H. Foreclosure of Real Estate Mortgage (Rule 68; RA 8791, Sec. 47)

F. Foreclosure of Real Estate Mortgage (Rule 68)

• Judicial Foreclosure
• Extrajudicial Foreclosure – Act No. 3135, as amended
• Bank Foreclosure – R.A. No. 8791, Section 47

> RULE 68 FORECLOSURE OF REAL ESTATE MORTGAGE Section 1. Complaint in action for foreclosure. – In an action for the foreclosure of a mortgage or other encumbrance upon real estate, the complaint shall set forth the date and due execution of the mortgage; its assignments, if any; the names and residences of the mortgagor and the mortgagee; a description of the mortgaged property; a statement of the date of the note or other documentary evidence of the obligation secured by the mortgage, the amount claimed to be unpaid thereon; and the names and residences of all persons having or claiming an interest in the property subordinate in right to that of the holder of the mortgage, all of whom shall be made defendants in the action. (1a) Section 2. Judgment on foreclosure for payment or sale. – If upon the trial in such action the court shall find the facts set forth in the complaint to be true, it shall ascertain the amount due to the plaintiff upon the mortgage debt or obligation, including interest and other charges as approved by the court, and costs, and shall render judgment for the sum so found due and order that the same be paid to the court or to the judgment obligee within a period of not less than ninety (90) days nor more than one hundred twenty (120) days from the entry of judgment, and that in default of such payment the property shall be sold at public auction to satisfy the judgment. (2a) Section 3. Sale of mortgaged property; effect. – When the defendant, after being directed to do so as provided in the next preceding section, fails to pay the amount of the judgment within the period specified therein, the court, upon motion, shall order the property to be sold in the manner and under the provisions of Rule 39 and other regulations governing sales of real estate under execution. Such sale shall not affect the rights of persons holding prior encumbrances upon the property or a part thereof, and when confirmed by an order of the court, also upon motion, it shall operate to divest the rights in the property of all the parties to the action and to vest their rights in the purchaser, subject to such rights of redemption as may be allowed by law. Upon the finality of the order of confirmation or upon the expiration of the period of redemption when allowed by law, the purchaser at the auction sale or last redemptioner, if any, shall be entitled to the possession of the property unless a third party is actually holding the same adversely to the judgment obligor. The said purchaser or last redemptioner may secure a writ of possession, upon motion, from the court which ordered the foreclosure. (3a) Section 4. Disposition of proceeds of sale. – The amount realized from the foreclosure sale of the mortgaged property shall, after deducting the costs of the sale, be paid to the person foreclosing the mortgage, and when there shall be any balance or residue, after paying off the mortgage debt due, the same shall be paid to junior encumbrancers in the order of their priority, to be ascertained by the court, or if there be no such encumbrancers or there be a balance or residue after payment to them, then to the mortgagor or his duly authorized agent, or to the person entitled to it. (4a) Section 5. How sale to proceed in case the debt is not all due. – If the debt for which the mortgage or encumbrance was held is not all due as provided in the judgment, as soon as a sufficient portion of the property has been sold to pay the total amount and the costs due, the sale shall terminate; and afterwards, as often as more becomes due for principal or interest and other valid charges, the court may, on motion, order more to be sold. But if the property cannot be sold in portions without prejudice to the parties, the whole shall be ordered to be sold in the first instance, and the entire debt and costs shall be paid, if the proceeds of the sale be sufficient therefor, there being a rebate of interest where such rebate is proper. (5a) Section 6. Deficiency judgment. – If upon the sale of any real property as provided in the next preceding section there be a balance due to the plaintiff after applying the proceeds of the sale, the court, upon motion, shall render judgment against the defendant for any such balance for which, by the record of the case, he may be personally liable to the plaintiff, upon which execution may issue immediately if the balance is all due at the time of the rendition of the judgment; otherwise, the plaintiff shall be entitled to execution at such time as the balance remaining becomes due under the terms of the original contract, which time shall be stated in the judgment. (6a) Section 7. Registration. – A certified copy of the final order of the court confirming the sale shall be registered in the registry of deeds. If no right of redemption exists, the certificate of title in the name of the mortgagor shall be cancelled, and a new one issued in the name of the purchaser. Where a right of redemption exists, the certificate of title in the name of the mortgagor shall not be cancelled, but the certificate of sale and the order confirming the sale shall be registered and a brief memorandum thereof made by the registrar of deeds upon the certificate of title. In the event the property is redeemed, the deed of redemption shall be registered with the registry of deeds, and a brief memorandum thereof shall be made by the registrar of deeds on said certificate of title. If the property is not redeemed, the final deed of sale executed by the sheriff in favor of the purchaser at the foreclosure sale shall be registered with the registry of deeds; whereupon the certificate of title in the name of the mortgagor shall be cancelled and a new one issued in the name of the purchaser. (n) Section 8. Applicability of other provisions. – The provisions of sections 31, 32 and 34 of Rule 39 shall be applicable to the judicial foreclosure of real estate mortgages under this Rule insofar as the former are not inconsistent with or may serve to supplement the provisions of the latter. (8a)

