Why is it necessary to register or cancel a mortgage?

To make the real property mortgage valid, it is necessary for both the mortgagor and the mortgagee to annotate the Deed of Mortgage on the owner’s duplicate copy of the title and on the title existing within the records of the Registry of Deeds where the land is located. In this case, the registration of mortgage serves as a notice to a third party that the property is subject to a mortgage agreement. To register the mortgage and have it annotated means to comply with the rules set by the Republic of the Philippines. Article 2125 of the Civil Code of the Philippines provides:

“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.”

Moreover, to make the registration of a real estate mortgage valid and binding is to follow Section 60 of the Presidential Decree 1529 which states that:

“Upon presentation for registration of the deed of mortgage or lease together with the owner's duplicate, the Register of Deeds shall enter upon the original of the certificate of title and also upon the owner's duplicate certificate a memorandum thereof, the date and time of filing and the file number assigned to the deed, and shall sign the said memorandum. He shall also note on the deed the date and time of filing and a reference to the volume and page of the registration book in which it is registered.”

Following the aforesaid Section, the annotation of the mortgage on the title will remain until such time that the mortgagor fully satisfied the obligation set in the agreement indicated on the Deed of Mortgage. Further, in such cases, when the mortgage was already settled the mortgagor may, at his expense, requests to make the annotation be cancelled on the Registry of Deeds. In fact, under Section 62 of the Presidential Decree 1529, “A mortgage or lease on registered land may be discharge or canceled by means of an instrument executed by the mortgage or lessee in a form sufficient in law, which shall be filed with the Register of Deeds who shall make the appropriate memorandum upon the certificate of title.”

Relative thereto, the cancellation of mortgage will undergo court proceedings and that the foreclosure of mortgage undergoes legal procedures which will take a tedious and expensive way of cancellation.

Nonetheless, in terms of planning to invest a real estate asset, one should consider any annotations indicated at the Memorandum of Encumbrances on the title to make sure that the real estate property someone intends to buy is clean from any issues which may lead to litigation.

LRA_Circular_No_11-2020_-_Official_List_

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How to Proof Donation?

For a donation to be valid, it must comply with the requirements provided under Article 749 of the New Civil Code of the Philippines which states that:

“In order that the donation of an immovable may be valid, it must be made in a public document, specifying therein the property donated and the value of the charges which the donee must satisfy.

“The acceptance may be made in the same deed of donation or in a separate public document, but it shall not take effect unless it is done during the lifetime of the donor.

“If the acceptance is made in a separate instrument, the donor shall be notified thereof in an authentic form, and this step shall be noted in both instruments.”

If the deed of donation was lost, one can still prove the donation through the provision of Section 5, Rule 130 of the 1997 Revised Rules of Court:

“When original document is unavailable. – When the original document has been lost or destroyed, or cannot be produced in court, the offeror, upon proof of its execution or existence and the cause of its unavailability without bad faith on his part, may prove its contents by a copy, or by a recital of its contents in some authentic document, or by the testimony of witnesses in the order stated.”

This is in consonance with the decision of the court in the case of the Department of Education, Culture and Sports vs. Rosario, et al. (GR 146586, Jan. 26, 2005), where the Supreme Court through Chief Justice Hilario Davide Jr., stated that:

“The Notarial Law mandates a notary public to record in his notarial register the necessary information regarding the instrument acknowledged before him. The Notarial Law also mandates the notary public to retain a copy of the instrument acknowledged before him when it is a contract. The notarial register is a record of the notary public’s official acts. Acknowledged instruments recorded in the notarial register are public documents. If the instrument is not recorded in the notarial register and there is no copy in the notarial records, the presumption arises that the document was not notarized and is not a public document.”

The donation of land or immovable must be made in a public document for it to be valid.

Can a Foreigner be a mortgagee in real estate mortgage?

A foreigner or an alien is allowed to be a mortgagee in an REM or real estate mortgage involving a property situated in the Philippines.

Although it is true that an alien or foreigner is prohibited from acquiring lands under our Constitution, it is equally true that a REM is not equivalent to a contract of sale. As such, the mere execution of a REM does not result in an outright transfer of ownership in favor of the mortgagee.

Indeed, the 1987 Constitution provides the proscription on foreign ownership of land, viz: “1987 Philippine Constitution “ARTICLE XII

“NATIONAL ECONOMY AND PATRIMONY

“Section 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain.

“Section 8. Notwithstanding the provisions of Section 7 of this Article, a natural-born citizen of the Philippines who has lost his Philippine citizenship may be a transferee of private lands, subject to limitations provided by law.”

However, the same is not equivalent to a prohibition on a foreigner being a mortgagee. In fact, the law, specifically Republic Act 4882, otherwise known as the “Act to Authorize the Mortgage of Private Real Property in Favor of Any Individual, Corporation, or Association Subject to Certain Conditions,” dictates the condition with respect to an alien/foreigner mortgagee:

“Section 1. Section one Republic Act Numbered One hundred thirty-three as heretofore amended by Republic Act Numbered Forty-three hundred eighty-one, is hereby further amended to read as follows:

“Sec. 1. Any provision of law to the contrary notwithstanding, private real property may be mortgaged in favor of any individual, corporation, or association, but the mortgage or his successor in interest, if disqualified to acquire or hold lands of the public domain in the Philippines, shall not take possession of the mortgaged property during the existence of the mortgage and shall not take possession of mortgaged property except after default and for the sole purpose of foreclosure, receivership, enforcement or other proceedings and in no case for a period of more than five years from actual possession and shall not bid or take part in any sale of such real property in case of foreclosure: Provided, That said mortgagee or successor in interest may take possession of said property after default in accordance with the prescribed judicial procedures for foreclosure and receivership and in no case exceeding five years from actual possession.”

Thus, it is clear that an alien/foreigner can be a mortgagee in a REM, subject to the rule that such alien/foreigner mortgagee must not take possession of the mortgaged property during the existence of the REM.

Moreover, an alien/foreigner mortgagee shall not take possession of the mortgaged property except after default and for the sole purpose of foreclosure, receivership, enforcement or other proceedings, and in no case for a period of more than five years from actual possession.

And finally, an alien/foreigner mortgagee shall not bid or take part in any sale of such real property in case of foreclosure.