Foreclosure

§ FORECLOSURE OF REAL ESTATE MORTGAGE

Options/remedies of the mortgagee/secured creditor. If the debtor fails (or unjustly refuses)
to pay his debt when it falls due and the debt is secured by a mortgage and by a check,
the creditor has three options against the debtor and the exercise of one will bar the
exercise of the others. He may pursue either of the three but not all or a combination of them.
First, the creditor may file a collection suit against the debtor. This will open up all the properties
of the debtor to attachment and execution, even the mortgaged property it gel Second, the
debtor May opt to foreclose on the property. In case the debt is not fully satisfied, he may give
the debtor for deficiency judgment (not collection case or the whole indebtedness), in which
case, all the properties of the debtor, other than the mortgaged property, are again open up for
the satisfaction of the deficiency. Lastly, the creditor may opt to sue the debtor for violation of
BP 22 if the checks securing the obligation bounce. Circular 57-97 and Section 1(b), Rule 111
of the Rules of Court both provide that the criminal action for violation of BP 22 shall be deemed
to necessarily include the corresponding civil action, ie., a collection suit. No reservation to file
such civil action separately shall be recognized (Yap vs. First e-Bank Corpora-tion, 601 SCRA
250, 29 September 2009).

* A secured creditor may institute against the mortgage debtor either a personal action
for the collection of the debt, a real action to judicially foreclose the real estate mortgage, or
an extrajudicial foreclosure of the mortgage. The remedies, however, are alternative, not
cumulative, and the election or use of one remedy operate as a waiver of the others (Sycamore
Ventures Corp. u. Metrobank, 709 SCRA 559, 18
November 2013).
The secured creditor has three remedies/options that he may alternatively adopt for the
satisfaction of his indebted-ness.

In particular, he may choose to: (a) waive the mortgage and claim the entire debt from the
estate of the mortgagor as an ordinary claim; (b) foreclose the mortgage judicially and
prove the deficiency as an ordinary claim; and (c) rely on the mortgage exclusively, or
other security and foreclose the same before it is barred by prescription, without the
right to file a claim for any deficiency (Heirs of the Late Flaviano Maglasang and Salud
Adaza-Maglasang vs. Manilabank,
706 SCRA 235, 23 September 2013).

*Obtaining a personal judgment waives right to foreclose. Prior to the effectivity of Circular
57-97, the alter-native remedies of foreclosure of mortgage and collection suit were not barred
even if a suit for Batas Pambansa Blg.22 had been filed earlier, unless a judgment of conviction
had already been rendered in BP 22 case finding the accused debtor criminally liable and
ordering him to pay the amount of the checks.
A creditor who obtains personal judgment against the debtor on a loan waives his right
to foreclose on the mortgage securing the loan, otherwise, the creditor becomes guilty of
splitting a single cause of action for the debtor's inability (or unjustified refusal) to pay
his debt (Yap vs. First e-Bank Corporation, 601 SCRA 250, 29 September 2009).
When petitioner filed Criminal Cases No. 612-90 to No.615-90 (for violation of BP 22), he was
deemed to have already availed himself of the remedy of collection suit. Following the rule on
the alternative remedies of a mortgage-creditor, petitioner is barred from subsequently resorting
to an action for foreclosure (Ching us. Spouses Santos, GR No. 169647, 31 August 2007).
"Mortgagee's right in case of default of installment payment.

Where the secured debt is payable in installments, default in the payment of any
installment gives the mortgage a right to foreclose as to such installment without waiting
for the maturity of the whole debt (Sanga vs. Zaballero & Santos, 59 Phil 101).

*Default: basis of foreclosure of mortgage. Foreclosure of mortgaged properties in case

of default in payment of a debtor is a legal remedy afforded by law to a creditor.

Hence, a threat to foreclosure the mortgage would not, per se, vitiate consent (DBP u. Perez,
GR No. 148541, 11 November 2004).

Foreclosure is but a necessary consequence of nonpayment of mortgage indebtedness.

As a rule, the mortgage can be foreclosed only when the debt remains unpaid at the time it is
due

Foreclosure is valid where the debtor is in default in Snie payment of his obligation (PB
U. CA, GR No. 126908,
16 January 2003).
Foreclosure proceedings have in their favor the presumption of regularity and the burden of
evidence to rebut the same is on the party claiming otherwise (Cristobal v. CA, GR No. 124372,
16 March 2000, 328 SCRA 256).

