MORTGAGE

AND LEASES
By Group 4
 Presentation Outline

I. Nature and Meaning of Mortgage

A. Legal Basis
B. Effectivity
C. Effect of Lack of Registration
D. Procedure for Registration
 Presentation Outline

II. Governing Rules and Laws on

Mortgage
Nature of Mortgage
Essence of a Contract of Mortgage
B. Object of a mortgage
C. Characteristics of Mortgage
D. Doctrine of Innocent mortgagee for
value
E. Prescriptive Period
 F. Procedure for Registration:
Foreclosure of Mortgage:
G. Judicial Foreclosure of Mortgage
Procedures for Judicial Mortgage
H. Procedure for extrajudicial
foreclosure
Nature and Meaning of Mortgage
Legal Basis
is a real right constituted to secure an
obligation upon real property or rights
therein to satisfy with the proceeds of the
sale thereof such obligations when the same
becomes due and has not been fully paid or
fulfilled.
 is regarded as a mere lien, and not as
creating a title or estate. It is in essence a
charge on property for the purpose of
security.
 is 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 can waive the mortgage
security and proceed to collect the
principal debt by personal action against
the original mortgagor.
In the Philippines, the owner who constitutes
a mortgage retains title to the property and
does not lose his attributes as an owner. He
only creates a lien or encumbrance upon his
property. This is different from the common
law theory where title to the mortgage
passes to the mortgagee, subject to
reversion as a upon performance of the
condition
Essential Requisites of Mortgage
1. It be constituted to secure the fulfillment of a principal
obligation;
2. The mortgagor be the absolute owner of the property;
3. The mortgagor has the free disposal of the property, and in
the absence thereof, that he be legally authorized for the
purpose.
4. Third persons who are not parties to the principal
obligation may secure the latter by mortgaging their own
property. (Art. 2085, NCC)
5. It cannot exist without a valid obligation. Nevertheless, it
could be constituted to guarantee the performance of a
voidable or unenforceable contract. It may also guarantee
a natural obligation. (Art. 2052, NCC)
 5th Requisite

It must be recorded in the Registry of

Property.
 Effects of failure to register:

Failure does not invalidate the mortgage.

The mortgage is nevertheless binding
between the parties only, but not to third
persons who does not have notice of such
mortgage. (Art. 2125, par.1, Supra)
Parties to a Mortgage
 mortgagor

mortgagee
 Q: May a mortgagor validly sell a
mortgaged property even without
the consent of the mortgagee?
What are the effects of the sale to
the mortgage lien?
 Yes, a mortgagor could validly alienate the
mortgaged property, and any stipulation to
the contrary is void. A prohibition against
sale practically gives the mortgagee the
sole prerogative to prevent any sale of the
mortgaged property. This creates an
unconscionable advantage for the
mortgagee and virtually deprives the
mortgagor of his right to dispose his
property.
 Effectivity
Such deed of mortgage and all
instruments which assign, extend,
discharge or otherwise deal with the
mortgage shall be registered, and shall
take effect upon the title only from time of
registration.
 Effect of Lack of Registration
binding between the parties
The persons in whose favor the law
establishes a mortgage have no other right
than to demand the execution and the
recording of the document in which the
mortgage is formalized. (1875a)
 Procedure for Registration

Sec 61, PD 1529 - Registration of

mortgage

Section 62 of PD No. 1529. - Registration

of a discharge of mortgage
 Registration of mortgage
1. Presentation of the deed of mortgage for registration
together with the owners duplicate to the Register of
deeds of the city or province where the land lies.
2. Register of deeds shall enter upon the original of the
certificate of title and also upon the owners duplicate
certificate a
a) memorandum thereof
b) the date and time of filing
c) file number assigned to the deed
3. Register of deeds shall sign the said memorandum.
4. Register of deeds shall also note on the deed the date
and time of filing and a reference to the volume and
page of the registration book in which it is registered.
 Registration of a discharge of
mortgage,
1. By means of an instrument executed by
the mortgage or lessee in a form
sufficient in law.
2. Filed with the Register of Deeds
3. Register of Deeds shall make the
appropriate memorandum upon the
certificate of title.
 A mortgage may be discharged by the creditor
executing a public instrument cancelling or
releasing the mortgage, substantially in
accordance with the form prescribed by Section
127 of Act No. 496, and the instrument being
presented with the office of the Register of
Deeds of the city or province where the land lies,
together with the owners duplicate title, for
registration. Thereupon, a memorandum of
cancellation is annotated
II. Governing Rules and Laws
on Mortgage
Essence of a Contract of Mortgage
When the principal obligation becomes due, the
things in which the mortgage consists may be
alienated for the payment to the creditor. (Art.
2087, NCC) The property mortgaged cannot be
appropriated by the creditor, as in the case of
pactum commissorium, but must be sold at the
public auction in accordance with the procedure
prescribed by law for the satisfaction of the
obligation.

 Alienation of a Mortgaged Property

The mortgage credit may be alienated or assigned to a

third person, in whole or in part, with the formalities
required by law. (Art. 2128, NCC)
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 the terms and with the formalities which
the law establishes. (Art. 2129, NCC)
A stipulation forbidding the owner from alienating the
immovable mortgaged shall be void. (Art. 2130, NCC)
 Object of a mortgage
Only the following property may be the
object of a contract of mortgage:
Immovables;
Alienable real rights in accordance with the
laws, imposed upon immovables.
 Characteristics of Mortgage
All-embracing
extends to
to the natural accessions,
to the improvements,
growing fruits, and the rents or income not yet received when the
obligation becomes due, and
to the amount of the indemnity granted or owing to the proprietor
from the insurers of the property mortgaged, or in virtue of
expropriation for public use, with the declarations, amplifications
and limitations established by law, whether the estate remains in
the possession of the mortgagor, or it passes into the hands of a
third person. (Art. 2127, NCC)
 Prudential Bank vs Panis
153 SCRA 390 (1987)

