Real Estate Mortgage

Right of Redemption | Real Estate Mortgage | CREDIT TRANSACTIONS

Right of Redemption in Real Estate Mortgage (Philippine Law)

The Right of Redemption in the context of a real estate mortgage is a statutory privilege granted to a mortgagor (or other interested parties) to redeem a foreclosed property within a specified period and under certain conditions. This legal principle is embodied in the Civil Code of the Philippines, Special Laws, and jurisprudence.

Key Provisions and Principles

1. Legal Basis

  • Civil Code of the Philippines: The Civil Code provides general rules on obligations, contracts, and mortgages.
  • Act No. 3135 (Act to Regulate the Sale of Property under Special Powers Inserted in or Annexed to Real-Estate Mortgages): Governs the foreclosure of real estate mortgages and prescribes the right of redemption in extrajudicial foreclosure sales.
  • Rules of Court: Relevant for judicial foreclosure and redemption.
  • Jurisprudence: Numerous Supreme Court decisions elaborate on the nuances of the right of redemption.

2. When the Right of Redemption Applies

  • Judicial Foreclosure: If the mortgagee forecloses the property through a judicial action, the right of redemption is recognized.
  • Extrajudicial Foreclosure: When a property is foreclosed without court involvement under Act No. 3135, the right of redemption applies, but subject to conditions set in the statute.

3. Nature of the Right

  • Statutory in Nature: The right of redemption is not inherent but conferred by law, and its exercise must strictly comply with statutory requirements.
  • Time-Bound: Redemption can only be exercised within a specified period, failing which the right is lost.
  • Equitable Considerations: Courts may interpret redemption rules liberally in favor of the mortgagor to prevent unjust enrichment.

Specific Rules and Periods

A. Judicial Foreclosure (Rule 68, Rules of Court)

  • The right of redemption exists until the confirmation of the sale by the court.
  • The period to redeem is governed by the terms set forth in the judicial decree and applicable laws.
  • Redemption requires payment of:
    • The purchase price at the foreclosure sale.
    • Interest at the legal rate from the date of sale.
    • Other lawful expenses incurred by the purchaser.

B. Extrajudicial Foreclosure (Act No. 3135, as amended by Act No. 4118)

  • The right of redemption exists within one year from the registration of the certificate of sale with the Registry of Deeds.
  • To redeem, the debtor or interested party must pay:
    • The amount of the winning bid during the foreclosure auction.
    • Interest at the rate of 1% per month.
    • All other costs and expenses incurred in maintaining the property (e.g., taxes).
  • If redemption is not made within the period, the purchaser can consolidate ownership.

Who May Exercise the Right of Redemption?

  • Original Mortgagor: The borrower whose property was foreclosed.
  • Successors-in-Interest: Such as heirs, assigns, or other persons acquiring the mortgagor’s rights.
  • Judgment Creditors: Those who have obtained a judgment lien on the foreclosed property.
  • Third Parties with Interest: Others with a legally recognizable interest in the foreclosed property.

Effects of Redemption

  • Cancellation of Sale: Redemption extinguishes the purchaser’s rights and restores the mortgagor’s ownership.
  • Return of Title: The property is returned free of any liens arising from the foreclosure process.
  • Obligation Extinguished: The mortgagor’s obligation to pay the mortgage debt is deemed settled upon full redemption.

Loss of the Right of Redemption

  • Non-Exercise Within the Prescriptive Period: The right of redemption expires by operation of law if not exercised within the statutory period.
  • Waiver: Voluntary relinquishment of the right, explicitly or impliedly, bars its exercise.
  • Consolidation of Ownership: After the lapse of the redemption period, the purchaser may file for consolidation of ownership, rendering the sale final.

Prohibitions and Limitations

  • Waiver of Right of Redemption Before Sale: Any stipulation waiving the right of redemption prior to foreclosure is void as it contravenes public policy.
  • Unlawful Conditions: A mortgagee cannot impose additional conditions that effectively impede the exercise of the right of redemption.
  • Good Faith Requirement: Redemption must not be used as a tool to defraud or disadvantage the purchaser.