It is a settled rule of law that foreclosure is proper when the debtors are in default of
payment of their obligation. In fact, the parties stipulated in their credit agreements, mortgage
contracts and promissory notes that respondent was authorized to foreclose on the mortgages,
in case of a default by petitioners. That this authority was granted is not in dispute (Selegna
Management & Deu't. Corp. U. UCPB, GR No.
165662, 03 May 2006). Mora solvendi, or debtor's default is defined as a delay in the fulfillment
of an obligation, by reason of a cause imputable to the debtor.

There are three requisites necessary for a finding of default.

First, the obligation is demandable and liquidated; second, the debtor delays per-formance;
third, the creditor judicially or extrajudicially requires the debtor's performance (Selena
Management & Deu't. Corp. vs. CPB, GR No. 165662, 03 May 2006). A debt is liquidated
when the amount is known or is determinable by inspection of the terms and conditions
of the relevant promissory notes and related documentation. Failure to furnish a debtor a
detailed statement of account does not ipso facto result in unliquidated obligation (Selena
Management & Deu't. Corp. vs. UCPB, GR No. 165662, 03 May 2006).

*Demand is essential for default.

Those obliged to deliver or to do something incur in delay from the time the oblige judicially or
extrajudically demands from them the fulfillment of their obligation (Art. 1169, Civil Code).
Demand, however, is necessary for default to exist and which gives the right to collect debt and
foreclose the mortgage. The matur-it dates in the promissory notes or the acceleration clause
("in case of non-payment of this note or any portion of it on demand, when due, on account of
this note, the entire obligation shall become due and demandable..") therein stated only indicate
when payment can be demanded. It is the refusal to pay after demand that gives the creditor a
cause of action against the debtor

Demand, however, is not necessary where the law or the obligations expressly declare it
unnecessary (Premiere Deu't. Bank v. Central Surety & Insurance Company, Inc., 579 SCRA
359, 13 February 2009).
Filing a case in court is the judicial demand referred to in Article 1169 of the Civil Code, which
would put the obligor in delay (UCPB u. Beluso, 530 SCRA 567 [2007]).

*Two modes of foreclosure of real estate mortgage.

Foreclosure of real estate mortgage is either done extrajudicially or judicially. The
provisions of Rule 68 of the 1997 Rules of Civil Procedure govern judicial foreclosure. The ex-
tra-judicial foreclosure of real estate mortgage, on the other hand, is carried out in the procedure
governed by the provisions of Act 3135, as amended, otherwise known as "An Act to Regulate
the Sale of Property Under Special Powers Inserted in or Annexed to Real Estate Mortgages.'

O EXTRA-JUDICIAL FORECLOSURE OF REAL ESTATE MORTGAGE UNDER ACT 3135,

AS AMENDED

*Essential requirements under Act 3135. Under Act 3135, as amended and settled
jurisprudence, the following essential requirements must be met:
1. There must be a special power of attorney inserted in or attached to the real estate mortgage
authorizing the sale pursuant to the provisions of Act, 3135, as amended (Section 1; Paguyo vs.
Gatbun-ton, 523 SCRA 156 (2007)).

2. The sale must be made within the province where the property or any part thereof is located,
unless otherwise stipulated (Section 2; Supena v. de la Rosa, 267 SCRA 1).The extrajudicial
foreclosure sale of a real estate mortgage cannot be made legally outside of the province
in which the property sold is situated (Ochoa u. Chinabank, 646 SCRA 414, 23 March2011).
3. There must be a notice of sale to be posted in oree public places of the municipality or city
where the property is situated. If the property is woth more than P400.00, the notice shall also
be published once a week for three consecutive weeks in a newspaper of general circulation in
the city or municipality (Section 3).

4. The sale shall be made at public auction between the hours of nine in the morning and four in
the af-ternoon, and shall be under the direction of the sheriff of the province, the justice or
auxiliary jus-fice of the peace (now municipal judge) of the municipality in which such sale shall
be made, or a notary public of said municipality (Section 4).

*Procedure of extrajudicial foreclosure (EJF) under Act 3135. In Administrative Matter No.
99-10-05-0 (as fur-her amended on 07 August 2001), the Supreme Court pre-sibed the following
procedures in the extra-judicial foreclosure of mortgage:

