioned. The lack of
consent on the part of the wife will not make the husband's
alienation or encumbrance void, but merely voidable.
Hence, the sale is valid until and unless annulled.

Moreover, the legal prohibition against the disposition


of conjugal property by one spouse without the consent of
Page 16 of 23 Discussion on EJF Act 3135, as amended 16

the other has been established for the benefit, not of third
persons, but only of the other spouse for whom the law
desires to save the conjugal partnership from damage that
might be caused . A third party cannot avail himself of the
remedy prescribed by Article 173. Villaranda vs.
Villaranda, 423 SCRA 571

B. LEVY

Formalities of a levy as an essential requisite of a valid


execution sale and a valid attachment lien under the Rules
of Court are not basic requirements before an
extrajudicially foreclosed property can be sold at public
auction. This is because extra-judicial foreclosure of the
mortgage is not an execution of a money judgment under
the Rules of Court and is governed by Act No. 3135, as
amended. Fiestan vs. Court of Appeals, 185 SCRA 751

C. PLACE OF SALE

Unlike an action, an extrajudicial foreclosure of real


estate mortgage is initiated by filling a petition not with any
court of justice but with the office of the sheriff of the
province where the sale is to be made, by the sheriff of the
province where the sale id to be made. By no stretch of the
imagination can the office of the sheriff come under the
category of a court of justice. If ever the executive judge
comes into the picture, it is only because he exercises
administrative supervision over the sheriff. But this
administrative supervision, however, does not change the
fact that extrajudicial foreclosures are not judicial
proceedings, actions or suits. Supena vs. De la Rosa, 267
SCRA 1

Where there is a stipulation in the real estate


mortgage regarding the place of the foreclosure sale and
the mortgagor did not object to the holding of the
foreclosure sale in another place, the foreclosure sale is
valid. Langkaan Realty Development, Inc. vs. United
Coconut Planters Bank, 347 SCRA 542
Page 17 of 23 Discussion on EJF Act 3135, as amended 17

D. JURISDICTIONAL/OTHER PROCEDURAL
REQUIREMENTS

When the foreclosure sale was postponed, the notice of


sale must be republished once a week for three consecutive
weeks, otherwise, the foreclosure sale is invalid.
Tambunting vs. Court of Appeals, 167 SCRA 16;
Development Bank of the Philippines vs. Aguirre, 364
SCRA 755

Personal notice to the mortgagor of the foreclosure


sale is not required by ACT 3135. GSIS vs. Court of
Appeals, 170 SCRA 533; Philippine National Bank vs.
Rabat, 344 SCRA 706, Ardiente vs. Provincial Sherif
of Quezon, 436 SCRA 655

The requirement of weekly publication of notice of


extra-judicial foreclosure of mortgage means a period of
seven days, inclusive of the first day of publication. To
comply with the requirement that notice of the foreclosure
must be published once a week for three consecutive weeks,
the publication must be made seven days apart. Philippine
National Bank vs. Court of Appeals, 222 SCRA 134

Failure to post notice of foreclosure is not a ground to


nullify the sale if it was published in a newspaper of general
circulation, because the publication gives a greater
probability of notice to the public. Olizon vs. Court of
Appeals, 236 SCRA 148, Development Bank of the
Philippines vs. Aguirre, 364 SCRA 755 (See however
Lucena vs. Court of Appeals, 313 SCRA 47, Metrobank
vs. Wong, 359 SCRA 608, PNB vs. Nepomuceno
Productions, 394 SCRA 405, infra. It is submitted that
the better rule is that the posting of the notice of sale
must be complied with on top of the publication
requirement.)

The fact that the day on which the extrajudicial


foreclosure sale was conducted was declared a public
holiday does not affect the validity of the sale. ACT 3135
merely requires that sufficient publication and posting of
the notice of sale be caused, as required by law. Valmonte
vs. Court of Appeals, 303 SCRA 278
Page 18 of 23 Discussion on EJF Act 3135, as amended 18

Personal notice to the mortgagor is not is not


necessary under the Act 3135, Nevertheless, the parties are
not precluded from imposing the additional requirement of
personal notice to the mortgagors. When the real estate
mortgage provided that all correspondence relative to the
mortgage, including notifications of judicial or extrajudicial
action, shall be sent at the address of the mortgagors and
the mortgagee failed to send the personal notice of sale to
the mortgagors, the mortgagee committed a contractual
breach sufficient to render the foreclosure sale void.
Concepcion vs. Court of Appeals, 247 SCRA 614,
Metropolitan Bank and Trust Company vs. Wong, 359
SCRA 608

