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mortgage have on other right than to demand the execution and the recording
REAL MORTGAGE (Arts. 2124-2131) of the document in which the mortgage is formalized.
It is a contract whereby the debtor secures to the creditor the fulfillment of a
principal obligation, specially subjecting to such security immovable property INCIDENTS OF REGISTRATION OF MORTGAGE
or real rights over immovable property in case the principal obligation is not 1. Mortgagee entitled to registration of mortgage as a matter of right
complied with at the time stipulated. 2. Proceedings for registration do not determine validity of mortgage or its
effect
OBJECTS OF REAL MORTGAGE: 3. Registration is without prejudice to better right of third parties
1. immovables 4. Mortgage deed once duly registered forms part of the records for the
2. alienable real rights in accordance with the laws, imposed upon registration of the property mortgaged
immovables * future property cannot be object of mortgage 5. Mortgage by surviving spouse of his/her undivided share of conjugal
property can be registered
IMPORTANT POINTS
1. As a general rule, the mortgagor retains possession of the property EFFECT OF INVALIDITY OF MORTGAGE ON PRINCIPAL
he may deliver said property to the mortgagee without altering the nature of OBLIGATION
the contract of mortgage. 1. principal obligation remains valid
2. It is not an essential requisite that the principal of the credit bears 2. mortgage deed remains as evidence of a
interest, or that the interest as compensation for the use of the principal and personal obligation
the enjoyment of its fruits be in the form of a certain percent thereof.
EFFECT OF MORTGAGE
KINDS OF MORTGAGE: 1. creates real rights, a lien inseparable from the property mortgaged,
1. voluntary enforceable against the whole world
2. legal 2. creates merely an encumbrance
3. equitable – one which, although it lacks the proper formalities of a
mortgage shows the intention of the parties to make the property as a security LAWS GOVERNING MORTGAGE
for a debt (provisions governing equitable mortgage - arts 1365, 1450, 1454, 1. New Civil Code
1602, 1603, 1604 and 1607) 2. PD 1952
3. Revised Administrative Code
ESSENTIAL REQUISITES OF MORTGAGE: 4. RA 4882, as regards aliens becoming
1. constituted to secure the fulfillment of a principal obligation mortgages
2. mortgagor be the absolute owner of the thing pledged or mortgaged
3. the persons constituting the pledge or mortgage have the free disposal of FORECLOSURE OF MORTGAGE: It is the remedy available to the
their property, and in the absence thereof, that they be legally authorized for mortgagee by which he subjects the mortgaged property to the satisfaction of
the purpose the obligation to secure which the mortgage was given.
4. cannot exist without a valid obligation
5. when the principal obligation becomes due, the thing in which the pledge KINDS OF FORECLOSURE
or mortgage consists may be alienated for the payment to the creditor. 1. judicial
6. appears in a public document duly recorded in the Registry of Property to 2. extrajudicial
be validly constituted
Both should be distinguished from execution sale governed by Rule 39 of the
Rules of Court.
• Mere inadequacy of the price obtained at the sheriff’s sale will not be
sufficient to set aside the sale unless”the price is so inadequate as
to shock the conscience of the court” taking into consideration the
peculiar circumstances attendant thereto (Sulit v. CA, 268 SCRA
441)
PROCEDURE FOR EXTRAJUDICIAL FORECLOSURE OF BOTH REAL NATURE OF POWER OF FORECLOSURE BY EXTRAJUDICIAL SALE
ESTATE MORTGAGE UNDER ACT NO. 3135 AND CHATTEL 1. conferred for mortgagee’s protection
2. an ancillary stipulation a certain period after it was sold for the satisfaction of the debt; applies only
3.a prerogative of the mortgagee to extrajudicial foreclosure of real mortgage
Note: Stipulation of upset price in mortgage contract is void NOTE: the right of redemption, as long as within the period prescribed, may
be exercised irrespective of whether or not the mortgagee has subsequently
EFFECT OF INADEQUACY OF PRICE IN FORECLOSURE SALE conveyed the property to some other party (Sta. Ignacia Rural Bank,Inc v.
1. Where there is right to redeem CA, 230 SCRA 513 [1994])
GR: Inadequacy of price is immaterial because the judgment debtor may
redeem the property PERIOD OF REDEMPTION
Exception: the price is so inadequate as to shock the conscience of the court 1. extra-judicial (Act No. 3135)
taking into consideration the peculiar circumstances a.natural person – 1 year from registration of the certificate of sale with
2. Property may be sold for less than its fair market value upon the theory that Registry of Deeds
the lesser the price the easier for the owner to redeem b.juridical person – same rule as natural person
3. The value of the mortgaged property has no bearing on the bid price at the c.juridical person (mortgagee is bank) – 3 months after foreclosure or before
public auction, provided that the public auction was regularly and honestly registration of certificate of foreclosure whichever is earlier (Sec. 117 of
conducted General Banking Law)
2. Judicial – before confirmation of the sale by the court
WAIVER OF SECURITY BY CREDITOR
1. Mortgagee may waive right to foreclose his mortgage and maintain a NOTE: Allowing redemption after the lapse of the statutory period when the
personal action for recovery of the indebtedness buyer at the foreclosure sale does not object but even consents to the
2. Mortgagee cannot have both remedies redemption, will uphold the policy of the law which is to aid rather than defeat
Note: Foreclosure retroacts to the date of registration of mortgage the right of redemption (Ramirez v. CA, 219 SCRA 598 [1993])
PERIOD TO FORECLOSE
1. After 30 days from the time of the condition is broken
2. The 30-day period is the minimum period after violation of the
LAWS GOVERNING CHATTEL MORTGAGE mortgage condition for the creditor to cause the sale at public auction with at
1.Chattel Mortgage Law, Act No. 1508, as amended least 10 days notice to the mortgagor and posting of public notice of time,
2. Civil Code place, and purpose of such sale, and is a period of grace for the mortgagor, to
3. Revised Administrative Code discharge the obligation.
4. Revised Penal Code 3. After the sale at public auction, the right of redemption is no longer
5. Ship Mortgage Decree of 1978 (PD 1521) governs mortgage of vessels of available to the mortgagor.
domestic ownership
CIVIL ACTION TO RECOVER CREDIT
AFFIDAVIT OF GOOD FAITH - An oath in a contract of chattel mortgage 1. independent action not required
wherein the parties "severally swear that the mortgage is made for the purpose 2. mortgage lien deemed abandoned by
of securing the obligation specified in the conditions thereof and for no other obtaining a personal judgment
purposes and that the same is a just and valid obligation and one not entered
into for the purpose of fraud. RIGHT OF MORTGAGEE TO RECOVER DEFICIENCY
1. where mortgage foreclosed: creditor may maintain action for deficiency
EFFECT OF REGISTRATION although Chattel Mortgage Law is silent on this point. Reason is chattel
1. creates real rights mortgage is only given as a security and not as payment of the debt.
2. adds nothing to mortgage 2. where mortgage constituted as security for purchase of personal
Note: Registration of assignment of mortgage is not required property payable in installments: no deficiency judgment can be asked and
any contrary agreement shall be void
RIGHT OF REDEMPTION 3. where mortgaged property subsequently attached and sold: mortgagee is
1. when the condition of a chattel mortgage is broken, the ff may redeem: entitle to deficiency judgment in an action for specific performance
a. mortgagor;
APPLICATION OF PROCEEDS OF SALE
1. costs and expenses of keeping and sale
2. payment of the obligation
3. claims of persons holding subsequent mortgages in their order
4. balance, if any, shall be paid to the mortgagor, or person holding under him