REAL ESTATE MORTAGE

- A real estate mortage (REM) is an accessory contract executed by a debtor in favor of a creditor
as security for the principal obligation. The principal obligation is usually a simple loan or
mutuum described in Art. 1953, Civil Code. Obligation within the stipulated period.
(Bustamante vs. Rosel, 319 SCRA 413)

ELEMENTS OF PACTUM COMMISORIUM:

1. There should be a property mortgaged by way of security for the payment of the principal
obligation; and
2. There should be a stipulation for automatic appropriation by the thing mortgaged in case of
non-payment of the principal obligation within the stipulated period.” (Edrain vs. Phil. Veterans
Bank, 645 SCRA 75)

Section 1: Complaint in action for foreclosure

COURT WITH JURISDICTION TO HEAR ACTIONS FOR FORECLOSURE:

- It is the RTC that has jurisdiction to hear and decide actions for foreclosure of a REM. 9BO 129,
Russel vs. Vestil, 304 SCRA 738)
- For purposes of venue, an action for foreclosure of mortgage of real property is an action
affecting interest in real property and, therefore, is a real action. The venue of real actions is the
place where the real property involved, or a portion thereof is situated. (Sec. 1, Rule 4)

EFFECT OF DEATH OF THE MORTGAGOR/DEBTOR:

- The death of the mortgagor does not extinguish his debt. Such death does not also preclude the
foreclosure of any REM he may have executed prior to this death. (Rano, (2012), Civil Procedure
Vol. 2, p. 394)

REMEDIES OF THE MORTGAGEE/CREDITOR WHEN THE MORTGAGOR/DEBTOR DIES:

a. Creditor may abandon the security and prosecute his claim in the manner provided for
under Rule 86, and share in the general distribution of the assets of the estate:
b. He may foreclosure the mortgage by action in court, making the executor or administrator a
party defendant, and if there be a deficiency judgment after the sale of the mortgaged
property, he may claim the deficiency in the manner provided under Rule 86; or
c. He may rely upon the mortgage or other security alone, and foreclosure the same at any
time before it is barred by prescription, and in that event, he shall not be admitted as a
creditor, without the right to share in the distribution of the other assets of the state (Sec. 7,
Rule 86)

SPLITTING OF A SINGLE CAUSE OF ACTION:

- A creditor cannot file a civil action against the debtor for collection of the debt and subsequently
file an action to forclose the mortgage. This is an example of splitting of a single cause of action
which is prohibited under the ROC. (Danao vs. CA, 154 SCRA 446)
 MODES OF FORECLOSURE OF REAL ESTATE MORTGAGE:
a. Judicial Foreclosure; and
b. Extrajudicial Foreclosure

Section 2: Judgment on foreclosure for payment or sale

JUDGMENT ON FORECLOSURE:
- If upon the trial in such action the court shall find the facts set forth in the complaint to be true,
it shall render a judgment containing the following matters:
a. Ascertainment of the amount due to the plaintiff upon the mortgage debt or obligation,
including interest and other charges as approved by the court, and costs;
b. Render judgment for the sum so found due:
c. Order that the same be paid to the court of to the judgment oblige within a period of not
less than ninety (90) days nor more than one hundred twenty (120) days from the entry of
judgment; and
d. Admonition that in default of such payment the property shall be sold at public auction to
satisfy the judgment. (Sec. 2, Rule 68)
-The judgment of the court on the above matters is considered final adjudication of the case
and, therefore, subject to challenge by the aggrieved party by appeal or other post-
judgment remedies.

EQUITY OF REDEMPTION:
- The period mentioned in the judgment of the court (Sec. 2, Rule 68) is the period within which
the mortgagor may start exercising his “equity of redemption,” which is the right to extinguish
the mortgage and retain ownership of the property by paying the debt. The payment may be
made even after the foreclosure sale provided it is made before the sale is confirmed by the
court. (GSIS vs. CFI, 175 SCRA 19)

RIGHT OF REDEMPTION:
-General Rule: In judicial foreclosures, there is no right of redemption but only an equity of
redemption which can be exercised prior to the confirmation of the foreclosure sale:
-Exception: There is a right of redemption in a judicial foreclosure if the foreclosure is in favor of
banks as mortgagees, whether the foreclosure be judicial or extrajudicial. (Huerta Alba vs. CA,
339 SCRA 534)
- This right of redemption is explicity provided under Sec. 1, Rule 47 of the General Banking Laws
of 2000. Therefore, if the mortgagee is a bank, the mortgagor may exercise a right of
redemption even if the foreclosure is judicially made pursuant to Rule 68, ROC. (Huerta Alba vs.
CA, supra)

PERIOD OF REDEMPTION IN EXTRAJUDICIAL FORECLOSURES:

-General Rule: the period of redemption is one year.
-Exception: Under the General Banking Act, when the mortgagor is a juridical person. The period
of redemption is “until, but not after” the registration of the certificate of sale with the Register
of Deeds, “which in no case shall be more than 3 months after foreclosure, whichever is earlier.”
(Sec. 47, General Banking Acts of 2000)
 Section 6: Deficiency judgment

DEFICIENCY JUDGMENT; WHEN THERE IS NO DEFICIENCY JUDGMENT:

- If upon the sale of any real property as provided in the next preceding section there be a
balance due to the plaintiff after applying the proceeds of the sale, the court, upon motion, shall
render judgment against the defendant for any such balance for which, by the record of the
case, he may be personally liable to the plaintiff, upon which execution may issue immediately if
the balance is all due at the time of the rendition of the judgment; otherwise; the plaintiff shall
be entitled to execution at such time as the balance remaining becomes due under the terms of
the original contract, which time shall be stated in the judgment. 9Sec. 6, Rule 68)

RULE IN CASE THERE IS A SURPLUS INSTEAD OF A DEFICIENCY:

- It is the duty of the mortgagee to return to the mortgagor any surplus in the selling price during
the foreclosure sale. *Sulit vs. CA, 268 SCRA 441)

Section 7: Registration

REGISTRATION OF THE SALE:

- A certified copy of the final ord2er of the court confirming tha sale shall be registered in the
registry of deeds. If no right of r2edemption exists, the certificate of title in the name of the
mortgagor shall be cancelled, and 2a new one issued in the name of the purchaser. (Sec. 7, Rule
68)
- Where a right of redemption exists, the certificate of title in the name of the mortgagor shall not
be cancelled, but the certificate of sale and the order confirming the sale shall be registered and
a brief memorandum thereof made by the registrar of deeds upon the certificate of title. In the
event the property is redeemed, the deed of redemption shall be registered with the registry of
deeds, and a brief memorandum thereof shall be made by the registrar of deeds on said
certificate of title. (Sec. 7, Rule 68)
- If the property is not redeemed, the final deed of sale executed by the sheriff in favor of the
purchaser at the foreclosure sale shall be registered with the registry of deeds; whereupon the
certificate of title in the name of the mortgagor shall be cancelled and a new one issued in the
name of the purchaser. (Sec. 7, Rule 68)

Section 8: Applicability of other provisions

APPLICABILITY OF OTHER PROVISIONS:

The provisions of sections 31, 32 and 34 of Rule 39 shall be applicable to the judicial forclosure of real
estate mortgages under this Rule insofar as the former are not inconsistent with or may serve to
supplement the provisions of the lattetr. ( Sec. 8, Rule 68)