Notable Jurisprudence

  • Sulit v. CA (268 SCRA 441): Clarified that redemption is a substantive right that courts should uphold in favor of the mortgagor when doubt exists.
  • Union Bank v. Court of Appeals (294 SCRA 489): Held that payment of the redemption price must strictly adhere to statutory computation to be valid.
  • Gomez v. CA (405 SCRA 366): Emphasized the necessity of registering the certificate of sale to trigger the redemption period.
  • Barrozo v. CA (353 SCRA 487): Recognized the equitable nature of redemption and highlighted its role in preserving ownership rights.

Practical Considerations

  • Timely Action: Mortgagors must act quickly to determine the redemption period and ensure compliance with payment conditions.
  • Documentation: Accurate records of payments, taxes, and foreclosure proceedings are critical for exercising the right of redemption.
  • Legal Assistance: Navigating the nuances of redemption often requires professional legal guidance.

By understanding these provisions and observing due diligence, parties can effectively exercise their right of redemption or defend their interests in foreclosure proceedings.

Foreclosure | Real Estate Mortgage | CREDIT TRANSACTIONS

CIVIL LAW > VIII. CREDIT TRANSACTIONS > D. Real Estate Mortgage > 3. Foreclosure

Foreclosure of Real Estate Mortgage involves the process of enforcing the rights of a mortgagee (creditor) when the mortgagor (debtor) fails to fulfill their obligations under a real estate mortgage agreement. This remedy aims to satisfy the mortgage debt through the sale of the mortgaged property. Below is a comprehensive discussion of the foreclosure process, types, legal principles, remedies, and jurisprudence in the Philippine legal context.

I. NATURE OF FORECLOSURE

Foreclosure is a legal proceeding by which the mortgagee obtains the authority to sell the mortgaged property to satisfy a secured debt. The property acts as collateral, and foreclosure allows recovery of the loan amount in case of default.

Key Features of a Real Estate Mortgage:

  1. Accessory Obligation: A mortgage is ancillary to the principal obligation (loan or credit).
  2. Real Right: A mortgage creates a real right enforceable against third persons when duly registered.
  3. Indivisibility: The mortgage subsists in its entirety until the debt is fully satisfied.

II. TYPES OF FORECLOSURE

Under Philippine law, there are two types of foreclosure applicable to real estate mortgages:

1. Judicial Foreclosure

  • Initiated through a court proceeding.
  • Governed by Rule 68 of the Rules of Court.
  • Procedure:
    1. Filing of a verified complaint by the mortgagee.
    2. Hearing and determination of the amount due.
    3. Issuance of a judgment by the court ordering the sale of the property.
    4. Sale of the property at public auction.
    5. Application of proceeds to the mortgage debt.
    6. Issuance of a Certificate of Sale to the winning bidder.
  • Right of Redemption: The mortgagor or a junior lienholder may redeem the property within one year from the date of registration of the Certificate of Sale.

2. Extrajudicial Foreclosure

  • Done without court intervention.
  • Governed by Act No. 3135, as amended by Act No. 4118.
  • Procedure:
    1. The mortgagee issues a notice of default and demands payment.
    2. The mortgagee files a petition with a Notary Public or the Register of Deeds.
    3. Publication of the Notice of Sale in a newspaper of general circulation once a week for three consecutive weeks.
    4. Posting of the Notice of Sale in a conspicuous public place.
    5. Conduct of the auction sale by the Sheriff or Notary Public.
    6. Issuance of a Certificate of Sale to the highest bidder.
  • Equity of Redemption: The mortgagor may redeem the property before the sale is finalized.