A mortgage can be constituted

on the building only.
 Inseparable

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. (Art. 2126,
NCC)
 Indivisible
General rule
A mortgage is indivisible, even though the
debt may be divided among the
successors in interest of the debtor or of
the creditor.
The debtor's heir who has paid a part of
the debt cannot ask for the proportionate
extinguishment of the mortgage as long as
the debt is not completely satisfied.
 PNB vs Delos Reyes
179 SCRA 619 (1989)

The creditor's heir who received his

share of the debt cannot cancel the
mortgage, to the prejudice of the
other heirs who have not been paid.
 Exceptions:
Indivisibility does not apply when there are no
several heirs as Art 2089 presupposes several
heirs of the debtor or of the creditor Central
Bank vs CA 139 SCRA 46 (1987)

The debtor cannot ask for a release of a portion

if the entire loan is secured by the several lots
not yet paid. (PNB vs Delos Reyes, Supra)
Doctrine of Innocent mortgagee
for value

Despite the fact that the mortgagor is not

the owner of the mortgaged property, his
title being fraudulent, the mortgage
contract and any foreclosure sale arising
therefrom are given effect by reason of
public policy.
 Prescriptive Period
an action for could be brought within 10
years from the time the right of action
accrues (Art. 1144, Supra.) or from the
default in payment of the loan
amortizations
The prescription is interrupted
when :
1. the action is filed in court
2. there is a written extrajudicial demand by
the creditors, and
3. when there is any written
acknowledgement of the debt by the
debtor. (Art. 1155, Supra.) (B&I Realty vs
Caspe)
 Procedure for Registration:
Foreclosure of Mortgage:
Foreclosure is the process by which a
mortgagee acquires an absolute title to the
property of which he had previously been
only the conditional owner, or upon which
he had previously a mere lien or
encumbrance.
 Judicial Foreclosure
A certified copy of the final order of the court confirming the sale shall be registered with the
Register of Deeds.
No right of redemption With right of redemption

The certificate of title of the mortgagor The certificate of title of the mortgagor shall
shall be canceled. not be canceled
A new certificate is issued in the The certificate of sale and the order
name of the purchaser. confirming the sale shall be registered by a
brief memorandum thereof made by the
Register of Deeds upon the certificate of
title.

Effect of Right of Redemption

If redeemed If not redeemed
Certificate or deed of redemption shall The final deed executed by the sheriff shall
be filed with the Register of Deeds. be registered with the Register of Deeds

A brief memorandum shall be made by Title of the mortgagor is cancelled

the Register of deeds on the certificate
A new certificate is issued in the name of
of Title of the mortgagor.
the purchaser.
 Extrajudicial Foreclosure
A certified copy of the sale executed by the officer who conducted the sale shall be filed with
the Register of Deeds who shall make a brief memorandum thereof on the certificate of title.

No right of redemption With right of redemption

The certificate of title of the mortgagor The certificate of title of the mortgagor shall not
shall be canceled. be canceled
A new certificate is issued in the name The certificate of sale and the order confirming
of the purchaser. the sale shall be registered by a brief
memorandum thereof made by the Register of
Deeds upon the certificate of title.
Effect of Right of Redemption
If redeemed If not redeemed
Certificate or deed of redemption shall be The purchaser at a foreclosure sale will file to the
filed with the Register of Deeds. Register of Deeds either a:
1. final deed of sale executed by the person duly
authorized by virtue of attorney embodied in the
deed of mortgage, or
2. his sworn statement attesting to the fact of
non-redemption

A brief memorandum shall be made by the The owners duplicate of certificate will be
Register of deeds on the certificate of Title of delivered and cancelled.
the mortgagor. The Register of Deeds will issue a new certificate
in favor of the new purchaser.
 Guiding principles on judicial
foreclosure of mortgage

1. After the execution of a real estate

mortgage, the mortgagor has an equity of
redemption exercisable within the period
stipulated in the mortgage deed. In case
of judicial foreclosure, that equity of
redemption subsists after the sale and
before it is confirmed by the court.
 2. However, in case of a judicial
foreclosure of a mortgage in favor of
a banking institution, Section 78 of
the General Banking Law grants the
mortgagor a right of redemption which
may be exercised within one year
from the sale
 . 3. Under Section 3, Rule 68 of the Rules
of Court, it is the confirmation by the court
of the auction sale that would divest the
mortgagor of their rights to the mortgaged
lot and that would vest such rights in the
purchaser at the auction sale.
 There is no right of redemption in judicial
foreclosure unless the mortgagee is a banking
institution (Lonzame vs Amore)

Banks and other financial institutions are

cautioned to exercise more care and prudence
than private individuals before accepting a
mortgage, for their business is affected with
public interest (Gonzales vs Intermediate
Appellate Court)
 Procedures for Judicial Mortgage

1. Confirmation
A foreclosure sale is not complete until
it is confirmed
2. Notice and Hearing
In order that a foreclosure sale may be
validly confirmed by the court, it is
necessary that a hearing be given the
interested parties, at which they may have
an opportunity to show cause why the sale
should not be confirmed.
 Lack of notice vitiates the confirmation of
the sale. The mortgagor may still redeem
the mortgaged lot after the rendition of the
order confirming the sale which is void for
lack of hearing and notice to the
mortgagor.
 Essential to the validity of the order of
confirmation, not only to enable the
interested parties to resist the motion but
also to inform them of the time when their
right of redemption is cut off . An order of
confirmation, void for lack of notice and
hearing, may be set aside anytime. (Tiglao
vs. Botones, 90 Phil. 275, 279).
3. Acceptance

The acceptance of a bid at the foreclosure

sale confers no title on the purchaser
4. The confirmation retroacts to the date
of the sale.
 Whatever may have been the old rule by
all of the modern authorities, it is the
policy of the courts to assist rather than
to defeat the right of redemption. (De
Castro vs. Olondriz and Escudero 50 Phil.
725, 732).

