REAL MORTGAGE 2-K | 2016 - 2017

Art. 2124
Equitable Mortgage
Only the following property may be the object of a
contract of mortgage: -Where the sale is found to be a loan secured by a
(1) Immovables mortgage, the mortgagee-creditor who appears to be
(2) Alienable real rights in accordance with a buyer, has no right to eject petitioner since he
the laws, imposed upon immovable. cannot appropriate the things given by way of
mortgage of dispose of them.
Nevertheless, movables may be the object of a
chattel mortgage.
Interest in Contract of Mortgage

Real Estate Mortgage Interest is not an essential requisite of contract of

-A contract whereby the debtor secures to the
creditor the fulfillment of a principal obligation,
specially subjecting to such security immovable
property or real rights over immovable property
which such principal obligation shall be satisfied
with the proceeds of the sale of the said property or
rights in case the said obligation is not complied
with at the time stipulated.
Characteristics of Real Mortgage:
mortgage that the principal of the mortgage credit
bears interest or that there be interest as
compensation for the use of the principal.
If there is interest, interest may be in form of fruits
of the mortgaged property. In such case, the creditor
will be subject to obligations of antichresis creditor.
But if it is expressly agreed that the creditor will
apply the fruits to the interest and/or principal, then
the contract is antichresis defined under Article
2132.

a. Real
b. Accessory Cause or Consideration
c. Subsidiary
d. Unilateral Contract of Mortgage is an accessory contract and its
existence depends upon the existence of the
principal obligation.
Possesion of Property Mortgaged
The cause or consideration of the contract of
General Rule: mortgage is the same as that of the principal
The mortgagor-debtor retains possession of property contract. If the cause of the principal is valid, the
mortgaged as a security for the payment of sum contract of mortgage cannot be avoided on the
borrowed. ground of lack of consideration.1

This is because by the contract of mortgage, the The mortgage must sufficiently describe the debt
debtor merely subjects sought to be secured. An obligation is not secured by
the property to a lien but the ownership thereof is not a mortgage unless it comes fairly within its terms. 2
transferred.

Kinds of Mortgage
Exceptions:
A. When the mortgagor delivered the property
to the mortgage
- It is not an essential requisite that the
possession of the mortgaged property is 1 China Banking Corp vs Lichauco
retained by the mortgagor. He may
deliver it to mortgagee without altering
the nature of the contract. 2 Viola vs Equitable PCI Bank

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REAL MORTGAGE
1. Voluntary one which is agreed to between
the parties or constituted by the will of the
owner of the property on which it is created
2. Legal one required by law to be executed
in favor of certain persons 3
3. Equitable one which, although lacks the
proper form or other requisites of a
mortgage required by law, but the reveal the
intention of the parties to burden real
property as a security for a debt
Equitable mortgage is a real mortgage and the lien
created is not defeated by requiring compliance with
the formalities necessary to the validity of a
voluntary real estate mortgage. It is governed by Art.
1365, 1450, 1454, 1602, 1603, 1604 and 1607.
1602 listed the instance when a contract may be
presumed to be an equitable mortgage.
Subject Matter of Mortgage
Object of a contract of mortgage are immovable
property under Article 415 and alienable real rights
imposed upon immovable. A real right over a real
property is a real property itself.4 Thus a mortgage
on real property is in itself a real property.
Building under Art 415 is separate and distinct from
the land. Thus, building itself is an immovable
property and may thus be mortgaged apart from the
land on which it is built. However, land necessarily
includes building built thereon.
Objects of pledge and chattel mortgage are
movables.
Future property cannot be object of mortgage
Future property cannot be object of contract of
mortgage. A stipulation in a contract of mortgage
whereby the mortgagor also constituted a mortgage
in favor of the mortgagee on properties he might
acquire in the future did not constitute a valid
mortgage on the properties acquired subsequent to
the constitution of the mortgage.5
3 Art. 2082, 2083
4 Art 415 (10)
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A stipulation subjecting to the mortgage lien,
properties which the mortgagor may acquire, install
in connection to the real property already mortgaged
is valid.6
Article 2125
In addition to the requisites stated in Article 2085,
it is indispensable, in order that a mortgage may be
validly constituted, that the document in which it
appears be recorded in the Registry of Property. If
the instrument is not recorder, the mortgage is
nevertheless binding between the parties.
The persons in whose favor the law establishes a
mortgage have no other right than to demand the
execution and the recording of the document in
which the mortgage is formalized.
Essential Requisites of Mortgage in Article 2085
1. Mortgage be constituted to secure the
fulfillment of a principal obligation.
2. The mortgagor be the absolute owner of the
thing mortgaged.
3. The mortgagor should have the free disposal
of their property, and in the absence thereof,
that they be legally authorized for that
purpose.
Additional requisites provided for by Article
2125.
1. Mortgage must be in a public instrument.
2. Mortgage must be registered in the Registry
of Property.
Effects of non-registration:
5 Dilag vs Heirs of Resurrecion
6 Peoples Bank and Trust CO vs Dahican
Lumber Co.
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REAL MORTGAGE
-The registration only operates as a notice to others
but it neither adds to its validity nor converts an
invalid mortgage into a valid one. Hence, failure to
register does not invalidate the mortgage, but it
merely limits its binding effect to the parties thereto
to the exclusion of others.
Mortgagee in Good faith
-The benefit of the mirror doctrine similarly applies
to a mortgagee in good faith.
- This mirror doctrine provides that a mortgagee has
the right to rely in good faith on the certificate of
title of the mortgagor of the property and has no
obligation to undertake further investigation in order
to ascertain the defect in the title of the mortgagor.
Exceptions:
1. When there are indicators of any cloud
or vice in the ownership of the
mortgagee; e.g there are other occupants
of mortgaged property other than the
owner,.
2. In the mortgagee is a bank or financing
institutions.
o Consent of both parties is not necessary to
the registration of mortgage. Hence,
mortgage may be registered by the
mortgagee alone.
o Once a mortgage has been signed in due
form, mortgagee is entitled to its registration
as a matter of right.
o Registration is not a declaration by the state
that such an instrument is valid and
subsisting interest in the land.
Cases:
Lanuza vs De Leon
>Between an unrecorded sale of a prior date and a
recorded mortgage of a later date, the former is
preferred to the latter. It is for the reason that if the
original owner had parted with his ownership of the
thing sold, then he no longer had the ownership and
free disposal of that thing so as to be able to
mortgage it again.
>As between the unrecorded deed of Reyes and
Navarro which we hold to be an equitable mortgage,
and the registered mortgage of De Leon, the latter
must be preferred. Preference of mortgage credits is
determined by the priority of registration of the
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mortgages based on the maxim Prior tempore
potior jure
Tan vs Valdehueza
>Under Article 1875 of the civil code, registration
was a necessary requisite for the validity of a
mortgage even as between the parties, but under
Article 2125 of the
New civil code, this is no longer the rule because of
the inclusion of the phrase if the instrument is not
recorded, the mortgage is nevertheless binding
between the parties.
Article 2126
WRIT OF POSSESION- an order whereby a sheriff
is commanded to place in possession, of real or
personal property, the person entitled thereto such as
when property is extra judicially foreclosed.
NATURE AND PETITION FOR THE ISSUANCE
OF WRIT
The issuance of writ of possession is ex parte and
summary in nature and no litigious proceeding
authorized in extrajudicial foreclosure of mortgage.
It is brought for the benefit of one party only and
without notice to, or consent by, any person
adversely interested.
There is no necessity of giving notice to the
mortgagor who had lost interests in the mortgage
property when he failed to redeem the same.
NATURE OF ORDER FOR THE ISSUANCE OF
WRIT
SECTION 7, ACT NO. 3135
Purchaser seeks possession of the foreclosed
property during the redemption period has expired
without redemption having been made.
Allows the purchaser to take possession of the
foreclosed property during the period of redemption
upon filing of an ex parte application and approval
of bond.
The bond is required to protect the rights of the
mortgagor so that he may be indemnified in case it
be shown that the foreclosure sale was not justified.
RIGHT OF PURCHASER TO A CONVEYANCE
AND POSSESION
To obtain possession or bring an appropriate
independent action, such suit and ejectment.
