Law 204 Credit Transactions_ NOTES Team Paymens: Facundo, Aguillon, Tutanes, Occida , Odchigue

Topic to report: ACT 3135 as amended by ACT 4118

EXTRA-JUDUCIAL FORCLOSURE OF REAL ESTATE MORTGAGE

I. MEANING

FORECLOSURE - It is the remedy available to the mortgagee by which he subjects the

mortgaged property to the satisfaction of the obligation secured by the mortgage.

✓ It is the consequence of non-payment of a mortgage indebtedness.

✓ The right of foreclosure cannot be exercised by any person other than the creditor
mortgagee or his assigns.
✓ Foreclosure must be limited to the amount mentioned in the mortgage document
✓ As a General Rule, a demand before foreclosure is essential.

Note: once the proceeds have been applied to the payment of the obligation, the debtor
cannot anymore be required to pay, unless, there is a deficiency between the amount of the
loan and the foreclosure sale price, because the obligation has already been extinguished.

EXTRAJUDICIAL FORECLOSURE- It is a type of sale governed by Act 3135 as amended

by 4118 where:
✓ It is a remedy
✓ No court intervention
✓ Not appealable, it is immediately executory
✓ Foreclosure does not cut off right of all parties involved
✓ There is right of redemption
✓ Period to redeem start from date of registration of certificate of sale
✓ Special power of attorney in favor of mortgagee is needed in the contract

ACT 3135 (amended by ACT 4118)

AN ACT TO REGULATE THE SALE OF PROPERTY UNDER SPECIAL POWERS
INSERTED IN OR ANNEXED TO REAL-ESTATE MORTGAGES

Purpose:
To regulate the extrajudicial sale of mortgaged real properties by prescribing a procedure
which effectively safeguards the rights of both debtor and creditor.

Scope:
• 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.

II. ESSENTIAL REQUIREMENTS:

1. There must be a special power of attorney inserted in or attached to the real
estate mortgage authorizing the sale;

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Law 204 Credit Transactions_ NOTES Team Paymens: Facundo, Aguillon, Tutanes, Occida , Odchigue
Topic to report: ACT 3135 as amended by ACT 4118

2. The sale must be made within the province where the property or any part
thereof is located, unless otherwise stipulated; (Palada vs. Soldbank 653 SCRA 10)
3. There must be a notice of sale for the purpose of securing bidders and to prevent a
sacrifice of the property. The publication, therefore, is required to give the
foreclosure sale a reasonably wide publicity such that those interested might attend
the public sale. (See notes: Notice and Publication of Sale page 2-3)

4. 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 (now municipal
judge) of the municipality in which such sale shall be made, or a notary public of
said municipality. (PNB v. Cabatingan, 557 SCRA 426 [2008)
(See notes: Conduct of Auction Sale page 3)

NOTICE AND PUBLICATION OF SALE

Question: Is it required to publish the notice? YES.

1. PD 1079 and Act 3135, as amended

Under Act, 3135, if the property is worth more than four hundred pesos, shall be in a
newspaper of general circulation in the city or municipality where the property lies.
to be posted in three public places of the municipality or city where the property is
situated. If the property is worth more than P400.00, the notice shall also be
published once a week for three consecutive weeks in a newspaper of general
circulation in the city or municipality.

2. The notice and publication requirement are mandatory and failure to comply is a
jurisdictional defect that vitiates the foreclosure auction sale.
➢ The rule is that statutory provisions governing publication of notice of
mortgage foreclosure sales must be strictly complied with, and that even
slight deviation therefrom will invalidate the notice and render the sale at
least voidable. It has been held that failure to advertise a mortgage
foreclosure sale in compliance with statutory requirements constitute a
jurisdictional defect invalidating the sale and that a substantial error or
omission in a notice of sale will render the notice insufficient and vitiate the
sale.

Question: What is contained in the notice?

(1) correct certificate number and correct technical description of the real property to
be sold,
(2) time, place and date of public sale and the terms of the sale

Question: Does the parties have a right to wave?

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Law 204 Credit Transactions_ NOTES Team Paymens: Facundo, Aguillon, Tutanes, Occida , Odchigue
Topic to report: ACT 3135 as amended by ACT 4118

The parties have no right to waive the notice and publication requirements. There
is no estoppel in case of an agreement to dispense with the notice and publication
requirements.
➢ The parties have absolutely no right to waive the posting and publication
requirements. Foreclosure auction sale is imbued with public policy
considerations and any waiver on the notice and publication requirements
would be inconsistent with the intent and letter of Act 3135.

