Published 16 July 2018, The Daily Tribune

Congratulations! Your multimillion-peso loan was approved by your bank. You were called to sign the voluminous bank documents necessary to complete your loan, one of which is a mortgage document. The bank explained that you will be signing a Real Estate Mortgage constituted over your real property which contains a proviso that, in case of non-payment, the bank is authorized to extra-judicially foreclose the mortgage. (This means that in case of mortgagor’s default, the sale of the mortgaged property may be conducted by the sheriff without the need for court intervention.) Having been informed of such an arrangement and confident of your ability to pay off your loan obligation, you nonetheless agreed and signed the bank documents. These kinds of arrangement are customary and perfectly legal as they are necessary to protect the creditor’s interest in case of the default of the debtor. Unfortunately, for one reason or another, you failed to pay your loan obligation on maturity. The bank decided to exercise its right under the Real Estate Mortgage to extra-judicially foreclosure the mortgage and you learned that the Sheriff has issued a Notice of Sale informing the public that your property shall be sold in a public auction to satisfy your loan obligation.

Do not fret. Not all is lost for you. As a debtor-mortgagor, you have a number of remedies available to you to remedy your situation. At any time prior to the scheduled foreclosure sale of the mortgaged property, you may either pay off the entire obligation to prevent the auction sale (including all expenses arising from the foreclosure) or file an action to stop the scheduled extra-judicial foreclosure sale, should the circumstances warrant it. After the property is auctioned off at the foreclosure sale, you may either redeem the property within the period allowed by law or file a case to annul the mortgage and/or the extrajudicial foreclosure sale, should the circumstances warrant it.

We focus on the right of redemption. The exercise of debtor-mortgagor’s right of redemption depends on a number of circumstances. As a general rule, the mortgagor may redeem the foreclosed property within one (1) year from the date of the sale (see Act No. 3135, as amended). The Supreme Court had the occasion to explain that the “date of the sale” under Act No. 3135 is the date the certificate of sale is registered with the Register of Deeds since the sale of registered land does not ‘”take effect as a conveyance, or bind the land’ until it is registered.” The General Banking law reduced the redemption period to three months from registration of the certificate of foreclosure sale or three months after foreclosure, whichever is earlier, if the following elements are cumulatively present: a) the mortgagor is a juridical person; b ) the mortgagee is a banking or credit institution; and, c ) the mode of foreclosure is extra-judicial under Act 3135, as amended. (Section 47 of RA 8791, otherwise known as the new General Banking Law). Only after the lapse of the redemption period shall the buyer at the auction sale may consolidate its ownership over the foreclosed property.

The period to redeem a property sold in an extrajudicial foreclosure sale is not extendible. A pending action to annul the foreclosure sale does not toll the running of the one (1)-year period of redemption under Act No. 3135 (Mahinay vs. Dura Tire, G.R. No. 194152, 5 June 2017). The one (1)-year period of redemption is fixed, hence, non-extendible, to “avoid prolonged economic uncertainty over the ownership of the thing sold (BPI Family Savings Bank, Inc. vs. Spouses Veloso, GR No. 141974, 9 August 2004) and to prevent a dangerous precedent of filing of frivolous suits for annulment of mortgage intended merely to give the mortgagor more time to redeem the mortgaged property. Therefore, the right to redeem becomes functus officio on the date of its expiry, and its exercise after the period is not really one of redemption but a repurchase. Distinction must be made because redemption is by force of law; the purchaser at public auction is bound to accept redemption. Repurchase, however, of foreclosed property, after redemption period, imposes no such obligation. After expiry, the purchaser may or may not re-sell the property but no law will compel him to do so. And, he is not bound by the bid price; it is entirely within his discretion to set a higher price, for, after all, the property already belongs to him as owner (Lucasan vs. Phil. Deposit Insurance Corp., GR No. 176929, 4 July 2008).

The right of redemption being statutory, the mortgagor may compel the purchaser to sell back the property within the redemption period. If the purchaser refuses, the mortgagor may tender payment to the Sheriff who conducted the foreclosure sale or consign the payment in court.

The general rule in redemption is that it is not sufficient that a person offering to redeem manifests his desire to do so. The statement of intention must be accompanied by an actual and simultaneous tender of payment. This constitutes the exercise of the right to repurchase. Bona fide redemption necessarily implies a reasonable and valid tender of the entire purchase price, otherwise, the rule on the redemption period fixed by law can easily be circumvented. There is no cogent reason for requiring the vendee to accept payment by installments from the redemptioner, as it would ultimately result in an indefinite extension of the redemption period. Nevertheless, it has been the policy of the law to aid rather than defeat the right of redemption. Where no injury will follow, a liberal construction is given to our redemption laws as well as to the exercise of the right of redemption (GE Money Bank, Inc. vs. Spouses Dizon, GR No. 184301, 23 March 2015).

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