judicial foreclosure of mortgage

8/11/2019 Judicial Foreclosure of Mortgage

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Sale of mortgaged property; effect. When thedefendant, after being directed to do so as provided inthe next preceding section, fails to pay the amountof the judgment within the period specifiedtherein, the court, upon motion, shall order theproperty to be soldin the manner and under theprovisions of Rule 39 and other regulations governingsales of real estate under execution.


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Such sale shall not affect the rights of personsholding prior encumbrances upon the property ora part thereof, and when confirmed by an order of thecourt, also upon motion, it shall operate to divest therights in the property of all the parties to theaction and to vest their rights in the purchaser, subjectto such rights of redemption as may be allowed by law.


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Upon the finality of the order of confirmation orupon the expiration of the period of redemptionwhen allowed by law, the purchaser at the auctionsale or last redemptioner, if any, shall be entitled tothe possession of the property unless a third partyis actually holding the same adversely to thejudgment obligor. The said purchaser or lastredemptioner may secure awrit of possession,uponmotion, from the court which ordered the foreclosure.


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1. The mortgagee should file a petition for judicialforeclosure in the court which has jurisdiction over the area

where the property is situated

2. The court will conduct a trial. If, after trial, the court

finds merit in the petition, it will render judgmentordering the mortgagor/debtor to pay the obligation withina period not less than 90 nor more than 120 days fromthe finality of judgment.

3. Within the period assigned by the court (90-120 days),

the mortgagor has the chance to pay the obligation toprevent his property from being sold. This is called theEQUITY OF REDEMPTION PERIOD.


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4. If mortgagor fails to pay within the 90-120 days given tohim by the court, the property shall be sold to the highestbidder at public auction to satisfy the judgment.

5. There will be a judicial confirmation of the sale. Afterthe confirmation of the sale, the purchaser shall be entitled

to the possession of the property, and all the rights ofthe mortgagor with respect to the property are severedor terminated. The equity of redemption periodactually extends until the sale is confirmed. Even after thelapse of the 90 to 120 day period, the mortgagor can still

redeem the property, so long as there has been noconfirmation of the sale yet. Therefore, the equity ofredemption can be considered as the right of themortgagor to redeem the property BEFORE theconfirmation of the sale.


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Rural Bank of Oroquieta v. Court of Appeals

1. Under section 3, Rule 68 of the Rules of Court, it is the

confirmation by the court of the auction sale thatwould divest the mortgagor of their rightsto themortgaged lot and that would vest such rights in thebank as purchaser at the auction sale.


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2. The clause "subject to such rights of redemption

as may be allowed by law," found in the last part ofsection 3, has no application to a case where themortgagor did not exercise his right ofredemption under section 78 of the General Banking

Law.


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3. A foreclosure sale is not complete until it isconfirmed, and beforesaid confirmation, the court

retains control of the proceedings by exercising a sounddiscretion in regard to it, either granting or withholdingconfirmation as the rights and interests of the partiesand the ends of justice may require.


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4. In order that a foreclosure sale may bevalidly

confirmedby the court, it is necessary that a hearingbe given the interested parties, at which they may havean opportunity to show cause why the sale should not beconfirmed.


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5. The acceptance of a bid at the foreclosure saleconfers no title on the purchaser. Until the sale hasbeen validly confirmed by the court, he is nothing morethan a preferred bidder. Title vests only when the salehas been validly confirmed by the court.


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6. The confirmation retroacts to the date of the sale.A hearing should be held for the confirmation of thesale. The mortgagor should be notified of that hearing.Lack of notice vitiates the confirmation of the sale.The mortgagor may still redeem the mortgaged lot afterthe rendition of the order confirming the sale which isvoid for lack of hearing and notice to the mortgagor.


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7. Notice and hearing of a motion for confirmation of

sale are essential to the validity of the order ofconfirmation, not only to enable the interested parties toresist the motion but also to inform them of the timewhen their right of redemption is cut off.


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8. An order of confirmation,voidfor lack of notice andhearing, may be set aside anytime.

9. After the foreclosure sale but before itsconfirmation, the court may grant the judgment debtoror mortgagor an opportunity to pay the proceeds of the

sale and thus refrain from confirming it.


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10. If after the foreclosure sale and before theconfirmation thereof, the mortgagee, as purchaser atthe auction sale, sold the mortgaged property toanother person,that subsequent sale does not renderthe foreclosure sale more effective. That subsequentsale does not prevent the trial court from grantingthe mortgagor a period within which to redeemthe mortgaged lot by paying the judgment debt and

the expenses of the sale and costs.


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11. Whatever may have been the old rule by all of themodern authorities, it is the policy of the courts to assistrather than to defeat the right of redemption.

12.After the confirmation of the sale, made afterhearing and with due notice to the mortgagor, the lattercannot redeem anymore the mortgaged lot.

Exception: the mortgagee is a bankinginstitution.


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13. It is after the confirmation of the sale that the

mortgagor loses all interest in the mortgaged property.


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Any property brought within the ambit of Act No. 3135(An Act to Regulate the Sale of Property under SpecialPowers Inserted in or Annexed to Real Estate Mortgages)is foreclosed by the filing of a petition, not with anycourt of justice, but with the office of the sheriff of theprovince where the sale is to be made.


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In a real estate mortgagewhen the principal

obligation is not paid when due, the mortgagee hasthe right to foreclose the mortgage and to have theproperty seized and sold with the view of applying theproceeds to the payment of the obligation.


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1. All applications for extra-judicial foreclosure ofmortgage whether under the direction of the sheriff ora notary public, pursuant to Act 3135 shall be filedwith the Executive Judge, through the Clerk of

Courtwho is also the Ex-Officio Sheriff.

