Professional Documents
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Mortgage
The word “mortgage” is derived from two French words, “mort” and
“gage”. These are equivalent to the Latin terms mortuum uadium. The word
“mort” means “dead” and the term “gage” means “pledge.” Thus, mortgage
means a dead or unproductive pledge.1
Manresa defined mortgage as “a contract in which the debtor
guarantees to the creditor the fulfillment of a principal obligation, subjecting
for the faithful compliance therewith a real property in case of non-fulfillment
of said obligation at the time stipulated.2
Real Mortgage
According to our laws, immovable and alienable real rights in
accordance with the laws, imposed upon movables may be the object of a
contract of mortgage.3 Movables may however be the object of a chattel
mortgage. At the same time, real property may also be subjected to a chattel
mortgage when the parties thereto intended to considered and stipulated in
their contract that real property be treated as personal property, 4 this is
however a different topic to be discussed. As contemplated by the law, as
1
Sturpe v. Kopp, 201, No. 412, 99 S.W. 1903)
2
12 Manresa
3
Art. 2124. Only the following property may be the object of a contract of mortgage:
(1) Immovables;
(2) Alienable real rights in accordance with the laws, imposed upon immovables.
Real Property
The terms real property and immovable property are used
interchangeably and are considered by our laws as one and the same. Article
415 of the Civil Code of the Philippines gives us an extensive list of
immovable or real property.
The following are to be considered as immovable property:
- Land, buildings, roads and constructions of all kinds adhered to the
soil;
- Trees, plants, and growing fruits, while they are attached to the
land or form an integral part of an immovable;
- Everything attached to an immovable in a fixed manner, in such a
way that it cannot be separated therefrom without breaking the
material or deterioration of the object;
- Statues, reliefs, paintings or other objects for use or ornamentation,
placed in buildings or on lands by the owner of the immovable in
such a manner that it reveals the intention to attach them
permanently to the tenements;
- Machinery, receptacles, instruments or implements intended by the
owner of the tenement for an industry or works which may be
carried on in a building or on a piece of land, and which tend
directly to meet the needs of the said industry or works;
- Animal houses, pigeon-houses, beehives, fish ponds or breeding
places of similar nature, in case their owner has placed them or
preserves them with the intention to have them permanently
attached to the land, and forming a permanent part of it; the
animals in these places are included;
- Fertilizer actually used on a piece of land;
- Mines, quarries, and slag dumps, while the matter thereof forms
part of the bed, and waters either running or stagnant;
- Docks and structures which, though floating, are intended by their
nature and object to remain at a fixed place on a river, lake, or
coast;
- Contracts for public works, and servitudes and other real rights over
immovable property.5
5
Art. 415, Civil Code of the Philippines
It is an accessory contract, such that when the principal obligation is
considered void, the mortgage is also considered void. Nonetheless, when a
mortgage is void because it was not made by the owner of the property, the
principal contract of loan may still be valid.
Registration
6
McCullough vs. Veloso, 46 Phil. 1.
7
Supra.;
8
Art 2125, Civil Code,
The persons in whose favor the law establishes a mortgage have no
other right than to demand the execution and the recording of the document
in which the mortgage is formalized.9
Scope of Mortgage
Art 2127 of the Civil Code provides “The mortgage extends to the
natural accessions, to the improvements, growing fruits, and the rents or
income not yet received when the obligation becomes due, and to the
9
Ibid.,
10
Gonzales vs. Basa 73 Phil. 704
11
Samanilla v. Cajucom, L-13683
12
Ibid,
amount of the indemnity granted or owing to the proprietor from the insurers
of the property mortgaged, or in virtue of expropriation for public use, with
the declarations, amplifications and limitations established by law, whether
the estate remains in the possession of the mortgagor, or it passes into the
hands of a third person.”
Some Rules
Forms
13
Ganzon v. Sanco, G.R. No. 56450, 1983
14
Berkenkotter v. Cu Unjieng, 61 Phil. 663
15
Afable v. Belando, 55 Phil 64
16
Serra vs. NB, 45 Phil. 907
17
Serra vs NB, 45 Phil. 907
18
Philippine Sugar Estate Dev. Co. V. Campos, 36 Phil 85.
