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[A.M. No. 99-10-05-0.January 30, 2001]
RE: PROCEDURE IN EXTRA-JUDICIAL FORECLOSURE OF MORTGAGES
EN BANC
Gentlemen:
Quoted hereunder for your Information, is a resolution of this Court dated JAN 30 2001.
A.M. No. 99-10-05-0 (Re: Procedure in Extra-Judicial Foreclosure of Mortgages.)
For consideration are the following: (1) Letter, dated January 14, 2000, of Atty. Lucas C. Licerio; (2) Position Paper, dated February 23, 2000, of 12 clerks of court of Regional Trial Courts in Metro Manila; (3) Letter, dated February 7, 2000, of Atty. Antonio V. Viray of Metropolitan Bank and Trust Company; (4) Letter, dated March 19, 2000, of Notary Public Roseller Viray; (5) Letter, dated June 9, 2000, of the Chamber of Thrift Banks; and (6) Letter, dated April 14, 2000, of Mr. Pedro Malabanan of PDCP Development Bank, Inc.
The letters contain observations and proposals concerning the rules of procedure for the extrajudicial foreclosure of mortgages as embodied in Circular A.M. No. 99-10-05-0 of the Court. The observations and proposals cover the following subjects: (1) persons authorized to conduct extrajudicial foreclosure; (2) approval by the executive judge of the certificate of sale and the participation of deputy sheriffs; (3) fees; (4) bidding requirements; and (5) publication of notices.
The parties concerned seek a review of A.M. No. 99-10-05-0 and a clarification of the rules for its implementation.Pending such revision, Atty. Licerio asks that implementation of the circular be suspended and the fees paid under protest by one of his clients be refunded. The Chamber of Thrift Banks on the other hand, requests that a ceiling or cap on the sheriff's fees be provided so as not to unduly increase the redemption price.
Pursuant to the instructions of the Court, Court Administrator Alfredo L. Benipayo submitted a memorandum, dated March 13, 2000, commenting on the letter of Atty. Antonio V. Viray and the position paper of the RTC Clerks of Courts.
After due deliberation on the points raised by the parties and considering the report of the OCA, the Court resolved as follows:
1. Paragraph 5 of the Circular A.M. No. 99-10-05-0 provides:
No auction sale shall be held unless there are at least two (2) participating bidders, otherwise the sale shall be postponed to another date. If on the new date set for the sale there shall not be at least two bidders, the sale shall then proceed. The names of the bidders 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.
It is contended that this requirement is not found in Act No. 3135 and that it is impractical and burdensome, considering that not all auction sales are commercially attractive to prospective bidders.
The observation is well taken. Neither Act No, 3135 nor the previous circulars issued by the Court governing extrajudicial foreclosures provide for a similar requirement. The two-bidder rule is provided under P.D. No. 1594 and its implementing rules with respect to contracts for government infrastructure projects because of the public interest involved. Although there is a public interest in the regularity of extrajudicial foreclosure of mortgages, the private interest is predominant. The reason, therefore, for the requirement that there must be at least two bidders is not as exigent as in the case of contracts for government infrastructure projects.
On the other hand, the new requirement will necessitate re-publication of the notice of auction sale in case only one bidder appears at the scheduled auction sale. This is not only costly but, more importantly, it would render naught the binding effect of the publication of the originally scheduled sale. Prior publication of the extrajudicial foreclosure sale in a newspaper of general circulation operates as constructive notice to the whole world (Cruz vs. Court of Appeals, 191 SCRA 170 (1990); Bohanan v. Court of Appeals, 256 SCRA 355 (1996)).
Indeed, the object of a notice of sale is to inform the public of the nature and condition of the property to be sold, and of the time, place, and terms of the sale so as to secure bidders and thus prevent a sacrifice of the property (See Olizon v. Court of Appeals, 236 SCRA 148 (1994)). Except for errors or omissions in the notice of sale which are calculated to deter or mislead bidders, to depreciate the value of the property, or to prevent it from bringing a fair price, simple mistakes or omissions are not considered fatal to the validity of the notice and the sale made pursuant thereto.
