REAL ESTATE

MORTGAGE
MORTGAGE
May a deed of mortgage provide that
future amounts borrowed be included as
part of the mortgage obligation?
The provisions in the first mortgage deed,
including as part of the obligation future
amounts that may be borrowed by the
mortgagor-debtors is not improper
MORTGAGE IN BAD FAITH
A person who deliberately ignores a
significant fact that would create a
suspicion in an otherwise reasonable
person is not an innocent purchaser for
value (DBP vs CA, 331 SCRA 267)
WHO MAY CONSTITUTE
MORTGAGE
It is only the absolute owner of the
property who can constitute a valid
mortgage on it (Art. 2085, NCC)
MORTGAGEE IN GOOD FAITH
A valid mortgage under Art. 2085 of the
Civil Code is that the thing mortgage be
owned by the person who mortgage it.
The innocent mortgagee for value
principle contemplates cases involving
individuals who by their negligence
enabled other persons to cause the
cancellation of the original TCT and the
issuance of a new one.
ASSIGNMENT OF THE RIGHT OF
THE MORTGAGEE
The mortgagee may convey or assign his
mortgage credit to a third person totally
or partially, provided that it is effected by
a public instrument and that a notice
therefore is given to the debtor and that is
recorded in the registry.
COURSES OF ACTIONS LEFT TO
MORTGAGEE UPON DEATH OF
MORTGAGOR
1. He may abandon the security and file his
claim with the clerk of court in the testate or
intestate proceedings against the
deceaseds estate and share in the general
distribution of the assets thereof;
2. He may foreclose the mortgage by ordinary
action in court, making the executor or
administrator of the estate a party
defendant and ask for deficiency judgment
in case the proceeds of the sale are not
sufficient
3. He may rely exclusively upon his
mortgage and foreclose the same at any
time within the period of statute of
limitations and in such event he shall not be
admitted as creditor of the estate nor share
in the general distribution of the assets of the
decedents estate.
MAY A MARRIED WOMAN
MORTGAGE WITHOUT MARITAL
CONSENT?
Article 140 of the Civil Code provides that a
married woman of age may mortgage,
encumber, alienate or otherwise dispose of
her paraphernal property without the
permission of the husband, and appear alone
in court to litigate with regard to the same
In case the woman shall be the administrator
of the property shall have the rights of the
husband when he was the administrator
Art. 214 of the Civil Code provides that the wife may
dispose of or mortgage her own separate estate
without the consent of her husband, including what
she may accumulate from her profession, business or
industry
In an absolute community, neither spouse may
alienate or encumber any common property
without the consent of the other.
When the husband acts as the administrator of the
conjugal partnership, he cannot alienate or
encumber any real property of the conjugal
partnership without the wifes consent.
UNREGISTERED SALE VS.
MORTGAGE
The unregistered sale is superior than the
registered mortgage. (dela Merced vs.
GSIS, et al., GR No. 140398, Sept. 1, 2002)
The owner of registered land may
mortgage it by executing the deed in a
form sufficient in law.
The instrument shall be registered and
shall take effect upon the title only from
the time of registration.
REGISTRATION OF MORTGAGE
No new title shall be entered or issued pursuant to
any instrument which does not divest the
ownership or title from the owner or from the
transferee of the registered owners.
All interest in the registered land less than the
ownership shall be registered by filing with the
Registrar of Deeds the instrument which creates or
transfers or claims such interest and by a brief
memorandum thereof made by the Registrar of
Deeds upon the certificate of title and signed by
him.
Real mortgage need be registered or filed in the
Registry of Deeds of the city or province where the
land lies. (Sec. 124, Act 496)
If the deed of mortgage is not registered, the
mortgage is nevertheless binding between the
parties. (Art. 2125 Civil Code of the Phil.)
The mortgagees knowledge of a prior unregistered
mortgage is equivalent to registration since the
purpose of the law has already been served.
The registration of mortgage binds third parties.
CONVEYANCING: FORMS
Deeds, conveyances , encumbrances,
discharges, powers of attorney and other
voluntary instruments, whether affecting
registered or unregistered land, executed
in accordance with law in the form of
public instrument shall be registrable.
FORGED POWER OF ATTOREY
When a person, under a forged power of
attorney , mortgages a property
belonging to another, the mortgage
thereby executed is void.