Modes of Foreclosure of Real Estate Mortgage

• Judicial Foreclosure pursuant to Rule 68;
• Extrajudicial Foreclosure pursuant to Act No. 3135 as amended by Act 4118, and A.M. No. 99-10-05-0. (Acbang v. Luczon, G.R. No. 164246, 2014)

The availment of the remedy under Rule 68 bars recourse to the subsequent filing of a personal action for collection of the same debt, in this case, under the principle of litis pendentia, considering that the foreclosure case only remains pending as it was not shown to have attained finality. (Marilag v. Martinez, G.R. No. 201892, 2015)

JUDICIAL FORECLOSURE VERSUS EXTRAJUDICIAL FORECLOSURE

Complaint in Action for Judicial Foreclosure

In an action for the foreclosure of a mortgage or other encumbrance upon real estate, the complaint shall set forth:

• The date and due execution of the mortgage;
• Its assignments, if any;
• The names and residences of the mortgagor and the mortgagee;
• A description of the mortgaged property;
• A statement of the date of the note or other documentary evidence of the obligation secured by the mortgage, the amount claimed to be unpaid thereon; and
• The names and residences of all persons having or claiming an interest in the property subordinate in right to that of the holder of the mortgage, all of whom shall be made defendants in the action. (Sec. 1, Rule 68)

WHERE TO FILE

A mortgage may be foreclosed judicially by bringing an action for that purpose, in the proper court which has jurisdiction over the area wherein the real property involved or a portion thereof, is situated. (Sec.1, Rule 4).

The venue of the extra-judicial foreclosure proceedings is the place where each of the mortgaged property is located. (Benguet Management Corp. v. Court of Appeals, G.R. No. 153571, 2003)

Judicial Foreclosure Sale

If the defendant fails to pay the amount adjudged within the period given, the court will order the foreclosure and execution sale of the mortgaged property. The court, upon motion, shall order the property to be sold in the manner and under the provisions of Rule 39 and other regulations governing sales of real estate under execution. (Sec. 3, Rule 68)

PUBLICATION REQUIREMENT

Statutory provisions governing publication of notice of mortgage foreclosure sales must be strictly complied with and slight deviations therefrom will invalidate the notice and render the sale, at the very least, voidable. Certainly, the statutory requirements of posting and publication are mandated and imbued with public policy considerations. Failure to advertise a mortgage foreclosure sale in compliance with the statutory requirements constitutes a jurisdictional defect, and any substantial error in a notice of sale will render the notice insufficient and will consequently vitiate the sale. (Caubang v. Spouses Crisologo, G.R. No. 174581, Feb. 4, 2015).

Note: The publication requirements apply to both judicial and extra-judicial foreclosure.

The failure to post a notice is not per se a ground for invalidating the sale provided that the notice thereof is duly published in a newspaper of general circulation. (Development Bank of the Philippines v. Aguirre, G.R. No. 144877, 2001)

REMEDY OF DEBTOR IF FORECLOSURE IS NOT PROPER

See further discussions on Mortgage & Foreclosure under Civil Law.