The extra-judicial foreclosure of a real estate mortgage


made without complying with the requirements regarding
posting of the notices in public places and publication of the
notice in a newspaper of general circulation is void. Lucina
vs. Court of Appeals, 313 SCRA 47

Non compliance with the requirements of notice and


publication in extra-judicial foreclosure sale could constitute
jurisdictional defect that would invalidate the sale.
However, the non-presentation of a certification of posting
does not affect intrinsic validity of the questioned
foreclosure sale. A certificate of posting is not required,
much less considered indispensable, for the validity of a
foreclosure sale. Cristobal vs. Court of Appeals, 328
SCRA 256

Clerical errors in the name of the mortgagor and the


technical description in the notice of sale are not sufficient
to annul the foreclosure sale. Langkaan Realty
Development, Inc. vs. United Coconut Planters Bank,
347 SCRA 542

Failure to post notice of sale within municipality where


the property is located renders the foreclosure sale void.
Metropolitan Bank & Trust Company vs. Wong, 359
SCRA 608
Page 19 of 23 Discussion on EJF Act 3135, as amended 19

ACT 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. The parties have absolutely no right to waive
the posting and publication requirements of ACT 3135.
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 nor 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 is 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 requirement
of posting and publication are mandated, not for the
mortgagor's benefit, but for the public or third persons. As
such, it is embued with public policy considerations and any
waiver thereon would be inconsistent with the intent and
letter of ACT 3135. PNB vs. Nepomuceno Productions, 394
SCRA 405

The parties absolutely no right to waive the posting


and publication requirements of ACT 3135. Publication is
required to give the foreclosure sale a reasonably wide
publicity such that those interested might attend the public
sale. To allow the parties to waive this jurisdictional
requirement would result in converting into a private sale
what ought to be a public auction.

In an attempt to uphold the validity of the said waiver,


petitioner assert that the CA should have applied Rule 39,
Section 4 of the Rules of Court, which allows adjournment
of execution sales by agreement of the parties.

At the outset, distinction should made of the 3 different


kinds of sale under the law, namely; an ordinary execution
sale, a judicial foreclosure sale, and an extrajudicial
foreclosure sale . An ordinary execution sale is governed by
the pertinent provisions of Rule 39 of the Rules of Court.
Rule 68 of the Rules of Court applies in cases of judicial
foreclosure sale. On the other hand, Act No. 3135, as
Page 20 of 23 Discussion on EJF Act 3135, as amended 20

amended by Act No. 4118 known as “ An act to Regulate the


Sale of Property under the Special Powers Inserted in or
Annexed to Real Estate Mortgage's applies in cases of
Extrajudicial foreclosure sale. A different set of law applies
to each class of sale mentioned. The cited provision in the
Rules of Court hence does not apply to an extrajudicial
foreclosure sale. Ouano vs. Court of Appeals, 398 SCRA
405

A certificate of posting is not required much less


considered indispensable for the validity of an extra-judicial
foreclosure sale of real property under Act No. 3135 The
fact alone that there is no certificate of posting is not
sufficient to prove the lack of posting. What the law
requires is the posting of the notice of sale and not the
certificate of posting. In the absence of contrary evidence,
the presumption prevails that the sheriffs performed their
official duty of posting the notices of sale xxx Republication
in the manner prescribed by Act 3135 is necessary for the
validity of the postponed extrajudicial foreclosure sale. The
absence of such republication invalidates the foreclosure
sale. The parties have no right to waive the republication
requirement in Act No. 3135 . The rescheduled auction sale
will only be valid if the rescheduled date of auction is
clearly specified in the prior notice of sale. Development
Bank of the Phils. vs. Court of Appeals, 403 SCRA 460

E. SALE

Act No. 3135 does not require mortgaged properties to


be sold by lots or only so much of he mortgaged property as
to cover only the obligation. The levy requirement is
mandated by Rule 39 only and not by Act 3135.xxx While in
ordinary sales on grounds of equity a transaction may be
invalidated on the ground of inadequacy of the price, such
does not follow when the law gives the owner the right to
redeem as when a sale is made at public auction, upon the
theory that the lesser the price the easier it is for the owner
to redemption. Abaca Corporation of the Philippines vs.
Garcia, 272 SCRA 475