6. After the confirmation of the sale, made

after hearing and with due notice to the
mortgagor, the latter cannot redeem
anymore the mortgaged lot (unless the
mortgagee is a banking institution) (Piano
vs. Cayanong 117 Phil. 415). There is no
right of redemption in judicial foreclosure
unless the mortgagee is a banking
institution. (Lonzame v. Amore)
 Disposition of the proceeds
The amount realized from the foreclosure sale of the
mortgaged property shall be distributed in the following
order:
1. Costs of the sale
2. Paid to the person foreclosing the mortgage
3. If there is any balance or residue after paying off the
mortgage debt due, the same shall be paid to junior
encumbrances, in the order of their priority, to be
ascertained by the court
4. If there be no such encumbrancers or there be a
balance or residue after payment to them, then to the
mortgagor or his duly authorized agent, or to the
person entitled to it. (Sec. 4, Rule 68)
 Procedure for extrajudicial
foreclosure
AM NO. 99-10-05-SC, DECEMBER
14,999, AS AMENDED BY SC
RESOLUTIONS DATED JANUARY 30,
2001 AND AUGUST 7, 2001 AND THE SC
CIRCULAR NO. 7-2002)
 Extrajudicial Foreclosure
Any property brought within the
ambit of Act No 3135 is foreclosed by
filing of a petition, not with any court of
justice, but with the office of the sheriff
of the province where the sale is to be
made.
 Procedure for Extrajudicial Mortgages

1. All applications for extra-judicial

foreclosure of mortgage whether under the
direction of the sheriff or a notary public shall
be filed with the Executive Judge, through
the Clerk of court who is also the Ex-Officio
Sheriff.
2. Upon receipt of an application for extra-judicial
foreclosure of mortgage, it shall be the duty of the Clerk
of Court to:
a) receive and docket said application and to stamp thereon
the corresponding file number, date and time of filing;
b) collect the filing fees and issue the corresponding official
receipt;
c) examine, in case of real estate mortgage foreclosure,
whether the applicant has complied with all the
requirements before the public auction is conducted under
the direction of the sheriff or a notary public,
d) sign and issue the certificate of sale,
subject to the approval of the Executive
Judge, or in his absence, the Vice-Executive
Judge. No certificate of sale shall be issued
in favor of the highest bidder until all fees
shall have been paid; Provided, that in no
case shall the amount payable under Rule
141, Section 9(1), as amended, exceed
P100,000.00;
e) after the certificate of sale has been issued to the
highest bidder, keep the complete records, while awaiting
any redemption within a period of one (1) year from date of
registration of the certificate of sale with the Register of
Deeds concerned, after which, the records shall be
archived. Notwithstanding the foregoing provision, juridical
persons whose property is sold pursuant to an extra-judicial
foreclosure, shall have the right to redeem the property
until, but not after, the registration of the certificate of
foreclosure sale which in no case shall be more than three
(3) months after foreclosure, whichever is earlier, as
provided in Section 47 of Republic Act No. 8791 (as
amended, Res. Of August 7, 2001).
1. The notices of auction sale in extrajudicial
foreclosure for publication by the sheriff or
by a notary public shall be published in a
newspaper of general circulation.
2. The Executive Judge shall, with the
assistance of the Clerk of Court, raffle
applications for extrajudicial foreclosure of
mortgage under the direction of the sheriff
among all sheriffs, including those assigned
to the Office of the Clerk of Court and
Sheriffs IV assigned in the branches.
3. The name/s of the bidder/s shall be reported
by the sheriff or the notary public who
conducted the sale to the Clerk of Court
before the issuance of the certificate of sale.
 DBP vs Doyon
GR No 167238, 25 March 2009

The petitioner had the legal right to

foreclose on the real and chattel
mortgages. Since respondents neither
assailed the due execution of the June 29,
1994 promissory notes nor presented
proof of payment thereof, their obligation
remained outstanding. Upon default, by
prior mutual agreement, petitioner had the
right to foreclose on the real and chattel
mortgages securing their loans.
 I. Right of Redemption in Extrajudicial
Foreclosure of Mortgage

Who may redeem:

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 of
trust under which the property is sold. (Sec
6, Art. 3135)
 Proof required:

A redemptioner must produce to the officer, or person

from whom he seeks to redeem, and serve with his
notice to the officer a copy of the judgment or final order
under which he claims the right to redeem, certified by
the clerk of the court wherein the judgment or final order
is entered; or, if he redeems upon a mortgage or other
lien, a memorandum of the record thereof, certified by
the registrar of deeds; or an original or certified copy of
any assignment necessary to establish his claim; and an
affidavit executed by him or his agent, showing the
amount then actually due on the lien. (Sec. 30, Rule 39
of the Rules of Court)
 When to redeem:

Any time within one year from the date of

registration of the certificate sale.
 How exercised:

Redemption can be exercised by paying

only the purchase price paid by the
successful bidder plus one percent (1%)
monthly interest up to the time of
redemption.
 Gorospe vs UCPB
193 SCRA 546 (1991)

The right to redeem may be transferred or

assigned by the owner
 Gorospe vs Santos
69 SCRA 191 (1976)

In cases of redemption of registered land,

the period should be reckoned from the
date the certificate of sale of the property
involved was registered, since it is
only from the date of its registration that a
certificate of sale takes effect as a
conveyance.

