Guidelines for The Enforcement of A.M. No. 99-10-05-0., as amended.

CIRCULAR NO. 7-2002

TO: ALL EXECUTIVE JUDGES, CLERKS OF COURT, SHERIFFS IN THE OFFICE OF THE CLERK OF COURT AND BRANCH SHERIFFS IN THE REGIONAL TRIAL COURTS

SUBJECT: GUIDELINES FOR THE ENFORCEMENT OF SUPREME COURT RESOLUTION OF DECEMBER 14, 1999 IN ADMINISTRATIVE MATTER NO. 99-10-05-0 (RE: PROCEDURE IN EXTRA-JUDICIAL FORECLOSURE OF MORTGAGE), AS AMENDED BY THE RESOLUTIONS DATED JANUARY 30, 2001 AND AUGUST 7, 2001

These guidelines are issued pursuant to the Supreme Court En Banc Resolution of December 14, 1999 in Administrative Matter No. 99-10-05-0, as amended by the resolutions of January 30, 2001 and August 7, 2001, directing the Office of the Court Administrator to prepare the guidelines for the enforcement of A.M. No. 99-10-05-0 on the extra-judicial foreclosure of mortgages.

Sec. 1. All applications for extra-judicial foreclosure of mortgage, whether under the direction of the Sheriff or a notary public pursuant to Art.No. 3135, as amended, and Act  1508, as amended, shall be filed with the Executive Judge, through the Clerk of Court, who is also the Ex-Officio Sheriff (A.M. No. 99-10-05-0, as amended, March 1, 2001).

Sec. 2. Upon receipt of the application, the Clerk of Court shall:

a.  Examine the same to ensure that the special power of attorney authorizing the extra-judicial foreclosure of the real property is either inserted into or attached to the deed of real estate mortgage (Act No. 3135, Sec. 1, as amended);

b.  Give a file number to the application and endorse the date and time of its filing and thereafter docket the same, keeping, in this connection, separate docket books for extra-judicial foreclosure sales conducted by the Sheriff and those conducted by notaries public;

c.  For the conduct of extra-judicial foreclosure of real estate or chattel mortgage under the direction of the sheriff, collect the appropriate filing fees and issues the corresponding official receipt pursuant to the following schedule:

If the amount of the indebtedness or the mortgagee’s claim is:

(1)     Less than P50,000.00 ………………….. P275.00

(2)     P50,000.00 or more but less than

P100,000.00 ……………………………..... 400.00

(3)     P100,000.00 or more but less than

P150,000.00 ………………………………. 500.00

(4)     P150,000.00 or more but less than

P200,000.00 ………………………………. 650.00

(5)     P200,000.00 or more but less than

P250,000.00 …………………………….. 1,000.00

(6)     P250,000.00 or more but less than

P300,000.00 ………………………….…. 1,250.00

(7)     P300,000.00 or more but less than

P400,000.00 …………………………….. 1,500.00

(8)     P400,000 or more but less than

P500,000.00 …………………………….. 1,750.00

(9)     P500,000.00 or more but not more than

P100,000,000.00 ……………………..…. 2,000.00

(10)   For each P1,000.00 in excess of

P1,000,000.00……………………………….. 10.00

(Section 7 (c), Rule 141, Rules of Court, as amended by A.M. No. 00-2-01-SC, February 1, 2000).

Cooperatives, thrift banks, and rural banks are not exempt from the payment of filing fees and other fees under these guidelines (A.M. No. 98-9-280-RTC, September 29, 1998; A.M. No. 99-3-93-RTC, April 20, 1999; and A.M. No. 92-9-408-0).

d. In case the application is for the extra-judicial foreclosure of mortgages of real estates and/or chattels in different locations covering one indebtedness, issue, apart from the official receipt for the fees, a certificate of payment indicating the amount of indebtedness, the filing fees collected, the mortgages sought to be foreclosed, the real estates and/or chattels mortgaged and their respective locations, for purposes of having the application docketed with the Clerks of Court in the places where the other properties are located and of allowing the extra-judicial foreclosure to proceed thereat. (A.M. No. 99-10-05-0, par. 2(e)).

