Right of redemption, formalities  RIGHTS of the seller under

and Requisites the Recto Law

The following are the requisites 1. Exact (or demand) fulfillment of the
for the exercise of legal obligation, should the buyer fail to
redemption: pay; (one payment has defaulted)

1. There must be a co-ownership; 2. Cancel the sale, should the buyer's

2. one of the co-owners sold his failure to pay cover two or more
right to a stranger; installments;
3. the sale was made before the
partition of the co-owned 3. Foreclose the chattel mortgage on
property; the thing sold if one has been
4. the right of redemption must be constituted, should the buyer's failure
exercised by one or more co- to pay cover two or more installments.
owners within a period of thirty In this case, the seller shall have no
days to be counted from the further action against the buyer to
time that he or they were recover any unpaid balance of the
notified in writing by the vendee price. Any agreement to the contrary
or by the co-owner vendor;
shall be void.
5. And the vendee must be
reimbursed for the price of the Note: If the seller did not foreclose the
sale.” mortgage, but rather filed an action to
Rights and Remedies under Recto recover the unpaid balance.
Law Thereafter a writ of attachment and
execution was filed and the judge
 REMEDIES: ordered the sale of property at a
public auction. The seller can still
(1) Exact fulfillment of the obligation,
recover any deficiency.
should the vendee fail to pay;
Right of buyer under Maceda Law
(2) Cancel the sale, should the
vendee's failure to pay cover two or A defaulting buyer that has paid
more installments. at least two years of installments
has the following options:
(3) Foreclose the chattel mortgage on
the thing sold, if one has been 1. To pay, without additional
constituted, should the vendee's interest, the unpaid installments
failure to pay cover two or more due within the total grace
installments. In this case, he shall period earned by him, which is
have no further action against the hereby fixed at the rate of one
purchaser to recover any unpaid month grace period for every
balance of the price. Any agreement one year of installment
to the contrary shall be void. payments made: Provided, That
this right shall be exercised by
the buyer only once in every
 five years of the life of the cancellation/demand for rescission by
contract and its extensions, if notarial act.
any.
Cancellation of contract under
2. If the contract is cancelled, the Maceda Law
seller shall refund to the buyer
the cash surrender value of the Four conditions before seller may
payments on the property actually cancel the contract
equivalent to fifty percent of the Section 4 of RA 6552 requires 4
total payments made and, after conditions before the seller may
five years of installments, an actually cancel the contract
additional five percent every thereunder:
year but not to exceed ninety
percent of the total payments 1. The defaulting buyer has paid
made: Provided, That the actual less than 2 years of
cancellation of the contract installments;
shall take place after thirty days 2. The seller must give such
from receipt by the buyer of the defaulting buyer a 60-day grace
notice of cancellation or the period, reckoned from the date
demand for rescission of the the installment became due;
contract by a notarial act and 3. If the buyer fails to pay the
upon full payment of the cash installments due at the
surrender value to the buyer. expiration of the said grace
period, the seller must give the
A defaulting buyer that has paid buyer a notice of cancellation
less than two years of and/or a demand for rescission
installments is entitled to the by notarial act; and
following: 4. The seller may actually cancel
the contract only after the lapse
1. The seller shall give the buyer a
of 30 days from the buyer’s
grace period of not less than 60 days
receipt of the said notice of
to be reckoned from the date the
cancellation and/or demand for
installment became due;
rescission by notarial act.
2. The seller must give the buyer a
notice of cancellation/demand for Nature and Requites of Pledge,
rescission by notarial act if the buyer legal pledge
fails to pay the installments due at the
In a contract of pledge, the creditor is
expiration of the said grace period;
given the right to retain his debtor’s
and
movable property in his possession, or
3. The seller may actually cancel the in that od a third person to whom it
contract only after 30 days from the has been delivered, until the debt is
buyer's receipt of the said notice of paid. For the contract to be valid, it is
necessary that; Requisites:
 1. The pledge is constituted to to live up to his undertakings, without
secure the fulfillment of further formality, such as formality,
principal obligation such as foreclosure proceedings, and a
2. The pledgor is the absolute public sale.
owner of the thing pledged
3. The person constituting the ELEMENTS OF PACTUM
pledge has the free disposal of COMMISSORIUM
his property and in the absence
thereof, that he be legally 1. That there should be a pledge
authorized for the purpose or mortgage wherein a property
4. the creditor is given the right to is pledged or mortgaged by way
retain his debtor’s movable of security for the payment of
property in his possession, or in the principal obligation.
that od a third person to whom 2. That there should be a
it has been delivered, until the stipulation for an automatic
debt is paid. appropriation by the creditor of
the thing pledged or mortgaged
Note: A pledge contract is an in the event of nonpayment of
accessory contract, and is the principal obligation within
necessarily discharged if the stipulated period.
principal obligation is
THE ESSENCE OF PACTUM
extinguished.
COMMISSORIUM
Characteristics/Nature of Pledge
The essence of pactum commissorium
 Accessory- one which attached is that ownership of the security will
to a principal obligation pass to the creditor by the mere credit
therefore cannot stand alone default of the debtor. The supreme
 Real contract- under control of court has repeatedly declared such
creditor arrangements are contrary to morals
 Unilateral- one phase and public policy.
obligation; debtor and creditor
 Subsidiary- creditor will not Nature and requisites of Mortgage
have obligation to return the
thing pledged unless debtor Characteristics of Mortgage:
fulfilled the obligation.
 Accessory- one which attached
Pactum Commisorum to a principal obligation
therefore cannot stand alone
Pactum Commissorium- is among  Real contract- under control of
the contractual stipulations that are creditor
deemed contrary to law.  Unilateral- one phase
obligation; debtor and creditor
Pactum Commissorium- a  Subsidiary- creditor will not
stipulation empowering the creditor to have obligation to return the
appropriate the thing given as thing pledged unless debtor
guaranty for the fulfillment of the fulfilled the obligation.
obligation in the event the obligor fails
The essential requisites of is being recorded and follows the
Mortgage to be Valid: chattel wherever it goes.

