Real Estate Mortgage Law

(Act 3135, as amended by RA 4118)

a. Coerage
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 1!"
The law covers only real estate mortgages. #t is intended merely to regulate the e$tra%udicial sale and
redemption of the property if and when the mortgagee is given a special power or e$press authority to do so in
the deed itself or in a document anne$ed thereto.
b. Remed!es aa!lable to mortgagee "#on de$a"lt o$ t%e mortgagor
The mortgagee has a choice of one (1" of two (&" 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.
'hen 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. 'ith this remedy, he has a prior lien on the property. #n 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. (Soriano v. Enriquez, &( )hil. !*(+ Banco
de Islas Filipinas v. Concepcion Hijos, ! )hil. *,; Banco Nacional v. Barreto, ! )hil. 1-1"
.n the other hand, if the mortgagee resorts to an action to collect the debt, he thereby waives his
mortgage lien. /e will have no more priority over the mortgaged property. #f the %udgment in the action to
collect is favorable to him, and it becomes final and e$ecutory, he can enforce said %udgment by e$ecution. /e
can even levy e$ecution 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. Caltex !ils. vs. I"C, August
&!, 10*0
#f mortgagor issues post-dated chec1s, resorting to a criminal action for violation of 2) && also precludes
the remedy of foreclosure and vice versa. 3ecovery of the amount due is deemed included in the action for
violation of 2) &&.
T#)4 #f the mortgage covers the total claim, then foreclose. #f 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. 5a1e it a last resort to file a criminal action because in
reality it ta1es much longer to pursue 2) &&.
c. &eed $or s#ec!al #ower o$ attorney
6nder Section 1 of Act 7o. 1!, a special power of attorney must be inserted in or attached to any
3eal 8state 5ortgage.
'ithout proof of petitioner9s special authority to foreclose, the :ler1 of :ourt as 8$-.ficio Sheriff is
precluded from acting on the application for e$tra%udicial foreclosure. (#$$ice o$ t!e Court "d%inistrator v.
ardo, 3T;--*-&1-0, April -, &--*+ Casano v. &a'at, (&! )hil. !,, ,--,1 (&--&"+ a'u(o v. )at*unton,
A.5. 7o. )--,-&1!, 5ay &!, &--<, !& S:3A 1!,, 1,1".
d. A"t%or!ty to $oreclose e'tra("d!c!ally

A mortgage may be foreclosed e$tra%udicially where there is inserted in the contract a clause giving the
mortgagee the power upon default of the debtor, to foreclose the mortgage by an e$tra%udicial sale of the
mortgaged property. The authority to sell is not e$tinguished by the death of the mortgagor (or mortgagee".
e. )roced"re
(1" 'here to file
All applications shall be filed with the 8$ecutive ;udge through the :ler1 of :ourt, who is also the 8$-
.fficio Sheriff. See Sec. 1, :ircular 7o. <-&--&, Guidelines for the enforcement of Supreme :ourt 3esolution of
=ecember 1(, 1000 in A.5. no. 00-1---!-- (re4 )rocedure in e$tra-%udicial foreclosure of mortgage", as
amended by the 3esolutions dated ;anuary -, &--1 and August <, &--1.
(&" 'here to sell

)rovince where the property is situated. (Sec. &, 3.A. 1!, as amended" Sale cannot be made legally outside
of the province in which the property sold is situated.
#f venue is sub%ect to stipulation, such sale shall be made in said place (i.e., the place so stipulated" or
in the municipal building of the municipality in which the property or part thereof is situated. (ibid."
(" )osting re>uirement
7otice of the sale is posted in at least three (" public places of the municipality or city (Sheriff?s .ffice,
Assessor?s .ffice and 3egister of =eeds" where the property is situated for not less than twenty (&-" days and
published once a wee1 for at least three (" consecutive wee1s in a newspaper of general circulation in the
municipality or city (Sec. , ibid". )osting of notice on mortgaged property not re>uired.
@ailure to advertise a mortgage foreclosure sale in compliance with statutory re>uirements constitutes a
%urisdictional defect invalidating the sale. A substantial error or omission in a notice of sale will render the notice
insufficient and vitiate the sale. (NB v. Nepo%uceno, 0( S:3A (-!, &--&"