1. All applications for extra-judicial foreclosure of mortgage whether under the direction of the
sheriff or a notary public, pursuant to Act 3135, as amended, shall be filed with the Executive
Judge, through the Clerk of Court who is also the Ex-Officio Sheriff.
2. Upon receipt of an application for extra-judicial foreclosure of mortgage, it shall be the duty of
the Clerk of Court to:
a)
receive and docket said application and to stamp thereon the corresponding file num-ber, date
and time of filing;
b)
collect the filing fees therefore pursuant to Rule 141, Section 7(c) as amended by A.M.
No. 00-2-01-SC, and issue the corresponding official receipt;
c)
examine, in case of real estate mortgage foreclosure, whether the applicant has com plied with
all the requirements before the public auction is conducted under the direction of the sheriff or a
notary public, pursuant to Sec.
4 of Act 3135, as amended;
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 in the aforementioned sections and in Rule 141, Section 9(1) as
amended by A.M. 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;

e) after the certificate of sale has been issued to the highest bidder, keep the complete re-cords,
while awaiting any redemption within a period of one (1) year from date of registration of the
certificate of sale with the Register hall be archived. Notwithstanding the foregoing provision,
juridical persons whose property is sold pursuant to an extrajudicial fore-closure, shall have the
right to redeem the property until, but not after, the registration of The certificate of foreclosure
sale which in no case shall be more than three (3) months after foreclosure, whichever is
earlier, as provided in Section 47 of Republic Act No. 8791 (as amended, Res. of August 7,
2001)

Where the application concerns the extrajudicial foreclosure of mortgages of real estates and/or
chattels in different locations covering one indebtedness, only one filing fee corresponding to
such indebtedness shay he collected. The collecting Clerk of Court shall, apart from the official
receipt of the fees, issue a certificate of payment indicating the amount of indebtedness, the
filing fees collected, the mortgages sought to be foreclosed, the real estates and/or chattels
mortgaged and their respective locations, which certificate shall serve the purpose of having the
application docketed with the clerks of Court of the places where the other properties are
located and of allowing the extrajudicial foreclosures to proceed thereat.

3. The notices of auction sale in extrajudicial foreclosure for publication by the sheriff or by a
notary public shall be published in a newspaper of general circulation pursuant to Section 1,
Presidential Decree No. 1079, dated January 2, 1977, and noncompliance therewith shall
constitute a violation of Section 6 thereof.

4. The Executive Judge shall, with the assistance of the Clerk of Court, raffle applications for
extrajudicial foreclosure of mortgage under the direction of the sheriff among all sheriffs,
including those assigned to the Office of the Clerk of Court and Sheriffs IV assigned in the
branches

5. The name/s of the bidder/s shall be reported by the sheriff or notary public who conducted the
sale to the Clerk of Court before the issuance of the certificate of sale.

*Administrative duty of executive judge in EJF. (EXTRAJUDICIAL FORECLOSURE)

An executive judge has the administrative duty in extrajudicial proceedings to ensure that all
conditions of the law have been complied with before authorizing the public auction of any
mortgaged property and this duty, by necessity, included facially examining the mortgage
agreement as to whether it adequately identified the land to be auctioned or whether it contains
sufficient authorization on the part of the mortgagee to push forth with an extrajudicial sale
(Ingles u. Estrada, 695
SCRA 285, 08 April 2013).

*Time when to conduct auction sale.

Whether a sale a public auction, to be valid, must be conducted the whole day from 9:00 a.m.
until 4:00 p.m. of the scheduled auction day. Section 4 of Act 3135 provides that the sale must
take place between the hours of nine in the morning and four in the afternoon.
The word "between" ordinarily means "in time interval that separates." Thus, "between the hours
of nine in the morning and four in the afternoon" merely provides a time frame within which an
auction sale may be conducted Therefore, a sale at public auction held within the intervening
period provided by law (i.e., at any time from 9:00 a.m. until
4:00 p.m.) is valid, without regard to the duration or length of time it took the auctioneer to
conduct the proceedings (PNB
V. Cabatingan, 557 SCRA 426 [2008]). Act 3135 regulates the extrajudicial sale of mortgaged
real properties by prescribing a procedure which effectively safeguards the rights of both debtor
and creditor.

« The mandatory notice and publication require. pents.

Notice and publication under PD 1079 and Act
3135, as amended.
secion 1 Of PD 1079, as amended provides:
"All notices of auction sales in extra-judicial oreclosure of real estate mortgage under Act 3135,
as amended xxx required by law to be published in a newspaper of general circulation
inparticular provinces and/or cities shall be published in newspapers or publications published,
edited and circulated in the same city andlor province where the requirement of general
circulation applies: Provided, That the province or city where the publication's principal office is
located shall be considered the place where it is edited and published x x x.
Section 3 of Act 3135, as amended, reads:
"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
hree consecutive weeks in a newspaper of general circulation in the municipality or city.
A reading of the above provisions gives us the impres-in that the publication of extra-iudicial
sales under Act. 3135, if the property is worth more than 400 pesos, shall be in a newspaper of
general circulation in the city or municipality where the property lies. Hence, if the property in
question is located in QC, it logically follows that the auction sale of said property should be
published in a newspaper of general circulation that is edited and published in QC.

