Mortgage (Otherwise Known As "Real Estate Mortgage" or "Real

Notes 28 REAL ESTATE MORTGAGE
(Civil Code Art. 2124-2131)
Art. 2124. Only the following property may be the object of a

contract of mortgage:
(1) Immovables;
(2) Alienable real rights in accordance with the laws, imposed
upon immovables.
Nevertheless, movables may be the object of a chattel
mortgage.
Concept
Mortgage (otherwise known as “real estate mortgage” or “real
mortgage”) is a contract whereby the debtor secures to the creditor the
fulfillment of a principal obligation, especially subjecting to such
security, immovable property or real rights over immovable property in
case the principal obligation is not complied with the time stipulated.
Kinds of Real Mortgage

1. Conventional or voluntary - one created by agreement of the
parties.
2. Legal – one constituted pursuant to an express requirement of
the law.
3. Equitable – one which, although lacking some formality, form of
words or other requisites prescribed by law, show the intention of
the parties to charge real property as security for a debt and
contain nothing impossible or contrary to law.
Characteristics of Real Mortgages:

1. Nominate- it has a special designation or name under the civil
code.
2. Consensual- perfected my mere consent.
3. Accessory- its validity depends upon the validity of the principal
contract.
4. Unilateral- only the mortgagor has an obligation in favor of the
mortgages.
5. Real right- it binds ad creates a lien on the real property
6. Real property- a mortgage on real property is by itself real
property also.
7. Indivisible – as long as the principal obligation remains unpaid,
the real estate mortgage will continue to subsist.
8. Inseparable- the mortgage on real property, regardless of who its
owner may subsequently be.
Art. 2125. In addition to the requisites stated in Article 2085, it is
indispensable, in order that a mortgage may be validly constituted,
that the document in which it appears be recorded in the Registry
of Property. If the instrument is not recorded, the mortgage is
nevertheless 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)
Requisites of real mortgage
1. That it be constituted to secure the fulfillment of a principal

obligation.
2. That the mortgagor be the absolute owner of the thing
mortgaged.
3. That the person constituting the mortgage have the free disposal
of his property, and in the absence thereof, that he be legally,
authorized for the purpose.
4. That the document in which it appears be recorded in the
Registry of Property.
Effect of unregistered mortgage
1. Between the parties

Even if the mortgage is not registered, the mortgage is
nevertheless binding between the parties.
2. Against third person

a. Without knowledge
An unregistered mortgage does not affect innocent
third persons.
b. With knowledge
Third persons with knowledge of the existence of the
mortgage are bound because as to them, knowledge
of a prior unregistered mortgage is the equivalent of
registration.
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.
Effect of mortgage
(1) Creates a real right- a mortgage creates what is called a real

right which is enforceable against the whole world. It follows the
property wherever it goes.
(2) Creates merely an encumbrance - the mortgage, however, is

merely an encumbrance upon the property and does not
extinguish the title of the debtor who does not lose his principal
attribute as owner, that is, the right to dispose .
Art. 2127. The mortgage extends 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.
Extent of real mortgage:
A contract of real mortgage shall cover the ff:

 The property mortgaged
 Natural accessions
 Improvements
 Growing fruits
 Rents and income not yet received when the obligation
becomes due.
 Indemnity granted or owing to the proprietor from the insurers
of the property mortgaged, or in virtue of expropriations for
public use.
Art. 2128. The mortgage credit may be alienated or assigned to a

third person, in whole or in part, with the formalities required by
law. (1878)
Validity to third persons
1. Public document and registration in the Registry of Property

2. Notice of the assignment to the debtor. Thus, if the debtor is not
given notice of the assignment, the debtor who before having
knowledge of the assignment, pays his creditor shall be released
from the obligation.
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 the terms and with the formalities which the law
establishes. (1879)
Art. 2130. A stipulation forbidding the owner from alienating the

immovable mortgaged shall be void. (n)
Stipulation prohibiting alienation and second mortgage
1. Alienation
A stipulation forbidding the owner from alienating te
immovable mortgaged shall be void.
2. Second mortgage
The mortgagor, being the owner of the property mortgaged,
may execute a second mortgage thereon, even without the
consent of the mortgagee. This is an incident of ownership.
However, the mortgagor and mortgagee may validly enter
into a stipulation prohibiting a second mortgage with
respect to property registered under the Torrens System.
Art. 2131. The form, extent and consequences of a mortgage, both

as to its constitution, modification and extinguishment, and as to
other matters not included in this Chapter, shall be governed by
the provisions of the Mortgage Law and of the Land Registration
Law. (1880a)
Foreclosure of mortgage
1. Concept
Foreclosure – a proceeding by which the creditor subjects
the thing mortgaged for the payment of the obligation
secured.
2. Kinds
a. Judicial – foreclosure under Rule 68 of the Rules of
Court.
b. Extrajudicial - foreclosure under Act No. 3135, as
amended by Act No. 4118.
3. Grounds for Foreclosure
a. Non-payment of the principal obligation on maturity.
b. Violation of any condition, stipulation or warranty by the
mortgagor.
Redemption
1. Concept
Redemption – a transaction through which the mortgagor
or one claiming in his right, by means of a payment or the
performance of a condition, re-acquires or buys back the value
of the title which may have passed under the mortgage, or
divests the mortgaged premises of the lien which the mortgage
may have created.
2. Kinds of Redemption
1. Equity of Redemption – right of mortgagor to redeem the

mortgaged property after his default in the performance of the
conditions of the mortgage within the 90-day period from the date of
the service of the order of foreclosure or even thereafter but before
the confirmation of the sale. Applies to judicial foreclosure of real
mortgage and chattel mortgage foreclosure.
2. Right of Redemption – right of mortgagor to redeem the mortgaged

property within one year from the date of registration of the certificate
of sale. Applies only to extrajudicial foreclosure of real mortgage.
Submitted by: Garcia, Sharlyn B. RTU 2014-2015

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Notes 28 REAL ESTATE MORTGAGE

(Civil Code Art. 2124-2131)

Art. 2124. Only the following property may be the object of a

Kinds of Real Mortgage

Characteristics of Real Mortgages:

The persons in whose favor the law establishes a mortgage have

Requisites of real mortgage

1. That it be constituted to secure the fulfillment of a principal

Effect of unregistered mortgage

1. Between the parties

2. Against third person

Art. 2126. The mortgage directly and immediately subjects the

(1) Creates a real right- a mortgage creates what is called a real

(2) Creates merely an encumbrance - the mortgage, however, is

Art. 2127. The mortgage extends to the natural accessions, to the

Extent of real mortgage:

A contract of real mortgage shall cover the ff:

Art. 2128. The mortgage credit may be alienated or assigned to a

Validity to third persons

1. Public document and registration in the Registry of Property

Art. 2130. A stipulation forbidding the owner from alienating the

Stipulation prohibiting alienation and second mortgage

Art. 2131. The form, extent and consequences of a mortgage, both

1. Equity of Redemption – right of mortgagor to redeem the

2. Right of Redemption – right of mortgagor to redeem the mortgaged

Submitted by: Garcia, Sharlyn B. RTU 2014-2015

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