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. (1874a)
 

MORTGAGE

> Contract  whereby  the  debtor  secures  to  the  creditor  the fulfillment of a principal obligation, specially substituting to such  security  immovable  property  or  real  rights  over immovable property which obligation shall be satisfied with the proceeds of sale of said property or rights in case the said obligation is not complied with at the time stipulated

> Real, accessory, unilateral and subsidiary contract
 

POSSESSION OF PROPERTY MORTGAGED

> As a general rule, it is retained by the mortgagor
> The mortgaged property is only subjected to a lien by the mortgagee but ownership is retained by the mortgagor
 

PAYMENT OF INTEREST ON MORTGAGE CREDIT

> With  regard  to  fruits  or  interest,  the  mortgagee  shall  be subject to the obligation of an antichresis creditor

SUBJECT MATTER OF MORTGAGE

> Immovables and alienable real rights over immovables
 

FUTURE PROPERTY CANNOT BE OBJECT OF MORTGAGE

> Future  property  cannot  be  the  object  of  a  contract  of mortgage

> A   stipulation   however   subjecting   the   mortgage   lien, properties which the mortgagor may subsequently acquire, install,  or  use  in  connection  with  real  property  already mortgaged belonging to the mortgagor is valid
 
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)
 

ESSENTIAL REQUISITES OF A MORTGAGE

1.   To secure the fulfillment of a principal obligation
2.   The  mortgagor  should  be  the  absolute  owner  of  thing mortgaged
3.   The mortgagor should have free disposal of the thing
4.   When  the  principal  obligation  becomes  due,  the  thing mortgaged may be alienated to secure payment
5.   For a mortgage to  be validly  constituted  and to prejudice third  persons,  the  mortgage  should  be  recorded  with  the Registry of Property
 
NO  VALIDLY  CONSTITUTED  MORTGAGE  IF  THE  DEED  OF MORTGAGE IS A MERE PRIVATE DOCUMENT
 

MORTGAGE   IS   NEVERTHELESS   BINDING   BETWEEN   THE PARTIES EVEN IF UNREGISTERED

> Actual knowledge on the part of the buyer
> Actual knowledge=registration
 

PROCEDURE:  WHAT  HAPPENS  WHEN  YOU  ENTER  INTO  A CONTRACT OF MORTGAGE? 

1.   Execute the document of mortgage 
2.   Go to a notary public, who will notarize the document. 
3.   Pay the documentary stamp tax within the first five days of the succeeding month.  The doc stamp tax is a percentage of the value of the property mortgaged. 
4.   Go  to  the  Office  of  the  Register  of  Deeds  and  pay  the registration fees.  Before you pay the registration fees, the government  will  require  you  to  update  payment  of  realty taxes  on  the  property.    After  payment  of  the  registration fees, the mortgage will be annotated on the title.
 

EFFECT   OF   INVALIDITY   OF   MORTGAGE   ON   PRINCIPAL OBLIGATION

1.   The principal obligation remains valid
2.   Mortgage deed remains as evidence of principal obligation

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. (1876)
 

EFFECTS OF MORTGAGE

1.   Creates a real right
a.    If  the  mortgagor  sells  the  encumbered  property, the  property  remains  subject  to  the  fulfillment  of the principal obligation secured by it

b.   The mortgagee has a right to rely in good faith on what  appears  on  the  certificate  of  title  of  the
mortgagor of the property given as security and in the  absence  of  anything  to  excite  suspicion,  he  is
under no obligation to look beyond the certificate 

c.    Until   the   action   for   expropriation   has   been completed,  ownership  over  the  property  remains
with the registered owner

d.   Banking  institution  must  exercise  due  diligence before entering contract of mortgage

e.    If a person is the first mortgagee over a property which  was  sold  in  an  auction  by  the  second
mortgagee,  the  only  right  left  to  him  is  to  collect  his  mortgage  credit  from  the  purchaser  thereof
during the sale conducted

f.    In  a  suit  to  nullify  a  certificate  of  title,  the mortgagee is an indispensable party

2.   Creates merely an encumbrance
 
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. (1877)
 

EXTENT OF MORTGAGE

> A REM constituted on an immovable property is not limited to the property itself but also extends to all its accessions, improvements, growing fruits, and rents
> To exclude them, it is necessary that there be an express stipulation to that effect

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)
 
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) 

RIGHT     OF     CREDITOR     AGAINST     TRANSFEREE     OF MORTGAGED PROPERTY

> The fact that the mortgagor has transferred the mortgaged property  to  a  third  person  doesn't  relieve  him  from  his obligation to pay the debt to the mortgage creditor in the absence of Novation

> A recorded REM is merely an accessory contract

> The  creditor  may  only  demand  from  any  possessor  the payment  only  of  the  part  of  the  credit  secured  by  said property

> Necessary  that  there  be  prior  demand  for  payment  be made on the debtor and the latter failed to pay

> Does not really  apply to all third persons in possession of the property

> It  only  applies  to  those  in  possession  of  the  mortgaged property in the  concept of  owner.  If the possession by a third person is only as lessee, the creditor may not collect the credit from that third person.
 
Art.   2130.   A   stipulation   forbidding   the   owner   from alienating the immovable mortgaged shall be void. (n)

STIPULATION  FORBIDDING  ALIENATION  OF  MORTGAGED PROPERTY

> Such   stipulation   would   be   contrary   to   public   good inasmuch  as  the  transmission  of  property  should  not  be unduly impeded
 

CAN  MORTGAGEE  PROHIBIT  ENCUMBERANCES  WITHOUT PRIOR CONSENT?

> Yes, regulation is not the same as prohibition
> The mortgagee may even add a standard.  This is for good measure on the part of the mortgagee which is allowed by law.  
 

IN  THE  FIRST  PLACE,  WHY  WOULD  YOU  BE  CONCERNED WITH  THE  DISPOSITION  OF  THE  PROPERTY  IF  YOU  ARE THE MORTGAGEE?

> You don't want the property to be in the hands of someone who is litigious 
> As  a  means  of  monitoring  the  financial  condition  of  the mortgagor
 
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)