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Issuance of writ of possession.
RIGHT OF PURCHASER TO AID THE COURT
Before the expiration period- possession can be
availed of as long as an ex parte motion under oath
is filed and a bond in accordance with Section 7, OF
Act No. 3135 is posted (PBCOM vs Yeung, G.R. No.
179691)
After lapse of redemption period purchaser is not
obliged to bring a separate suit for possession. He
must invoke the aid of the courts and ask a writ of
possession (Javelosa vs CA, G.R. No. 124292,
December 10, 1996)
NOTE:
Upon proper application and proof of title.
The purchaser is not obliged to bring separate and
independent suit, he must invoke the aid of the court
and ask for writ of possession.
The pendency of an action is not a bar for the
issuance of writ of possession.
The motion for issuance of the writ can proceed
independently (Carlos vs CA).
No bond is required after the redemption period of
the property is not redeemed.
WHEN WRIT OF POSSESION NOT AVAILABLE
Where the mortgage property is under lease the
mortgagee has prior knowledge of the existence and
duration of the lease and (Ibasco vs Caguioa, 143
SCRA 538)
Where the mortgagor refuses to surrender property
sold the remedy is to file an ordinary action for the
recovery of possession in order that the mortgagor
may be given the opportunity to be heard. The
purchaser cannot take possession of the property by
force either directly or, through the sheriff because
the reason of the creditors possession is condition
upon the fact of default (Luna vs. Encarnacion, 91
PHIL 531 (1952)).
Where third party in actual possession adverse to the
judgment debtor.
NATURE OF PETITION FOR ANNULMENT OF
FORECLOSURE PROCEEDINGS
It is a judicial proceeding for the enforcements of
ones right of possession as purchaser in a
foreclosure sale.
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ISSUANCE OF WRIT BEFORE LAPSE OF
REDEMPTION PERIOD
Where bond filed by purchaser the purchaser at the
auction sale is entitled to a writ of possession
pending the lapse of redemption period upon petition
in the form of an ex parte motion and upon posting
of a bond.
REMEDY OF THE MORTGAGOR
Question on the Validity and Regularity of the Sale
Question the Validity of the sale.
Writ of Certiorari, prohibition and Mandamus
(issued when there is neither appeal or any plain,
speedy and adequate relief in the ordinary course of
law)
Section 8 Act No. 3135
Purchaser must be first place in possession of the
mortgage property pending assailing the issuance of
writ of possession.
Appeal (Writ of possession has been issued)
WHERE RIGHTS OF THIRD PERSONS
INVOLVED
Claimants with interest adverse mortgagor
possession may be given to the purchaser by the
sheriff (Section 27 to 29 of RULE 39, RULES OF
COURT).
Succesor-in-interest of mortgagor the purchaser as
absolute owner entitled to the possession of the
property and cannot be excluded therefrom by one
who merely claims to be successor-in-interest of the
mortgagor.
Lessee of Agricultural Land preemptive right to
buy the land he cultivates as well as the right to
redeem the land if sold to the third person without
his knowledge (Cuiano vs CA, 237 SCRA 122)
Buyer of a Condominium unit upon payment by
the buyer, the seller is duty bound to deliver the title
of the unit to the buyer ( Sec 25 PD No. 597,
Subdivision and Condominium Buyers Protective
Decree)
Article 2127
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REAL MORTGAGE
The mortgage extends to the natural acces- sions,
to the improvements, growing fruits, and the rents
or income not yet received when the obligation
becomes due, and to the amount of the indemnity
granted or owing to the proprietor from the
insurers of the property mort- gaged, or in virtue of
expropriation for public use, with the declarations,
amplifications and limitations established by law,
whether the estate remains in the possession of the
mortgagor, or it passes into the hands of a third
person.
Extent of Mortgage:
General Rule:
A real estate mortgage constituted on immovable
property is not limited to the property itself but also
extends to all its accessions, improvements, growing
fruits and rents or income as well as to the proceeds
of insurance should the property be destroyed, or the
expropriation value of the property should it be
expropriated.
Deemed included in the real mortgage:
1. new plantings
2. fruits, except those collected before the
obligation falls due, and those removed and
stored when it falls due;
3. accrued and unpaid rents as well as those
which should have to be paid while the
credit remains wholly unsatisfied
4. buildings, machinery and accessories
belonging to the mortgage debtor installed
on a mortgaged sugar central.
5. all objects permanently attached to a
mortgaged land or building.
6. a more costly building erected in place of
the mortgaged building which was torn
down by the debtor.
Exception:
When there is an express stipulation to that effect.
o Stipulation in the mortgage including after-
acquired properties is valid. Because, such
stipulation is neither unlawful nor immoral, its
obvious purpose being to maintain, to the extent
allowed by the circumstances, the original value
of the properties given as security.
o When a mortgage is made to include new or
future improvements on registered land, said lien
attaches and vests not at the time said
improvements are constructed but
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on the date of the recording and registration of the
deed of mortgage.
Mortgage with dragnet clauses
General Rule:
An action to foreclose a mortgage must be limited to
the amount mentioned in the mortgage.
Exception:
Mortgage with dragnet clauses to secure future
advancements.
Definition:
It is one which is specifically phrased to subsume all
debts of past or future origin.
Example:
For the payment of loan of P20,000.00 and such
other loans or other advances already obtained or
still to be obtained by the mortgagors as makers.
Purpose:
A dragnet clause operates as a convenience and
accommodation to the borrowers as it makes
available additional funds without their having to
execute additional security documents, thereby
saving time, travel, loan closing costs, costs of extra
legal services, recording fees, etc.
ART. 2128.
The mortgage credit may be alienated or assigned
to a third person, in whole or in part, with the
formalities required by law.
o The mortgage credit (the right of the
mortgagee) is a real right and directly and
immediately subjects the mortgaged
property to the fulfillment of the principal
obligation.
o Such real right may be alienated or assigned
to a third person, in whole or in part, by the
mortgagee who is the owner of said right
and the assignee may foreclose the mortgage
in case of nonpayment of the mortgage
indebtedness. (Santiago vs. Pioneer Savings
and Loan Bank, 157 SCRA 100 [1988].)
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o The alienation or assignment is valid even if
it is not registered. Registration is necessary
only to affect third persons.
Article 2129:
The creditor may claim from a thrid person in
possession of the mortgaged property, the payment
of the part of the credit secured by the property
which said third person possesses, in the terms and
with the formalities which the law establishes.
Right of creditor/mortgagee against transferee of
mortgaged property:
o The fact that mortgagee has transferred the
mortgaged property to a third person does
not relieve him from his obligation to pay
the debt to the mortage creditor in the
absence of novation. (McCullogh & Co. vs
Veloso & Serna)
o The mortgaged property may still be
foreclosed despite the transfer.
o The mortgaged credit being a real right
which follows the property, the creditor may
demand from any possessor the payment
ONLY OF THE PART OF THE CREDIT
SECURED by said property. It is necessary,
however , that prior demand for payment
must have been made on the debtor and the
latter failed to pay. (BPI vs. Concepcion &
Hijos, Inc.)
Example:
A mortgaged his land worth P500,000 in favor of B
to secure As debt of P600,000. A then sold land to
C.
-The obligation of A to pay the debt is not affected
by the transfer. B may demand payment from A. If A
fails to pay, B may foreclose the mortgage. B has the
right to claim frim C the payment of P500,000, part
of the credit secured by the property sold to C. But
C is not liable to any deficiency.
Article 2130:
A stipulation forbidding the owner from alienating
the immovable mortgaged shall be void.
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o Such a prohibition would be contrary to the
public good inasmuch as the transmission of
property should not be duly impeded,
because this creates an unconscionable
advantage for the mortgagee and amounts to
a virtual prohibition on the owner to sell his
mortgaged property.
o If the mortgagor alienates the property, the
transferee is bound to respect the
encumbrance, because being a real right, the
property remains subject to the fulfillment of
the obligation for whose guaranty it was
constituted (Art. 2126).
