Real Estate Mortgage

1. One’s status as mortgagee cannot be the basis of possession

2. It is not an essential requisite of the contract of mortgage that the property
mortgaged remains in the possession of the mortgagor. The mortgagor MAY
deliver said property to the mortgagee, without thereby altering the nature of
the contract
3. Not essential requisite of the contract of mortgage that the principal of them
mortgage credit bears interest or the the interest as compensation for the use
of the principal and enjoyment of its fruits be in form of a certain percentage
thereof.
4. Kinds of Mortgage:
a. Voluntary- agreed to between parties
b. Legal- required to be executed by law in favor of certain persons
c. Equitable- (1602) one although lacks the proper formalities or other
requisites, nevertheless reveals the intention of the parties to burden
real property to secure debt; ought not be defeated by requiring
compliance with the formalities necessary to the validity of a voluntary
real estate mortgage.
5. Future property cannot be object of a contract of mortgage. However, a
stipulation subjecting the mortgage lien, properties or improvements which
the mortgagor may subsequently acquire, install or use in connection with real
property already mortgaged belonging to the mortgagor is valid
6. No valid mortgage is constituted where the deed of mortgage is a mere private
document and therefore is not registered. The creditor may recover the loan
although the mortgage document evidencing the loan was non-registrable
being purely private document. He has the right to compel the debtor to
execute a contract of mortgage in a public instrument
7. Registration only operates as a notice of the mortgage to others but neither
adds to its validity nor converts an invalid mortgage into a valid one between
parties. An order for foreclosure cannot be refused on the ground that the
 mortgage had not been registered provided no innocent third parties are
involved.
8. A mortgagee has a right to rely in good faith on the Certificate of the Title of
the mortgagor of the property given as security and in the absence of any sign
that might arose suspicion, has no obligation to undertake further
investigation.
9. Where the purchaser or mortgagee has knowledge of a defect or lack of title in
the vendor or the mortgagee does not directly deal with the registered owner
of real property or that he was aware of sufficient facts to induce a reasonably
prudent man to inquire into the status of a property in litigation, he is required
to look beyond the title
10. A mortgagee-bank is expected to exercise greater care and prudence before
entering into a mortgage contract even those involving registered lands in its
dealings than private individuals as their business is impressed with public
interest.
11. Prior registration of a lien creates a preference; hence, the subsequent
annotation of an adverse claim cannot defeat the rights of the mortgagee or
the purchaser at the auction sale whose rights were derived from a prior
mortgage validly registered.
12. All subsequent purchasers of the property must respect the mortgage
whether the transfer to them be with or without the consent of the
mortagagee. But them mortgage must be registered or if not registered, the
buyer must know of its existence, his knowledge of the prior unregistered
mortgage having the effect of registration as to him. The mortgagor may not
be the principal debtor.
13. If a person in the first mortgagee over a property which was sold in an
auction sale by the second mortgagee, the only right left to him is to collect his
mortgage credit from the purchaser thereof during the sale conducted, this is
so because a “a mortgage directly and immediately subjects the property on
which it is constituted whoever the possessor may be”
14. A mortgagor’s default does not operate to vest in the mortgagee the
ownership of the encumbered property. His failure to redeem the property
does not automatically vest ownership of the property to the mortgagee which
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 would grant the latter the right to appropriate the property or dispose of it for
such effect is against public policy.
15. A real estate mortgage constituted on immovable property is not limited to
the property itself but also extends to all its accessions, improvements,
growing fruits and rents or income as well to the proceeds of insurance should
the property be destroyed or the expropriation value of the property should it
be expropriated.
16. Stipulation in mortgage contract including after-acquired property is valid.
17. A “dragnet clause” operates as a convenience and accommodation to the
borrowers as it makes available additional funds without their having to
execute additional security documents, thereby saving time, travel, loan
closing costs, cost of extra legal services.
18. The alienation or assignment of mortgage credit is valid even if it is not
registered. Registration is necessary only to affect third persons
19. A demand before foreclosure is essential.
20. A mortgage may contain an acceleration clause.
21. Application of proceeds of sale
a. Costs of sale
b. The amount due the mortgagee
c. Claims of junior encumbrances or persons holding subsequent
mortgagees
d. The balance if any shall be paid to mortgagor or his duly authorized
agent
22. Failure to comply with publication of notice of auction sale constitutes a
jurisdictional defect which invalidates the sale or at least renders the sale
voidable.
23. Unless required in the mortgage contract, the lack of personal notice to the
mortgagor is not a ground to set aside a foreclosure sale
24. Notice to executing mortgagee-creditor not provided by law

