PRUDENTIAL BANK v. PANIS

An Real Estate Mortgage can be constituted on the building erected on the land belonging to another.

FACTS:

Spouses Magcale secured a loan with Prudential Bank. To further secure said loan, the spouses executed a Real Estate Mortgage over the residential building, with a right to occupy the lot. The Real Estate Mortgage also included information about the Sales Patent applied for by the spouses for the lot to which the building stood. The spouses got another loan, which was secured by another Real Estate Mortgage over the same properties.

The Sec. of Agriculture issued a Miscellaneous Sales Patent over the lot which was then mortgaged to the bank in favor of the Macales.

The spouses defaulted on both loans. Thus, the Real Estate Mortgage was extrajudicially foreclosed, and sold in a public auction.

The RTC held that the Real Estate Mortgage was null and void.

ISSUE:

Whether or not a Real Estate Mortgage can be constituted on the building erected on a lot belonging to another?

HELD:

Yes.
The fact that the spouses executed the Real Estate Mortgage over the building before executing the second Real Estate Mortgage over the land proved that the spouses intended for the building to be an immovable separate and distinct from the land on which it is built.