 Limpin vs IAC
166 SCRA 87 (1980)

After an extrajudicial foreclosure, a

mortgager has the right of redemption
which he may exercise within one year
from the registration of the sheriffs
certificate of sale.
 Option to redeem is personal to the
mortgagor, hence may be waived.
 Tolentino vs CA
193 SCRA 546 (1991)

The act of redeeming of a property mortgaged is not an obligation

but a privilege, in the sense that the mortgagor may or may not
redeem his property. That of course is a privilege. He may choose to
give up the property and have the mortgage foreclosed, or redeem
the property with the obligation of course to pay the loan or
indebtedness. But where he elects to redeem the property and he
has to pay the loan for which the mortgage was constituted, then Art.
1249 of the Civil Code applies because it involves now the
'payment of debts.' It is only the act of redeeming or not that is
considered a privilege, but not the act of paying the obligation once
the mortgagor has elected to redeem the property, in which case the
check issued or drawn shall produce the effect of payment only
when it has been cashed.
 A mortgagor is deemed to have waived the
statutory period of redemption of one year
from the date of expiration of redemption
period
 Ramirez vs CA
219 SCRA 598 (1993)
The PNB accepted the redemption price from the petitioner after the
one (1) year period had expired. By accepting the redemption price
after the statutory period for redemption had expired, PNB is
considered to have waived the one (1) year period within which
Ramirez could redeem the property. There is nothing in the law
which prevents such a waiver. Allowing a redemption after the lapse
of the statutory period, when the buyer at the foreclosure does not
object but even consents to the redemption, will uphold the policy of
the law recognized in such cases as Javellana v. Mirasol and Nuez
and in the more recent case of Tibajia, et al. v. Honorable Court of
Appeals, et al. which is to aid rather than defeat the right of
redemption. Thus, there is no doubt that the redemption made by
petitioner Ramirez is valid.
 A mortgagor may still execute another
mortgage contract during the redemption
period.
 Medida vs CA
208 SCRA 887 (1992)

Since the mortgagor remains as the

absolute owner of the property during the
redemption period and has the free
disposal of his property, there would be
compliance with the requisites of Article
2085 of the Civil Code for the constitution
of another mortgage on the property. To
hold otherwise would create the
inequitable.
 Procedure for Foreclosure of
Prior Mortgage
The rule is that upon a proper foreclosure
of a prior mortgage, all liens subordinate to
the mortgage are likewise foreclosed, and
the purchaser at public auction held
pursuant thereto acquires title free from
the subordinate liens. Ordinarily, thereafter
the Register of Deeds is authorized to
issue the new titles without carrying over
the annotation of subordinate liens.

Effect of liens subordinate to the

First Mortgage
The rights of a subsequent lien holder over
the mortgaged property are inferior to that
of the prior mortgagee. A subsequent lien
holder acquires only the right of
redemption vested in the mortgagor, and
his rights are strictly subordinate to the
superior lien of the anterior mortgagee.
After the foreclosure sale, the remedy of
the second mortgagee is limited to the
right to redeem by paying off the debt
 Upon a proper foreclosure of a prior
mortgage, all liens subordinate to the
mortgage are likewise foreclosed, and the
purchaser at public auction held pursuant
thereto acquires title free from the
subordinate liens. Ordinarily, thereafter the
Register of Deeds is authorized to issue
the new titles without carrying over the
annotation of subordinate liens.
 PNB vs IAC
199 SCRA 508 (1991)

In a case with similar features, the failure

of the subsequent attaching creditor to
redeem, within the time allowed by Section
6 of Act 3136, the land which was sold
extrajudicially to satisfy the first mortgage,
gives the purchaser a perfect right to
secure the cancellation of the annotation
of said creditor's attachment lien on the
certificates of title of said land.
 Writ of Possession in
Foreclosure Proceedings
A writ of possession is an order by which
the sheriff is commanded to place a
person in possession of a real or personal
property. It may be issued in any of the
following instances:
1. land registration proceedings which is a
proceeding in rem to place the applicant or
oppositors, or whoever is the successful
litigant, in possession of the property;
2. in extrajudicial foreclosure of a realty mortgage;
3. in a judicial mortgage, a quasi-judicial in rem
proceeding, provided that the mortgagor is in
possession of the mortgaged realty and no third
person, not a party to the foreclosure suit, had
intervened; and
4. in execution sales.
 The purchaser at the public auction sale of
an extrajudicially foreclosed real property
may seek possession in accordance with
Section 7 of Act no. 3135, as amended
by Act no. 4118. The same procedure is
applicable to a purchaser seeking
possession of the foreclosed property
bought at the auction sale after
redemption period has expired without
redemption having been made.
 The purchaser in the extrajudicial foreclosure may petition the Regional Trial Court
where the property is located.
Purpose of the petition: to give him possession of the land during the redemption
period.
Form: Shall be made under oath and filed in form of (1) an ex parte motion in the
registration or cadastral proceedings if the property is registered, or (2) in special
proceedings in the case of property registered under the Mortgage Law or of any
other real property encumbered with a mortgage duly registered in the office of any
register of deeds in accordance with any existing law.
The purchaser also has a duty to furnish bond
Amount: equivalent to the use of the property for 12 months.
Purpose: To indemnify the debtor if
it be shown that the sale was made without violating the mortgage; or
without complying with the requirements of this Act.
The clerk of court has a duty to collect fees upon filing of the petition.
The court, upon approval of the bond, order that a writ of possession issue. The writ
of possession is addressed to the sheriff of the province where the property is
located. The sheriff shall execute the order immediately.
 General Rule: Upon the expiration of the
one-year period for redemption counted
from the registration of the sale, the right
of the purchaser to the possession of the
foreclosed property becomes absolute.
 China Banking Corporation vs Lozada
GR No. 164919, July 4, 2008

The buyer in a foreclosure sale becomes

the absolute owner of the property
purchased if it is not redeemed during
the period of one year after the
registration of the sale. As such, he is
entitled to the possession of the said
property and can demand it at any time
following the consolidation of ownership in
his name and the issuance to him of a new
 PNB vs Gotesco
GR No. 183211, June 5, 2009