((" )ublication re>uirement
(a" Sufficiency of newspaper publication
7otice shall also be published once a wee1 for at least three (" consecutive wee1s in a newspaper of
general circulation. The newspaper need not have the largest circulation so long as it is of general circulation.
To be a newspaper of general circulation, it is enough that it is published for the dissemination of local news and
general information+ that it has a bona fide subscription list of paying subscribers+ and that it is published at
regular intervals. The newspaper must not be devoted to the interests or entertainment of a particular class,
profession, trade, calling, race or religious denomination. The newspaper need not have the largest circulation
so long as it is of general circulation ()ereA vs. )ereA (&--!"" in the municipality or city where the property is
located. &etro*an+ v. e,a$iel, G.3. 7o. 1<0<, @eb. &<, &--0
(b" 7eed for republication in case of postponement
3epublication is necessary for the validity of a postponed e$tra%udicial foreclosure sale. Another
publication is re>uired in case the auction sale is rescheduled, and the absence of such republication invalidates
the foreclosure sale. The last paragraph of the prescribed notice of sale (under S: :ircular <-&--&" allows the
holding of a rescheduled auction sale without reposting or republication of the notice. #n the event the public
auction should not ta1e place on the said date, it shall be held on BBBBBBBBBBB,BBBBBB -it!out $urt!er notice.
/owever, the rescheduled auction sale will only be valid if the rescheduled date of auction is clearly specified in
the prior notice of sale. The absence of this information in the prior notice of sale will render the rescheduled
auction sale void for lac1 of reposting or republication. (.B vs. E%erald /esorts Hotel0
(c" )ersonal notice to the mortgagor when and when not needed
General 3ule4 )ersonal notice to the mortgagor is not generally re>uired. 8$ception4 6nless re>uired in the
mortgage contract, the lac1 of personal notice to the mortgagor is not a ground to set aside a foreclosure sale.
6nless otherwise stipulated by the parties to the mortgage contract, the debtor-mortgagor need not be
personally served a copy of the notice of the e$tra- %udicial foreclosure.

S: :ircular <-&--&
$. )ossess!on by #"rc%aser o$ $oreclosed #ro#erty
6pon failure of the debtor to redeem the property within one (1" year after the date of the registration
of the certificate of sale, winning bidder becomes the absolute owner.
g. Remedy o$ debtor !$ $oreclos"re !s not #ro#er
'ithin thirty (-" 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 1!. (Sec. *. This may be done in the proceedings in which possession
was re>uested"
%. Redem#t!on
3ight of 3edemption is the right of the mortgagor to redeem the mortgage property within a certain
period (1 year" after it was sold for the satisfaction of the mortgage debt.
3e>uisites for valid redemption4
1. 3edemption within 1 year from registration of sale+
&. )ayment of purchase price plus 1C interest per month thereon if any, paid by purchaser+ and
. 'ritten notice of redemption served on officer who made the sale.
<!--[if !supportLists]-->(1"DE--FendifG--H 'ho may redeem
<!--[if !supportLists]-->a. DE--FendifG--HThe debtor+
<!--[if !supportLists]-->b. DE--FendifG--HThe debtor9s successors-in-interest+
<!--[if !supportLists]-->c. DE--FendifG--HAny %udicial creditor or %udgment creditor of the debtor+
<!--[if !supportLists]-->d. DE--FendifG--HAny person having a lien on the property subse>uent to the mortgage or
deed of trust under which the property is sold (3edemption price to be paid by accommodation mortgagors".
(&" Amount of 3edemption price
a. Iimited to the winning bid price plus twelve percent (1&C" interest per annum.
b. )urchase price if %udgment obligor. Sum paid on last redemption if redemptioner. (3ule 0, Sec. &*, 3ules of
:ourt". The redemptioner should ma1e an actual tender in good faith of the full amount of the purchase price
(Hi12ield /ealt( vs. C" (&--&"
(" )eriod for redemption
7atural persons4 'ithin 1 year from and after the date of the sale. Sec. ,
;uridical persons4 6ntil but not after the registration of the certificate of foreclosure sale with the applicable
3egister of =eeds, which in no case shall be more than months after foreclosure, whichever is earlier. (Sec.
(<, 3.A. *<01"
((" 8ffect of pendency of action for annulment of sale
The filing of court action to enforce redemption has effect of preserving the redemptioner?s rights+ and
freeAing the e$piration of one year period to redeem. (Banco Filipino v Court o$ "ppeals0
!. *r!t o$ #ossess!on
(1" 5inisterial duty of the court
The duty of the trial court to grant a writ of possession is ministerial. Such writ issues as a matter of
course upon the filing of the proper motion and the approval of the corresponding bond. Any >uestion regarding
the regularity and validity of the sale is to be determined in a subse>uent proceeding. (Sec. *". 5andamus will
lie.
The %udge to whom an application for writ of possession is filed need not loo1 into the validity of the
mortgage or the manner of its foreclosure. #n the issuance of a writ of possession, no discretion is left to the
Trial :ourt. Any >uestion regarding the cancellation of the writ in respect to the validityJregularity of the
foreclosure sale or the mortgage should be determined in a subse>uent proceeding (NB v. Sanao". Such
>uestion cannot be raised to oppose the issuance of the writ, since the proceeding is ex parte. (Sa%son vs
/ivera, &--("
After the consolidation of title in the buyer?s name for failure of the mortgagor to redeem, the writ of
possession becomes a matter of right
(&" 8nforcement against third parties
The purchaser or last redemption shall be entitled to possession of the property upon the finality of the
order of confirmation or upon the e$piration of the period of redemption, unless a third party is actually holding
the same adversely to the %udgment debtor.
(" )endency of action for annulment of sale
The pendency of a separate civil suit >uestioning the validity of the sale of the mortgaged property
cannot bar the issuance of the writ of possession. .B vs Spouses )atal (34450
(. Ann"lment o$ sale (See g. 3emedy of debtor if foreclosure is not proper, supra"
REA+ AL,-. @ull Te$t of Act 1! 3eal 8state 5ortgage Iaw