Stipulation requiring mortgagees consent before
alienation of property:
o This kind of stipulation is valid and binding
in the sense that the mortgagee cannot be
compelled to recognize the sale while the
loan is unpaid.
o It does not absolutely forbid the mortgagor
from selling the same while the loan
remained unpaid.
o The sale of the property does not affect the
right of the registered mortgagee to
foreclose on the same even if ownership has
been transferred to another person, because
the transferee is bound by the registered
mortgaged.
Stipulation granting right of first refusal:
o This kind of stipulation is valid.
o In the right of first refusal, the mortgagor is
in obligation to notify the mortgagee of his
intention to sell the property; and to give
him priority over other buyers.
o The right of first refusal must be stipulated
in the contract.
o A sale made in violation of the mortgagees
right of first refusal is rescissible.
o Buyers are presumed to have been notified
of the mortgagees right of first refusal by
the registration of the mortgage deed
containing such stipulation, because
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REAL MORTGAGE
registration amounts to a notice to the whole
world.
Subsequent mortgage on property already
mortgaged.
o A subsequent mortgage is valid, subject to
the prior rights of previous mortgages.
Because if the owner is allowed to convey
the entirety of his interests in the mortgaged
property, then the lesser right to encumber
his property with other liens must also be
recognized.
o Section 4, Rule 68 of the 1997 Rules of
Civil Procedure on the disposition of the
proceeds of sale after foreclosure actually
requires the payment of the proceeds to the
junior encumbrancers in the order of their
priority.
o Pertinent Cases
o Litonjua vs L&R Corporation,
December 9, 1999
o Vega vs Social Security System,
September 20, 2010
o Cinco vs CA, October 9, 2009.
Article 2131:
The form, extent and consequences of a mortgage,
both as to its constitution, modification and
extinguishment, and as to the other matters not
included in this Chapter, shall be governed by the
provisions of the Mortgage Law and of the Land
Registration Law.
Laws Governing the Mortgage:
o Civil code;
o Land Registration Law
o Revised Administrative Code
o RA no. 4882
Meaning of foreclosure of mortgage.
o Foreclosure is the remedy available to the
mortgagee by which he subjects the
mortgaged property to the satisfaction of the
obligation to secure which the mortgage was
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given where the mortgagor is in default in
the payment of said obligation.
o It denotes the procedure adopted by the
mortgagee to terminate the rights of the
mortgagor on the property and includes the
sale itself.
o Foreclosure is a necessary consequence of
non-payment of a mortgage debt.
Persons who may foreclose:
o The creditor-mortgagee or his assigns.
o The mortgagee has a single cause of action
against mortgagor, which is to recover the
debt, but he has the option of either
Filing a personal action for
collection of sum of money;
or
Instituting a real action to
foreclose on the mortgage
security.
o As to the second option, the mortgagee may
file an independent civil action to recover
whatever deficiency may remain.
Foreclosure in the Real Estate Mortgage:
o When the principal obligation is not paid
when due, the mortgagee has the right to
foreclose the mortgage and to have the
property seized and sold with a view to
apply the proceeds to the payment of the
principal obligation.
o Foreclosure must be limited to the amount
mentioned in the mortgage document.
o As a rule, a demand before foreclosure is
essential.
Application of the Proceeds:
o After the proceeds have been applied to the
payment of the obligation, the debtor cannot
be required to pay because the obligation is
extinguished, unless
-There is a deficiency between the amount of the
loan and the foreclosure sale price.
Public notice of the foreclosure sales:
o These requirements must be strictly
complied with such that even slight
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deviations will invalidate the sale or render appeal Immediately

it voidable. executory.
As to The order of Foreclosure
Right of Redemption: cutting off the court cuts does not cut
of rights off all rights off the rights
o After foreclosure, the mortgagor has a right of the parties of all parties
to redeem the property and the possession, impleaded involved.
use and enjoyment of the same during the As to right There is There is a
period of redemption. of equity of right of
redemption redemption, redemption.
Steps to protect or enforce mortgagees right to except on
foreclose: banks which
provides for
1. File an action to recover possession of the a right of
property; or redemption
2. Obtain judicial foreclosure. As to the The period The period
period of starts from starts from
Presumption of Regularity: redemption the finality the date of
of the the
o Foreclosure proceedings have in their favor judgment registration
the presumption of regularity. Hence, the until order of of the
mortgagor has the burden of evidence to confirmation certificate of
rebut the same. . sale
As to No need for Special
Allegation of Fraud: necessity of a special power of
o An allegation that the mortgagee committed a special power of attorney in
fraud in the constitution of a real mortgage power of attorney in favor of the
is an attack on the mortgage contract attorney the contract mortgagee is
of mortgage. needed in the
o The nullity of the foreclosure is a necessary contract.
consequence of the invalidity of the As to the Rule 68 of Act No.
mortgage. governing the Rules of 3135, as
rule Court amended.
o A general prayer in the complaint for other
reliefs equitable and just in the premises
justifies the grant of a relief not otherwise
specifically prayed for if warranted by the JUDICIAL FORECLOSURE (RULE 68, RULES
facts alleged in the complaint and the OF COURT)
evidence introduced.
Judicial Action for the Purpose
Kinds of foreclosure. -A mortgage may be foreclosed judicially by
1. Judicial by ordinary action bringing an action for that purpose, in the proper
2. Extrajudicial foreclosure by the mortgagee court which has jurisdiction over the area wherein
under power of sale contained in the the real property involved or a portion thereof, is
mortgage. situated (Section 1)

Judicial Extrajudicia Order to the mortgagor to pay the mortgage debt

l -If the court finds the complaint to be well-founded,
As to court There is There is it shall order the mortgagor to pay the amount due
interventio court none. upon the mortgage debt or obligation with interest
n intervention. and other charges within a period of not less than 90
As to the Not days nor more than 120 days from the entry of
right of Appealable appealable;
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judgment (90-120 days from entry of judgment)
(Section 2)
Sale to the highest bidder at Public Auction
-If the mortgagor fails to pay at the time directed in
the order, the court, upon motion, shall order the
property to be sold to the highest bidder at public
auction (Section 3)
Confirmation of Sale
o The sale when confirmed by an order of the
court, also upon motion, shall operate to
divest the rights of all parties to the action
and to vest their rights in the purchaser
subject to such right of redemption as may
be allowed by law.
o Before confirmation of a judicial foreclosure
sale, the court retains control of the
proceedings
In the exercise of sound discretion,
it may grant or withhold
confirmation
Any order which neither sets aside
nor confirms the foreclosure is
merely interlocutory in character.
Execution of Judgement
o The judgment rendered in an action for
foreclosure or mortgage must be executed in
the manner prescribed by the law on
mortgages.
o Remedy to reverse a judgment in an action
for foreclosure of real estate mortgage:
Appeal from the judgment or from the order
confirming the sale of the foreclosed real
estate.
Application of Proceeds of Sale
o The proceeds of the sale shall be applied to
the payment of the :
1. Costs of the sale;
2. Amount due the mortgagee;
3. Claims of junior encumbrancers or
persons holding subsequent
mortgages in the order of their
priority; and
4. The balance, if any, shall be paid to
the mortgagor or his duly authorized
agent, or to the person entitled to it.
(Section 4)
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Note: If the mortgagee receives more of the
proceeds than he is entitled to, the validity of the
foreclosure sale is not affected. The mortgagor may
file an action to recover the surplus.
Execution of Sheriffs Certificate
o A sheriffs certificate must be executed,
acknowledged and recorded.
o In the absence of a Certificate of Sale, no
title passes by the foreclosure proceedings to
the vendee.
o It is only when the foreclosure proceedings
are completed and the mortgaged property
sold to the purchaser that all interests of the
mortgagor are cut off from the property.
o The mortgagor is liable for additional
interests properly chargeable on the balance
of the mortgage indebtedness during the
period from the notice of sale to actual sale.
This principle is applicable to extrajudicial
foreclosures.
EXTRAJUDICIAL FORECLOSURE (ACT NO.