However, such application and/or interpretation are too narrow and very limited that it virtually
defeats the purpose and intention of the law. If this is the case, the leading dailies, like the
Philippine Daily Inquirer (PDI) (with head office in Makati City) and Manila Bulletin (with head
office in Manila), which enjoys a wide circulation nationwide, cannot publish notice of extra-
judicial sales of properties located in Quezon City simply because it is outside their place of
publication.

What is important is that the newspaper is of general circulation in the place where the
property/ies to be foreclosed is/are located.

The Affidavit of Publication executed by the account executive of the newspaper in the place
where the properties are located stating that said newspaper is of general circulation and is
published in the said locality is prima facie proof that the newspaper is generally circulated in
said place (China Banking Corporation U. Martir, 599 SCRA 672, 11 September 2009).

To be a newspaper of general circulation, it is enough that it is published for the dissemination

of local news and general information, that it has a bona fide subscription list of paying
subscribers, and that it is published at regular inter-vals. Over and above all these, the
newspaper must be available to the public in general, and not just to a select few chosen by the
publisher. Otherwise, the precise objective of publishing the notice of sale in the newspaper will
not be realized (Metrobank v. Penafiel, GR No. 173976, 27 February 2009).

In a line of cases, the Highest Court declared that publication of the extrajudicial sale in a
newspaper of general circulation is more than sufficient compliance with the notice posting
requirement of the law. (Fortune Motors vs Metrobank. Cristobal v. CA.; Concepcion vs. CA.
Bohanan vs. CA, Olizon vs CA, Gravina vs CA)

PD. 1079 and Act 3135 do not require that the newspaper which publishes judicial notices
should be a daily newspaper (Fortune Motors, 265 SCRA 72).

In Olizon at 156, it was ruled that.

"x xx the publication of the notice of sale in the newspaper of general circulation alone is more
than sufficient compliance with the notice-posting requirement of the law. By such publica-tion, a
reasonably wide publicity had been ef fected such that those interested might attend the public
sale, and the purpose of the law had 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 inform 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 at-tained, immaterial errors and mistakes will not affect the sufficiency of the
notice; xxx" (empha-ses supplied)
An extra-judicial foreclosure sale is an action in rem and thus requires only notice by publication
and posting to bind the parties in the foreclosed property. No personal notice is necessary
(Langkaan Realty Deu't., supra; Bohanan u. CA, supra; Fortune Motors, 265 SCRA 72).
A certificate of posting is not required, much less considered indispensable, for the validity of a
foreclosure sale under Act 3135 - it is significant only in the matter of providing compliance with
the required posting of notice. The failure to post a notice is not per se a ground for invalidating
the sale provided that the notice thereof is duly published in a newspaper of general circulation
(DBP U. Aguirre, GR No. 144877, 07 September
2001).

However, the failure to publish the notice of auction sale as required by the statute
constitutes a jurisdictional defect which invalidates the sale (DBP u. Aguirre, GR No.
144877,
07 September 2001).
The affidavit of publication executed by the publisher, business/advertising manager that a
newspaper is a newspaper of general circulation constitutes prima face evidence of compliance
with the requisite publication (Bonnevie u. CA,
125 SCRA 122 [1983]; Sadang u. GSIS, 18 SCRA 491).
A single act of posting the notice of auction sale satisfies the requirements of law. The
burden of proving that the posting requirement was not complied with is shifted to the one who
alleges non-compliance (Bonnevie u. CA, 125
SCRA 122 [1983])

2)
The object of a notice of sale is to inform the public of the nature and condition of the
property to be sold, and inform 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 (Olizon u. CA, 236 SCRA
148). Publication, therefore, is required to give the foreclosure sale a reasonably wide publicity
such that those interested might attend the public sale.

The publication of the notice of sale in the newspaper of general circula-posing requirene than
suficient compance win the notice st Marequirement of the law China lance in corporation v.
Martir, 590 SCRA 622. Il Sita Bank-2009).
Failure to post a notice is not a ground for invalidating he sale as long as the notice is duly
published in a newspa per of general circulation. Thus, publication of the novspa; sale is
sufficient compliance with the statutory requirement on notice-posting

It is true 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
and render the sale at least voidable.
Nonetheless, we must not also lose sight of the fact that the purpose of the publication of the
Notice of Sheriff's Sale is to inform all interested parties of the date, time and place of the
foreclosure sale of the real property subject thereof.
Logically, this not only requires that the correct date, time and place of the foreclosure sale
appear in the notice, but also that any and all interested parties be able to determine that what
is about to be sold at the foreclosure sale is the real property in which they have an interest
(Sps Suico us. Phil ippine National Bank, et al., GR No. 170215, August 28, 2007).