III. DISTINCTION BETWEEN EQUITY OF REDEMPTION AND RIGHT OF REDEMPTION

  1. Equity of Redemption:
    • Available in both judicial and extrajudicial foreclosures.
    • Refers to the mortgagor’s right to settle the mortgage debt before the foreclosure sale.
  2. Right of Redemption:
    • Exclusive to judicial foreclosures.
    • Allows the mortgagor or any interested party to repurchase the property within one year after the auction sale.

IV. LEGAL REQUIREMENTS AND PROCEDURAL CONSIDERATIONS

1. Valid Mortgage Agreement

  • The real estate mortgage must:
    • Be in writing and comply with the Statute of Frauds.
    • Be registered with the Register of Deeds to bind third parties.

2. Notice Requirements

  • Notices must strictly comply with statutory requirements to protect the mortgagor’s rights.
  • Defects in notice (e.g., improper publication or posting) render the foreclosure void.

3. Compliance with Publication

  • Extrajudicial foreclosures require:
    • Publication in a newspaper of general circulation.
    • Strict adherence to publication timelines.

4. Deficiency Judgment

  • If the foreclosure sale proceeds are insufficient to cover the mortgage debt, the mortgagee may file for a deficiency judgment to recover the balance.
  • This applies to both judicial and extrajudicial foreclosures.

V. DEFENSES AGAINST FORECLOSURE

  1. Payment or Satisfaction of Debt: Proves that the mortgage obligation has been discharged.
  2. Defects in the Mortgage Contract: Challenges the validity of the mortgage (e.g., fraud, lack of consideration).
  3. Improper Notice or Publication: Raises procedural defects in the foreclosure process.
  4. Tender of Payment: Asserts that the mortgagor offered to pay the debt but was refused by the mortgagee.

VI. RELEVANT JURISPRUDENCE

  1. Sulit v. CA (G.R. No. 116599):

    • Strict compliance with notice and publication requirements is mandatory in extrajudicial foreclosure.

  2. Development Bank of the Philippines v. Licuanan (G.R. No. 158498):

    • Failure to comply with procedural requisites invalidates the foreclosure sale.

  3. Consolidated Bank and Trust Corporation v. CA (G.R. No. 138569):

    • A mortgagor may assert a lack of demand as a defense in judicial foreclosures.

  4. Union Bank v. SPS. Santibañez (G.R. No. 149926):

    • Clarifies the application of the right of redemption in judicial foreclosures.

VII. TAX IMPLICATIONS

  1. The winning bidder assumes liability for capital gains tax (if not a financial institution).
  2. Documentary stamp taxes and transfer fees apply during the sale and registration process.

VIII. PRACTICAL CONSIDERATIONS

  1. Consolidation of Title:

    • After foreclosure and expiration of the redemption period, the mortgagee must consolidate ownership by registering the Certificate of Sale.

  2. Possession of Property:

    • The mortgagee may seek a writ of possession after consolidation, provided the foreclosure was valid.

  3. Consumer Protection:

    • The Maceda Law (R.A. 6552) offers additional protections for buyers of real estate on installment who are subject to foreclosure.

IX. CONCLUSION

Foreclosure of real estate mortgage is a remedy designed to balance the rights of creditors and debtors. Compliance with statutory and procedural requirements is essential to ensure its validity. Courts meticulously scrutinize the process to protect the interests of both parties, and any procedural lapses may nullify the foreclosure proceedings. Legal practitioners must exercise diligence in observing the statutory requirements and advocating for their clients' interests.

Characteristics | Real Estate Mortgage | CREDIT TRANSACTIONS

Characteristics of a Real Estate Mortgage under Civil Law

A Real Estate Mortgage (REM) is a contract whereby the debtor secures an obligation by subjecting immovable property (real estate) to the fulfillment of such obligation, without transferring ownership. Below are the detailed characteristics of an REM as governed by Philippine Civil Law:

1. Accessory Contract

  • A real estate mortgage is an accessory contract, meaning it cannot exist independently but depends on the principal obligation it secures.
  • If the principal obligation is extinguished, the mortgage is likewise extinguished (Article 1231, Civil Code).

