FORECLOSURE PDCP v.

BPI
Registration of the REM contract is not essential to its validity. Article
Alona G. Roldan v. Spouses Clarence I. Barrios, et al. 2085 of the Civil Code provides:
Foreclosure is but a necessary consequence of non-payment of the Art. 2085. The following requisites are essential to the contracts of
mortgage indebtedness. In a real estate mortgage when the principal pledge and mortgage:
obligation is not paid when due, the mortgagee has the right to (1) That they be constituted to secure the fulfillment of a principal
foreclose the mortgage and to have the property seized and sold with obligation;
the view of applying the proceeds to the payment of the obligation. (2) That the pledgor or mortgagor be the absolute owner of the thing
Therefore, the foreclosure suit is a real action so far as it is against pledged or mortgaged;
property, and seeks the judicial recognition of a property debt, and (3) That the persons constituting the pledge or mortgage have the
an order for the sale of the res. free disposal of their property, and in the absence thereof, that they
As foreclosure of mortgage is a real action, it is the assessed value of be legally authorized for the purpose.
the property which determines the court's jurisdiction. Third persons who are not parties to the principal obligation may
secure the latter by pledging or mortgaging their own property. In
Floro Mercene v. Government Service Insurance System relation thereto, Article 2125 of the Civil Code reads:
Prescription runs in mortgage contract from the time the cause of Article 2125. In addition to the requisites stated in Article 2085, it is
action arose and not from the time of its execution. indispensable, in order that a mortgage may be validly constituted,
The right to foreclose prescribes after 10 years from the time a that the document in which it appears be recorded in the Registry of
demand for payment is made, or when then loan becomes due and Property. If the instrument is not recorded, the mortgage is
demandable in cases where demand is unnecessary. nevertheless binding between the parties.