If a mortgage creditor pursues foreclosure even after previously instituting a personal action for recovery of debt, mortgage debtor can allege in its answer splitting of cause of action since the said personal action constitutes a waiver of the right to foreclosure. (Bachrach Motor Co., Inc vs. Icarañgal, G.R. No. L-45350 1939)

Mortgage debtor can file opposition to the motion for writ of possession alleging that notice and hearing was not afforded before a confirmation sale is ordered. Notice and hearing of motion for confirmation are therefore essential to the validity of the order of confirmation, not only to enable the interested parties to resist the motion but also to inform them of the time when their right of redemption is cut off. (Tiglao vs. Botones, G.R. No. L-3619, 1951)

Equity of Redemption in Judicial Foreclosure

Summary of Redemption Periods

Equity of Redemption

Regardless of who is the mortgagor or mortgagee, the period for equity of redemption is:

• Not less than 90 days nor more than 120 days from entry of judgment of foreclosure; or
• Even after the foreclosure sale but before judicial confirmation of the sale (Huerta Alba Resort v. CA, G.R. No. 128567, 2000)

Right of Redemption under Judicial Foreclosure (Rule 68)

If the mortgagee is a bank or banking institution, the right of redemption is 1 year, counted from the registration of the certificate of sale with the Register of Deeds (Sec. 47, General Banking Law of 2000; Huerta Alba Resort v. CA, G.R. No. 128567, 2000)

Right of Redemption under Extrajudicial Foreclosure (Act. No. 3135)

General Rule: Whether or not the mortgagee is a non-bank or banking institution, the redemption period is 1 year, counted from the registration of the certificate of sale with the Register of Deeds.

Exception: If the mortgagor is a juridical person, the redemption period is either:

• Before registration of the certificate of foreclosure sale with the Register of Deeds, or
• No more than 3 months after the foreclosure sale, whichever is earlier. (Sec. 47, General Banking Law of 2000

Formula

Amount realized from the foreclosure sale, less costs of the sale, shall be paid to the person foreclosing.

Junior Encumbrancers

When there shall be any balance or residue after paying off the mortgage debt due, the same shall be paid to:

• Junior encumbrancers in the order of their priority;
• If there be no junior encumbrancers or if there is still a balance after paying off the junior encumbrancers, the same shall be paid to the mortgagor or any person entitled thereto. (Sec. 4, Rule 68)

DEFICIENCY JUDGMENT

If there be a balance due to the plaintiff after applying the proceeds of the sale, the court, upon motion, shall render judgment against the defendant for any such balance.

Execution may issue immediately if the balance is all due. The plaintiff shall be entitled to execution at such time as the remaining balance shall become due and such due date shall be stated in the judgment. (Sec. 7, Rule 68) The deficiency judgment is in itself a judgment; thus, it is also appealable.

No independent action need be filed to recover the deficiency from the mortgagor. The deficiency judgment shall be rendered upon motion of the mortgagee.

The motion must be made only after the sale and after it is known that a deficiency exists. Before that, any court order to recover the deficiency is void. (Gov’t. of the Philippines v. Torralba, G.R. No. L41573, 1935)

The mortgagor who is not the debtor and who merely executed the mortgage to secure the principal debtor’s obligation, is not liable for the deficiency, unless he assumed liability for the same in the contract. (Philippine Trust Co. v. Echaus Tan Siua, G.R. No. L-29736, 1929)

Since a deficiency judgment cannot be obtained against the mortgagor who is not the debtor in the principal obligation, the mortgagee may have to file a separate suit against the principal debtor.

WRIT OF POSSESSION

See the prior discussion on Possession by Purchaser of Foreclosed Property.

Upon the finality of the order of confirmation or upon the expiration of the period of redemption when allowed by law, the purchaser at the auction sale or last redemptioner, if any, shall be entitled to the possession of the property unless a third party is actually holding the same adversely to the judgment obligor. The said purchaser or last redemptioner may secure a writ of possession, upon motion, from the court which ordered the foreclosure. (Sec. 3, Rule 68)

The writ of possession is a means of recognizing and enforcing the rights of the purchaser emphasized in Sec. 3 which provides that the confirmation of the sale operates to divest all parties to the action of their respective rights and vest them in the purchaser. (RIANO, 2016)

General Rule: There is no need for the purchaser to notify parties of the proceedings. The law expressly authorizes the purchaser to petition for a writ of possession by filing an ex parte motion. (Carlos vs. CA, 537 SCRA 247)

As an exception, the ministerial duty of the court to issue an ex parte writ of possession ceases once it appears that a third party, not the debtor-mortgagor, is in possession of the property under a claim of title adverse to that of the applicant. (Sec. 33, Rule 39)

The remedy of a writ of possession, a remedy that is available to the mortgagee-purchaser to acquire possession of the foreclosed property from the mortgagor, is made available to a subsequent purchaser, but only after hearing and after determining that the subject property is still in the possession of the mortgagor. (Sps. Reyes vs. Sps. Chung, G.R. No. 228112 2017, citing Okabe v. Saturnina)

ANNULMENT OF SALE

See further discussions on Mortgage & Foreclosure under Civil Law.

