EN BANC

A.M. No. 99-10-05-0

RE: PROCEDURE IN EXTRA-JUDICIAL FORECLOSURE OF
MORTGAGES
Gentlemen:
Quoted hereunder, for your information, is a resolution of the
Court dated AUG 7 2001.
A.M. No. 99-10-05-0 (Re: Procedure in Extra-Judicial Foreclosure of
Mortgages). - For consideration are various letters received by the Court
regarding this subject matter.
(1) Atty. Michael G. Jornales of the Bank of the Philippine Islands,
requests, in a letter dated January 11, 2001, that the Court issue a
circular to reflect a later change introduced by §47 of R.A. No. 8791
(The General Banking Law of 2000) to Act No. 3135 concerning the
period of redemption of properties sold in extrajudicial foreclosures so
far as juridical persons are concerned.
(2) Atty. Jeoffrey S. Joaquino, Clerk of Court VII, RTC of Cebu, and
Mr. Tomas P. Arejola, manager of the LBC Bank, Naga City, in separate
letters, dated May 28, 2001 and May 11, 2001, respectively, inquire (a)
whether the ceiling of P100,000.00 for sheriff's fees provided for in
paragraph 2(d) of A.M. No. 99-10-05-0 applies as well to the fees
assessed in extrajudicial foreclosure held under the direction of a notary
public and (b) whether, in addition to the fee under Rule 141, §20(d), as
amended, the payment of sheriff's fees under Rule 141, §9(1) is a
condition for the issuance of the certificate of sale in extrajudicial
foreclosure.
(3) A "taxpayers'" letter, dated March 5, 2001, which Director Emilio
A. Gonzalez III, Office of the Ombudsman, indorses, seeks a review of
Circular A.M. No. 99-10-05-0, and other administrative issuances
pertaining to extrajudicial foreclosure under Act No. 3135.
The Court, taking note of the foregoing letters, RESOLVED as
follows:
(1) The proposal of Atty. Jornales is well taken.  Under Act No.
3135, §6, as amended, any person having interest or lien on the
property sold in extrajudicial foreclosure sale may redeem the same "at
any lime within the term of one year from and after the date of the sale."
The one-year period is counted from, the date of the registration of the
certificate of sale with the Register of Deeds.  Thus, paragraph 2(e) of I
Circular A.M. No. 99-10-05-0 provides:

Upon receipt of an application for extrajudicial foreclosure of mortgage, it shall

be the duty of the Clerk of Court to:

…..
e) after the certificate of sale has been issued to the highest bidder, keep the
complete records, while awaiting redemption within a period of one (1) year
from the date of registration of the certificate of sale with the Register of Deeds
concerned, after which the records shall be archived.  (emphasis added)

However, R.A. No. 8791, §47, which took effect on June 13, 2000,
after the promulgation of Circular A.M. No. 99-10-052-0 on December
14, 1999, provides:

Notwithstanding Act 3135, juridical persons whose property is being sold

pursuant to an extrajudicial foreclosure shall have the right to redeem the
property in accordance with this provision until, but not after, the registration of
the certificate of foreclosure sale with the applicable Register of Deeds which
in no case shall be more than three (3) months after foreclosure, whichever is
earlier.  Owners of property that has been sold in a foreclosure sale prior to
the effectivity of this Act shall retain their redemption rights until their
expiration.  (emphasis added)

An exception is thus made in the case of juridical persons which are

allowed to exercise the right of redemption only "until, but not after, the
registration of the certificate of foreclosure sale" and in no case more
than three (3) months after foreclosure, whichever comes first.  This
exception must he duly reflected in A.M. No. 99-10-05-0.
Accordingly, Circular A.M. No. 99-10-05-0, paragraph 2(e), as
amended, is further amended so as to make it read as follows:

e) alter the certificate of sale has been issued to the highest bidder, keep the
complete records, while awaiting any redemption within a period of one (l)
year from date of registration of the certificate of sale with the Register of
Deeds concerned, after which, the records shall be
archived.  NOTWITHSTANDING THE FOREGOING PROVISION,
JURIDICAL PERSONS WHOSE PROPERTY IS SOLD PURSUANT TO AN
EXTRA-JUDICIAL FORECLOSURE, SHALL HAVE THE RIGHT TO
REDEEM THE PROPERTY UNTIL, RUT NOT AFTER, THE
REGISTRATION OF THE CERTIFICATE OF FORECLOSURE SALE
WHICH IN NO CASE SHALL 'RE MORE THAN THREE (3) MONTLIS
AFTER FORECLOSURE, WHICHEVER IS EARLIER, AS PROVIDED IN
SECTION 47 OF REPUBLIC ACT NO. 8791.

(2) With respect to the query posed in the letter of Atty. Joaquino,

paragraph 2(d) of Circular A.M. No. 99-10-0-5-0, states:

Upon receipt of an application for extrajudicial foreclosure of mortgage, it shall

be the duty of the Clerk of Court to:

.....