2. Objections are made with regard to the imposition and collection of legal fees. It is contended that Act No. 3135 does not authorize the collection and payment of sheriff's fees apart from the P5.00 for each day of actual work performed by the officer conducting the sale under �4 of the law. Queries are likewise made whether sheriff's fees should be paid in extrajudicial foreclosures conducted under the direction of notaries public. In addition, Mr. Pedro Malabanan of the PDCP asks questions concerning the collection of fees in three hypothetical situations given in his letter. On the other hand, Mr. Reynato D. Sarmiento of the Chamber of Thrift Banks suggests that, with regard to the collection of sheriff's fees, a cap or ceiling should be imposed on the amount to be collected or, in the alternative, that the amount of the fees to be imposed should be based on each transaction and not on the amount of the highest bid.
The provision for the collection of fees in extrajudicial foreclosures is not new. It was first embodied in Administrative Order No. 3, dated October 19, 1984, which required the payment of filing fees upon the filing of an application for extrajudicial foreclosure. On the other hand, Administrative Circular No. 3-98, dated February 5, 1998, required the payment of sheriff's fees, in addition to filing fees, by adopting the schedule of filing fees and sheriff's fees in Rule 141, ��7(c) and 9(1) of the Rules of Court. The Circular made payment of these fees a condition for the issuance of a certificate of sale by providing that "no certificate of sale shall be issued in favor of the highest bidder until all fees provided for in the aforementioned Sections [Rule 141, �7(c)] and �9(1) of Rule 141 shall have been paid."
The imposition of filing fees as well as that of the sheriff's fees is sanctioned by P.D. No. 1949 which authorizes the judiciary, "in the discharge of its functions and duties, [to] generate its own funds and resources."
Accordingly, the question whether under Circular A.M. No. 99-10-05-0 the mortgagee is required to pay the sheriff's fees in extrajudicial foreclosures conducted under the direction of the notary public, must be answered in the affirmative.Administrative Circular No. 3-98 governs the procedure for extrajudicial foreclosures conducted by sheriffs as well as notaries public.In case the extrajudicial foreclosures is done under the direction of the notary public, the amount corresponding to the sheriff's fees shall accrue to the general fund of the Court.Consequently, in redeeming his property, the mortgagee must pay the fees paid by the highest bidder.
The proposal that a ceiling or cap be imposed on the amount of the sheriff's fees is well taken.Rule 141, �9(1), in accordance with which the sheriff's fees in extrajudicial foreclosures are computed, provides:
Sec. 9. Sheriffs and other persons serving processes. -
..
(1)For money collected by him by order, execution, attachment, or any process, judicial or extrajudicial, the following sums to wit:
1.On the first four thousand (P4,000.00) pesos, two and one-half (2.5%) per centum.
2.On all sums in excess of four thousand (P4,000.00) pesos, two and one-half (2.5%) per centum.
The amount of the
sheriff's fees is thus based on the amount of the highest bid notwithstanding
that the services to be rendered, either by the sheriff or the notary public,
is essentially the same.Considering
that the amount paid for the sheriff's commission, as in the other fees which
are required to be paid, will be included in the computation of the redemption
price, the imposition of a cap or ceiling thereon works to the benefit both of
the creditor-mortgagee as well as the debtor-mortgagor.Accordingly, while sheriff's fees in extrajudicial
foreclosure are to be computed in accordance with Rule 141, �9(1), the total
amount of fees should not exceed P100,000.00.
Mr. Malabanan's letter is referred to the OCA for appropriate action.
3.The Clerks of Court in the 12 RTCs of Metro Manila contend that A.M. No. 99-10-05-0, in requiring that applications for extrajudicial judicial foreclosure under the direction of the sheriff shall be raffled among the sheriffs in the branches, in effect amends Act. No. 3135 because this law authorizes only the provincial sheriffs, the notaries public, and judges of Municipal Trial Courts to conduct extrajudicial foreclosure of mortgages.They claim that the participation of the branch deputy sheriffs makes the clerks of court responsible for irregularities committed by the deputy sheriffs.
The participation of the Sheriffs IV or Branch Deputy Sheriffs in the extrajudicial foreclosures is provided for in Administrative Circular No. 3-98.The rule is a valid exercise of the Court's power to promulgate rules for the implementation of Act No. 3135.
