ACT NO.
3135 - AN ACT TO REGULATE THE SALE OF PROPERTY UNDER same conditions as any other bidder, unless the contrary has been expressly
SPECIAL POWERS INSERTED IN OR ANNEXED TO REAL-ESTATE MORTGAGES
Section 1. When a sale is made under a special power inserted in or
attached to any real-estate mortgage hereafter made as security for the
payment of money or the fulfillment of any other obligation, the provisions
of the following election shall govern as to the manner in which the sale and
redemption shall be effected, whether or not provision for the same is
made in the power.
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 subject to 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.
Sec. 3. 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 at least
three consecutive weeks in a newspaper of general circulation in the
municipality or city.
Sec. 4. The sale shall be made at public auction, between the hours or 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 of the
municipality in which such sale has to be made, or a notary public of said
municipality, who shall be entitled to collect a fee of five pesos each day of
actual work performed, in addition to his expenses.
Sec. 5. At any sale, the creditor, trustee, or other persons authorized to act
for the creditor, may participate in the bidding and purchase under the
provided in the mortgage or trust deed under which the sale is made.
Sec. 6. In all cases in which an extrajudicial sale is made under the special
power hereinbefore referred to, 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 one year from and after the date of the sale; and such redemption
shall be governed by the provisions of sections four hundred and sixty-four
to four hundred and sixty-six, inclusive, of the Code of Civil Procedure, in so
far as these are not inconsistent with the provisions of this Act.
Sec. 7. In any sale made under the provisions of this Act, the purchaser may
petition the Court of First Instance of the province or place where the
property or any part thereof is situated, to give him possession thereof
during the redemption period, furnishing bond in an amount equivalent to
the use of the property for a period of twelve 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 this Act. Such
petition shall be made under oath and filed in form of an ex parte motion in
the registration or cadastral proceedings if the property is registered, or in
special proceedings in the case of property registered under the Mortgage
Law or under section one hundred and ninety-four of the Administrative
Code, or of any other real property encumbered with a mortgage duly
registered in the office of any register of deeds in accordance with any
existing law, and in each case the clerk of the court shall, upon the filing of
such petition, collect the fees specified in paragraph eleven of section one
hundred and fourteen of Act Numbered Four hundred and ninety-six, as
amended by Act Numbered Twenty-eight hundred and sixty-six, and the
court shall, upon approval of the bond, order that a writ of possession issue,
addressed to the sheriff of the province in which the property is situated,
who shall execute said order immediately.
Sec. 8. The debtor may, in the proceedings in which possession was
requested, but not later than thirty days after the purchaser was given
possession, petition that the sale be set aside and the writ of possession
cancelled, specifying the damages suffered by him, because the mortgage
was not violated or the sale was not made in accordance with the provisions
hereof, and the court shall take cognizance of this petition in accordance
with the summary procedure provided for in section one hundred and
twelve of Act Numbered Four hundred and ninety-six; and if it finds the
complaint of the debtor justified, it shall dispose in his favor of all or part of
the bond furnished by the person who obtained possession. Either of the
parties may appeal from the order of the judge in accordance with section
fourteen of Act Numbered Four hundred and ninety-six; but the order of
possession shall continue in effect during the pendency of the appeal.
Sec. 9. When the property is redeemed after the purchaser has been given
possession, the redeemer shall be 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 purchaser occupied the
property 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 one per centum per month provided for in section four hundred and
sixty-five of the Code of Civil Procedure.
Sec. 10. This Act shall take effect on its approval.
Approved: March 6, 1924
MORTGAGE, FORECLOSURE AND REDEMPTION
Larry P. Ignacio
 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; Gov’t 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 EXTRA-JUDICIAL FORECLOSURE OF REAL ESTATE MORTGAGE UNDER ACT
Dev’t. Bank v. Central Surety & Insurance Company, Inc., 579 SCRA 359, 13 3135, AS AMENDED & REDEMPTION
February 2009). 
 Essential requirements under Act 3135 
        Mora solvendi or debtor’s default is defined as a delay in the
        Under Act 3135, as amended and settled jurisprudence, the
fulfillment of an obligation, by reason of a cause imputable to the
following essential requirements must be met:
debtor. There are three requisites necessary for a finding of
default.  First, the obligation is demandable and liquidated; second,  1.                  There must be a special power of attorney inserted in or
the debtor delays performance; third, the creditor judicially or attached to the real estate mortgage authorizing the sale pursuant to
extrajudicially requires the debtor’s performance ( Selegna the provisions of Act, 3135, as amended (Section 1; Paguyo v.
Management & Dev’t. Corp. v. UCPB, GR No. 165662, 03 May 2006 ). Gatbunton, 523 SCRA 156 [2007]). 2.                  The sale must be made
within the province where the property or any part thereof is located,
 Prohibition against Pactum Commissorium. 
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
A stipulation in a deed of mortgage which states that upon failure of
situated.  If the property is worth more than P400.00, the notice shall
the mortgagor to pay the debt within the agreed period, the land
also be published once a week for three consecutive weeks in a
covered by the mortgage shall become property of the mortgagee or
newspaper of general circulation in the city or municipality (Section
the transaction shall become a sale and the consideration shall be
3). 4.                  The sale shall be made at public auction between the
considered as payment of the price of the land is pactum
hours of nine in the morning and four in the afternoon, and shall be
commissorium and is null and void (Reyes v. Nebreja, 98 Phil 639 [1956]).
under the direction of the sheriff of the province, the justice or
Such stipulation is void since it enables the mortgagee to acquire
auxiliary justice of the peace (now municipal judge) of the
ownership of the mortgaged property without need of foreclosure
municipality in which such sale shall be made, or a notary public of
(Olea v. CA, 247 SCRA 274 [1995]); it is a nullity being contrary to the
said municipality (Section 4).   Procedure of extrajudicial foreclosure
provisions of Article 2088 of the Civil Code (Lumayag v. Heirs of Jacinto
under Act 3135 
Nemeno, 526 SCRA 315 [2007]).
In Administrative Matter No. 99-10-05-0 (as further amended on 07
   Two modes of foreclosure of real estate mortgage. 
August 2001), the Supreme Court prescribed the following
Foreclosure of real estate mortgage is either done extra-judicially or procedures in the extra-judicial foreclosure of mortgage:
judicially.  The provisions of Rule 68 of the 1997 Rules of Civil
 1.   All applications for extra-judicial foreclosure of mortgage whether
Procedure govern judicial foreclosure. The extra-judicial foreclosure
under the direction of the sheriff or a notary public, pursuant to Act
of real estate mortgage, on the other hand, is carried out in the
3135, as amended, shall be filed with the Executive Judge, through
procedure governed by the provisions of Act 3135, as amended,
the Clerk of Court who is also the Ex-Officio Sheriff. 2.   Upon receipt of
otherwise known as “An Act to Regulate the Sale of Property Under
an application for extra-judicial foreclosure of mortgage, it shall be
Special Powers Inserted in or Annexed to Real Estate Mortgages.”
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
publication’s principal office is located shall be considered the place where it
is edited and published x x x.”  publishes judicial notices should be a daily newspaper (Fortune
        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.”  and the purpose of the law had thereby subserved.     The object of a notice
        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
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,
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 Dev’t., 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 mortgagor’s
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 Dev’t. 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 sheriff’s 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  of law; the purchaser at public auction is bound to accept
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
redemption. Repurchase however of a foreclosed property, after   
redemption period, imposes no such obligation. After expiry, the The trial court shall render a judgment based on the facts proven and shall
purchaser may or may not resell the property but no law will compel ascertain the amount due based on the mortgage debt or obligation,
him to do so. And, he is not bound by the bid price; it is entirely including interests, charges and costs. The court shall then direct the
within his discretion to set a higher price, for after all, the property defendant to pay said amount within a period of not less than ninety (90)
already belongs to him as owner (Prudencio v. CA, 431 SCRA 566).  days nor more than one-hundred twenty (120) days (Sec. 2, Rule 68).

