Professional Documents
Culture Documents
WHAT IS A MORTGAGE?
A real estate mortgage is a contract whereby the d
ebtor secures to the creditor the fulfillment of a princi
pal obligation, specially subjecting to such security im
movable property or real rights over immovable prope
rty in case the principal obligation is not complied wit
h at the time stipulated.
CHARACTERISTICS OF
MORTGAGE
Real
Accessory
Subsidiary
Unilateral
MORTGAGE?
MO
GENERAL RULE:
Future property CANNOT be the object of a c
ontract of mortgage. One cannot constitute
a mortgage on any other property he might
have now and those he might acquire in the
future.
EXCEPTION:
A stipulation which says that the mortgage covers fut
ure improvements upon real property already mortga
ged is valid. This is because these future improvement
s are deemed included in the real property by accessio
n; they are not separate from the real property already
subject of the mortgage.
LEGAL MORTGAGES
One which is in conformity of the with the rule establ
ished under the law on Form of Contracts which giv
es the contracting parties the right to compel each ot
her to observe the form required by law like the execu
tion of a document or other special forms provided th
e contract between them is valid and enforceable.
MORTG
EFFECTS OF
MORTGAGE
EFFECTS OF MORTGAGE
Extent of Mortgage
1.Natural accessions
2.Growing fruits
3. Rents or income not yet received when t
he obligation becomes due
4. Amount of Indemnity granted or owing
to the proprietor from:
The insurers of the property manage
d; or
Expropriation for public use (Art. 21
27)
Exceptions:
Alienation or Assignment of
Mortgage
1. Said assignment is valid and assignee may forecl
ose the mortgage in case of nonpayment of the
mortgage indebtedness.
2. An assignee cannot acquire greater rights than t
hose pertaining to an assignor
Article 2131
THE FORM, EXTENT AND CONSEQUENCE OF A MOR
TGAGE, BOTH AS TO ITS CONSTITUTION, MODIFICATI
ON AND EXTINGUISHMENT, AND AS TO THE OTHER
MATTERS NOT INCLUDED IN THIS CHAPTER, SHALL B
E GOVERNED BY THE PROVISIONS OF THE MORTGA
GE LAW AND OF THE LAND REGISTRATION LAW.
Foreclosure
DEFINITION - the remedy available to the mortgage
e by which he subjects the mortgaged property to t
he satisfaction of the obligation to secure which the
mortgage was given where the mortgagor is in def
ault in the payment of the obligation
Kinds
of Foreclosure
JUDICIAL - an ordinary action for foreclosure under
Rule 68 of the ROC.
Kinds of Foreclosure
EXTRAJUDICIAL - when mortgage is given a special p
ower of attorney to sell the mortgaged property by pu
blic auction under Act No. 3135
JUDICIAL
EXTRAJUDICIAL
AS TO COURT
INTERVENTION
No court intervention
AS TO THE RIGHT TO
APPEAL
Decisions are
immediately executory
AS TO THE CUTTING
OFF OF RIGHTS
AS TO THE RIGHT OF
REDEMPTION
There is a right of
redemption
AS TO THE PERIOD OF
REDEMPTION
AS TO THE NECESSITY
OF A SPECIAL POWER
OF ATTORNEY
No need
SPA in favor of
mortgagee is needed
GOVERNING RULE
Rule 68 of ROC
Article 3135
If yes, it is automatically a
JUDICIAL FORECLOSURE
If theres no stipulation,
JUDICIAL FORECLOSURE
will apply under Rule 68 of
ROC
Who is foreclosing?
BANK- it is subject to Section
47 of General Banking Act
PROCEDURE OF JUDICIAL F
ORECLOSURE
STEP 2: TRIAL,
JUDGMENT, PAYMENT
WITHIN 90-120 DAYS
FROM FINALITY
STEP 3: EQUITY
REDEMPTION PERIOD
STEP 4: PUBLIC
AUCTION IF MORTGAGOR
DEFAULTS
STEP 5: JUDICIAL
CONFIRMATION
STEP 6: DISPOSAL OF
PROCEEDS OF SALE OF
THE PROPERTY
EXTRAJUDICIAL FORECLOS
URE
ACT NO. 3135,
As amended by Act No. 4118
&
A.M. No. 99-10-05-0
PROCEDURE
1. File a complaint with the Executive Judge.
At any sale, the creditor, trustee, or other person, authorized to act for the creditor, may participate in the bidding, and purchase under the same conditions as any other bidder, UNLESS the contrary has been expressly provided in th
e mortgage or trust deed under which the sale is made.
(Section 5, Act No. 3135, as amended)
Step 5. Redemption
xxx the debtor, his successors in interest or any judicial creditor or judgment creditor of said debtor, or any person having a lien on the property subsequent to the mortgage or deed o
f trust under which the property is sold, may redeem the same at any time within the term of one year from and after the date of the sale xxx
(Section 6, Act No. 3135, as amended)
Step 5. Redemption
EXCEPTION:
If the mortgagee foreclosing is a BANK, and the mortgagor is a JURIDICAL PERSON.
Step 5. Redemption
Right of Redemption
Equity of Redemption
It is available to the
mortgagor only when the
mortgage is foreclosed
extrajudicially.