2. Real Right

  • Once registered, a real estate mortgage creates a real right over the immovable property.
  • This real right follows the property, regardless of who possesses it (principle of lex rei sitae).

3. Formal Contract

  • The real estate mortgage must comply with the formal requirements of law to be valid:
    • It must be in writing (Article 2125, Civil Code).
    • If it involves properties required by law to be registered, it must also be registered with the Register of Deeds to bind third parties.
    • Lack of registration makes the mortgage valid only between the contracting parties but not against third persons (Article 2125).

4. Non-Transfer of Ownership

  • Ownership of the mortgaged property remains with the mortgagor.
  • The creditor (mortgagee) only has the right to foreclose and sell the property in case of default.

5. Indivisibility

  • The mortgage is indivisible, meaning:
    • It subsists as a whole over the entire property even if the debt is partially paid (Article 2089, Civil Code).
    • Partial satisfaction of the debt does not correspondingly extinguish the mortgage over any specific portion of the property.
  • This principle ensures that the mortgagee’s security is not compromised until full payment.

6. Right to Foreclose

  • In case of default, the creditor may foreclose the mortgage to satisfy the obligation.
  • Foreclosure may be judicial (through court proceedings) or extrajudicial (pursuant to Act No. 3135, as amended by Act No. 4118).

7. Limitation to Obligation Secured

  • A mortgage is merely a security for an obligation; it does not create or give rise to a debt.
  • The debt or principal obligation must exist independently of the mortgage.

8. Special Rule on Future Obligations

  • A mortgage may secure future advancements or obligations stipulated in the agreement, provided the advancements or obligations are clearly contemplated in the contract (Article 2126).

9. Right of Redemption

  • In cases of extrajudicial foreclosure, the mortgagor retains a right of redemption under Act No. 3135.
    • Redemption must be exercised within one year from the date of registration of the certificate of sale.
  • In judicial foreclosures, the period of redemption is determined by the rules of court and typically exists until the court's confirmation of the sale.

10. Coverage of Immovables

  • Only immovable property (e.g., land, buildings) and their accessories may be subject to a real estate mortgage.
  • The accessories include natural fruits, industrial fruits, and civil fruits if stipulated (Article 2127).

11. Stipulations Not Contrary to Law

  • Parties may freely stipulate terms in the contract, provided these are not contrary to law, morals, good customs, public order, or public policy (Article 1306, Civil Code).
  • Pactum commissorium (automatic appropriation of the mortgaged property by the creditor in case of default) is prohibited and void (Article 2088).

12. Requirement of Default

  • The mortgagee’s right to foreclose only arises upon the debtor’s default in fulfilling the obligation.

13. No Deficiency Judgment in Extrajudicial Foreclosure

  • In extrajudicial foreclosures, if the proceeds of the sale are insufficient to cover the debt, the mortgagee is prohibited from recovering the deficiency through personal action against the debtor unless the mortgagor is a juridical person (Act No. 3135).

14. Priority of Claims

  • The mortgagee has a preferential right over the proceeds of the foreclosure sale.
  • If multiple mortgages exist, the priority is determined by the order of registration in the Register of Deeds.

15. Extinguishment of Mortgage

A real estate mortgage is extinguished upon:

  • Full payment or performance of the obligation.
  • Abandonment or cancellation of the mortgage contract.
  • Foreclosure and exhaustion of the mortgaged property.

16. Applicability of General Provisions on Obligations and Contracts

  • General principles on obligations and contracts apply, including rules on:
    • Consent, object, and cause (essential requisites of a contract).
    • Nullity of contracts that lack essential elements or violate prohibitory laws.

By understanding these characteristics, parties can properly structure a real estate mortgage contract while ensuring compliance with Philippine Civil Law.

