MORTGAGE Mr. De Guzman
MORTGAGE > Contract whereby the debtor secures to the creditor the fulfillment of a principal obligation, specially substituting to such security immovable property or real rights over immovable property which obligation shall shall be satisfied with the proceeds of sale of said property or rights in case the said obligation is not complied with at the time stipulated.
Derived from two French words words “mort” and “gage”. “Mort” means “dead” and “gage” means “pledge”. hus, a mortgage mortgage is “dead” or “unproductive “unproductive pledge”. pledge”.
OBJECTS OF REAL MORTGAGE !. immovables ". alienable real rights in accordance with the laws, imposed upon immovables * future property cannot be object of mortgage #$rticle "!"%&!
CHARACTERISTICS OF A MORTGAGE !. 'eal ( )t re*uires delivery delivery for its perfection.
". $ccessory ( )t can only e+ist if there is a principal obligation, obligation, which it secures. secures. )f the principal obligation is void, the mortgage is also void.
1 Art. 2124. Only the following property may be the object of a contract of mortgage;Immovables; mortgage;Immovables; (2) Alienabl Alienablee real rights rights in acooran acoorance ce with the the laws! laws! impose impose "pon immo immovable vable.. #evertheless! movables may be the object of a chattel mortgage.
. -ubsidiary ( nce the obligation has been paid or satisfied, the property must be released from the encumbrance imposed. he mortgage is answerable only if the principal obligation is not paid.
%. /nilateral 0 $fter perfection, it creates obligation to be performed by the mortgagee.
1. )ndivisible ( 2ven though the debt is divided among the debtors or their successors in interest of the debtor, or the credit among the creditors or successors in interest, the mortgage remains an undivided one.
3. )nseparable 0 he mortgage attaches to the property, regardless of who will be its subse*uent owner or possessor.
4. Comprehensive ( )t can secure all 5inds of obligations which are not void.
$ mortgage does not involve a transfer, cession or conveyance of property but only constitutes a lien thereon.
RIGHT TO POSSESSION 6eneral rule7 he mortgagee has no right or claim to the possession of the property. -uch possession is only a security for the payment of the sum borrowed. 8ence, one9s status as a mortgagee cannot be the basis of possession. 2+ception7 )f there is a stipulation to the contrary. :ote7 )t is not an essential re*uisite of a contract of mortgage that the property mortgaged remains in the possession of the mortgagor. KINDS OF MORTGAGE:
!. ;oluntary ( one which is agreed to between the parties or constituted by the will of the owner of the property on which it is created ".
. 2*uitable ( one which, although it lac5s the proper formalities of a mortgage shows the intention of the parties to ma5e the property as a security for a debt. Venus
ESSENTIAL RE!ISITES OF A CONTRACT OF MORTGAGE " PLEDGE
!. hat they be constituted to secure the fulfillment of a principal obligation= ". hat the pledgor or mortgagor be the absolute owner of thing pledged or mortgaged . hat the persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof, that they be legally authoried for the purpose. #$rticle "?@1&" %. hat when the principal obligation becomes due, the things in which the pledge or mortgage consists may be alienated for the payment to the creditor. #$rticle "?@4&
SPECIAL RE!ISITES FOR MORTGAGE #. I$ %an %&'er &n() *mm&'a+(e ,r&,er$) an- a(*ena+(e rea( r*/$s *m,&se- u,&n *mm&'a+(e. #$rticle "!"%&% 2 Art. 2$%&. 'he following re"isites are essential to the contracts of plege an mortgage(1) 'hat they be constit"te to sec"re the f"lfillment of a principal obligation; (2) 'hat the plegor or mortgagor be the absol"te owner of the thing plege or mortgage; (*) 'hat the persons constit"ting the plege or mortgage have the free isposal of their property! an in the absence thereof! that they be legally a"thori+e for the p"rpose. 'hir persons who are not parties to the principal obligation may sec"re the latter by pleging or mortgaging their own property. (1%&,)
3 Art. 2$%,. It is also of the essence of these contracts that when the principal obligation becomes "e! the things in which the plege or mortgage consists may be alienate for the payment to the creitor. (1%&%)
4
Art. 2124. Only the following property may be the object of a contract of mortgage;Immovables; (4) Alienable real rights in acoorance with the laws! impose "pon immovable. #evertheless! movables may be the object of a chattel mortgage.
