Real Estate Mortgage

Law
Act No. 3135, as amended by R.A. No. 4118, Articles 2124-213 Civil
Code
What is a real estate mortgage?
is an ACCESSORY 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. (Philippine law Dictionary)
What are the essential requisites of a mortgage?
(Article 2085)
a. That they be constituted to secure the fulfillment of a
principal obligation.
b. That the mortgagor be the absolute owner of the thing
mortgaged.
c. That the person constituting the mortgage has free
disposal of his property, and in the absence thereof, he
be legally authorized for the purpose.
It is also indispensable for a mortgage to be validly
constituted that the document inw hich it appears be
recorded in the Registry of Property. If the instrument
is not recorded, the mortgage is nevertheless valid. *
(Article 2125)
Can a debtor be prohibited from alienating the
immovable that is mortgaged?
NO. Any stipulation forbidding the owner from alienating the
immovable mortgaged shall be void. (Article 2130)
Can the mortgage credit be assigned?
YES. The mortgage credit may be
alienated or assigned to a thrid person,
in whole or in part, with the formalities
required by law. (Article 2130)
What is the extent of an assignment by the
creditor of the mortgage credit?
In an assignment of credit, the assignee is subrogated to the rights
of the original creditor, such that he acquires the power to enforce
it, to the same extent as the assignor could have enforced it against
the debtor. Through the assignment of credit, the new creditor is
entitled to the rights and remedies available to the previous
creditor, and includes accessory rights such as mortgage or
pledge. Consequently, ARC acquired all the rights, benefits and
obligations of Metrobank under its mortgage contract with
Grandwood. The same could be said for subsequent assignees or
successors-in-interest after ARC like White Marketing.
The mortgage between Grandwood and Metrobank, as the
original mortgage, was subject to the provisions of Section 47
of R.A. No. 8791. Section 47 provides that when a property of
a juridical person is sold pursuant to an extrajudicial
foreclosure, it "shall have the right to redeem the property
in accordance with the provision until, but not after, the
registration of the Certificate of Foreclosure Sale with the
applicable Register of Deeds which in no case shall be more
than three (3) months after foreclousre, whichever is
earlier."
Applied in the present case, Grandwood had three months from
the foreclosure or before the certificate of foreclosure sale was
registered to redeem the foreclosed property. This holds true
even when Metrobank ceased to be the mortgagee in view of its
assignment to ARC of its credit, because the latter acquired all
the rights of the former under the mortgage contract-including
the shorter redemption period. The shorter redemption period
should also redound to the benefit of White Marketing as the
highest bidder in the foreclosure sale as it steeped into the
shoes of the assignee-mortgagee.
Is a dragnet clause valid?
As a GR, a mortgage liability is limited to the amount mentioned in the contract.
However, the amounts named as consideration in a contract of mortgage do not
limit the amount for which the mortgage may stand as security if from the four
corners of the instrument the intent to secure future and other indebtedness can
begathered. This stipulation is calid and binding between the parties and is known
as "blanket mortgage clause" or "dragnet clause".

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, costs of extra
legal services, recording fees et cetera.

(Sps. Cuyco vs. Sps Cuyco, 487 SCRA 693, April 19, 2006
Can the mortgagor ask for a proportionate extinguishment of a
mortgage when he has partially paid the principal debt?
NO. This disposition stems from the basic postulate that a mortgage contact is, by
nature, indivisible. Consequent to this feature, a debtor cannot ask for the release of
any portion of mortgaged property or of one or some of the several properties
mortgaged unless and until the loan thus secured has been paid, notwithstanding the
fact that there has been partial fulfillment of the obligation. Hence, it is provided that
the debtor who has paid a part of the debt cannot ask for the proportionate
extinguishment of the mortgage as long as the debt is not completely satisfied.
When can EJ foreclosure be resorted to?
emanates from the presence of stipulation that allows the
creditor/mortgagee to extra-judicially foreclose and designates
the said party as the attorney-in-fact of the mortgagor to cause
the same and to sell the subject property at a foreclosure sale
by an insertion into or attachment to the real estate mortgage.
(Section 1)
What are the remedies of a creditor when the debt is secured by
a REM?
mortgagee has two options where a default in payment on the part of the
mortgagor:
1. FORECLOSE THE MORTGAGE or
2. FILE AN ORDINARY ACTION TO COLLECT THE DEBT.
(mortgagee has a choice of one. He cannot choose both)
If mortgagee chooses the FORECLOSURE OF THE MORGAGE:
he enforces the lien by the sale on foreclosure of the
mortgaged property.
The proceeds of the sale will be applied tot he satisfaction of
the debt.
With this remedy, he has a PRIOR LIEN on the property.
In case of deficiency, the mortgagee has the right to claim for
the deficiency resulting from the price obtained in the sale of
the RP at public auction and the outstanding obligation at the
time of the foreclosure proceedings.
If mortgagee resorts to an action to collect the debt:
he thereby waives the mortgage lien.
He will have no more priority over the mortgage property. If
judgment is favorable to him, and it becomes final and
executory, he can enfoce said judgment by execution. He
can levy execution on the same mortgaged property, but he
will not have priority over the latter and there may be other
creditors who have a better lien ont he properties of the
mortgagor. (CALTEX PHILIPPINES vs IAC, GR. No. 74730,
Augest 25, 1989)