Upon the expiration of the redemption period,

the right of the purchaser to the possession of
the foreclosed property becomes absolute.
Thus, the mere filing of an ex parte motion for
the issuance of a writ of possession would
suffice, and there is no bond required since
possession is a necessary consequence of the
right of the confirmed owner. It is a settled
principle that a pending action for annulment of
mortgage or foreclosure sale does not stay the
issuance of the writ of possession.
 He is entitled to possession following
consolidation of ownership in his name.
 BPI vs Tarampi
GR No. 174988, December 10, 2008

It is settled that the buyer in a foreclosure sale becomes

the absolute owner of the property purchased if it is not
redeemed during the period of one year after the
registration of sale. As such, he is entitled to the
possession of the property and can demand it any
time following the consolidation of ownership in his
name and the issuance of a new transfer certificate of
title. In such a case, the bond required in Section 7 of
Act No. 3135 is no longer necessary. Possession of the
land then becomes an absolute right of the purchaser as
confirmed owner. Upon proper application and proof of
title, the issuance of the writ of possession becomes a
ministerial duty of the court.
 A mortgagor is entitled to a writ of
possession after extrajudicial possession
after extrajudicial foreclosure even before
the expiration of the period of redemption.
 Veloso vs IAC
205 SCRA 227 (1992)

Nature of writ of possession in foreclosure

proceedings

A petition for a writ of possession is ex

parte and summary in nature.
 A mortgagee becomes the absolute owner
after expiration of the period of redemption
without mortgagor exercising the right to
redeem.
 Lam vs Metrobank
GR No. 178881, 18 February 2008,
546 SCRA 200

It is settled that the issuance of a writ of possession to a

purchaser in a public auction is a ministerial act. After
the consolidation of title in the buyer's name for failure of
the mortgagor to redeem the property, entitlement to
the writ of possession becomes a matter of right. Its
issuance to a purchaser in an extrajudicial foreclosure
sale is merely a ministerial function. It is undisputed that
herein petitioners failed to redeem the property within the
redemption period and thereafter, ownership was
consolidated in favor of herein respondent and a new
certificate of title was issued in its name. Thus, it was a
purely ministerial duty for the trial court to issue a writ of
possession in favor of herein respondent upon the
latter's filing of a petition.
 Possession may be demanded after
consolidation of ownership
. David Enterprises vs Insular Bank of Asia and
America
191 SCRA 516 (1990
The buyer can in fact demand possession of
the land even during the redemption period
except that he has to post a bond in
accordance with Section 7 of Act No. 3133 as
amended. No such bond is required after the
redemption period if the property is not
redeemed. Possession of the land then
becomes an absolute right of the purchaser as
confirmed owner. Upon proper application and
proof of title, the issuance of the writ of
possession becomes a ministerial duty of the
court.
 The purchaser at the public auction sale of
an extrajudicially foreclosed real property
may seek possession thereof in
accordance with Sec. 7 of same Act
 China Banking Corporation vs Lozada
GR No. 164919, July 4, 2008
No such bond is required after the redemption
period if the property is not redeemed.
Possession of the land then becomes an
absolute right of the purchaser as confirmed
owner. Upon proper application and proof of title,
the issuance of the writ of possession becomes
a ministerial duty of the court.[
 It is a ministerial duty of the court to issue
a writ of possession.
 Sueno vs LBP
GR No. 174711, 17 September 2008
A writ of possession may also be issued after consolidation of
ownership of the property in the name of the purchaser. It is settled
that the buyer in a foreclosure sale becomes the absolute owner of
the property purchased if it is not redeemed during the period of one
year after the registration of sale. As such, he is entitled to the
possession of the property and can demand it any time following the
consolidation of ownership in his name and the issuance of a new
transfer certificate of title. In such a case, the bond required in
Section 7 of Act No. 3135 is no longer necessary. Possession of the
land then becomes an absolute right of the purchaser as confirmed
owner. Upon proper application and proof of title, the issuance of the
writ of possession becomes a ministerial duty of the court
 Joven vs CA
212 SCRA 700 (1992)

To give effect Section 7 of Act No. 3135, as amended by Act No.

4118, provides that in case of extrajudicial foreclosure of mortgage,
the court may issue as a matter of course a writ of possession in
favor of the purchaser even during the redemption period, provided
that a proper motion has been filed, a bond is approved, and no third
person is involved to his right of possession, the purchaser must
invoke the aid of the courts and ask for a writ of possession. He
cannot simply take the law into his own hands and enter the
property without judicial authorization. We have consistently held
that he need not bring a separate and independent suit for this
purpose. Nevertheless, it is essential that he ask for and be granted
a writ of possession in order that he may be legally installed in the
property he has bought.
 General Rule: The pendency of a separate
civil suit questioning the validity of the
mortgage cannot be a legal ground for
refusing the issuance of a writ of
possession because the same is a
ministerial act of the trial court after title
has been consolidated in the name of the
mortgagee.
 Sps. Vaca vs CA
GR No. 109672, 14 July 1994

The pendency of a separate civil suit questioning the

validity of the mortgage cannot bar the issuance of the
writ of possession, because the same is a ministerial
act of the trial court after title on the property has been
consolidated in the mortgagee. The ruling was reiterated
in Navarra v. Court of Appeals, in which we held that as
a rule any question regarding the validity of the
mortgage or its foreclosure cannot be a legal ground
for refusing the issuance of a writ of possession.
Exceptions: Instances when the issuance of a writ
of possession is not ministerial

