Credit Transactions: Pledge, Real Estate Mortgage & Chattel Mortgage Credit Transactions: Pledge, Real Estate Mortgage

s: Pledge, Real Estate Mortgage & Chattel Mortgage

CREDIT TRANSACTIONS B SIMILARITIES between Pledge, Real Estate Mortgage & Chattel Mortgage

A
1. TRUE OR FALSE. Pledge and mortgage have common requisites.
GENERAL PRINCIPLES 2. What are the three (3) common essential requisites of pledge and mortgage? (Art.
2085, NCC) (See REO Reviewer)
1. What are Credit Transactions? a. Reason for the 2nd and 3rd requisite:
Credit transactions are contracts of security that include all transactions involving the
This is in anticipation of a foreclosure sale. Thus, the act of pledging or
purchase or loan of goods, services, or money with a promise to pay or deliver in the
mortgaging is a strict act of ownership.
future.
b. ADDITIONAL common requisite (NATURAL ELEMENT):
2. What is a Security? When the principal obligation becomes due, the subject matter of the pledge
Security ensures the enforcement of an obligation or protect some interest in or mortgage may be ALIENATED for the payment to the creditor [See B7 below]
property.
3. ILLUSTRATION: (See REO Reviewer) What is the status of the contract of pledge?
3. What are the types of contracts of security?
ANSWER: The contract of pledge is VOID since the requirement of absolute
1. Secured transactions
ownership must be complied with at the time of the perfection of the contract being
2. Unsecured transactions an essential requisite.

NOTES: 4. TRUE OR FALSE. Being an accessory contract, pledge, real estate mortgage and
chattel mortgage cannot exist without a valid contract. (See REO Reviewer)
SECURED TRANSACTIONS (AKA contracts of real security) are those
transactions supported by a collateral or an encumbrance of property 5. TRUE OR FALSE. Pledge and mortgage remain to be valid even if the principal contract
UNSECURED TRANSACTIONS (AKA contracts of personal security) are those is declared void. (See REO Reviewer)
transactions supported only by a promise to pay, or commitment of another
such as a guarantor or surety 6. TRUE OR FALSE. Properties owned by a third person, not a party to the principal
contract, may be used to secure the obligation in that contract.
a. ILLUSTRATION: (See REO Reviewer) Was the pledge/mortgage valid?
ANSWER: YES.
Third persons can pledge or mortgage their own property or other person’s
property with authority and consent of the owner of the property pledged or
mortgaged to secure the principal obligation.
If a third person secures an obligation by pledging his own movable property
under Art. 2085, NCC, he shall have the same rights as guarantor under Art.
2066 to 2070, NCC and Art. 2077 to 2081, NCC. He is not prejudiced by any
waiver of defense by the principal obligor (Art. 2120, NCC)1

b. What if the pledge or mortgage is constituted by an impostor?

GR: The pledge or mortgage is VOID.
EXCEPTION: If the Certificate of Title was already in the name of the forger
or impostor when the land was sold or mortgaged to an innocent purchaser
or mortgagee, there being nothing to excite suspicion, the vendee or
mortgagee has the right to rely on what appeared in the Certificate of Title of
the vendor or mortgagor and acquires enforceable right. [Doctrine of
Mortgagee in Good Faith]

