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MORTGAGES

 WHAT LAWS GOVERN MORTGAGES•

CIVIL CODE ◦

BASIC PRINCIPLES‣

 A mortgage is an accessory contract which can legally exist only if there is a principal contract•The mortgagor should be the owner of the property •

May not be the principal debtor◦

Mortgagor should have the capacity to mortgage•OVER WHAT MAY BE CONSTITUTED.‣

Personal: CHATTEL•

Personal property ◦

Case: there was a chattel mortgage constituted over a house◦

 Won RD has the right to refuse the registration‣

SC: no, the duty of the rd is purely ministerial‣

 Art. 1159: stipulation of the parties‣

The agreement by the parties is valid as against each other but not against third persons‣

Can only secure existing obligations◦

Can be a ‣

 Voidable•

Rescissible•

Unenforceale•If the principal obligation has already been extinguished the mortgage ver the property is also extinguished•

Can be foreclosed only extrajudicially ◦

No right of redemption◦

The definition of the CM in the CM law is considered repealed by the NCC. It constitutes pactum commisorium◦

NCC: it is a contract where a personal property is recorded to secure the fulfillment of any valid obligations‣

 Where registered: in the RD where the mortgagor resides◦

Q: What if the property in one place and the mortgagor resides in another place‣

 A: must be recorded in the rd where the mortgagor resides and in the rd where the property is recorded‣

Real: REAL ESTATE MORTGAGE•

Real property ◦

Can secure even future obligations◦

Can be foreclosed extrajudicially and judicially ◦

There is right of redemption◦

CHATTEL MORTGAGE LAW ◦

Personal property ‣

Case: there was a chattel mortgage constituted over a house‣

 Won RD has the right to refuse the registration•

SC: no, the duty of the rd is purely ministerial•

 Art. 1159: stipulation of the parties•The agreement by the parties is valid as against each other but not against third persons•

Can only secure existing obligations‣

Can be a •

 Voidable◦

Rescissible◦

Unenforceale◦

If the principal obligation has already been extinguished the mortgage ver the property is also extinguished◦

Can be foreclosed only extrajudicially ‣

No right of redemption‣

The definition of the CM in the CM law is considered repealed by the NCC. It constitutes pactum commisorium‣

NCC: it is a contract where a personal property is recorded to secure the fulfillment of any valid obligations•

 Where registered: in the RD where the mortgagor resides‣

Q: What if the property in one place and the mortgagor resides in another place• A: must be recorded in the rd where the mortgagor resides and in the rd where the property is recorded•

Requires the observance of a particular form: DEED OF CHATTEL MORTGAGE AND THE AFFIDAVIT OF GOOD FAITH‣

Registration is constructive notice to the whole world‣

Unregistered mortgage is perfectly valid between the parties and anyone who has knowledge but it shall not be binding to 3rd persons• AFFIDAVIT OF GOOD FAITH:‣

The sworn declaration of both mortgagor and mortgagee that they constituted the mortgage in good faith and not for the purpose of •fraud

REMEDIES: alternative remedies - can only choose 1. If you take one you abandon the other. Weigh your options.  ‣

Sue for specific performance•

Foreclose mortgage•Before initiating foreclosure the mortgagee should have possession of the property mortgage◦

Complaint for replevin◦

Foreclosure extrajudicially ◦

 Attended to by a sheriff or notary public: notice of aution sale‣

To be posted in 3 public places•

Municipal/city hall◦

Hall of justice◦

Public market◦

Not necessary that it be posted until the auction sale•

Copy sent to mortgagor before day of auction‣

Failure to send notice invalidates the proceedings•Sold to the highest bidder‣

If mortgagee himself: the amount he bid will be credited to his total claims. He need not deliver any a,ount to the•sheriff 

If other than mortgagee, he shall deliver the amount to the sheriff and the sheriff will remit the proceeds of sale to the•mortgagee

NP or sheriff will prepare the Certificate of sale‣

 AUCTION: 3 Possibilities‣

Highest bid = all claims•Highest bid > all claims•

Deliver to the mortgagor not necessarily the principal debtor◦

Highest bid < all claims•Determine if covered by the RECTO LAW ◦

INSTALLMENT SALE OF PERSONAL PROPERTY ‣

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secure payment of the price, if the buyer fails to pay 2 or more installments, there is no right o recover‣

deficiency if the mortgagee foreclosed on the property subject of the mortgageLease purchase agreement, recto law also applies - if foreclosed, cannot recover the unpaid rentals‣

 Applies only if the mortgage was constituted over the very object of the installment sales not when the‣

mortgage is constituted over another

SHIP MORTGAGE DECREE◦

 

 ACT NO. 3135 as amended ◦

Created the right to foreclose REM extrajudicially ‣

REQUIREMENTS‣

In the deed of mortgage or in a separate instrument the mortgagor must expressly authorize the mortgagee to sell the property •mortgage in case of default