Demand is unnecessary: As a third-party mortgagor, the limitation on its liability pertains not
(1) Where the law so provides; only to the properties it mortgaged but also to the obligations
(2) when the period is the controlling motive or the principal specifically secured thereby. It is well settled that while a REM may
inducement for the creation of the obligation; exceptionally secure future loans or advancements, these future
(3) and where demand would be useless. debts must be specifically described in the mortgage contract. An
obligation is not secured by a mortgage unless it comes fairly within
It is not enough that the law or obligation fixes a date for the terms of the mortgage contract.
performance; it must further state expressly that after the period
lapses, default will commence. A dragnet clause is a stipulation in a REM contract that extends the
coverage of a mortgage to advances or loans other than those already
Gotesco Properties, Inc. v. Solidbank Corporation obtained or specified in the contract. Where there are several
In order that the debtor may be in default it is necessary that the advances, however, a mortgage containing a dragnet clause will not
following requisites be present: be extended to cover future advances, unless the document
(1) that the obligation be demandable and already liquidated; evidencing the subsequent advance refers to the mortgage as
(2) that the debtor delays performance; and providing security therefor or unless there are clear and supportive
(3) that the creditor requires the performance judicially and evidence to the contrary.
extrajudicially.
The parties having conformed to the "blanket mortgage clause" or
Default generally begins from the moment the creditor demands the "dragnet clause," it is reasonable to conclude that they also agreed to
performance of the obligation. an implied understanding that subsequent loans need not be secured
by other securities, as the subsequent loans will be secured by the
White Marketing Development Corporation v. Grandwood Furniture first mortgage. In other words, the sufficiency of the first security is a
Through the assignment of credit, the new creditor is entitled to the corollary component of the "dragnet clause."
rights and remedies available to the previous creditor and includes But of course, there is no prohibition, as in the mortgage contract in
accessory rights such as mortgage or pledge. issue, against contractually requiring other securities for the
subsequent loans.
While it is a given that redemption by property owners is looked upon Thus, when the mortgagor takes another loan for which another
with favor, it is equally true that the right to redeem properties security was given it could not be inferred that such loan was made in
remains to be a statutory privilege. reliance solely on the original security with the "dragnet clause," but
The liberal application of redemption laws in favor of the property rather, on the new security given. This is the "reliance on the security
owner is not an austere solution to a controversy, where there are test."
remarkable factors that lead to a more sound and reasonable
interpretation of the law. While as a rule, personal notice to the mortgagor is not required, such
notice may be subject of a contractual stipulation, the breach of which
is sufficient to nullify the foreclosure sale.
deynlaw; SCA; Atty. Custodio
Marilag v Martinez It is meant to save time, loan closing charges, additional legal services,
In loan contracts secured by a real estate mortgage, the rule is that recording fees, and other costs. A blanket mortgage clause is designed
the creditor-mortgagee has a single cause of action against the to lower the cost of loans to borrowers, at the same time making the
debtor mortgagor, i.e., to recover the debt, through the filing of a business of lending more profitable to banks.
personal action for collection of sum of money or the institution of a Settled is the rule that mortgages securing future loans are valid and
real action to foreclose on the mortgage security. legal contracts.
The two remedies are alternative, not cumulative or successive, and
each remedy is complete by itself. Thus, if the creditor-mortgagee It is the act of registration which creates a constructive notice to the
opts to foreclose the real estate mortgage, he waives the action for whole world and binds third persons. Registration is the ministerial
the collection of the unpaid debt, except only for the recovery of act by which a deed, contract, or instrument is inscribed in the records
whatever deficiency may remain in the outstanding obligation of the of the office of the Register of Deeds and annotated on the back of
debtor-mortgagor after deducting the bid price in the public auction the TCT covering the land subject of the deed, contract, or instrument.
sale of the mortgaged properties. A person dealing with registered land is not required to go beyond the
Accordingly, a deficiency judgment shall only issue after it is TCT to determine the liabilities attaching to the property. He is only
established that the mortgaged property was sold at public auction charged with notice of such burdens on the property as are duly
for an amount less than the outstanding obligation. annotated on the TCT.
To require him to do more is to defeat one of the primary objects of
Parents-Teachers Association v. Metropolitan Bank and Trust Co. the Torrens system.
Even if the application for the writ of possession was denominated as
a "petition", it was in substance merely a motion. Indeed, any Since the mortgage contract containing the blanket mortgage clause
insignificant lapse in the certification on non-forum shopping filed by was already annotated on the TCT of the mortgaged property,
the MBTC did not render the writ irregular. subsequent loans need not be separately annotated on the said TCT
After all, no verification and certification on non-forum shopping in order to bind third parties.
need be attached to the motion.
For its failure to include the second loan in its application for
Espinoza, et al. v. United Overseas Bank Philippines extrajudicial foreclosure as well as in its bid at the public auction sale,
By its nature, a petition for nullification or annulment of foreclosure respondent bank is deemed to have waived its lien on the mortgaged
proceedings contests the presumed right of ownership of the buyer property with respect to the second loan.
in a foreclosure sale and puts in issue such presumed right of Of course, respondent bank may still collect the unpaid second loan,
ownership. and the interest thereon, in an ordinary collection suit before the right
Thus, a party scheming to defeat the right to a writ of possession of a to collect prescribes.
buyer in a foreclosure sale who had already consolidated his
ownership over the property subject of the foreclosure sale can After the foreclosure of the mortgaged property, the mortgage is
simply resort to the subterfuge of filing a petition for nullification of extinguished and the purchaser at auction sale acquires the property
foreclosure proceedings with motion for consolidation of the petition free from such mortgage.
for issuance of a writ of possession. Any deficiency amount after foreclosure cannot constitute a
This we cannot allow as it will render nugatory the presumed right of continuing lien on the foreclosed property but must be collected by
ownership, as well as the right of possession, of a buyer in a the mortgagee-creditor in an ordinary action for collection. In this
foreclosure sale, rights which are supposed to be implemented in case, the second loan from the same mortgage deed is in the nature
an ex parte petition for issuance of a writ of possession. of a deficiency amount after foreclosure.

