a. Requisites and Characteristics

Characteristics

• Generally unilateral, although a donation may impose a burden or charge on the donee.
• A donation is perfected when the donor knows of the donee’s acceptance, which must be made during the lifetime of both donor and donee. Its validity remains subject to the formalities required for the property donated under Articles 748 and 749 of the Civil Code.

Characteristics of real mortgage

• It is a real right;
• It is an accessory contract;

NOTE: If the principal obligation is VOID, the mortgage is also VOID. (Reyes v. Gonzales, [C.A.] 45 O.G. No. 2, p. 831) But if a mortgage is void because it was not made by the owner of the property, the principal contract of loan may still be valid. (PNB v. Rocha, G.R. No. L-32260, December 29, 1930)

• Unilateral; it creates only an obligation on the part of the creditor who must free the property from encumbrance once the obligation is fulfilled.
• It is indivisible;
• It is inseparable;

NOTE: The mortgage adheres to the property, regardless of who its owner may subsequently be. (McCullough v. Veloso, 46Phil.1)

• It is real property;
• It is subsidiary;

NOTE: Once the obligation has been paid or satisfied, the property must be released from the encumbrance imposed. The mortgage is answerable only if the principal obligation is not paid.

Consideration in mortgage

Its consideration is the same as of the principal contract from which it receives its life, and without which it cannot exist as an independent contract. (China Banking Corp. v. Lichauco, G.R. No. L-22001, November 4, 1924)

Requisites for a valid constitution of a real mortgage (BAR AREA)

The following requisites are essential to the contract of a real estate mortgage:

• That it be constituted to secure the fulfillment of a principal obligation;
• That the mortgagor be the absolute owner of the thing mortgaged;
• That the person constituting the mortgage have the free disposal of their property, and in the absence thereof, that they are legally authorized for the purpose;
• The mortgage document must be recorded in the Registry of Property for the mortgage to be validly constituted; if unrecorded, the mortgage is nevertheless binding between the parties (NCC, Art. 2125); and
• Recording in the Registry of Property is necessary to bind third persons.

NOTE: A recorded Real Estate Mortgage is a right in rem, a lien on the property whoever its owner may be.

Registration operates as a notice of the mortgage to others, but neither adds to its validity nor converts an invalid mortgage into a valid one between the parties. The person in whose favor the law establishes a mortgage has the right to demand the execution and the recording of the document in which the mortgage is formalized. [Civil Code, Art. 2125, second paragraph]

Q: Vicente was the owner of a real property in Davao City. He executed an SPA in favor of his sister, Nanette. She entered into contract of loan with BAP and used Vincente’s property as collateral. However, she failed to pay the obligation to BAP when it fell due. Demand letters were sent but to no avail. BAP instituted an Extra-Judicial Foreclosure of Vincente’s property. Vicente and Nanette filed a complaint for declaration of nullity of real estate mortgage against BAP. In the complaint, Nanette alleges that she signed blank loan forms, she did not receive the proceeds of the loan, and another sister, named Eleonor, was included in the loan documents when only Nanette is empowered by Vincente to enter contract of loan. Thus, they contend that since there is absence of consideration, the loan contract is void which means its accessory contract, real mortgage, is void as well. RTC ruled in favor of BAP and dismissed the complaint finding that Vicente and Nanette indeed applied for loan and received the proceeds through the account under the name of Holy Infant Medical Clinic/Nanette Luntao/Eleanor Luntao. Also, it relied heavily on the letter of Jesus Luntao in court showing an admission of the existence of the loan. CA denied the appeal. Whether the contract of loan entered by Nanette is void thus nullifies the contract of real mortgage being an accessory contract.

A: NO. As an accessory contract, a mortgage contract's validity depends on the loan contract's validity. Thus, the contract of loan between petitioners and private respondent must be valid. The real mortgage contract remains valid because the main contract of loan is found to be valid when it was proven during trial that Vicente and Nanette received the proceeds of the loan and further supported by the letter of Jesus Luntao of the existence of the loan. Despite having the opportunity to prove that the admission of Jesus is false, petitioners failed to present rebuttal evidence. They also failed to present evidence to support their allegation that Eleanor received the loan proceeds or that Eleanor's non-payment of her alleged personal loan with BAP caused the foreclosure of the mortgage. What petitioners presented were mere denials. (Luntao vs. BAP, G.R. 204412, September 20, 2017)

Requisites of things as a Subject Matter

• Within the commerce of man (CIVIL CODE, art. 1347) – either existing or in potency
• Licit or not contrary to law, morals, good customs, public order or public policy (CIVIL CODE, art. 1347)
• Possible, legally or physically (CIVIL CODE, art. 1348)
• Determinate as to its kind or determinable without need to enter into a new contract (CIVIL CODE, art. 1349)
• Transmissible (CIVIL CODE, art. 1347)

Requisites

• The document evidencing the credit must have been delivered by the creditor to the debtor;
• The document must be a private document; and
• The delivery must be voluntary. (NCC, Art. 1271)

NOTE: If the document is public, the presumption does not arise considering the fact that the public character of the document would always protect the interest of the creditor.