GROUP 3

REAL ESTATE
MORTAGE

Submitted by:
Agcopra, Ryan
Cu, Anthony
Evangelista, Jel Arnett
Paderanga, Ethaniel
Tolinero, Renato Jr.

Submitted to:
Judge
General Concept

Article 2122 of the New Civil Code “A contract whereby the debtor secures to the
creditor the fulfillment of a principal obligation specially subjecting to such
security immovable property in case the principal obligation is not complied with
at the time stipulated.”

Characteristics of Real Estate Mortgage

 It is a Real Right
 It is an Accessory Contract
 It is Indivisible
 It is Inseparable
 It is real property
 It is a Limitation on Ownership
 It can secure all Kinds of Obligation
 The property cannot be appropriate
 The mortgage is a Lien

Obligations Secured
Blanket or Dragnet Clause
It is specifically phrased to subsume all debts of past or future origins.
Mortgages of this character enable the parties to provide continues dealings, the
nature or extent of which may not be known or anticipated at the time, and they
avoid the expenses and inconvenience of executing a new security on each new
transaction.

Prudential vs Aviar
It can be said that the “offer’ was not accepted by the bank when a
subsequent advance was made because of a new security. A mortgage
containing a “dragnet clause” will not be extended to cover the future advances
unless the document evidencing the subsequent advance refers to the mortgage
as providing security therefor.
In this case, the security specifically executed for subsequent loans must
first be exhausted before the mortgaged property can be resorted to.

Objects of Real Estate Mortgage

 Immovables
 Alienable real rights over immovable
* future property cannot be object of mortgage
Right to Alienate Real Estate Mortgage Credit

Article 2128 of the New Civil Code “The mortgage credit may be alienated or
assigned to a third person, in whole or in part, with the formalities required by
law.”

Right to Alienate Collateral

Article 2130 of the New Civil Code “A stipulation forbidding the owner from
alienating the immovable mortgage shall be valid.”

Garcia vs Villar
The sale was valid. The stipulation appointing Villar, the mortgagee, as the
mortgagers attorney-in-fact, to sell the property in case of default in the payment
of the load did not violate the prohibition on Pactum Commissorium.
The power of attorney provision did not provide that the ownership over
the subject property would automatically pass to Villar upon Galas’s failure to pay
the loan on time. What it granted was the mere appointment of Villar as attorney-
in-fact, with authority to sell or otherwise disposed of the subject property, and to
apply the proceeds to the payment of the loan. The provision is customary in
mortgage contracts, and is in conformity with Article 2087 of the Civil Code,
which read: It is also of the essence of these ‘contracts that when the principal
obligation becomes due, the things in which the pledge consists may be
alienated for the payment to the creditor.

What is Foreclosure?
Foreclosure is the remedy available to the mortgage by which he subjects the
mortgaged property to the satisfaction of the obligation to secure that the
mortgage was given.
It presupposes something more than a mere demand to surrender possession of
the object of the mortgage. It denotes the procedure adopted by the mortgage to
terminate the rights of the mortgagor on the property and includes the sale itself.

Judicial Foreclosure
This is governed by Rule 68 of the Rules of Court:
• (1) Judicial action for the purpose, --- A mortgage may be foreclosed
judicially by bringing an action for that purpose, in the proper court which
has jurisdiction over the area wherein the real property involved or a
portion thereof, is situated.
• (2) Order to mortgagor to pay mortgage debt, --- If the court finds the
complaint to be well-founded, it shall order the mortgagor to pay the
amount due upon the mortgage debt or obligation with interest and other
charges within a period of not less than 90 days nor more than 120 days
from the entry of judgment.
 • (3) Sale to highest bidder at public auction, --- If the mortgagor fails to
pay at the same time directed in the order, the court, upon motion, shall
order the property to be sold to the highest bidder at public auction.
• (4) Confirmation of sale, --- The sale when confirmed by an order of the
court, also upon motion, shall operate to divest the rights of all the parties
to the action and to vest their rights in the purchaser subject to such right
of redemption as may be allowed by law.
• (5) Execution of judgment, --- No judgment rendered in an action for
foreclosure or mortgage can be executed otherwise than in the manner
prescribed by the law on mortgages, because parties to an action are not
authorized to change the procedure which it prescribed.
• (6) Application of proceeds of sale, --- The proceeds of the sale shall be
applied to the payment of the:
• (a) cost of the sale
• (b) the amount due to the mortgage;
• (c) claims of the junior encumbrances or persons holding
subsequent mortgages in the order of their priority; and
• (d) the balance if any, or to the person entitled to it.
• (7) Execution of sheriff's certificate, --- In judicial foreclosures, the
“foreclosure” is not complete until the sheriff's certificate is executed,
acknowledged and recorded.

