Rule 68: FORECLOSURE OF REAL ESTATE
MORTGAGE (REM)
DEFINITION:
- An accessory contract executed by a debtor in favor
of a creditor as security of the principal obligation.
- To be a REM, the contract must be constituted on
either immovables (real property) or alienable real
rights.
 Art. 1953, NCC:
A person who receives a loan of money or any
other fungible thing acquires the ownership
thereof, and is bound to pay to the creditor an
equal amount of the same kind and quality.
 Art. 2124, NCC
Only the following property may be the object
of a contract of mortgage:
(1) Immovables;
(2) Alienable real rights in accordance with the
laws, imposed upon immovables.
Nevertheless, movables may be the object of a
chattel mortgage. (1874a)
 DRAGNET CLAUSE OR BLANKET
MORTGAGE CLAUSE:
o A provision in a mortgage contract in which
the mortgage is a security for the past, present
and future indebtedness.
 WHEN FORECLOSURE IS PROPER;
DEMAND TO PAY
1. Foreclosure of REM presupposes that the debtor
failed to pay his debt despite demand.
o Default must first be established
 GR: Default occurs when payment is
not made after a valid demand.
 XPN: contract between the parties
carries with it a stipulation that demand
is not necessary
2. The issue of whether demand was not made
before the foreclosure was effected is essential.
Ratio: If no demand, then the loans had not yet
become due and demandable.
Alternative Remedies of the Mortgagee-Creditor:
1. File an action for collection of sum of money; or
2. To foreclose the mortgage, if one has been
constituted.
Splitting a Single Cause of Action:
- Vexatious and oppressive
1 2
AN ACT EXPANDING THE JURISDICTION OF THE METROPOLITAN TRIAL COURTS, MUNICIPAL TRIAL
COURTS, AND MUNICIPAL CIRCUIT TRIAL COURTS, AMENDING FOR THE PURPOSE BATAS PAMBANSA,
BLG. 129, OTHERWISE KNOWN AS THE "JUDICIARY REORGANIZATION ACT OF 1980"
- An election of the first bars the recourse of the
second, otherwise there would be multiplicity of suits
PACTUM COMMISSORIUM; NOT A VALID
AGREEMENT
Definition:
- A stipulation empowering the creditor to appropriate
the thing given as guaranty for the fulfillment of
obligation in the event the obligor (debtor) fails to
live up to his undertakings, without further formality,
such as foreclosure proceedings, and a public sale.
Elements:
1. There should be a property mortgaged by way of
security for the payment of the principal obligation;
and
2. There should be a stipulation for automatic
appropriation by the creditor of the thing mortgaged
in case of non-payment of the principal obligation
within the stipulated period.
ISSUE IN FORECLOSURE OF REM:
- Whether or not there is a legal basis for foreclosure
(incapable of pecuniary estimation)
COURT WITH JURISDICTION:
1. Traditionally: RTC (BP 129)
2. Modern: MTC or RTC (RA 76911 – considers he
assessed value of the property in real actions)
o BP 129 – where the action is one “involving title
to, or possession of, real property or any interest
therein,” the determination of jurisdiction shall
be made by inquiring into the assessed value of
the property. (Sec. 33 [3] and 19 [2], BP 129)
o MTC:
 Assessed value: not more than 20,000
(outside Manila); not more than 50,000
(Manila)
 Mortgage debt: not more than 300,000
(outside Manila); not more than 400,000
(Manila)
 RTC: otherwise
 MODES OF FORECLOSURE OF REM
1. JUDICIAL FORECLOSURE – RULE 68,
RC
2. EXTRAJUDICIAL FORECLOSURE –
ACT 31352, amended by ACT 4118
 Used if there is a special power inserted
in or attached to the REM contract
allowing an extrajudicial foreclosure
sales
 No special power: judicial foreclosure
An Act to Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real
Estate Mortgages
APPLICABILITY: Rule 68 applies only judicial foreclosures 5. Confirmation of the Sale (Sec. 3)
of REM (Sec. 1, Rule 68) o After the foreclosure sale, the mortgagee should
file a motion for the confirmation of the sale (ex
parte)
PROCEDURE: o Requires notice and hearing
 Hearing: mortgagor will be allowed to show
1. Filing of Complaint (Sec. 1)
cause why the sale should not be confirmed
Setting forth the following:
 No Hearing: sale is vitiated, as if no
a. Date and due execution of the mortgage;
confirmation took place
b. Assignments of the mortgage (if any);
 Effect of no hearing: mortgagor-debtor may
c. Names and residences of the mortgagor and
still insist on his right to exercise his equity
martgagee;
of redemption
d. Description of the mortgaged property;
o After hearing: if the court finds valid grounds for
e. Statement of the date of the note and other
its confirmation, it shall issue an order
documentary evidence of the obligation secured
confirming the foreclosure sale
by the mortgage;
 Note: judgment is deemed a final
f. Amount claimed unpaid; and
adjudication on the propriety and merits of
g. Names and residences of all persons having
the sale.
