Extrajudicial Foreclosure of Property Subject of a Real Estate Mortgage
In the extrajudicial foreclosure of property subject of a real estate mortgage, Act 3135 (“An Act to Regulate the Sale of Property Under Special Powers Inserted in or Annexed to Real Estate Mortgages”) is explicit and definite about the special power to sell the property being required to be either inserted in or attached to the deed of mortgage. Section 1 of Act 3135 provides:
“Section 1. When a sale is made under a special power inserted in or attached to any real estate mortgage hereafter made as security for the payment of money or the fulfillment of any other obligation, the provisions of the following section shall govern as to the manner in which the sale and redemption shall be effected, whether or not provision for the same is made in the power.”
Accordingly, to enable the extrajudicial foreclosure of a REM, the special power to sell must be either inserted in the REM itself or embodied in a separate instrument attached to the REM.
If no special power to sell is either inserted in the REM or attached to the REM the foreclosing mortgagee, cannot initiate the extrajudicial foreclosure, but must resort to judicial foreclosure pursuant to the procedure set forth in Rule 68 of the Rules of Court.
The requirement for the special power or authority to sell finds support in the civil law.
To begin with, because the sale of the property by virtue of the extrajudicial foreclosure would be made through the sheriff by the mortgagee acting as agents, there must be a written authority from the mortgagors-owners in favor of the former as their agents;
otherwise, the sale would be void.
Article 1874 of the Civil Code provides:
“Article 1874. When a sale of a piece of land or any interest therein is through an agent, the authority of the latter shall be in writing; otherwise, the sale shall be void.”
Secondly, considering that, pursuant to Article 1878, (5) of the Civil Code, a special power of attorney was necessary for entering “into any contract by which the ownership of an immovable is transmitted or acquired either gratuitously or for a valuable consideration,” the written authority must be a special power of attorney to sell.