KOREA EXCHANGE BANK VS FILKOR BUSINESS INTEGRATED, INC

Petitioner's action being one for the foreclosure of REM, it was incumbent
upon the trial court to order that the mortgaged property be foreclosed and sold
at public auction in the event that respondent Filkor fails to pay its outstanding
obligations. This is the pursuant to Section 2 of Rule 68 of the 1997 Rules of
Civil Procedure, which provides:
SEC, 2. Judgment on foreclosure for payment or sale. If upon the trial in
such action 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 other charges as approved by the court, and
costs, and shall render judgment for the sum found due and order that the same
be paid to the court or the judgment obligee within a period of not less than a
ninety (90) days nor more than one hundred twenty (120) days from entry of
judgment, and that in default of such payment the property shall be sold at public
auction to satisfy the judgment.

Equity of Redemption
Equity of redemption or the right of the mortgagor in case of judicial foreclosure
to redeem the mortgaged property after his default in the performance of the
conditions of the mortgage but before the confirmation of the sale of the
mortgaged property.
 Exercise before confirmation of sale- In judicial foreclosure, the
mortgagor may exercise his equity of redemption before but not after the
sale is confirmed by the court.
  Acquired by second mortgagee- A second mortgagee acquires only the
equity of redemption vested in the mortgagor, and his rights are strictly
subordinate to the superior lien of the first mortgagee.
 Taking physical possession not necessary for levy- To levy upon the
mortgagor's equity of redemption, it is not necessary for the sheriff to take
physical possession of the mortgaged property. Levying upon the property
is distinguishable from levying on the mortgagor's interest in it. Being
incorporeal or intangible right, the actual value of the property upon which
it may be exercised.
 Levy by means of writ of execution- The mortgagor's equity of
redemption can be levied upon by means of a writ of execution, with the
result that this interest will pass to the purchaser at the execution sale.
 Remedy of mortgagee to obtain possession- If a mortgagee cannot
obtain possession of the mortgaged property for its sale on foreclosure, he
must bring a civil action either to recover such possession as a preliminary
step to the sale or to obtain judicial foreclosure.

Right of Redemption
 Period within which to exercise right- What is extant in extrajudicial
foreclosure is the right of redemption. In all cases of extrajudicial sale, the
(individual) mortgagor may redeem the property at any time within the
term of one year from the after date of the sale.
 Effect of failure to exercise right- Title to the property sold under a
mortgage foreclosure remains with the mortgagor or his grantee until the
expiration of the redemption period. The right of the purchaser at the
foreclosure sale is merely inchoate until after the period of redemption has
expired without the right being exercised.
 Effect of exercise of right- What actually is effected where redemption is
seasonably exercised by the judgment or mortgage debtor is not the
recovery of the property which ownership is never lost.
 *Where mortgaged property sold to a third party- A sale by the
mortgagor to a third party of the mortgaged property during the period for
redemption transfers only the right to redeem the property and the right to
possess, use and enjoy the same during the said period.
 *Where sale not registered and made without consent of the
mortgage- Where the mortgagor, two days after the execution of the
mortgage to a bank, executed in favor of a third party a Deed of Sale with
Assumption of Mortgage, no consent having been secured from the bank
to the sale which was not registered so that the title remained in the name
of the mortgagor, it was held that the buyer was not validly substituted as
debtor, and hence, had no right to redeem.
 Where extrajudicial foreclosure effected with fraud- An extrajudicial
foreclosure effected with fraud is null and void ab initio. Consequently, the
consolidation of ownership of the subject property to the mortgagee as the
highest bidder and its subsequent resale to a third party are also without
legal force and effect.
Confirmation by Court of Auction Sale in Judicial Foreclosure
 Equity of redemption- The equity of redemption is different from and
should not be confused with the right of redemption. The latter in relation
to a mortgage-- understood in the sense of a prerogative to re-acquire
mortgaged property after registration of the foreclosure sale exist only in
the case of extrajudicial foreclosure of mortgage.
 Procedure- The mortgagor's equity of redemption is simply the right of the
mortgagor to extinguish the mortgage and retain ownership of the property
by paying the secured debt within 120-day period from the entry of
judgment in accordance with Section 2, Rule 68 of the Rules of Court, or
even after the foreclosure sale but prior to its confirmation.
 Effect and nature- In judicial foreclosure of real estate mortgage, the
general rule is that the mortgagor cannot exercise his right of redemption
after the sale is confirmed.
 Control of court over proceedings before confirmation- A foreclosure
sale is not complete until it is confirmed and before such confirmation, the
court retains control of the proceedings by exercising sound discretion in
regard to it either granting or withholding confirmation as the rights and
interests of the parties and the ends of justice may require.
 Requirement of notice and hearing- In order that a foreclosure sale may
be validly confirmed by the court, it is necessary that a hearing be given
the interested parties, at which they may have an opportunity to show
cause why the sale should not be confirmed.

