Real Estate Mortgage

What is a real estate mortgage?

Real estate mortgageis 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

What are the essential requisites of real estate mortgage?

1. Secures the fulfillment of a principal obligation;
2. Mortgagor, must be the absolute owner of the thing mortgaged; and
3. Mortgagor must have free disposal of their property, or be legally authorized for such purpose.

The abovementioned enumeration is based on this article of the law:

Art. 2085. The following requisites are essential to the contracts of pledge and mortgage:

(1) That they be constituted to secure the fulfillment of a principal obligation;

(2) That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged;

(3) That the persons constituting the pledge or mortgage have the free disposal of their property, and in the absence thereof, that they be legally authorized for the purpose.

Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property. (1857)

Other special requisites include the following:

1. It can cover only immovable property and alienable real rights imposed upon immovables;
2. It must appear in a public instrument;
3. Registration in the registry of property is necessary to bind third persons, but not for the validity of the contract

When the principal obligation becomes due, the things in which was mortgaged may be alienated for the payment to the creditor. This is supported by this article:

Art. 2087. It is also of the essence of these contracts that when the principal obligation becomes due, the things in which the pledge or mortgage consists may be alienated for the payment to the creditor. (1858)

Mortgagor retains ownership of the thing given as a security.

What are the Kinds of real estate mortgage?

1. Voluntary- agreed to by the parties or constituted by the will of the owner of the property on which it is created
2. Legal- one required by law
3. Equitable- one which, although lacking the formalities of a mortgage, shows the intention of the parties to make the property a security for a debt

What is the rule for alien mortgagors?

1. An alien may accept mortgage but he is prohibited from taking possession of the mortgaged property during the existence of the mortgage and even after default of the mortgage except for the purpose of :

• Foreclosure of mortgage
• Receivership for a period of 5 years from the actual possession
• Participating in the bidding or taking part in any sale of the property mortgaged in cases of foreclosure

The mortgagee has the right to rely on what appears on the face of the certificate and in the absence of suspicion the mortgagee has no obligation to look beyond thereon. If the title bears the name of the real owner and the mortgagee was constituted by an impostor without consent of the owner then the mortgage is null and void.

References:

Guillermo Adriano v. Romulo Pangilinan, GR 137471, January 16, 2002

Paras, E. (2013). Civil Code Volume V (Special Contracts). Quezon City: Rex Printing Company, Inc.

The New Civil Code

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