:ote7 Ahile a mortgage of land necessarily includes, in the absence of a stipulation, the improvements thereon, a building itself may be mortgaged apart from the land on which it is built. 0. I$ mus$ a,,ear *n a ,u+(*% *ns$rumen$. 2ffect when mortgage is in a private document7 :o valid mortgage is constituted. he creditor may recover the loan and has the right to compel the debtor to e+ecute a contract of mortgage in a public instrument. 1. I$ mus$ +e re%&r-e- *n $/e Re*s$r) &2 Pr&,er$). Re*s$ra$*&n *n $/e re*s$r) &2 ,r&,er$) *s ne%essar) $& +*n- $/*r- ,ers&ns3 +u$ n&$ 2&r $/e 'a(*-*$) &2 $/e %&n$ra%$. #$rticle "!"1&1 he persons in whose favor the law establishes a mortgage has the right to demand the e+ecution and the recording of the document in which the mortgage is formalied. rder of foreclosure cannot be refused on the ground that the mortgage was not registered provided no innocent third parties are involved.
REGISTRATION OF MORTGAGE
nce the mortgage has been signed in due form #i.e. in a public instrument&, the mortgagee is entitled to its registration as a matter of right. #$rticle !14&3
S!BSE!ENT REGISTRATION OF AN ADVERSE CLAIM
5 Art. 212&. In aition to the re"isites state in Article 2$%&! it is inispensable! in orer that a mortgage may be valily constit"te! that the oc"ment in which it appears be recore in the -egistry of roperty. If the instr"ment is not recore! the mortgage is nevertheless bining between the parties.
6 Art. 1*&,. If the law re"ires a oc"ment or other special form! as in the acts an contracts en"merate in the following article! the contracting parties may compel each other to observe that form once the contract has been perfecte. 'his right may be e/ercise sim"ltabeo"sly with the action "pon the contract.
$ prior registration of a lien creates a preference. 8ence, the subse*uent annotation of an adverse claim cannot defeat the rights of the mortgagee or the purchaser at the auction sale whose rights are derived from a prior mortgage validly registered.
EFFECT OF REGISTRATION AS TO THE BETTER RIGHT OF THIRD PARTIES
$ registered mortgage right over property previously sold is inferior to the buyer9s unregistered right.
Case: Mar*a Bau$*s$a V-a. De Re)es 's. Mar$*n De Le&n 04 SCRA 156 Fa%$s: $ property was sold. he sale was not recorded. herefore, the seller mortgaged the same property to a third person. he mortgage was recorded.
Issue: Between the unrecorded sale of prior date and a recorded mortgage thereof at a later date, which will prevail
He(-: he unrecorded sale is preferred for the reason that if the original owner had parted with his ownership of the thing sold, he no longer had the ownership and free disposal of that thing so as to be able to mortgage it.
EFFECT OF AN INVALIDIT7 OF MORTGAGE
)f the mortgage contract is void, the principal obligation which is guaranteed is not affected at all. Ahat is merely impaired is the mortgagee9s right to foreclose which is a convenient way of satisfying the principal obligation of the debtor to the creditor.
2ven then, the deed of real mortgage remains useful as evidence to prove the personal obligation of the debtor to the creditor in an ordinary action for collection.