JUDICIAL FORECLOSURE OF REAL ESTATE MORTGAGE UNDER RULE 68,  

RULES OF COURT
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
        Judicial foreclosure of real estate mortgage is governed by the
Court (Sec. 3, Rule 68).
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  3.1. Before the sale of the real property/ies, notice must be given:

Preparation and filing of complaint which shall set forth the following  
allegations (Sec. 1, Rule 68):
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,
a)   Date and due execution of the mortgage and its assignments, if any;
Rule 39).
 
b) Written notice to the judgment obligor at least three (3) days
        b) Names and residences of the mortgagor and mortgagee;
 before the sale (Sec. 15d, Rule 39).
 
 
        c) Description of the mortgaged property/ies;
3.2. The highest bidder shall be issued a certificate of sale (Sec. 25, Rule 39).
 
 
d) Documentary evidence/s of the obligation/s secured by the mortgage and
Upon motion and after notice and hearing, the trial court will issue an order
the unpaid obligation;
of confirmation of the sale (Rural Bank of Oroquieta v. CA, 101 SCRA 5
  [1980]).

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

mortgaged property/ies.
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.
 
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  Banking Act (R.A. 337). These laws confer on the mortgagor, his successors
        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.  the right of the defendant mortgagor to extinguish the mortgage and retain
        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.  provides that – ‘xx If upon the trial xx the court shall find the facts set forth
        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 extrajudicial foreclosure 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 sheriff’s
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
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
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
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
mortgagor’s equity (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) 
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.
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.
 
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.
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 –
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.
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. 
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.
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.
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) 

Properties covered: REM is constituted on immovables/real properties. Only

movables/personal properties may be the object of a chattel mortgage

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.

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.