1
Civil Code of the Philippines.

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Credit Transactions: Pledge, Real Estate Mortgage & Chattel Mortgage Credit Transactions: Pledge, Real Estate Mortgage & Chattel Mortgage
7. TRUE OR FALSE. Following the rule on autonomy of contracts, the parties’ stipulation ANSWER: NO. The debtor’s heir who has paid a part of the debt cannot ask for the
allowing the creditor to appropriate the things given by way of pledge or mortgage proportionate extinguishment of the of the pledge as long as the debt is not
or dispose of them is valid. completely satisfied. [Source: The RFBT Reviewer by Laco, Manuel and Soriano, 2020]
a. PACTUM COMMISSORIUM or PACTO COMMISSORIO 11. SUMMARY OF COMMONALITIES:
It is a stipulation whereby the things used as a security shall automatically a. Three (3) common essential requisites + One (1) common natural element
become the property of the creditor in the event of non-payment of the b. Prohibition against Pactum Commissorium or Pacto Commissorio
principal obligation in due time.
c. Kinds of obligation that can be secured
By such a stipulation, the creditor would be able to acquire ownership of the
property given as security without need of public sale or foreclosure required d. Indivisibility
by law. e. Concept of Possession of Mortgagee or Pledgee
b. GR: PACTUM COMMISSORIUM is PROHIBITED by law. Possession of a mortgagee or pledgee is NOT in the concept of an owner.
EXCEPTION: The pledgee may appropriate the thing pledged if after the f. Retention of Ownership:
first and second auctions, the thing is not sold. (Art. 2112. NCC) A promise to constitute pledge or mortgage, if accepted, gives rise ONLY to
 The creditor shall be obliged to give an acquittance for his entire a PERSONAL RIGHT binding upon the parties and creates no real right in the
claim. This act shall be considered as full payment of the claim. property. Thus, additional formal requirement should be satisfied to bind
c. The creditor does NOT AUTOMATICALLY become the owner if at the time of third persons.
payment stipulated, the obligation is still unfulfilled. The creditor CANNOT g. Accessory contract:
APPROPRIATE the things given by way of pledge or mortgage, or dispose of As an accessory contract, the invalidity of a pledge or mortgage does NOT
them. Any stipulation to the contrary is NULL and VOID. (Art. 2088, NCC) affect the principal contract of loan [principal obligation]. BUT the invalidity
i. Only the prohibited stipulation is void and shall not affect the validity of the principal obligation [VOID principal obligation] extinguishes the
of the principal obligation. pledge or mortgage.
8. TRUE OR FALSE. If a debt is divisible among the successors in interest of the debtor or
of the creditor, the pledge or mortgage becomes divisible too.
a. WHY? Partial payment shall not extinguish the contract of pledge or mortgage
partially. Complete satisfaction is required.
The indivisibility referred to is to the security given and NOT to the liability of
the debtors. While the debtors are only jointly and not solidarily bound, the
pledge or mortgage is indivisible.
b. GR: The pledge or mortgage is indivisible.
EXCEPTION: When there are several things given in pledge or mortgage,
each one of them guaranties only a determinate portion.

9. ILLUSTATION: (See REO Reviewer)

a. Can A demand the release of either the diamond ring or gold watch?
ANSWER: NO. The debtor’s heir who has paid a part of the debt cannot ask
for the proportionate extinguishment of the of the pledge as long as the debt
is not completely satisfied. (Art. 2089, NCC)

b. Or can X allow the release of either object?

ANSWER: NO. The creditor’s heir who received his share of the debt cannot
allow the return/release of any of the thing pledged or partially cancel the
contract of pledge to the prejudice of the other heirs who have not been paid.
(Art. 2089, NCC)

10. ILLUSTATION: (See REO Reviewer) In case of payment of P50,000, can D demand the
release of either the diamond ring or gold watch?

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Credit Transactions: Pledge, Real Estate Mortgage & Chattel Mortgage Credit Transactions: Pledge, Real Estate Mortgage & Chattel Mortgage

C Pledge

1. What are the essential requisites of pledge? (Art. 2085, NCC) (See REO Reviewer)
5. Obligations/Rights of the parties:
a. PLEDGOR:
i. Right to deal with the thing pledged (alienation/sale)
a. That they be constituted to secure the fulfillment of a principal obligation;
With the CONSENT of the PLEDGEE, the thing pledged may be
b. That the pledgor or mortgagor be absolute owner of the thing pledged or
alienated by the pledgor/owner. The ownership of the thing pledged
mortgaged;
is transmitted to the buyer as soon as the pledgee consents BUT
c. That the persons constituting the pledge or mortgage have the free disposal possession remains with the pledgee.
of their property, and in the absence thereof, that they be legally authorized
ii. NO right to SECOND PLEDGE, RE-PLEDGE
for the purpose;
WHY? Delivery cannot be complied with in the second or subsequent
d. Delivery of the thing pledged to the creditor or third person by common
contracts of pledge since the pledgee is in possession of the thing.
agreement [Additional requirement to the common requisites of pledge and
mortgage, specific to pledge only] iii. Right in case of danger of loss or impairment of the thing pledged:
1. If due to PLEDGEE’s FAULT (negligence/willful act):
ADDITIONAL NATURAL ELEMENT:
a. Pledgor may require that the thing be deposited with
When the principal obligation becomes due, the subject matter of the pledge a third person
or mortgage may be ALIENATED for the payment to the creditor [See B7
above] 2. If danger is NOT due to PLEDGEE’s FAULT:
a. Pledgor may DEMAND RETURN of the thing pledged,
Additional requirement as to form for the SOLE purpose of affecting third persons upon offering another thing of the same kind of the
[NOT part of the ESSENTIAL requisites]: thing originally pledged.
e. The description of the thing pledged and the date of the pledge must appear b. Pledgee may cause the thing pledged to be sold at
in a public instrument public auction