National Housing Authority v. Basa Edmundo, et al. v. Dizon

Mere entry in the primary book was considered sufficient registration xxx
since DBP cannot be blamed that annotation could not be made
contemporaneously with the entry because the originals of the St. James College of Parañaque, et al. v. Equitable PCI Bank
subject certificates of title were missing and could not be found, since The main purpose of the subsidiary contract of REM is to secure the
it had nothing to do with their safekeeping. principal obligation. Withal, when the mortgagors-debtors has
If anyone was responsible for failure of annotation, it was the Register defaulted in the amortization payments of their loans, the superior
of Deeds who was chargeable with the keeping and custody of those legal right of the secured unpaid creditors to exercise foreclosure
documents. proceedings on the mortgage property to answer for the principal
obligation arises.
Teklo v. Rural Bank of Pamplona, Inc.
A blanket mortgage clause, which makes available future loans The fact that the outstanding obligation is only P24 million while the
without need of executing another set of security documents, has value of the mortgaged property could be more than Php 1B is not
long been recognized in our jurisprudence. sufficient to enjoin the foreclosure sale of the said property.

deynlaw; SCA; Atty. Custodio

The value of the mortgaged property has no bearing on the propriety within ten years by an action refers to civil actions and is not
of the auction sale provided that the same is regularly and honestly applicable to special proceedings, such as land registration cases.
conducted. This is because in a foreclosure sale where there is a right This is so because a party in a civil action must immediately enforce a
to redeem, inadequacy of the bid price is of no moment for the reason judgment that is secured as against the adverse party, and his failure
that the judgment debtor has always the chance to redeem and to act to enforce the same within a reasonable time as provided in the
reacquire the property. Rules makes the decision unenforceable against the losing party.
In fact, the property may be sold for less than its fair market value In special proceedings the purpose is to establish a status, condition
precisely because the lesser the price, the easier for the owner to or fact; in land registration proceedings, the ownership by a person of
effect a redemption. a parcel of land is sought to be established. After the ownership has
been proved and confirmed by judicial declaration, no further
RCBC v. Buenaventura proceeding to enforce said ownership is necessary, except when the
xxx adverse or losing party had been in possession of the land and the
winning party desires to oust him therefrom.
Villanueva v. Cherda Lending Investors Corporation
The third party’s possession of the property is legally presumed to be BPI Family Savings Bank, Inc. v. Golden Power Diesel Sales Center, et
based on a just title, a presumption which may be overcome by the al.
purchaser in a judicial proceeding for recovery of the property. Considering that the property had already been sold at public auction
Through such a judicial proceeding, the nature of the adverse pursuant to an extrajudicial foreclosure, the only interest that may be
possession by the third party may be determined, after such third transferred by Valentin to Roxas is the right to redeem it within the
party is accorded due process and the opportunity to be heard. period prescribed by law.
The third party may be ejected from the property only after he has Roxas is therefore the successor-in-interest of Valentin, to whom the
been given an opportunity to be heard, conformably with the time- latter had conveyed his interest in the property for the purpose of
honored principle of due process. redemption. Consequently, Roxasʼ occupancy of the property cannot
be considered adverse to Valentin.
Century Savings Bank v. Spouses Samonte
Foreclosure proceedings enjoy the presumption of regularity and that Ong v. Premier Development Bank
the mortgagor who alleges absence of a requisite has the burden of Non-compliance with the requirements of notice and publication in
proving such fact. an extrajudicial foreclosure sale is a factual issue. The resolution
thereof by the lower courts is binding and conclusive upon this Court.
Respondents are already estopped from challenging the validity of
the foreclosure sale, after entering into a Contract of Lease with Spouses Edralin v. Philippine Veterans Bank
petitioner over one of the foreclosed properties. The title of the Mandamus is a proper remedy to compel the issuance of a writ of
landlord is a conclusive presumption as against the tenant or lessee. possession.
The juridical relationship between petitioner as lessor and
respondents as lessees carries with it a recognition of the lessor’s title. Pactum commissorium is a stipulation empowering the creditor to
As lessees, then respondents are estopped to deny their landlord's appropriate the thing given as guaranty for the fulfillment of the