Huerta Alba Resort vs Court of Appeals

FACTS: Syndicated Management Group, Inc. (SMGI), as mortgagee-assignee,

filed a complaint before the RTC for forclosure of 4 parcels of land mortgaged by
Huerta Alba Resort to Intercon Fund Resource (“Intercon”)
DECISION OF LOWER COURTS:
(a) RTC- granted the complaint
(b) CA- dismissed appeal due to late payment of docket fees
(c) Supreme Court- dismissed petition for certiorari.
SMGI then filed with the trial court of origin a motion of execution of decision.
Thus, a writ of execution was issued. Petitioner filed an urgent motion to quash
and set aside the writ of execution. The dispute is principally as is to when the
150 period within which Huerta Alba may exercise its equity of redemption be
counted.
DECISIONS:
(1) RTC- redemption should be governed by the rule on the sale of judicially
foreclosed property under Rule 68 of the Rules of Court Huerta Alba again
sought clarification with CA of the date of the commencement of the 1 year
period for the redemption of the properties.
(2) CA- Foreclosure in this case is judicial and as such mortgagor has only the
equity and not the right or redemption. Even if under section 78 of RA 337
(General Banking Act), a mortgagor of a bank, banking credit institution, whether
the foreclosure was done judicially or extrajudicially, has a period of 1 year from
the auction sale within which to redeem the foreclosed property, it was never
raised whether SMGI is a bank or credit institution.
Upon motion for a writ of possession by SMGI, Huerta Alba then filed in
opposition a motion to compel respondent to accept redemption, alleging for the
first time his right under RA 337, theorizing that the original mortgagee being a
credit institution, its assignment of mortgage credit did not remove the coverage
of RA 337.
DECISIONS:
(1) RTC- denied the SMGI's writ of possession
(2) CA- set aside the RTC'c decision. Hence, present the petition.

ISSUE: Whether or not Huerta Alba has the one year right of redemption of
subject properties under Section 78 of RA 337.

RULING:
YES, however, this was not seasonably filed. The claim that it is entitled to the
beneficial provisions of RA 337- since SMGI's predecessor-in-interest is a credit
institution is in a nature of a compulsory counterclaim which should have been
averred in its answer to the complaint for judicial foreclosure. The failure of
petitioner to seasonably assert its right under RA 337 precludes it from so doing
at this late stage case. Estoppel may be successfully invoked if the party fails ro
raise the question in the early stages in proceeding. The sale of the properties,
as confirmed by the court, operated to divest Huerta Alba of its right of
redemption. There then existed only what is known as equity of redemption
which is simply the right of the petitioner to extinguish the mortgage and retain
ownership of the property by paying the secured debt within 90 day period after
the judgment became final. However, redemption can no longer be effected since
petitioner failed to exercise its equity of redemption within the prescribed period.
“The equity of redemption is, to be sure, different from and should not be
confused with the right of redemption”

Extrajudicial Foreclosure
Extrajudicial foreclosure is governed by Act No. 3135, as amended
This law prescribes the procedure that effectively safeguards the rights of both
debtor and creditor. Hence, its construction must be equally and mutually
beneficial to both parties.

Sec. 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.

Notice and Publication

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. 

Publication of Notice
Publication is required to give the foreclosure sale a reasonably wide publicity
such that those interested might attend the public sale.
Publication is mandatory and failure to comply the statutory requirements as to
the publication of notice constitute a jurisdictional defect which invalidates the
sale or at least render the sale voidable.
Failure to post a notice is not per se a ground for invalidating a foreclosure
provided that the notice is duly published in a newspaper of general circulation.