The real estate mortgage contract may be instituted in the form of the
following document:
- and -
WITNESSETH; That:
MORTGAGOR MORTGAGEE
Mortgagor's Spouse
_________________ __________________
(ACKNOWLEDGMENT)
How Instituted
19
Art 2131. Civil Code
20
Bank of the Philippines vs. Yulo, 31 Phil 472
21
Tan v. Valdeheuza, L38745
22
Rule 68, Rules of Court
Where Instituted
The complaint shall be filed at the Regional Trial Court of the province
or municipality wherein the property subject of the mortgage is situated.
Effects
When after trial, the court finds for the plaintiff or the mortgagee, the
court shall ascertain the amount due to the mortgagee upon the debt or
obligation. It shall also compute and include the interes and other charges as
approved by the court. The court will then order the mortgagor to pay the
mortgagee or to pay to the court the sum due to the latter within a period
not less than 90 days nor more than 120 days from the entry of judgment,
otherwise the property foreclosed shall be sold at a public auction to satisfy
the judgment.
If the mortgagor fails to pay, the court shall order the property sold.
Such sale shall not affect the rights of persons holding prior encumbrances
upon the property or a part therof, and when confirmed by an order of the
court, also upon motion, it shall operate to dives the rights in the property of
all the parties to the action and to vest their rights in the purchaser. The
mortgagor will however be given a period to redeem the property foreclosed.
Judicial Sale
The sale shall be made within the province in which the property sold
is situated. The auction shall be held firstly if there is a stipulation as to
place, the place stipulated, and if there be none, it shall be made in the
municipal building of the municipality in which the property or a part therof
is situated.
Notice shall be given by posting notices of the sale for not less than
twenty days in at least three public places of the municipality or city where
the property is situated, if the property is worth more than four hundred
pesos, the notice shall also be published once a week for three consecutive
weeks in a newspaper of general circulation in the municipality or city.
Possession of Property
The highest bidder, or the purchaser would then have the right to ask
for the possession of the property during the redemption period, by filing a
bond with the court. If the writ of possession is issued it shall be issued
immediately.
The debtor or the mortgagor may then ask, if he believes that the
mortgage or the contract within which it is constituted is not violated, for the
order of possession to be set aside.
Proceeds of sale
The proceeds of the sale shall be given to the person foreclosing the
mortgage, and where there shall be any balance, the balance shall be paid to
the junior encumbrancers, if there be none, then to the mortgagor or his
agent or any person entitled to the balance.
The court shall certify the final order confirming the sale, and shall be
registered in the registry of deeds. If there is no right of redemption, the
certificate of title in the name of the mortgagor shall be cancelled, and a new
one issued in the name of the purchaser. If there is a right of redemption, the
title would not be cancelled but a certificated and the order confirming the
judicial sale shall be registered and a memorandum shall be made on the
title. If the property is redeemed, the deed of redemption shall be registered
with the registry of deeds, and a brief memorandum thereof shall be made
by the registrar of deeds on said certificate of title.
Redemption
When the property is redeemed after the purchaser has been givem
possession, the mortgagor shall be entitled to deduct from the redemption
price any rentals the purchases may have collected in case the property was
rented to a third person. If the person who purchased the property used it as
his own dwelling or used gainfully, the redeemer may deduct from the price,
the interest of one percent per month.23
23
Act 3135 as amended by Act 4119
confirmation, the previous owners lose any right they have had over the
property, the rights are in turn vested on the purchaser of the property. 24
With regards to juridical persons, the latter are allowed to exercise the
right of redemption only “until, but not after, the registration of the
certificate of foreclosure sale” and in no case more than three months after
foreclosure, whichever comes first.29 The rule was held by the Supreme Court
in response to the General Banking Law of 2000.
28
Development Bank of the Philippines v. West Negros College Inc. G.R. No. 152359, 2002.
29
A.M. No. 99-19-05-0
Appendices
Appendix A.
SECTION 3. Notice shall be given by posting notices of the sale for not less
than twenty days in at least three public places of the municipality or city
where the property is situated, and if such property is worth more than four
hundred pesos, such notice shall also be published once a week for at least
three consecutive weeks in a newspaper of general circulation in the
municipality or city.
SECTION 4. The sale shall be made at public auction, between the hours or
nine in the morning and four in the afternoon; and shall be under the
direction of the sheriff of the province, the justice or auxiliary justice of the
peace of the municipality in which such sale has to be made, or a notary
public of said municipality, who shall be entitled to collect a fee of five pesos
each day of actual work performed, in addition to his expenses.