3135, AS AMENDED)
Governing Law.
o Act No. 3135, as amended
o AM No. 99-10-05-0, as amended
Express authority to sell given to mortgagee.
o When a sale is made under a special power
inserted in or attached to any real estate
mortgage hereafter made as security for the
payment of money or the fulfillment of any
other obligation, the provisions of the
following sections shall govern as to the
manner in which the sale and redemption
shall be effected, whether or not provision
for the same is made in the power (Section
1, Act 3135)
o The Act intends to regulate the extrajudicial
sale of the property mortgaged if and when
the mortgagee is given a special power or
express authority to do so in the deed itself
or in a document annexed thereto.
o This authority to sell is not extinguished by
the death of the mortgagor or mortgagee.
o Reason: This is an essential and inseparable
part of a bilateral agreement
Posting of notice & Publication of notice of
auction sale.
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o Notice shall be given by posting notices of
the sale for not less than twenty days in at
least three public places of the municipality
or city where the property is situated and if
such property is worth more than Four
hundred pesos, such notice shall also be
published once a week for at least three
consecutive weeks in a newspaper of general
circulation in the municipality or city
(Section 3, Act 3135)
o Publication is required if property is worth
more than P400.
o Posting of notices must be done before
publication.
o The purpose of publication is to inform all
interested parties of the date, time and place
of the foreclosure sale of the real property
subject thereof.
o The compliance with requirements of
publication is a factual issue.
o Publication in a newspaper of general
circulation constitutes sufficient compliance
(Sec. 1 PD 1079; AM No. 99-10-05-0 [3])
o The publication of the sale in a newspaper of
general circulation alone is more than
sufficient compliance with the notice-
posting requirement of the law.
o What constitutes newspaper of general
circulation?
1. It is published for the
dissemination of local news
and general information;
2. It has a bona fide
subscription list of paying
subscribers,
3. It is published at regular
intervals
4. It is available to the public
in general
o Where must notices of sale be posted? The
law says in at least three public places of
the municipality or city where the property
is situated.
This refers to places exposed to the
public and where the public gathers
to and from
Example:
1. Sheriffs Office
2. Assessors Office
3. Register of Deeds
The law does not specifically
require notices to be posted on
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bulletin boards or information areas
of a public place. What the law
directs is for the notices to be placed
perceptible to the public.
o Publication of notice is mandatory.
Failure to comply constitutes a
jurisdictional defect. It will
invalidate the sale or render it at
least voidable.
o What are the contents of the notice?
Correct number of the certificate of
title; and
Correct technical description of the
real property to be sold
o Other Rules on Notice and Posting
As a rule, personal notice to the
mortgagor is not required because
Section 3 does not require it, unless
there is a contractual stipulation to
that effect.
Notice to creditor is not required
obviously because it is he who
causes the mortgaged property to be
sold.
A certificate of posting is not
required because the law requires
the posting of the notice of sale and
not such certificate.
Foreclosure proceedings have in
their favor the presumption of
regularity
1. The mortgagor who alleges
non-compliance with the
publication requirement has
the burden of proving the
factum probandum.
Under Section 5 of the Rural Banks
Act, the posting of a notice of the
foreclosure of the real estate
mortgage in at least three of the
most conspicuous public places not
only in the municipality but also in
the barrio where the land mortgaged
is situated during the 60-day period
immediately preceding the public
auction is mandatory.
o Posting and publication requirements are
imbued with public policy.
The requirements are intended to
protect the public or third persons.
Any waiver of the requirements
would be inconsistent with the intent
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REAL MORTGAGE
and letter of the Act and would
convert the public auction into a
private sale.
When must the extrajudicial sale take place?
o The sale shall be made at public auction,
between the hours of nine in the morning
and four in the afternoon, and shall be under
the direction of the sheriff of the province,
the justice or auxiliary justice of the peace of
the municipality, who shall be entitled to
collect a fee of Five pesos for each day of
actual work performed, in addition to his
expenses. (Section 4).
o 9am-4pm
o The duration or length of time it took the
questioner to conduct the proceeding does
not matter.
Public sale after proper notice.
o Where is the sale? Said sale cannot be
made legally outside of the province in
which the property sold is situated; and in
case the place within said province in which
the sale is to be made is the subject of
stipulation, such sale shall be made in said
place in the municipal building of the
municipality in which the property or part
thereof is situated (Section 2)
o Public sale at different places/on different
dates:
o The indivisibility of a real estate
mortgage is not violated by
conducting two separate foreclosure
proceedings on mortgaged
properties located in different cities
or municipalities.
o At any sale, the creditor, trustee, or other
person, authorized to act for the creditor,
may participate in the bidding, and purchase
under the same conditions as any other
bidder, unless the contrary has been
expressly provided in the mortgage or trust
deed under which the sale is made. (Section
5)
Where the highest bidder is the
mortgagee and the amount of his bid
represented the total mortgage debt,
it is not necessary for him to pay
cash despite the wording of Section
5.
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o In auction sale, the law does not mention
any minimum bid at the public auction sale.
Note: Inadequacy of price in a
forced sale is immaterial.
Surplus proceeds from foreclosure sale.
o The proceeds from the foreclosure sale is
greater than the mortgage debt.
o The mortgagor may file an action to recover
the surplus because it belongs to him or his
assigns.
o This right of the mortgagor is subject to the
rights of junior encumbrancers and senior
mortgagee.
Remedy of the debtor aggrieved by foreclosure.
o Summary of remedies:
Debtor may file a petition that the
sale be set aside and the writ of
possession be cancelled, specifying
the damage to him based on the
following causes
1. Mortgage was not violated;
and
2. The sale was not made in
accordance with Act No.
3135
Debtor may ask for the annulment
of the foreclosure on the following
grounds:
1. Fraud, collusion, accident,
mutual mistake, breach of
trust or misconduct by the
purchaser;
2. The sale has not been fairly
and regularly conducted; or
3. The price was inadequate
and the inadequacy was so
great so as to shock the
conscience of the court
Right of mortgagee to recover deficiency.
o If there is a balance due to the mortgagee
after applying the proceeds of the sale, the
mortgagee may recover the deficiency.
o Basis: Mortgage is only a security and not a
satisfaction of the indebtedness.
o But where the mortgagor is a third person,
he is not liable for any deficiency.
o In such case, the mortgagee should
file an action for the recovery of
such deficiency against the debtor.
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REAL MORTGAGE
o The action to recover deficiency may be
filed during redemption period.
o Deficiency judgment the deficiency is
embodied in a judgment
o Prescriptive period of the action: 10 years
from the time the right of action accrues
(Arts. 1144[2]; 1142)
Procedure for Extrajudicial Foreclosure (AM No.
99-10-05-0)
1) All applications for extrajudicial foreclosure
of mortgage whether under the direction of
the sheriff or a notary public, pursuant to Act
3135, as amended by Act 4118, and Act
1508, 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
extrajudicial foreclosure of mortgage, it
shall be the duty of the Clerk of Court to:
xxx
(c) examine, in case of real estate mortgage
foreclosure, whether the applicant has complied with
all the requirements before the public auction is
conducted under the direction of the sheriff or a
notary public, pursuant to Section 4 of Act 3135, as
amended
xxx
3) The notices of auction sale in extrajudicial
foreclosure for publication of 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 non-compliance
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
or the notary public who conducted the sale
of the Clerk of Court before the issuance of
the certificate of sale.
Nature of judicial foreclosure proceeding (action
quasi in rem)
It is based on a personal claim against a
specific property of the defendant.
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A judgment ordering a foreclosure sale is
conditioned upon:
o A finding of the correct amount of
the unpaid mortgage debt; and
o Failure of the mortgagor to pay the
said amount
Remember: In a mortgage, the principal
obligation is the money indebtedness.
o The foreclosure of the property is
only the result or an incident of the
failure to pay the indebtedness.
An action for the foreclosure of a mortgage
survives the death of the mortgagor.
o Reason: The claim is (not a pure
money claim) but an action to
enforce a mortgage lien.
o Judgment rendered in an action for
foreclosure is enforced by a writ of
execution.
o Who will be the defendant then if
the mortgagor is dead?
The executor or
administrator.
The actin to foreclose is
independent from the testate
or intestate proceedings for
the settlement of the
mortgagors estate becaue
such claims cannot in any
just sense be considered
claims against the estate, but
the right to subject specific
property to the claim arises
from the contract of the
debtor whereby he has
during life set aside certain
property for its payment,
and such property does not,
except in so far as its value
may exceed the debt, belong
to the estate.