The annotation of the final Certificate of sale in the


Original Certificate of Title, even without the presentation
of petitioner's duplicate, was valid. To rule otherwise would
result in a situation in which a purchaser in a foreclosure
Page 21 of 23 Discussion on EJF Act 3135, as amended 21

sale can never consolidate his title to the property even


after the lapse of the redemption period, because of the
sheer refusal or failure or the former owner to submit the
latter's duplicate certificate of title. The mortgagee-
purchaser would then be at the mercy of the mortgagor, if
the latter without any just cause withholds such duplicate.
San Juan vs. Court of Appeals, 363 SCRA 387

F. REDEMPTION

Section 78 of the General Banking Act (now section 47


of the New General Banking Law) had the effect of
amending Section 6 of Act No. 3135 insofar as he
redemption price is concerned when the mortgagee is a
bank, as in this case, or a banking or credit institution. The
apparent conflict between the provisions of Act No. 3135
and the General Banking Act was, therefore, resolved in
favor of the latter, being a special and subsequent
legislation. This pronouncement was reiterated by the
Supreme Court where it held that the amount at which
reiterated by the Supreme Court where it held that the
amount at which the foreclosed property is redeemable is
the amount due under the mortgage deed, or the
outstanding obligation of the mortgagor plus interest and
expenses in accordance with the General Banking Law. Xxx
The period to redeem property that was sold at foreclosure
sale is not interrupted by the filling of an action questioning
the validity of the foreclosure sale. Sy vs. Court of
Appeals, 172 SCRA 125, Union Bank of the Philippines
vs. Court of Appeals, 359 SCRA 480

Acceptance of the redemption price after expiration of


the statutory period for redemption deemed waiver of the
period to redeem foreclosed real property xxx The rights of
a first mortgagee constitute a superior lien as against that
of a second mortgagee who merely has the exercise of so-
called equity of redemption over the same property and who
has to wait until after the debtor's obligation to the first
mortgagee has been fully settled. Ramirez vs. Court of
Appeals, 219 SCRA 598

A bank which did not object when the sheriff who


extrajudicially foreclosed a real state mortgage indicated in
the certificate of sale that the redemption period was two
Page 22 of 23 Discussion on EJF Act 3135, as amended 22

years is deemed to have consented to it under the principle


of estoppel. Ibaan Rural Bank Inc. vs. Court of Appeals,
321 SCRA 88

The right of redemption in relation to a mortgage


-understood in the sense of a prerogative to re-acquire
mortgaged property after registration of the foreclosure
sale-exist only in the case of the extra-judicial foreclosure of
mortgage. Huerta Alba Resort vs. Court of Appeals, 339
SCRA 534

Accommodation mortgagors as such are not in anyway


liable for the payment of the loan or principal obligation of
the debtor/borrower. The liability of the accommodation
mortgagors extends only up to the loan itself. Hence, it is
only just that they be allowed to redeem their mortgaged
property by paying only the winning bid price thereof (plus
interest thereon) at the public auction sale. Belo vs.
Philippine National Bank. 359 SCRA 480

Section 1, Rule 68 of the Rules of Court requires all


persons having or claiming an interest in the premises
subordinate in right to the mortgage sought to be
foreclosed be made defendants in the action for foreclosure.
However it is not mandatory in character4 but merely
directory, in the sense that failure to comply therewith will
not invalidate the foreclosure proceedings. A subordinate
lien holder is a proper, even a necessary, but not an
indispensable, party to a foreclosure proceeding, without
affecting the rights of the subordinate lien holder. The effect
of the failure on the part of the mortgagee to make the
subordinate lien holder. The effect of the failure on the part
of the mortgagee to make the subordinate lien holder
defendant is that the decree of foreclosure in a suit to which
the holders of a second lien are not parties leaves the equity
of redemption in favor of such lien holders unforeclosed
and unaffected. Layuko, et al. vs. Court of Appeals, 361
SCRA 150

In case the redemption period is about expire and the


redemption can not take place on account of disagreement
over the redemption price, the redemptioner faced with
such a problem may preserve his right of redemption
Page 23 of 23 Discussion on EJF Act 3135, as amended 23

through judicial action which in every case must be filled


within the one year redemption period. The filling of the
court action to enforce redemption being equivalent to
formal offer to redeem, would would have the effect of
preserving