Sec. 3. The application for extra-judicial foreclosure shall be raffled under the supervision of the Executive Judge, with the assistance of the Clerk of Court and Ex-Oficio Sheriff, among all Sheriffs including those assigned to the Office of the Clerk of court and Sheriffs assigned in the branches of the court. A Sheriff to whom the case has been raffled shall be excluded in the succeeding raffles and shall participate again only after all other Sheriffs shall have been assigned a case by raffle (Administrative Circular No. 3-98, Feb. 5, 1998).

Sec. 4. The Sheriff to whom the application for extra-judicial foreclosure of mortgage was raffled shall do the following:

a.  Prepare a Notice of Extra-judicial Sale using the following form:

“NOTICE OF EXTRA-JUDICIAL SALE”

“Upon extra-judicial petition for sale under Act 3135 / 1508 filed __________________ against (name and address of Mortgator/s) to satisfy the mortgage indebtedness which as of ___________ amounts to P _________________, excluding penalties, charges, attorney’s fees and expenses of foreclosure, the undersigned or his duly authorized deputy will sell at public auction on (date of sale) _______________ at 10:00 A.M. or soon thereafter at the main entrance of the ___________ (place of sale) to the highest bidder, for cash or manager’s check and in Philippine Currency, the following property with all its improvements, to wit:

”(Description of Property)”

“All sealed bids must be submitted to the undersigned on the above stated time and date.”

“In the event the public auction should not take place on the said date, it shall be held on _______________, _______________ without further notice.”

________________ (date)

“SHERIFF”

b. (1) In case of foreclosure of real estate mortgage, cause the publication of the notice of sale by posting it for not less than twenty (20) days in at least three (3) public places in the municipality or city where the property is situated and if such property is worth more than four hundred (P400.00) pesos, by having such notice published once a week for at least three (3) consecutive weeks in a newspaper of general circulation in the municipality or city (Sec. 3, Act No. 3135, as amended). The Executive Judge shall designate a regular working day and definite time each week during which said notice shall be distributed personally by him for publication to qualified newspapers or periodicals as defined in Sec. 1 of P.D. No. 1079, which distribution shall be effected by raffle (A.M. No. 01-1-07-SC, Oct. 16, 2001). Unless otherwise stipulated by the parties to the mortgage contract, the debtor-mortgagor need not be personally served a copy of the notice of the extra-judicial foreclosure.

For real estate mortgages covering loans not exceeding P100,000.00, exclusive of interests due and unpaid, granted by rural banks (RA No. 7353, Sec. 6) or thrift banks (RA No. 7906, Sec. 18),publication in a newspaper shall be dispensed with, it being sufficient that the notices of foreclosure are posted for a period of sixty (60) days immediately preceding the public auction in the most conspicuous areas of the municipal building, the municipal public market, the rural bank, the barangay hall, and the barangay public market, if any, where the land mortgaged is situated. Proof of publication shall be accomplished by an affidavit of the Sheriff and shall be attached to the records of the case.

(2) In case of foreclosure of a chattel mortgage, post the notice for at least ten (10) days in two (2) or more public places in the municipality where the mortgagor resides or where the property is situated (Sec. 14, Act No. 1508, as amended).

Sec. 5. Conduct of the extra-judicial foreclosure sale –

a.  The bidding shall be made through sealed bids which must be submitted to the Sheriff who shall conduct the sale between the hours of 9 a.m. and 4 p.m. of the date of the auction (Act 3135, Sec. 4). The property mortgaged shall be awarded to the party submitting the highest bid and, in case of a tie, an open bidding shall be conducted between the highest bidders. Payments of the winning bid shall be made either in cash or in manager’s check, in Philippine currency, within five (5) days from notice.

b.  The sale must be made in the province in which the real property is situated and, in case the place within the said province in which the sale is to be made is the subject of stipulation, such sale shall be made in said place in the municipal building of the municipality in which the property or part thereof is situated (Act No. 3135, as amended, Sec. 2);

in case of a chattel mortgage, the sale shall be made at a place in the municipality where the mortgagor resides or where the property is situated (Sec. 14, Act No. 1508, as amended).