1. When the third party is actually holding

the property adversely to the judgment
debtor
 Clapano vs Gapultos
132 SCRA 429
Under Sec. 35, Rule 39 of the Revised Rules of Court, which was
made applicable to the extrajudicial foreclosure of real estate
mortgages by Sec. 6 Act No. 3135, the possession of the mortgaged
property may be awarded to a purchaser in extrajudicial foreclosures
"unless a third party is actually holding the property adversely
to the judgment debtor."
In an extrajudicial foreclosure of real property, when the foreclosed
property is in the possession of a third party holding the same
adversely to the defaulting debtor/mortgagor, the issuance by the
RTC of a writ of possession in favor of the purchaser of the
said real property ceases to be ministerial and may no longer be
done ex parte. For the exception to apply, however, the property
need not only be possessed by a third party, but also held by the
third party adversely to the debtor/mortgagor.
2. Where the price is unjustifiably higher that
the real mount of the obligation
 Sulit vs CA
268 SCRA 441
The general rule that mere inadequacy of price is not sufficient
to set aside a foreclosure sale is based on the theory that the
lesser the price the easier it will be for the owner to effect the
redemption. The same thing cannot be said where the amount of the
bid is in excess of the total mortgage debt. The reason is that in
case the mortgagor decides to exercise his right of redemption,
Section 30 of Rule 39 provides that the redemption price should
be equivalent to the amount of the purchase price, plus one per
cent monthly interest up to the time of the redemption, together
with the amount of any assessments or taxes which the purchaser
may have paid thereon after purchase, and interest on such last-
named amount at the same rate.

 . Effect of Granting a Writ of

Possession
Where the trial court had already granted a writ of
possession sought by the buyer at an extrajudicial
foreclosure sale, a petition to consolidate said case with
the case pending before another court for Declaration of
Nullity of Contracts/ Discharge of Mortgage, Annulment
of Extrajudicial Foreclosure Sales & Reconveyance had
become moot and academic.
A moot and academic case is one that ceases to present
a justiciable controversy by virtue of supervening events,
so that a declaration thereon would be of no practical
value. As a rule, courts decline jurisdiction over such
case, or dismiss it on ground of mootness. Leong vs
Tanguangco
 Remedy of the Mortgagor
Mortgagor may question the sale and the
move for the cancellation of the writ of
possession
 De Ramos vs CA
213 SCRA 207 (1992)

HELD: After having submitted to the jurisdiction of the court in SLRC

No. 111-83-C, testifying therein and offering documentary evidence
to resist the petition for a writ of possession and to obtain affirmative
relief such as the nullification of the foreclosure proceedings and all
incidents thereto including, necessarily, the sale at the public
auction, Demamay cannot now be heard to challenge the jurisdiction
of the said court and to suggest, in order to escape from the effects
of the finality of the Order, that all that had transpired in the said
case was an exercise in futility.
A party cannot invoke the jurisdiction of the court to secure
affirmative relief against his opponent and, after obtaining or failing
to obtain such relief, repudiate or question that same.
 Order Granting a Writ of
Possession
The order of the RTC granting the
petition for a writ of possession is final
which can also be questioned on appeal
 San Fernando Rural Bank vs Pampanga Omnibus Development
Corp
GR No. 168088, 4 April 2007
An error of judgment is one which the court may commit in the
exercise of its jurisdiction, and which error is reviewable only by an
appeal. Error of jurisdiction is one where the act complained of was
issued by the court
without or in excess of jurisdiction and which error is correctible only
by the extraordinary writ of certiorari. As long as the court acts within
its jurisdiction, any alleged errors committed in the exercise of its
discretion will amount to nothing more than mere errors of judgment,
correctible by an appeal if the aggrieved party raised factual and
legal issues; or a petition for review under Rule 45 of the Rules of
Court if only questions of law are involved

 Equitable Mortgage
An equitable mortgage is one although
lacking in some formality or form or words
or other requisites demand by a statute,
nevertheless reveals the intention of the
parties to change real property as security
for debt and contains nothing impossible
contrary to law.
 Elements of Equitable
Mortgage:
For a presumption of an equitable
mortgage to arise, there are two (2)
requisites, namely:
that the parties entered into a contract
denominated as a contract of sale with a
right of repurchase or purporting to be an
absolute sale (Art. 1604.) and
that their intention was to secure an
existing debt by way of mortgage.
When is there an Equitable
Mortgage:
1. When the price of a sale with the right to repurchase is
unusually inadequate;
2. When the vendor remains in possession as lessee or
otherwise;
3. When upon or after the expiration of the right to
repurchase, another instrument extending the period of
redemption or granting a new period is executed;
4. When the purchaser retains for himself a part of the
purchase price;
5. When the vendor binds himself to pay the taxes on the
thing sold;
6. In any case where it may be fairly be inferred that the real
intention of the parties is that the real intention shall secure
the payment of a debt or the performance of any other
obligation
 Art. 1603 and 1604:

Doubt resolved in favor of equitable mortgage.

Whether the sale is absolute or pacto de retro, it shall be
presumed to be an equitable mortgage even if only one
of the circumstances mentioned in Article 1602 is
present. This is so because pacto de retro sales, with the
stringent and onerous effects that accompany them, are
not favored.

Where the contract is deemed an equitable mortgage,

ownership of the property cannot be consolidated until
after foreclosure of the mortgage has been undertaken.

