MORTGAGE, FORECLOSURE AND REDEMPTION

REAL ESTATE MORTGAGE A real estate mortgage is a contract in which the debtor
guarantees to the creditor the fulfillment of a principal obligation, subjecting for the faithful
compliance therewith a real property in case of non-fulfillment of said obligation at the time
stipulated (Manresa). It is a lien on specific or identified immovable property. It directly and
immediately subjects the property upon which it is imposed, whoever the possessor may be,
to the fulfillment of the obligation for whose security it was constituted. It creates a real right
enforceable against the whole world (DBP v. NLRC, 183 SCRA 328 [1990]).

Foreclosure of mortgage
Foreclosure of mortgage is the process by which a property covered may be subjected
to sale to pay demand for which mortgages stand as security (Pacific Commercial Co. v.
Alvarez, 38 OG 758). Foreclosure is the necessary consequence of non-payment of mortgage
indebtedness. The mortgage can be foreclosed only when the debt remains unpaid at the time
it is due (Producers Bank v. CA, GR No. 111584, 17 Sept. 2001; Govt of the PI v. Espejo, 57
Phil 496) or in case of default in the payment of obligation (PNB v. CA, GR No. 126908, 16
Jan. 2003; Chinabank v. CA, 265 SCRA 327 [1996])

Demand is essential for default.

Demand, however, is necessary for default to exist and which gives the right to collect
debt and foreclose the mortgage. The maturity dates in the promissory notes or the
acceleration clause ([i]n case of non-payment of this note or any portion of it on demand, when
due, on account of this note, the entire obligation shall become due and demandable. .
.) therein stated only indicate when payment can be demanded. It is the refusal to pay after
demand that gives the creditor a cause of action against the debtor (DBP v. Licuanan, GR No.
150097, 26 February 2007). Default commences upon judicial or extrajudicial demand (UCPB
vs. Beluso, G.R. No. 159912, August 17, 2007). Demand, however, is not necessary where the
law or the obligations expressly declare it unnecessary (Premiere Devt. Bank v. Central Surety
& Insurance Company, Inc., 579 SCRA 359, 13 February 2009).
Mora solvendi or debtors default is defined as a delay in the fulfillment of an obligation,
by reason of a cause imputable to the debtor. There are three requisites necessary for a
finding of default. First, the obligation is demandable and liquidated; second, the debtor
delays performance; third, the creditor judicially or extrajudicially requires the debtors
performance (Selegna Management & Devt. Corp. v. UCPB, GR No. 165662, 03 May 2006).

Prohibition against Pactum Commissorium.

A stipulation in a deed of mortgage which states that upon failure of the mortgagor to
pay the debt within the agreed period, the land covered by the mortgage shall become
property of the mortgagee or the transaction shall become a sale and the consideration shall
be considered as payment of the price of the land is pactum commissorium and is null and
void (Reyes v. Nebreja, 98 Phil 639 [1956]). Such stipulation is void since it enables the
mortgagee to acquire ownership of the mortgaged property without need of foreclosure (Olea
v. CA, 247 SCRA 274 [1995]); it is a nullity being contrary to the provisions of Article 2088 of
the Civil Code (Lumayag v. Heirs of Jacinto Nemeno, 526 SCRA 315 [2007]).
Two modes of foreclosure of real estate mortgage.
Foreclosure of real estate mortgage is either done extra-judicially or judicially. The
provisions of Rule 68 of the 1997 Rules of Civil Procedure govern judicial foreclosure. The
extra-judicial foreclosure of real estate mortgage, on the other hand, is carried out in the
procedure governed by the provisions of Act 3135, as amended, otherwise known as An Act
to Regulate the Sale of Property Under Special Powers Inserted in or Annexed to Real Estate
Mortgages.

EXTRA-JUDICIAL FORECLOSURE OF REAL ESTATE MORTGAGE UNDER ACT 3135,

AS AMENDED & REDEMPTION

Essential requirements under Act 3135

Under Act 3135, as amended and settled jurisprudence, the following essential
requirements must be met:

1. There must be a special power of attorney inserted in or attached to the real

estate mortgage authorizing the sale pursuant to the provisions of Act, 3135,
as amended (Section 1; Paguyo v. Gatbunton, 523 SCRA 156 [2007]).
2. The sale must be made within the province where the property or any part
thereof is located, unless otherwise stipulated (Section 2;Supena v. de la Rosa,
267 SCRA 1).
3. There must be a notice of sale to be posted in three public places of the
municipality or city where the property is situated. If the property is worth
more than P400.00, the notice shall also be published once a week for three
consecutive weeks in a newspaper of general circulation in the city or
municipality (Section 3).
4. The sale shall be made at public auction between the hours of nine in the
morning and four in the afternoon, and shall be under the direction of the
sheriff of the province, the justice or auxiliary justice of the peace (now
municipal judge) of the municipality in which such sale shall be made, or a
notary public of said municipality (Section 4).

Procedure of extrajudicial foreclosure under Act 3135

In Administrative Matter No. 99-10-05-0 (as further amended on 07 August 2001), the
Supreme Court prescribed the following procedures in the extra-judicial foreclosure of
mortgage:

