A mortgaged property can still be sold
Sometimes there is a provision in the Deed of Real Estate Mortgage to the effect that the mortgagor is prohibited from disposing the property mortgaged without the prior written consent of the mortgagee.
May a mortgage contract provide such stipulation?
"Art. 2130. A stipulation forbidding the owner from alienating the immovable mortgaged shall be void."
Further interpreting the above provision of law, the Supreme Court held in the case of Spouses Litonjua and Philippine White House Auto Supply, Inc. v. L & R Corporation, et al. (GR. 130722, Dec. 9, 1999, Ponente: Associate Justice Consuelo Ynares-Santiago), in this wise:
"Paragraphs 8 and 9 of the subject Deed of Real Estate Mortgage read as follows —
"'1. That the MORTGAGORS shall not sell, dispose of, mortgage, nor in any other manner encumber the real property/properties subject of this mortgage without the prior written consent of the MORTGAGEE. x x x'
"Insofar as the validity of the questioned stipulation prohibiting the mortgagor from selling his mortgaged property without the consent of the mortgagee is concerned, therefore, the ruling in the Tambunting case is still the controlling law.
Indeed, we are fully in accord with the pronouncement therein that such a stipulation violates Article 2130 of the New Civil Code.
Both the lower court and the Court of Appeals in its Amended Decision rationalize that since paragraph 8 of the subject Deed of Real Estate Mortgage contains no absolute prohibition against the sale of the property mortgaged but only requires the mortgagor to obtain the prior written consent of the mortgagee before any such sale, Article 2130 is not violated thereby.
This observation takes a narrow and technical view of the stipulation in question without taking into consideration the end result of requiring such prior written consent.
True, the provision does not absolutely prohibit the mortgagor from selling his mortgaged property; but what it does not outrightly prohibit, it nevertheless achieves.
For all intents and purposes, the stipulation practically gives the mortgagee the sole prerogative to prevent any sale of the mortgaged property to a third party.
The mortgagee can simply withhold its consent and thereby, prevent the mortgagor from selling the property.
This creates an unconscionable advantage for the mortgagee and amounts to a virtual prohibition on the owner to sell his mortgaged property.
In other words, stipulations like those covered by paragraph 8 of the subject Deed of Real Estate Mortgage circumvent the law, specifically, Article 2130 of the New Civil Code.
"Being contrary to law, paragraph 8 of the subject Deed of Real Estate Mortgage is not binding upon the parties. Accordingly, the sale made by the spouses Litonjua to PWHAS, notwithstanding the lack of prior written consent of L & R Corporation, is valid."
Applying the foregoing, the law absolutely bars a stipulation that prohibits the owner of the mortgaged property from alienating or selling it.
Such prohibition covers not only direct prohibition, but also applies to other schemes that practically result in prohibiting the owner from selling the mortgaged property even though the actual words used in the contract do not state an outright prohibition.
This includes stipulations requiring the prior consent of the mortgagee before the owner-mortgagor can sell the property because it practically defeats the latter's right to sell the mortgaged property at the behest of the former.
As reasoned by the Supreme Court, while such provision does not absolutely prohibit the owner-mortgagor from selling the mortgaged property; but what it does not outrightly prohibit, it nevertheless achieves because it gives the mortgagee the sole prerogative to prevent any sale of the mortgaged property to a third party.
Source: Manila Times