ALCANTARA v.

ALINEA
- Alinea and Belarmino borrowed P480 from Alcantara
- It was agreed upon by the parties that the amount should the debtors fail to pay
the said amount, it is understood that the house and lot owned by the debtors be
considered as absolutely sold to Alcantara
- The period for payment expired and no payment was made
- Alcantara filed a case against the debtors stating that they violated the terms of
the contract thus depriving him of the rental income he could have earned
- Alinea and Belarmino denied the agreement with regard to the sale of the house
but admitted the existence of the loan
1. What kind of contract was agreed upon?
We have in this case a CONTRACT OF LOAN & a PROMISE OF SALE OF HOUSE AND LOT, the
price of which should be the amount loaned, if within a fixed period of time such amount should not
be paid by the debtor-vendor of the property to the creditor-vendee of same.

Not a contract of Mortgage: The property, the sale of which was agreed to by the
debtors, does not appear mortgaged in favor of the creditor, because in order to
constitute a valid mortgage it is indispensable that the instrument be registered in
the Register of Property, in accordance with article 1875 of the Civil Code, and the
document of contract, Exhibit A, does not constitute a mortgage, nor could it
possibly be a mortgage, for the reason of said document is not vested with the
character and conditions of a public instrument.
Not Pledge: By the aforesaid document, Exhibit A, said property could not be
pledged, not being personal property, and notwithstanding the said double contract
the debtor continued in possession thereof and the said property has never been
occupied by the creditor.
Not Antichresis: Neither was there ever nay contract of antichresis by reason of the
said contract of loan, as is provided in articles 1881 and those following of the Civil
Code, inasmuch as the creditor-plaintiff has never been in possession thereof, nor
has he enjoyed the said property, nor for one moment ever received its rents;
therefore, there are no proper terms in law, taking into consideration the terms of
the conditions contained in the aforesaid contract, whereby this court can find that
the contract was null, and under no consideration whatever would it be just to apply
to the plaintiff articles 1859 and 1884 of the same code.
The contract ( pactum commissorium) referred to in Law 41, title 5, and law 12, title
12, of the fifth Partida, and perhaps included in the prohibition and declaration of
nullity expressed in articles 1859 and 1884 of the Civil Code, indicates the existence
of the contracts of mortgage or of pledge or that of antichresis, none of which have
coincided in the loan indicated herein.
2. Whether the contract agreed upon by the parties is binding?

YES. The Code provides that "contracts shall be binding, whatever may be the form
in which they may have been executed, provided the essential conditions required
for their validity exist."
If the promise of sale is not vitiated because, according to the agreement between
the parties thereto, the price of the same is to be the amount loaned and not
repaid, neither would the loan be null or illegal, for the reason that the added
agreement provides that in the event of failure of payment the sale of property as
agreed will take effect, the consideration being the amount loaned and not paid.
PRUDENTIAL BANK v. PANIS
- Fernando Magcale secured a loan in the sum of P70,000.00 from Prudential
Bank
- To secure payment of the loan the spouses executed a real estate mortgage in
favor of Prudential Bank.
- The real estate mortgage, dated November 19, 1971, covered a 1) residential
building with warehouse (note: the land where the building is situated does not
belong to Fernando Magcale, as it still belongs to the government, during the
execution of the real estate mortgage), and a 2) first class residential land
- The deed of real estate mortgage contained a rider at the bottom of the reverse
side of the document which reads as follows:
AND IT IS FURTHER AGREED that in the event the Sales Patent on the lot
applied for by the Mortgagors as herein stated is released or issued by the
Bureau of Lands, the Mortgagors hereby authorize the Register of Deeds to
hold the Registration of same until this Mortgage is cancelled, or to annotate
this encumbrance on the Title upon authority from the Secretary of Agriculture
and Natural Resources, which title with annotation, shall be released in favor
of the herein Mortgage.

- On April 24, 1973, the secretary of agriculture then issued a sales patent over the
parcel of land, and an original certificate of title was issued in the name of Fernando
Magcale
- On May 2, 1973, Fernando Magcale secured a second loan from Prudential
Bank in the sum of P20,000. To secure payment of the additional loan,
Fernando executed in favor of Prudential another deed of Real Estate
Mortgage over the same properties
- Magcale failed to pay his obligation and the real estate mortgage were extra
judicially foreclosed
- Later, Judge Panis declared the deed of real estate mortgage null and void
1. Whether or not a valid real estate mortgage can be constituted on the building
erected on the land belonging to another.
YES. A mortgage of land necessarily includes, in the absence of stipulation of the
improvements thereon, buildings, still a building by itself may be mortgaged apart
from the land on which it has been built. Such a mortgage would be still a real
estate mortgage for the building would still be considered immovable property even
if dealt with separately and apart from the land. In the same manner, this Court has

also established that possessory rights over said properties before title is vested on
the grantee, may be validly transferred or conveyed as in a deed of mortgage
It is therefore without question that the original mortgage was executed before the
issuance of the final patent and before the government was divested of its title to
the land, an event which takes effect only on the issuance of the sales patent and
its subsequent registration in the Office of the Register of Deeds Under the
foregoing considerations, it is evident that the mortgage executed by private
respondent on his own building which was erected on the land belonging to the
government is to all intents and purposes a valid mortgage.
2. (Optional) Whether the second real estate mortgage is valid?
NO. The mortgage executed after the issuance of the sales patent and of the
Original Certificate of Title, falls squarely under the prohibitions stated in Sections
121, 122 and 124 of the Public Land Act and Section 2 of Republic Act 730, and is
therefore null and void.