1. All applications for extra-judicial foreclosure of mortgage whether under the direction of
the sheriff or a notary public, pursuant to Act 3135, as amended, shall be filed with the
Executive Judge, through the Clerk of Court who is also the Ex-Officio Sheriff.
2. Upon receipt of an application for extra-judicial foreclosure of mortgage, it shall be the
duty of the Clerk of Court to:
 a) receive and docket said application and to stamp thereon the corresponding file
number, date and time of filing;
b) collect the filing fees therefore pursuant to Rule 141, Section 7(c) as amended by
A.M. No. 00-2-01-SC, and issue the corresponding official receipt;
c) examine, in case of real estate mortgage foreclosure, whether the applicant has
complied with all the requirements before the public auction is conducted under the direction
of the sheriff or a notary public, pursuant to Sec. 4 of Act 3135, as amended;
d) sign and issue the certificate of sale, subject to the approval of the Executive Judge,
or in his absence, the Vice-Executive Judge. No certificate of sale shall be issued in favor of
the highest bidder until all fees provided in the aforementioned sections and in Rule 141,
Section 9(1) as amended by A.M. 00-2-01-SC, shall have been paid; Provided, that in no case
shall the amount payable under Rule 141, Section 9(1), as amended, exceed P100,000.00;
e) 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 from date of
registration of the certificate of sale with the Register of Deed concerned, after which, the
records shall be archived. Notwithstanding the foregoing provision, juridical persons whose
property is sold pursuant to an extrajudicial foreclosure, shall have the right to redeem the
property until, but not after, the registration of the certificate of foreclosure sale which in no
case shall be more than three (3) months after foreclosure, whichever is earlier, as provided
in Section 47 of Republic Act No. 8791 (as amended, Res. of August 7, 2001) Where the
application concerns the extrajudicial foreclosure of mortgages of real estates and/or chattels
in different locations covering one indebtedness, only one filing fee corresponding to such
indebtedness shall be collected. The collecting Clerk of Court shall, apart from the official
receipt of the fees, issue a certificate of payment indicating the amount of indebtedness, the
filing fees collected, the mortgages sought to be foreclosed, the real estates and/or chattels
mortgaged and their respective locations, which certificate shall serve the purpose of having
the application docketed with the Clerks of Court of the places where the other properties are
located and of allowing the extrajudicial foreclosures to proceed thereat.
3. The notices of auction sale in extrajudicial foreclosure for publication by the sheriff or by
a notary public shall be published in a newspaper of general circulation pursuant to Section
1, Presidential Decree No. 1079, dated January 2, 1977, and non-compliance therewith shall
constitute a violation of Section 6 thereof.
4. The Executive Judge shall, with the assistance of the Clerk of Court, raffle applications
for extrajudicial foreclosure of mortgage under the direction of the sheriff among all sheriffs,
including those assigned to the Office of the Clerk of Court and Sheriffs IV assigned in the
branches.
5. The name/s of the bidder/s shall be reported by the sheriff or notary public who
conducted the sale to the Clerk of Court before the issuance of the certificate of sale.

Time when to conduct auction sale.

Issue: Whether a sale a public auction, to be valid, must be conducted the whole day from
9:00 a.m. until 4:00 p.m. of the scheduled auction day. Section 4 of Act 3135 provides that
the sale must take place between the hours of nine in the morning and four in the
afternoon. The word between ordinarily means in time interval that separates.
Thus, between the hours of nine in the morning and four in the afternoon merely provides
a time frame within which an auction sale may be conducted. Therefore, a sale at public
auction held within the intervening period provided by law (i.e., at any time from 9:00 a.m.
until 4:00 p.m.) is valid, without regard to the duration or length of time it took the auctioneer
to conduct the proceedings (PNB v. Cabatingan, 557 SCRA 426 [2008]). Act 3135 regulates
the extrajudicial sale of mortgaged real properties by prescribing a procedure which
effectively safeguards the rights of both debtor and creditor (ibid.).

Notice and publication requirements.

1. Notice and publication under PD 1079 and Act 3135, as amended.

Section 1 of PD 1079, as amended provides:

All notices of auction sales in extra-judicial foreclosure of real estate mortgage under Act
3135, as amended x x x required by law to be published in a newspaper of general circulation
in particular provinces and/or cities shall be published in newspapers or publications
published, edited and circulated in the same city and/or province where the requirement of
general circulation applies: Provided, That the province or city where the publications principal
office is located shall be considered the place where it is edited and published x x x.
Section 3 of Act 3135, as amended, reads:
Notice shall be given by posting notices of the sale for not less than twenty days in at
least three public places of the municipality or city where the property is situated, and if such
property is worth more than four hundred pesos, such notice shall also be published once a
week for three consecutive weeks in a newspaper of general circulation in the municipality or
city.
A reading of the above provisions gives us the impression that the publication of extra-
judicial sales under Act, 3135, if the property is worth more than four hundred pesos, shall
be in a newspaper of general circulation in the city or municipality where the property
lies. Hence, if the property in question is located in Quezon City, it logically follows that the
auction sale of said property should be published in a newspaper of general circulation that
is edited and published in Quezon City.

However, such application and/or interpretation are too narrow and very limited that it
virtually defeats the purpose and intention of the law. If this is the case, the leading dailies,
like the Philippine Daily Inquirer (PDI) (with head office in Makati City) and Manila Bulletin
(with head office in Manila), which enjoys a wide circulation nationwide, cannot publish
notice of extra-judicial sales of properties located in Quezon City simply because it is outside
their place of publication. What is important is that the newspaper is of general
circulation in the place where the property/ies to be foreclosed is/are located. In a line
of cases, the Highest Court declared that publication of the extra-judicial sale in a newspaper
of general circulation is more than sufficient compliance with the notice-posting requirement
of the law (Fortune Motors v. Metrobank, 265 SCRA 72; Cristobal v. CA, 328 SCRA 256;
Concepcion v. CA, 274 SCRA 614; Bohanan v. CA, 256 SCRA 355; Olizon v. CA, 236 SCRA
148; Gravina v. CA 220 SCRA 178). PD 1079 and Act 3135 do not require that the newspaper
which publishes judicial notices should be a daily newspaper (Fortune Motors, 265 SCRA
72).
In Olizon at 156, it was ruled that:
 x x x the publication of the notice of sale in the newspaper of general circulation alone is
more than sufficient compliance with the notice-posting requirement of the law. By such
publication, a reasonably wide publicity had been effected such that those interested might
attend the public sale, and the purpose of the law had thereby subserved. The object of a
notice of sale is to inform the public of the nature and condition of the property to be
sold, and inform of the time, place and terms of the sale. Notices are given for the purpose
of securing bidders and to prevent a sacrifice of the property. If these objects are attained,
immaterial errors and mistakes will not affect the sufficiency of the notice; x x x (emphases
supplied)
An extra-judicial foreclosure sale is an action in rem and thus requires only notice by
publication and posting to bind the parties in the foreclosed property. No personal notice is
necessary (Langkaan Realty Devt., supra; Bohanan v. CA, supra; Fortune Motors, 265 SCRA
72).

