b. Foreclosure (Rules of Court, Rule 68; Act 3135, as amended by Act 4118; RA 8791, Sec. 47)

Effects of failure to file answer

Absent any oppositor, the court will issue an order of default pursuant to Sec. 26 of P.D. 1529.

Foreclosure

Foreclosure is a remedy available to the mortgagee by which he subjects the mortgaged property to the satisfaction of the obligation. It is a proceeding to terminate the rights of the mortgagor of the property.

Necessity for confirmation of court in foreclosure sale (Judicial Foreclosure)

A foreclosure sale (in judicial foreclosure) is not complete until it is confirmed and before such confirmation, the court retains control of the proceedings by exercising sound discretion in regard to it either granting or withholding confirmation as the rights and interests of the parties and the ends of justice may require. (Rural Bank of Oroquieta v. CA, G.R. No. L-53466, November 10, 1980)

Generally, there can be no redemption of the property after confirmation of a judicial foreclosure sale. Where the real-estate mortgage secures a bank loan or other credit accommodation, however, the mortgagor or debtor has a statutory right to redeem even after confirmation, within the period provided in RA 8791, Sec. 47. Such confirmation retroacts to the date of the auction sale. After the confirmation, the previous owners lose any right they may have had over the property, which rights in turn vested on the Purchaser of the property. (Lonzame v. Amores, G.R. No. L-53620, January 31, 1985)

Notes on posting and publication under Act No. 3135:

• Nature

They are imbued with public considerations and any waiver thereon would be inconsistent with the intent and letter of the law.

Failure to comply with the statutory requirements as to publication of notice of auction sale constitutes a jurisdictional defect which invalidates the sale for lack of publication

NOTE: The failure to post 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. (Development Bank of the Philippines v. Aguirre, G.R. No. 144877, March 3, 2003)

• No requirement for personal notice

Sec 3 of Act No. 3135 does not require personal notice or any particular notice on the mortgagor much less on his successors-in-interest where there is no contractual stipulation therefor.

NOTE: Unless the parties stipulate, personal notice to the mortgagor in extrajudicial proceedings is not necessary because Sec. 3 of Act No. 3135 only requires the posting of notice of the sale in three public places and the publication of that notice in a newspaper of general circulation. (Ramirez v. The Manila Banking Corp., G.R. No. 198800, December 11,2013)

Requisites for a newspaper to be deemed of general circulation

• It must be published for the dissemination of local news and general information;
• It must have a bona fide subscription list of paying subscribers;
• It must be published at regular intervals;
• It must be available to the public in general and not just to a select few chosen by the publisher, otherwise, the precise objective of publication of notice of sale will not be realized; and
• It must not be devoted to the interests or published for the entertainment of a particular profession, trade, calling, race, or religion.

Q: MBTC granted a loan to spouses Peñafiel, who mortgaged their two parcels of land in Mandaluyong. The spouses defaulted on the payment. MBTC instituted an extrajudicial foreclosure proceeding under Act No. 3135. The Notice of Sale was published in Maharlika Pilipinas, which has no business permit in Mandaluyong and its list of subscribers shows that there were no subscribers from Mandaluyong. Did MBTC comply with the publication requirement under Section 3, Act No. 3135?

A: NO. Maharlika Pilipinas is not a newspaper of general circulation in Mandaluyong where the property is located. 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 be available to the public in general, and not just to a select few chosen by the publisher. Otherwise, the precise objective of publishing the notice of sale in the newspaper will not be realized. (Metropolitan Bank and Trust Company, Inc. v. Eugenio Peñafiel, G.R. No. 173976, February 27, 2009)

• No certificate of posting is required
• GR: A certificate of posting is not required, much less considered indispensable for the validity of a foreclosure sale under Act No. 3135.
• XPN: Such certificate is significant only when it becomes necessary to prove compliance with the required notice of posting.
• The fact alone that there is no certificate of posting attached to the sheriff's records is not sufficient to prove the lack of posting.
• Burden of proving non-compliance with the publication and posting requirements
• Foreclosure proceedings have in their favor the presumption of regularity. (Union Bank of the Philippines v. CA, G.R. No. 164910, September 30, 2005)

Requisites for valid right of redemption

• Must be made within twelve (12) months from the time of the registration of the sale in the Office of the Registry of Property;
• 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;
• 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 (Sps. Yap v. Sps. Dy, G.R. No. 171868, June 27, 2011); and
• Tender of payment within the prescribed period to make the redemption for future enforcement. (Sec. 6, Act No. 3135; Secs. 28–30, Rule 39, Rules of Court)

Filing an action to enforce redemption does not, by itself, preserve an expiring right of redemption. The redemptioner must pay or validly tender the full redemption price within the redemption period; willingness to pay is insufficient. (Heirs of Quisumbing v. PNB, G.R. No. 178242, January 20, 2009)

Summary of Redemption Period

• Extrajudicial (Act No. 3135)
• Natural Person - one (1) year from registration of the certificate of sale with the Registry of Deeds.

NOTE: The statutory period of redemption is only directory and can be extended by agreement of the parties provided:

• The agreement to extend is voluntary; and
• The debtor commits to pay the redemption price on a fixed date. (Gajudo v. Traders Royal Bank, G.R. No. 151098, March 21, 2006)
• Juridical Person – same rule as natural person.
• Juridical Person (mortgagor) and Bank (mortgagee) – three (3) months after foreclosure or before registration of certificate of foreclosure whichever is earlier. (RA 8791, Sec. 47)

NOTE: By an amendment by the General Banking Law of 2000, juridical mortgagors like partnerships and corporations are barred from the right of redemption of mortgaged property sold pursuant to an extrajudicial foreclosure, after the registration of the certificate of foreclosure with the applicable Register of Deeds.

For an individual mortgagor in an extrajudicial foreclosure, the one-year redemption period is reckoned from registration of the certificate of sale. Under RA 8791, Sec. 47, a juridical mortgagor may redeem until registration of the certificate of foreclosure sale, but not more than three months after foreclosure, whichever is earlier. Neither period is reckoned from confirmation of the auction sale or issuance of a certificate of title. (BIR RMC No. 15-2008, August 15, 2008)

• Judicial – the foreclosure judgment directs payment of the mortgage debt within a period of not less than 90 nor more than 120 days from entry of judgment. If payment is not made, the property may be sold; the mortgagor may still pay before confirmation of the sale. This period is not a statutory redemption period. A separate statutory right to redeem after the sale applies where provided by law, including RA 8791, Sec. 47, for covered bank mortgages. (Rules of Court, Rule 68, §§ 2–3)

NOTE: Allowing redemption after the lapse of the statutory period, when the buyer at the foreclosure sale does not object but even consents to the redemption, will uphold the policy of the law which is to aid rather than defeat the right of redemption. (Ramirez v. CA, G.R. No. 98147, March 5, 1993)

Amount of Redemption Price

• When mortgagee is not a bank (Act 3135 in relation to Rules of Court, Sec. 28, Rule 39)
• Purchase price of the property;
• 1% interest per month on the purchase price from the date of registration of the certificate up to the time of redemption;
• Assessments or taxes paid by the purchaser after purchase, with interest at the same rate from the time of payment; and, if the purchaser is a creditor with a prior lien to that of the redemptioner, other than the judgment under which the purchase was made, the amount of that lien, with interest.
• When mortgagee is a bank (General Banking Law, 2000):
• Amount due under the mortgage deed;
• Interest at the rate specified in the mortgage;
• Bank’s costs and expenses from the sale and custody of the property.
• Redemption price in this case is reduced by the income received from the property.