Private interest

Is an extrajudicial foreclosure of mortgage null and void if there is only one bidder in the auction sale conducted pursuant thereto? This is the question answered in this case of the spouses Mar and Rose, and Mandy and Minia.

The case involved two parcels of land together with all the buildings and improvements thereon owned by the two spouses and mortgaged to a bank (PSB) to secure their loan of P1,255,000. On May 8, 2002, when the spouses failed to pay their obligation despite demands, the bank instituted extrajudicial foreclosure proceedings on the real estate mortgage pursuant to Act 3135, as amended.

During the auction sale conducted on February 18, 2003, PSB itself emerged as the sole and highest bidder. So a corresponding Certificate of Sale dated February 20, 2003 was issued in its favor which was registered with the Registry of Deeds on March 25, 2003.

On December 1, 2003 PSB filed an Ex Parte Petition for a Writ of Possession before the Regional Trial Court (RTC). On September 21, 2004, after the period of redemption had already expired, the Writ was granted by the RTC. On January 20, 2005 the spouses filed a Motion to stop the implementation of the Writ. They claimed and sought the nullification of the foreclosure sale for allegedly having been conducted in contravention of the procedural requirements in Extrajudicial Foreclosure particularly A.M. Circular No. 99-10-05-0 which took effect on January 15, 2000 requiring at least two participating bidders in an auction sale. Were they correct?

No. The law governing extrajudicial foreclosure of mortgage is Act 3135. The requirement of at least two participating bidders provided in the AM cited is not found in said law. The two-bidder rule is provided in PD 1594 and its implementing rules with respect to contracts for government infrastructure projects because of the public interest involved. Although there is public interest in the regularity of extrajudicial foreclosure of mortgages, the private interest is predominant. The reason therefore for the two-bidder requirement is not as exigent as in contracts for government infrastructure projects.

Hence A.M. Circular 99-10-05-0 has already been amended by Circular 7-2002 Section 5 (a) issued on April 22, 2002 pursuant to Resolutions of January 30, 2001 and August 7, 2001 which provides that “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 Section4). 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. Payment of the winning bid shall be made either in cash or manager’s check, in Philippine currency within 5 days from notice”.

The use of the word “bids” (in plural form) does not make it mandatory requirement to have more than one bidder for an auction sale to be valid. AM 99-10-05-0 as amended no longer prescribes the requirement of at least two bidders for a valid auction sale (Spouses Certeza and Villamayor, Jr. vs. Philippine Savings Bank, G.R. 190078, March 5, 2010).

Note: Books containing compilation of my articles on Labor Law and Criminal Law (Vols. I and II) are now available. Call tel. 7249445.

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