Note: You cannot waive posting. To allow the parties to waive the
posting and publication requirements would result in converting into a private
sale what ought to be a public auction. It as been held, however, that the
failure to post a notice is not per se a ground for invalidating a foreclosure
sale provided that the notice thereof is duly published in a newspaper of
general circulation

3. Personal notice to the mortgagor is required if it is stipulated.

➢ There being no contractual stipulation therefore, personal notice is not
necessary.
➢ While publication of the foreclosure proceedings in the newspaper of general
circulation was complied with, personal notice is still required when the same
was mutually agreed upon by the parties as additional condition of the
mortgage contract. Failure to comply with such stipulation is fatal

CONDUCT OF AUCTION SALE (Frequent Question)

Question: Who conducts the public sale?

The sheriff or the notary public as provided for in the administrative matter. For the sheriff,
the cases are raffled.

Question: Where do you hold the auction sale?

If place is ascertained in contract, the public sale will be held in the general location of the
place or province where the property is located or at the municipal hall where the property
is located

Note: 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
as long as each parcel of land is answerable for the entire debt.

Question: If auction sale is published on a certain date, what time should it be

held?
Section 4 of Act 3135 provides that the sale must take place between the hours of nine
in the morning and four in the afternoon. (9 AM- 4 PM)

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Law 204 Credit Transactions_ NOTES Team Paymens: Facundo, Aguillon, Tutanes, Occida , Odchigue
Topic to report: ACT 3135 as amended by ACT 4118

Let’s examine a case?

Olizon vs. Court of Appeals

G.R. No. 107075 September 1, 1994

Facts:
Spouses Armando and Iluminada Olizon obtained a loan from respondent Prudential Bank in
the amount of P25,000.00 and, as security, they executed in favor of respondent bank a real
estate mortgage over a parcel of land consisting of 1,000 square meters located in Kalookan
City and registered in their names under TCT of the Registry of Deeds of Kalookan City.
Olizon spouses failed to pay their obligation upon its maturity, so private respondent
extrajudicially foreclosed the real estate mortgage. At a public auction thereafter held on

March 11, 1975, the subject property was sold to respondent bank as the highest bidder,
pursuant to which it was issued a certificate of sale as of the same date. On March 12,
1974, the said certificate of sale was duly annotated at the back of petitioner's TCT.
Petitioner spouses failed to redeem the foreclosed property within the period of redemption,
title to the property was consolidated in favor of respondent bank.
Transfer of Certificate of Title No. 24604 in the name of the Olizon spouses was cancelled
and, in lieu thereof, Transfer Certificate of Title No. 149858 was issued on June 5, 1987 in
the name of respondent bank.

Herein petitioners are now seeking the annulment of the extrajudicial foreclosure sale
conducted more than 20 years ago, invoking therefor two grounds, namely, lack of personal
notice to the mortgagors about the foreclosure sale, and the failure of the mortgagee bank
to comply with the posting requirement under Section 3 of Act No. 3135, as amended. That
there was no certificate of posting attached to the sheriff’s records of the extrajudicial
foreclosure sale.

Issue: Did the extrajudicial foreclosure validly complied with the notice and publication
requirement?

Held: Yes.

On the alleged lack of personal notice:

It is now a well-settled rule that personal notice to the mortgagor in extrajudicial foreclosure
proceedings is not necessary.
Section 3 of Act No. 3135 governing extrajudicial foreclosure of real estate mortgages, as
amended by Act No. 4118, requires only the posting of the notice of sale in three public
places and the publication of that notice in a newspaper of general circulation. Hence, the
lack of personal notice to the mortgagors, herein petitioners, is not a ground to set aside the
foreclosure sale.

On Publication:
The publication of the notice of sale in the newspaper of general circulation alone is more
than sufficient compliance with the notice-posting requirement of the law.

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 Law 204 Credit Transactions_ NOTES Team Paymens: Facundo, Aguillon, Tutanes, Occida , Odchigue
Topic to report: ACT 3135 as amended by ACT 4118

The fact that newspaper publications have more far-reaching effects than posting on bulletin
boards in public places. There is a greater probability that an announcement or notice
published in a newspaper of general circulation, which is distributed nationwide, shall have a
readership of more people than that posted in a public bulletin board.

By such publication, a reasonably wide publicity had been effected such that those
interested might attend the public sale, and the purpose of the law had been thereby
subserved.

