Equitable Mortgage and Double Sale
Content
What are the essential
requisites of equitable
mortgage?
1. Parties entered into a contract of sale
2. Their intention was to secure an existing debt by way of a mortgage.
What is the rule on the presumption of an equitable mortgage?
A sale with conventional redemption is deemed to be an equitable mortgage in
any of the following cases: (Art. 1602)
1. Price of the sale with right to repurchase is unusually Inadequate
2. Seller Remains in possession as lessee or otherwise
3. Upon or after the expiration of the right to repurchase Another instrument
extending the period of redemption or granting a new period is executed
4. Purchaser Retains for himself a part of the purchase price
5. Seller binds himself to pay the Taxes on the thing sold
6. In any other case where the real intention of the parties is that the transaction
shall Secure the payment of a debt or the performance of any other obligation.
7. Art. 1602 shall also apply to a contract purporting to be an Absolute sale. (Art.
1604)
Note: In case of doubt in determining whether it is equitable mortgage or sale a
retro (with right of repurchase); it shall be construed as equitable mortgage.
Remedy is reformation.
An equitable mortgage is one which although lacking in some formality, or form
or words, or other requisites demanded by a statute, nevertheless reveals the
intention of the parties to charge real property as security for a debt, and
contains nothing impossible or contrary to law.
Rules On Double Sale Of
Immovables
In double sale of an immovable,
the rules of preference are as
follows:
(a)
the first registrant in good faith;
(b)
should there be no entry, the first in possession in good faith; and
(c)
in the absence thereof, the buyer who presents the oldest title in good
faith. (Martinez vs. CA, 358 SCRA 38 (2001); Art. 1544, NCC).
Prior registration of the subject property does not by itself confer ownership or a
better right over the property. Article 1544 requires that before the second buyer
can obtain priority over the first, he must show that he acted in good faith
throughout (i.e., in ignorance of the first sale and of the first buyer’s rights) from
the time of acquisition until the title is transferred to him by registration or failing
registration, by delivery of possession. (Uraca vs. CA, 344 Phil 253; Consolidated
Rural Bank (Cagayan Valley) Inc. vs. CA, et al, G.R. No. 132161, January 17,
2005).
One who purchases real property which is in actual possession of others should,
at least, make some inquiry concerning the rights of those in possession. The
actual possession by people other than the vendor should, at least, put the
purchaser upon inquiry. He can scarcely, in the absence of such inquiry, be
regarded as a bona fide purchaser as against such possessions. (Rep. vs. CA, 102
SCRA 331; Conspecto vs. Fuerto, 31 Phil. 144). The rule of caveat emptor requires
the purchaser to be aware of the supposed title of the vendor and one who buys
without checking the vendor’s title takes all the risks and losses consequent to
such failure. (Caram vs. Laureta, 103 SCRA 16 [1981]; Consolidated Rural Bank
(Cagayan Valley) Inc. vs. CA, et al, G.R. No. 132161, January 17, 2005; see also
Sps. Mathay vs. Court of Appeals, 356 Phil. 870 [1998]).
Registration of the second buyer under Act 3344, providing for the registration of
all instruments on land neither covered by the Spanish Mortgage Law nor the
Torrens System (Act 496), cannot improve the standing of a party since Act 3344
itself expresses that registration thereunder would not prejudice prior rights in
good faith (see Carumba vs. Court of Appeals, 31 SCRA 558). Registration,
however, by the first buyer under Act 3344 can have the effect of constructive
notice to the second buyer that can defeat his right as such buyer in good faith
(see Arts. 708-709, Civil Code; see also Revilla vs. Galindez, 107 Phil. 480;
Taguba vs. Peralta, 132 SCRA 700). Art. 1544 has been held to be inapplicable to
execution sales of unregistered land, since the purchaser merely steps into the
shoes of the debtor and acquires the latter’s interest as of the time the property
is sold. (Carumba vs. Court of Appeals, 31 SCRA 558; see also Fabian vs. Smith,
Bell & Co., 8 Phil. 496), (Remalante vs. Tibe, 158 SCRA 138; Sps. Noel & Julie
Abrigo vs. De Vera, G. R. No. 154409, June 21, 2004).
requisites of equitable
mortgage?