 Effect where a contract will be held as an Equitable

Mortgage

1. Formal requirements of mortgage deemed

complied with.
2. Contract subordinate to a subsequent registered
mortgage
3. Title of property remains in supposed vendor
4. Remedy of creditor is to foreclose.
5. Conveyance of land not to affect mortgagors
right of redemption.
 Governing laws and rules on
leasing of rural and urban
lands:
Effect of Registration of Lease:
Art. 1648. Every lease of real estate may be
recorded in the Registry of Property. Unless a
lease is recorded, it shall not be binding upon
third persons
If a lease is registered it is binding upon third
persons. Unless so recorded, an innocent
purchaser for value is not bound to respect the
existing lease and he may terminate the same.
(Art. 1676.) A contract of lease of land must be in
a public instrument so that it may be recorded.
 Leases are effective only from the time
of registration (Section 60 of PD 1529)
 The owner of registered land may
mortgage or lease it by executing the deed
in a form sufficient in law.
Such deed of mortgage or lease and all
instruments which assign, extend,
discharge or otherwise deal with the
mortgage or lease shall be registered, and
shall take effect upon the title only from
time of registration.
 Mortgage and leases shall be registered in
the manner provided in Section 54.
Section 54 states that all interests in
registered land less than ownership shall
be registered by:
1. Filing with the Register of Deeds the instrument which
creates or transfers or claims such interests
2. The Register of Deeds will create a brief memorandum
upon the certificate of title which will be signed by him.
3. A similar memorandum shall also be made on the
owners duplicate.
4. The cancellation or extinguishment of such interests
shall be registered in the same manner.
 No mortgagee's or lessee's duplicate
certificate of title shall hereafter be issued
by the Registers of Deeds, and those
issued prior to the effectivity of this Decree
are hereby deemed canceled and the
holders thereof shall immediately
surrender the same to the Register of
Deeds concerned
 Who are disqualified:

Art. 1646: The persons disqualified to buy

in Articles 1490 and 1491 are also
disqualified to be lessees of things.
Art 1490: The husband and the wife
cannot sell property to each other, except:
When a separation of property was agreed upon in
the marriage settlements; or
When there has been a judicial separation or
property under Article 191.
 Art 1491: The following persons cannot acquire by purchase, even
at a public or judicial auction, either in person or through the
mediation of another:
The guardian, the property of the person or persons who may be under his
guardianship;
Agents, the property whose administration or sale may have been entrusted
to them, unless the consent of the principal has been given;
Executors and administrators, the property of the estate under
administration;
Public officers and employees, the property of the State or of any subdivision
thereof, or of any government-owned or controlled corporation, or institution,
the administration of which has been intrusted to them; this provision shall
apply to judges and government experts who, in any manner whatsoever,
take part in the sale;
Justices, judges, prosecuting attorneys, clerks of superior and inferior
courts, and other officers and employees connected with the administration
of justice, the property and rights in litigation or levied upon an execution
before the court within whose jurisdiction or territory they exercise their
respective functions; this prohibition includes the act of acquiring by
assignment and shall apply to lawyers, with respect to the property and
rights which may be the object of any litigation in which they may take part
by virtue of their profession.
Any others specially disqualified by law.
 When Proper Authority is
needed
Art. 1647. If a lease is to be recorded in
the Registry of Property, the following
persons cannot constitute the same
without proper authority (ex. Special power
of attorney):
The husband with respect to the wife's
paraphernal real estate,
The father or guardian as to the property
of the minor or ward, and the manager
 In the cases mentioned above, the lessee
(the husband or the father or guardian)
need the proper authority to be able to
register the lease in the Register of Deeds.
However as mentioned earlier, if the lease
is not to be recorded, the lease entered
into by said persons is valid among the
parties even without a special power, the
unregistered lease, however, can not bind
third persons.
 POWER OF ATTORNEY & TRUST

A power of attorney has been defined as

an authority enabling one person to
dispose of the interest which is vested in
another. It is also referred to as an
authority to do some act in relation to
lands, or the creation of estates therein, or
of charges thereon, which the owner,
granting or reserving such power, might
himself lawfully perform
 How POA is registered?

Section 64: Any person may, by power of

attorney, convey or otherwise deal with
registered land and the same shall be
registered with the Register of Deeds of
the province or city where the land lies.
Any instrument revoking such power of
attorney shall be registered in like manner.

Form in which the authority is

vested.
Agents authority to sell a parcel of land or
any interest therein shall be in writing;
otherwise sale is void

Special Power to Sell v. Special power to

Mortgage:

Art. 1879. A special power to sell

excludes the power to mortgage; and a
special power to mortgage does not
include the power to sell.
For the purpose of executing a
mortgage, an express power is required
and if an attorney-in-fact is authorized to
mortgage, he cannot sell and vice-versa.

 When is Special Power of

Attorney Necessary:
Art. 1878. Special powers of attorney are
necessary in the following cases:
(5) To enter into any contract by which
the ownership of an immovable is
transmitted or acquired either gratuitously
or for a valuable consideration;
(8) To lease any real property to another
person for more than one year;

 How power of attorney should be

construed:
The Power of Attorney is to be
construed according to the natural import
of its language; and the authority which
the principal has conferred upon his agent
is not to be extended by implication
beyond the natural and ordinary
significance of the terms in which that
authority has been given.
Power of Attorney Trust

There are two parties the principal There are three persons involved,
and the attorney in fact namely, the trustor, trustee, and the
cestui que trustor beneficiary

A power of attorney is never A trust is always imperative and leaves

imperative but always discretionary nothing to the option of the trustee.

The attorney-in-fact in a power of The trustee in a trust instrument acts

attorney acts for the use and benefit not necessarily for the benefit of the
of the principal who appointed him. trustor who appointed him but, upon
his discretion, for the ultimate benefit of
a third party (the cestui que trust)
 REGISTRATION OF TRUSTS:

Trust is a confidence reposed to one

person, who is termed trustee, for the
benefit of another who is called the cestui
que trust, the source of the trust is called
the trustor.
A trust is the right to the beneficial
enjoyment of property, the legal title to
which is vested in another. It is a fiduciary
relationship concerning property which
obliges the person holding it to deal with
 KINDS OF TRUST

1. Express Trust
Express trusts are created by the intention
of the trustor or of the parties. (Art. 1441,
Civil Code)
 Elements of Express Trust
Competent trustor and trustee,
An ascertainable trust res,
Sufficiently certain beneficiaries.