If the deed merely states that the mortgage may be foreclosed extrajudicially pursuant to act 3135 - NOT SUFFICIENT◦

The authority must be expressly stated in order to comply with the law: as the bank is hereby authorize to sell◦

 WHAT SHOULD BE DONE‣

PREPARE A VERIFIED PETITION•

Payment of DOCKET FEES• WHO MAY FORECLOSE‣

Sheriff or NP of the city or province where the property is located•

PREPARES A NOTICE OF AUCTION SALE◦

LOOK CLOSELY AT DESCRIPTION OF THE NOTICE: if wrong property advertised for sale the sale can be voided‣

POSTING OF NOTICE IN 3 public places◦

PUBLICATION IN NEWSPAPERS OF GENERAL CIRCULATION◦

once a week or 2 consecutive weeks‣

Check what was printed‣

 Agreement to postpone the date of auction sale: is it valid◦

SC: valid. Not against good morals, customs, laws, etc.‣

The processes of the notices and publication MUST BE REPEATED FOR THE PROCEEDINGS TO VALIDLY BE CONTINUED‣

 AUCTION: 3 Possibilities◦

Highest bid = all claims‣

Highest bid > all claims‣

Deliver to the mortgagor not necessarily the principal debtor•

Highest bid < all claims‣

CERTIFICATE OF SALE◦

RECOVERY FEES‣

Register the certificate of sale with the RD◦

MUST REGISTER SALE AS SOON AS POSSIBLE BECAUSE THE RIGHT OF REDEMPTION IS RECKONED FROM DATE OF‣

REGISTRATION

If redemption right not exercised:◦

 Ask the sheriff or NP to issue a final certificate of sale, or‣

Under the property registration decree: execute an affidavit of non-redemption‣

Highest bidder required to pay the taxes◦

Cannot register the title if the taxes are not paid‣

Reckoned from the expiry of the redemption period‣

Doc stamps:5th day of the month following expiry of redemption period‣

CGT: within 30 days from expiry of redemption period.‣

 What is the tax base: bid price or declaration or the market value whichever is highest‣

Certificate authorizing registration and tax clearance certificate‣

Go to local treasurer: pay transfer taxes◦

Rates will depend on whether city or municipality ‣

Update realty taxes and get clearance‣

Register of deeds: present your documents◦

Issuance of the certificate of title‣

Mortgagor retains possession◦

To acquire possession: File an ex-parte petition to issue a writ of possession ‣

 Attach all certified true copies from the register of deeds• When may a petition for a writ of possession be filed:•

Right after the sale but the highest bidder must post a bond◦

May the writ of possession be enforced against anyone?•

Can be issued except on a person who has a better right of possession◦

RIGHT OF REDEMPTION: 1 year reckoned from the registration of the certificate of sale‣

EXCEPTION: GBA of 2000: if the mortgagor is a juridical person and the mortgagee is a bank and the bank is the highest bidder the•redemption period is 3 months or when the bank registers its title to the property 

 Who may exercise•

The mortgagor◦

Successor in interest◦

Judgment creditor of a mortgagor◦

Can a person entitled to right of redemption be waived?•

NO. THIS RIGHT WAS CREATED AS A MATTER OF PUBLIC POLICY ◦

 Any waiver contrary to public policy is void◦

It is not a duty •

Cannot be compelled to exercise it◦

IT IS A REAL PROPERTY BECAUSE IT ARISES FROM REAL PROPERTY •It may be transferred: onerous or gratuitous title◦

Gratuitous:◦

Heirs in case of death of mortgagor can exercise the right‣

HOW EXERCISED•

 Valid tender of the redemption price within the redemption period◦

 What is a valid tender?‣

 A: it must be a tender of the FULL AMOUNT not the PARTIAL AMOUNT‣

 A: must be in legal tender‣

TO WHOM TENDERED?◦

 A: the highest bidder, if refused, the sheriff or NP who conducted the foreclosure‣

If refused for any reson,◦

File a case for specific performnce not consignment‣

Cannot be consignment because thereis no obligation ny,ore when it was paid for during the auction sale•

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REDEMPTION PRICE•

RULE 1: if the mortgagee is a government financial institution (GFI) shall be what is provided in the law that created the GFI◦

EX: dbp, landbank, pag-ibig ‣

RULE 2: if the mortgagee is a bank, the redemption price shall be what is allowed under the general banking act of 2000◦

RULE 3: if the mortgagee is anyone else the redemption price shall consist of:◦

Bid price‣

Interest of the bi dprice: 1% per month‣

Taxes and assessments‣

Interest on taxes and assessments: 1% per month‣

TO•

 

NEXT WEEK:

Documents of titleCivil code

 Warehouse receipts actTruth in lending act

Bulk sales law General bonded warehouse act