Nature of power of foreclosure by extrajudicial
sale.
o The power to foreclose is meant to protect
the mortgagee.
.
o How do you initiate an extrajudicial
foreclosure?
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REAL MORTGAGE
By filing a petition within the office
of the sheriff of the province where
the sale is to be made.
Reason: Extrajudicial foreclosures
are not judicial proceedings, actions
or suits.
Prerogative of the mortgagee:
o The power to decide to foreclose or not is
the prerogative of the mortgagee.
Pertinent Cases:
RURAL BANK OF CALOOCAN vs CA (1981):
o The public auction sale was held on April
11, 1961, which was the next business day
after the scheduled date of the sale on April
10, 1961, a special public holiday.
o Was the sale valid? NO. The sale was
contrary to Section 3 of Act No. 3135.
Section 31 of the Revised Administrative
Code ordains Pretermission of holiday
where the day, or the last day, for doing any
act required or permitted by law falls on a
holiday, the act may be done on the next
succeeding business day.
o The pretermission applies ONLY when the
last day of a given period falls on a
holiday.
o It does not apply to a day fixed by an office
or officer of the government for an act to be
done, as distinguished from a period of
time within which an act should be done,
which may be on any day within that
specified period.
o Since April 10, 1961 was a date fixed by the
deputy sheriff, the aforesaid sale cannot
legally be made on the next succeeding
business day without the notice of the sale
on that day being posted as prescribed in
Section 9 of Act No. 3135
FIESTAN vs CA (1990):
o Upon failure of petitioners to redeem the
mortgaged land within one year, their TCT
was cancelled another TCT was issued to
DBP (mortgagee). P, purchaser from DBP,
mortgaged the lot to PNB. Petitioners were
still in possesstion so the sheriff ordered
them to vacate the same.
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o Petitioners seek to annul the sale in favor of
DBP because the sheriff did not first effect
a levy on said property before selling the
same at the public auction sale. They
maintain that the extrajudicial foreclosure
being null and void, the certificate of sale
issued to DBP cannot transfer ownership
over the lot in question and consequently,
the deed of sale in favor of P and the real
estate mortgage constituted by the latter in
favor of PNB are likewise null and void.
o Is levy required before an extrajudicial
foreclosure can be effected? NO.
Three different kinds of Sale:
Ordinary execution sale (Rule 39 of
the Rules of Court);
Judicial foreclosure sale (Rule 68 of
the Rules of Court; and
Extrajudicial foreclosure sale (Act
No. 3135, as amended)
o The present case involves an extrajudicial
sale therefore, Act No. 3135 shall govern
the sale.
o The formalities of a levy is an essential
requisite of a valid execution sale under
Rule 39 of the Rules of Court which does
not apply in this case.
Stipulation of upset price in mortgage contract
void.
Upset price
-The minimum price fixed in a real mortgage at
which the property shall be sold, to become
operative in the event of a foreclosure sale at public
auction.
o The stipulation is void because the property
must be sold to the highest bidder.
o Where the purchaser happens to be the
creditor or mortgagee himself and an upset
price is stipulated,
o The mortgagor can argue that the stipulation
should be binding on the mortgagee based
on the principle of estoppel.
Effect of inadequacy of price in foreclosure sale.
General Rule:
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REAL MORTGAGE
Inadequacy of the price is not material. The
judgment debtor may reacquire the property easier at
a low price.
Exception:
The price is so inadequate as to shock the conscience
of the court taking into consideration the peculiar
circumstances attendant.
At a nominal cost:
o Mortgagors whose properties are foreclosed
and are purchased by the mortgagee as
highest bidder at the auction sale are at a
great disadvantage because mortgagors
forfeit their properties at a great loss as they
are purchased at a nominal cost by the
mortgagee himself, who ordinarily bids no
more than his credit or the balance thereof at
the auction sale.
o Property may be sold for less than its fair
market value because it will be easier for the
owner to effect redemption.
Waiver of security by mortgagee.
o A mortgagee has two options
1. He may institute a personal action to
collect the debt; or
2. He may file a real action to
foreclose the mortgage.
o These remedies are alternative in nature.
In case of death of the debtor:
o The mortgagee has three options
1. To waive the mortgage and claim
the entire debt from the estate of the
mortgagor as an ordinary claim;
2. To foreclose the mortgage judicially
and prove any deficiency as an
ordinary claim; and
3. To rely on the mortgage exclusively,
foreclosing the same at any time
before it is barred by prescription
without right to file a claim for any
deficiency.
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Foreclosure retroacts to date of registration
o A person who takes a mortgage in good faith
and for valuable consideration, the record
showing clear title to the mortgagor, will be
protected against equitable claims on the
title in favor of third persons of which he
had no actual or constructive notice.
Redemption:
o Redemption, in general, allows the
owner/mortgagor to repurchase or buy back,
within a certain period and for a certain
amount, a property that has been sold due to
debt, tax or encumbrance.
o It is the transaction by which the mortgagor
reacquires or buys back the property which
may have passed under the mortgage, or
divests the property of the lien which the
mortgage may have created.
Equity of redemption.
o It is the right of the mortgagor in case of
judicial foreclosure to redeem the mortgaged
property after his default in the performance
of the conditions of the mortgage but before
the confirmation of the sale of the
mortgaged property
o The mortgagor may extinguish the mortgage
and retain the ownership by paying the debt
within 90 days after judgment becomes final
or after the foreclosure sale but before
confirmation.
Acquired by a second mortgagee:
o A second mortgagee acquires only equity of
redemption vested in the mortgagor, and his
rights are strictly subordinate to the superior
lien of the first mortgagee.
o To levy upon the mortgagors equity of
redemption, it is not necessary for the sheriff
to take physical possession of the mortgaged
property.
Right of Redemption:
o The right of the mortgagor in case of
extrajudicial foreclosure to redeem the
mortgaged property within a certain period
from and after it was sold for the satisfaction
of the mortgage debt.
o This right may be exercised one year from
and after the date of the sale.
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REAL MORTGAGE
Effect of failure to exercise redemption
o During redemption period, the
purchaser has a mere inchoate title
because title to the property remains
with the mortgagor or his grantee.
o The purchaser becomes the absolute
owner.
He has an absolute right to a
writ of possession.- the final
process to carry out or
consummate the
extrajudicial foreclosure.
He does not need to file the
bond required under Sec 7
of Act 3135.
Summary of the periods of redemption:
o Extrajudicial foreclosure
1. Natural Person one year from
registration of cert of sale with
Register of Deeds
2. Judicial Person same rule as
natural
3. Juridical person mortgagor) and
Bank (mortgagee) -3 months after
foreclosure or before registration of
certificate of foreclosure sale,
whichever is earlier.
o Judicial foreclosure
1. Within a period of 90 to 120 days
from the date of the service of the
order of foreclosure pr even
thereafter, but before the order of
confirmation of the sale.
Effect of the exercise of the right:
o Redemption eliminates the lien created by
the levy or attachment or judgment or
registration pf the mortgage thereon
o Redemption defeats the inchoate right of the
purchaser
o Redemption restores the property to the
same condition as if no sale had been made
o Redemption is an implied admission of
regularity of foreclosure sale.
When mortgaged property is sold to third party:
o The mortgagor merely transfers only the
right to redeem the property and the right to
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possess, use and enjoy the same during said
period. Ownership is not transferred.
Nature of mortgagors right of redemption:
o Absolute privilege its exercise depends
upon the will and discretion of the
redemptioner
o There is no legal obligation to exercise the
right of redemption
o Mortgagor cannot be compelled to redeem.
o Statutory privilege it must be exercised in
the mode and within the period prescribed
by the statute.
o Involves title to foreclosed property - affects
title of the
debtor over the foreclosed property.
o Construed in favor of the original owner
Requisites of Valid Redemption
1. There must be a formal offer to redeem
accompanied by a tender of payment of
redemption price within the prescribed
period to make the redemption valid or
preserve the right of redemption for future
enforcement.
