Real Estate Mortgage Law

(Act 3135, as amended by RA 4118)

a. Coverage

Governs sales made under a special

power inserted in or attached to any
real-estate mortgage, which is made as
security for the payment of money or
the fulfillment of any other obligation.
The Act will govern the manner in which
the sale and redemption shall be
effected, whether or not provision for
the same is made in the power. (Sec 1,
Act 3135)
 Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)

The law covers only real estate

mortgages. It is intended merely to
regulate the extrajudicial sale and
redemption of the property 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.
 Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)

b. Remedies available to mortgagee

upon default of the mortgagor

The mortgagee has a choice of one

(1) of two (2) remedies, but he cannot
have both. The mortgagee may (i)
foreclose the mortgage or (ii) file an
ordinary action to collect the debt, i.e.
specific performance.
 Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)

When the mortgagee chooses the foreclosure

of the mortgage as a remedy, he enforces his
lien by the sale on foreclosure of the mortgaged
property. The proceeds of the sale will be
applied to the satisfaction of the debt. With this
remedy, he has a prior lien on the property. In
case of a deficiency, the mortgagee has the
right to claim for the deficiency resulting from
the price obtained in the sale of the real
property at public auction and the outstanding
obligation at the time of the foreclosure
proceedings.
 Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)

On the other hand, if the mortgagee resorts

to an action to collect the debt, he thereby
waives his mortgage lien. He will have no more
priority over the mortgaged property. If the
judgment in the action to collect is favorable to
him, and it becomes final and executor, he can
enforce said judgment by execution. He can
even levy execution on the same mortgaged
property, but he will not have priority over the
latter and there may be other creditors who have
better lien on the properties of the mortgagor.
 Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)

If mortgagor issues post-dated checks,

resorting to a criminal action for violation of BP 22
also precludes the remedy of foreclosure and vice
versa. Recovery of the amount due is deemed
included in the action for violation of BP 22.

TIP: If the mortgage covers the total claim,

then foreclose. If not, still foreclose for after all
you can still collect the deficiency from the
principal debtor (if mortgagor is a third person),
not the mortgagor unless the latter bound himself
solidarily liable with the borrower. Make it a last
resort to file a criminal action because in reality it
takes much longer to pursue BP 22.
 Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)

c. Need for special power of attorney

Under Section 1 of Act No. 3135, a special
power of attorney must be inserted in or attached
to any Real Estate Mortgage.

Without proof of petitioner's special authority

to foreclose, the Clerk of Court as Ex-Oficio
Sheriff is precluded from acting on the application
for extrajudicial foreclosure.
 Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)

d. Authority to foreclose extrajudicially

A mortgage may be foreclosed extra

judicially where there is inserted in the contract
a clause giving the mortgagee the power upon
default of the debtor, to foreclose the mortgage
by an extrajudicial sale of the mortgaged
property. The authority to sell is not
extinguished by the death of the mortgagor (or
mortgagee).
 Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)

e. Procedure
P (1) Where to file
R
O All applications shall be filed with the Executive
C Judge through the Clerk of Court, who is also the
E Ex-Officio Sheriff. See Sec. 1, Circular No. 7-
D 2002, Guidelines for the enforcement of Supreme
Court Resolution of December 14, 1999 in A.M.
U no. 99-10-05-0 (re: Procedure in extra-judicial
R foreclosure of mortgage), as amended by the
E Resolutions dated January 30, 2001 and August
7, 2001.
 Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)

2) Where to sell

P Province where the property is situated. (Sec.
R 2, R.A. 3135, as amended) Sale cannot be made
O legally outside of the province in which the
C property sold is situated.
E
If venue is subject to stipulation, such sale
D shall be made in said place (i.e., the place so
U stipulated) or in the municipal building of the
R municipality in which the property or part thereof
E is situated.
 Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)

(3) Posting requirement

Notice of the sale is posted in at least three (3) public

P places of the municipality or city (Sheriffs Office,
R Assessors Office and Register of Deeds) where the
O property is situated for not less than twenty (20) days and
published once a week for at least three (3) consecutive
C weeks in a newspaper of general circulation in the
E municipality or city (Sec. 3,). Posting of notice on
mortgaged property not required.
D
U Failure to advertise a mortgage foreclosure sale in
R compliance with statutory requirements constitutes a
jurisdictional defect invalidating the sale. A substantial
E error or omission in a notice of sale will render the notice
insufficient and vitiate the sale.
 Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)
(4) Publication requirement

(a) Sufficiency of newspaper publication
P Notice shall also be published once a week for at least
R three (3) consecutive weeks in a newspaper of general
circulation. The newspaper need not have the largest
O circulation so long as it is of general circulation. To be a
C newspaper of general circulation, it is enough that it is
published for the dissemination of local news and general
E information; that it has a bona fide subscription list of
D paying subscribers; and that it is published at regular
U intervals. The newspaper must not be devoted to the
interests or entertainment of a particular class, profession,
R trade, calling, race or religious denomination. The
E newspaper need not have the largest circulation so long as
it is of general circula in the municipality or city where the
property is located.
 Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)