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 25. Neither does section 3 of 3135 require posting of the notice of sale on the
mortgage property. It merely requires that the notice of sale be posted in at
least 3 public places in the city or municipality where the property is situated.
26. Certificate of Posting is not required under RA 3135.
27. Burden of proving non-compliance with notice-posting requirement is upon
mortgagor.
28. Failure to post notice is not per se a ground for invalidating a foreclosure
sale provided that the notice thereof is duly published in a newspaper of
general circulation. The publication of the notice of sale in a newspaper of
general circulation alone is more than sufficient compliance with the notice-
posting requirement of the law considering that such newspaper, which is
distributed world wide, has a readership of more than people than notice
posted in a public bulletin.
29. The debtor has the right to redeem property sold within the term of one
year from and after the date of the sale. The reckoning date in cases of
registered land is from the registration of the certificate of sale since it is only
from the date that the sale takes effect as a conveyance.
30. An aggrieved party may ask for the annulment of the foreclosure sale on the
ground that
a. There was fraud, collusion, accident, mutual mistake, breach of trust or
misconduct by the purchaser
b. The sale had not been fairly and regularly conducted
c. The price was inadequate and inadequacy was so great to shock the
conscience of the court
31. RA 3135 governing extrajudicial foreclosures of mortgage does not give a
mortgagee the right to recover deficiency after the public auction sale, neither
does it expressly or impliedly prohibit such recovery
32. Where a third person is the mortgagor, he is not liable for any deficiency in
the absence of a contrary stipulation
33. The action to recover a deficiency after foreclosure prescribes after 10 years
from the time the right of action accrues as provided in Article 1144(2) of the
NCC.
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 34. An action for the foreclosure of a mortgage is an action which survives the
death of the mortgagor because the claim against him is not pure money but
an action to enforce a mortgage lien.
35. A stipulation in a mortgage of real property fixing a tipo or upset prince i.e.
the minimum price at which the property shall be sold, to become operative in
the event of a foreclosure sale at public auction, is null and void for the
property must be sold to the highest bidder.
36. Mere inadequacy of the price obtained at the sheriff’s sale will not be
sufficient to annul or set aside the foreclosure sale unless the price is so
inadequate as to shock the conscience of the court taking into consideration
the peculiar circumstance attendant thereto
37. The mortgagee may institute either a personal action for debt or a real
action to foreclose the mortgage. The mortgagee cannot have both remedies.
He has only one cause of action.
38. A mortgagee-creditor is not synonymous to a judgment creditor. While the
law expects a mortgagee-creditor to inquire as a reasonably prudent man
would regarding encumbrances on the property in question, no such
knowledge is imputed to a judgment creditor who merely seeks the
satisfaction of the judgment awarded in its favor.
39. Kinds of redemption
a. Equity of redemption or the right of the mortgagor in case of judicial
foreclosure to redeem the mortgaged property after his default in the
performance of the conditions of the property of the mortgage but
before the confirmation of the sale of the mortgaged property
It is simply the right of the defendant mortgagor to extinguish the
mortgage and retain ownership of the property by paying the secured
debt within the 90-day period after the judgment becomes final in
accordance with rule 68 or even after foreclosure sale but prior to its
confirmation. Where the foreclosure is judicially effected, no
equivalent right of redemption exists.
To levy upon the mortgagor’s equity of redemption, it is not necessary
for the sheriff to take physical possession of the mortgaged property.