Requisites | Real Estate Mortgage | CREDIT TRANSACTIONS

CIVIL LAW

VIII. CREDIT TRANSACTIONS

D. Real Estate Mortgage

1. Requisites

A real estate mortgage is a contract whereby the debtor or a third person secures the performance of an obligation by subjecting immovable property or real rights over immovable property to the fulfillment of the obligation, with the condition that if the obligation is not fulfilled, the creditor may cause the property to be sold in a public auction and apply the proceeds to the satisfaction of the debt. The governing provisions can be found under the Civil Code of the Philippines, specifically Articles 2085 to 2123.

Requisites of a Real Estate Mortgage

A. Essential Requisites

  1. Principal Obligation Must Be Valid

    • The mortgage is an accessory contract, meaning there must be a valid principal obligation (e.g., a loan, debt, or any obligation secured by the mortgage).
    • If the principal obligation is void, the mortgage is also void. However, if the principal obligation is merely voidable or unenforceable, the mortgage may still be enforced until annulled or declared void.

  2. The Mortgagor Must Have Free Disposal of the Property or Legal Authority to Constitute the Mortgage

    • The mortgagor must own the property being mortgaged or be authorized to mortgage it, as ownership or legal authority is necessary to create a valid lien.
    • A co-owner may only mortgage their undivided share unless consent from other co-owners is obtained.

  3. Subject Matter Must Be Determinate Immovable Property or Real Rights Over Immovables

    • The property must be identifiable and must consist of:
      • Immovable property (e.g., land, buildings); or
      • Real rights over immovables (e.g., usufruct, easement).
    • The property must also be alienable, meaning it cannot be subject to prohibitions against alienation or encumbrance (e.g., public lands or properties subject to a prohibition under special laws).

  4. Formal Requirements (Article 2125, Civil Code)

    • The mortgage must be constituted in a public instrument.
    • It must be registered with the Registry of Property to bind third parties.
    • Absence of registration does not render the mortgage void but merely makes it ineffective against third parties.

B. Special Requisites

  1. Stipulation on Redemption

    • There can be no pactum commissorium (automatic appropriation of the mortgaged property by the creditor in case of default), as this is expressly prohibited by law (Article 2088, Civil Code).
    • Redemption periods for mortgages are governed by special laws, such as the General Banking Law or Maceda Law, depending on the nature of the loan and debtor.

  2. Obligations Secured Must Be Future, Past, or Contingent

    • A mortgage may secure obligations already existing, future obligations (e.g., credit lines), or contingent obligations.
    • Future obligations must be specified or determinable, and the contract must clearly indicate this intent.

  3. Indivisibility of the Mortgage

    • The mortgage is indivisible (Article 2089, Civil Code). This means that even if the debt is partially paid, the mortgage subsists until the entire obligation is satisfied unless expressly stipulated otherwise.
    • This rule does not apply to divisible obligations when the property mortgaged is physically divisible and there is express agreement allowing division.

C. Effects of Non-Compliance with Requisites

  1. As to Non-Registration

    • If the mortgage is not registered, it is valid and binding between the parties but not against third parties.
    • Unregistered mortgages cannot prejudice subsequent purchasers or encumbrancers in good faith.

  2. As to Lack of Public Instrument

    • If the mortgage is not in a public instrument, it is void.

  3. As to Lack of Ownership or Legal Authority

    • If the mortgagor is not the owner or lacks authority, the mortgage is void, but it may give rise to an action for damages if there was bad faith or fraud.

  4. As to Invalidity of the Principal Obligation

    • A void principal obligation renders the mortgage void. However, a voidable or unenforceable obligation does not automatically void the mortgage.

Legal Effects of Real Estate Mortgage

Rights of the Mortgagee (Creditor)

  1. Right to Foreclose

    • In case of default by the mortgagor, the mortgagee may file for foreclosure to sell the property in a public auction.

  2. Right to Apply Proceeds to the Debt

    • The mortgagee has a preference to apply the proceeds of the sale to the satisfaction of the debt.