(b) Need for republication in case of postponement

P Republication is necessary for the validity of a postponed

R extrajudicial foreclosure sale. Another publication is required
in case the auction sale is rescheduled, and the absence of
O such republication invalidates the foreclosure sale. The last
C paragraph of the prescribed notice of sale (under SC Circular
7-2002) allows the holding of a rescheduled auction sale
E without reposting or republication of the notice. In the event
D the public auction should not take place on the said date, it
U shall be held on ___________,______without further
notice. However, the rescheduled auction sale will only be
R valid if the rescheduled date of auction is clearly specified in
E 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.
 Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)

(c) Personal notice to the mortgagor when

and when not needed
P
General Rule: Personal notice to the mortgagor
R is not generally required. Exception: Unless
O required in the mortgage contract, the lack of
C personal notice to the mortgagor is not a ground
E to set aside a foreclosure sale.
D Unless otherwise stipulated by the
U parties to the mortgage contract, the debtor-
mortgagor need not be personally served a copy
R of the notice of the extra- judicial foreclosure.SC
E Circular 7-2002
 Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)

f. Possession by purchaser of
foreclosed property

Upon failure of the debtor to redeem the

property within one (1) year after the date
of the registration of the certificate of sale,
winning bidder becomes the absolute
owner.
 Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)

g. Remedy of debtor if foreclosure is not

proper

Within thirty (30) days after the purchaser is

given possession of the property, the debtor may
petition that the sale be set aside on the ground
that the mortgage was not violated or the sale
was not made in accordance with the provisions
of Act 3135. (Sec. 8. This may be done in the
proceedings in which possession was requested)
 Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)

h. Redemption

R Right of Redemption is the right of the
mortgagor to redeem the mortgage property
E within a certain period (1 year) after it was sold
D for the satisfaction of the mortgage debt.
E Requisites for valid redemption:
M 1. Redemption within 1 year from registration
T of sale;
I 2. Payment of purchase price plus 1% interest
per month thereon if any, paid by purchaser; and
O 3. Written notice of redemption served on
N officer who made the sale.
 Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)

(1)Who may redeem

a.The debtor;
R
E b.The debtor's successors-in-interest;
D
E c.Any judicial creditor or judgment creditor
M of the debtor;
T
d.Any person having a lien on the property
I subsequent to the mortgage or deed of trust
O under which the property is sold (Redemption
N price to be paid by accommodation mortgagors).
 Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)

(2) Amount of Redemption price

R a. Limited to the winning bid price plus twelve
E percent (12%) interest per annum.
D
E b. Purchase price if judgment obligor. Sum paid
M on last redemption if redemptioner. (Rule 39, Sec.
T 28, Rules of Court). The redemptioner should
make an actual tender in good faith of the full
I amount of the purchase price.
O
N
 Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)

(3) Period for redemption

R Natural persons: Within 1 year from and after
E the date of the sale.Sec. 6
D
E Juridical persons: Until but not after the
M registration of the certificate of foreclosure sale
T with the applicable Register of Deeds, which in no
case shall be more than 3 months after
I foreclosure, whichever is earlier.(Sec. 47, R.A.
O 8791)
N
 Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)

(4) Effect of pendency of action for

R annulment of sale
E
D The filing of court action to enforce
E redemption has effect of preserving the
M redemptioners rights; and freezing the
T expiration of one year period to redeem.
I
O
N
 Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)

i. Writ of possession

W (1) Ministerial duty of the court

R The duty of the trial court to grant a writ of
I
T
possession is ministerial. Such writ issues as a
matter of course upon the filing of the proper
P motion and the approval of the corresponding
O bond.
S Any question regarding the regularity and
S
I
validity of the sale is to be determined in a
O subsequent proceeding. (Sec. 8). Mandamus will
N lie.
 Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)

The judge to whom an application for writ of

possession is filed need not look into the validity
W of the mortgage or the manner of its foreclosure.
R In the issuance of a writ of possession, no
I
T
discretion is left to the Trial Court. Any question
regarding the cancellation of the writ in respect to
P the validity/regularity of the foreclosure sale or
O the mortgage should be determined in a
S subsequent proceeding . Such question cannot be
S
I
raised to oppose the issuance of the writ, since
O the proceeding isex parte.
N After the consolidation of title in the buyers
name for failure of the mortgagor to redeem, the
writ of possession becomes a matter of right.
 Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)

(2) Enforcement against third

W parties
R
I

T The purchaser or last redemption shall
be entitled to possession of the property
P
O upon the finality of the order of
S confirmation or upon the expiration of the
S
I
period of redemption, unless a third party
O is actually holding the same adversely to
N the judgment debtor.
 Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)

(3) Pendency of action for

W annulment of sale
R
I

T The pendency of a separate civil suit
questioning the validity of the sale of the
P
O mortgaged property cannot bar the
S issuance of the writ of possession.
S
I
O
N
 Real Estate Mortgage Law
(Act 3135, as amended by RA 4118)

j. Annulment of sale

(See g. Remedy of debtor if foreclosure is

not proper, supra)

READ ALSO:
Full Text of Act 3135 Real Estate Mortgage
Law