interest therein (named as defendants)
 Appealable
2. Trial
3. Judgment, containing the ff matters (Sec. 2):
o Effect of confirmation: divest the rights in the
a. Ascertainment of the amount due to the plaintiff,
property of all the parties to the action and vest
plus interest and other charges;
their rights in the purchaser
b. Judgment for the sum found due;
o Effect of Finality (Confirmation):
c. Order that the amount found due be paid to the
o Final: expiration of the period of
court or to the judgment oblige (mortgagee-
redemption, not appealed within the period
creditor) within a period of not less than 90 days
allowed
nor more than 120 days (90-120 days) from the
o Appealable
entry of judgment; and
o Purchaser/last redemptioner (if any) shall be
d. Admonition that, in default of such payment, the
entitled to the possession of the property,
property shall be sold at public auction to satisfy
and may secure a WRIT OF POSSESSION
the judgment.
(upon ex parte motion)
Notes on Judgment: o UNLESS: a third party is actually holding
the same adversely to the judgment obligor
o Considered a final adjudication of the case
o Subject to challenge by the aggrieved party by (Sec. 3)
o Motion is an exception to the general 3-day
appeal or other post-judgment remedies
notice rule for motions
o PERIOD (90-120 days – equity of redemption) given
o Not a denial of due process because it does
is not merely procedural but substantive right as the
not bar a separate case for annulment of the
last opportunity to pay the debt and save his
mortgage and foreclosure sale
mortgaged property
o Ratio: One of the 2 steps necessary to destroy
the mortgagor’s equity of redemption, the other 6. Disposition of the proceeds (Sec. 4)
is sale
- after deducting the costs of the sale
4. Sale of the Mortgaged Property (Sec. 3) - any balance shall be paid to the junior encumbrancers (if
o If the mortgagor-debtor fails to pay the sum due any, in the order of their priority)
within the period stated by the court in the
- further balance, shall be paid to the mortgagor or any person
judgment (90-120 days from the entry of
entitled thereto
judgment)
o The court shall order the sale of the property
upon motion (may be made ex parte)
7. Registration of the Sale (Sec. 7)
- certified copy of the final order confirming the sale is
necessary for the sale to be registered in the ROD
NOTE:
a. No right of redemption exists:
- The certificate of title in the name of the
mortgagor-debtor shall be cancelled
- A new one shall be issued in the name of the
purchaser
b. Right of Redemption exists:
- Certificate of sale and order confirming the sale
shall be registered and a brief memoranda shall
be made by the ROD upon the certificate of title
- Certificate of title in the name of the mortgagor-
debtor shall not be cancelled.