3) The notice and publication requirement are mandatory and failure to comply is a
jurisdictional defect that vitiates the foreclosure auction sale.

Non-compliance with the notice and publication requirement in Act 3135, as amended is
a jurisdictional defect that vitiates the auction sale.

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
.
The failure to publish the notice of auction sale as required by the statute constitutes a
jurisdictional defect which invalidates the sale (DBP U. Aguirre, GR No. 144877, 07 September
2001).

The right of a bank to foreclose a mortgage upon the mortgagor's 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 end. The valid exercise of the right ends when
the right disappears, and it disappears when it is abused especially to the prejudice of others
(PNB v. Nepomuceno, supra.).

4) The parties have no right to waive the notice and publication requirements. There is no
estoppel in case of an agreement to dispense with the notice and publication requirements.
The parties have absolutely no right to waive the posting and publication requirements (PNB vs
Nepomuceno Productions; Ouano v CA)

To request postponement of the sale is one thing; to request it without need of compliance with
the statutory requirements is another. Therefore, a party is not estopped from questioning the
validity of the foreclosure sale for noncompliance with Act 3135

Publication, therefore, 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 (Ouano v.
CA, GR No. 129279, 04 March 2003).
In the case of DPB v. CA, GR No. 125838, 10 June 2003, the Supreme Court clarified that:
"The form of the notice of extrajudicial sale is now prescribed in Circular No. 7-2002 issued by
the Office of the Court Administrator on 22
January 2002. Section 4(a) of Circular No. 7-2002 provides that: xxX
The last paragraph of the prescribed notice of sale allows the holding of a rescheduled auction
sale without reposting or republication of the notice. However, the rescheduled auction sale will
only be valid if the rescheduled date of auction is clearly specified in the prior notice of sale.
The absence of this information in the prior notice of sale will render the rescheduled auction
sale void for lack of reposting or republication. If the notice of auction sale contains this
particular information whether or not the parties agreed to such rescheduled date, there is no
more need for the reposting or republication of the notice of the rescheduled sale

5. Immaterial errors in publication in mortgage foreclosure auction sales will not

invalidate it.

While 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, the validity of a notice of sale is not affected by immaterial
errors - only substantial errors will invalidate it (K-Phil, Inc. U. Metrobank, 569 SCRA 459, 17
October 2008).
6) Republication and reposting is required in case of postponement.
Under Act 3135, as amended, republication as well as reposting of the notice of sale is required
if the foreclosure does not proceed on that date originally intended (Metro-bank v. Nikko
Sources International Corp., 604 SCRA 336,
23 October 2009). Statutory provisions governing publication of notice of mortgage foreclosure
sales must be strictly complied with and slight deviations will invalidate the notice and render the
sale at the very least voidable
.
7) Personal notice to the mortgagor is REQUIRED if it’s stipulated
There being no contractual stipulation therefore, personal notice is not necessary and what
governs is the general rule in Section 3 of Act 3135, as amended, which directs the posting of
notices of the sale in at least three (3) public places of the municipality where the property is
situated, and the publication therefore in a newspaper of general circulation in said municipality.

Act 3135 only requires (1) the posting of notices of sale inthree 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 additonal requirement

Thus, while publication of the foreclosure proceedings in the newspaper of general circulation
was complied with, personal notice is still required when the same was mutually agreed upon by
the parties as additional condition of the mortgage contract.
Failure to comply with such stipulation is fatal

The rule is that statutory provisions governing publication of mortgage foreclosure sales must
be strictly complied with, and that even slight deviation therefrom Will invalidate the notice and
render the sale at least voidable. × x × 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 vitiates the
sale

The failure to publish the notice of auction sale as required by the statute constitutes a
jurisdictional defect which invalidates the sale (DBP vs Aguirre Gr no. 144877)

"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 cir-culation. Personal notice to the
mortgagor is not necessary.