2. Upon receipt of an application for extra-judicialforeclosure of mortgage, it shall be the duty of theClerk of Court to:


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(a) receive and docketsaid application and to stampthereon the corresponding file number, date and timeof filing;

(b) collect the filing fees therefor and issue the

corresponding official receipt. (c) examine,in case of real estate mortgage

foreclosure,whether the applicant has compliedwith all the requirements before the public

auction is conducted under the direction of thesheriff or a notary public, pursuant to Sec. 4 of Act3135, as amended;


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(d) sign and issue the certificate of sale,subject tothe approval of the Executive Judge, or in his absence,the Vice-Executive Judge;

(e) after the certificate of sale has been issued tothe highest bidder, keep the complete records, whileawaiting any redemption within a period of one(1) year from date of registration of the certificate ofsale with the Register of Deeds concerned, after whichthe records shall be archived.


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"3. The noticesof auction sale in extra-judicialforeclosure for publication by the sheriff or by a notarypublic shall be published in a newspaper of generalcirculation.


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"4. The Executive Judge shall, with the assistance of theClerk of Court, raffle applications for extrajudicialforeclosure of mortgage under the direction of thesheriff among all sheriffs, including those assigned to

the Office of the Clerk of Court and Sheriff IV assignedin the branches.


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"5. No auction sale shall be held unless there are atleast two (2) participating bidders, otherwise thesale shall be postponedto another date. If on the newdate set for the sale there shall not be at least two

bidders, the sale shall then proceed. The names of thebidders shall be reported by the sheriff or the notarypublic who conducted the sale to the Clerk of Courtbefore the issuance of the certificate of sale.


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If the property has been the subject of extrajudicialforeclosure, the sheriffs certificate of sale shall be filedwith the Register of Deeds and a brief memorandumentered on the mortgagors certificate of title.


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If no redemption is made, the final deed of saleexecuted by the officer authorized for the purpose, orhis certificate of non-redemption, shall be filed withthe Register of Deeds who shall cancel themortgagors certificate of title and issue a newtitle to the purchaser.


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Sale cannot be made legally outside the city or

province wherein the property sold is situated. Incase the place has been stipulated, it shall bemade in the municipal building of the said place.


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1. POSTING of the notices of the sale FOR NOTLESS THAN 20 DAYS in at least 3 public places ofthe municipality or city where the property is situated

2. IF THE PROPERTY IS WORTH MORE THANP400, such notice shall also be published once aweek at least 3 consecutive weeks in a newspaper ofgeneral circulation in the municipality or city.


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1. Time shall be between 9AM and 4PM. It shall bemade in the direction of the sheriff of theprovince, the justice or auxiliary justice of thepeace of the municipality, or of the notary

public of the municipality, who shall becompensated with P5 for each day of actual workor performance in addition to his expenses.

2. Anyone may bid at the sale, unless there arestipulations in the agreement.


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The debtor, his successors-in-interest, or anyjudicial creditor or judgment creditor of said debtor, orany person having a lien on the property subsequent tothe mortgage or deed of trust under which the

property is sold, may redeem the same at any timeWITHIN THE TERM OF 1 YEAR FROM ANDAFTER THE DATE OF THE SALE and such will begoverned by the Rules of Court


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When the property is redeemed after the purchaserhas been given possession,the redeemer is entitledto deduct from the price of redemption any rentalsthat said purchaser may have collectedin case the

property or any part thereof was rented. If the propertywas used as his own dwelling, it being town property,or used it gainfully, it being rural property, theredeemer may deduct from the price the interest of

1% per month provided in the Rules of Court. RULES OF COURT, RULE 39, SECTIONS 29 TO 31,

AND 35


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EXCEPTION:

Section 47 of R.A. No. 8791 The General Banking Lawof 2000: Notwithstanding Act 3135, juridical personswhose

property is being sold pursuant to an extrajudicialforeclosure, shall have the right to redeemthe propertyin 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 caseshall be more than three (3) months afterforeclosure, whichever is earlier.


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The right of redemption, like any other propertyright, may be transferred or assigned by its owner.

SEC. 27. Who may redeem real property so sold: 1. The judgment debtor, or his successor in interest in

the whole or any part of the property;


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2. A creditor having a lien by virtue of anattachment,judgment or mortgage on the propertysold, or on some part thereof, subsequent to the lienunder which the property was sold. Such redeemingcreditor is termed a redemptioner.

Note: One year period to redeem is counted from thedate of the registration of the sheriffs sale, not from thedate of the auction sale.


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Mortgagor may still execute another mortgage contract

during the redemption period. Reason: The purchaser is yet to acquire ownership

until the lapse of the redemption period.


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The purchaser at the foreclosure sale merely acquired aninchoate right to the property which could ripen intoownership only upon the lapse of the redemptionperiodwithout his credit having been discharged, it is

illogical to hold that during that same period of twelvemonths the mortgagor was "divested" of his ownership,since the absurd result would be that the land willconsequently be without an owner although it remainsregistered in the name of the mortgagor.

What is divested from the mortgagor is only his "full rightas owner thereof to dispose of and sell the lands,".(Medida vs CA, 1992)


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1. All liens subordinate to the mortgage are likewiseforeclosed

2. The purchaser at public auction acquires title freefrom the subordinate liens.

3. The Register of Deeds is authorized to issue anew title without carrying over the annotations ofsubordinate liens


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The rights of a subsequent lien holder over themortgaged property are inferior to that of the priormortgagee. A subsequent lien holder acquires onlythe right of redemption vested in the mortgagor.

Remedy of the second mortgage after the foreclosuresale: The right to redeem by paying off the debt secured by

the first mortgage

judicial foreclosure of mortgage

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