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 If a mortgagee cannot obtain possession of the mortgaged property
for its sale on foreclosure, eh must bring a civil action either to recover
such possession as preliminary step to the sale or to obtain judicial
foreclosure
b. Right of redemption or the right of the mortgagor in case of extrajudicial
foreclosure to redeem the mortgaged property withy a certain period
from and after it was sold for the satisfaction of the mortgage debt
The filling of an action by the redemptioner to enforce his right to
redeem does not suspend the running of the statutory period to
redeem the property, nor bar the purchaser at public auction from
procuring a writ of possession after the period had lapsed, without
prejudice to the final outcome of the action to enforce the right of
redemption
40. If no redemption is made within the prescribed period, the purchaser
becomes the absolute owner of the property. He has the absolute right to a
writ of possession which is the final process to carry out our consummate the
extrajudicial foreclosure
41. The statutory period of redemption is only directory and can be extended by
agreement of the parties if:
a. Voluntary agreement of the parties to extend the redemption period
b. Debtor’s commitment to pay the redemption price on a fixed date
42. Redemption does not give the right of the mortgagor a new title, but merely
restores to him the title freed of the encumbrance of the lien foreclosed
43. A sale by the mortgagor to a third party of the mortgaged property during
the period of redemption transfers only the right to redeem the property and
the right to possess, use and enjoy the same during said period. The
judgment debtor remains in possession of the property foreclosed and sold,
during the period of redemption, but he cannot make a conveyance of the
ownership of the property as said ownership belongs to the purchaser at the
foreclosure sale.
44. Equity of redemption is different from right of redemption. The latter in
relation to a mortgage – understood in the sense of a prerogative to re-

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 acquire mortgaged property after registration of the foreclosure sale - exist
only in the case of extrajudicial foreclosure of mortgage. No such right is
recognized in a judicial foreclosure except only where the mortgagee is a
banking institution.
45. In judicial foreclosure of real estate, the general rule is that the mortgagor
cannot exercise his right of redemption after the sale is confirmed.
46. The subsequent sale by the purchaser to a third person of the mortgaged
property does not prevent the court from granting the mortgagor a period
within which to redeem the property by paying the judgment debt and
exercise of the sale and costs.
47. There is no legal obligation to exercise the right of redemption.
48. The payment of the redemption money “may be made to the purchaser or
redemptioner, or for him the officer who made the sale”
49. In case of extrajudicial foreclosure under 3135 in relation to Rule 39 Section
28 of the Rules of Court, the redemptioner is bound to pay only 1% per month
from the date of registration of the certificate sale up to the time of
redemption rather than the interest stipulated in the contract of loan.
50. The purchaser is entitled to reimbursement of the reasonable cost of the
improvements made by him to preserve the property during the period of
redemption as well as the amount of any assessments or taxes which the
purchaser may have paid on the property after the purchase, including interest
of 1% per month
51. the purchaser or redemptioner shall not be entitled to receive the rents,
earnings and income of the property sold on execution, or the value of the use
and occupation thereof when such property is in the possession of a tenant
which rents, “shall belong to the judgment obligor until the expiration of the
period of redemption”
52. a second or junior mortgagee acquires only the equity of redemption vested
in the mortgagor, and his rights are strictly subordinate to the superior lien of
the first mortgagee.
53. In case the credit of the first mortgagee has absorbed the entire proceeds of
the sale, the second mortgage is extinguished with it because said mortgage

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 cannot be enforced by the second mortgagee beyond the total value of the
mortgaged property.
54. Generally, a mortgagee in possession of mortgaged property who introduces
improvements thereon is not entitled to reimbursement for the value thereof
upon the redemption of the mortgage.
55. The law and jurisprudence are clear the both during and after the period of
redemption, the purchaser at the foreclosure sale is entitled as of right to a
writ of possession, regardless of whether or not there is a pending suit for
annulment of the mortgage or the foreclosure itself.
56. Section 7 of RA 3135 allows the purchaser to take possession of the
foreclosed property during the period of redemption upon filing of an ex parte
application and approval of bond.
57. A mortgagee who has foreclosed upon the mortgaged real property and has
purchased the same at the foreclosure sale can be granted a writ of possession
over the property despite the fact that the premises are in the possession of a
lessee thereof and whose lease has not as yet been terminated, unless the
lease had been previously registered in the Registry of Property or unless
despite non-registration, the mortgagee had prior knowledge of the existence
and duration of the lease, actual knowledge being equivalent to registration.

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