1. Parties entered into a contract of sale
2. Their intention was to secure an existing debt by way of a mortgage.
What is the rule on the presumption of an equitable mortgage?
A sale with conventional redemption is deemed to be an equitable mortgage in
any of the following cases: (Art. 1602)
1. Price of the sale with right to repurchase is unusually Inadequate
2. Seller Remains in possession as lessee or otherwise
3. Upon or after the expiration of the right to repurchase Another instrument
extending the period of redemption or granting a new period is executed
4. Purchaser Retains for himself a part of the purchase price
5. Seller binds himself to pay the Taxes on the thing sold
6. In any other case where the real intention of the parties is that the transaction
shall Secure the payment of a debt or the performance of any other obligation.
7. Art. 1602 shall also apply to a contract purporting to be an Absolute sale. (Art.
1604)
Note: In case of doubt in determining whether it is equitable mortgage or sale a
retro (with right of repurchase); it shall be construed as equitable mortgage.
Remedy is reformation.
An equitable mortgage is one which although lacking in some formality, or form
or words, or other requisites demanded by a statute, nevertheless reveals the
intention of the parties to charge real property as security for a debt, and
contains nothing impossible or contrary to law.
Rules On Double Sale Of
Immovables
In double sale of an immovable,
the rules of preference are as
follows:
(a)
the first registrant in good faith;
(b)
should there be no entry, the first in possession in good faith; and
(c)
in the absence thereof, the buyer who presents the oldest title in good
faith. (Martinez vs. CA, 358 SCRA 38 (2001); Art. 1544, NCC).
Prior registration of the subject property does not by itself confer ownership or a
better right over the property. Article 1544 requires that before the second buyer
can obtain priority over the first, he must show that he acted in good faith
throughout (i.e., in ignorance of the first sale and of the first buyer’s rights) from
the time of acquisition until the title is transferred to him by registration or failing
registration, by delivery of possession. (Uraca vs. CA, 344 Phil 253; Consolidated
Rural Bank (Cagayan Valley) Inc. vs. CA, et al, G.R. No. 132161, January 17,
2005).
One who purchases real property which is in actual possession of others should,
at least, make some inquiry concerning the rights of those in possession. The
actual possession by people other than the vendor should, at least, put the
purchaser upon inquiry. He can scarcely, in the absence of such inquiry, be
regarded as a bona fide purchaser as against such possessions. (Rep. vs. CA, 102
SCRA 331; Conspecto vs. Fuerto, 31 Phil. 144). The rule of caveat emptor requires
the purchaser to be aware of the supposed title of the vendor and one who buys
without checking the vendor’s title takes all the risks and losses consequent to
such failure. (Caram vs. Laureta, 103 SCRA 16 [1981]; Consolidated Rural Bank
(Cagayan Valley) Inc. vs. CA, et al, G.R. No. 132161, January 17, 2005; see also
Sps. Mathay vs. Court of Appeals, 356 Phil. 870 [1998]).
Registration of the second buyer under Act 3344, providing for the registration of
all instruments on land neither covered by the Spanish Mortgage Law nor the
Torrens System (Act 496), cannot improve the standing of a party since Act 3344
itself expresses that registration thereunder would not prejudice prior rights in
good faith (see Carumba vs. Court of Appeals, 31 SCRA 558). Registration,
however, by the first buyer under Act 3344 can have the effect of constructive
notice to the second buyer that can defeat his right as such buyer in good faith
(see Arts. 708-709, Civil Code; see also Revilla vs. Galindez, 107 Phil. 480;
Taguba vs. Peralta, 132 SCRA 700). Art. 1544 has been held to be inapplicable to
execution sales of unregistered land, since the purchaser merely steps into the
shoes of the debtor and acquires the latter’s interest as of the time the property
is sold. (Carumba vs. Court of Appeals, 31 SCRA 558; see also Fabian vs. Smith,
Bell & Co., 8 Phil. 496), (Remalante vs. Tibe, 158 SCRA 138; Sps. Noel & Julie
Abrigo vs. De Vera, G. R. No. 154409, June 21, 2004).
