PRUDENTIAL BANK V. PANIS

153 SCRA 390

 

FACTS:

Spouses  Magcale  secured  a  loan  from  Prudential  Bank.    To  secure payment, they executed a real estate mortgage over a residential building.  The mortgage included also the right to occupy the lot and the information about the sales patent applied for by the spouses for the lot to which the building stood.  After securing the first loan, the spouses secured another from  the  same  bank.    To  secure  payment,  another  real  estate  mortgage was executed over the same properties.   
 
The Secretary of Agriculture then issued a Miscellaneous Sales Patent over the land which was later on mortgaged to the bank.   
 
The spouses then failed to pay for the loan and the REM was extrajudicially foreclosed and sold in public auction despite opposition from the spouses.  The respondent court held that the REM was null and void.
 

HELD:

A real estate mortgage can be constituted on the building  erected on the land belonging to another.
 
The  inclusion  of  building  distinct  and  separate  from  the  land  in  the  Civil Code can only mean that the building itself is an immovable property.
 
While it is true that a mortgage of land necessarily includes in the absence of  stipulation  of  the  improvements  thereon,  buildings,  still  a  building  in itself may be mortgaged by itself apart from the land on which it is built.  Such a mortgage would still be considered as a REM for the building would
still be considered as immovable property even if dealt with separately and apart from the land.
 
The original mortgage on the building and right to occupancy of the land was  executed  before  the  issuance  of  the  sales  patent  and  before  the government  was  divested  of  title  to  the  land.    Under  the  foregoing,  it  is evident  that  the  mortgage  executed  by  private  respondent  on  his  own
building was a valid mortgage.
 
As to the second mortgage, it was done after the sales patent was issued and thus prohibits pertinent provisions of the Public Land Act.