A certificate of posting is not required, much less considered indispensable, for the
validity of a foreclosure sale under Act 3135 it is significant only in the matter of providing
compliance with the required posting of notice (Bohanan v. CA, 256 SCRA 355; Olizon v. CA,
256 SCRA 355; Cristobal v. CA, 328 SCRA 256 [2000]; DBP v. CA, GR No. 125838, 10 June
2003). 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 (DBP v. Aguirre,
GR No. 144877, 07 September 2001).

However, the failure to publish the notice of auction sale as required by the statute
constitutes a jurisdictional defect which invalidates the sale (DBP v. Aguirre, GR No. 144877,
07 Sept. 2001).

The affidavit of publication executed by the publisher, business/advertising manager

that a newspaper is a newspaper of general circulation constitutes prima facie evidence of
compliance with the requisite publication (Bonnevie v. CA, 125 SCRA 122 [1983]; Sadang v.
GSIS, 18 SCRA 491).

A single act of posting the notice of auction sale satisfies the requirements of law. The
burden of proving that the posting requirement was not complied with is shifted to the one
who alleges non-compliance (Bonnevie v. CA, 125 SCRA 122 [1983]).

2. The purpose of notice and publication.

The object of a notice of sale is to inform the public of the nature and condition of the
property to be sold, and inform of the time, place and terms of the sale. Notices are given for
the purpose of securing bidders and to prevent a sacrifice of the property (Olizon v. CA, 236
SCRA 148). Publication, therefore, is required to give the foreclosure sale a reasonably wide
publicity such that those interested might attend the public sale (Ouano v. CA, 129279, 04
March 2003).

3. The notice and publication requirement are mandatory and failure to comply is a
jurisdictional defect that vitiates the foreclosure auction sale.
 Non-compliance with the notice and publication requirement in Act 3135, as amended is a
jurisdictional defect that vitiates the auction sale (Tambunting v. CA, 167 SCRA 16).
The rule is that statutory provisions governing publication of notice of mortgage
foreclosure sales must be strictly complied with, and that even slight deviation therefrom will
invalidate the notice and render the sale at least voidable. x x x It has been held that failure to
advertise a mortgage foreclosure sale in compliance with statutory requirements constitute a
jurisdictional defect invalidating the sale and that a substantial error or omission in a notice of
sale will render the notice insufficient and vitiate the sale. (Tambunting v. CA, 167 SCRA 16).

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 (PNB v. Nepomuceno Productions, Inc., GR No. 139479, 27
December 2002; Ouano v. CA, GR No. 129279, 04 March 2003; Lucena v. CA, 313 SCRA47,
[1999]).

The failure to publish the notice of auction sale as required by the statute constitutes
a jurisdictional defect which invalidates the sale (DBP v. Aguirre, GR No. 144877, 07
September 2001).

The right of a bank to foreclose a mortgage upon the mortgagors failure to pay his
obligation must be exercised according to its clear mandate and every requirement of the law
must be complied with, lest the valid exercise of the right end. The valid exercise of the right
ends when the right disappears, and it disappears when it is abused especially to the
prejudice of others (PNB v. Nepomuceno, supra.).

4. The parties have no right to waive the notice and publication requirements. There is no
estoppel in case of an agreement to dispense with the notice and publication requirements.

The parties have absolutely no right to waive the posting and publication requirements
(PNB v. Nepomuceno Productions, Inc., GR No. 139479, 27 December 2002; Ouano v. CA, GR
No. 129279, 04 March 2003). Foreclosure auction sale is imbued with public policy
considerations and any waiver on the notice and publication requirements would be
inconsistent with the intent and letter of Act 3135, as amended (PNB v. Nepomuceno, supra.).

To request postponement of the sale is one thing; to request it without need of

compliance with the statutory requirements is another. Therefore, a party is not estopped
from questioning the validity of the foreclosure sale for non-compliance with Act 3135 (PNB
v. Nepomuceno, supra.).

Publication, therefore, is required to give the foreclosure sale a reasonably wide

publicity such that those interested might attend the public sale. To allow the parties to
waive this jurisdictional requirement would result in converting into a private sale what ought
to be a public auction (Ouano v. CA, GR No. 129279, 04 March 2003).

In the case of DPB v. CA, GR No. 125838, 10 June 2003, the Supreme Court clarified
that:
The form of the notice of extrajudicial sale is now prescribed in Circular No. 7-2002
issued by the Office of the Court Administrator on 22 January 2002. Section 4(a) of Circular
No. 7-2002 provides that: x x x The last paragraph of the prescribed notice of sale allows the
holding of a rescheduled auction sale without reposting or republication of the notice. However,
the rescheduled auction sale will only be valid if the rescheduled date of auction is clearly
specified in the prior notice of sale. The absence of this information in the prior notice of sale
will render the rescheduled auction sale void for lack of reposting or republication. If the notice
of auction sale contains this particular information, whether or not the parties agreed to such
rescheduled date, there is no more need for the reposting or republication of the notice of the
rescheduled auction sale.

5. Personal notice to the mortgagor is REQUIRED if it is stipulated.

There being no contractual stipulation therefore, personal notice is not necessary and
what governs is the general rule in Section 3 of Act 3135, as amended, which directs the
posting of notices of the sale in at least three (3) public places of the municipality where the
property is situated, and the publication therefore in a newspaper of general circulation in
said municipality (PNB v. International Corporate Bank, 199 SCRA 508).

Act 3135 only requires (1) the posting of notices of sale in three public places, and (2)
the publication of the same in a newspaper of general circulation. Personal notice to the
mortgagor is not necessary. Nevertheless, the parties to the mortgage contract are not
precluded from exacting additional requirement (Metrobank v. Wong, GR No. 120859, 26 June
2001; Concepcion v. CA, 274 SCRA 614). Thus, while publication of the foreclosure
proceedings in the newspaper of general circulation was complied with, personal notice is
still required when the same was mutually agreed upon by the parties as additional condition
of the mortgage contract. Failure to comply with such stipulation is fatal (Community
Savings & Loan Association, Inc. v. CA, 153 SCRA 564; Grand Farms Inc. v. CA, 193 SCRA
748; Concepcion v. CA, GR No. 122079, 27 June 1997).