title, or to assert a better title not only in themselves, but also in some obligation in the event the obligor fails to live up to his undertakings,
third person while they remain in possession of the leased premises without further formality, such as foreclosure proceedings, and a
and until they surrender possession to the landlord. public sale.
This estoppel applies even though the lessor had no title at the time The elements of pactum commissorium, which enable the mortgagee
the relation of lessor and lessee was created, and may be asserted not to acquire ownership of the mortgaged property without the need of
only by the original lessor, but also by those who succeed to his title. any foreclosure proceedings, are:
(1) there should be a property mortgaged by way of security for the
Development Bank of the Philippines v. Environmental Aquatics payment of the principal obligation, and
Where the real property is mortgaged to and foreclosed judicially or (2) there should be a stipulation for automatic appropriation by the
extrajudicially by the Development Bank of the Philippines, the right creditor of the thing mortgaged in case of non-payment of the
of redemption may be exercised only by paying to "the Bank all the principal obligation within the stipulated period.
amount he owed the latter on the date of the sale, with interest on
the total indebtedness at the rate agreed upon in the obligation from Cahilig v. Terencio
said date, unless the bidder has taken material possession of the xxx
property or unless this had been delivered to him, in which case the
proceeds of the property shall compensate the interest. BPI Family Savings Bank Inc. v. Avenido
We have consistently held in previous cases that unlike in an ordinary
Spouses Topacio v. Banco Filipino Savings and Mortgage Bank sale, inadequacy of the price at a forced sale is immaterial and does
The provision in the Rules of Court to the effect that judgment may not nullify the sale.
be enforced within five years by motion, and after five years but
deynlaw; SCA; Atty. Custodio
In fact, in a forced sale, a low price is more beneficial to the mortgage To be a newspaper of general circulation, it is enough that it is
debtor for it makes redemption of the property easier. published for the dissemination of local news and general
information; that it has a bona fide subscription list of paying
Reyes v. Tang, et al. subscribers; that it is published at regular intervals.
A succeeding registration of property in another's name, after its The newspaper need not have the largest circulation so long as it is of
original registration, contemplates a separate original action. general circulation.
Reyes already consolidated ownership over the subject property; as
owner, he has a right to have the same registered in his name. This The object of a notice of sale is to inform the public of the nature and
transfer of title to the subject property in Reyes' name is no longer condition of the property to be sold, and of the time, place and terms
part of the execution proceedings: the fact of levy and sale constitutes of the sale. Notices are given for the purpose of securing bidders and
execution, not so is the action for the issuance of a new title. to prevent a sacrifice of the property.
If these objects are attained, immaterial errors and mistakes will not
Rabat v. Philippine National Bank affect the sufficiency of the notice; but if mistakes or omissions occur
xxx in the notices of sale, which are calculated to deter or mislead bidders,
to depreciate the value of the property, or to prevent it from bringing
JUDICIAL a fair price, such mistakes or omissions will be fatal to the validity of
the notice, and also to the sale made pursuant thereto.
Spouses Edralin v. Philippine Veterans Bank
Mortgagors generally do not have the right of redemption in judicial It is ministerial upon the trial court to issue such writ upon an ex parte
foreclosure unless there is an express grant by law. petition of the purchaser. However, this rule admits an exception.
Where a parcel levied upon on execution is occupied by a party other
EXTRAJUDICIAL than a judgment debtor, the procedure is for the court to order a
hearing to determine the nature of said adverse possession.
Spouses Laher v. Spouses Lopez
The failure to publish the notice of auction sale as required by the Any question regarding the validity of the mortgage or its foreclosure
statute constitutes a jurisdictional defect which invalidates the sale. cannot be a legal ground for the refusal to issue a writ of possession.
Regardless of whether there is a pending suit for the annulment of
The mortgage remains valid and subsisting notwithstanding the mortgage or the foreclosure itself, the purchaser is entitled to a
annulment of the extrajudicial foreclosure due to lack of publication writ of possession, without prejudice, of course, to the eventual
of notice of the auction sale. outcome of the pending annulment case.