Mr. C/*&%&
EFFECTS OF MORTGAGE !. )t creates a real right. he mortgage directly and immediately subects the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation for whose security it is constituted. #$rticle "!"3& /ntil discharged upon payment of the obligation, it follows the property wherever it goes and subsists notwithstanding change of ownership. ". )t creates merely an encumbrance. $ mortgage is merely a security for a debt and an encumbrance upon the property. )t does not e+tinguish the title of the debtor. he debtor remains the owner, i.e. he has the right to dispose. he only right of a mortgagee in case of non0payment of a debt secured by a mortgage would be to foreclose the mortgage and have the encumbered property sold to satisfy outstanding indebtedness. DOCTRINE OF MORTGAGEE IN GOOD FAITH he doctrine provides that a mortgagee has a right to rely in good faith on the certificate of title of the mortgagor of the property given as a security, and in the absence of any sign that might arouse suspicion, has no obligation to underta5e further investigation. he doctrine presupposes, however, that the mortgagor, who is not the rightful owner of the property, has already succeeded in obtaining a orrens itle over the property. he doctrine does not apply to a situation where the title is still in the name of the rightful owner and the mortgagor is different from the person pretending to be the owner. he mortgagee shall not be considered an innocent mortgagee for value and the registered owner will not lose his title. DILIGENCE RE!IRED OF A MORTGAGEE8BANK )f the mortgagee is a ban5 or a financing institution, the general rule that a purchaser or mortgagee of land is not re*uired to loo5 further than what appears on the face of the orrens Certificate of itle does not apply.
)t is settled that ban5s, their business being impressed with public interest are e+pected to e+ercise more care and prudence than private individuals in their dealings, even those involving registered lands. 'espondent Ban5 should have diligently conducted an investigation of the land offered as collateral. -ince the subect land was not mortgaged by the owner thereof and since the Ban5 is not a mortgagee in good faith, said ban5 is not entitled to protection under the law #$rguelles v. Malarayat 'ural Ban5, ):C. 6.'. :o. "??%3@, March !E, "?!%&.
Ms. Lauren$e E9TENT OF MORTGAGE 6eneral 'ule7 Mortgage e+tends to the following7 !. :atural $ccessions= ". 6rowing fruits= . 'ents or income not yet received when the obligation becomes due= and %. $mount of indemnity granted or owing to the proprietor from7 a. he insurers of the property managed= or b. 2+propriation for public use 4 'eason7 he ownership of such accessions and accessories and improvements subse*uently introduced also belongs to the mortgagor who is the owner of the principal. 2+ception7 !. $n e+press stipulation e+cluding them= and ". here is evidence sufficiently overthrowing the presumption that the mortgagor owns the mortgaged property.
7 Ar$. 0#0. T/e m&r$ae e;$en-s $& $/e na$ura( a%%ess*&ns3 $& $/e *m,r&'emen$s3 r&<*n 2ru*$s3 an- $/e ren$s &r *n%&me n&$ )e$ re%e*'e- ?
$rticle "!"4 of the Civil Code is irrelevant and inapplicable to mortgages and their foreclosures if the mortgagor is later found or declared to be not the true owners of the property.
BLANKET OR DRAGNET CLA!SE )t is specifically phrased to subsume all debts of pastor future origins. Mortgages of this character enable the parties to provide continuous dealings, the nature of which may not be 5nown or anticipated at the time, and they avoid the e+pense and inconvenience of e+ecuting a new security on each new transaction. -tatus7 ;alid $ mortgage with a dragnet clause is an “offer” by the mortgagor to the ban5 to provide the security of the mortgage for advances of and when they were made. 2+ception7 )t can be said that the “offer” was not accepted by the ban5 when a subse*uent advance was made because of a new security. $ mortgage containing a “dragnet clause” will not be e+tended to cover future advances unless the document evidencing the subse*uent advance refers to the mortgage as providing security therefor. )n this case, the security specifically e+ecuted for subse*uent loans must first be e+hausted before the mortgaged property can be resorted to. urpose7 )t operates as a convenience and an accommodation to the borrowers as it ma5es available additional funds without the parties having to e+ecute additional security documents. :ote7 rovisions of this nature are carefully scrutinied and strictly construed particularly when the mortgage contracts one of adhesion.
