Notice to mortgagor is required prior to extrajudicial foreclosure

Foreclosure of property is a remedy used to satisfy an obligation in case the debtor defaults on his or her obligation.

Foreclosure can be judicial or extrajudicial, the latter being governed by Act 3135, as amended by Act 4118, or "An act to regulate the sale of property under special powers inserted in or annexed to real estate mortgages."

A careful reading of this law shows that the only notice required is found in Section 3 thereof, which provides:

"SEC. 3. Notice shall be given by posting notices of the sale for not less than twenty days in at least three public places of the municipality or city where the property is situated, and if such property is worth more than four hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city."

Notably, and as consistently ruled in the past by the Supreme Court, personal notice to the mortgagor is not required as the only notice required under this law is a notice of sale to the public. However, in the recent case of Philippine Savings Bank v. Josephine Co (GR 232004, Oct. 6, 2021, Ponente: Associate Justice Marvic M.V.F Leonen), the Supreme Court revisited this interpretation, stating:

"Notwithstanding the absence of an express directive under Act No. 3135, principles of due process and the utmost diligence of banks require that mortgagors be personally notified of extrajudicial foreclosures of their mortgages prior to public auctions.

"Due process requires that a mortgagor be notified, to afford him or her an opportunity to safeguard his or her rights prior to the extrajudicial foreclosure of his or her mortgage, and the sale of his or her property. The current reading of Act No. 3135 affords no safeguards whatsoever for the mortgagor. The publication requirement under Act No. 3135 is not intended as a notification for the mortgagor, but rather for the public, to enable participation in the auction sale of the foreclosed property."

The extrajudicial foreclosure made without your knowledge or personal notice may be held null and void as it violates your right to due process. Such action amounts to a deprivation on your part of any opportunity to exhaust all possible legal remedies to protect your interest.

Ratings upgrade possible as S&P raises PH outlook

S&P Global Ratings affirmed the Philippines’ investment grade rating on Tuesday and raised its outlook to “positive” from “stable” to reflect the economy’s strong growth potential amid improved institutional strength on the back of “effective policy making.”

The debt watcher on Tuesday affirmed its “BBB+” long-term credit rating for the country, which is a notch below the “A” level grade targeted by the government. It also kept its “A-2” short-term rating for the Philippines.

Still, S&P Global raised its rating outlook to “positive” from “stable.” A positive outlook means the Philippines’ credit rating could be raised over the next two years if improvements are sustained.

“Our improved institutional assessment drives our positive outlook on the Philippines. We believe the strengthening of the country’s institutional settings, which had contributed to a significant enhancement in the sovereign’s credit metrics over the past decade, will continue,” S&P Global said in a statement. “This is demonstrated by the strong economic recovery in the last two years, and ongoing reforms to support business and investing conditions.”

“This improvement could lead to stronger sovereign support over the next 12-24 months if the Philippines’ economy maintains its external strength, healthy growth rates, and that fiscal performance will strengthen.”

Bangko Sentral ng Pilipinas (BSP) Governor Eli M. Remolona, Jr. said the debt watcher’s upgraded outlook “reflects the work the government has done to improve the economic, fiscal, and monetary environment, enabling strong growth to continue.”

Finance Secretary Ralph G. Recto likewise said this “reaffirms our stable economic and political environment and that we are on track to achieve a growth-enhancing fiscal consolidation.”

“We have a comprehensive ‘Road to A’ initiative to ensure that we secure more upgrades soon,” he added.

S&P Global said the Philippines’ sovereign rating reflects the economy’s “above-average growth potential.”

“This strength underpins constructive development outcomes. The ratings also benefit from the country’s strong external position,” it added.

For the first nine months of the year, the Philippine economy expanded by 5.8%, slightly below the government’s goal of 6-7% gross domestic product (GDP) growth this year.

The government is targeting 6.5-7.5% GDP growth next year and 6.5-8% growth from 2026 to 2028.

S&P Global expects Philippine GDP growth to average 5.5% this year, driven by exports and easing inflationary pressures.

“Ongoing reform on the business, investment, and tax fronts should benefit growth over the next three to four years.”

The Philippine economy will likely grow at an average of 6.2% a year over the next three years, it added.

“Solid household and corporate balance sheets, and sizable remittance inflows underpin the Philippine economy’s positive medium-term trajectory,” S&P Global said.

“Ongoing efforts to address infrastructure gaps, and improvements in the business climate through regulatory and tax reforms should also support growth in economic productivity.”

FISCAL REFORMS

The government’s fiscal reforms have also boosted the economic outlook, the credit rater said.

