LAND TITLES & DEEDS: LEASES AND REAL MORTGAGES

GOVERNING LAWS: 1. 2. 3. 4. 5. 6. NEW CIVIL CODE PD 1529 REVISED ADMINISTRATIVE CODE RA 4882 RULES OF COURT (on judicial foreclosure) ACT 3135 (extra-judicial foreclosure)

recording of the document in which the mortgage is formalized. 3. EQUITABLE INTEREST one which, although it lacks the proper formalities of a mortgage, shows the intention of the parties to make the property as a security for debt ESSENTIAL REQUISITES OF MORTGAGE: 1. constituted to secure the fulfillment of a principal obligation 2. mortgagor must be the absolute owner of the thing mortgaged 3. 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 4. cannot exist without a valid obligation 5. when the principal obligation becomes due, the thing in which the mortgage consists may be alienated for the payment to the creditor 6. appear in a public document duly recorded in the Registry of Property to be validly constituted. CHARACTERISTICS OF MORTGAGE: 1. ALL-EMBRACING it extends to natural accessions, improvements, growing fruits, and the rents/income not yet received when obligation becomes due, and to the amount of indemnity granted or owing to proprietor whether estate remains in hands of mortgagor or passes into the hands of third person. EX. a mortgage of land necessarily includes, in the absence of stipulation, the building (however, mortgage can be constituted on a building itself even if dealt with separately and apart from land) 2. INSEPARABLE it directly and immediately subjects the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation. 3. INDIVISIBLE as even though the debt may be divided among successors in interest of debtor/creditor, a debtors heir who has paid a part of debt cannot ask for the proportionate extinguishment of the mortgage as long as the debt is not completely satisfied. RULE OF INDIVISIBILITY INAPPLICABLE:

REQUISITE REGISTRATION/PROCEDURE: RULE: all deeds of mortgage or lease, and all instruments that deal with them, shall be registered and recorded in Registry of Deeds, and shall take effect upon the title only from the time of registration. Only upon registration shall it be binding to third persons (if not, binding only to the parties). 1. 2. 3. 4. 5. File with RD RD makes brief memorandum on COT RD signs the memorandum Similar memorandum on owners duplicate Discharge, cancellation or extinguishment shall be registered in same manner

A. LEASE a contract whereby one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain, and for a period which may be definite or indefinite. SALE the delivery of the thing sold transfers ownership LEASE no such transfer of ownership results as the rights of the LESSEE are limited to the use and enjoyment of the thing leased.

B. REAL MORTGAGE - 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. KINDS OF MORTGAGE: 1. VOLUNTARY by act of parties 2. LEGAL by operation of law; the persons in whose favor the law establishes a mortgage have other right than to demand the execution and the

a. after complete foreclosure of mortgage, with full payment of debt (there is nothing more to secure) b. there are no several heirs or debtors (the law presupposes several h/d) CONTRACTS PRESUMED TO BE EQUITABLE MORTGAGE 1. When the price of a sale with 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 other cases where it may be fairly inferred that the real intention of the parties is that the transaction shall secure the payment of a debt or the performance of any other obligation. PACTO COMMISSORIUM a stipulation in a mortgage which provides for automatic forfeiture, i.e., that ownership of the security will pass to the creditor by the mere default of the debtor. REQUISITES: 1. 2. there should be a mortgage there should be a stipulation for an automatic appropriation by the creditor of the property in the event of non-payment

DUTY TO FORECLOSE: there is no obligation resting upon the purchaser to foreclose.

DUTY TO FORECLOSE: it is the duty of the mortgagee to foreclose the mortgage if he wishes to secure a perfect title thereto RIGHT TO REDEEM: mortgagor has the right to redeem after maturity of the debt secured and before foreclosure

RIGHT TO REDEEM: the vendor has no right to redeem the property after the maturity of the debt.

RECOURSE OF MORTGAGEE WHERE MORTGAGOR DEFAULTS (either of the two, not both): 1) FORECLOSURE OF THE MORTGAGE 2) FILE ORDINARY ACTION TO COLLECT DEBT WHEN HE CHOOSES FORECLOSURE: he enforces his lien by sale on foreclosure. The proceeds will be applied to the satisfaction of the debt. In case of deficiency, he has the right to claim for deficiency resulting from the price obtained in the sale at public auction and the outstanding obligation at the time of foreclosure proceedings. WHEN HE CHOOSES ACTION TO COLLECT DEBT: he thereby waives his mortgage lien. He will have no more priority over the mortgaged property. If judgment is favorable, it becomes final and executory, he can enforce this by execution. He can levy execution on the mortgaged property, but he will not have better lien on the properties of mortgagor. foreclosure then can only be valid where debtor is in default. But where loan secured has been completely paid prior to foreclosure, then such proceeding and the certificate of sale issued becomes void. IF THERE IS PARTIAL FAILURE OF CONSIDERATION: the mortgage becomes unenforceable to the extent of such failure. C. FORECLOSURE OF MORTGAGE a remedy available to the mortgagee where he subjects the mortgaged property to the satisfaction of the obligation to secure for which the mortgage was given. here, the mortgagee enforces his lien and does not levy on the property. Levy is an act of an officer where he sets apart the judgment-debtors property for purposes of prospective execution sale on a money judgment.