The rule is that statutory provisions governing publication of mortgage

foreclosure sales must be strictly complied with, and that even slight deviation
therefrom will invalidate the notice and render the sale at least voidable. x x x Where
required by the statute or by the terms of the foreclosure decree, public notice of the place
and time of the mortgage foreclosure sale must be given, a statute requiring it being held
applicable to subsequent sales as well as to the first advertised sale of the property. It
has been held that failure to advertise a mortgage foreclosure sale in compliance with
statutory requirements constitutes a jurisdictional defect invalidating the sale and that a
substantial error or omission in a notice of sale will render the notice insufficient and vitiates
the sale (Tambunting v. CA, 167 SCRA 16, 23 [1988] citing Jalandoni v. Ledesma, 64 Phil 1058
& 59 CJS 1314, emphases supplied).

The failure to publish the notice of auction sale as required by the statute constitutes a
jurisdictional defect which invalidates the sale (DBP v. Aguirre, GR No. 144877, 07 September
2001).

The Act only requires (1) the posting of notices of sale in three public places, and (2)
the publication of the same in a newspaper of general circulation. Personal notice to the
mortgagor is not necessary. Nevertheless, the parties to the mortgage contract are not
precluded from exacting additional requirements. In this case, petitioner and respondent in
entering into a contract of real estate mortgage, agree inter alia:
all correspondence relative to this mortgage, including demand letters, summonses,
subpoenas, or notifications of any judicial or extrajudicial action shall be sent to the
MORTGAGOR at 40-42 Aldeguer St., Iloilo City, or at the address that may hereafter be given
in writing by the MORTGAGOR to the MORTGAGEE.
Precisely, the purpose of the foregoing stipulation is to apprise respondent of any action
which petitioner might take on the subject property, thus according him the opportunity to
safeguard his rights. When petitioner failed to send the notice of foreclosure sale to
respondent, he committed a contractual breach sufficient to render the foreclosure sale on
November 23, 1981 null and void. (Metrobank v. Wong, 359 SCRA 608 [2001])

The OLIZON CASE is an exception:

Obviously, as correctly pointed out by respondent, what prompted the Court to dispense
with the posting requirement is the unusual nature of the attendant facts and the peculiarity
of the confluent circumstances involved in Olizon. It bears stressing that in the said case, the
extrajudicial-judicial foreclosure sale sought to be annulled was conducted more than 15 years
ago, thus, even on the equitable ground of laches, the Olizons action for annulment of
foreclosure proceedings and certificate of sale was bound to fail. An extrajudicial foreclosure
sale is an action in rem and thus requires only notice of publication and posting to bind the
parties in the foreclosed property. (Langkaan Realty Devt. v. UCPB, GR No. 139437, 08
December 2000; Olizon v. CA, 2236 SCRA 148; Bohanan v. CA, 256 SCRA 355). No personal
notice is necessary to the mortgagor (Bonnevie v. CA, 125 SCRA 122; Fortune Motors v.
Metrobank, 265 SCRA 72) unless stipulated upon by the parties (PNB v. International
Corporate Bank, 199 SCRA 508; Community and Savings Loan Association, Inc. v. CA, 153
SCRA 564; Grand Farms Inc. v. CA, 193 SCRA 748). Publication of the extrajudicial sale in a
newspaper of general circulation is more than sufficient compliance with the notice-posting
requirement of the law (Cristobal v. CA, 328 SCRA 256; Gravina v. CA, 220 SCRA 178;
Concepcion v. CA, 274 SCRA 614; Olizon v. CA, 236 SCRA 148). The notice and publication
requirement are mandatory and failure to comply is a jurisdictional defect that vitiates the
foreclosure auction sale (Tambunting v. CA, 167 SCRA 16). The parties have absolutely no
right to waive the posting and publication requirements. Foreclosure auction sale is imbued
with public policy considerations and any waiver on the notice and publication requirements
would be inconsistent with the intent and letter of Act 3135, as amended (PNB v. Nepomuceno,
GR No. 1139479, 27 December 2002). Publication is therefore required to give the foreclosure
sale a reasonably wide publicity such that those interested might attend the public sale. To
allow the parties to waive this jurisdictional requirement would result in converting into a
private sale what ought to be public auction (Ouano v. CA, GR No. 129279, 04 March 2003).
Notices are given for the purpose of securing bidders and to prevent a sacrifice of the property
(Olizon v. CA, 236 SCRA 148).

REDEMPTIONRedemption period
After the issuance of the certificate of sale to the highest bidder, this shall be registered with
the Register of Deeds where the property is located. At this point, the remaining right of the
mortgagor/debtor is to redeem the property. The period to redeem property sold
extrajudicially following the foreclosure of mortgage is one (1) year from the registration of
the sheriffs certificate of foreclosure sale (Bernardez v. Reyes, 201 SCRA 648; Section 6, Act
3135, as amended). In case the mortgagor is a juridical person Section 47, RA 8791, the
General Banking Law of 2000 provides: Notwithstanding Act 3135, juridical persons x x x
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 the foreclosure, whichever is
earlier. Redemption period not suspended by TRO or a separate civil case. The period to
redeem was not suspended by the institution of a separate civil case for annulment of
mortgage, foreclosure, etc. (Sumerariz v. DBP, 21 SCRA 1374; Unionbank v. CA, GR No.
134068, 25 June 2001) and NEITHER is it suspended by the issuance of a TRO by the courts
(Peoples Financing Corp. v. CA, 192 SCRA 34).

Redemption price
In case of redemption, a written notice of redemption must be served on the officer who
made the sale and a duplicate filed with the applicable Register of Deeds (Rosales v. Yboa,
120 SCRA 869; Section 28[par. 3], Rule 39, Rules of Court). The redemption price shall be:
the purchase price with one percent (1%) per month interest; assessment or taxes paid with
1% per month interest (Section 28, Rule 39). When the mortgagee is a bank or a banking or
credit institution, the redemption price is that which is stipulated in the mortgage document
or the outstanding obligation of the mortgage plus interest and expenses (Unionbank v. CA,
GR No. 134068, 25 June 2001; Ponce de Leon v. RFC, 36 SCRA 289; Sy v. CA, 172 SCRA
125). The redemption amount includes the assessment of taxes paid by the purchaser and
the interest on the auction price that should be computed from the date of the registration
of the certificate of sale (Sps. Estanislao, Jr. v. CA, GR No. 143687, 31 July 2001).