b.1 When the property is redeemed:
- deed of redemption shall be registered, and a
brief memoranda thereof shall be made upon the
certificate of title
b.2 When the property is not redeemed:
- final deed of sale executed in favor of the
purchaser shall be registered with the ROD
- Certificate of title in the name of the mortgagor
shall then be cancelled
- New one shall be issued in the name of the
purchaser
HOW SALE TO PROCEED IN CASE THE DEBT IS
NOT ALL DUE (Sec. 5)
1. If the property is divisible
- As soon as a sufficient portion of the property
has been sold to pay the total amount and the
costs due the sale shall terminate
- Afterwards, as often as more becomes due for
principal or interest and other valid charges, the
court (upon motion) may order more to be sold
2. If the property is not divisible
- Without prejudice to the parties
- The whole shall be ordered to be sold
- The entire debt and costs shall be paid
- If the proceeds of the sale be sufficient, there
being a rebate of interest where such rebate is
proper
DEFICIENCY JUDGMENT (Sec. 6)
- If there be a balance due to the plaintiff after applying the
proceeds of the sale, the court (upon motion) shall render
judgment against the defendant for any such balance
- Sec. 6 applies in cases stipulated in Sec. 5 (if not all debts
are due
- Independent action need not be filed to recover the
deficiency
- Motion by the mortgagee is enough
- When the mortgagor-debtor is a non-resident:
- at the time of the filing of the action was outside the
Phil., a deficiency judgment would not be
procedurally feasible
- Ratio: the nature of the deficiency judgment is in
personam, and jurisdiction over the person is
mandatory
- Being outside the country, jurisdiction over his
person cannot be acquired
RULE IN CASE OF SURPLUS:
- Duty of the mortgagee to return to the mortgagee the
surplus
EQUITY OF REDEMPTION (90-120 DAYS PERIOD)
- The period within which the mortgagor may start
exercising the equity of redemption
- Right to extinguish the mortgage and retain ownership of
the property by paying debt
- Payment may be made even after the foreclosure sale
- Provided, it is made before the sale is confirmed by the
court
- Exercised only in judicial foreclosure
RIGHT OF REDEMPTION
- Right granted to reacquire the property even after the
confirmation of the sale and the registration of the
certificate of sale
- No right of redemption in a judicial foreclosure of
mortgage (Rule 68); only in extrajudicial foreclosure
(always)
- Period: within one year from the date of sale (one year
from the registration of sale)
GR: No right of redemption in judicial foreclosure, only in EJ
foreclosure
XPN: if the foreclosure is in favor of banks (or juridical
persons as mortgagees
Period of redemption: Under GBA of 2000, one year after the
sale of the property (one year after the registration of the sale)
If the mortgagee is a juridical person (except banks/other
banking institutions)
- Not more than 3 months after foreclosure sale whichever
is earlier

JUDICIAL FORECLOSURE vs EXTRAJUDICIAL

Governed by the Rules of
Court (R68)
Involves filing of
independent action
Equity of redemption in
judicial foreclosure; no right
of redemption XPN when
the mortgagee is a banking
institution
There can be a deficiency
judgment
Recovery can be done
through motion on
deficiency judgment
Governed by Act 3135
Does not require the filing of
an action
Right of redemption in
extrajudicial foreclosure
No deficiency judgment
because there is no judicial
proceeding, recovery of
deficiency is allowed
Recovery is through an
independent action (no
prohibition under Act 3135)
 RULE 69: PARTITION
DEFINITION:
Art. 1079 – separation, division and assignment of a thing held
in common among those to whom it may belong
Art. 494 – (Rule Allowing Partition)
- No co-owner shall be obliged to remain in the co-
ownership
- Because of this rule, he may demand, at any time, the
partition of the property owned in common, in so far as
his share is concerned
Instances when co-owner may not demand partition:
a. Agreement among the co-owners to keep the party
undivided (but not exceeding 10 years, extendible;
Art. 494, NCC)
b. Prohibited by the donor or testator for a period not
exceeding 20 years (Art. 494 and 1083, NCC)
c. Prohibited by law (Art. 494, NCC)
d. Property is not subject to physical division (Art. 495,
NCC)
e. Condition imposed upon voluntary heirs before they
can demand partition has not yet been fulfilled (Art.