  3. Right to Retain Lien Until Obligation Is Fully Satisfied

    • The mortgage subsists until the obligation is fully paid, regardless of partial payments.

Rights and Obligations of the Mortgagor (Debtor)

  1. Right to Possession

    • The mortgagor retains possession of the property unless otherwise stipulated.

  2. Right of Redemption

    • Redemption rights are governed by the terms of the mortgage or by law (e.g., one-year redemption period under the Rules of Court for judicial foreclosures).

  3. Obligation to Pay the Principal Debt

    • The mortgagor must fulfill the principal obligation to extinguish the mortgage.

Foreclosure of Mortgage

  1. Judicial Foreclosure

    • Initiated by filing a court case; governed by Rule 68 of the Rules of Court.
    • The mortgagor has a one-year redemption period from the date of registration of the certificate of sale.

  2. Extrajudicial Foreclosure

    • Allowed if there is a special power of attorney in the mortgage contract.
    • Governed by Act No. 3135 (as amended by Act No. 4118).
    • Redemption period depends on whether the mortgage involves a natural person or a juridical entity.

  3. Deficiency Judgment

    • If the proceeds of the foreclosure sale are insufficient to satisfy the debt, the creditor may file an action for the deficiency unless otherwise stipulated.

This comprehensive framework ensures that all legal requisites and effects surrounding real estate mortgages in the Philippines are meticulously applied and adhered to, safeguarding the interests of both creditors and debtors.

Real Estate Mortgage | CREDIT TRANSACTIONS

CIVIL LAW > VIII. CREDIT TRANSACTIONS > D. REAL ESTATE MORTGAGE

A Real Estate Mortgage (REM) is a contractual arrangement where the owner of real property (the mortgagor) grants a security interest over the property in favor of a creditor (the mortgagee) to secure the performance of a principal obligation. This is governed by Articles 2085 to 2123 of the Civil Code of the Philippines and pertinent jurisprudence.

I. ESSENTIAL REQUISITES OF A REAL ESTATE MORTGAGE

Under Article 2085, the following requisites must be present for a mortgage to be valid:

  1. Existence of a Principal Obligation
    The mortgage is merely an accessory contract, meaning it cannot exist without a valid principal obligation (e.g., loan or debt).

    • If the principal obligation is void, the mortgage is also void.
    • However, the nullity of the mortgage does not necessarily affect the validity of the principal obligation.

  2. Ownership of the Mortgaged Property
    The mortgagor must own the property or have the authority to encumber it.

    • Third-party mortgages are allowed where the mortgagor is not the debtor but consents to encumber their property as security for another’s obligation.

  3. Compliance with Formal Requirements

    • Form: Under Article 1358, a contract creating a mortgage must appear in a public instrument.
    • Registration: The mortgage must be registered in the Register of Deeds to bind third parties under the Property Registration Decree (P.D. 1529). Without registration, the mortgage is valid only between the contracting parties.

  4. Specification of Obligation Secured
    The obligation secured by the mortgage must be clearly stated. Ambiguities in the amount or scope of the obligation may render the mortgage unenforceable.

II. RIGHTS AND OBLIGATIONS OF PARTIES

A. Mortgagor (Owner of the Property)

  1. Right to Possess the Property
    The mortgagor retains possession of the mortgaged property unless there is a contrary stipulation (Article 2128).

  2. Obligation to Pay the Principal Obligation
    The mortgagor must ensure compliance with the obligation secured by the mortgage.

  3. Prohibition Against Alienation Without Consent
    The mortgagor cannot validly sell or encumber the mortgaged property without the mortgagee’s consent, if stipulated.

B. Mortgagee (Creditor)

  1. Right to Foreclosure
    If the principal obligation is breached, the mortgagee has the right to foreclose the mortgage, either judicially or extrajudicially.

  2. Obligation to Return the Title
    Upon full payment of the obligation, the mortgagee must cancel the mortgage and return the certificate of title to the mortgagor.