Effect of failure to redeem.

If no redemption is made within the prescribed period, the buyer at foreclosure sale
becomes the absolute owner of the property purchased (Joven v. CA, 212 SCRA 700; PNB v.
Adil, 118 SCRA 110). The purchaser then has the absolute right to a writ of possession that
is the final process to carry out or consummate the extrajudicial foreclosure. Henceforth,
the mortgagor/debtor loses his right over the property (Bernardez v. Reyes, 201 SCRA 648;
Section 6, Act 3135, as amended). Consolidation of title likewise becomes a matter of right on
the part of the auction buyer, and the issuance of a certificate of title in favor of the purchaser
becomes ministerial upon the Register of Deeds (Unionbank v. CA, GR No. 133366, 05 August
1999).

Redemption vs. repurchase

The right to redeem (a foreclosed property) becomes functus oficio on the date of its
expiry, and its exercise after the period is not really one of redemption but of repurchase.
Distinction must be made because redemption is by force of law; the purchaser at public
auction is bound to accept redemption. Repurchase however of a foreclosed property, after
redemption period, imposes no such obligation. After expiry, the purchaser may or may not
resell the property but no law will compel him to do so. And, he is not bound by the bid price;
it is entirely within his discretion to set a higher price, for after all, the property already
belongs to him as owner (Prudencio v. CA, 431 SCRA 566).
JUDICIAL FORECLOSURE OF REAL ESTATE MORTGAGE UNDER RULE 68, RULES OF
COURT

Judicial foreclosure of real estate mortgage is governed by the provisions of Rule 68 of

the Rules of Court. It is like any ordinary civil action filed in court that shall be proven by
preponderance of evidence.

Procedure
1. Preparation and filing of complaint which shall set forth the following allegations (Sec.
1, Rule 68):

a) Date and due execution of the mortgage and its assignments, if any;

b) Names and residences of the mortgagor and mortgagee;

c) Description of the mortgaged property/ies;

d) Documentary evidence/s of the obligation/s secured by the mortgage and the

unpaid obligation;

e) Names and residences of all persons having or claiming an interest in the

mortgaged property/ies.

2. The trial court shall render a judgment based on the facts proven and shall ascertain
the amount due based on the mortgage debt or obligation, including interests, charges
and costs. The court shall then direct the defendant to pay said amount within a period
of not less than ninety (90) days nor more than one-hundred twenty (120) days (Sec.
2, Rule 68).

3. In the event of failure to pay as directed within 90 to 120 days, the mortgage realty/ies
shall be sold at an auction sale, the proceeds of which shall be applied to the mortgage
debt, pursuant to Rule 39 of the Rules of Court (Sec. 3, Rule 68).

a) 3.1. Before the sale of the real property/ies, notice must be given:

a) By posting for 20-days in three (3) public places. If the assessed value is more
than P50,000.00, by publishing a copy of the notice once a week for two (2)
consecutive weeks in one newspaper selected by raffle (Sec. 15c, Rule 39).
b) Written notice to the judgment obligor at least three (3) days
1. before the sale (Sec. 15d, Rule 39).

b) 3.2. The highest bidder shall be issued a certificate of sale (Sec. 25, Rule 39).
 4. Upon motion and after notice and hearing, the trial court will issue an order of
confirmation of the sale (Rural Bank of Oroquieta v. CA, 101 SCRA 5 [1980]).

4.1. The final order of confirmation shall be registered with the Registry of Deeds (Sec.
7, Rule 68).

a) 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.

b) Where a right of redemption exists, the certificate of title of the mortgagor shall
not be cancelled. Instead, the certificate of sale and order of confirmation shall
be registered with a memorandum of the right redemption. If the property is not
redeemed a final deed of sale shall be executed by the sheriff in favor of the
purchaser which shall be registered in the Register of Deeds, whereupon the
title of the mortgagor shall be cancelled and a new one issued in the name of
the purchaser.

5. If the proceeds of the auction sale of the property are not sufficient, the trial court,
upon motion, shall render a deficiency judgment against the defendant (Sec. 6, Rule
68).

Equity of Redemption
Equity of redemption is the right of the mortgagor to redeem the mortgaged property
after his default in the performance of the conditions of the mortgage but before the sale of
the property or the confirmation of the sale after judicial foreclosure thereof (International
Services, Inc. v. IAC, 142 SCRA 467 [1986]). This is the right of the defendant mortgagor to
extinguish the mortgage and retain ownership of the property by paying the secured debt
within a 90-day period after the judgment becomes final or after the foreclosure sale but prior
to its confirmation (GSIS v. CFI, 175 SCRA 19 [1989]).

No right of redemption in judicial foreclosure.

There is no right of redemption from a judicial foreclosure of mortgage, except
foreclosure of mortgage by banks or banking institutions (GSIS v. CFI, 175 SCRA 19 [1989];
Huerta Alba Resort, Inc. v. CA, 339 SCRA 534 [2000]).

Equity of redemption vs. right of redemption.

The Supreme Court already ruled on the distinction between the equity of redemption
and the right of redemption as follows:

The equity of redemption is, to be sure, different from and should not be confused with
the right of redemption. The right of redemption in relation to a mortgage understood in the
sense of a prerogative to re-acquire mortgaged property after registration of the foreclosure
sale exists only in the case of the extrajudicialforeclosure of the mortgage. No such right is
recognized in a judicial foreclosure except only where the mortgagee is the Philippine National
Bank or a bank or banking institution. Where a mortgage is foreclosed extrajudicially, Act
3135 grants to the mortgagor the right of redemption within one (1) year from the registration
of the sheriffs certificate of foreclosure sale. Where the foreclosure is judicially effected,
however, no equivalent right of redemption exists. The law declares that a judicial foreclosure
sale, when confirmed by an order of the court, x x shall operate to divest the rights of all the
parties to the action and to vest their rights in the purchaser, subject to such rights of
redemption a may be allowed by law. Such rights exceptionally allowed by law (i.e. even
after confirmation by an order of the court) are those granted by the charter of the Philippine
National Bank (Acts No. 2747 and 2938), and the General Banking Act (R.A. 337). These laws
confer on the mortgagor, his successors in interest or any judgment creditor of the mortgagor,
the right to redeem the property sold on foreclosure after confirmation by the court of the
foreclosure sale which may be exercised within a period of one (1) year, counted from the
date of registration of the certificate of sale in the Registry Property. But, to repeat, no such
right of redemption exists in case of judicial foreclosure of a mortgage if the mortgagee is not
the PNB or a bank or banking institution. In such a case, the foreclosure sale, when
confirmed by an order of the court. x x shall operate to divest the rights of all the parties to
the action and to vest their rights in the purchaser. There then exists only what is known as
the 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 judgment
becomes final, in accordance with Rule 68, or even after the foreclosure sale but prior to its
confirmation. Section 2, Rule 68 provides that xx If upon the trial xx 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 costs, and shall render judgment
for the sum so found due and order the same to be paid into court within a period of not less
than ninety (90) days from the date of the service of such order, and that in default of such
payment the property be sold to realize the mortgage debt and costs. This is the
mortgagorsequity (not right) of redemption which, as above stated, may be exercised by him
even beyond the 90-day period from the date of service of the order, and even after the
foreclosure sale itself, provided it be before the order of confirmation of the sale. After such
order of confirmation, no redemption can be effected any longer. (Italics supplied, Huerta
Alba Resort, Inc. v. CA, 339 SCRA 534 [2000] citing Limpin v. IAC, 166 SCRA 87)
Deficiency judgment
It refers to judgment for any unpaid balance of the obligation, which remains after foreclosure
of mortgage, judicial or extrajudicial, which a creditor may secure from the court (Phil. Bank
of Commerce v. de Vera, 6 SCRA 1026 [1962]). In extrajudicial foreclosure of mortgage, where
the proceeds of the sale are insufficient to pay the debt, the mortgagee has the right to recover
the deficiency from the debtor (Prudential Bank v. Martinez, 189 SCRA 612 [1990]. In a
foreclosure, the deficiency is determined by simple arithmetical computation immediately
after foreclosure (United Planters Sugar Milling Co., Inc. (UPSUMCO) v. CA, 527 SCRA 336
[2007]).
Extrajudicial foreclosure (EJF) vs. judicial foreclosure (JF)
1. On the governing law. EJF is governed by the provisions of Act 3135, as amended,
while JF is by the provisions of Rule 68 of the Rules of Court.

2. On the publication requirement. In EJF, the auction sale shall be published once a
week for three (3) consecutive weeks in a newspaper of general circulation. In JF, the
publication shall only be for two (2) consecutive weeks.
 3. On the notice requirement. Personal notice to the mortgagor is not required in EJF as
a rule, UNLESS stipulated upon. In JF, written notice to the judgment obligor at least
three (3) days before the auction sale is required.

4. On redemption. There is a right of redemption in EJF, which is one year from

registration of the certificate of sale. If the mortgagor is a juridical person the
redemption period is until, but not after, the registration of the certificate of foreclosure
sale with the applicable Register of Deed which in no case shall be more than three (3)
months after the foreclosure, whichever is earlier. In JF, there is no right of redemption
but only equity of redemption, unless the mortgagee is a bank or banking institution.
In the latter instance, the redemption period shall be one (1) year from the date of
registration of the certificate of sale.

CHATTEL MORTGAGE
Chattel mortgage is a security for the performance of obligation effected by the
recording of the personal property mortgaged in the chattel mortgage register (Art. 2140, Civil
Code; Northern Motors, Inc. v. Coquia, 66 SCRA 415 [1975]). Only personal property may be
the object of a chattel mortgage (Sec. 2, Act No. 1508). While the subject of a chattel mortgage
is personal property, the parties thereto may by agreement treat as personal property that
which by nature would be real property, such as a building, as the subject of a chattel
mortgage, and the owner thereof may be estopped from subsequently claiming otherwise
(Tumalad v. Vicencio, 41 SCRA 143 [1971]). Such agreement, however, is valid only as
between the contracting parties (Evangelista v. Alto Surety, 103 Phil 401).

Affidavit of good faith.

Section 5 of Act No. 1508 requires the following form of an affidavit of good faith to be
appended to the chattel mortgage:
We severally swear that the foregoing mortgage is made for the purpose of securing the
obligation specified in the conditions thereof, and for no other purpose, and that the same is
a just and valid obligation, and one not entered into for the purpose of fraud

The absence of such affidavit vitiates a mortgage as against creditors and subsequent
encumbrances (Phil. Refining Co. v. Jarque, 61 Phil 229; Giberson v. Jureideni Bros., 44 Phil
216; Benedicto de Tarrosa v. Yap Tico & Co., 46 Phil 753) but may, however, be valid as
between the parties (Lilius & Lilius v. Manila Railroad Co., 62 Phil 56).

Foreclosure of chattel mortgage.

It appears that a chattel mortgage may only be foreclosed extrajudicially pursuant to

Section 14 of Act No. 1508 with the deletion of Section 8, Rule 68 of the former rule on judicial
foreclosure of chattel mortgage.

In Section 14 of Act No. 1508, it is a condition precedent before foreclosure that the
conditions of the chattel mortgage be broken and at least 30-days already elapsed.
Procedure
 Section 14 of Act No. 1508, provides the following procedure in the extrajudicial
foreclosure of chattel mortgage
1. Posting of the notice of auction sale at least 10 days before auction, indicating time,
place and purpose of sale, at two or more public places in the municipality where the
mortgagor resides, or where the property is situated.

2. Notification of the mortgagor or his assigns, of the time and place of sale, at least 10-
days previous to the sale, either in writing if a resident of the municipality, or by
registered mail if a resident outside of the municipality.

3. Auction sale of the mortgaged property by a public officer at a public place in the
municipality where the mortgagor resides, or where the property is situated.

4. The officer making the sale shall, within 30-days thereafter, make in writing a return
of his doings and file the same in the office of the register of deeds where the mortgage
is recorded, and the register of deeds shall record the same. The return shall
particularly describe the articles sold, and state the amount received for each article,
and shall operate as a discharge of the lien thereon created by the mortgage.