2. Redemption must be made within one year
from date of registration of the certificate of
sale in the Register of Deeds
3. Payment of the purchase price plus 1%
interest per month, with taxes, if any,
interest to be computed from date of
registration up to the time of redemption;
and
4. Written notice of the redemption served
upon the officer who made the sale and
duplicate filed with the proper Register of
Deeds.
Payment of redemption money.
To whom it may be made.
o The payment of the redemption money may
be made to the purchaser or redemptioner, or
for him to the offi cer who made the sale. It
may be made to the sheriff.
Medium of payment.
o may be made in lawful money or in check. If
the sheriff sees fit to do so, he may require
payment to be made in lawful money, but in
accepting a check, he undoubtedly places
himself in a position where he can be held
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REAL MORTGAGE
liable to the purchaser at the public auction
if any damage has been suffered by the latter
as a result of the medium in which payment
was made. But this cannot affect the validity
of the payment.
Amount Payable:
1. Purchase price purchase price at the auction
sale.
2. Amount fixed by court
3. 1% interest per month - the redemptioner is
bound to pay only 1% interest per month from
the date of registration of the certifi cate sale
up to the time of redemption rather than the
interest stipulated in the contract of loan. This
is so because when the foreclosure
proceedings are completed and the mortgaged
property is sold to the purchaser, then all
interests of the mortgagor are cut off from the
property.
4. Necessary expenses incurred by the
purchaser/taxes - purchaser is entitled to
reimbursement of the reasonable cost of
improvements made by him to preserve the
property during the period of redemption,
5. Rentals received by purchaser - the purchaser
or redemptioner shall not be entitled to receive
the rents, earnings and income of the property
sold on execution, or the value of the use and
occupation thereof when such property is in
the possession of a tenant which rents, etc.
shall belong to the judgment obligor until the
expiration of the period of redemption.
Rights of persons with subordinate interest.
Mortgagors equity of redemption before
foreclosure.
o A second or junior mortgagee acquires only
the equity of redemption vested in the
mortgagor, and his rights are strictly
subordinate to the superior lien of the first
mortgagee. Thus, a second mortgagee has to
wait until after the debtors obligation to the
first mortgagee has been fully settled.
Mortgagors right of redemption after
foreclosure.
o After the foreclosure sale, there remains in
the second mortgagee a mere right of
redemption; and only this right passes to
him by virtue of the second mortgage. His
remedy is limited to the right to redeem by
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paying off the debt secured by the first
mortgage.
o An attaching creditor may succeed to the
incidental rights to which the debtor was
entitled by reason of his ownership of the
property, as for example, a right to redeem
from a prior mortgagee.
Payment of his credit from excess of proceeds of
auction sale.
o Aside from the right of repurchase, the
second mortgagee is entitled, to the
payment of his credit the excess of the
proceeds of the auction sale, after covering
the mortgagors obligations to the first
mortgagee. In case the credit of the first
mortgagee has absorbed the entire proceeds
of the sale, the second mortgage is
extinguished with it because said mortgage
cannot be enforced by the second
mortgagee beyond the total value of the
mortgaged property.
o Consequently, the property passes to the
purchaser free from the second mortgage.
Where persons with subordinate interest not
made defendants.
o The requirement, however, for joinder of
the person claiming an interest
subordinate to the mortgage sought to be
foreclosed is not mandatory in character
but merely directory, in the sense that
failure to comply therewith will not
invalidate the (judicial) foreclosure
proceedings.
A subordinate lien holder is not an indispensable
party to a foreclosure proceeding.
o The effect of the failure of the
mortgagee to implead a subordinate
lien-holder or subsequent purchaser or
both is to render the foreclosure
ineffective as against them, with the
result that there remains in their favor
the unforeclosed equity of redemption
o A second mortgagee merely takes what
is called an equity of redemption and
thus, a second mortgagee has to wait
until after the debtors obligation to the
first mortgagee has been fully settled.
o The failure of the registered second
mortgagee to exercise his equity of
redemption on property foreclosed by
the first mortgagee divests him of his
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REAL MORTGAGE
right to claim title against an unrecorded
assignee of right of redemption of the
first mortgagee who redeemed the same.
o A separate foreclosure proceeding
should be brought to require the
mortgagors successor-in-interest or
junior lien-holders to redeem from the
first mortgagee, or the party requiring
title to the mortgaged property at the
judicial foreclosure sale, within 90 days
under penalty of losing that prerogative
to redeem.
Unpaid seller of property.
o It has been held that the mortgagees act of
including in the foreclosure the unpaid
goods and merchandise earlier sold on
credit and delivered to the mortgagor and
which the mortgagee acquired at the
foreclosure sale, does not make said
mortgagee an obligor to pay for such unpaid
goods, ownership of which has been
acquired by the mortgagor.
o The seller has no cause of action against the
mortgagee because the obligation to pay for
the goods remains with the mortgagor as
buyer.
Equity of redemption in judicial foreclosure.
Period for exercise.
o there is no right of redemption after the
judicial sale is confirmed. There is only the
equity of redemption in favor of the
mortgagor consisting in the right to redeem
the mortgaged property within the ninety-
day period from the order of foreclosure
Reckoning of ninety-day period.
o The ninety-day period granted the mortgage
debtor within which to pay the amount of
the mortgage is from the date of the service
of such order/judgment
o This provision cannot be literally complied
with in case the mortgagor appeals from the
lower courts judgment.
Where period never began to run.
o Where the original judgment of the court
required payment within ninety days but this
same judgment was expressly held in
abeyance, the ninety-day period never began
to run.
Period given, a substantive right.
o The period given in the rule is a substantive
right granted to the mortgage debtor as the
last opportunity to pay the debt and save his
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mortgaged property from final disposition at
the foreclosure sale.
o An order for the sale of mortgaged property
within the ninety-day period would be a
denial of a substantial right and void.
Persons entitled to exercise right of redemption.
1. Mortgagor or one in privity of title with
mortgagor.
o Only such persons can redeem as
are authorized to do so by statute.
As a general principle, if one is in
privity of title with the mortgagor,
and he has such an interest that he
would be a loser by the foreclosure,
he may redeem
2. Successor-in-interest.
o like any other property right, may
be transferred or assigned by its
owner. The transferee of such right
stands in the position of a
successor-in interest of the
mortgagor
o Such successor-in-interest is
subrogated to the position of the
debtor-mortgagor and is bound by
exactly the same conditions that
bound the latter.
o So, redemption is proper where
made by the debtor, grantee, or
assignee for the benefit of creditors,
or assignee or trustee in solvency
proceedings of the mortgage-
debtor.
3. Under the Rules of Court.
o When real property is sold on
execution of a judgment, the same
may be redeemed by the following
persons: (a) the judgment debtor, or
his successor-in-interest in the
whole or any part of the property; or
(b) a creditor having a lien by
attachment, judgment or mortgage
on the property sold or some part
thereof, subsequent to the judgment
under which the property was sold.
Such a redeeming creditor is termed
a redemptioner.
o The redemption may be made by
one acting in behalf of the judgment
debtor as long as the latter does not
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REAL MORTGAGE
oppose the formers capacity to act
as such.
Registration of transfer of right of redemption.
o The transfer of the right of redemption from
the original debtor-mortgagor need not be
registered with the Register of Deeds to
enable the transferee or assignee to exercise
the same.
Rights and obligations of mortgagee in
possession.
o Mortgagee in possession - one who has
lawfully acquired actual or constructive
possession of the premises mortgaged to
him, standing upon his rights as mortgagee
and not claiming under another title, for the
purpose of enforcing his security upon such
property or making its income help to pay
his debt.
o Mortgagee is entitled to retain such
possession until the indebtedness is satisfied
and the property redeemed.
o Generally, however, a mortgagee in
possession of mortgaged property who
introduces improvements thereon is not
entitled to reimbursement for the value
thereof upon the redemption of the
mortgage, for according to Article 2125
(par. 2.), the persons in whose favor the
law establishes a mortgage have no other
right than to demand execution and the
recording of the document in which the
mortgage is formalized.
o To hold otherwise would render redemption
oppressive, if not nugatory, as a scheming
mortgagee could then put so much
improvements thereon, until the debtor-
mortgagor is improved out of his property
by his failure to pay the increased
redemption costs.