A judgment in the Annulment of Mortgage case will amount to res judicata in the Annulment of Foreclosure Sale case. (FCD Pawnshop vs. Union Bank, G.R. No. 207914 2017)

The period within which to redeem the property sold at a sheriff's sale is not suspended by the institution of an action to annul the foreclosure sale (Fundamentals of Redemption in Extra-Judicial Foreclosures, citing De Connejero, et al. v. Court of Appeals, et al., L-21812; Castillo v. Samonte, L13146, 1960; Daza v. Tomacruz, G.R. No. 37046, 1933; and Sumerariz v. Development Bank of the Philippines, G.R. No. L-23764, 1967).

Section 47. Foreclosure of Real Estate Mortgage. - In the event of foreclosure, whether judicially or extra-judicially, of any mortgage on real estate which is security for any loan or other credit accommodation granted, the mortgagor or debtor whose real property has been sold for the full or partial payment of his obligation shall have the right within one year after the sale of the real estate, to redeem the property by paying the amount due under the mortgage deed, with interest thereon at rate specified in the mortgage, and all the costs and expenses incurred by the bank or institution from the sale and custody of said property less the income derived therefrom. However, the purchaser at the auction sale concerned whether in a judicial or extra-judicial foreclosure shall have the right to enter upon and take possession of such property immediately after the date of the confirmation of the auction sale and administer the same in accordance with law. Any petition in court to enjoin or restrain the conduct of foreclosure proceedings instituted pursuant to this provision shall be given due course only upon the filing by the petitioner of a bond in an amount fixed by the court conditioned that he will pay all the damages which the bank may suffer by the enjoining or the restraint of the foreclosure proceeding. Notwithstanding Act 3135, juridical persons whose property is being sold pursuant to an extrajudicial foreclosure, shall have the right to redeem the property in accordance with this provision until, but not after, the registration of the certificate of foreclosure sale with the applicable Register of Deeds which in no case shall be more than three (3) months after foreclosure, whichever is earlier. Owners of property that has been sold in a foreclosure sale prior to the effectivity of this Act shall retain their redemption rights until their expiration. (R.A. No. 8791, Sec. 47)

Updated: A challenge alone does not bar enforcement of a purchaser’s writ of possession, but defects in the foreclosure or auction may affect the writ’s validity (Spouses An v. Philippine National Bank, G.R. No. 266071, 7 April 2026; Cruz v. Metropolitan Bank, G.R. No. 236605, 29 July 2024).

THE GENERAL BANKING LAW OF 2000 (SEC. 47, R.A. NO. 8791)

In the event of JUDICIAL or EXTRA-JUDICIAL FORECLOSURE:

• The mortgagor or debtor whose real property has been sold for the full or partial payment of his obligation shall have the right WITHIN ONE YEAR AFTER THE SALE to REDEEM the property by:
• Paying the amount due under the mortgage deed, with interest at the rate specified in the mortgage; and
• Paying all the costs and expenses incurred by the bank or institution from the sale and custody of the property LESS the income derived therefrom.
• The purchaser at the auction sale shall have the right to ENTER UPON AND TAKE POSSESSION OF SUCH PROPERTY IMMEDIATELY after the date of the confirmation of the auction sale and ADMINISTER the same in accordance with law.
• Any petition in court to enjoin/restrain the conduct of foreclosure proceedings instituted pursuant to Sec. 47 of RA No. 8791 shall be given due course ONLY UPON:
• The filing by the petitioner of a BOND in an amount fixed by the court, CONDITIONED that he will PAY ALL THE DAMAGES which the bank may suffer by the enjoining/restraint of the foreclosure proceedings.
• Owners of property that has been sold in a foreclosure sale prior to the effectivity of RA No. shall retain their redemption rights until their expiration. (R.A. No. 8791, Sec. 47)

For juridical persons whose property is being sold pursuant to EXTRAJUDICIAL FORECLOSURE:

• They shall have the RIGHT TO REDEEM the property in accordance with Sec. 47 of RA No. 8791 UNTIL, BUT NOT AFTER, the registration of the certificate of foreclosure sale with the applicable Register of Deeds,
• WHICH IN NO CASE, shall be more than three (3) months after foreclosure, whichever is earlier
• This shall be the case notwithstanding Act 3135. (R.A. No. 8791, Sec. 47)