With regard to the claim that the Circular in question makes the Clerks of Court, who are ex oficio sheriffs, answerable for irregularities which may be committed by Sheriffs IV, suffice it to say that under the Manual for Clerks of Court (Chapter VII, �A.1), Clerks of Court exercise general supervision over all court personnel.That they may be held liable for acts or omissions of Sheriffs IV is a reasonable consequence of such duty.As this Court has more than one explained:"Supervision is not a meaningless thing.It is an active power.It is certainly not without limitation, but it at least implies authority to inquire into facts and conditions in order to render the power real and effective." (Planas v. Gil, 67 Phil. 62, 77 (1939); Mondano v. Silvosa, 97 Phil. 143 (1955)).
4.It is likewise claimed that by failing to include the Municipal Trial Court Judge as one of the officers authorized to conduct extrajudicial foreclosures, A.M. No. 99-10-05-0 amends Act No. 3135, �4.
The contention has no merit.A.M. No. 99-10-05-0 was issued in line with Administrative Order No. 6, dated June 30, 1975, which deals with the powers and functions of executive judges of the Regional Trial Court in the management of courts within their administrative area.This is why A.M. No. 99-10-05-0 does not mention extrajudicial foreclosures conducted under the direction of the judges of the Municipal Trial Courts.But it is a mistake to say that the issuance of such resolution precludes the conduct of extrajudicial foreclosures under the direction of the Municipal Trial Court judge as provided under Act No. 3135.
5.Notary Public Roseller Viray inquiries whether, in the publication of the notice of auction sale in extrajudicial foreclosures conducted under the direction of the notary public, it is the notary public or the Regional Trial Court who selects the newspaper for the publication of the notices.The answer is found in P.D. No. 1079, �2 under which it is the executive judge of the Regional Trial Court who is tasked with this function.
Paragraph 3 of A.M. No. 99-10-05-0 provides that the notices of auction sale for publication by the sheriff or by the notary public shall be published in a newspaper of general circulation, pursuant to P.D. No. 1079, �1.Section 2 of the same Decree provides that in the selection of the newspaper for the publication of said notices -
The executive judge of the court of first instance shall designate a regular working day and a definite time each week during which the said judicial notices or advertisements shall be distributed personally by him for publication to qualified newspapers or periodicals as defined in the preceding section, which distribution shall be done by raffle:Provided, That should the circumstances require that another day be set for the purpose, he shall notify in writing the editors and publishers concerned at least three (3) days in advance of the designated date:Provided, further, That the distribution of said notices by raffle shall be dispensed with in case only one newspaper or periodical is in operation in a particular province or city.
In this connection, reference in paragraph 3 of Circular A.M. No. 99-10-05-0 to "Presidential decree No. 1709, dated January 27, 1997" is erroneous and should be corrected.The reference should be Presidential Decree No. 1079, dated January 2, 1977.
WHEREFORE, the Court RESOLVED:
1.To amend A.M. No. 99-10-05-0 as follows:
(a) Paragraph 2 is hereby amended so as to read thus:
"2. Upon receipt of an application for extrajudicial 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 therefor 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 AFOREMETIONED 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."
(b) Paragraph 3 is hereby amended so as to read thus:
"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. [1709, dated January 26, 1977] 1079, DATED JANUARY 2, 1977, and non-compliance therewith shall constitute a violation of Section 6 thereof;"
(c) Paragraph 5 is hereby amended so as to read thus:
"5. [No auction sale shall be held unless there are at least two (2) participating bidders, otherwise the sale shall be postponed to another date.If on the new date set for the sale there shall not be at least two bidders, the sale shall then proceed.] The [names] NAME/s of the [bidders] 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."
2. To direct the Office of the Court Administrator to prepare for the approval of the Court, the necessary guidelines for the enforcement of A.M. No. 99-10-05-0, as modified herein, taking into account the letter of Mr. Pedro Malabanan.
3. To deny for lack of merit the requests for suspension of implementation and refund of fees.Puno. J., is on official leave.
Very truly yours,
LUZVIMINDA D. PUNO
Clerk of Court
(Sgd.) MA. LUISA D. VILLARAMA
Asst. Clerk of Court
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