1. Judicial Foreclosure

Defendants in Judicial Foreclosure

• Persons obliged to pay the mortgage debt;
• Persons who own, occupy, or control the mortgaged premises or any part thereof;
• Transferee or grantee of the property;
• Second mortgagee or junior encumbrancers or any person claiming a right or interest in the property subordinate to the mortgage sought to be foreclosed to foreclose their equity of redemption; but if the action is by the junior encumbrancer, first mortgagee MAY also be joined as defendant; and
• The mortgagor even if not owner of the mortgaged property should be included (to satisfy the deficiency).

Effect of Junior Encumbrancer Not Impleaded

After completed foreclosure under a senior mortgage, a junior encumbrancer may be given, by the court, the right to redeem the senior mortgage and protect his own lien. Where a junior encumbrancer has been given, by the court, the right to redeem after the completed foreclosure under a senior mortgage, he must exercise his right within the time limited or be barred thereof. (Sunlife Assurance v. Diez, G.R. No. 29027, 1928)

Judgment on Judicial Foreclosure for Payment of Sale

If after the trial, the court finds that the matters set forth in the complaint are true, it shall render a judgment containing the following matters:

• An ascertainment of the amount due to the plaintiff upon the mortgage debt or obligation, including interest and other charges as approved by the court, as well as costs;
• A judgment of the sum found due;
• An order that the amount found due be paid to the court or to the judgment obligee within the period of not less than 90 days nor more than 120 days from the entry of judgment; and
• An admonition that in default of such payment the property shall be sold at public auction to satisfy the judgment. (Sec. 2, Rule 68)

The judgment of the court on the above matters is considered a final adjudication of the case and hence, is subject to challenge by the aggrieved party by appeal or by other post-judgment remedies.

The period granted to the mortgagor for the payment of the amount found due by the court is not just a procedural requirement but a substantive right given by law to the mortgagee as his first chance to save his property from final disposition at the foreclosure sale. Hence, this period cannot be omitted. (De Leon v. Ibañez, G.R. No. L-6967, 1954)

Notice Requirement in Judicial Foreclosure

The foreclosure sale shall be conducted in the manner provided for an execution sale of real property under Rule 39, to wit:

• The court, upon motion, shall order the foreclosure sale;
• There must be a notice of sale posted for 20 days in the 3 public places in conspicuous areas of municipal or city hall, post office and public market in the municipality or city where the sale is to take place, describing the property and stating where the property is to be sold;
• If the assessed value of the property exceeds P50,000.00 pesos, the notice must be published once a week for 2 consecutive weeks in one newspaper selected by raffle, whether in English, Filipino, or any major regional language published, edited and circulated or, in the absence thereof, having general circulation in the province or city;
• Written notice of the sale shall be given to the mortgagor, at least 3 days before the sale;
• The notice shall specify the place, date and exact time of the sale which should not be earlier than nine o'clock in the morning and not later than two o'clock in the afternoon; (Sec. 15, Rule 39 vis-à-vis Sec. 3, Rule 68)

A motion is needed. Such motion is non-litigious and may be made ex parte. (GPI v. De Las Cajigas, G.R. No. L-33913, 1931)

Confirmation of the Judicial Foreclosure Sale

After the foreclosure sale has been effected, the mortgagee shall file a MOTION FOR ITS CONFIRMATION. (Sec. 3, Rule 68)

The motion for confirmation:

• Is non-litiguous and may be made ex parte;
• Requires notice and hearing;
• Mortgagor will be allowed the opportunity to show cause why the sale should not be confirmed and to inform them when his right will be cut off;
• If the mortgagor was not notified of the hearing, the subsequent confirmation of the sale is vitiated as if no confirmation ever took place;
• After the hearing and the court finds valid grounds, it shall issue an order confirming the foreclosure sale, which is a judgment in itself and is deemed a final adjudication.

Right of Redemption

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 and he may secure a writ of possession, upon, motion, from the court which ordered the foreclosure unless a third party is actually holding the same adversely to the judgment obligor. (Sec. 3, Rule 67)

The import of Sec. 3 includes one vital effect—the equity of redemption of the mortgagor or redemptioner is cut-off and there will be no further redemption, unless allowed by law (as in the case of banks as mortgagees). The equity of redemption starts from the 90-120 day period set in the judgment of the court up to the time before the sale is confirmed by an order of the court. Once confirmed, no equity of redemption may further be exercised.

General Rule: There is no right of redemption in a judicial foreclosure.

Exception: Judicial foreclosures by banks: 1 year redemption period. (Cayton v. Zeonnix Trading Corp., G.R. No. 169541, 2009; Sec. 47, General Banking Law of 2000)

While there is no right of redemption in judicial foreclosure, there is in favor of the mortgagor an equity of redemption. This is simply the right of the defendant mortgagor to extinguish the mortgage and retain ownership of the property by paying the secured debt within the 90-day period after the judgment becomes final, in accordance with Rule 68, or even after the foreclosure sale but prior to its confirmation. (Huerta Alba Resort v. CA, G.R. No. 128567, 2000)

By subsequent redemptioners:

• Amount paid on the last redemption.
• 2% interest per month thereon.
• Any amount of assessments or taxes which the last redemptioner may have paid thereon after redemption by him/her with interest on such last named amount; and
• Amount of any liens held by said last redemptioner prior to his/her own, with interest.
• The offer to redeem must be accompanied by a bona fide tender of redemption price. But a formal offer to redeem with a tender is not necessary when the right to redeem is exercised through the filing of a complaint to redeem in the courts, within the period to redeem.