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Q: In 1926, A a widow, borrowed P100,000 from R.

This is evidenced by an informal private instrument

executed by A, the security for the loan is a parcel of unregistered land which belongs to A and which
she had inherited from her parents. In 1938, A died without paying the indebtedness. The records show
that R had been paying the realty taxes from 1926 1944 when he finally died. S his son, who had
inherited the property, continued paying the taxes. In 1961, S filed an application for the registration of
his title to the land. The children of B, who were in possession of the land, filed their opposition. They
contended that they are the owners of the land and that S does not have a registrable title thereto.
Decide controversy.

A: the children of A are the owners of the land. Consequently, S does not have a registrable title thereto.

Obviously, and this can be shown by an analysis of the private instrument executed by A in favour of R,
the contract of real estate mortgage. Failure of the mortgagor to redeem the property does not
automatically vest the ownership of the property to the mortgagee. Otherwise, there would be a
violation of Art. 2088 which reads: the creditor cannot appropriate the things given by way of pledge or
mortgage or dispose of them. Any stipulation to the contrary is null and void. It is crystal clear that if S
is allowed to register the subject property in his name, that would constitute a pactum commissorium
which is contrary to morals and public policy.

The belief of the applicant that he owns the property in question which is inherited from his father
cannot overthrow the fact that the transaction is mortgage. The doctrine once a mortgage always a
mortgage has been firmly established whatever be its form. (Macapinlac v Guiterrez Repide). The
parties cannot, by stipulation, however express and positive, render it anything but a mortgage. No right
passed to the applicant except that of a mortgage since one cannot acquire a right from another who
was not in possession thereof. A derivative right cannot rise higher than its source.

Consequently, the oppositors should not pay the indebtedness of their predecessor plus legal interest.
(Reyes v Sierra)

Q: To secure a debt, Torre executed a mortgage on a parcel of registered land in favour of Unson, with
Victoria acting as one of the 2 witesses to the mortgage deed. Neither Torre nor Unson registered the
mortgage. Upon Torres failure to pay when the debt became due, Unson sought to foreclose the
mortgage. Victoroio (who in the meantime had bought the land) resisted the foreclosure, claiming that
the mortgage, not having been registered was ineffective because under the law, registration is the
operative act that binds the land, and that at any ratem he (Victorio) could not be prejudiced by the
unregistered mortgage to which he was not a party. Is the position taken by Victorio tenable?

A: untenable for the following reasons:

1. If the document is which the mortgage appears is not recorded, the mortgage is nevertheless
binding between the parties. Consequently, when torre subsequently sold the mortgage land to
Victorio, the latter was bound by the contract of mortgage the principle of relativity of
contracts. According to the law, contracts take effect between the parties, their assigns and
heirs. (Art. 1311). Victorio is clearly an assign within the meaning of the law. True, under our
land registration laws, registration is the operative act that binds the land. It must be noted,
however, that this principle is only for the protection of the persons; it is not the protection of
the contracting parties or their privies.
2. Beside, vitorio was a witness to the execution of the mortgage deed. He was therefore, aware of
the fact that the land was mortgaged. It is well settled that such knowledge or noteice is
equivalent to registration.
3. Furthermore, under the principle of estoppels, Victorio cannot deny the existence of the
contract of mortgage. Consequently, he is precluded by his previous conduct from asserting a
legal title or interest in derogation thereof, being a witness thereto, and a t the same time, a
successor in interest of the mortgagor.

Q: A debt secured with mortgage upon real property of the debtor fell due on a certain date and was
not paid. Do you think that the fruits harvested from the mortgaged land on the date of the maturity are
subjected to the mortgage, no mention thereof having been made in the contract? How about pending

A: pending fruits or those which are not yet harvested when the obligation becomes due are covered by
the contract of real estate mortgage, but not those which are already harvested. This is evident from
Art. 2127 of the NCC.

Q: Suppose that in the contract of real estate mortgage, there is a stipulation prohibiting the owner of
the mortgaged property from alienating the property during the pendency of the mortgage (pactum de
non alienando), is the stipulation valid?

A: Void.

Q: To secure a loan obtained from a rural bank, Ellen assigned her leasehold rights over a stall in the
public market in favour of the bank. The deed of assignment states that in case of default in the
payment of the loan, the bank shall have the right to sell Ellens rights over the market stall as her
attorney-in-fact, and to apply the proceeds to the payment of the loan.

1. Was the assignment of leasehold rights a mortgage or a cession?

The assignment was a mortgage, not a cession, of the leasehold rights. A cession would have
transferred ownership to the bank. However, the grant of authority to the bank to sell the
leasehold rights in case of default is proof that no such ownership was transferred and that
mere encumbrance was constituted. There would have been no need for such authority had
there been a cession.

2. Assuming the assignment to be a mortgage, does the provision giving the bank the power to sell
Ellens rights constitute pactum commisorium? Why?

No, the subject provision is not a pactum commissorium. It is pactum commissorium when
default in the payment of the loan automatically vests ownership of the encumbered property
in the bank. In the instances, the bank does not automatically become owner of the property
upon default of the mortgagor. The bank has to sell the property and apply the proceeds to the

Q: Spouses Madonna and Bradd Pacquiao leased a portion of a tract of land owned by Jen Lopez. To
finance their business venture, respondents spouses pacquiao obtained a loan from PNB secured by a
real estate mortgage on their own 4 residential houses located in Makati City as well as on the
agricultural land owned by Jen Lopeze who executed a SPA in their favour. For failure to pay their
obligation, the mortgaged properties were foreclosed by PNB. PNB was the highest bidder of the
foreclosed properties at P447,632.00. Before the expiration of the redemption period, Lopez tendered
payment of the redemption of the agricultural land in the amount of P484,482.96. PNB rejected the
tender of payment on the ground that the redemption price should be the total claim of the bank on the
date of the auction sale and custody of property plus charges accrued plus interest amounting to
P2,779,978.72. Is PNB correct?

A: No. There is doubt that Lopez is an accommodation mortgagor. An accommodation mortgagor is not
himself a recipient of the loan, otherwise that would be contrary to his designation as such. It is not
always necessary that the accommodation mortgagor be appraised beforehand of the entire amount of
the loan nor should it first be determined before the execution of the SPA.

On the other hand, PNB has no claim against accommodation mortgagor Lopez inasmuch as she only
mortgaged her property to accommodate Spouses Pacquiao who are loan borrowers of the PNB. The
principal contract is the contract of loan between the Spouses Pacquiao, as borrower/debtor, and the
PNB as lender.

The accommodation real estate mortgage is only an accessory contract. The term mortgagor in Sec. 25
of P.D. No. 694 pertains only to a debtor mortgagor and not to an accommodation mortgagor.

On the other hand, accommodation mortgagors as such are not in any way liable for the payment of the
loan or principal obligation of the debtor/borrower. The liability of the accommodation mortgagors
extends only up to the loan value of their mortgaged property and not to the entire loan itself. Hence, it
is only just that they be allowed to redeem their mortgaged property by paying only the winning bid
price thereof (plus interest thereon) at the public auction sale. (Belo v PNB)