Sec. 6. After the sale, the Clerk of Courts shall collect the appropriate fees pursuant to Sec. 9(1), Rule 141, as amended by A.M No. 00-2-01-SC, computed on the basis of the amount actually collected by him, which fee shall not exceed P100,000.00 (A.M. No. 99-10-05-0, March 1, 2001, 2[d]). The amount paid shall not be subject to a refund even if the foreclosed property is subsequently redeemed.

Sec. 7. In case of foreclosure under Act No. 1508, the Sheriff shall, within thirty (30) days from the sale, prepare a return and file the same in the Office of the Registry of Deeds where the mortgage is recorded.

Sec. 8. The Sheriff or the notary public who conducted the sale shall report the name/s of the bidder/s to the Clerk of Court.

Sec. 9. Upon presentation of the appropriate receipts, the Clerk of Court shall issue and sign the Certificate of Sale, subject to the approval of the Executive Judge or, in the latter’s absence, the Vice-Executive Judge. Prior to the issuance of the certificate of Sale, the Clerk of court shall, in extra-judicial foreclosure conducted under the direction of the sheriff, collect P300.00 as provided in Section 20(d), Rule 141, as amended, and in extra-judicial foreclosure sales conducted under the direction of a notary public, collect the appropriate fees pursuant to Rule 141, §20(e), which amount shall not exceed P100,000.00 (Minute Res., A.M. No. 99-10-05-0, August 7, 2001).

Sec. 10. After the Certificate of Sale has been issued, the Clerk of Court shall keep the complete records for a period of one (1) year from the date of registration of the certificate of sale with the Register of Deeds, after which the records shall be archived. Notwithstanding the foregoing, juridical persons whose property is sold pursuant to an extra-judicial foreclosure shall have the right to redeem the property until, but not later than, the registration of the certificate of foreclosure sale which in no case shall be more than three (3) months after foreclosure, whichever is earlier (R.A. 8791, Section 47). In case the property is redeemed, the Clerk of Court shall assess the redemptioner’s fee as provided in Section 7 (k), Rule 141, as amended. If the property is not redeemed, the Clerk of Court shall, as a requisite for the issuance of the final Deed of Sale, assess the highest bidder the amount of P300.00 as provided in Section 20(d), Rule 141, as amended.

Sec. 11. These guidelines shall take effect on April 22, 2002.

Issued this 22^nd day of January 2002.

(Sgd.) PRESBITERO J. VELASCO, JR.

Court Administrator

Extra-judicial Foreclosure of Mortgage - Procedure

EN BANC

[A.M. No. 99-10-05-0.  August 7, 2001]

(AS FURTHER AMENDED, AUGUST 7, 2001)

PROCEDURE IN EXTRA-JUDICIAL FORECLOSURE OF MORTGAGE

In line with the responsibility of an Executive Judge under Administrative Order No. 6, dated June 30, 1975, for the management of courts within his administrative area, included in which is the task of supervising directly the work of the Clerk of Court, who is also the Ex-Office Sheriff, and his staff, and the issuance of commissions to notaries public and enforcement of their duties under the law, the following procedures are hereby prescribed in extrajudicial foreclosure of mortgages:

1.  All applications for extra-judicial foreclosure of mortgage whether under the direction of the sheriff or a notary public, pursuant to Act 3135, as amended by Act 4118, and Act 1508, as amended, shall be filed with the Executive Judge, through the Clerk of court who is also the Ex-Officio Sheriff.