SECTION 7. In any sale made under the provisions of this Act, the purchaser
may petition the Court of First Instance of the province or place where the
property or any part thereof is situated, to give him possession thereof
during the redemption period, furnishing bond in an amount equivalent to
the use of the property for a period of twelve months, to indemnify the
debtor in case it be shown that the sale was made without violating the
mortgage or without complying with the requirements of this Act. Such
petition shall be made under oath and filed in form of an ex parte motion in
the registration or cadastral proceedings if the property is registered, or in
special proceedings in the case of property registered under the Mortgage
Law or under section one hundred and ninety-four of the Administrative
Code, or of any other real property encumbered with a mortgage duly
registered in the office of any register of deeds in accordance with any
existing law, and in each case the clerk of the court shall, upon the filing of
such petition, collect the fees specified in paragraph eleven of section one
hundred and fourteen of Act Numbered Four hundred and ninety-six, as
amended by Act Numbered Twenty-eight hundred and sixty-six, and the
court shall, upon approval of the bond, order that a writ of possession issue,
addressed to the sheriff of the province in which the property is situated,
who shall execute said order immediately.
SECTION 9. When the property is redeemed after the purchaser has been
given possession, the redeemer shall be entitled to deduct from the price of
redemption any rentals that said purchaser may have collected in case the
property or any part thereof was rented; if the purchaser occupied the
property as his own dwelling, it being town property, or used it gainfully, it
being rural property, the redeemer may deduct from the price the interest of
one per centum per month provided for in section four hundred and sixty-
five of the Code of Civil Procedure.
SECTION 2. The following three sections are hereby inserted after section
six of said Act Numbered Thirty-one hundred and thirty-five:
"Section 7. In any sale made under the provisions of this Act, the purchaser
may petition the Court of First Instance of the province or place where the
property or any part thereof is situated, to give him possession thereof
during the redemption period, furnishing bond in an amount equivalent to
the use of the property for a period of twelve months, to indemnify the
debtor in case it be shown that the sale was made without violating the
mortgage or without complying with the requirements of this Act. Such
petition shall be made under oath and filed in form of an ex parte motion in
the registration or cadastral proceedings if the property is registered, or in
special proceedings in the case of property registered under the Mortgage
Law or under section one hundred and ninety-four of the Administrative
Code, or of any other real property encumbered with a mortgage duly
registered in the office of any register of deeds in accordance with any
existing law, and in each case the clerk of the court shall, upon the filing of
such petition, collect the fees specified in paragraph eleven of section one
hundred and fourteen of Act Numbered Four hundred and ninety-six, as
amended by Act Numbered Twenty-eight hundred and sixty-six, and the
court shall, upon approval of the bond, order that a writ of possession issue,
addressed to the sheriff of the province in which the property is situated,
who shall execute said order immediately.
"Section 9. When the property is redeemed after the purchaser has been
given possession, the redeemer shall be entitled to deduct from the price of
redemption any rentals that said purchaser may have collected in case the
property or any part thereof was rented; if the purchaser occupied the
property as his own dwelling, it being town property, or used it gainfully, it
being rural property, the redeemer may deduct from the price the interest of
one per centum per month provided for in section four hundred and sixty-
five of the Code of Civil Procedure."
SECTION 3. The number of the present section seven of said Act Numbered
Thirty-one hundred and thirty-five is hereby changed, making it section ten.
RULE 68
Upon the finality of the order of confirmation or upon the expiration of the
period of redemption when allowed by law, the purchaser at the auction sale
or last redemptioner, if any, shall be entitled to the possession of the
property unless a third party is actually holding the same adversely to the
judgment obligor. The said purchaser or last redemptioner may secure a writ
of possession, upon motion, from the court which ordered the foreclosure.
(3a)
Where a right of redemption exists, the certificate of title in the name of the
mortgagor shall not be cancelled, but the certificate of sale and the order
confirming the sale shall be registered and a brief memorandum thereof
made by the registrar of deeds upon the certificate of title. In the event the
property is redeemed, the deed of redemption shall be registered with the
registry of deeds, and a brief memorandum thereof shall be made by the
registrar of deeds on said certificate of title.
If the property is not redeemed, the final deed of sale executed by the sheriff
in favor of the purchaser at the foreclosure sale shall be registered with the
registry of deeds; whereupon the certificate of title in the name of the
mortgagor shall be cancelled and a new one issued in the name of the
purchaser. (n)