Nevertheless, the parties to the mortgage contract are not precluded from exacting additional
requirements. In this case, petitioner and respondent in entering into a contract of real estate
mortgage, agree inter alia:
"all correspondence relative to this mortgage, including demand letters, summonses,
subpoenas, or notifications of any judicial or extrajudicial 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" (Metrobank v. Wong, 359
SCRA 608 [2001]).
The Olizon case is an exception:
"Obviously, as correctly pointed out by re-spondent, 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 extrajudicial 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.
An extrajudicial foreclosure sale is an action in rem and thus requires only notice of publication
and posting to bind the parties in the foreclosed property. (Langkaan Realty Devt.. Vs. UCPB,
GR No. 139437, 08 December 2000; Olizon v. CA,
2236 SCRA 148; Bohanan U. CA, 256 SCRA 355).

No personal notice is necessary to the mortgagor

unless stipulated upon by the parties.

Publication of the extrajudicial sale in a newspaper of general circulation is more than sufficient
compliance with the notice-posting requirement of the law (Cristobal vs. CA, 328 SCRA 256;
The notice and publication requirement are mandatory and failure to comply is a jurisdictional
defect that vitiates the foreclosure auction sale (Tambunting U. CA, 167 SCRA 16)

. The parties have absolutely no right to waive the posting and publication requirements.
Foreclosure auction sale is imbued with public policy considerations and any waiver on the
notice and publication requirements would be inconsistent with the intent and letter of Act 3135,
as amended.

Publication is therefore 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 public auction

8) Posting of extra-judicial foreclosure auction sale in perceptible areas

The law does not intend that notices to the public be posted on specific bulletin boards or
information areas of a public place. What the law directs is for the notices to be placed in an
area where the same is perceptible (Marcelo v.
PCIB, 607 SCRA 778, 04 December 2009).

*Bid price in extra-judicial foreclosure.

1)
Surplus money arising from foreclosure auction sale belongs to the mortgagor.
Surplus money arising from a sale of land under a decree of foreclosure stands in the place of
the land itself with respect to liens thereon or vested rights therein. They are constructively, at
least, real property and belong to the mortgagor or his assigns. Inevitably, the right of a
mortgagor to the surplus proceeds is a substantial right which must prevail over rules of
technicality
Inadequacy of price in foreclosure auction sale is not sufficient to set aside foreclosure
sale.
Now in forced sales, low prices are generally offered and the mere inadequacy of the price
obtained at the sheriff's sale, unless shocking to the conscience, has been held insufficient to
set aside the sale. This is because no disadvantage stands to gain with a reduced price
because he possess the right to redemption

When there is the right to redeem, inadequacy of price becomes immaterial since the
judgment debtor may reacquire the property or sell his right to redeem, and thus recover the
loss he claims to have suffered by reason of the price at the auction sale

Gross inadequacy of the price will not nullify the foreclosure sale (Tiongco vs. Phil.
Veterans Bank, 212 SCRA 176 [1992); ABACA Corp. vs. Garcia, GR No. 118408, 14
May 1997).
With respect to the allegation that foreclosure was void due to the inadequacy of the bid price,
we agree with the CA that the "mere inadequacy of the price obtained at the sheriff's sale,
unless shocking to the conscience, (was) not sufficient to set aside the sale if there (was) no
showing that, in the event of a regular sale, a better price (could) be obtained." Furthermore, in
the absence of any irregularity in the foreclosure proceeding or proof that it was carried out
without strict observance of the procedure, we will continue to assume its regularity and strike
down any attempt to vitiate it.

In this case, E.T. Henry and the spouses Tan made no mention of any anomaly to support the
nullification of the foreclosure sale but merely alleged a disparity in the bid price and the
property's fair market value (Hi-Cement Corporation vs. Insular Bank of Asia and America, GR
No. 132403, September 28, 2007).
EXCEPTION: When the price is unusually lower than their true value.
Mere inadequacy of price per se will not invalidate a judicial sale of real property. It is only when
the inadequacy of the price is grossly shocking to the conscience or revolting to the mind, such
that a reasonable man would neither directly or Indirectly be likey to consent to it, that the sale
shall be declared null and void.

This rule, however, does not strictly apply in the case of extrajudicial foreclosure sales
where the right of redemption is available (Sycamore Ventures Corp. vs. Metrobank, 709
SCRA 559, 18 November 2013).
The foreclosure sale may be set aside on equitable consideration in case the properties were
sold at an unusually lower price than their true value, ie. properties worth P500,000.00 were
sold for only P57,396.85 (Cometa VS. IAC,
151 SCRA 563 [19871).
The grounds for the proper annulment of the foreclosure sale are the following: (1) that
there was fraud, collusion, accident, mutual mistake, breach of trust or misconduct by
the purchaser; (2) that the sale has not been fairly and regularly conducted; or (3) that
the price was inadequate and the inadequacy was so great as to shock the conscience of
the court (UCPB vs. Beluso, 530 SCRA 567 (20071).