2.  Upon receipt of an application for extra-judicial foreclosure of mortgage, it shall be the duty of the Clerk of Court to:

a)  receive and docket said application and to stamp thereon the corresponding file number, date and time of filing;

b)  collect the filing fees therefore pursuant to rule 141, Section 7(c), as amended by A.M. No. 00-2-01-SC, and issue the corresponding official receipt;

c)  examine, in case of real estate mortgage foreclosure, whether the applicant has complied with all the requirements before the public auction is conducted under the direction of the sheriff or a notary public, pursuant to Sec. 4 of Act 3135, as amended;

d)  sign and issue the certificate of sale, subject to the approval of the Executive Judge, or in his absence, the Vice-Executive Judge.  No certificate of sale shall be issued in favor of the highest bidder until all fees provided for in the aforementioned sections and in Rule 141, Section 9(1), as amended by A.M. No. 00-2-01-SC, shall have been paid; Provided, that in no case shall the amount payable under Rule 141, Section 9(1), as amended, exceed P100,000.00;

e)  after the certificate of sale has been issued to the highest bidder, keep the complete records, while awaiting any redemption within a period of one (1) year from date of registration of the certificate of sale with the Register of Deeds concerned, after which, the records shall be archived.  Notwithstanding the foregoing provision, juridical persons whose property is sold pursuant to an extra-judicial foreclosure, shall have the right to redeem the property 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 earlier, as provided in Section 47 of Republic Act No. 8791 (as amended, Res. Of August 7, 2001).

Where the application concerns the extrajudicial foreclosure of mortgages of real estates and/or chattels in different locations covering one indebtedness, only one filing fee corresponding to such indebtedness shall be collected.  The collecting Clerk of Court shall, apart from the official receipt of the fees, issue a certificate of payment indicating the amount of indebtedness, the filing fees collected, the mortgages sought to be foreclosed, the real estates and/or chattels mortgaged and their respective locations, which certificate shall serve the purpose of having the application docketed with the Clerks of Court of the places where the other properties are located and of allowing the extrajudicial foreclosures to proceed thereat.

3.  The notices of auction sale in extrajudicial foreclosure for publication by the sheriff or by a notary public shall be published in a newspaper of general circulation pursuant to Section 1, Presidential Decree No. 1079, dated January 2, 1977, and non-compliance therewith shall constitute a violation of Section 6 thereof.

4.  The Executive Judge shall, with the assistance of the Clerk of Court, raffle applications for extrajudicial foreclosure of mortgage under the direction of the sheriff among all sheriffs, including those assigned to the Office of the Clerk of Court and Sheriffs IV assigned in the branches.

5.  The name/s of the bidder/s shall be reported by the sheriff or the notary public who conducted the sale to the Clerk of Court before the issuance of the certificate of sale.

This Resolution amends or modifies accordingly Administrative Order No. 3 issued by then Chief Justice Enrique M. Fernando on 19 October 1984 and Administrative Circular No. 3-98 issued by the Chief Justice Andres R. Narvasa on 5 February 1998.

The Court Administrator may issue the necessary guidelines for the effective enforcement of this Resolution.

The Clerk of Court shall cause the publication of this Resolution in a nuewspaper of general circulation not later than August 14, 2001 and furnish copies thereof to the Integrated Bar of the Philippines.

This Resolution shall take effect on the 1^st day of September of the year 2001.

Promulgated this 7^th day of August 2001 in the City of Manila.

Davide, Jr., C.J., Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Panganiban, Quisumbing, Pardo, Buena, Gonzaga-Reyes, Ynares-Santiago, andDe Leon, Jr., JJ., concur.

Sandoval-Gutierrez J., on leave.