Gotesco Properties, Inc. v. Solidbank Corporation Spouses George A. Gallent, Sr., et al. v. Mercedes M. Gallent, et al.
Section 3 of Act No. 3135 requires that the Notice of Sale be The purchaser in an extrajudicial foreclosure of real property
a) physically posted in 3 public places and becomes the absolute owner of the property if no redemption is
b) be published once a week for at least 3 consecutive weeks in a made within one year from the registration of the certificate of sale
newspaper of general circulation in the city where the property is by those entitled to redeem. As absolute owner, he is entitled to all
situated. the rights of ownership over a property.

If notices are only published in newspapers printed in the city where An ordinary action to acquire possession in favor of the purchaser at
the property is located, even newspapers that are circulated an extrajudicial foreclosure of real property is not necessary. The
nationwide will be disqualified from announcing auction sales outside purchaser is not obliged to bring a separate and independent suit for
their city of publication. possession after the one-year period for redemption has expired and
This runs contrary to the spirit of the law which is to attain wide after he has obtained the sheriff's final certificate of sale.
enough publicity so all parties interested in acquiring the property can The basis of this right to possession is the purchaser's ownership of
be informed of the upcoming sale. the property. The mere filing of an ex parte motion for the issuance
Newspaper publications have more far-reaching effects than posting of the writ of possession would suffice, and no bond is required.
on bulletin boards in public places. There is a greater probability that
an announcement or notice published in a newspaper of general The nature of an ex parte petition for issuance of the possessory writ
circulation, which is distributed nationwide, shall have a readership of under Act No. 3135 has been described as a non-litigious proceeding
more people than that posted in a public bulletin board, no matter and summary in nature.
how strategic its location may be, which caters only to a limited few. As an ex parte proceeding, it is brought for the benefit of one party
Hence, the publication of the notice of sale in the newspaper of only, and without notice to or consent by any person adversely
general circulation alone is more than enough compliance with the interested.
notice-posting requirement of the law. Moreover, not even a pending action to annul the mortgage or the
foreclosure sale will by itself stay the issuance of the writ of
possession.
deynlaw; SCA; Atty. Custodio
White Marketing Development Corporation v. Grandwood Furniture Indeed, the payment mentioned in the rule must be made by
Section 47 of RA 8791 provides that when a property of a juridical tendering and delivering to the purchaser the sum of money required
person is sold pursuant to an extrajudicial foreclosure, it shall have for the purpose.
the right to redeem the property in accordance with this provision Obviously, he cannot be compelled to accept a promissory note;
until, but not after, the registration of the Certificate of foreclosure much less may he be compelled to accept an amount in the
sale with the applicable Register of Deeds which in no case shall be possession of a third person, which amount, to make things worse, is
more than 3 months after foreclosure, whichever is earlier. the subject of an adverse claim by another party.