LENGTH OF MORTGAGE :
Mortgage to Aliens
Any provision of law to the contrary
notwithstanding, private real property may be
mortgaged in favor of ay individual,
corporation, or association, but the
mortgagee or his successor-in-interest, if
disqualified to acquire or hold lands of the
public domain in the Philippines, shall not take
into possession or enjoy the fruits of the
mortgaged property during the existence of
the mortgage and shall not bid or take part in
any sale of such real property in case of
forclosure.
MORTGAGE WITHOUT FIXED
PERIOD
The obligation is not due ad payable until
an action is commenced by the
mortgagee against the mortgagor for the
purpose of having the court fix the date
on and after which the instrument is
payable and the date of maturity is fixed
in pursuance thereto.
HOW MORTGAGE MAY BE
DISCHARGED
A mortgaged may be discharged by the
creditor executing a public instrument
cancelling or releasing the mortgage
substantially in accordance with form
prescribed by Sec. 112 of PD 1529.
The instrument must be presented to the
RD where the land lies together with the
owners duplicate copy for registration.
FORCLOSURE
A remedy available to the mortgagee by
which he subjects the mortgaged
property to the satisfaction of the
obligation, to secure which the mortgage
was given.
Grounds;
Principal obligation was not paid
Condition, stipulation, or warranty is
violated by the mortgagor
JUDICIAL vs.
EXTRAJUDICIAL
JUDICIAL FORCLOSURE
A certified copy of the final order of the
court confirming the sale shall be
registered with the RD.
If there is no right of redemption, the title
of the mortgagor shall be cancelled and
a new title shall be issued to the name of
the purchaser
When there is a right of redemption, the certificate of
title of the mortgagor shall not be cancelled but the
certificate confirming the sale shall be registered by a
brief memorandum thereof made by the Registrar of
Deeds upon the certificate of title
In case of redemption, the certificate of redemption
shall be filed with the registry of deeds and a brief
memorandum shall be annotated on the title of the
mortgagor
If the property is not redeemed, the final deed of sale
shall be executed by the sheriff in favor of the purchaser
at a foreclosure sale shall be registered with the Registrar
of Deeds; whereupon the title of the mortgagor shall be
cancelled, and a new certificate issued in the name of
the purchaser
Public action is always under the direction of sheriff
with the owner of the property being allowed to
participate
A deficiency judgment may be asked to cover any
pat of the obligation still unsatisfied.
NATURE OF ACTION
In personam
Based on personal cause of action and binding
only upon the defendant personally
In rem
One directed exclusively against the property
which is responsible for the satisfaction of the
claim of the party bringing the action
Quasi in rem
An action based on personal claim but is sought
to be enforced against specific property of the
defendant.
VENUE FOR FORECLOSURE
Action for foreclosure must be brought in
the Regional Trial Court of the province
where property lies, unless there is an
agreement between parties.
INSTITUTION OF FORECLOSURE
SUIT
The mortgagee is not compelled to rely
on his security and is under no obligation
to foreclose the mortgage.
An action for foreclosure may be
instituted in accordance with Rule 68 of
the Rules of court.
CONTENTS OF COMPLAINT
The complaint shall set forth date and due
execution of mortgage, its assignments,
names and residence of the mortgagors and
mortgagee, description of the mortgaged
premises, a statement of the date of the note
or other obligation secured by the mortgage,
the amount claimed to be unpaid thereon
and the names and residences of all persons
having or claiming an interest in the premises
subordinate in right to that of the holder of
the mortgagee, all of whom shall be made
defendants in the action
Section 1 of PD 385 makes it mandatory for
government financial institutions to foreclose the
collaterals and/or security for any loan, credit,
accommodation and/or guarantees granted by
them whenever the arrearages on such account,
including accrued interest and other charges,
amount to at least twenty percent (20%) of the total
outstanding obligations including interests and
other charges, as appearing in the books of
account and/or related records of the financial
institution concerned
Sec 2 of the said law provides that no restraining
order, temporary or permanent injunction shall be
issued by the court against any government
financial institution in any action taken by such
institution in compliance with mandatory
foreclosure provided in sec 1 thereof whether such
restraining order is sought by the borrower or any
third party, except after due hearing in which it is
established by the borrower and admitted by the
government institution that 20% of the outstanding
arrearages had been paid after the filing of
foreclosure proceedings
ACTION TO FORECLOSE
MORTGAGE: PRESCRIPTION
The right of action to foreclose a
mortgage affecting registered land
prescribes after ten years according to
article 1142 of the Civil Code
ATTACHMENT OF
UNMORTGAGED PROPERTY
The court has jurisdiction to grant an
attachment against the property of the
debtor to be levied upon property not
covered by the mortgage, upon showing
by affidavit that the value of the
mortgaged property is insufficient to
cover the debt and that the debtor has
disposed, or is to disposed of his other
property with intent to defraud the
creditor.