Prescription of Action to Foreclose

          Under Article 1142 of the Civil Code, a mortgage action prescribes after ten (10) years. Jurisprudence, however, has clarified this rule by holding that a mortgage action prescribes after ten (10) years from the time the right of action accrued, which is obviously not the same as the date of the mortgage contract. Stated differently, an action to enforce a right arising from a mortgage should be enforced within ten (10) years from the time the right of action accrues; otherwise, it will be barred by prescription and the mortgage creditor will lose his rights under the mortgage. The right of action accrues when the mortgagor defaults in the payment of his obligation to the mortgagee. (HERMINIA CANDO vs. SPS. AURORA OLAZO and CLAUDIO OLAZO, G.R. No. 160741, March 22, 2007)

Interruption of Prescription of Action to Foreclose

          Art. 1155 of the Civil Code provides that prescription of actions is interrupted when they are filed before the court, when there is a written extrajudicial demand by the creditors, and when there is any written acknowledgment of the debt by the debtor.

CASE DIGEST (Transportation Law): PHILTRANCO vs. CA

                                                      PHILTRANCO vs. Court of Appeals

(G.R. No. 120553 June 17, 1997)

FACTS:

Ramon Acuesta, while riding in his bicycle, was bumped and ran over by a defendant’s bus which resulted to his death.

As expected, the heirs of Ramon filed a suit for damages with the trial court which eventually ordered, after trial, that the petitioners to jointly and severally pay the private respondents the following amounts:

1) P55, 615.72 as actual damages;
2) P200,000 as death indemnity for the death of the victim Ramon A. Acuesta;
3) P1 million as moral damages;
4) P500,000 by way of exemplary damages;
5) P50,000 as attorney's fees; and
6) the costs of suit.

On appeal, the CA affirmed the trial court’s decision.

ISSUE:

Whether or not the damages awarded are improper and excessive.

HELD: Yes.

The trial court erroneously fixed the "death indemnity" at P200,000. The private respondents defended the award in their Opposition to the Motion for Reconsideration by saying that "[i]n the case of Philippine Airlines, Inc. vs. Court of Appeals, 185 SCRA 110, our Supreme Court held that the award of damages for death is computed on the basis of the life expectancy of the deceased." In that case, the "death indemnity" was computed by multiplying the victim's gross annual income by his life expectancy, less his yearly living expenses. Clearly then, the "death indemnity" referred to was the additional indemnity for the loss of earning capacity mentioned in Article 2206(1) of the Civil Code, and not the basic indemnity for death mentioned in the first paragraph thereof. This article provides as follows:

Art. 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand pesos, even though there may have been mitigating circumstances. In addition:

(1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter; such indemnity shall in every case be assessed and awarded by the court, unless the deceased on account of permanent physical disability not caused by the defendant, had no earning capacity at the time of his death;

We concur with petitioners' view that the trial court intended the award of "P200,000.00 as death indemnity" not as compensation for loss of earning capacity. Even if the trial court intended the award as indemnity for loss of earning capacity, the same must be struck out for lack of basis. There is no evidence on the victim's earning capacity and life expectancy.

Only indemnity for death under the opening paragraph of Article 2206 is due, the amount of which has been fixed by current jurisprudence at P50,000.

The award of P1 million for moral damages to the heirs of Ramon Acuesta has no sufficient basis and is excessive and unreasonable. This was based solely on the testimony of one of the heirs, Atty. Julio Acuesta, x x x. Since the other heirs of the deceased did not take the witness stand, the trial court had no basis for its award of moral damages to those who did not testify thereon.

Moral damages are emphatically not intended to enrich a plaintiff at the expense of the defendant. They are awarded only to allow the former to obtain means, diversion, or amusements that will serve to alleviate the moral suffering he has undergone due to the defendant's culpable action and must, perforce, be proportional to the suffering inflicted. 20 In light of the circumstances in this case, an award of P50,000 for moral damages is in order.

The award of P500,000 for exemplary damages is also excessive. In quasi-delicts, exemplary damages may be awarded if the party at fault acted with gross negligence. The Court of Appeals found that there was gross negligence on the part of petitioner Manilhig. Under Article 2229 of the Civil Code, exemplary damages are imposed by way of example or correction for the public good, in addition to the moral, temperate, liquidated, or compensatory damages. Considering its purpose, it must be fair and reasonable in every case and should not be awarded to unjustly enrich a prevailing party. In the instant case, an award of P50,000 for the purpose would be adequate, fair, and reasonable.