It is not available in judicial
foreclosures, except when
Step 5. Redemption
EXAMPLE:
M, as mortgagor, mortgaged a house and lot to A. Later, M also mortgaged it to B.
A foreclosed the mortgage and bought the house and lot at the auction.
Step 5. Redemption
A: In this case, upon the sale of the property to A, the only right that B as second mortgagee has is the right to redeem. He may exercise the right by p
aying off the debt secured by the first mortgage. Bs exercise of mortgagors equity of redemption is equivalent to foreclosure of the junior mortgage.
Step 5. Redemption
How much should the one exercising the right of redemption pay?
Step 5. Redemption
How much should the one exercising the right of redemption pay?
Step 5. Redemption
What happens if the debtor/mortgagor fails to redeem the property within the prescribed period?
Step 5. Redemption
What is the effect of the timely exercise of the right of redemption?
He does not really recover property since he does not lose ownership until after the expiration of the redemption period.
HE MERELY FREES IT OF THE ENCUMBRANCE CREATED BY THE MORTGAGE.
Step 5. Redemption
What happens if the mortgagor sells the property to a third person within the redemption period?
The third person, in buying the property, is actually buying not the property itself but the right to redeem to redeem the property and the right to possess it within the redem
ption period.
Step 5. Redemption
PROBLEM:
X mortgaged property to a Bank to secure a P1M loan at 17% interest. The mortgage was foreclosed. At the sale, the property was sold to the Bank as the highest bidder for P800K. The bank then sold the property to Y for P1.5M.
Q: If X wants to redeem the property, to whom should he pay and how much?
Step 5. Redemption
A: X should pay to the Bank. He should pay only P1M - the amount of the principal obligation plus interest at 17%, plus costs.
Y would then have a right to seek reimbursement from the Bank.
Equity
Kinds
ofof Redemption
Redemption
Judicial foreclosure
Right of Redemption
Extrajudicial foreclosure
Equity of Redemption
PERIOD OF REDEMPTION
n of foreclosure of sale
Subsists for one year from registration of certificate s
ale
Exercised by offer with tender (an action to repurcha
se has been construed as such offer)
Extrajudicial Foreclosure
After the lapse of redemption period, purchaser is en
titled to consolidate title by Affidavit of Consolidation
at Register of Deeds and obtain possession by Writ of
Possession or other action
Right of Redemption
PERIOD OF REDEMPTION
Right of Redemption
Allowing
redemption after the lapse of the sta
Take
NOTE:
Persons
Entitled
to
Exercise
Rig
Mortgagor
or one in privity of title
ht of
Redemption
with
mortgagor
Successor-in-interest
Under Rules Of Court
Judgment debtor or successor-in-interest
Creditor who has lien over the property
Right of redemption
Exercised BEFORE the CONFIRMATION OF SALE
Judicial
Extra-Judicial
Exercised within one year from
the date of the sale, reckoned from
date of execution of the certificate of sale since it is only from that d
ate
that
the
sale
takes
effect
as
a
conveyance.
Exception: If the mortgagee foreclosing is a BANK and the mortgago
r is a JURIDICAL PERSON, the juridical person shall have the right to r
edeem the property BEFORE the registration of the certificate of sale
but NOT EXCEEDING 90 DAYS FROM THE DATE OF THE FORECLOSU
RE.
Take NOTE:
AFTER FORECLOSURE AND SALE OF THE MORTGAGE
D PROPERTY, THE MORTGAGE INDEBTEDNESS IS EXT
INGUISHED EXCEPT TO THE EXTENT THAT THERE IS A
DEFICIENCY. WHAT REMAINS IS THE RIGHT VESTED B
Y LAW IN FAVOR OF THE MORTGAGOR TO REDEEM T
HE PROPERTY WITHIN THE PRESCRIBED PERIOD.
Mortgagee in
Possession
Vendee
Against Third
Persons
1. Similar to those
of an antichresis
creditor.
1. Right to
possession.
1. Claimants with
interest adverse to
mortgagor.
2. Without right to
reimbursement for
useful expenses.
2. Right to writ of
possession.
2. Successor-ininterest of
mortgagor
3. Right to aid of
court.
3. Agricultural
lessees.
What1.Where
are the
instances
when
a lease
writthat:
of possession is
mortgaged
property
is under
a. Had been previously registered in the Registry of Property; or
not available?
b. Despite non-registration, the mortgagee had prior knowledge
of the existence and duration of the lease.
2.Where mortgagor refuses to surrender property sold.
a. Remedy of the purchaser: To file an ordinary action for the rec
overy of possession.
3.Where third party is in actual possession.
a. Remedy: To bring the appropriate judicial action, i.e., ejectme
nt suit or reivindicatory action
Where
rights of third
persons
invol
2. Successor-in-interest
of mortgagor.
The purchase
absolute owner, is entitled to the possession of
ved.r,theasproperty
bought and cannot be excluded theref
rom by any one who merely claims to be a successo
r-in-interest of the mortgagor xxx UNLESS, it is adju
dged that the alleged successor has a better right t
o the property than the purchaser.
THE END