Facts: A private document, not registered, was constituted as a mortgage.

Thereafter, the property was sold to the Hechanova spouses under a Deed of Sale. The purported mortgagee objected to the sale, saying that the seller, Jose Servando, could not possibly sell because the property was mortgaged to him. SC: The mortgage is not binding against 3rd persons (the vendee Hechanova spouses), as it was embodied in a private document and unregistered. It is clear from the records of this case that the plaintiff, Servando, has no cause of action. Plaintiff has no standing to question the validity of the deed of sale executed by the deceased defendant Jose Servando in favor of his co-defendants Hechanova and Masa. No valid mortgage has been constituted plaintiff's favor, the alleged deed of mortgage being a mere private document and not registered; moreover, it contains a stipulation (pacto comisorio) which is null and void under Article 2088 of the Civil Code. Even assuming that the property was validly mortgaged to the plaintiff, his recourse was to foreclose the mortgage, not to seek annulment of the sale. Q: A is indebted to B in the amount of Php 100,000. The obligation is secured by a mortgage where A signs a public document, acknowledged before a notary public, in favor of B. It was duly recorded in the Register of Deeds. Thereafter, the property is sold to C. The title is transferred to C who is now the owner. Afterwards, A defaulted in the obligation. Can B foreclose the mortgage? A: Yes, because the mortgage is binding as it was registered. Not only was the mortgage recorded in the (1) Day Book, it was also (2) annotated in the dorsal portion of the title so that 3rd persons will know that it is burdened. 3rd persons can no longer invoke the defense of being a purchaser in good

faith.

Note: The subsequent sale to C is valid. If the mortgaged property is transferred to C, the mortgage will still be reflected to the new title issued to C. Mortgage follows the property, regardless of the owner! (Creation of a REAL RIGHT!) Rights of the 2nd Mortgagee o o o 2nd mortgagor cannot foreclose even if his maturity date is EARLIER than the 1st mortgage. His right is SUBORDINATE to the 1st mortgagee. Remedy: In order to foreclose the mortgage, he has to redeem the property. He needs to pay the mortgagors obligation to the 1st mortgagee.

The general rule in redemption is that it is not sufficient that a person offering to redeem manifests his desire to do so. The statement of intention must be accompanied by an actual and simultaneous tender of payment. This constitutes the exercise of the right to repurchase REDEMPTIONER Its not only the debtor who is entitled to redeem. Even a JUDGMENT CREDITOR of the DEBTOR can redeem. A judgment creditor is one who has a lien on the property subsequent to the judgment under which the property was sold. He is also called a REDEMPTIONER who is entitled to make an offer to redeem. In addition to the offer to redeem, you must also tender the full redemption price. You cannot delay payment by making an offer to redeem and paying the price NEXT YEAR IN INSTALLMENTS OFFERING A SURETY BOND

In effect, you are extending the period of redemption which is NOT ALLOWED. RULE: OFFER TO REDEEM + ACTUAL TENDER OF FULL REDEMPTION PRICE Full Redemption Price = Full Purchase Price + 1% Interest Per Month on the Full Purchase Price + Taxes & Assessments w/c the Purchaser Paid + 1% Interest Per Month on the Taxes & Assessments + Necessary Expenses for Preservation

If the mortgagee is a banking institution, the amount to be paid must be the AMOUNT DUE under the MORTGAGE DEED. This means the full obligation of the mortgagor to the bank

REMEDIES OF A MORTGAGOR IN AN EQUITABLE MORTGAGE: 1. File an action for the REFORMATION OF THE INSTRUMENT. 2. Raise it as a DEFENSE against the SELLER that it is actually a mortgage and not a sale. 3. When the period of redemption has LAPSED in an Sale A Retro. Title will not be absolutely conferred on the vendee a retro. He has to get a court declaration of absolute ownership for the consolidation of his ownership. The vendor a retro can then raise an objection in the judicial proceeding in the consolidation of the his ownership

Example 2: Even if the first Chattel Mortgage is registered, it is not binding against C, a 3rd party. Because when a real property is the subject of a Chattel Mortgage, that mortgage is valid only between the parties. Properly, a real property is not the subject of a Chattel Mortgage. As between B & C, C, the real estate mortgagee has a better right to foreclose the property if A cannot pay his debt or cannot fulfill his obligation. The remedy of B is to recover from the residue as he is treated a subsequent mortgagee.