Ms. Lumaue ALIENATION OF MORTGAGE CREDIT he mortgage credit may be alienated or assigned to a third person, in whole or in part, with the formalities re*uired by law. #$rticle "!"@&@
8
Art. 212%. 'he mortgage creit may be alienate or assigne to a thir person! in whole or in part! with the formalities re"ire by law. (1%,%)
)n this case, the assignee may foreclose the mortgage in case of non0payment by the debtor. :ote7 2ven if the alienation is not registered, it would still be valid as between the parties.
STIP!LATIONS ON MORTGAGE CONTRACTS #. In%(u-*n a2$er8a%@u*re- ,r&,er$*es Future property cannot be an obect of a contract of mortgage. 8owever, a stipulation subecting to the mortgage lien, properties and improvements #after0ac*uired properties& added to a property already mortgaged which the mortgagor may subse*uently ac*uire, install, or use in connection with real property already mortgaged belonging to the mortgagor is valid. -tatus7 ;$<)D urpose7 o maintain, to the e+tent allowed by the circumstances, the original values of the property given as security. -uch stipulation is common where the properties given as collateral are perishable or subect to inevitable wear and tear. 0. B(ane$ Or Drane$ C(ause 8 a(rea-) -*s%usse1. F&r+*--*n A(*ena$*&n O2 M&r$ae- Pr&,er$) -tatus7 $ny stipulation forbidding the owner from alienating is ;)D. )n case of alienation, the transferee is bound to respect the encumbrance because being a real right, the property remains subect to the fulfillment of the obligation for whose guaranty it was constituted. . S$*,u(a$*&n re@u*r*n m&r$aees %&nsen$ +e2&re a(*ena$*&n -tatus7 ;$<)D and binding only in the sense that the mortgagee cannot be compelled to recognie the sale while the loan is unpaid. he sale of the property does not affect the right of the registered mortgagee to foreclose on the same even if ownership has been transferred to another. :ote7 -uch stipulation nonetheless contravenes public policy, being an undue impediment or interference on the transmission of property. . Gran$ &2 F*rs$ Re2usa(
-tatus7 ;$<)D he consideration for the loan (mortgage may be said to include the consideration for the right of first refusal. :ote7 $ sale made in violation of the mortgagee9s contractual right of first refusal is rescissible. he buyer is presumed to have been notified thereof by the registration of the mortgage deed containing such stipulation, which e*uates to notice to the whole world. 5. A%%e(era$*&n C(ause $ stipulation stating that on the occasion of the mortgagor9s default, the whole sum remaining unpaid automatically becomes due and payable. -tatus7 )t is ;$<)D. . S$*,u(a$*&n $& !,se$ Pr*%e &r TIPO $n /pset rice or ) is the minimum price at which the property shall be sold at a public auction. -tatus7 ;)D $ stipulation in the mortgage of real property providing for a /pset rice, to become operative in the event of a foreclosure sale at public auction, is null and void because property must be sold to the highest bi dder. arties cannot, by agreement, contravene the law and interfere with the lawful procedure of the courts.
SPECIAL RIGHTS
⇒
R*/$s &2 a M&r$a&r
o alienate the mortgaged property but the mortgage shall remain attached to the property. #$rticle "!?&E
9
Art. 21*$. A stip"lation forbiing the owner from alienating the immovable mortgage shall be voi. (n)
⇒
R*/$s &2 a M&r$aee
o claim from a third person in possession of the mortgaged property the payment of the part of the credit secured by the property which said third person possesses. #$rticle "!"E&!? rior demand must have been made on the debtor and the latter failed to pay.
INS!RANCE OF THE PROPERT7
he mortgagee and the mortgagor both have insurable interest in the property. hey may insure the same.
10
Art. 2120. 'he creitor may claim from a thir person in possession of the mortgage property! the payment of the part of the creit sec"re by the property which sai thir person possesses! in the terms an with the formalities which the law establishes. (1%,0)