In Luisa Briones – Velasquez vs. CA, et al., G.R. No. 144882, February 4, 2005, the Supreme Court once again said that if there is an equitable mortgage, the creditor cannot consolidate his ownership in case the debtor does not pay. The proper remedy is to foreclose it. The reason is founded on Article 2088, NCC which provides that the creditor cannot appropriate the things given by way of pledge or mortgage, or dispose of them. Any stipulation to the contrary is null and void.
Applying the principle of pactum commissorium specifically to equitable mortgages, in Montevergin vs. CA, 112 SCRA 641 (1982) it has been said that the consolidation of ownership in the person of the mortgagee in equity, merely upon failure of the mortgagor in equity to pay the obligation, would amount to a pactum commissorium. It was further articulated that an action for consolidation of ownership is an inappropriate remedy on the part of the mortgagee in equity. The only proper remedy is to cause the foreclosure of the mortgagee in equity. And if the mortgagee in equity desires to obtain title to the mortgaged property, the mortgagee in equity may buy it at the foreclosure sale.