Conduct of Sale
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 same
conditions as any other bidder, unless the contrary has been expressly provided
in the mortgage or trust deed under which the sale is made.

Surplus proceeds from foreclosure sale - it belongs to the mortgagor or his

assigns.

In case there are junior encumbrances on the mortgaged property or there are
several liens over such property, the surplus proceeds shall be applied to
discharge in the order of their priority.
Redemption of Property Sold
 The debtor has the right to redeem the property sold within the term of one
year from and after the date of the sale.
 In case of juridical persons (corporation or partnerships), they have the
right to redeem 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 higher.

Remedy of the Party Aggrieved by the Foreclosure

 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.

Right of the Mortgagee to Recover Deficiency

 The mortgage is merely a security, not a satisfaction of an obligation- if
there is a balance due to the mortgagee after applying the proceeds of the
sale, the mortgagee is entitled to recover the deficiency.

Right of Redemption
 Right of the mortgagor to redeem the mortgaged property within one year
from the date of registration of the certificate of sale.
 Redemption is a transaction by which the mortgagor reacquires or buys
back the property which may have passed under the mortgage or divests
the property of the lien which the mortgage may have created.

Act 3135 as amended

 Sec. 6 - In all cases in which an extrajudicial sale is made under the
special power herein before 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. 

Requisites of a Valid Right of Redemption

 Must be made within twelve (12) months from the time of the registration
of the sale in the Office of the Registry of Property;
 Payment of the purchase price of the property plus 1% interest per month
together with the taxes thereon, if any, paid by the purchaser with the
same rate of interest computed from the date of registration of the sale;
 Written notice of the redemption must be served on the officer who made
the sale and a duplicate filed with the proper Register of Deeds (Rosales
v. Yboa, G.R. No. L-42282, February 28, 1983); and
 Tender of payment within the prescribed period to make the redemption
for future enforcement (Sec. 26, Act No. 3135; Sec. 8, Rule 39, Rules of
Court).

Who May Redeem?

Rule 39, Section 27. Who may redeem real property so sold. — Real property
sold as provided in the last preceding section, or any part thereof sold separately,
may be redeemed in the manner hereinafter provided, by the following persons:
(a) The judgment obligor; or his successor in interest in the whole or any part of
the property;
(b) A creditor having a lien by virtue of an attachment, judgment or mortgage on
the property sold, or on some part thereof, subsequent to the lien under which
the property was sold. Such redeeming creditor is termed a redemptioner.

Medida et al vs Court of Appeals

Facts:
 Private respondents, Spouses Dolino, alarmed of losing their right of
redemption over the subject parcel of land from Juan Gandiocho,
purchaser of the aforesaid lot at a foreclosure sale of the previous
mortgage in favor of Cebu City Development Bank, went to Teotimo
Abellana, President of the City Savings Bank (formerly known as Cebu
City Savings and Loan Association, Inc.), to obtain a loan of P30, 000.
Prior thereto, their son Teofredo filed a similar loan application and the
subject lot was offered as security. Subsequently they executed a
promissory note in favor of CSB.
 The loan became due and demandable without the spouses Dolino paying
the same, petitioner association caused the extrajudicial foreclosure of the
mortgage. The land was sold at a public auction to CSB being the highest
bidder. A certificate of sale was subsequently issued which was also
registered. No redemption was being effected by Sps. Dolino, their title to
the property was cancelled and a new title was issued in favor of CSB.
 Sps. Dolino then filed a case to annul the sale at public auction and for the
cancellation of certificate of sale issued pursuant thereto, alleging that the
 extrajudicial foreclosure sale was in violation of Act 3135, as amended.
The trial court sustained the validity of the loan and the real estate
mortgage, but annulled the extrajudicial foreclosure on the ground that it
failed to comply with the notice requirement of Act 3135.
 Not satisfied with the ruling of the trial court, Sps. Dolino interposed a
partial appeal to the CA, assailing the validity of the mortgage executed
between them and City Savings Bank, among others. The CA ruled in
favor of private respondents declaring the said mortgage as void.

Issue:
Whether or not a mortgagor, whose property has been extrajudicially
foreclosed and sold at the corresponding foreclosure sale, may validly
execute a mortgage contract over the same property in favor of a third
party during the period of redemption.