1084, NCC)
LEGAL EFFECT OF PARTITION:
- by agreement of by judicial proceeding
- to terminate the co-ownership and to make the co-owners
the absolute and exclusive owner of the share allotted to
him
PRESCRIPTION:
GR: does not run in favor of a co-owner as long as there is a
recognition of ownership (expressly or impliedly; Art. 494,
NCC)
XPN: clear repudiation of the co-ownership, and the co-
owners are apprised of the claim of adverse and exclusive
partnership
ISSUE: Whether or not the plaintiff has a right to partition
(incapable of pecuniary estimation)
COURT WITH JURISDICTION:
1. Traditional: RTC
2. Modern: MTC or RTC (depending upon the assessed
value of the property)
MODES OF PARTITION:
1. Agreement of the parties
2. Judicial Proceedings – when the parties cannot reach
agreement (Art. 496)
Sec. 12, Rule 69, RC
“Nothing in this Rule shall be construed as to restrict or prevent
persons holding real estate jointly or in common from making
an amicable partition by agreement and suitable instruments of
conveyance without recourse to an action.”
STAGES OR .PHASES IN PARTITION:
1. Whether or not a co-ownership in fact exists, and a
partition is proper and may be made by voluntary
agreement of all the parties interested in the property.
End:
a. Entitled
- co-ownership exists
- partition is proper; and
- an accounting of rents and profits received by
the defendant from the real estate is in order
b. Not entitled
- Either because: no co-ownership exists or
partition is legally prohibited
2. A. Parties are unable to agree upon the partition
directed by the court; or
- partition shall be done for the parties by the court
with the assistance of not more than 3 commissioners
B. Rendition of the accounting and approval by the
court
MULTIPLE APPEALS
- subject to multiple appeals
- requires a record on appeal
Ratio: To enable the rest of the case to proceed in the event
that a separate and distinct issue is resolved by the court and
held to be final (Roman Catholic vs CA)
SECTION 1. PARTIES AND COMPLAINT
WHO MAY FILE ACTION FOR PARTITION (Plaintiff)
1. Person who has a right to compel the partition
2. Person who is supposed to be a co-owner of the
property
DEFENDANTS:
- All the co-owners (indispensable parties)
Ratio: an action will not lie without the joinder of all co-
owners and other persons having interest therein.
COMPLAINT:
A. The plaintiff shall state in his complaint:
1. Nature and extent of his title, and
2. Adequate description of the real or personal
estate
B. Join as defendants all other persons interested in the
property
C. Must also include a demand for an accounting of
the rents, profits and other income (which he may be
entitle to as his share)
Ratio: cannot be demanded in another action because
they are parts of the cause of action for partition
Consequence (if not set-up):
- Barred; pursuant to the rule against splitting a
single cause of action
If for exclusive ownership:
- Nature of the action is not partition; but action
for recovery of property
SECTION 2. ORDER FOR PARTITION
1. During the trial, the court shall determine WON the
plaintiff is truly a co-owner of the property
(establish ownership)
- That there is indeed a co-ownership among
parties
- Partition is not legally proscribed, thus may be
allowed
- IF the court finds that the facts are such that a
partition would be in order, COURT WILL
ISSUE AN ORDER FOR PARTITION
2. Partition by Agreement:
- Make the partition among themselves
- The court shall confirm the partition so agreed
upon
- Such partition together with the ORDER OF
THE COURT CONFIRMING shall be
recorder in the ROD
- Final order (partition and accounting) may be
appealed
SECTION 3. APPOINTMENT OF COMMISSIONERS
- Parties are unable to agree upon the partition the
court shall appoint not more than 3 competent
and disinterested commissioners
a. To make the partition
b. Commanding to them (commissioners) to
set off to the plaintiff and to each party in
interest such part and proportion of the
property as the court shall direct
SECTION 4. DUTIES OF COMMISSIONERS
A. Shall view and examine the real estate
- After due notice to the parties to attend at such
view and examination;
B. Shall hear the parties as to their preference in the
portion of the property to be set apart to them
- and the comparative value thereof; and
C. Shall set apart the same to the parties in lots or
parcels as will be most advantageous and equitable
- Having due regard to the improvements,
situation and quality of the different parts
thereof
Note: Nothing in the provision w/c grants the commissioners
the authority to adjudicate on questions of title or ownership
of property
SECTION 5. WHEN DIVISION WOULD BE
PREJUDICIAL
- The court may order it assigned to one of the parties
willing to take
- Provided: He pays to the other parties such amounts as
the commissioners deem equitable
XPN: One of the interested parties asks that the property
be sold instead of being assigned
- The Court shall order the commissioners to sell the
real estate at public sale
SECTION 6. REPORT OF COMMISSIONERS
- Commissioners shall make full and accurate report to the
court of all their proceedings as to the partition
- Upon filing of such report: Copies shall be served by the
clerk of court upon all interested parties
- with a notice that they are allowed 10 days
– within which to file objections to the findings of the
court
Note: No proceeding had before or conducted by the
commissioners shall pass the title to the property or bind the
parties until the court shall have accepted the report of the
commissioners and rendered judgment thereon.