Finally, the award of P50,000 for attorney's fees must be reduced. The general rule is that attorney's fees cannot be recovered as part of damages because of the policy that no premium should be placed on the right to litigate. Stated otherwise, the grant of attorney's fees as part of damages is the exception rather than the rule, as counsel's fees are not awarded every time a party prevails in a suit. Such attorney's fees can be awarded in the cases enumerated in Article 2208 of the Civil Code, and in all cases it must be reasonable. In the instant case, the counsel for the plaintiffs is himself a co-plaintiff; it is then unlikely that he demanded from his brothers and sisters P100,000 as attorney's fees as alleged in the complaint and testified to by him. He did not present any written contract for his fees. He is, however, entitled to a reasonable amount for attorney's fees, considering that exemplary damages are awarded. Among the instances mentioned in Article 2208 of the Civil Code when attorney's fees may be recovered is "(1) when exemplary damages are awarded." Under the circumstances in this case, an award of P25,000 for attorney's fees is reasonable.

The petitioners did not contest the award for actual damages fixed by the trial court. Hence, such award shall stand.

CASE DIGEST (Credit Transactions): ACME vs. Court of Appeals

ACME SHOE, RUBBER & PLASTIC CORPORATION and CHUA PAC vs.HON. COURT OF APPEALS, BANK OF THE PHILIPPINES and REGIONAL SHERIFF OF CALOOCAN CITY

G.R. No. 103576 August 22, 1996

FACTS:
Petitioner Chua Pac, the president and general manager of co-petitioner Acme executed a chattel mortgage in favor of private respondent Producers Bank as a security for a loan of P3,000,000. A provision in the chattel mortgage agreement was to this effect:

"In case the MORTGAGOR executes subsequent promissory note or notes either as a renewal of the former note, as an extension thereof, or as a new loan, or is given any other kind of accommodations such as overdrafts, letters of credit, acceptances and bills of exchange, releases of import shipments on Trust Receipts, etc., this mortgage shall also stand as security for the payment of the said promissory note or notes and/or accommodations without the necessity of executing a new contract and this mortgage shall have the same force and effect as if the said promissory note or notes and/or accommodations were existing on the date thereof. This mortgage shall also stand as security for said obligations and any and all other obligations of the MORTGAGOR to the MORTGAGEE of whatever kind and nature, whether such obligations have been contracted before, during or after the constitution of this mortgage."

In due time, the loan of P3,000,000.00 was paid. Subsequently it obtained additional loan totalling P2,700,000.00 which was also duly paid.

Another loan was again extended (P1,000,000.00) covered by four promissory notes for P250,000.00 each, but went unsettled prompting the bank to apply for an extrajudicial foreclosure with the Sheriff.

ISSUE:
Would it be valid and effective to have a clause in a chattel mortgage that purports to likewise extend its coverage to obligations yet to be contracted or incurred?

HELD:
No. While a pledge, real estate mortgage, or antichresis may exceptionally secure after-incurred obligations so long as these future debts are accurately described, a chattel mortgage, however, can only cover obligations existing at the time the mortgage is constituted. Although a promise expressed in a chattel mortgage to include debts that are yet to be contracted can be a binding commitment that can be compelled upon, the security itself, however, does not come into existence or arise until after a chattel mortgage agreement covering the newly contracted debt is executed either by concluding a fresh chattel mortgage or by amending the old contract conformably with the form prescribed by the Chattel Mortgage Law. Refusal on the part of the borrower to execute the agreement so as to cover the after-incurred obligation can constitute an act of default on the part of the borrower of the financing agreement whereon the promise is written but, of course, the remedy of foreclosure can only cover the debts extant at the time of constitution and during the life of the chattel mortgage sought to be foreclosed.