(d) sign and issue the certificate of sale, subject to the approval of the

Executive Judge, or in his absence, the Vice-Executive Judge. No certificate of
sale shall be issued in favor of the highest bidder until all fees provided for in
the aforementioned sections and in Rule 141, Section 9(1) as amended by A.M.
No. 00-2-01-SC, shall have been paid; Provided, that in no case shall the
amount payable under Rule 141, Section 9(1), as amended, exceed
P100,000.00;

The imposition of the P100,000.00 ceiling on the sheriff's fees, as

provided in Rule 141, §9(1), has been explained as follows:

Considering that the amount paid for the sheriff's commission, as in the other
fees which are required to be paid, will be included in the computation of the
redemption price, the imposition of a cap or ceiling thereon works to the benefit
both of the creditor-mortgagee as well as the debtor-mortgagor.  Accordingly,
while sheriff's fees in extrajudicial foreclosure are to he computed in
accordance with Rule 141, §9(1), the total amount of the fees should not exceed
P100,000.00.  (Minute Res., A.M. No. 99-10-05-0, January 30, 2001.)

There is no reason why the ceiling in par. 2(d) of Circular A.M. No.
99-10-05-0 should not be applied to the fees collected in extrajudicial
foreclosure sales conducted by notaries public under Rule 141, §20(e)
which provides:

Other fees - The following fees shall also be collected by the clerks of Regional
Trial Courts or courts of the first level, as the case may be:

.....

(e) For applications for and certificates of sale in notarial foreclosures:

1. On the first lour thousand (P4,000) pesos, five (5%) per cent;

2. On all sums in excess of four thousand (P4,000) pesos, two and one half
(2.5%) per cent. (A.M. No. 99-8-01-SC, September 14, 1999).

Thus, whether the sale is conducted by the sheriff under Rule 141,
§9(1) or by a notary public under §20(e), the limit of P100,000.00 on the
amount of fees which may be collected should be applied.
(3) Anent Mr. Arejola's query, the payment not only of the sheriffs
fees under §9(1) but also of the filing fees under §7(c) is a condition for
the issuance of the certificate of sale as provided in Administrative
Circular No. 3-98, dated February 5, 1998, and now reiterated in
paragraph 2(d) of Circular A.M. No. 99-10-05-0.  The fee provided in
Rule 141, §20(d) pertains to applications for and entries of certificates of
sale and final deeds of sale m extra-judicial foreclosures of
mortgagees.  Such fee is separate and distinct from the filing and
sheriffs fees under Rule 141, §§7(c) and 9(1).
(4) The points raised in the letter of the unnamed "taxpayers" have
no merit.  Circular A.M. No. 99-10-05-0, like Administrative Order No. 3
and Administrative Circular No. 3-98, was issued to implement Act No.
3135.  Under Administrative Order No. 6, dated June 30, 1975,
executive Judges are responsible for the management of courts within
their administrative areas, including the supervision of the work of
Clerks of Court, as Ex-officio Sheriffs, in the conduct of extrajudicial
foreclosure of mortgages under Act No. 3135.
On the other hand, the Court's authority to impose the payment of
fees incident to the implementation of Act No. 3135 is derived from
Presidential Decree No. 194-9 which authorizes the judiciary to
generate its own funds and resources for the discharge of its functions
and duties.  The unnamed "taxpayers'" challenge to the constitutionality
of P.D. No. 1949 on the ground that it authorizes the Court to exercise
taxing powers can only be raised in a proper case.
There is likewise no merit in the contention that the participation of
the Executive Judge in approving the certificate of sale is "uncalled for"
as he may later on preside over a case questioning the validity of the
foreclosure sale. Such possibility can easily be avoided by re-assigning
the case to another branch of the court.  Nor do the cases of China
Banking Corporation v. Court of Appeals, 265 SCRA 327 (1996),
and Supenav. De la Rosa, 267 SCRA 1 (1997), cited by the unnamed
letter writers, support their contention.  In China Banking, the Court
ruled that in case of conflict between. Act No. 3135 and the
administrative issuance implementing such, which, at that time, was
Administrative Order No. 3, the former prevails.  That proposition is not
in dispute.  No conflict exists between Act No. 3135 and Circular A.M.
No. 99-10-05-0.  Similarly, the case of Supena, which concerns an
administrative complaint against a judge for having applied in an
extrajudicial foreclosure of mortgage the rules on venue of actions
under the Rules of Court instead of that under Act No. 3135, is
irrelevant to the question raised by the unnamed parties.  Gutierrez, J.,
on leave.
Very truly yours,

LUZVIMINDA D. PUNO
Clerk of Court
By:

(SGD.) MA. LUISA D. VILLARAMA

Assistant Clerk of Court