Ruling: YES
 It is undisputed that the real estate mortgage in favor of petitioner bank
was executed by respondent spouses during the period of redemption.
During the said period it cannot be said that the mortgagor is no longer the
owner of the foreclosed property since the rule up to now is the right of a
purchaser of a foreclosure sale is merely inchoate until after the period of
redemption has expired without the right being exercised. The title to the
land sold under mortgage foreclosure remains in the mortgagor or his
grantee until the expiration of the redemption period and the conveyance
of the master deed.
 The mortgagor remains as the absolute owner of the property during the
redemption period and has the free disposal of his property, there would
be compliance with Article. 2085 of the Civil Code for the constitution of
another mortgage on the property. To hold otherwise would create an
inequitable situation wherein the mortgagor would be deprived of the
opportunity, which may be his last recourse, to raise funds to timely
redeem his property through another mortgage.

Spouses Yap vs Spouse Dy et al

Facts:
 The subject parcels of land designated as lot 1, 3, 4, 5, 6, 8 as well as lot
846 are originally owned by spouses Tirambulos. They executed a Real
Estate Mortgage over Lots 1,4, 5,6, and 8 in favour of the Rural Bank of
Dumaguete, predecessor of Dumaguete Rural Bank Inc. (DRBI). Later,
Lots 3 and 8446 were also mortaged in favour of the same bank.
 Subsequently, the Tirambulos sold all & mortgaged lots to spouse Dy
without consent and knowledge of DRBI. Tirambulos failed to pay their
loans so DRBI foreclosed lots 1, 4, 5, 6, and 8 and sold at public auction.
DRBI was the highest bidder. 
 Later, DRBI sold lots 1, 3, and 6 to spouses Yap.
Issue:
Whether the doctrine of indivisibility is applicable in the instant case.

Ruling: NO
 General Rule: Art. 2089, Civil Code
 A pledge or mortgage is indivisible, even though the debt may be
divided among the successors in interest of the debtor or of the
creditor.
 Exception:
 The case in which, there being several things given in mortgage or
pledge, each one of these guarantees only a determinate portion of
the credit.

Once the mortgage is extinguished by a complete foreclosure thereof, said

doctrine of indivisibility ceases to apply since, with the full payment of the debt,
there is nothing more to secure.

Right To Deficiency
 Deficiency judgment
It is the judgment rendered by the court holding the defendant
liable for any unpaid balance due to the mortgagee if the proceeds from the
foreclosure sale do not satisfy the entire debt.

 Recovery of deficiency
If there is 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 balance for which, by the record of the case, he may be personally liable
to the plaintiff. Execution may issue immediately if the balance is all due at the
time of the rendition of the judgment. If not due, the plaintiff shall be entitled to
execution at such time as the balance remaining becomes due under the terms
of the original contract, which time shall be stated in the judgment

Rule 86 Sec. 7 of the Rules of Court

 Mortgage debt due from estate. – A creditor holding a claim against the
deceased secured by a mortgage or other collateral security, may:
1.        Abandon the security and prosecute his claim in the manner
provided in this rule, and share in the general distribution of the assets of
the estate; or
2.       He may foreclose his mortgage or realize upon his security, by
action in court, making the executor or administrator a party defendant,
and if there is a judgment for a deficiency, after the sale of the mortgaged
premises, or the property pledged, in the foreclosure or other proceeding
to realize upon the security, he may claim his deficiency judgment in the
manner provided in the preceding section; or
3.       He may rely upon his mortgage or other security alone, and
foreclose the same at any time within the period of the statute of
 limitations, and in that event he shall not be admitted as a creditor, and
shall receive no share in the distribution of the other assets of the estate;
 
But nothing herein contained shall prohibit the executor or
administrator from redeeming the property mortgaged or pledged, by paying the
debt for which it is held as security, under the direction of the court, if the court
shall adjudged it to be for the best interest of the estate that such redemption
shall be made.