Vendees right to possession of mortgaged
property sold.
o Contingent. Before the expiration date of
the redemption period, the vendees right to
possession (or continued possession) of the
property sold is contingent upon the failure
of the mortgagor to redeem.
o Final. After the redemption period is
terminated, the right to redeem is barred, the
mortgagor is divested of his rights to the
mortgaged property sold, and the vendees
right of possession of the property becomes
final.
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o The issuance of the writ to a purchaser in an
extrajudicial foreclosure is merely a
ministerial function
o both during and after the period of
redemption, the purchaser at the foreclosure
sale is entitled as of right to a writ of
possession, regardless of whether or not
there is a pending suit for annulment of the
mortgage or the foreclosure itself (without
prejudice, of course, to the eventual outcome
of said case.)
o As a rule, any question regarding the
validity of the mortgage or its foreclosure is
not a legal ground for refusing the writ of
possession.
o In cases of extrajudicial foreclosure sales of
real estate mortgages, the issuance of a writ
possession is governed by Section 730 of
Act.
Said provision allows the purchaser to
take possession of the foreclosed
property during the period of
redemption upon filing of an ex parte
application and approval of a bond
The duty of the trial court to grant the
writ is ministerial. Such writ issues as a
matter of course upon the fi ling of the
proper motion and the approval of the
corresponding bond.
o The period of redemption is not interrupted
by the filing of an action assailing the
validity of the mortgage. A likely offshoot of
such a ruling is the institution of frivolous
suits for annulment of mortgage intended
merely to give the mortgagor more time to
redeem the mortgaged property.
o Any question regarding the regularity and
validity of the writ shall, as well as the
consequent cancellation of the writ, is to be
determined in a subsequent proceeding as
outlined in Section 8 (infra.) of Act No.
3135.
o Such question cannot be raised to oppose the
issuance of the writ, since the proceeding is
ex parte.
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REAL MORTGAGE
o The bond is required to protect the rights of
the mortgagor so that he may be indemnified
in case it be shown that the foreclosure sale
was not justified
o i.e., it was conducted without complying
with the requirements of the law or
without the mortgagor violating the
mortgage contract.
o If a writ of possession may be issued even
before the redemption period has expired on
the ex parte application of the purchaser,
with greater reason could such writ be issued
after the time for redemption has expired,
without redemption having been, especially
where a new title has already been issued in
the name of the purchaser.
o The purchaser at public auction has only to
file a petition for issuance of the writ
pursuant to Section 33.
Right of purchaser to aid of court.
Nature of petition/motion for issuance of writ
o The petition and/or motion for the
issuance of a writ of possession is
summary in nature and a non-litigious
proceeding authorized in an extrajudicial
foreclosure of mortgage pursuant to Act
No. 3135, as amended. It is brought for
the benefit of one party only, and
without notice to, or consent by, any
person adversely interested.
o There is no necessity of giving notice to
the mortgagor who had lost all interests
in the mortgaged property when he
failed to redeem the same.
o The order for the issuance of the writ is
simply an incident in the transfer of title
in the name of the petitioner. The trial
court is mandated and it is its ministerial
duty to issue the writ upon a finding of
the lapse of the statutory period for
redemption, the effect of which is to
make the right of the purchaser to the
possession of the property absolute.
o The possession of the property becomes
an absolute right of the purchaser as
confirmed owner.
Right of purchaser to a conveyance and to
possession.
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o The rule is that after the redemption period
has expired, the purchaser of the property
has the right to a conveyance and to be
placed in possession thereof. The posting of
a bond is no longer needed. To obtain
possession, the vendee or purchaser may
either ask for a writ of possession or bring
an appropriate independent action, such as a
suit for ejectment.
o The right to possession is based simply on
the purchasers ownership of the property.
Thus, the mere filing of an ex parte motion
for the issuance of a writ of possession
would suffice.
o Upon the expiration of the redemption
period, without the mortgagor having made
use of his right of redemption, ownership of
the property becomes consolidated in the
purchaser.
o The purchaser of the property sold is entitled
to the aid of the court in effecting its
delivery, the reason being that upon
expiration of the redemption period (or
confirmation of the sale), the ownership of
the property is transferred to him.
Upon proper application and proof of
title, the issuance of the writ of
possession becomes a ministerial duty of
the court and the relief is granted ex
parte without giving the person against
whom the relief is sought an opportunity
to be heard.
The purchaser is not obliged to bring a
separate and independent suit for
possession. But to give effect to his right
of possession, he must invoke the aid of
the courts and ask for a writ of
possession. He cannot simply take the
law into his own hands and enter the
property without judicial authorization.
o The pendency of an action questioning the
validity of a mortgage or its foreclosure
cannot bar the issuance of the writ of
possession particularly after title to the
property has been consolidated in the
mortgagee as the purchaser at the public
auction, without prejudice to the outcome of
the action.
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REAL MORTGAGE
o The motion for issuance of the writ can
proceed independently. Its issuance does not
bar a separate case for annulment of
mortgage and foreclosure sale and,
therefore, the ex parte nature of the
proceeding does not deny due process to the
mortgagor.
o No bond is required of the purchaser after
the redemption period if the property is not
redeemed. To impose a bond requirement
upon the purchaser who has become the
absolute owner of the foreclosed property
purchased 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 against all other persons.
Suspension of implementation of writ.
o Where a writ of possession has been issued
by a court, it is the inescapable duty of the
sheriff to enforce the writ. The sheriff has no
authority to give a grace period, and it would
be gross error for the court to suspend the
implementation of the writ of possession
which should issue as a matter of course.
Once the writ of possession has been issued,
the court has no alternative but to enforce
the writ without delay.
Where mortgaged property under lease.
o A mortgagee who has foreclosed upon the
mortgaged real property and has purchased
the same at 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 as yet been terminated,
unless the lease had been previously
registered in the Registry of Property or
unless despite nonregistration, the
mortgagee had prior knowledge of the
existence and duration of the lease, actual
knowledge being equivalent to registration.
Every lease of real estate may be recorded in
the Registry of Property. Unless a lease is
recorded, it shall not be binding upon third
persons.
Where mortgagor refuses to surrender property
sold.
o In case of refusal to surrender the possession
of the property sold by the sheriff on the part
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of the debtor or mortgagor, the purchaser
cannot merely file petition for a writ of
possession. The remedy is to fi le an
ordinary action for the recovery of
possession in order that the debtor may be
given an opportunity to be heard not only
regarding possession but also regarding the
obligation covered by the mortgage. The
purchaser cannot take possession of the
property by force either directly or through
the sheriff. The reason for this is that the
creditors right of possession is conditioned
upon the fact of default, and the existence of
this fact may naturally be the subject of
controversy.
Where third party in actual possession.
o The writ of possession issues as a matter of
course even without the filing and approval
of a bond after consolidation of ownership
and the issuance of a new transfer certificate
of title in the name of the purchaser.
Exception.
Under Section 35, Rule 39 of the Rules of Court,
which is made suppletory to the extrajudicial
foreclosure of real estate mortgages, 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. Under Article 433 of the
Civil Code, one who claims to be the owner of a
property possessed by another must bring the
appropriate judicial action for its physical recovery.
The term judicial process could mean no less than
an ejectment suit or reivindicatory action in which
ownership claims of the contending parties may be
properly heard. An ex parte petition for issuance of a
possessory writ under Section 7 of Act 3135, as
amended, is not, strictly speaking, a judicial
process as contemplated in Article 433. The reason
for the limitation is that the writ does not issue in
case of doubt.