III. PROCEDURE IN EXTRA JUDICIAL FORCLOSURE

(A.M. No. 99-10-05-0, August 7, 2001: PROCEDURE IN EXTRA-JUDICIAL FORECLOSURE OF

MORTGAGE)

1. File an application for extra-judicial foreclosure with the Executive Judge;

2. Upon receipt of an application for extra-judicial foreclosure of mortgage, it shall be the duty
of the Clerk of Court to:
a) receive and docket said application and to stamp thereon the corresponding file number,
date and time of filing;

b) collect the filing fees therefore pursuant to rule 141, Section 7(c), as amended by A.M.
No. 00-2-01-SC, and issue the corresponding official receipt;

c) examine, in case of real estate mortgage foreclosure, whether the applicant has complied
with all the requirements before the public auction is conducted under the direction of the
sheriff or a notary public, pursuant to Sec. 4 of Act 3135, as amended;

d) sign and issue the certificate of sale, subject to the approval of the Executive Judge, or in
his absence, the Vice-Executive Judge. No certificate of sale shall be issued in favor of the
highest bidder until all fees provided for in the aforementioned sections and in Rule 141,
Section 9(1), as amended by A.M. No. 00-2-01-SC, shall have been paid; Provided, that in
no case shall the amount payable under Rule 141, Section 9(1), as amended, exceed
P100,000.00;

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

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Law 204 Credit Transactions_ NOTES Team Paymens: Facundo, Aguillon, Tutanes, Occida , Odchigue
Topic to report: ACT 3135 as amended by ACT 4118

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

3. The notices of auction sale in extrajudicial foreclosure for publication by the sheriff or by
a notary public shall be published in a newspaper of general circulation pursuant to Section
1, Presidential Decree No. 1079, dated January 2, 1977, and 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 by the sheriff or the notary public who
conducted the sale to the Clerk of Court before the issuance of the certificate of sale.

Let’s examine the case?

Feistan vs. CA
G.R. No. 81552 May 28, 1990

Spouses Dionisio Fiestan and Juanita Arconada motgage to respondent Development Bank
of the Philippines (DBP) a parcel of land as security on the loan the obtained from the latter.
When they failed to pay their loan, PNB executed an extrajudicial foreclosure and was able
to acquire at a public auction sale the said parcel of land that Fiestan owned. The Provincial
Sheriff issued a certificate of sale and was registered on September 28 in the Office of the
Register of Deeds of Ilocos Sur.

When spouses Fiestan failed to redeem their parcel of land within the 1 year period, the
Register of Deeds cancelled their title over the subject property. DBP then sold the lot to
Francisco Peria and the Register of Deeds of Ilocos Sur cancelled DBP’s title over said
property and issued TCT to Peria’s name. Peria thereafter mortgaged said lot to the PNB-
Vigan Branch. Since the spouses Fiestan were still in possession of the property, the
Provincial Sheriff ordered them to vacate the premises, but instead of leaving, they filed a
complaint in the RTC of Vigan, Ilocos Sur for annulment of sale, mortgage and cancellation
of transfer certificates. The spouses Fiestan herein seek to annul the extrajudicial
foreclosure sale of the mortgaged property on the ground that the Provincial Sheriff

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Law 204 Credit Transactions_ NOTES Team Paymens: Facundo, Aguillon, Tutanes, Occida , Odchigue
Topic to report: ACT 3135 as amended by ACT 4118

conducted the foreclosure without first effecting a levy on said property before selling the
same at the public auction sale

Issue: Was the sale an extrajudicial foreclosure sale?

Held: Yes.
Formalities of a levy as an essential requisite of a valid execution sale under
Section 15 of Rule 39 and a valid attachment lien under Rule 57 of the Rules of
Court are not basic requirements before an extrajudicially foreclosed property
can be sold at public auction; Three different kinds of sales under the law, distinguished.
At the outset, distinction should be made of the three different kinds of sales under the law,
namely: an ordinary execution sale, a judicial foreclosure sale, and an extrajudicial
foreclosure sale, because a different set of law applies to each class of sale mentioned. An
ordinary execution sale is governed by the pertinent provisions of Rule 39 of the Rules of
Court. Rule 68 of the Rules of Court applies in cases of judicial foreclosure sale. On the
other hand, Act No. 3135, as amended by Act No. 4118 otherwise known as “An Act to
Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real Estate
Mortgages” applies in cases of extrajudicial foreclosure sale.