5. The proceeds of the sale shall be applied in the following order:

a) Costs and expenses of keeping the sale;

b) Payment of the demand or obligation secured by such mortgage;
c) Residue shall be paid to persons holding subsequent mortgages in their order;
d) Balance, if any, shall be paid to the mortgagor or persons holding him on
demand.

Deficiency judgment in chattel mortgage.

If in an extrajudicial foreclosure of chattel mortgage a deficiency exists, an independent
civil action may be instituted for recovery of said deficiency, the chattel mortgage being given
only as security and not as payment for debt in case of failure of payment (Bicol Savings &
Loan Assn. v. Guinhawa, 188 SCRA 642 [1990]; Superlines v. ICC, GR No. 150673, 28 Feb.
2003).

Note however, that in a contract of sale of personal property where the price is payable
in installments and in the event of foreclosure of the chattel mortgage should the vendee fail
to pay two or more installments, the vendor shall have no further action against the
purchaser to recover any unpaid balance of the price. Any agreement to the contrary shall
be void (Art. 1484, Civil Code; Recto Law). Please note that this is applicable in cases of sale
of personal property on installment.

Distinction: real estate mortgage (REM) vs. chattel mortgage (CM)

1. Properties covered: REM is constituted on immovables/real properties. Only
movables/personal properties may be the object of a chattel mortgage
 2. Modes of foreclosure: There are two modes of foreclosure in a REM extrajudicial under
Act No. 3135, as amended or judicial under Rule 68 of the Rules of Court. In a CM,
only extrajudicial foreclosure under Sec. 14 of Act No. 1508 is now available.

3. On redemption: There is NO right of redemption in CM. In REM, there is right of

redemption in case of extrajudicial foreclosure, and when the mortgagee is a bank or
banking institution in case of judicial foreclosure. In CM, the purchaser at an auction
sale becomes the owner of the property.

FORECLOSURE
> Remedy available to the mortgagee by which he subjects the mortgaged property to the
satisfaction of the obligation to secure which the mortgage was given
> Denotes a procedure adopted by the mortgagee to terminate the rights of the mortgagor on
the property and includes the sale itself

VALIDITY AND EFFECT OF FORECLOSURE

> The right to foreclose the mortgage and to have the property seized and sold with
a view to applying the proceeds to the payment of the principal obligation
> A mortgage contract may contain an acceleration clauseon occasion of the mortgagors
default, the whole sum remaining unpaid automatically becomes due and payable
> Essence of mortgage contractproperty has been identified and separated from
a mass of the property of the mortgagor to secure the payment of a principal obligation
> Once the proceeds have been applied to the payment of the principal obligation, the
debtor cannot anymore be asked to pay unless there is deficiency

KINDS OF FORECLOSURE

1. Judicial
2. Extrajudicial

AN ACT TO AUTHORIZE THE MORTGAGE OF PRIVATE REAL PROPERTY IN

FAVOR OF ANY INDIVIDUAL, CORPORATION, OR ASSOCIATION SUBJECT TO
CERTAIN CONDITIONS

Section 1. Any provision of law to the contrary notwithstanding, private real

property may be mortgaged in favor of any individual, corporation, or association, but the
mortgagee or his successor in interest, if disqualified to acquire or hold lands of
the public domain in the Philippines, shall not take possession of the mortgaged
property during the existence of the mortgage and shall not take possession of the
mortgaged property except after default and for the sole purpose of foreclosure,
receivership, enforcement or other proceedings and in no case for a period of more
than 5 years from actual possession and shall not bid or take part in any sale of such
real property in case of foreclosure: Provided, that said mortgagee or successor in
interest may take possession of said property after default in accordance with the
prescribed judicial procedures for foreclosure and receivership and in no case
exceeding 5 years from actualpossession.
Section 2. All laws, orders, or regulations, or parts thereof inconsistent with the provisions
of this Act, are repealed or modified accordingly.

Section 3. This Act shall take effect upon its approval.

NOTES ON RA 133:

1. You can mortgage to a foreigner. RA 133 sanctions this. Ownership is not equivalent
to mortgage. Nonetheless, he can only institute judicial proceedings and not
extrajudicially foreclose the mortgage. Furthermore, he cannot bid or take part in the
sale of the real property.
2. The foreigner may not take possession of the property during the mortgage. He could
only possess the same as a lessee.
3. The foreigner may only take possession of the mortgaged property after default, and
for the sole purpose of foreclosure, enforcement or other proceedings. This should
not exceed the period of 5 years from actual possession.

JUDICIAL FORECLOSURE UNDER RULE 68, RULES OF COURT

1. The mortgagee should file a petition for judicial foreclosure 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 judgment ordering the mortgagor/debtor to pay the obligation within a period not
less than 90 nor more than 120 days from the finality of judgment.

3. Within this 90 to 120 day period, the mortgagor has the chance to pay the obligation
to prevent his property from being sold. This is called the EQUITY OF REDEMPTION
PERIOD.

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

5. There will be a judicial confirmation of the sale. After the confirmation of the sale, the
purchaser shall be entitled to the possession of the property, and all the rights of the
mortgagor with respect to the property are severed or terminated. The equity of
redemption period actually extends until the sale is confirmed. Even after the lapse of the
90 to 120 day period, the mortgagor can still redeem the property, so long as there has been
no confirmation of the sale yet. Therefore, the equity of redemption can be considered as
the right of the mortgagor to redeem the property BEFORE the confirmation of the sale.

a. After the confirmation of the sale, the mortgagor does not have a right to redeem
the property anymore. This is the general rule in judicial foreclosures there is no
right of redemption after the sale is confirmed.

The proceeds of the sale of the property will be disposed as follows:

a. First, the costs of the sale will be deducted from the price at which the property
was sold
b. The amount of the principal obligation and interest will be deducted
c. The junior encumbrances will be satisfied
d. If there is still an excess, the excess will go back to the mortgagor. In mortgage, the
mortgagee DOESNOT get the excess (unlike in pledge).

If there is a deficiency, the mortgagee can ask for a DEFICIENCY JUDGMENT which
can be imposed on other property of the mortgagor. The rule on extrajudicial
foreclosure is different. The mortgagee must go to court and file another action for the
collection of the deficiency.

