Foreclosure Sales Upholding Validity Despite Single Bidder

The Supreme Court has settled a common question among property owners facing foreclosure: is an auction sale void if only one bidder shows up? In Spouses Certeza v. Philippine Savings Bank (G.R. No. 190078, March 5, 2010), the Court ruled that a foreclosure sale with a single bidder is valid and regular. This decision provides clarity for both lenders and borrowers navigating extrajudicial foreclosures under Philippine law.

The Case Background

The petitioners obtained a ₱1,255,000.00 loan from Philippine Savings Bank, secured by two parcels of land covered by Transfer Certificates of Title. When they failed to pay their obligation, the bank instituted extrajudicial foreclosure proceedings under Act No. 3135, as amended.

At the auction sale held on February 18, 2003, the bank emerged as the sole and highest bidder. A Certificate of Sale was issued in its favor and registered with the Registry of Deeds. After the one-year redemption period expired without redemption, the bank filed an ex-parte petition for a writ of possession, which the Regional Trial Court granted.

The petitioners later sought to intervene and nullify the foreclosure sale, arguing that it violated the supposed requirement of at least two bidders under A.M. No. 99-10-05-0, the procedural rules for extrajudicial foreclosure. Both the trial court and the Court of Appeals denied their motions, prompting them to elevate the case to the Supreme Court.

The Two-Bidder Requirement Issue

The petitioners' main argument rested on an earlier version of A.M. No. 99-10-05-0, which originally required at least two participating bidders before an auction sale could proceed. That original provision stated that no auction sale should be held unless at least two bidders participated, otherwise the sale would be postponed.

However, the Supreme Court explained that this requirement was not found in Act No. 3135, the law governing extrajudicial foreclosure of mortgages. In a January 30, 2001 Resolution, the Court itself amended A.M. No. 99-10-05-0 to remove the two-bidder requirement.

Why the Rule Was Removed

The Court explained that the two-bidder requirement was originally designed for government infrastructure contracts under P.D. No. 1594, where public interest is paramount. In contrast, while there is public interest in the regularity of mortgage foreclosures, the private interest of the parties is the predominant concern.

The Court also noted practical problems with the old rule. Requiring at least two bidders would necessitate republication of the auction notice if only one bidder appeared, which is costly. More importantly, it would render ineffective the binding effect of the original publication of the scheduled sale.

As amended, paragraph 5 of A.M. No. 99-10-05-0 now simply requires the sheriff or notary public to report the name/s of the bidder/s to the Clerk of Court before issuing the certificate of sale.

The Ruling on Validity

The Supreme Court held that the foreclosure sale conducted with the bank as the sole bidder was regular and valid. Consequently, the issuance of the writ of possession was likewise valid.

The Court also addressed the argument that Circular No. 7-2002's use of the word "bids" in its plural form implied a requirement for multiple bidders. The Court clarified that the plural usage does not make it mandatory to have more than one bidder for an auction sale to be valid.

Practical Takeaways

• A single bidder can validly win a foreclosure auction. The two-bidder requirement no longer exists under A.M. No. 99-10-05-0, as amended in 2001.
• The creditor may bid at the foreclosure sale. Under Section 5 of Act No. 3135, the mortgagee can participate in the bidding and purchase the property under the same conditions as any other bidder.
• A writ of possession is ministerial. Once the redemption period expires and a certificate of sale is issued, courts generally grant the purchaser's petition for possession without further inquiry into the sale's regularity.
• Challenges to foreclosure sales must be timely. Borrowers who wish to question alleged irregularities should act promptly, as courts may treat belated intervention motions as improper.
• Act No. 3135 remains the governing law. Its provisions, not administrative circulars, control the manner of extrajudicial foreclosure sales and redemption periods.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.