Right to Surplus
Suico vs PNB GR No. 170215

Facts: Petitioners obtained a loan from the Philippine National Bank (PNB) secured
by a real estate mortgage on real properties in the name of the former. The
petitioners were unable to pay their obligation prompting the PNB to extra judicially
foreclose the mortgage over the subject properties.
Petitioners claimed that during the foreclosure sale of the subject properties held
on 30 October 1992, PNB, as the lone bidder, offered a bid in the amount
of P8,511,000.00. By virtue of the said bid, a Certificate of Sale of the subject
properties was issued by the Mandaue City Sheriff in favor of PNB. PNB did not pay
to the Sheriff who conducted the auction sale the amount of its bid which
was P8,511,000.00 or give an accounting of how said amount was applied against
petitioners outstanding loan, which, as of 10 March 1992, amounted only
to P1,991,770.38. Since the amount of the bid grossly exceeded the amount of
petitioners outstanding obligation as stated in the extrajudicial foreclosure of
mortgage, it was the legal duty of the winning bidder, PNB, to deliver to
the Mandaue City Sheriff the bid price or what was left thereof after deducting the
amount of petitioners outstanding obligation. PNB failed to deliver the amount of
their bid to the Mandaue City Sheriff or, at the very least, the amount of such bid in
excess of petitioners outstanding obligation.

Issue: Considering the amount of PNB’s bid of P8,511,000.00 as against the amount

of the petitioners’ obligation ofP1,991,770.38 in the Notice of Sale, is the PNB
obliged to deliver the excess? 

Ruling: YES.
•       Rule 68, Section 4 of the Rules of Court provides:
            SEC. 4.  Disposition of proceeds of sale.- The amount realized from the
foreclosure sale of the mortgaged property shall, after deducting the costs of the
sale, be paid to the person foreclosing the mortgage, and when there shall be any
balance or residue, after paying off the mortgage debt due, the same shall be paid to
junior encumbrancers in the order of their priority, to be ascertained by the court,
or if there be no such encumbrancers or there be a balance or residue after payment
to them, then to the mortgagor or his duly authorized agent, or to the person
entitled to it.
• Under the above rule, the disposition of the proceeds of the sale in
foreclosure shall be as follows:
1.       First, pay the costs
2.       Secondly, pay off the mortgage debt
3.       Thirdly, pay the junior encumbrancers, if any in the order of priority
4.       Fourthly, give the balance to the mortgagor, his agent or the person
entitled to it.

Effect: Thus it has been held that if the mortgagee is retaining more of the proceeds
of the sale than he is entitled to, this fact alone will not affect the validity of the
sale but simply give the mortgagor a cause of action to recover such surplus.

Right to Possession

During Redemption Period

Act No. 3135 Section 7 to 9
• SECTION 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.

• SECTION 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.

• SECTION 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.

After Consolidation of Ownership

Rule 39 Sec. 33 of the Rules of Court
• Section 33. Deed and possession to be given at expiration of
redemption period; by whom executed or given. — If no
redemption be made within one (1) year from the date of the
registration of the certificate of sale, the purchaser is entitled
to a conveyance and possession of the property; or, if so
redeemed whenever sixty (60) days have elapsed and no other
redemption has been made, and notice thereof given, and the
time for redemption has expired, the last redemptioner is
entitled to the conveyance and possession; but in all cases the
judgment obligor shall have the entire period of one (1) year
from the date of the registration of the sale to redeem the
property. The deed shall be executed by the officer making the
sale or by his successor in office, and in the latter case shall
have the same validity as though the officer making the sale
had continued in office and executed it.
• Upon the expiration of the right of redemption, the purchaser
or redemptioner shall be substituted to and acquire all the
rights, title, interest and claim of the judgment obligor to the
property as of the time of the levy. The possession of the
property shall be given to the purchaser or last redemptioner
by the same officer unless a third party adversely to the
judgment obligor. 
Chu et al vs Lacqui and PBCOM GR No. 169190

Facts: Petitioners point out that the issuance of a writ of possession will deprive
them not only of the use and possession of their property, but also of its ownership.
Private respondent argues that the issuance of a writ of possession may not be
stayed by a pending case questioning the validity of the extrajudicial foreclosure
sale.

Issue: Whether the writ of possession was properly issued despite the pendency of
a case questioning the validity of the extrajudicial foreclosure sale and despite the
fact that petitioners were declared in default in the proceeding for the issuance of a
writ of possession. 