3. Bid price in excess of mortgage debt may be a ground to set aside foreclosure sale.
"The general rule that mere inadequacy of price is not sufficient to set aside a foreclosure sale
is based on the theory that the lesser the price the easier for the owner to effect the redemption.
The same thing cannot be said where the amount of the bid is in excess of the total mortgage
debt.

The reason is that in case the mortgagor decides to exercise his right of redemption,
Section 30 of Rule 39 provides that the redemption price should be equivalent to the
amount of the purchase price, plus one percent monthly interest up to the time of
redemption, together with the amount of any assessments or taxes which the purchaser
may have paid thereon after purchase, and interest on such last-named amount at the
same rate. Applying this provision to the present case would be highly iniquitous if the amount
required for redemption is based on P7,000,000.00, because that would mean exacting
payment at a price unjustifiably higher than the real amount of the mortgage obligation. We
need not elucidate on the obvious. Simply put, such a construction wil undeniably be prejudicial
to the substantive rights of pri. vate respondent and it could even effectively prevent her tom
exercising the right of redemption" (Sulit v. CA, 268
SCRA 441, 453-454 |19977).
4. "Tipo" or upset price
The price which is set by the parties as the amount at which the property will be sold at public
auction. This stipulation is null and void because it contravenes Rule 68 of the Rules of Court
which provides that the property mortgaged shall be sold to the highest bidder. Accordingly,
even if there is such a stipulation, the sale of the property shall take place in accordance with
the requirements of the law, and the property sold to the highest bidder (BPI v. Yulo, 31 Phil
472).
5)
Mortgaged property sold at an auction sale lower than the actual market value
The fact that the mortgaged property was sold at an amount less than its actual market value
should not militate against the right to such recovery - a mortgagor stands to gain with a
reduced price because he possesses the right of redemption (Suico Rattan & Buri Interiors, Inc.
vs, 490SCRA 560 (2006]).
6) There is no legal basis for requiring that the bid should at least be equal to the market
value of the foreclosed property or the outstanding obligation of the foreclosed property
on the outstanding obligation of the mortgage debtor (BPI Family Savings Bank, Inc v.
Avenido, 661 SCRA 758, 07
December 2011).
7)
Change of bid after foreclosure
PNB cannot be allowed to change its bid after foreclosure sale by simply submitting a letter
because tolerating it is to set a dangerous precedent where unscrupulous bidders would offer
an astronomical amount, only to withdraw it after the foreclosure sale has been completed (PMB
u. Roque, 665
SCRA 57, 06 February 2012).
Act 3135 has no requirement for the determination of the mortgaged properties' appraised value
as basis for the bid price.
Act 3135 has no requirement for the determination of the mortgaged properties' appraisal
value. Nothing in the law likewise indicates that the mortgagee-creditor's appraisal value
shall be the basis for the bid price. Neither is there any rule nor any guideline prescribing the
minimum amount of bid, nor that the bid should at least equal to the properties' current
appraised value. What the law only provides are the requirements, procedure, venue and
the mortgagor's right to redeem the property. When the law does not provide for the
determination of the property's valuation, neither should the courts so require, for our
duty limits us to the interpretation of the law, not its augmentation (Sycamore Ventures
Corp.
VS. Metrobank, 709 SCRA 559, 18 November 2013).

*Foreclosure of mortgage does not ipso facto extinguish the debtor's obligation. The
foreclosure of a mortgage does not ipso facto extinguish a debtor's obligation to his creditor.
The proceeds of a sale at public auction may not be sufficient to extinguish the liability of the
former to the latter. For this reason, we favor a construction of Section 4 of Act 3135 that affords
the creditor greater opportunity to satisfy his claim without unduly rewarding the debtor for not
paying his just debt (PNB VS. Cabatingan, 557 SCRA 426
[2008]). It is well settled that the creditor is allowed to recover the deficiency from the sale of the
property that was extrajudicial foreclosed (Cunada v. Drilon, 432 SCRA 618 (2004]).

*Deficiency judgment. It refers to judgment for any unpaid balance of the obligation, which
remains after foreclosure of mortgage.

