REAL ESTATE MORTGAGE 1.

There must be a public instrument

OBJECT: Only The following property may be the containing the description thereof; and
object of a contract of mortgage: 2. The same should be recorded in the Registry
1. Immovable; (land, trees and plants) of Property.
2. Alienable real rights in accordance with the The creditor-mortgagee has no other right than to
laws, imposed upon immovable. demand the execution and the recording of the
document in which the mortgage is formalized.
Nevertheless, movables may be the object of a
chattel mortgage. Object: the mortgage extends to the natural
accessions, to the improvements, growing fruits,
CHARACTERISTICS: and the rents or income not yet received when the
1. ACCESSORY- connate exists without a obligation become due, and to the amount of the
principal obligation such as contract of loan. indemnity granted or owing to the proprietor for
2. INDIVISIBLE – creates a lien ( legal right public use, with the declarations, amplifications and
or claim against other person’s property) on limitations established by law, whether the estate
the whole or all of the properties mortgaged, remains in the possession of the mortgagor, or it
which lien continues until the obligation is passes into the hands of a third person.
secures has been fully paid.
3. INSEPARABLE- subjects the property Principal Obligation Covered:
upon which it is imposed whoever the General Rule: covers only that which is stated in
possessor may be, to the fulfillment of the the deed even if less than the amount of loan.
obligation for whose security it was Exception: if there is stipulation to cover future
constituted. advancement called a dragnet clause.
4. REAL RIGHT- creates a lien on the
property mortgaged which may be Mortgage credit is Transferable: the mortgage
enforceable even against third party credit may be alienated or assigned to a third
possessors in good faith, if it is registered. person, in whole or in part, with formalities required
5. CONSENCUAL CONTRACT- perfected by law.
by mere consent
6. NOMINATE- has a name given to it by law Pactum de non-alienado: the owner is allowed to
and specific rules as applicable to it. alienate the immovable property mortgaged. A
stipulation prohibiting/forbidding such right is
TYPE OF REAL ESTATE MORTGAGE: called Pactum de non-alienado and is considered
1. CONVENTIONAL REAL ESTATE void.
MORTGAGE- one which is created by the
agreement of the parties Third party transferee: Buyers or transferees of
2. LEGAL mortgage- one executed pursuant, the property mortgaged are not affected by an
to an express requirement of a provision of unregistered mortgage. However, if the mortgage is
law. registered they are
3. EQUITABLE mortgage- one which a. Bound by a foreclosure sale on the property
although lacks certain formality, form or b. Not bound to answer the deficiency
words or other requisites provide by statute, c. Unless there is novation is the person of the
but the facts show the intention of the parties debtor
to charge the real property as a security for a
debt and contains nothing contrary to law. ILLUSTRATION: D is indebted to C for
The remedy of the injured party is to file an P1,000,000. To secure the obligation, D mortgaged
action for reformation of instrument. his lot and executed a Deed of Real Estate
Mortgage. In this case
Form: There is no form required to constitute a 1. D can validly dispose or transfer the lot to
contract of real estate mortgage. third persons. Any stipulation prohibition
ORDER RO EFFECT THIRD PERSON: him (pactum de non-aliendo) shall be void.
2. If D sells the property to X:
 a. X shall not be bound by the REDEMPTION: exists only in Real Estate
mortgage if the Deed of Real Estate Mortgage foreclosure. The period to redeem shall
Mortgage is not registered in the depend if the foreclosure is:
Registry of Property; 1. Extrajudicial:
b. If the Deed is registered, X shall be a. General Rule: 1 year from date of
bound by such registered mortgage, foreclosure
and in case of foreclosure: b. Exception: Under General Banking
i. And the proceeds of the Law, 3 months from sale or
foreclosure are P1,200,000 – registration of the certificate of sale,
X shall be entitled to the whichever is earlier, whenever:
excess. i. The debtor- judicial person
ii. If the proceeds are only ii. The creditor- bank
P800,000
1. X shall not be liable ILLUSTRATION: ABC Bank borrowed money
for the P 200,000 from XYZ Corporation and secured the obligation
deficiency, as a rule. with real estate mortgage. Due to non-payment,
2. X shall be bound for XYZ Corporation foreclosed the mortgage. What
the deficiency of P will be the applicable period of redemption?
200,000 if there was
novation ANSWER: The generic rule of 1 year. The
(expromision or exception under the General banking Law applies
delegacion). only if the bank is the creditor and the judicial
person is the debtor. In this case, the judicial person
FORECLOSURE: in case of non-payment of the (XYZ Corporation) is the creditor, and the bank
principal obligation, the creditor-mortgagee may (ABC Bank) is the debtor.
foreclose the mortgage either:
1. Judicially – under Rule 68 of the Rule of 2. Judicial- although the Rule of Court provide
Court that the equity of redemption is 90 to 120
2. Extra-judicially- under Act No. 3135 days, it has been held that the equity of
redemption exists as long as there is no
NOTICE FOR FORECLOSURE SALE: confirmation of sale by the court.
1. Extrajudicial- not required, unless stipulated
2. Judicial- posting in 3 public places at least VOID STIPULATION:
20 days prior to sale and publication of the 1. A stipulation which provides for tipo or
notice of sale in a newspaper of general upset price in the foreclosure sale of
circulation. mortgaged property. A tipo or upset price is
maximum limit as to the selling price in the
PROCEEDS: if the proceeds of the foreclosure public sale of mortgaged property. It is void
sale: because the mortgaged property must be
1. Are more than the unpaid amount- the sold to the highest bidder and there must be
mortgagor shall be entitled to the excess; no maximum limitation on the price.
2. Are less than the unpaid amount- the 2. A stipulation allowing the automatic
mortgagor shall be entitled to recover the appropriation by the mortgagee of the thing
deficiency. mortgaged in case of default of the debtor.
3. A stipulation prohibiting the mortgagor from
The generic treatment is the mortgage is still a disposing or selling his property.
separate contract and merely stands as a means to
recover the unpaid amount. That’s why any excess
is returned to the mortgagor and any deficiency, the
debtor remains liable thereto.