The difference in the treatment of juridical persons and natural The rule and practice in judicial foreclosure sales with respect to any
persons was based on the nature of the properties foreclosed - balance or residue should be likewise applied to extrajudicial
whether these are used as residence, for which the more liberal one- foreclosure sales with respect to any balance or residue should be
year redemption period is retained, or used for industrial or likewise applied to extrajudicial foreclosure sales ion a similar event,
commercial purposes, in which case a shorter term is deemed considering that both are foreclosure sales.
necessary to reduce the period of uncertainty in the ownership of
property and enable mortgagee-banks to dispose sooner of these Mallari v. Government Service Insurance System
acquired assets. The redemption period envisioned under Act 3135 is reckoned from
The amendment introduced by Section 47 embodied one of such safe the date of the registration of the sale, not from and after the date of
and sound practices aimed at ensuring the solvency and liquidity of the sale
our banks. This construction was because the sheriff’s sale of registered (and
unregistered) lands did not take effect as a conveyance, or did not
The shortened period of redemption provided in Section 47 of R.A. bind the land, until the sale was registered in the Register of Deeds.
No. 8791 serves as additional security and protection to mortgagee-
banks for them to maintain a solvent and liquid financial status. Cua Lai Chu v. Laqui
The period is not extended by the mere fact that the bank assigned Under Act No. 3135, as amended, a writ of possession is issued ex
its interest to the mortgage to a non-banking institution because the parte as a matter of course upon compliance with the requirements.
assignee merely steps into the shoes of the mortgagee bank and It is not a judgment on the merits that can amount to res judicata, one
acquires all its rights, interests and benefits under the mortgage- of the essential elements in forum shopping.
including the shortened redemption period.
Moreover, to extend the redemption period would prejudice the Heirs of Burgos-Lipat v. Heirs of Trinidad
ability of the banks to quickly dispose of its hard assets to maintain The period of redemption is not tolled by the filing of a complaint or
solvency and liquidity. petition for annulment of the mortgage and the foreclosure sale
conducted pursuant to the said mortgage.
Peñaflor v. De la Cruz
To be considered in adverse possession, the third-party possessor Philippine Savings Bank v. Spouses Geronimo
must have done so in his own right and not merely as a successor or For the purpose of extrajudicial foreclosure of mortgage, the party
transferee of the debtor or mortgagor. alleging non-compliance with the requisite publication has the burden
of proving the same.
Where a third party has raised in an opposition to the writ or in a
motion to quash the same, his actual possession thereof upon a claim Petitioner's invocation of the presumption of regularity in the
of ownership or a right adverse to that of the debtor or mortgagor. performance of official duty on the part of Sheriff Castillo is
The procedure is for the trial court to order a hearing to determine misplaced. While posting the notice of sale is part of a sheriff's official
the nature of the adverse possession, conformably with the time- functions, the actual publication of the notice of sale cannot be
honored principle of due process. considered as such, since this concerns the publisher's business.
Simply put, the sheriff is incompetent to prove that the notice of sale
Aparri v Court of Appeals was actually published in a newspaper of general circulation.
Under Section 30 of Rule 39, in order to effect redemption, the
judgment debtor must pay the purchaser within twelve months after Planters Development Bank v. Ng
the sale, the amount of his purchase, with one per centum per month The defaulting mortgagor is not without any expedient remedy,
interest thereon in addition, up to the time of redemption, together however. For under Section 8 of Act 3135, as amended by Act 4118, it
with the amount of any assessments or taxes which the purchaser can file with the court which issues the writ of possession a petition
may have paid thereon after the purchase, and interest on such last- for cancellation of the writ within 30 days after the purchaser-
named amount at the same rate, otherwise, the purchaser may justly mortgagee was given possession, specifying the damages suffered by
refuse the tender if it is for less than this amount. him, because the mortgage was not violated or the sale was not made
in accordance with the provisions hereof.

deynlaw; SCA; Atty. Custodio

Villanueva v. Cherda Lending Investors Corporation
Unlike a judicial foreclosure of real estate mortgage under Rule 68 of
the Rules of Court where an action for foreclosure is filed before the
RTC where the mortgaged property or any part thereof is situated,
any property brought within the ambit of Act 3135 is foreclosed by
the filing of a petition, not with any court of justice, but with the office
of the sheriff of the province where the sale is to be made.
As such, a third person in possession of an extrajudicially foreclosed
property, who claims a right superior to that of the original
mortgagor, is given no opportunity to be heard on his claim.
It stands to reason, therefore, that such third person may not be
dispossessed on the strength of a mere ex parte possessory writ, since
to do so would be tantamount to his summary ejectment, in violation
of the basic tenets of due process.

deynlaw; SCA; Atty. Custodio