RULE 68:

JUDICIAL
FORECLOSURE
11 POINTS TO REMEMBER

PURPOSE:
It is a remedy used for the satisfaction of any monetary obligation, which a person
owes to another, by proceeding against the property used to secure said
obligation.
Its purpose is to have the property seized and sold by the court order to the end
that the proceeds therof to be applied to the payment of the plaintiffs claim.

PARTIES:
It is commenced by a complaint setting forth the date and due execution of the
mortgage; the names and residences of the mortgagor and the mortgagee; a
description of the mortgaged property; date of the note or other documentary
evidence of the obligation secured by the mortgage, the amount claimed to be
unpaid thereon; and the names and residences of all person claiming and interest
in the property subordinate in the right to that of the holder of the mortgage. (sec
1)
Defendants are 1. The person obliged to pay; 2. The person who own, occupy and
control the property subject to the mortgage; 3. Transferee or grantee; and 4.
Second mortgage, junior encumbrancer, third party claiming right and interest.

VENUE:
Where the land is located or any part thereof is located.

JURISDICTION:
Traditionally, Jurisdiction in an action to foreclose mortgage is in the RTC
(incapable of pecuniary estimation)
Cite: Brgy San Roque v Heirs of Pastor

REQUISITES:
First, debtor is in default in the payment of his obligation; and second, foreclosure
is limited to the amount mentioned in the mortgaged document.
Note: if there is an acceleration clause this will trigger the right
of the
mortgagee to foreclose the mortgage against the
convention of prematurity, if
the mortgager fails to pay any
instalment.
Also, the rights which a mortgagor can legally transfer, cede and convey after the
foreclosure of his property are the right to redeem the same and the possession,
use, and enjoyment of the same during the period of redemption.

JUDGMENT:
Judgement in judicial foreclosure proceedings is the judgment of the court
ordering the debtor to pay within a period of not less than 90 days nor more than
120 days from the entry of judgement after ascertaining the amount due plaintiff.
(sec 2)

POST JUDGMENT
The debtor may petition that the sale be set aside and the writ of possession
cancelled for the reason that the mortgage was not violated or the sale was not
made in accordance with the provisions thereof.

POST JUDGMENT REMEDY:

Another post-judgement remedy is the equity of redemption
In order to explain this, the Supreme Court in a decided case compared the concepts
of right of redemption and equity redemption to wit:
In Huerta Alba Resort, Inc. vs. Court of Appeals,
The court held that the right of redemption is not recognized in a judicial foreclosure,
thus:
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 a 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 sheriffs certificate
of foreclosure sale.

POST JUDGMENT REMEDY:

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 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 as may be allowed by law. Such rights exceptionally allowed
by law (i.e., even after the confirmation by an order of the court) are those granted by the charter
of the Philippine National Bank (Act Nos. 2747 and 2938), and the General Banking Act (R.A.337).
These laws confer on the mortgagor, his successors 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 right may be exercised within a period of one (1) year, counted from the
date of registration of the certificate of sale in the Registry of 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 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 the right of the defendant mortgagor to extinguish the
mortgage and retain 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 the foreclosure
sale but prior to its confirmation.

IMPORTANT POINTS:

LANDMARK CASES

FLOWCHART:
Judicial foreclosure of real estate mortgage is governed by the 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:
Preparation and filing of complaint which shall set forth the following allegations
(Sec. 1, Rule 68):
a) Date and due execution of the mortgage and its assignments, if any b) Names
and residences of the mortgagor and mortgagee; c) Description of the mortgaged
property/ies;
d) Documentary evidence/s of the obligation/s secured by the mortgage and the
unpaid obligation; e) Names and residences of all persons having or claiming an
interest in the mortgaged property/ies.

FLOWCHART:
First step:
The trial court shall render a judgment based on the facts proven and shall ascertain
the amount due based on the mortgage debt or obligation, including interests,
charges and costs. The court shall then direct the defendant to pay said amount within
a period of not less than ninety (90) days nor more than one-hundred twenty (120)
days (Sec. 2, Rule 68).
Second step:
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 Court (Sec. 3, Rule 68).

Third step:
Before the sale of the real property/ies, notice must be given 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, Rule 39).

FLOWCHART:
Written notice to the judgment obligor at least three (3) days before the sale (Sec. 15d, Rule 39).
The highest bidder shall be issued a certificate of sale (Sec. 25, Rule 39).
Upon motion and after notice and hearing, the trial court will issue an order of confirmation of
the sale (Rural Bank of Oroquieta v. CA, 101 SCRA 5 [1980]).
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).

FLOWCHART:
Equity of Redemption
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]).

SAMPLE PLEADING:
See Document