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.
ISSUE: Whether or not a real estate mortgage can be instituted on the building of a land
belonging to anothe
RULING: 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.