Ruling: YES.
In the present case, the certificate of sale of the foreclosed property was
annotated on TCT No. 22990 on 7 June 2002. The redemption period thus lapsed on
7 June 2003, one year from the registration of the sale. When private respondent
applied for the issuance of a writ of possession on 18 August 2004, the redemption
period had long lapsed. Since the foreclosed property was not redeemed within one
year from the registration of the extrajudicial foreclosure sale, private respondent
had acquired an absolute right, as purchaser, to the writ of possession. It had
become the ministerial duty of the lower court to issue the writ of possession upon
mere motion pursuant to Section 7 of Act No. 3135, as amended.
 
Moreover, once ownership has been consolidated, the issuance of the writ of
possession becomes a ministerial duty of the court, upon proper application and
proof of title. In the present case, when private respondent applied for the issuance
of a writ of possession, it presented a new transfer certificate of title issued in its
name dated 8 July 2003. The right of private respondent to the possession of the
property was thus founded on its right of ownership. As the purchaser of the
property at the foreclosure sale, in whose name title over the property was already
issued, the right of private respondent over the property had become absolute,
vesting in it the corollary right of possession.

When Held by a Third Party

Rule 39 Sec. 16 of the Rules of Court
• Section 16. Proceedings where property claimed by third person.
— If the property levied on is claimed by any person other than the
judgment obligor or his agent, and such person makes an affidavit of
his title thereto or right to the possession thereof, stating the grounds
of such right or title, and serves the same upon the officer making the
levy and copy thereof, stating the grounds of such right or tittle, and a
serves the same upon the officer making the levy and a copy thereof
upon the judgment obligee, the officer shall not be bound to keep the
property, unless such judgment obligee, on demand of the officer, files
a bond approved by the court to indemnity the third-party claimant in
 a sum not less than the value of the property levied on. In case of
disagreement as to such value, the same shall be determined by the
court issuing the writ of execution. No claim for damages for the
taking or keeping of the property may be enforced against the bond
unless the action therefor is filed within one hundred twenty (120)
days from the date of the filing of the bond.

• The officer shall not be liable for damages for the taking or keeping of
the property, to any third-party claimant if such bond is filed. Nothing
herein contained shall prevent such claimant or any third person from
vindicating his claim to the property in a separate action, or prevent
the judgment obligee from claiming damages in the same or a
separate action against a third-party claimant who filed a frivolous or
plainly spurious claim.

• When the writ of execution is issued in favor of the Republic of the

Philippines, or any officer duly representing it, the filing of such bond
shall not be required, and in case the sheriff or levying officer is sued
for damages as a result of the levy, he shall be represented by the
Solicitor General and if held liable therefor, the actual damages
adjudged by the court shall be paid by the National Treasurer out of
such funds as may be appropriated for the purpose. 

BPI vs Golden Power Diesel Sales Center GR No. 176019

Facts: BPI Family argues that respondents cannot be considered “a third party who
is claiming a right adverse to that of the debtor or mortgagor” because respondents,
as vendee, merely stepped into the shoes of CEDEC, the vendor and judgment
obligor. According to BPI Family, respondents are mere extensions or successors-in-
interest of CEDEC. BPI Family also argues that the pendency of an action questioning
the validity of a mortgage or auction sale cannot be a ground to oppose the
implementation of a writ of possession.
On the other hand, respondents insist that they are third persons who claim rights
over the properties adverse to CEDEC. Respondents argue that the obligation of the
court to issue an ex parte writ of possession in favor of the purchaser in an
extrajudicial foreclosure sale ceases to be ministerial once it appears that there is a
third party in possession of the property who is claiming a right adverse to that of
the judgment obligor.

Issue: WON respondents are third party adversely to the judgment obligor so that

the issuance of a writ of execution may be stayed and a hearing shall be conducted
to determine their ownership.

Ruling: NO.
In this case, respondentsʼ possession of the properties was premised on
the sale to them by CEDEC for the amount of P15,000,000. Therefore,
respondents hold title to and possess the properties as CEDECʼs transferees and any
right they have over the properties is derived from CEDEC. As transferees of CEDEC,
respondents merely stepped into CEDEC’s shoes and are necessarily bound to
acknowledge and respect the mortgage CEDEC had earlier executed in favor of BPI
Family. Respondents are the successors-in-interest of CEDEC and
thus, respondentsʼ occupancy over the properties cannot be considered adverse to
CEDEC.