Stilted formalities are unnecessary, but

nevertheless each of the above elements
is required to be established, and, if any
one of them is missing, it is fatal to the
trusts.
 Additional Elements:

There must be a present and complete disposition of the trust

property, notwithstanding that the enjoyment in the beneficiary will
take place in the future.
The purpose be an active one to prevent trust from being executed
into a legal estate or interest, and one that is not in contravention of
some prohibition of statute or rule of public policy.
There must also be some power of administration other than a mere
duty to perform a contract although the contract is for a third-party
beneficiary.
A declaration of terms is essential, and these must be stated with
reasonable certainty in order that the trustee may administer, and
that the court, if called upon so to do, may enforce, the trust.
2. Implied Trust
Implied trusts come into being by
operation of law. This trust is enforced by
law against unjust enrichment of a person
at the expense of another
 Kinds of Implied Trust

Resulting Trust
A resulting trust is presumed to have been
contemplated by the parties, the intention
as to which is to be found in the nature of
their transaction but not expressed in the
deed itself. It is based on an equitable
doctrine that valuable consideration, not
legal title determines the equitable title or
interest.
Constructive Trust

Constructive Trust is created by the

construction of equity in order to satisfy the
demands of justice and prevent unjust
enrichment.
Registration of Express Trust:

Section 65 of PD 1529. Trusts in registered land. If a deed or

other instrument is filed in order to transfer registered land in
trust, or upon any equitable condition or limitation expressed
therein, or to create or declare a trust or other equitable
interests in such land without transfer, the following must be
done:
The particulars of the trust, condition, limitation or other
equitable interest shall not be entered on the certificate;
but only a memorandum thereof shall be entered by the
words "in trust", or "upon condition", or other apt words,
and by a reference by number to the instrument
authorizing or creating the same.
A similar memorandum shall be made upon the original
instrument creating or declaring the trust or other equitable
interest with a reference by number to the certificate of title
to which it relates and to the volume and page in the
registration book in which it is registered.
 Section 66 of PD 1529. Trust with power of sale, etc., how expressed. If the
instrument creating or declaring a trust or other equitable interest contains an
express power to sell, mortgage or deal with the land in any manner:
Such power shall be stated in the certificate of title by the words "with
power to sell", or "power to mortgage", or by apt words of description in
case of other powers.
No instrument which transfers, mortgages or in any way deals with
registered land in trust shall be registered
Exception: Unless the enabling power thereto is expressly
conferred in the trust instrument, or unless a final judgment or
Exception: When an order of a court of competent jurisdiction has
construed the instrument in favor of the power, in which case a
certified copy of such judgment or order may be registered.
 Registration of constructive
Whoever claims an interest in the
registered land by reason of any implied or
constructive trust shall file for registration a
sworn statement thereof with the Register
of Deeds. The statement shall contain a
description of the land, and a reference to
the number of the certificate. Such claim
shall not affect the title of a purchaser for
the value and in good faith.
 Appointment of new trustee:
When a new trustee is appointed by a court of
competent jurisdiction, a new certificate shall be
entered to him upon presentation to the Register of
Deeds of a certificate copy of the decree and the
surrender and cancellation of the duplicate
certificate.
 Trusts created to go around
the law, void:
Example: Being a dummy for a foreigner
to own land. It has been held that a trust
will not be created when, for the purpose
of evading the law prohibiting one from
taking or holding real property, he takes
conveyance thereof in the name of a third
person. By transgressing the law and
allowing one to be a dummy in the
acquisition of the land, he has eliminated
the very source of his claim in the land and
 RULE XII. RIGHTS OF FORMER NATURAL BORN
FILIPINOS TO OWN PRIVATE LAND

Limitations in Acquisition of Land

Section 1: Under the law, Former Natural Born Filipinos
may be a transferee of a private land up to a maximum
area of 5,000 square meters in the case of urban land or
three (3) hectares in the case of rural land to be used by
him for business or other purposes.

Section 2: A transferee may acquire not more than two

(2) lots which should be situated in different
municipalities or cities anywhere in the Philippines. The
total land area acquired shall not exceed the area
prescribed by law.

 Purpose of the Land Acquired

Section 5: Land acquired under this Act
shall be primarily, directly and actually
used by the transferee in the performance
or conduct of his business or commercial
activities in the broad areas of agriculture,
industry and services, including the lease
of land, but excluding the buying and
selling thereof.

 Can a Former Naturally Born Filipino own

lands in both urban and rural areas?
No. Section 4: A transferee who has already
acquired urban land shall be disqualified from
acquiring rural land and vice versa.
Exception: However, if the transferee has
disposed of his urban land, he may still acquire
rural land and vice versa, provided that the
same shall be used for business or other
purposes.

 Rule on Spouses who are both Former

Naturally Born Filipino:

Section 2: In case where both spouses

are qualified under the law, one of them
may avail of the said privilege. However, if
both shall avail of the privilege, the total
area acquired shall not exceed the
maximum allowed.
 Rule if the Former Naturally Born
Filipino already owns a land.
Section 3: In case the transferee already
owns urban or rural land for business or
other purposes, he shall still be entitled to
be a transferee of additional urban or rural
land for business or other purposes which
when added to those already owned by
him shall not exceed the maximum areas
allowed.
 Land Registration Proceedings (Section 6):
The land will be registered in the register of deeds in the
province or city where the land is located.
The land shall register the land in the name of the transferee
only upon presentation of proof by the transferee that it will be
used for any of the purposes mentioned in Section 5 above, i.e.,
certification of business registration issued by the DTI and
affidavit that the land shall be used for business purposes.
The provisions of BP 185 (An Act to Implement Section 15 of
Article XIV of the Constitution and for Other Purposes Pertaining
to the Ownership of Private Lands for Residential Purposes by
Former Natural Born Filipinos) and its implementing rules and
regulations shall be adopted, where applicable, in the
implementation of this Act through a circular to be issued by the
Laud Registration Authority.
The Register of Deeds shall also ensure that the limits
prescribed by law are observed.