“We believe that effective policy making in the Philippines has delivered structural improvements to the country’s credit metrics. Fiscal reforms have raised government revenue as a share of GDP and helped to fund public investment. Improved infrastructure and policy environment have helped to keep economic growth strong in much of the past decade,” it said.

“The government’s fiscal and debt settings had deteriorated due to the economic fallout from the pandemic and the associated extraordinary policy responses. Fiscal buffers built through a long record of prudence before the pandemic thinned, but consolidation has begun with the economic recovery well on track.

The Philippines’ low GDP per capita relative to other investment-grade sovereigns temper these strengths,” it added.

Latest data from the Treasury showed that the budget deficit narrowed by 1.35% to P970.2 billion in the first nine months.

The government is seeking to bring the deficit-to-GDP ratio to 5.6% this year and further down to 3.7% by 2028.

“The Philippine government has generally enacted effective and prudent fiscal policies over the past decade. Improvements to the quality of expenditure, manageable fiscal deficits, and relatively low general government indebtedness testify to this,” S&P Global said.

However, the credit rater said restoring fiscal and debt settings to pre-pandemic levels will be challenging and likely be a gradual process.

“The ongoing economic recovery in the Philippines should facilitate a reduction in the general government deficit and a further stabilization of the debt burden,” it said. “It will, however, take several years for fiscal balances to recover to pre-pandemic levels given the eroded fiscal headroom.”

S&P Global added that it expects the country’s net general government debt to gradually decline amid continued fiscal consolidation.

Moving forward, the debt watcher said it could upgrade the Philippines’ credit rating if the current account deficit and fiscal position remain well-managed.

“We may raise the ratings if our expectations of current account deficits tapering over the forecast period are realized such that buffers in the Philippines’ narrow net external asset position are maintained and if the government achieves more rapid fiscal consolidation,” it said.

S&P Global expects the country’s current account deficit to persist but at “modest levels.”

The BSP estimates the current account deficit to reach $6.8 billion this year, equivalent to 1.5% of GDP. In the first half of the year, the country’s current account deficit stood at $7.1 billion, accounting for 3.2% of economic output.

On the other hand, the rating outlook could be revised down to “stable” if economic recovery slows down or if the government’s fiscal and debt positions deteriorate.

“If persistently large current account deficits lead to a structural weakening of the Philippines’ external balance sheet, we would also revise the outlook to stable,” S&P Global added.

Source: Business World

Heirs are not liable for their parents' debts

In the Philippines, the principle that heirs are not liable for their parents’ debts is a crucial aspect of inheritance law. This principle ensures that the financial obligations of a deceased person do not unduly burden their heirs. Let’s delve into the legal framework and provisions under the New Civil Code of the Philippines that govern this principle.

The Principle Explained

When a person passes away, their estate, which includes all their assets and liabilities, is subject to settlement. The estate is used to pay off any outstanding debts before any distribution to the heirs. However, if the estate is insufficient to cover the debts, the heirs are not personally liable to pay the remaining balance from their own pockets.

Key Provisions in the New Civil Code

The New Civil Code of the Philippines provides clear guidelines on this matter:

1. Article 774: Defines succession as the mode of acquisition by virtue of which the property, rights, and obligations to the extent of the value of the inheritance of a person are transmitted through his death to another or others.

2. Article 776: States that the inheritance includes all the property, rights, and obligations of a person which are not extinguished by his death.

3. Article 774: Emphasizes that the heirs are only liable to the extent of the value of the inheritance they receive. This means that if the inherited estate is insufficient to cover the debts, the heirs are not required to pay the excess from their personal assets.

4. Article 1311: Reinforces that contracts take effect only between the parties, their assigns, and heirs, except in cases where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. This means that personal obligations of the deceased do not automatically transfer to the heirs.

Practical Implications

In practice, this means that if a parent leaves behind debts that exceed the value of their estate, the creditors can only claim up to the value of the estate. The heirs are protected from having to use their personal funds to settle these debts. This protection is vital for ensuring that the financial stability of the heirs is not compromised by the debts of the deceased.

Conclusion

The principle that heirs are not liable for their parents’ debts is a fundamental aspect of Philippine inheritance law. It ensures that the financial responsibilities of the deceased do not unfairly impact the heirs. The New Civil Code provides robust provisions to protect heirs, limiting their liability to the value of the inheritance they receive. This legal framework is essential for maintaining fairness and protecting the rights of heirs in the Philippines.

Source: The Manila Times and RALB Law