Nagtalon vs UCBP GR No. 172504

Facts: Spouses Nagtalon executed deeds of real estate mortgage over several
properties in Kalibo, Aklan. After the Spouses Nagtalon failed to abide and comply
with the terms and conditions Officio Provincial Sheriff a verified petition 5 for
extrajudicial foreclosure of the mortgage.
The mortgaged properties were consequently foreclosed and sold at public auction
for the sum of ₱3,215,880.30 to the respondent which emerged as the sole and
highest bidder. With the lapse of the one-year redemption period and the
petitioner’s failure to exercise her right to redeem the foreclosed properties, the
respondent consolidated the ownership over the properties, resulting in the
cancellation of the titles in the name of the petitioner and the issuance of TCTs in the
name of the respondent. The respondent filed an ex parte petition for the issuance
of a writ of possession with the RTC, docketed as CAD Case No. 2895. In the petition,
the respondent alleged that it had been issued the corresponding TCTs to the
properties it purchased, and has the right to acquire the possession of the subject
properties as the current registered owner of these properties.
The petitioner opposed the petition, citing mainly the pendency of Civil Case No.
6602(for declaration of nullity of foreclosure, fixing of true indebtedness,
redemption, damages and injunction with temporary restraining order) still
pending with the RTC. In this civil case, the petitioner challenged the alleged nullity
of the provisions in the credit agreement, particularly the rate of interest in the
promissory notes. She also sought the nullification of the foreclosure and the sale
that followed. To the petitioner, the issuance of a writ of possession was no longer a
ministerial duty on the part of the court in view of the pendency of the case.

Issue: Whether the pendency of a civil case challenging the validity of the credit
agreement, the promissory notes and the mortgage can bar the issuance of a writ of
possession after the foreclosure and sale of the mortgaged properties and the lapse
of the one-year redemption period.

Ruling: NO.
The issuance of a writ of possession is a ministerial function of the court.
The issue this Court is mainly called upon to resolve is far from novel; jurisprudence
is replete with cases holding that the issuance of a writ of possession to a purchaser
in a public auction is a ministerial function of the court, which cannot be enjoined or
restrained, even by the filing of a civil case for the declaration of nullity of the
foreclosure and consequent auction sale.
We have long recognized the rule that once title to the property has been
consolidated in the buyer’s name upon failure of the mortgagor to redeem the
property within the one-year redemption period, the writ of possession becomes a
matter of right belonging to the buyer. Consequently, the buyer can demand
possession of the property at anytime. Its right to possession has then ripened into
the right of a confirmed absolute owner and the issuance of the writ becomes a
ministerial function that does not admit of the exercise of the court’s discretion. The
court, acting on an application for its issuance, should issue the writ as a matter of
course and without any delay.

Exception to the general rule that issuance of a writ of possession is a

ministerial function:
A review of the Court’s ruling in the Tolosa case would reveal a discussion of
the few jurisprudential exceptions worth reiterating.

(1)Gross inadequacy of purchase price

In Cometa v. Intermediate Appellate Court which involved an execution sale,
the court took exception to the general rule in view of the unusually lower price
(₱57,396.85 in contrast to its true value of ₱500,000.00) for which the subject
property was sold at public auction. The Court perceived that injustice could result
in issuing a writ of possession under the given factual scenario and upheld the
deferment of the issuance of the writ.

(2)Third party claiming right adverse to debtor/mortgagor

In Barican v. Intermediate Appellate Court, consistent with Section 35, Rule
39 of the Rules of Court, the Court held that the obligation of a court to issue a writ
of possession in favor of the purchaser in a foreclosure of mortgage case ceases to
be ministerial when a third-party in possession of the property claims a right
adverse to that of the debtor-mortgagor. In this case, there was a pending civil suit
involving the rights of third parties who claimed ownership over the disputed
property. The Court found the circumstances to be peculiar, necessitating an
exception to the general rule. It thus ruled that where such third party claim and
possession exist, the trial court should conduct a hearing to determine the nature of
the adverse possession.

(3) Failure to pay the surplus proceeds of the sale to mortgagor

We also deemed it proper to defer the issuance of a writ in Sulit v. Court of
Appeals in light of the given facts, particularly the mortgagee’s failure to return to
the mortgagor the surplus from the proceeds of the sale (equivalent to an excess
of approximately 40% of the total mortgage debt). We ruled that equitable
considerations demanded the deferment of the issuance of the writ as it would be
highly unfair and iniquitous for the mortgagor, who as a redemptioner might choose
to redeem the foreclosed property, to pay the equivalent amount of the bid clearly in
excess of the total mortgage debt.