Professional Documents
Culture Documents
Prepared by:AGN
I. CASE PROBLEM
"A is preparing to make a loan to a foreign national resident of the Philippines and his wife (a
Philippine citizen) and wishes to secure those loans with a lien/mortgage/deed of trust against a
number of properties that the wife owns in the Philippines. Consider yourself the local attorney
who will advise the client as to the best way to handle the transaction and then to prepare and
record the necessary documents.
A would make a new loan of US$112,500 in addition to an existing US$75,000 loan that has already
been made and would take a mortgage on the following 3 properties for the full amount of the 2
loans:
Birch Tower Unit 410 Victoria Station I Unit PHB15 Block 1, Lot 72, Legian 2
1622 Jorge Bocobo Street Kamuning Station Baranguay Carsadang Bago 1
Malate Manila, the Philippines 793 Epifanio de Los Santos Imus Cavite City, the
1004 Avenue Philippines 4103
Diliman, Quezon City Metro
Manila, the Philippines 1103
The term of the loan would be about 2 years and interest would be at 5% per annum. We would
need you to confirm that there is adequate equity in the property to fully secure the loans. I also
will need a complete explanation of the foreclosure process and any defenses that the borrower
could claim to delay or avoid a successful foreclosure should that become necessary. Understand
that A's status as a foreign national (US citizen) might complicate things.
II. ISSUES:
I. As to the Preparation of Loan Transaction and Records needed for the necessary
transactions
Note:
The Client, Creditor while The Foreigner and his Wife should Co-
Debtors (Solidarily Liable)
Structure the loan to allow an extrajudicial foreclosure.
o In this type of foreclosure, file a foreclosure statement with
the Register of Deeds and with the office of the municipal
sheriff. The sheriff shall post the foreclosure sale notice in a
public place and ask for sealed bids. On a set date, he will open
the bids and declare the winner. For the Client to obtain the
property a bid high enough to close out the mortgage. If this
bid wins, the client gets the property. Thereafter if client
wishes sell it to someone else he may do so.
o The only issue is the Right of Redemption, prohibition from
selling the property for one year. Must give the previous
owner 12 months to redeem the property; however, client
does take possession during this year.
1. Condo
P2,200,000-2,800,000*
Birch Tower Unit 410 Studio to 1 Bedroom Unit Apartment
1622 Jorge Bocobo Street
Malate Manila, the Philippines 1004
2. Condo
Townhouse
Analysis:
The above-quoted prices where arrived at without taking into account other external
factors which may affect value of the property (i.e. Depreciation, Demand for Property
and etc.)
Given the information available and applying the conservative approach for valuation of
Property the estimated total of P 5,989,088 would only provide the Client an equity of
P127,445.
Based from the available facts provided, A request for some additional Securities would
be appropriate.
1
Based from private listings of exact same properties or similar properties on the market
III. Discussion on the Foreclosure Process (Extra-Judicial Foreclosure)
I. Extrajudicial Procedure
A.M. No. 99-10-05-0 provides for the procedure for Extra-Judicial Foreclosure of Mortgage.
In summary the following are the salient provisions prescribed in extra-judicial foreclosure
of mortgage:.
"5. No auction sale shall be held unless there are at least two (2)
participating bidders, otherwise the sale shall be postponed to
another date. If on the new date set for the sale there shall not be
at least two bidders, the sale shall then proceed. The names of the
bidders shall be reported by the sheriff or the notary public who
conducted the sale to the Clerk of Court before the issuance of the
certificate of sale.
II. Noteworthy Jurisprudence
The extrajudicial foreclosure sale of a real estate mortgage is governed by Act No. 3135, as
amended by Act No. 4118, otherwise known as "An Act to Regulate the Sale of Property Under
Special Powers Inserted In or Annexed to Real-Estate Mortgages." Sections 1 and 2 thereof clearly
state:
Sec. 2. Said sale cannot be made legally outside of the province in which the
property sold is situated; and in case the place within said province in which the sale is
to be made is the subject of stipulation, such sale shall be made in said place or in the
municipal building of the municipality in which the property or part thereof is
situated.
These pronouncements were confirmed on August 7, 2001 through A.M. No. 99-10-05-0,
entitled Procedure in Extra-Judicial Foreclosure of Mortgage, the significant portions of which
provide:
Verily then, with respect to the venue of extrajudicial foreclosure sales, Act No. 3135, as
amended, applies, it being a special law dealing particularly with extrajudicial foreclosure sales of
real estate mortgages, and not the general provisions of the Rules of Court on Venue of Actions.
IV. Possible legal complications that may arise base on the facts of the case.
I. WIFE MAY INTERPOSE SHE IS NOT THE ABSOLUTE OWNER OF THE PROPERTY
WHICH MAY EFFECTIVELY INVALIDATING THE MORTGAGE CONTRACT
o Documentary evidence may prove otherwise
II. ISSUE ON THE EFFECT OF THE CITIZENSHIP OF ONE OF THE DEBTORS TO THE