EXTRAJUDICIAL FORECLOSURE OF MORTGAGE

by: Roxanne Joy B. Solidarios

-stipulated in the contract

-governed by the provisions of Act No. 3135, as amended by Act No. 4118 (“An Act To Regulate the Sale of Property under Special Powers Inserted inor Annexed to Real Estate Mortgages’’)

a. Coverage 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.

b. Remedies available to mortgagee upon default of the mortgagor

(i)foreclose the mortgage(ii)file an ordinary action to collect the debt, i.e. specific performance

c. Need for special power of attorney

Without proof of petitioner's special authority to foreclose, the Clerk of Court as Ex-Oficio Sheriff is precluded from acting on the application for extrajudicial foreclosure. (Office of the Court Administrator v. Pardo, RTJ-08-2109, April 30, 2008; Casano v. Magat, 425 Phil. 356, 360-361 (2002); Paguyo v. Gatbunton, A.M. No. P-06-2135, May 25, 2007, 523 SCRA 156, 161).

d. Authority to foreclose extrajudicially

The authority to sell is not extinguished by the death of the mortgagor (or mortgagee). 

e. Procedure

(1)Where to file Executive Judge through the

Clerk of Court, who is also the Ex-Officio Sheriff

(2) Where to sell            Province where the property is situated. 

(3) Posting requirement-at least three (3) public places of

the municipality or city (Sheriff’s Office, Assessor’s Office and Register of Deeds)

(4) Publication requirement

(a) Sufficiency of newspaper publication

-for not less than twenty (20) days and published once week for at least three (3) consecutive weeks in a newspaper of general circulation in the municipality or city

(b) Need for republication in case of postponement-rescheduled date of auction is clearly specified in the prior notice of sale  

(c) Personal notice to the mortgagor when and when not needed

General Rule: Personal notice to the mortgagor is not generally required.

Exception: Unless required in the mortgage contract, the lack of personal notice to the mortgagor is not a ground to set aside a foreclosure sale. 

-Sale shall be made at public auction(9 AM-4 PM)

-sheriff of the province, the justice or auxiliary justice of the peace of the municipality in which such sale has to be made or of a notary public of said municipality

-At any sale, the creditor, trustee, or other person authorized to act for the creditor, may participate in the bidding,and purchase under the same conditions as any other bidder, unless the contrary has been expressly provided.

-Mortgagee has the right to recover the deficiency from the debtor.

The mortgagor who mortgaged his properties to guarantee anindebtedness of a third person is not liable for the payment of thedeficiency judgment, should the mortgaged properties not besufficient to cover the entire debt.(Parsons Hardware Co., Inc. vs. Acosta, VII Lawyers’ Journal, 357; Phil. Trust Co. vs. Echaus, 52 Phil. 852)

If the mortgage was foreclosed extrajudicially, a certificate of sale executed by the officer who conducted the sale shall be filed with the Register of Deeds who shall make a brief memorandum thereof on the certificate of title.

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 form 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, juridicial 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, whichever is earlier, as provided in Section 47 of Republic Act No. 8791

Where the right of redemption exists, the certificate of title of the mortgagor shall not be canceled, but the certificate of sale and the order confirming the sale shall be registered by a brief memorandum thereof made by the Register of Deeds upon the certificate of title.

In the event the property is redeemed, the certificate or deed of redemption shall be filed with the Register of Deeds, and a brief memorandum thereof shall be made by the Register of Deeds on the certificate of title of the mortgagor

f. Possession by purchaser of foreclosed property-failure of the debtor to redeem the property within one (1) year after the date of the registration of the certificate of sale

 

In case of non-redemption, the purchaser at 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; whereupon, the Register of Deeds shall issue a new certificate in favor of the purchaser after the owner's duplicate of the certificate has been previously delivered and canceled.

g. Remedy of debtor if foreclosure is not proper -Within thirty (30) days after the purchaser is given possession of the property, the debtor may petition that the sale be set aside and the writ ofpossession cancelled

h. Redemption

 

i. Writ of possession (1)Ministerial duty of the court

-In the issuance of a writ of possession, no discretion is left to the Trial Court.

- After the consolidation of title in the buyer’s name, the writ of possession becomes a matter of right.

 

(2) Enforcement 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 expiration of the period of redemption, unless a third party is actually holding the same adversely to the judgment debtor.

 

(3) Pendency of action for annulment of sale

  -The pendency of a separate civil suit questioning the validity of the sale of the mortgaged property cannot bar the issuance of the writ of possession.   

-the property sought to be foreclosed need not be identified or set apart by the sheriff from the whole mass of property of the mortgagor for the purpose of satisfying the mortgage indebtedness

- Buyer in Foreclosure Sale Acquires Title Free From Rights of Subsequent Mortgagee

- it will be seen that the right of a subordinate lien holder cannot be enforced upon the property until after the legal claims of the superior lien holder shall have been fully satisfied