Closure of mortgage, judical or extrajudicial, which a creditor nay secure from the court Phil.
Bank of Commerce v. de 1a, 6 SCRA 1026 (1962). In extrajudicial foreclosure of mortgage,
where the proceeds of the sale are insufficient to pay the debt, the mortgagee has the right to
recover the deficiency from the debtor (Prudential Bank vs. Martinez, 189 SCRA 612 11990). In
a foreclosure, the deficiency is determined by simple arithmetical computation immediately after
foreclosure (United Planters Sugar Milling Co., Inc.
(UPSUMCO) U. CA, 527 SCRA 336 (20071).

*Effect of foreclosure of a prior mortgage on subordinate liens. The rights of a

subsequent lien holder over the mortgage property are inferior to that of the prior
mortgagee.
A subsequent lien holder acquires only the right of redemption vested in the mortgagor, and his
rights are strictly subordinate to the superior lien of the anterior mortgagee. After the foreclosure
sale, the remedy of the second mortgagee is limited to the right to redeem by paying off the debt
secured by the first mortgagee (PNB vs. ICB, 199 SCRA 508, 31 July
1991).
The rule is that upon a proper foreclosure of a prior mortgage, all liens subordinate to the
mortgage are likewise foreclosed, and the purchaser at public auction held pursuant
thereto acquires title free from the subordinate liens. Ordinarily, thereafter the Register of
Deeds is authorized to issue the new title without carrying over the annotation of subordinate
liens. (ibid.)

*Foreclosure of mortgage with usurious loan. 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. The debt due is considered as without the
stipulated excessive interest, and the legal interest of 12% per annum will be added in place of
the excessive interest formerly imposed (Advocates for Truth in Lending, Inc. u. Bangko Sentral
Monetary Board, 688
SCRA 530, 15 January 2013).
It is jurisprudential axiom that a foreclosure sale arising from a usurious mortgage
cannot be given legal effect (An-chor Savings Bank (now Equicom Saving Bank) VS
Pinzman Realty Dev't. Corp., 732 SCRA 678, 13 August
2014).
#For failure to include the second loan in its application for extrajudicial foreclosure as
well as in its bid at the public auction sale, respondent bank is deemed to have waived its
lien on the mortgaged property with respect to the second loan. After the foreclosure of the
mortgage property, the mortgage is extinguished and the purchaser at auction sale acquires the
property free from such mortgage.
Any deficiency amount after foreclosure cannot constitute a continuing lien on the foreclosed
property, but must be collected by the mortgagee-creditor in an ordinary action for collection. In
this case, the second loan from the same mortgage deed is in the same nature of a deficiency
amount after foreclosure (Tecklo v. Rural Bank of Pamplona, Inc., 620
SCRA 262, 18 June 2010).

*Foreclosure and subsequent or junior lien-holders.

If subsequent or junior lien-holders are not joined in the foreclosure action, the judgment
in favor of the mortgagee is ineffective as to them. In that case, they retain what is known as
the "unforeclosed equity of redemption." A separate foreclosure proceeding should be brought
to require them to redeem from the first mortgagee, or the party acquiring title to the mortgaged
property at the foreclosure sale under penalty of losing that prerogative to redeem (Limpin vs.
IAC, 166 SCRA 87 [1988]; also Top Rate Int'l. Services, Inc. u. IAC,
143 SCRA 467 [1986]).
*Extrajudicial foreclosure of a property under lease.
A mortgagee who has foreclosed upon the mortgaged real property of a delinquent debtor and
has purchased the same a the foreclosure sale, can be granted a writ of possession over the
property despite the fact that the premises are in the possession of a lessee thereof and whose
lease has not yet been terminated, unless the lease has been previously registered in the
Registry Property or with prior knowledge of the mortgagee (Prudential Bank vs. Gapultos, GR
No. 41835, 19
January 1990).

*Penalty charge and foreclosure. Where the mortgage contract does not contain a trace of the
penalty charges, such penalty cannot be recovered on the foreclosure of the mortgage (Phil.
Bank of Commerce U. CA, 253 SCRA 241).
Grounds for annulment of foreclosure. The grounds for the proper annulment of the
foreclosure sale are the following: (1) that there was fraud, collusion, accident, mutual
mistake, breach of trust or misconduct by the purchaser; (2) that the sale has not been fairly and
regularly conducted; or
(3) that the price was inadequate and the inadequacy was so great as to shock the conscience
of the court (UCPB u. Be-luso, 530 SCRA 567 [2007]).

*Retention of the surplus proceeds in an auction sale will not affect the validity of the
sale. If the mortgagee is retaining more of the proceeds of the sale than he is enti-ted to, this
fact alone will not affect the validity of the sale but gives the mortgagor a cause of action to
recover such surplus (Metrobank u. Lamb Construction Consortium Corp., 606 SCRA 159, 27
November 2009).