Sunday, July 15, 2012

The mere fact that the purchaser of an immovable has notice that the acquired realty is encumbered with a mortgage does not render him liable for the payment of the debt guaranteed by the mortgage, in the absence of stipulation or condition that he is to assume payment of the mortgage debt. The reason is plain: the mortgage is merely an encumbrance on the property, entitling the mortgagee to have the property foreclosed, i.e., sold, in case the principal obligor does not pay the mortgage debt, and apply the proceeds of the sale to the satisfaction of his credit. Mortgage is merely an accessory undertaking for the convenience and security of the mortgage creditor, and exists independently of the obligation to pay the debt secured by it. The mortgagee, if he is so minded, can waive the mortgage security and proceed to collect the principal debt by personal action against the original mortgagor.- G.R. No. 158891

G.R. No. 158891

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Propriety of Garcia’s action
for foreclosure of mortgage

The real nature of a mortgage is described in Article 2126 of the Civil Code, to wit:

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.


Simply put, a mortgage is a real right, which follows the property, even after subsequent transfers by the mortgagor.  “A registered mortgage lien is considered inseparable from the property inasmuch as it is a right in rem.”[41] 

The sale or transfer of the mortgaged property cannot affect or release the mortgage; thus the purchaser or transferee is necessarily bound to acknowledge and respect the encumbrance.[42]  In fact, under Article 2129 of the Civil Code, the mortgage on the property may still be foreclosed despite the transfer, viz:

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 terms and with the formalities which the law establishes.


While we agree with Garcia that since the second mortgage, of which he is the mortgagee, has not yet been discharged, we find that said mortgage subsists and is still enforceable.  However, Villar, in buying the subject property with notice that it was mortgaged, only undertook to pay such mortgage or allow the subject property to be sold upon failure of the mortgage creditor to obtain payment from the principal debtor once the debt matures.  Villar did not obligate herself to replace the debtor in the principal obligation, and could not do so in law without the creditor’s consent.[43]  Article 1293 of the Civil Code provides:

Art. 1293. Novation which consists in substituting a new debtor in the place of the original one, may be made even without the knowledge or against the will of the latter, but not without the consent of the creditor.  Payment by the new debtor gives him the rights mentioned in articles 1236 and 1237.


Therefore, the obligation to pay the mortgage indebtedness remains with the original debtors Galas and Pingol.[44]  The case of E.C. McCullough & Co. v. Veloso and Serna[45] is square on this point:

The effects of a transfer of a mortgaged property to a third person are well determined by the Civil Code. According to article 1879[46] of this Code, the creditor may demand of the third person in possession of the property mortgaged payment of such part of the debt, as is secured by the property in his possession, in the manner and form established by the law.  The Mortgage Law in force at the promulgation of the Civil Code and referred to in the latter, provided, among other things, that the debtor should not pay the debt upon its maturity after judicial or notarial demand, for payment has been made by the creditor upon him.  (Art. 135 of the Mortgage Law of the Philippines of 1889.)  According to this, the obligation of the new possessor to pay the debt originated only from the right of the creditor to demand payment of him, it being necessary that a demand for payment should have previously been made upon the debtor and the latter should have failed to pay.  And even if these requirements were complied with, still the third possessor might abandon the property mortgaged, and in that case it is considered to be in the possession of the debtor.  (Art. 136 of the same law.) This clearly shows that the spirit of the Civil Code is to let the obligation of the debtor to pay the debt stand although the property mortgaged to secure the payment of said debt may have been transferred to a third person.  While the Mortgage Law of 1893 eliminated these provisions, it contained nothing indicating any change in the spirit of the law in this respect. Article 129 of this law, which provides the substitution of the debtor by the third person in possession of the property, for the purposes of the giving of notice, does not show this change and has reference to a case where the action is directed only against the property burdened with the mortgage.  (Art. 168 of the Regulation.)[47]


This pronouncement was reiterated in Rodriguez v. Reyes[48] wherein this Court, even before quoting the same above portion in E.C. McCullough & Co. v. Veloso and Serna, held:

We find the stand of petitioners-appellants to be unmeritorious and untenable.  The maxim “caveat emptor” applies only to execution sales, and this was not one such.  The mere fact that the purchaser of an immovable has notice that the acquired realty is encumbered with a mortgage does not render him liable for the payment of the debt guaranteed by the mortgage, in the absence of stipulation or condition that he is to assume payment of the mortgage debt. The reason is plain: the mortgage is merely an encumbrance on the property, entitling the mortgagee to have the property foreclosed, i.e., sold, in case the principal obligor does not pay the mortgage debt, and apply the proceeds of the sale to the satisfaction of his credit. Mortgage is merely an accessory undertaking for the convenience and security of the mortgage creditor, and exists independently of the obligation to pay the debt secured by it. The mortgagee, if he is so minded, can waive the mortgage security and proceed to collect the principal debt by personal action against the original mortgagor.[49]  


In view of the foregoing, Garcia has no cause of action against Villar in the absence of evidence to show that the second mortgage executed in favor of Garcia has been violated by his debtors, Galas and Pingol, i.e., specifically that Garcia has made a demand on said debtors for the payment of the obligation secured by the second mortgage and they have failed to pay.

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