PRUDENTIAL BANK V.

PANIS
153 SCRA 390
FACTS:
Spouses Magcale secured a loan from Prudential Bank. To secure payment, they executed a
real estate mortgage over a residential building. The mortgage included also the right to occupy the
lot and the information about the sales patent applied for by the spouses for the lot to which the
building stood. After securing the first loan, the spouses secured another
from the same bank. To secure payment, another real estate mortgage was executed over
the same properties.
The Secretary of Agriculture then issued a Miscellaneous Sales Patent over the land which was later
on mortgaged to the bank.
The spouses then failed to pay for the loan and the REM was extrajudicially foreclosed and sold in
public auction despite opposition from the spouses. The respondent court held that the REM was
null and void.

HELD:
A real estate mortgage can be constituted on the building erected on the land belonging to another.
The inclusion of building distinct and separate from the land in the Civil Code can only mean
that the building itself is an immovable property.
While it is true that a mortgage of land necessarily includes in the absence
of stipulation of the improvements thereon, buildings, still a building in itself may be mortgaged
by itself apart from the land on which it is built. Such a mortgage would still be considered as a REM
for the building would
still be considered as immovable property even if dealt with separately and apart from the land.
The original mortgage on the building and right to occupancy of the land
was executed before the issuance of the sales patent and before the

government was divested of title to the land. Under the foregoing, it is

evident that the mortgage executed by private respondent on his own
building was a valid mortgage.
As to the second mortgage, it was done after the sales patent was issued and thus prohibits
pertinent provisions of the Public Land Act.