Issuance of writ before lapse of redemption
period.
o Where bond filed by purchaser. As
already pointed out, the purchaser at the
auction sale is entitled to a writ of
possession pending the lapse of the
redemption period upon petition in the form
of an ex parte motion and upon the posting
of a bond. In such case, no discretion is left
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REAL MORTGAGE
to the court. There is, therefore, no
necessity for the purchaser to file an
ejectment case. The requirement of a bond is
a consequence of the inchoate character of
the right of the purchaser during the
redemption period inasmuch during said
period full ownership has not yet vested on
the creditor-mortgagee. After the one-year
period and no redemption was made, the
mortgagor loses all interest over the
mortgaged property. The rationale for the
ministerial issuance of a writ of possession
is to put the foreclosure buyer in possession
of the property sold without delay, since the
right of possession is founded on ownership
of the property. But where a lease agreement
is subsequently entered into by the
mortgagor and the mortgagee after the
expiration of the redemption period and the
consolidation of title in the name of the
latter, a case for ejectment or unlawful
detainer, not a motion for a writ of motion
for a writ of possession is the proper remedy
in order to evict from the questioned
premises a mortgagor-turned-lessee.
Remedy of mortgagor.
o Any question regarding the regularity and
validity of the sale as well as the consequent
cancellation of the writ of possession is to be
determined in a subsequent proceeding as
outlined in Section 8 of Act No. 3135. It
cannot be raised as a justification for
opposing the issuance of the writ of
possession since, under the Act, the
proceeding for this is ex parte.
The only remedy of the mortgagor is to
question the validity of the sale by a
petition to set aside the sale and to
cancel the writ of possession, which
should be disposed of in accordance
with the summary procedure prescribed
in Section 112 of Act No. 496, the Land
Registration Act,33 provided the petition
is filed not later than thirty days after
the purchaser was given possession.
Section 8 of Act No. 3135 lists the
exclusive grounds for the petition,
namely, 1) that the mortgage was not
violated, and, 2) that the sale was not
made in accordance with the provisions
of Act No. 3135. Any question regarding
validity of the mortgage or its
foreclosure cannot be a legal ground for
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refusing the issuance of a writ of
possession.
Section 8 of Act No. 3135 is clear that
the purchaser must first be placed in
possession of the mortgaged property
pending proceedings assailing the
issuance of the writ of possession. If the
trial court later finds merit in the petition
to set aside the writ, it shall dispose in
favor of the mortgagor the bond
furnished by the purchaser. The rationale
for the mandate is to allow the purchaser
to have possession of the foreclosed
property without delay such possession
being founded on his right of ownership.
Section 8 of Act No. 3135 mandates that
even if an appeal is interposed from an
order granting a petition for a writ of
possession, such order shall continue to
be in effect during the pendency of the
appeal.
Section 8 of Act No. 3135 affords both
parties an expeditious way to resolve
any conflict regarding the writ of
possession alone issued by reason of an
extrajudicial foreclosure. It should be
distinguished from those cases which
involved writs of possession issued in
the course of the execution of judgment.
Where rights of third persons involved.
Claimants with interest adverse to mortgagor.
o in case of an extrajudicial foreclosure of a
real estate mortgage, the possession of the
property sold may be given to the purchaser
by the sheriff after the period of redemption
had expired, unless a third person is actually
holding the property adversely to the
mortgagor or judgment debtor.
o If no redemption be made within one (1)
year from the date of registration of the
certificate of sale, the purchaser is entitled to
a conveyance and possession of the
property; or, if so redeemed whenever sixty
(60) days have elapsed and no other
redemption has been made, and notice
thereof given, and the time or redemption
has expired, the last redemptioner, is entitled
to the conveyance and possession; but in all
cases, the judgment debtor shall have the
entire period of one (1) year from the date of
the registration of the sale to redeem the
property.
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REAL MORTGAGE
o The possession of the property shall be
given to the purchaser or last redemptioner
by the same officer unless a third party is
actually holding the property adversely to
the judgment debtor in which case an
ordinary action is necessary to recover
possession from such third person.
It is implicit in Section 7 of Act No.
3135 that it is ministerial upon the
court to issue an ex parte writ of
possession in favor of the purchaser
in a foreclosure sale of a mortgaged
property provided no rights of third
persons are involved.
This obligation of a court to issue
the writ ceases to be ministerial
once it appears that there is a third
party in possession of the foreclosed
property who is claiming a right
adverse to that of the debtor-
mortgagor and is a stranger to the
foreclosure proceedings in which
the ex parte writ of possession was
applied for.
Section 16, Rule 39 of the Rules of
Court, bestows upon third parties
claiming rights to properties under
execution the right to protect their
interests by interposing a third-party
claim in the same case, or by
instituting a separate reinvindicatory
action against the executing creditor.
Proceedings to resolve the
possession of third-party claimants
may proceed independently of the
action which said claimants may
bring to enforce or protect their
claim of ownership over the
property.
A proceeding for the issuance of a
writ of possession is a mere incident
in the transfer of title. The court
may not grant the writ through a
mere motion where title is in doubt.
The actual possession under claim
of ownership raises a disputable
presumption of ownership. The true
owner must resort to judicial process
for the recovery of the property.
As adverted to earlier, an ex-parte
petition for issuance of a possessory
writ under Section 7 of Act No.
3135 is not, strictly speaking, a
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judicial process as contemplated
above. The issuance of a writ of
possession is not a judgment on the
merits. Such petition, in the form of
an ex parte motion, is a non-litigious
proceeding and summary in nature
as well authorized in an extrajudicial
foreclosure of mortgage pursuant to
Act 3135, as amended. What
distinguishes a motion from a
petition or other pleading is not its
form or the title given by the party
executing it, but rather its purpose.
A motion is not an independent right
or remedy, but is confined to
incidental matters in the progress of
a cause. It relates to some question
that is collateral to the main object
of the action and is connected with
and dependent upon the principal
remedy. An application for a writ of
possession is a mere incident in the
registration proceeding. Hence,
although it is denominated as a
petition, it may be in substance
merely a motion.
the filing of a petition, not with any
court of justice, but with the office
of the sheriff of the province (or
city) where the sale is to be made.
As such, a third person in possession
of an extrajudicially foreclosed
realty, who claims a right superior to
that of the original mortgagor, will
have no opportunity to be heard on
his claim in a proceeding of this
nature. It stands to reason, therefore,
that such third person may not be
dispossessed on the strength of a
mere ex-parte possessory writ, since
to do so would be tantamount to his
summary ejectment, in violation of
the basic tenets of due process.
o Section 16, Rule 39, reserves to adverse
third parties the remedies of
to determine whether the sheriff has
rightly or wrongly taken hold of the
property not belonging to the
judgment debtor or obligor and
an independent separate action to
vindicate their claim of ownership
and/ or possession over the
foreclosed property.
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REAL MORTGAGE
o Under Section 16, a third party claimant or
stranger to the foreclosure suit, can opt to
file a remedy known as terceria against the
sheriff or officer effecting the writ by
serving on him an affidavit of his title and a
copy thereof upon the judgment creditor. By
the terceria, the officer shall not be bound to
keep the property and could be answerable
for damages. A third-party claimant may
also resort to an independent separate
action, the object of which is the recovery
of ownership or possession of the property
seized by the sheriff, as well as damages
arising from wrongful seizure and detention
of the property despite the third-party claim.
Availment of the terceria is not a condition
sine qua non to the institution of a separate
action.
The judge to whom an application
for the writ is filed need not look
into the validity of the mortgage or
the manner of its foreclosure. No
discretion is left to the judge. Any
question regarding the cancellation
of the writ or in respect of the
validity and regularity of the public
sale, should be determined in a
subsequent proceeding as outlined
in Section 8 of Act No. 3135.
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An ordinary civil action may be
consolidated with a petition for a
writ of possession although the latter
is an ex parte proceeding to thresh
out thoroughly all related issues in
the interest of a more expeditious
and less expensive resolution of the
controversy.
A purchaser or mortgagee cannot
close his eyes to facts which should
put a reasonable man upon his
guard, and then claim that he acted
in good faith under the belief that
there was no defect in the title of the
vendor or mortgagor. Banks, their
business being impressed with
public interest, are expected to
exercise more care and prudence
than private individuals in their
dealings, even those involving
registered lands. Hence, for merely
relying on the certificate of title and
for its failure to ascertain the status
of the mortgaged property as is the
standard operating procedure in the
operation of a bank, it cannot be
said that a bank is a mortgagee in
good faith. The general rule that a
mortgagee or purchaser of land need
not look beyond the four corners of
the title is inapplicable.
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