Prepared by: Zolletta Dantes Rodriguez Bachelor of Laws II-B

CHAPTER XI: REAL ESTATE MORTGAGE

A. BASIC CONCEPTS:
I. Definition: Mortgage According to Sanchez Roman A mortgage is a real right constituted to secure an obligation upon real property or rights therein to satisfy with the proceeds of the sale thereof such obligation when the same becomes due and has not been paid or fulfilled. According to the Civil Code of the Philippines A mortgage is a contract whereby the debtor secures to the creditor the fulfillment of a principal obligation, especially subjecting to such security, immovable property or real rights over immovable property in case the principal obligation is not complied with at the time stipulated. It is a real, accessory, and subsidiary contract. It is also unilateral because it creates an obligation only on the part of the creditor who must free the property from the encumbrance once the obligation is fulfilled. (NOTE: In the Philippines, the owner who constitutes a mortgage retains title to the property and does not lose attributes as an owner. He only creates a lien or encumbrance up his property.) II. Parties in the Contract of Mortgage Mortgagor he who constitutes a mortgage. Mortgagee he whose favor a mortgage is constituted. III. Kinds of Mortgages Conventional or Voluntary Mortgage is one created by agreement of the parties.

Legal Mortgage is one created by operation of law, wherein the

creditor is given a mortgage on the property of his debtor, without the necessity of the parties actually stipulating for it. May also be defined as one required by express provision of law to be executed in favor of certain persons to secure performance of a principal obligation. Judicial Mortgage is one resulting from a judgment. Equitable Mortgage is one that is not a mortgage in form but in substance a mere security for a debt or obligation. This commonly occurs in the case of a pacto de retro sales. IV. Laws governing mortgage in general Contract of Real Estate Mortgage Articles 2085 to 2092 and 2124 to 2131 of the Civil Code of the Philippines. Foreclosure of Mortgages Rule 68 of the Rules of Court (Judicial Foreclosure) and Act No. 3135, as amended by Act No. 4118 (ExtraJudicial Foreclosures)

 Aliens becoming mortgagees R.A. No. 133, approved in 1947, as superseded by R.A. 4381, and later by R.A. 4882, approved June 17, 1967.

Prepared by: Zolletta Dantes Rodriguez Bachelor of Laws II-B

V. Essential requisites of Mortgage According to Article 2085 of the Civil Code of the Philippines:

a) That it be constituted to secure the fulfillment of a principal obligation; b) That the mortgagor be the absolute owner of the thing mortgaged; c) That the person constituting the mortgage has the free disposal of the
property, and in the absence thereof, that he be legally authorized for the purpose. According to Article 2125:

a) It must be in a public instrument. b) It must be registered in the Office of the Registry of Deeds concerned. (NOTE: Failure to register, according to the same article, does not necessarily invalidate the mortgage, but limits its binding effect to the parties thereto only.) VI. Special Characteristics of Real Mortgage a) Realty as subject matter only real property or alienable rights and interests therein may be the subject matter of a mortgage. b) Real right A mortgage lien is a real right and as such it is good and binding against the whole world, and may be enforced by real action against all persons who may have existing rights or interests in the same property, not registered prior to the mortgage. c) Accessory obligation it presupposes the existence of a principal obligation.

d) Indivisibility The mortgage shall remain one and indivisible, unless

there there have been several things given in mortgage and each of them guarantees only a determinate portion of the obligation. e) Inseparability The mortgage, until discharged, follows the property to whomever it may be transferred no matter how many times over it changes hands as long as the annotation is carried over. f) Retention of possession The mortgagor generally retains the possession of the mortgaged property inasmuch as a mortgage is a mere lien and title to the property does not pass to the mortgagee.

B. IMPORTANT POINTS TO CONSIDER:

A person who deliberately ignores a significant fact that would create suspicion in an otherwise reasonable person is not an innocent purchaser for value. (DBP vs. CA) Registration is not the operative act for mortgage to be binding between the parties. But to third persons, it in indispensable. (Art. 2125, NCC)

A prior registration of a lien creates a preference. Even a prior mortgage will not diminish this preference, which retroacts to the date of annotation of the notice of lis pendens and the adverse claim. (Lavides vs. Pre) Prepared by: Zolletta
Dantes Rodriguez Bachelor of Laws II-B

Prepared by: Zolletta Dantes Rodriguez Bachelor of Laws II-B

Only the absolute owner of the property may constitute a valid mortgage. (Art. 2085)

Mortgage VS. Antichresis:

a.) As to possession of the property given in security: The debtor retains it in case of a mortgage; whereas, the creditor takes over in the case of antichresis. A mortgage coupled with delivery of possession of the land to the creditor, becomes antichresis. b) As to the fruits: In mortgage, the creditor does not gather or receive them, whereas, in antichresis the creditor generally receives them with the obligation to apply the value thereof or proceeds therefrom to the payment of interest due, and if any still remaining, to the principal obligation. c) In antichresis, the creditor is obliged to pay for the taxes and charges upon the estate; whereas in mortgage it is the debtor.

Real Mortgage VS. Chattel mortgage: a) Subject matter: Real Mortgage Real Property or real rights Chattel Mortgage chattels or personal property b) Formality required: Real Mortgage Public instrument Chattel Mortgage Private instrument accompanied with an affidavit of good faith.

provided

it

be

c) Foreclosure: Real Mortgage Right of redemption is always available for a period of 1 year (extra-judicially) Chattel Mortgage No right of redemption can be invoked after the chattels have been sold at public auction. The owner of registered land may mortgage the same by executing a mortgage deed, and such deed may be assigned, extended, discharged, released in whole or in part, or otherwise dealt with by the mortgagee by any form of deed or instrument sufficient in law for purpose. (Sec. 60 of P.D. No. 1529)

C. MORTGAGE
How deed is executed in a form sufficient in law (Sec. 112, P.D. No. 1529) a) It shall be sufficient when made substantially in accordance with the forms prescribed therein; b) Signed by the person or persons executing the same; c) In the presence of 2 witnesses who shall sign the instrument as witnesses to the execution thereof;

d) And shall be acknowledged to be his or their free act and deed before a notary public or other public officer authorized by law to take acknowledgment.

Prepared by: Zolletta Dantes Rodriguez Bachelor of Laws II-B

Registration of Mortgage (Sec. 61 of Act No. 496, as amended by P.D.

No. 1529) a) The mortgage deed is filed together with the owners duplicate certificate of title with the Register of Deeds of city or province where the land lies. b) Thereupon, this official enters the upon the original certificate of title and the owners duplicate certificate a memorandum of the purport of the mortgage deed, the time of filing, and the file number of the deed, signing the memorandum after the entry. c) He also notes down upon the mortgage deed the time of filing and a reference to the volume and page of the registration book where it is registered. Consideration of Mortgage

The consideration of Mortgage is that of the principal contract, from which it receives its life, and without which it cannot exist as an independent contract, even if the obligation thereby secured is of a third person, and therefore it will be valid, if the principal one is valid, and cannot be voided on the ground of lack of consideration.