SECTION 7. ACTION OF THE COURT UPON
COMMISSIONER’S REPORT
The Court may, upon hearing, take any of the following actions
on the report of the commissioners:
a. Accept the report and render judgment
b. Recommit to the Commissioners for further report of
facts
c. Set aside the report and appoint new commissioners
d. Accept the report (in part) and reject (in part)
e. Make order and render judgment to effectuate a fair
and just partition
SECTION 8. ACCOUNTING FOR RENT AND PROFITS - The expenses of such recording shall be taxed as part of the
costs of the action
- Party shall recover from another his just share of rents and
profits received by other party; and
- Judgments shall include an allowance for such rents and
SECTION 12. NEITHER PARAMOUNT RIGHTS NOR
profits
AMICABLE PARTITION AFFECTED BY THE RULE
- Nothing in the rule shall be construed so as to prejudice,
SECTION 9. POWER OF GUARDIAN defeat, or destroy the right or title of any person claiming
the real estate involved
- Guardian or Guardian ad litem of:
- by title under any other person; or
a. Minor
- by title paramount to the title if the parties among
b. Person judicially declared to be incompetent
whom the partition may have been made
- May (with approval of court), do and perform on behalf of
- Nor as to restrict or prevent persons holding real estate
his ward
jointly or in common from making an amicable partition
- Any act, matter or thing respecting the partition
- By agreement; and
which such persons could do in partition proceedings
- Suitable instruments of conveyance without recourse
if he were of age or competent
to an action

SECTION 10. COSTS AND EXPENSES TO BE TAXED

SECTION 13. PARTITION OF PERSONAL PROPERTY
AND COLLECTED
- Provisions of this Rule shall apply to partitions of estate
- The court shall equitably tax between or among the parties
composed of personal property, or of both (real and
the costs and expenses which accrue
personal)
- Including the compensation of the commissioners (Ratio:
- In so far as it may be applicable
having regard to the interests of the parties)
- Execution may issue therefor as in other cases

SECTION 11: JUDGMENT AND ITS EFFECTS

1. Actual Partition
- Judgment shall state definitely (by metes and bounds
and adequate description) the particular portion of the
real estate assigned to each party
Effect: to vest in each party the portion of the real estate
assigned to him
2. Assigned to one of the parties
- Judgment shall state the fact of such payment to the
parties and of the assignment to the party making such
payment
Effect: to vest in the party making the payment the whole
of the real estate free from any interest on the part of the
other parties to the action
3. Property is sold and sale confirmed by the Court
- Judgment shall state the name of the purchaser/s; and
- a definite description of the parcels of real estate sold
to each purchaser
Effect: To vest the real estate in the purchaser/s free from
the claims of any of the parties to the action

Note: (Recording of the Judgment)

- Certified copy of the judgment shall be recorded in the
ROD (of the place in which the real estate is situated); and