MORTGAGE

7434 Yakal St. Brgy. San Antonio, Makati City

SCHOOL OF BUSINESS

LAW ON MORTGAGE
ATTY. ROLANDO B. PAGTOLON-AN, REB, REA

REAL MORTGAGE

What is a contract of real mortgage?

A real mortgage is a contract whereby the debtor secures to the creditor
the fulfillment of a principal obligation, specially subjecting to such security
immovable property or real rights over immovable property in case the
principal obligation is not complied with at the time stipulated.

Parties to the Contract of Mortgage

1. Mortgagor- A person who encumbers his property by way of mortgage
to guarantee the performance of an obligation; and
2. Mortgagee- A person in whose favor a property is mortgaged

Enumerate the characteristics of a real mortgage?

1. Real- it is perfected by the delivery of the thing mortgaged;
2. Accessory- it has no independent existence of its own;
3. Subsidiary- the obligation incurred does not arise until the fulfillment of
the principal obligation which is secured; and
4. Unilateral- it creates only an obligation on the part of the creditor who
must free the property from the encumbrance once the obligation is
fulfilled.

Enumerate the essential requisites of a contract of real mortgage.

1. That the mortgage be constituted to secure the fulfillment of a principal
obligation (Art. 2086);
2. That the mortgagor be the absolute owner of the thing mortgaged (art.
2086);
3. That the persons constituting the mortgage have the free disposal of their
property, and in the absence thereof, that they be legally authorized for
the purpose (Art. 2086);
4. It can cover only immovable property and alienable real rights imposed
upon immovable;
5. It must appear in a public instrument; and
6. Registration in the registry of property is necessary to bind third persons,
but not for the validity of the contract.

What are the kinds of real mortgage?

1. Voluntary- one which is agreed by between the parties;
2. Legal- one required by law to be executed in favor of certain persons; or

Page | 1
ATTY. ROLANDO B. PAGTOLON-AN, REB, REA
 3. Equitable- one which, although it lacks the proper formalities or other
requisites of a mortgage required by law, nevertheless reveals the intention
of the parties to burden real property as a security for a debt.

Other kinds:
Open Mortgage
- A mortgage which can be paid off at anytime even before its
maturity

Open-end mortgage
- A mortgage containing a clause which permits the mortgagor to
borrow additional money after the loan has reduced, without
rewriting the mortgage

Blanket Mortgage
- A simple mortgage which covers more than one piece of real
estate

Junior Mortgage
- A mortgage subordinate to an earlier mortgage on the same
property whereby the subsequent lender’s claim against the
owner’s right must respect the claims of the first mortgage

Explain the doctrine of mortgage in good faith.

A mortgagee has a right to rely in good faith on the certificate of title of the
mortgagor of the property given as security in the absence of any sign that
may arouse suspicion and has no obligation to undertake further
investigation.

Is a mortgage with a dragnet clause allowed?

Yes. Generally, an action to foreclose a mortgage must be limited to the
amount mentioned in the mortgage. But the amounts named as
consideration in a contract for 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 loans or advancements and other
indebtedness can be gathered.

Explain foreclosure in real estate mortgage/

Foreclosure is a remedy available to the mortgagee by which he subjects
the mortgaged property to the satisfaction of the obligation to secure that
for which the mortgage was given.

Enumerate the different kinds of foreclosure.

1. Judicial; and
2. Extrajudicial.

JUDICIAL FORECLOSURE EXTRAJUDICIAL FORECLOSURE

Judicial foreclosure is an ordinary Extrajudicial foreclosure is when
action for foreclosure under Rule 68 of mortgagee is given a special power of
the Rules of Court attorney to sell the mortgaged
property by public auction under Act

Page | 2
ATTY. ROLANDO B. PAGTOLON-AN, REB, REA
 No. 3135. It must be stipulated in the
contract.
EQUITY OF REDEMPTION RIGHT OF REDEMPTION
- is the right of a mortgagor to - is a right of mortgagor to
redeem the mortgaged property redeem the mortgaged
after his default in the property within one year from
performance of the conditions of the date of registration of the
the mortgage within the 90-120 certificate of sale.
day period from the date of the
service of the order of foreclosure
or even thereafter but before the
confirmation of the sale.

Where is the venue for the Action of Foreclosure?

The venue for action of foreclosure shall be in the Regional Trial Court of the
province where the land is located or as agreed upon by the parties

Rights of a Second Party in a Judicial Foreclosure

1. Right to be joined as party defendant with the mortgagor;
2. Right to participate in public bidding of the mortgaged property; and
3. Rightto be paid to the extent available out of the excess of the proceeds
of the foreclosure less claims of first mortgage and incidental expenses.

What is a Lien?
- A lien is a hold or claim which one person/entity has upon the property of
another as security for a debt or charge, judgment, mortgage and taxes.

Pactum Commissorium Pactum de Non Aliendo

A stipulation which authorizes the A stipulation which prohibits the
mortgagee to appropriate as his own mortgagor from alienating the
upon failure of the debtor to fulfill the property within the period of the
principal obligation. mortgage.
This is void. This is void.

Sale with Assumption of Mortgage Sale with Mortgage

The buyer assumes the outstanding Portion of the selling price is to be paid
mortgage of the property as part of from loan secured by the Buyer
the consideration of sale

When can the spouse mortgage a property without the consent of the other?
1. If he/she mortgage his/her own exclusive property
2. If there property regime is complete separation of property
3. If one spouse is the administrator of their absolute community property
4. In case the other spouse is declared an absentee or subject to civil
interdiction
5. If the spouse was granted authority by the court

Can a real property be mortgaged to an Alien?

A mortgage of real properties to aliens is allowed but the mortgagee shall
not take possession or enjoy the fruits of the mortgaged real property and

Page | 3
ATTY. ROLANDO B. PAGTOLON-AN, REB, REA
 shall not bid or take part in any sale of such real property in case of
foreclosure

What is a Mortgage Redemption Insurance (MRI)?

MRI is an insurance policy that provides financial protection for home loan
borrowers and their families. It helps settle outstanding home loan amounts
in the event if death or total disablement of the borrowers.

ANTICHRESIS

What is contract of antichresis?

It is a contract whereby the creditor acquires the right to receive the fruits
of an immovable of the debtor, with the obligation to apply them to the
payment of the interest, if owing, and thereafter to the principal of his credit
(Art. 2132).

What are the requisites of antichresis?

1. It can cover only the fruits of an immovable property (Art. 2132);
2. Delivery of the immovable is necessary for the creditor to receive the fruits
and not that the contract shall be binding;
3. Amount of principal and interest must be specified in writing (Art. 2134);
and
4. Express agreement that debtor will give possession of the property to
creditor and that the latter will apply the fruits to the interest, if any, then to
the principal of his credit. In the absence of this requisite, the contract shall
be deemed to be one of mortgage.

What are the characteristics of antichresis?

1. An accessory contract
2. A formal contract- it must be in a specified form to be valid.

Enumerate the obligations of an antichretic creditor?

1. To pay taxes and charges on the estate, including expenses necessary
for preservation and repair;
2. To apply all the fruits, after receiving them, to the payment of interest, if
owing and thereafter to the principal.
3. To render an account of the fruits to the debtor; and
4. To bear the expenses necessary for its preservation and repair (Art. 2135).

Note: The antichretic creditor cannot ordinarily acquire ownership over the
property by prescription.

xxx Nothing follows xxx

Page | 4
ATTY. ROLANDO B. PAGTOLON-AN, REB, REA