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