GARCIA vs.

VILLAR
(Right to alienate collateral)
FACTS: Galas mortgaged the subject property to Villar, and the same property was also subsequently mortgaged by
the same mortgagor to Gacia. Both REMs provided that the mortgagee’s consent is necessary in case of subsequent
encumbrance or alienation of the property. Galas sold said property to Villar. Upon default of Galas, Garcia sought to
foreclose the property. Villar opposed saying that the second REM made in favour of Garcia was without her
knowledge and consent, hence void.

Issue: WON Garcia could judicially foreclose the subject property.

Held:
1.       Second REM to Garcia and the sale of the subject property to Villar are valid. While it is true that the
annotation of the first REM to Villar on contained a restriction on further encumbrances without the mortgagee’s
prior consent, this restriction was nowhere to be found in the Deed of REM. If it were the intention of the parties to
impose such restriction, they would have and should have stipulated such in the Deed of REM itself. Neither did this
Deed proscribe the sale or alienation of the subject property during the life of the mortgages.   Nowhere was it stated
in the Deed that Galas could not opt to sell the subject property to Villar, or to any other person.  Such stipulation
would have been void anyway, as it is not allowed under Article 2130 of the Civil Code, to wit:
Art. 2130.  A stipulation forbidding the owner from alienating the immovable mortgaged shall be void.

2.       Garcia’s action of foreclosure of mortgage cannot prosper

Real nature of a mortgage:
( Article 2126 of the Civil Code)
Art. 2126.  The mortgage directly and immediately subjects the property upon which it is imposed, whoever the
possessor may be, to the fulfillment of the obligation for whose security it was constituted.
  
A mortgage is a real right, which follows the property, even after subsequent transfers by the mortgagor.  “A
registered mortgage lien is considered inseparable from the property inasmuch as it is a right in  rem.” The sale or
transfer of the mortgaged property cannot affect or release the mortgage; thus the purchaser or transferee is
necessarily bound to acknowledge and respect the encumbrance. In fact, under Art. 2129 of the Civil Code, the
mortgage on the property may still be foreclosed despite the transfer, viz:
Art. 2129.  The creditor may claim from a third person in possession of the mortgaged property, the payment of the
part of the credit secured by the property which said third person possesses, in terms and with the formalities which
the law establishes.
  
While we agree with Garcia that since the second mortgage, of which he is the mortgagee, has not yet been
discharged, we find that said mortgage subsists and is still enforceable.  However, Villar, in buying the subject
property with notice that it was mortgaged, only undertook to pay such mortgage or allow the subject property to be
sold upon failure of the mortgage creditor to obtain payment from the principal debtor once the debt matures.   Villar
did not obligate herself to replace the debtor in the principal obligation, and could not do so in law without the
creditor’s consent. Therefore, the obligation to pay the mortgage indebtedness remains with the original debtors
Galas and Pingol.

Effects of a transfer of a mortgaged property to a third person

According to Art. 1879 of this Code, the creditor may demand of the third person in possession of the property
mortgaged payment of such part of the debt, as is secured by the property in his possession, in the manner and form
established by the law.  The Mortgage Law provided that the debtor should not pay the debt upon its maturity after
judicial or notarial demand, for payment has been made by the creditor upon him.  (Art. 135 of the Mortgage Law of
the Philippines of 1889.)  According to this, the obligation of the new possessor to pay the debt originated only from
the right of the creditor to demand payment of him, it being necessary that a demand for payment should have
previously been made upon the debtor and the latter should have failed to pay.  And even if these requirements were
complied with, still the third possessor might abandon the property mortgaged, and in that case it is considered to be
in the possession of the debtor.  (Art. 136 of the same law.)  This clearly shows that the spirit of the Civil Code is to let
the obligation of the debtor to pay the debt stand although the property mortgaged to secure the payment of said debt
may have been transferred to a third person.  While the Mortgage Law of 1893 eliminated these provisions, it
contained nothing indicating any change in the spirit of the law in this respect. Article 129 of this law, which provides
the substitution of the debtor by the third person in possession of the property, for the purposes of the giving of
notice, does not show this change and has reference to a case where the action is directed only against the property
burdened with the mortgage.  (Art. 168 of the Regulation.)
The mere fact that the purchaser of an immovable has notice that the acquired realty is encumbered with a mortgage
does not render him liable for the payment of the debt guaranteed by the mortgage, in the absence of stipulation or
condition that he is to assume payment of the mortgage debt.

Reason: the mortgage is merely an encumbrance on the property, entitling the mortgagee to have the property
foreclosed, i.e., sold, in case the principal obligor does not pay the mortgage debt, and apply the proceeds of the sale
to the satisfaction of his credit. Mortgage is merely an accessory undertaking for the convenience and security of the
mortgage creditor, and exists independently of the obligation to pay the debt secured by it. The mortgagee, if he is so
minded, can waive the mortgage security and proceed to collect the principal debt by personal action against the
original mortgagor