ONE WOULD SHY AWAY FROM A JUDICIAL FORECLOSURE:

1. Judicial foreclosure is costly, since the parties would need to hire lawyers. But then
again, the present rules provide that court fees are needed to be paid in extrajudicial
proceedings also.
2. The parties have very little control over the sale because there is court intervention.

3. More susceptible to stalling/dilatory tactics by the mortgagor, since he can file

all sorts of motions in court to prevent the sale.
4. It is more efficient to have extrajudicial proceedings since for judicial proceedings, there
is a minimum lapse of time of 6 years.
EXTRAJUDICIAL FORECLOSURE

(UNDER ACT 3135/4118 AND SC ADMINISTRATIVE CIRCULAR)

WHERE SHOULD AN EXTRAJUDICIAL FORECLOSURE SALE BE DONE?

> Sale cannot be made legally outside the city or province wherein the property sold
is situated. In case the place has been stipulated, it shall be made in the municipal
building of the said place

NOTICE OF THE SALE

1. POSTING of the notices of the sale FOR NOT LESS THAN 20 DAYS in at least 3
public places of the municipality or city where the property is situated
2. IF THE PROPERTY IS WORTH MORE THAN P400, such notice shall also be
published once a week at least 3 consecutive weeks in a newspaper of general circulation
in the municipality or city. (You don't need to count 6 days between publications.)
NOTE: there is jurisprudence, which held that there is sufficient notice when there is
publication.

PUBLIC AUCTION/SALE

1. Time shall be between 9AM and 4PM. It shall be made in the direction of the sheriff
of the province, the justice or auxiliary justice of the peace of the municipality, or of the
notary public of the municipality, who shall be compensated with P5 for each
day of actual work or performance in addition to his expenses.

2. Anyone may bid at the sale, unless there are stipulations in the agreement.
 POSSESSION

> Upon foreclosure, if the mortgagor is in possession of the property, he will retain
possession during the redemption period1 year from the date of sale
> If the winning bidder wants possession during the redemption period, he may
execute a bond in the amount equivalent to the use of the property for 12 months, to
indemnify the debtor in case it be shown that the sale was made without violating the
mortgage or without complying with the requirements of the Act. Upon approval, a writ of
possession will be issued in his favor.
> If the winning bidder is able to secure possession, the mortgagor may petition that
the sale is set aside and the writ of possession be cancelled on the ground that he
wasn't in default or that the sale wasn't made in accordance with Act 3135.
This must be filed within 30 days from issuance of the writ of possession.

RIGHT OF REDEMPTION

> The debtor, his successors-in-interest, or any judicial creditor or judgment creditor of
said debtor, or any person having a lien on the property subsequent to the mortgage or deed
of trust under which the property is sold, may redeem the same at any time WITHIN
THE TERM OF 1 YEAR FROM AND AFTER THE DATE OF THE SALE and such will be
governed by the Rules of Court

> When the property is redeemed after the purchaser has been given possession, the
redeemer is entitled to deduct from the price of redemption any rentals that said
purchaser may have collected in case the property or any part thereof was rented. If the
property was used as his own dwelling, it being town property, or used it gainfully, it being
rural property, the redeemer 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

Sec. 29. Effect of redemption by judgment obligor, and a certificate to be delivered

and recorded thereupon; to whom payments on redemption made. If the judgment obligor
redeems, he must make the same payments as are required to effect a redemption
by a redemptioner, whereupon, no further redemption shall be allowed and he is restored
to his estate. The person to whom the
redemption payment is made must execute and deliver to him a certificate of
redemption acknowledged before a notary public or other officer authorized to take
acknowledgments of conveyances of real property. Such certificate must be filed and recorded
in the registry of deeds of the place in which the property is situated, and the registrar of
deeds must note the record thereof on the margin of the record of the certificate of sale. The
payments mentioned in this and the last preceding sections may be made to the purchaser r
redemptioner, or for him to the officer who made the sale.

Sec. 30. Proof required of redemptioner.

A redemptioner must produce to the officer, or person from whom he seeks to redeem, and
serve with his notice to the officer a copy of the judgment or final order under which he claims
the right to redeem, certified by the clerk of the court wherein the judgment or final order is
entered; or, if he redeems upon a mortgage or other lien, a memorandum of the record
thereof, certified by the registrar of deeds; or an original or certified copy of any
assignment necessary to establish his claim; and an affidavit
executed by him or his agent, showing the amount then actually due on the lien.

Sec. 31. Manner of using premises pending redemption; waste restrained.

Until the expiration of the time allowed for redemption, the court may, as in other proper
cases, restrain the commission of waste on the property by injunction, on the application
of the purchaser or the judgment obligee, with or without notice; but it is not waste for a
person in possession of the property at the time of the sale, or entitled to possession
afterwards, during the period allowed for redemption, to continue to use it in the same
manner in which it was previously used; or to use it in the ordinary course of
husbandry; or to make the necessary repairs to buildings thereon while he occupies the
property.

Sec. 35. Right to contribution or reimbursement.

When property liable to an execution against several persons is sold thereon, and more
than a due proportion of the judgment is satisfied out of the proceeds of the sale of the
property of one of them, or one of them pays, without a sale, more than his proportion,
he may compel a contribution from the others; and when a judgment is upon an
obligation of one of them, as security for another, and the surety pays the amount, or any
part thereof, either by sale of his property or before sale, he may compel repayment
from the principal.

GENERAL BANKING LAW OF 2000, SECTION 47

Sec. 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.

NOTES:
1. For judicial foreclosure, the redemption period is within one year. For extrajudicial,
its 90 days from sale or registration.
2. The purpose is to give concession to the banks. Banks cannot get properties
mortgaged by those in financial distress.
3. The redemption price would be the mortgaged obligation plus the interest as
stipulated in the original obligation. Compare this with judicial foreclosure wherein
the redemption price is the original price. In this case, you have to pay more when
redeeming from a bank.
4. There is immediate possession
5. A motion to enjoin would not be entertained unless secured by a bond.
6. Court will fix the amount of the bond. Normally, this would be the liability of
the bank plus costs. This remedied the loopholes in Act 3135protect the bank
during foreclosures. This makes it hard to secure injunctions and it shortens the
redemption period.