1. The mortgage is constituted to Nature and Requisites of

secure the fulfillment of Antichresis
principal obligation
2. The mortgagor is the absolute Nature/ Characteristics Of
owner of the thing pledged Antichresis
3. The person constituting the
mortgage has the free disposal 1. It is an accessory contract
of his property and in the because it secures the
absence thereof, that he be performance of a principal
legally authorized for the obligation.
purpose 2. It is a formal contract because it
4. It is indispensable, in order that must be in a specified form to
a mortgage may be validly be valid (i.e. "in writing.")
constituted, that the document 3. It is a nominate contract
in which it appears be recorded because it is given a specific
in the Registry of Deeds. name by the Civil Code
Nature and Requisites of Chattel 4. It is a consensual contract
Mortgage because the Civil Code does not
require the delivery of the
Characteristics of chattel immovable to the creditor.
mortgage- However, the amount of the
principal and of the interest
1. It is a formal contract because it
shall be specified in writing
must be embodied in a public
instrument and recorded in the Chattel Essential requisites of the
Mortgage Register; contract

2. It is an accessory contract because 1. Consent of the contracting

its existence depends upon an existing parties
valid principal obligation; 2. Object certain which is the
subject matter of the contract
3. It is a unilateral contract because
3. Cause of the obligation which is
the obligation is only on the part of the
established
creditor to free the chattel from
encumbrance upon payment of the Foreclosure, requisites and
principal obligation; procedures

4. It does not convey dominion but is When to foreclose?

only a security;
1. When the principal obligation is
5. It creates a real right (derecho real, not paid when due;
jus in re or jus ad rem) or a lien which 2. When the debtor has violated
the terms and conditions of the
mortgage contract.
 Note: The foreclosure of a mortgage in Rule 141, Section 9(1), as amended
before mortgagor's default is void. by A.M. No. 00-2-01-SC, shall have
been paid; Provided, that in no case
PROCEDURE IN EXTRA-JUDICIAL shall the amount payable under Rule
FORECLOSURE OF MORTGAGE 141, Section 9(1), as amended,
exceed P100,000.00;
1. All applications for extra-judicial
foreclosure of mortgage whether e) after the certificate of sale has been
under the direction of the sheriff or a issued to the highest bidder, keep the
notary public, pursuant to Act 3135, as complete records, while awaiting any
amended by Act 4118, and Act 1508, redemption within a period of one (1)
as amended, shall be filed with the year from date of registration of the
Executive Judge, through the Clerk of certificate of sale with the Register of
court who is also the Ex-Officio Sheriff. Deeds concerned, after which, the
records shall be archived.
2. Upon receipt of an application for
Notwithstanding the foregoing
extra-judicial foreclosure of mortgage,
provision, juridical persons whose
it shall be the duty of the Clerk of
property is sold pursuant to an extra-
Court to:
judicial foreclosure, shall have the
a) receive and docket said application right to redeem the property until, but
and to stamp thereon the not after, the registration of the
corresponding file number, date and certificate of foreclosure sale which in
time of filing; no case shall be more than three (3)
months after foreclosure, whichever is
b) collect the filing fees therefore earlier, as provided in Section 47 of
pursuant to rule 141, Section 7(c), as Republic Act No. 8791 (as amended,
amended by A.M. No. 00-2-01-SC, and Res. Of August 7, 2001).
issue the corresponding official
receipt; 3. The notices of auction sale in
extrajudicial foreclosure for
c) examine, in case of real estate publication by the sheriff or by a
mortgage foreclosure, whether the notary public shall be published in a
applicant has complied with all the newspaper of general circulation
requirements before the public auction pursuant to Section 1, Presidential
is conducted under the direction of the Decree No. 1079, dated January 2,
sheriff or a notary public, pursuant to 1977, and non-compliance therewith
Sec. 4 of Act 3135, as amended; shall constitute a violation of Section 6
thereof.
d) sign and issue the certificate of
sale, subject to the approval of the 4. The Executive Judge shall, with the
Executive Judge, or in his absence, the assistance of the Clerk of Court, raffle
Vice-Executive Judge. No certificate of applications for extrajudicial
sale shall be issued in favor of the foreclosure of mortgage under the
highest bidder until all fees provided direction of the sheriff among all
for in the aforementioned sections and sheriffs, including those assigned to
the Office of the Clerk of Court and mortgage realty/ies shall be sold at an
Sheriffs IV assigned in the branches. auction sale, the proceeds of which
shall be applied to the mortgage debt,
5. The name/s of the bidder/s shall be pursuant to Rule 39 of the Rules of
reported by the sheriff or the notary Court (Sec. 3, Rule 68).
public who conducted the sale to the
Clerk of Court before the issuance of 3.1. Before the sale of the real
the certificate of sale. property/ies, notice must be given:

