It is every Filipino’s dream to have a house they can call home. This is especially true to every family. In pursuit of that dream, they obtain a real estate loan where one will buy a property on installment basis and use that property as collateral for the loan. This is called mortgage. The failure to pay the loan will compel the bank to sell the mortgaged property to the highest bidder. This process is known as foreclosure. In this case, the law gives the mortgagor-debtor a period of one-year to buy back the property. This is called redemption. If the property is not redeemed, the bank will transfer the title to its name. This process is known as consolidation of title. Thereafter, the bank will get possession by filing a court petition for issuance of writ of possession. Once it gets the possession, it will sell the same.
If this happens to you, do not surrender, for the law providess remedies that you can use to your advantage. If you cannot pay, just be honest and request the bank for extension to pay. This is called restructuring. If the bank refuses, you may sell or assign your property with consent of the bank. If it was foreclosed, you may sell your right of redemption. The last option is to sue the bank and negotiate for settlement and if the bank refuses, you can question the process to get back your property.
Take for example the case of Magsano, et. al. v. Pangasinan Savings & Loan Bank, Inc., et. al., G.R. No. 215038 dated 17th October 2016. The bank was hailed to court because the husband died when the mortgage was signed. In this case, a Real Estate Mortgage was signed in 1991 over a house and lot as security for the loan. As the loan was not paid, the bank foreclosed the property in 1994. As the property was not redeemed, the bank sold it to Sps. Manuel in 1997 and a new title was issued.
The bank filed an application for issuance of writ of possession, which was granted leading to the demolition of the house. The bank was sued in 2004 for annulment of foreclosure since the husband was already dead in April 1991 when the real estate mortgage was signed in July 1991.
The bank denied knowledge of the death arguing that the children of Sps. Magsano have no right to sue, not being parties to the mortgage and 10 years had lapsed. The Regional Trial Court dismissed the case and the Court of Appeals affirmed it. While the CA declared the real estate mortgage void as it was signed when the husband was already dead, yet it only made the bank a mortgagee in bad faith, but the sale to Sps. Manuel is still valid for being buyers in good faith. The heirs appealed to the Supreme Court questioning the validity of the mortgage, foreclosure, sale and new title.
The Supreme Court ruled that every person dealing with registered land may safely rely on the correctness of the certificate of title. The law will in no way oblige him to go beyond the certificate of title to determine the condition of the property. But, if the land sold is in the possession of a person other than the seller, the buyer must go beyond the certificate of title and make inquiries on the actual possessor.
It is a common practice in the real estate industry that ocular inspection of the premises involved is a safeguard that a cautious and prudent buyer usually takes. If he finds out that the land he will buy is occupied by one other than the seller who is not in actual possession, it would then be the duty of the buyer to verify the extent of the occupant’s rights. The failure of the buyer to take such precautionary steps would mean negligence on his part and he cannot be considered a buyer in good faith.
In this case, petitioners were in possession of the property when it was bought by Sps. Manuel, who neither inspected the realty nor inquired the nature of possession of petitioners-heirs’, which should have been done as matter of prudence. Had they only inspected, they will discover the irregularity of the mortgage and foreclosure. Sps. Manuel failed to exercise the diligence required to protect their rights; thus, they are not buyers in good faith. As such, they merely stepped into the shoes of the bank and acquired only its rights, but not that of the right of the dead mortgagor.
While a new title was issued on the entire property, Sps. Manuel only acquired what validly pertains to the bank as successor-in-interest of the wife-mortgagor [in the event of partition], but not the shares pertaining to the co-owners, who are heirs of the dead husband, whose consent to the mortgage was not obtained. Thus, in 2016, the Supreme Court declared the 1991 mortgage, 1994 foreclosure, 1997 sale as well as new title as void.