The case at bar, as the facts disclose, involves an extrajudicial foreclosure sale. The
public auction sale conducted on August 6, 1979 by the Provincial Sheriff of Ilocos Sur
refers to the “sale” mentioned in Section 1 of Act No.3135, as amended, which was made
pursuant to a special power inserted in or attached to a real estate mortgage
made as security for the payment of money or the fulfillment of any other
obligation. It must be noted that in the mortgage contract, petitioners, as
mortgagor, had appointed private respondent DBP, for the purpose of
extrajudicial foreclosure, “as his attorney-in-fact to sell the property mortgaged under
Act No. 3135, as amended, to sign all documents and perform any act requisite and
necessary to accomplish said purpose x x x. In case of foreclosure, the Mortgagor hereby
consents to the appointment of the mortgagee or any of its employees as receiver, without
any bond, to take charge of the mortgaged property at once, and to hold possession of the
same.”

Therefore, such foreclosure is an extrajudicial one and is validly conducted

pursuant to Act 3135.
The mortgagee-creditor is allowed to participate in the bidding and purchase under the
same conditions as any other bidder, as in the case at bar. In other words, Section 5 of Act
No. 3135, as amended, creates and is designed to create an exception to the general rule
that a mortgagee or trustee in a mortgage or deed of trust which contains a power of sale
on default may not become the purchaser, either directly or through the agency of a third
person, at a sale which he himself makes under the power. Under such an exception, the
title of the mortgagee-creditor over the property cannot be impeachedor defeated on the
ground that the mortgagee cannot be a purchaser at his own sale.

IV. REDEMPTION

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Law 204 Credit Transactions_ NOTES Team Paymens: Facundo, Aguillon, Tutanes, Occida , Odchigue
Topic to report: ACT 3135 as amended by ACT 4118

✓ It is a transaction by which the mortgagor reacquires the property which may have
passed under the mortgage or divests the property of the lien which the mortgage may
have created.

Right of redemption - Right of the mortgagor to redeem the property within a certain period
after it was sold for the satisfaction of the debt.

NOTE: the right of redemption, as long as within the period prescribed, may be exercised
irrespective of whether or not the mortgagee has subsequently conveyed the property to
some other party (Sta. Ignacia Rural Bank, Inc v. CA, 230 SCRA 513 [1994])

WHO MAY REDEEM? (Section 6, Act 3135 and Section 27, Rule 39 ROC)
1. Mortgagor or one in privity of title with mortgage
2. Successor-in-interest of the mortgagor
3. Under the Rules of Court
- a. The judgment obligor; or his successor in interest in the whole or any part of the
property;
- b. A creditor having a lien by virtue of an attachment, judgment or mortgage on the
property sold, or on some part thereof, subsequent to the lien under which the
property was sold.

RIGHT OF POSSESSION WHILE ON THE REDEMPTION PERIOD:

For the purchaser: (Section 7, ACT 3135)
The purchaser may petition the Court of First Instance of the province or place where the
property or any part thereof is situated, to give him possession (writ of possession) thereof
during the redemption period, furnishing bond in an amount equivalent to the use of the
property for a period of twelve months, to indemnify the debtor in case it be shown that the
sale was made without violating the mortgage or without complying with the requirements
of this Act.

For the Mortgagor/Debtor: (Section 8, ACT 3135)

The debtor may, in the proceedings in which possession was requested, but not later than
thirty days after the purchaser was given possession, petition that the sale be set
aside and the writ of possession cancelled, specifying the damages suffered by him,
because the mortgage was not violated or the sale was not made in accordance with the
provisions hereof, and the court shall take cognizance of this petition in accordance with the
summary procedure provided for in section one hundred and twelve of Act Numbered Four
hundred and ninety-six; and if it finds the complaint of the debtor justified, it shall dispose in
his favor of all or part of the bond furnished by the person who obtained possession. Either
of the parties may appeal from the order of the judge in accordance with section fourteen of
Act Numbered Four hundred and ninety-six; but the order of possession shall continue
in effect during the pendency of the appeal.

What are the requisites for valid redemption?

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Law 204 Credit Transactions_ NOTES Team Paymens: Facundo, Aguillon, Tutanes, Occida , Odchigue
Topic to report: ACT 3135 as amended by ACT 4118

1. Within the redemption period: The redemption must be made within 12 months from
the time of the registration of the sale.
2. Purchase price is paid: Payment of the purchase price of the property plus 1% interest
per month together with the taxes thereon, if any, paid by the purchaser with the same rate
of interest computed from the date of registration of the sale; and
3. Written notice of the redemption must be served on the officer who made the sale
and a duplicate filed with the proper Register of Deeds. ( Rosales vs. Yboa, 120 SCRA 869
[1983]).