JUDGMENT
If the court shall find the fact set to be true, it
shall ascertain the amount to the plaintiff
upon the mortgage debt or obligation,
including interest and cost, and shall render
judgment for the sum so found due and order
the same to be paid unto court within the
period of not less than 90 days from the date
of service of such order, and that in default of
such payment, the property shall be sold to
realize the mortgage debt and cost.
SALE OF PROPERTY
The court shall order the sale of the property if
the judgment debtor shall fail to pay the
amount ascertained by the court.
It shall be sold in the manner and under the
regulations that govern sales of real
properties.
The sale shall operate to divest the rights of all
parties to the action and to vest their rights in
the purchaser, subject to such rights of
redemption as may be allowed by law
There is no right of redemption from a judicial
foreclosure after confirmation of sale except those
granted by banks or banking institutions as provided
by General Banking Act.
DISPOSTION OF PROCEEDS
The money obtained from the sale of
mortgaged property shall be, after deducting
costs of the sale, paid to the person
foreclosing the mortgage, and when there
shall be surplus, after paying off such
mortgage, the shall be paid to junior
encumbrances in the order of priority, to be
ascertained by the court, or if there is no
encumbrances or there be surplus after
payment of such encumbrances, to the
mortgagor or his agent, or to the person
entitled to it.
CONFIRMATION OF SALE
A hearing is held for confirmation of sale.
A notice shall be given to interested
parties, failure to do so is a good cause
for setting aside the confirmation
The mortgaged property should sold to
the highest bidder, any stipulation in the
mortgage contract fixing an upset price is
in violation of the rules of court.
CANCELLATION OF SALE
When the property was sold for an
inadequate price or was made not in
accordance with law, when there was
fraud, collusion, accident, mutual mistake,
breach of trust, or misconduct by the
purchaser, the sale may be set aside.
the sale shall not set aside by inadequacy
alone unless it is so great that it is shocking
to the conscience.
DEFICIENCY JUDGMENT
If there shall be a balance due to the plaintiff
upon applying the proceeds of sale, the
court, upon motion shall render a judgment
against the defendant for any such balance
for which, by the record of the case, may be
personally liable to the plaintiff upon which
execution may issue immediately if the
balance is all due at the time of the rendition
of the judgment
If not, the balance shall be due on the terms
stated on the original contract
MORTGAGEE FILES A
PERSONAL ACTION
If a mortgagee files for a personal action
for the recovery of indebtedness, he shall
lose the right to foreclose the mortgage.
Picking up one of the options shall waive
the right over the other option.
RIGHTS AND OBLIGATIONS OF
SECOND MORTGAGEE IN A
JUDICIAL FORECLOSURE OF
MORTGAGE

The second mortgagee has the right to be joined
as defendants together with the mortgagor
To participate in a public bidding of the
mortgaged property held under the judicial
foreclosure
The second mortgagee is bound to acknowledge
and respect the priority or preferred right of the
first mortgagee.
He must exercise his right to redeem or be
debarred from enforcing any further claim on the
mortgaged property.
FINAL RECORD IN JUDICIAL
FORECLOSURE
Sec 7, Rule 68 of the Rules of Court requires
that the final record of a foreclosure
proceeding shall set forth, in brief, the
proceedings under the order of sale, the
order confirming the sale, the name of the
purchaser, with the description of the
property by him purchased, and the
certificate of redemption, if any, or the final
deed of reconveyance executed in favor of
the purchaser
EXTRAJUDICIAL FORECLOSURE
A certificate of sale executed by the
officer who conducted by the sale shall
be filed with the Registrar of Deeds who
shall make a brief memorandum on the
Transfer Certificate of Title
In case of redemption, the certificate of
redemption shall be filed with the registry
of deeds and a brief memorandum shall
be annotated on the title of the
mortgagor
In case of non-redemption, the purchaser at
foreclosure sale shall file with the Registrar of Deeds,
either a final deed of sale executed by the person
authorized by virtue of the power of attorney
embodied in the deed of mortgage or his sworn
statement attesting to the fact of non-redemption.
The Registrar of Deeds shall issue a new certificate
in favor of the purchaser and cancel the previous
title in favor of the mortgagor
Public auction may be under the direction of either
the sheriff of the province, the justice or auxilliary
justice of peace of the municipality, or a notary
public.
There is no such thing as deficiency judgment
because there is no court action.