III. REGISTRATION OF MORTGAGE

  1. Purpose of Registration

    • To bind third parties and provide notice of the encumbrance on the property.
    • Registration must be done in the Registry of Deeds where the property is located.

  2. Effect of Non-Registration

    • The mortgage remains valid between the parties but does not prejudice third parties who acquire rights in good faith and for value.

IV. FORECLOSURE OF REAL ESTATE MORTGAGE

Foreclosure is the legal process by which the mortgagee seeks to recover the debt by selling the mortgaged property. This can be done either judicially or extrajudicially.

A. Judicial Foreclosure

  1. Governing Law: Rule 68 of the Rules of Court.

  2. Procedure:

    • Filing a verified complaint for foreclosure.
    • Issuance of a judgment ordering the debtor to pay or, in default, selling the property at a public auction.
    • Sale proceeds are applied to the debt, with any surplus returned to the mortgagor.

  3. Right of Redemption:

    • The mortgagor has a right to redeem the property within one year from the registration of the sale.

B. Extrajudicial Foreclosure

  1. Governing Law: Act No. 3135 (as amended by Act No. 4118).

  2. Procedure:

    • A special power of attorney authorizing foreclosure must be embodied in the mortgage deed.
    • Filing of the foreclosure application with the Office of the Sheriff.
    • Auction of the property without court intervention.

  3. Equity of Redemption:

    • In extrajudicial foreclosure, the mortgagor has the right to redeem only before the foreclosure sale is finalized.

  4. Publication Requirement:

    • Notice of sale must be published in a newspaper of general circulation for three consecutive weeks.

V. OTHER IMPORTANT DOCTRINES

  1. Pactum Commissorium (Article 2088)

    • A stipulation that ownership of the mortgaged property shall automatically pass to the mortgagee upon default is void. The remedy is foreclosure, not automatic ownership transfer.

  2. Indivisibility of Mortgage (Article 2089)

    • A mortgage remains indivisible even if the debt is divided among heirs or successors. Payment of part of the debt does not extinguish the mortgage.

  3. Extent of the Mortgage

    • A mortgage includes all accessions, improvements, and fruits of the property unless otherwise stipulated.

VI. REMEDIES IN CASE OF BREACH

  1. Action to Foreclose: Judicial or extrajudicial foreclosure depending on the stipulations in the mortgage contract.
  2. Action for Deficiency: After foreclosure, if the proceeds of the sale are insufficient to satisfy the debt, the creditor may file a separate action for the deficiency.

VII. JURISPRUDENTIAL PRINCIPLES

  1. Registration as Constructive Notice

    • Rizal Commercial Banking Corporation v. CA (1993): Registration of the mortgage in the Registry of Deeds constitutes constructive notice to third parties.

  2. Nullity of Pactum Commissorium

    • Spouses Belisario v. IAC (1988): A stipulation that the property automatically becomes the creditor’s upon default is contrary to public policy.

  3. Applicability of Redemption Rights

    • Paderes v. CA (1992): The right of redemption or equity of redemption must be exercised strictly within the period provided by law.

VIII. REAL ESTATE MORTGAGE VS. OTHER CREDIT TRANSACTIONS

  1. REM vs. Pledge:

    • Pledge involves movable property; REM involves real property.
    • Possession of pledged property is transferred to the creditor.

  2. REM vs. Antichresis:

    • In antichresis, the creditor may use the fruits of the property to apply against the debt.
    • In REM, fruits remain with the mortgagor unless stipulated.

  3. REM vs. Chattel Mortgage:

    • Chattel mortgage involves movable property; REM pertains to immovable property.
    • Registration processes differ under the Property Registration Decree and Chattel Mortgage Law.

IX. CONCLUSION

A Real Estate Mortgage is a critical instrument in credit transactions, balancing the creditor's right to secure repayment with the debtor's right to retain ownership and possession until default. Proper understanding of its requisites, effects, and remedies ensures protection of parties' rights while adhering to the law's requirements.

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