Note: Acceptance of redemption price after the expiration of the statutory period for
redemption is deemed a waiver of the one-year period to redeem foreclosed property.
(Ramirez vs. Court of Appeals, 219 SCRA 598)

PERIOD OF REDEMPTION

1. For natural person – 1 year from registration of the certificate of sale with Registry of
Deeds
2. For juridical person (mortgagee is bank) – 3 months after foreclosure or before
registration of certificate of foreclosure whichever is earlier (Sec. 117 of General Banking
Law and Section 47, RA 8791)
➢ After the issuance of the certificate of sale to the highest bidder, this shall be
registered with the Register of Deeds where the property is located. At this point,
the remaining right of the mortgagor/debtor is to redeem the property. The period to
redeem property sold extrajudicially following the foreclosure of mortgage is one (1)
year from the registration of the sheriff’s certificate of foreclosure sale.

REDEMPTION PRICE
1. Mortgagee is not a bank (Act No. 3135 in relation to Sec. 28, Rule 39 of Rules of Court)
a. The purchase price of the property;
b. 1% interest per month of the purchase property;
c. taxes paid and amount of purchaser’s prior lien, if any, with the same rate of
interest computed from the date of registration of sale, up to the time of redemption

2. Mortgagee is a bank (GBL 2000)

1. a. Price is that which is stipulated in the mortgage document or the outstanding
obligation of the mortgage;
2. interest;
3. costs and expenses.

The redemption amount includes the assessment of taxes paid by the purchaser and the
interest on the auction price that should be computed from the date of the registration of
the certificate of sale.

Let’s examine the case?

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Law 204 Credit Transactions_ NOTES Team Paymens: Facundo, Aguillon, Tutanes, Occida , Odchigue
Topic to report: ACT 3135 as amended by ACT 4118

Joven vs. CA, GR No. 80739, August 20, 1992

Facts:
Joven, the registered owner of three parcels of land which she mortgaged in favor of the
Development Bank of the Philippines failed to pay her loan. The bank filed for extrajudicial
foreclosure of the mortgage and the properties were eventually sold to at public auction to
DBP as the highest bidder. A certificate of sale was issued and annotated on the certificate
of title on November 17, 1982.

When the redemption period expired, the PNB sold the subject properties to Roberto Paguia,
one of the herein private respondents, through a deed of sale executed on December 17,
1985. On January 30, 1986, Paguia took possession of the properties through his
representative, Fernando Lasala, the other private respondent.

Hence, Joven filed a complaint against the private respondents for forcible entry with a
prayer for writ of mandatory injunction.

Issue: Was the possession of the land become an absolute right of the purchaser?

Ruling:
No. In the case at bar, the possession of the land still belongs to Joven as the registered
owner in the Registry of Deeds.

After the lapse of the redemption period without the petitioner having redeemed the lands,
DBP did not execute an affidavit of consolidation of ownership of the subject properties.
Neither has it filed with the Register of Deeds a final deed of sale or a sworn
statement attesting to the fact of non-redemption. The circumstance that the properties are
still in the name of the petitioner shows that DBP has also not yet obtained a new certificate
of title in its name. And neither does it appear that DBP, on the basis of its purchase of the
lands at the foreclosure sale, ever secured a writ of possession to authorize its entry
into the said lands. Therefore, DBP had as yet not acquired any perfected right of
possession that it could transfer to the private respondents as the purchasers.

Section 63 (b) of P.D. 1529, otherwise known as the Property Registration Decree, requires
that in case of non-redemption, the purchaser at a foreclosure sale shall file with the
Register of Deeds either a final deed of sale executed by the person authorized by virtue
of the power of attorney embodied in the deed of mortgage or his sworn statement
attesting to the fact of non-redemption. The Register of Deeds shall thereupon issue a new
certificate in favor of the purchaser after the owner’s duplicate certificate shall have been
previously delivered and canceled.

Therefore, Joven still has the right of possession of the said mortgage properties.