JUDICIAL FORECLOSURE OF REAL a) By posting for 20-days in three (3)

ESTATE MORTGAGE UNDER RULE public places. If the assessed value is
68 more than P50,000.00, by publishing a
copy of the notice once a week for two
1. Preparation and filing of complaint (2) consecutive weeks in one
which shall set forth the following newspaper selected by raffle (Sec.
allegations (Sec. 1, Rule 68): 15c, Rule 39).
a) Date and due execution of the b) Written notice to the judgment
mortgage and its assignments, if any; obligor at least three (3) days
b) Names and residences of the before the sale (Sec. 15d, Rule 39).
mortgagor and mortgagee;
3.2. The highest bidder shall be issued
c) Description of the mortgaged a certificate of sale (Sec. 25, Rule 39).
property/ies;
4. Upon motion and after notice and
d) Documentary evidence/s of the hearing, the trial court will issue an
obligation/s secured by the mortgage order of confirmation of the sale (Rural
and the unpaid obligation; Bank of Oroquieta v. CA, 101 SCRA 5
e) Names and residences of all [1980]).
persons having or claiming an interest 4.1. The final order of confirmation
in the mortgaged property/ies. shall be registered with the Registry of
2. The trial court shall render a Deeds (Sec. 7, Rule 68).
judgment based on the facts proven a) If no right of redemption exists, the
and shall ascertain the amount due certificate of title in the name of the
based on the mortgage debt or mortgagor shall be cancelled and a
obligation, including interests, charges new one issued in the name of the
and costs. The court shall then direct purchaser.
the defendant to pay said amount
within a period of not less than ninety b) Where a right of redemption exists,
(90) days nor more than one-hundred the certificate of title of the mortgagor
twenty (120) days (Sec. 2, Rule 68). shall not be cancelled. Instead, the
certificate of sale and order of
3. In the event of failure to pay as confirmation shall be registered with a
directed within 90 to 120 days, the memorandum of the right redemption.
If the property is not redeemed a final Thus, in judicial foreclosure of
deed of sale shall be executed by the mortgage where the mortgagee is the
sheriff in favor of the purchaser which Philippine National Bank or any
shall be registered in the Register of banking institution, there exist both
Deeds, whereupon the title of the equity of redemption and right of
mortgagor shall be cancelled and a redemption.
new one issued in the name of the
purchaser. Addition

5. If the proceeds of the auction sale NOTES ON RA 133:

of the property are not sufficient, the 1. You can mortgage to a foreigner.
trial court, upon. motion, shall render RA 133 sanctions this. Ownership is
a deficiency judgment against the not equivalent to mortgage.
defendant (Sec. 6, Rule 68). Nonetheless, he can only institute
Equity of redemption judicial proceedings and not
extrajudicially foreclose the mortgage.
In relation to mortgage, the right of Furthermore, he cannot bid or take
redemption exists in extra-judicial part in the sale of the real property.
foreclosure; while equity of
redemption exists only in judicial 2. The foreigner may not take
foreclosure. possession of the property during the
mortgage. He could only possess the
- Extrajudicial foreclosure - the same as a lessee.
mortgagor may exercise his
right of redemption within 1 3. The foreigner may only take
year from the registration of the possession of the mortgaged property
sale in the Office of the Registry after default, and for the sole
of Deeds. purpose of foreclosure, enforcement
or other proceedings. This should not
- Judicial foreclosure - the exceed the period of 5 years from
mortgagor may exercise his actual possession.
equity of redemption during the
period of not less than 90 days
nor more than 120 days from
entry of judgment of foreclosure
or even after the foreclosure
sale but before the judicial
confirmation of the sale.
There is no right of redemption in
judicial foreclosure of mortgage,
except only if the mortgagee is the
Philippine National Bank or any
banking institution.