PC IS PROHIBITED: the stipulation is considered null and void. However, the nullity does not affect the validity and efficacy of the principal contract. PACTO DE RETRO a clause in the deed of sale giving the vendor the right to repurchase the property within a fixed period from the date of sale. PACTO DE RETRO IF SELLER DOES NOT REPURCHASE ON DATE STIPULATED: by express terms of the law he loses all interest therin. MORTGAGE IF SELLER DOES NOT REPURCHASE ON DATE STIPULATED: the mortgagor does not lose his interest in the property if he fails to pay the debt at its maturity.

JUDICIAL FORECLOSURE There is court intervention. Decisions are appealable. Order of court cuts off all rights of the parties impleaded. There is EQUITY OF REDEMPTION (except banks which provides for right of redemption) Period of redemption starts from the finality of judgment until order of confirmation. No need for special power of attorney in mortgage.

EXTRA-JUDICIAL FORECLOSURE No court intervention. Not appealable (immediately executory) Foreclosure does not cut off right of all parties involved. There is RIGHT OF REDEMPTION.

motion, shall order the property to be sold to the highest bidder. d. BEFORE CONFIRMATION OF SALE the court retains control of the proceedings; execution on judgment e. AFTER CONFIRMATION OF SALE also upon motion, confirmation shall operate to divest the rights of all parties to the action and to vest their rights to the purchaser subject to such rights of redemption as may be allowed by court. f. PROCEEDS OF SALE - shall be applied to the payment of the:

Period starts from date of registration of certificate of sale. Special power of attorney in favor of mortgagee is needed.

i. costs of the sale ii. amount due the mortgagee iii. claims of junior encumbrancers or persons holding subsequent mortgages in the order of their priority, and iv. the balance, if any, paid to mortgagor. g. SHERIFFS CERTIFICATE shall be executed, acknowledged, and recorded to complete the foreclosure. NATURE OF JUDICIAL FORECLOSURE: Quasi-in rem action Foreclosure is only the result/incident of failure to pay debt It survives the death of mortgagor

IMPORTANT: Foreclosure sale retroacts to the date of registration of the mortgage A person who takes a mortgage in good faith and for valuable consideration, the record showing clear title to mortgagor, will be protected against equitable claims on the title in favor of 3rd persons of which he had no actual or constructive notice MERE INADEQUACY OF PRICE OBTAINED AT SHERIFFS SALE: not sufficient to set aside sale unless the price is so inadequate as to shock the conscience of the court taking into consideration the peculiar circumstances PRESCRIPTION OF FORECLOSURE: 10 YEARS (from the time the right of action accrues)

2. EXTRA-JUDICIAL FORECLOSURE PROCEDURE a. FILE APPLICATION before the Executive Judge through Clerk of Court b. CLERK OF COURT EXAMINATION OF REQUIREMENTS: i. notice of sale posted for not less than 20 days in at least 3 public places of municipality/city where property is situated ii. property is worth more than P400 iii. notice published once a week for at least 3 consecutive weeks in newspaper of general circulation in city/municipality c. APPROVAL OF CERTIFICATE OF SALE by Executive Judge d. FILING FEE if real mortgages are in different locations covering one indebtedness, only one filing fee corresponding to such debt is collected.

1. JUDICIAL FORECLOSURE PROCEDURE a. FILE ACTION bring action to proper court which has jurisdiction over the area wherein real property involved or portion thereof is situated. b. COURT ORDERS TO PAY AMOUNT if complaint well-founded, court will order mortagor to pay amount due with interest and other charges (not less than 90 days, nor more than 120 days from entry of judgment) c. PUBLIC AUCTION if mortgagor fails to pay at time directed by court, upon

e. CERTIFICATE OF PAYMENT issued by Clerk of Court indicating the amount of indebtedness, the filing fees collected, the mortgages sought to be foreclosed, the description of the real estates, and their respective locations f. NOTICE OF SALE PUBLICATION in newspaper of general circulation g. RAFFLE OF APPLICATION raffled among all sheriffs h. AUCTION SALE there must be at least 2 participating bidders, otherwise the sale shall be postponed to a later date. If on new date, there is at least 2 bidders, sale shall proceed. NAMES OF BIDDERS: reported to the Sheriff of the Notary Public, who conducted the sale to the Clerk of Court before the issuance of the certificate of sale. i. ARCHIVE RECORDS to be done by Clerk of Court after redemption period has expired. NATURE OF EXTRA-JUDICIAL FORECLOSURE: NOTES: STIPULATION OF UPSET PRICE (TIPO) a stipulation of minimum price at which the property shall be sold to become operative in the event of a foreclosure sale at public auction is NULL AND VOID. EFFECT OF INADEQUACY OF PRICE IN FORECLOSURE SALE: 1. Where there is right to redeem GEN RULE: inadequacy is immaterial because the judgment debtor may redeem the property. EXCEPTION: the price is so inadequate as to shock the conscience of the court taking into consideration the peculiar circumstances. 2. Property may be sold for less than its fair market value upon the theory that the lesser price the easier for the owner to redeem. 3. The value of the mortgaged property has no bearing on the bid price at the public auction, provided that the public auction was regularly and honestly conducted. Conferred for mortgagees protection An ancillary stipulation A prerogative of mortgagee

D. RULES ON RECOVERY OF DEFICIENCY If deficiency is embodied in a judgment, it is referred to as DEFICIENCY JUDGMENT. Where the proceeds of the sale are insufficient to cover the debt, the mortgagee is entitled to claim the deficiency of the debtor.

WHEN: action for recovery may be filed within 10 years from the time the right of action accrues, or even during redemption period. EXCEPTION: When the mortgagor is not the debtor. The action for recovery of such deficiency must be directed against the debtor.

AYN RUTH NOTES