EFFECT OF FAILURE TO REDEEM

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Law 204 Credit Transactions_ NOTES Team Paymens: Facundo, Aguillon, Tutanes, Occida , Odchigue
Topic to report: ACT 3135 as amended by ACT 4118

➢ If no redemption is made within the prescribed period, the buyer at foreclosure sale
becomes the absolute owner of the property purchased. The purchaser then
has the absolute right to a writ of possession that is the final process to carry out or
consummate the extrajudicial foreclosure. Henceforth, the mortgagor/debtor loses
his right over the property.
➢ Consolidation of title likewise becomes a matter of right on the part of the auction
buyer, and the issuance of a certificate of title in favor of the purchaser becomes
ministerial upon the Register of Deeds

WHEN PROPERTY IS REDEEMED WHILE IT IS IN POSSESSION OF THE

PURCHASER: (Section 9, Act 3135)

Redeemer shall be entitled to deduct from the price of redemption any rentals that said
purchaser may have collected in case the property or any part thereof was rented;
If the purchaser occupied the property as his own dwelling, it being town property, or used
it gainfully, it being rural property, the redeemer may deduct from the price the interest of
one per centum per month provided for in section four hundred and sixty-five of the Code of
Civil Procedure."

REDEMPTION VS. REPURCHASE

The right to redeem (a foreclosed property) becomes functus oficio on the date of its expiry,
and its exercise after the period is not really one of redemption but of repurchase.
Distinction must be made because redemption is by force of law; the purchaser at public
auction is bound to accept redemption. Repurchase however of a foreclosed property, after
redemption period, imposes no such obligation. After expiry, the purchaser may or may not
resell the property but no law will compel him to do so. And, he is not bound by the bid
price; it is entirely within his discretion to set a higher price, for after all, the property
already belongs to him as owner.

Let’s examine the case?

Sta. Ignacia Rural Bank, Inc v. CA, 230 SCRA 513 [1994])

Facts:
Conrado Pablo and Juanita Gonzales obtained a loan of P12,109.75 from Sta. Ignacia Rural
Bank and executed in favor of the defendant bank a Real Estate Mortgage over their
residential house and two (2) lots covered by Free Patent Title, located at Poblacion Norte,
Mayantoc, Tarlac. When the spouses defaulted in payment, the bank filed for extra-judicial
foreclosure of the said real properties and was sold at public auction at the highest bidder
for P13,168.35.

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Law 204 Credit Transactions_ NOTES Team Paymens: Facundo, Aguillon, Tutanes, Occida , Odchigue
Topic to report: ACT 3135 as amended by ACT 4118

Thereafter, the Certificate of Sale was executed in favor of the defendant bank on
September 29, 1981 and the same was registered with the Register of Deeds of Tarlac on
November 5, 1981.The ownership of the subject house and lots was consolidated in favor of
the defendant bank by virtue of the final deed of sale executed on November 5, 1983. On
December 19, 1984, the defendant bank sold the aforementioned real estates to defendant-
spouses Alberto Lucas and Nelia Rico for P47,500.00. Transfer Certificates of Title over the
house and lots were subsequently issued in the name of said Lucas and Rico.

Hence, the spouses filed for repurchase of their real properties, annulment of title and
damages.

Issue: What is the period of right of redemption and to repurchase?

Ruling:
Under Act 3135, redemption period should be reckoned from the date of the registration of
the Certificate of Sale in the Office of the Register of Deeds, that is on November 5, 1981
and not from the date of public auction nor the execution of Certificate of Sale. Redemption
period is from November 5, 1981 to November 5, 1982.

The five-year period of redemption fixed in Section 119 of the Public Land Law of
homestead sold at extrajudicial foreclosure begins to run from the day after the expiration of
the one-year period of repurchase allowed in an extrajudicial foreclosure. Hence, petitioners
still had five (5) years, the expiration of the redemption period under Act 3135) within which
to exercise their right to repurchase under the Public Land Act.”

The appellants still had five (5) years from November 5, 1982 (the expiration of the
redemption period under Act 3135), or until November 5, 1987, within which to exercise
their right to repurchase under the Public Land Act.
Right of repurchase, as long as within the redemption period, may be exercised irrespective
of whether or not the mortgagee bank had subsequently conveyed the property to some
other party.

KEY POINTS on ACT 3135 as amended:

◼ Notice and publication mandatory and failure to comply is a jurisdictional defect that
vitiates the foreclosure auction sale.
◼ As the only Remedy the mortgagor: to question the validity of the sale by a petition to
set aside the sale and to cancel the writ of possession
◼ Right of redemption may be exercised even if the mortgagee has subsequently
conveyed the property to some other party
◼ Acceptance of redemption price after the expiration of the period for redemption is
deemed a waiver

End of Report

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