2. CHARACTERISTICS: [ADDITIONAL] There is a CORRESPONDING OBLIGATION on the part of the

PLEDGEE to ADVISE/NOTIFY the pledgor without delay about any
e. Nominate – it has a name given to it by law and there are specific rules that danger to the thing pledged.
govern the same
If pledgee chose to sell the thing at public auction, the proceeds of
f. Indivisible – the contract cannot be partially extinguished as long as the the sale shall be the representative security for the principal
principal obligation has not yet been completely fulfilled obligation.

3. EXTENT of Pledge: iv. Right to BID and be PREFERRED at the public auction

a. ILLUSTRATION: (See REO Reviewer) What are the rights of C as to such v. Obligation to advise the pledgee of the flaws of the thing
dividends, if any?
ANSWER: The creditor may apply the dividends to those which are owing b. PLEDGEE:
him (i.e., interest, if any). If there is an excess OR there is no amount due, the
i. Obligation to RETURN the thing upon payment of debt
dividends shall be applied to the principal obligation.
ii. Obligation to PRESERVE/take care of the thing [if the thing pledged
4. FORM: is delivered to the pledgee and not to a third person]
a. GR: No form required. iii. Right to deposit the thing pledged with a third person ONLY IF
GRANTED BY STIPULATION
b. EXCEPTIONS:
1. If GRANTED, the pledgee is liable for the loss if he
i. PUBLIC INSTRUMENT to affect third persons (See REO Reviewer)
deposited the thing with a third person who is
WHY? The purpose of the law is to impose the existence, not only of MANIFESTLY CARELESS/UNFIT.
an efficacious and authentic means of proof of the constitution of a
iv. Right of RETENTION/POSSESSION
pledge, but also of a security of its certainty and the reality of the
pledge in order to avoid frauds and damages to the creditors, arising v. Right to use the thing pledged ONLY WITH AUTHORITY of the owner
from the bad faith of the debtor. OR if required FOR PRESERVATION
ii. If the value of the thing pledged EXCEEDS Five Hundred Pesos
(P500), the contract must be IN WRITING. (Art. 1358, last par., NCC)

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Credit Transactions: Pledge, Real Estate Mortgage & Chattel Mortgage Credit Transactions: Pledge, Real Estate Mortgage & Chattel Mortgage
vi. If the creditor-pledgee is deceived on the substance or quality of the 11. LEGAL PLEDGE
thing pledged, the creditor-pledgee may EITHER: a. Right of retention by a possession in good faith in connection with the
1. Claim another thing in its stead/replacement; OR necessary and useful expenses incurred by him (546, NCC)
2. Demand immediate payment of the principal obligation b. In contract for a piece of work, he who has executed work upon a movable
vii. Right at the PUBLIC AUCTION SALE: has a right to retain it by way of pledge until he is paid

1. Right to sell at public auction in case of non-payment of EXAMPLE: Yung sapatos na pinagawa mo sa sapatero
debt at maturity Yung gown na pinatahi mo sa modista/sastre
2. Right to choose which of the things pledged will be sold c. In agency, the agent may retain in pledge the things which are the subject of
at the public auction, in two or more things are pledged the agency until the principal effects reimbursement and pays the indemnity
3. Right to BID at the public auction, UNLESS he is the ONLY mentioned in Arts. 1912 and 1913, NCC
bidder d. In deposit, the depositary may retain the thing pledge until the full payment
4. Right to APPROPRIATE the thing in case of failure of the of what may be due him by reason of the deposit
SECOND PUBLIC AUCTION EXAMPLE: Conventional pledge but possession was agreed to be given to a
5. Right to the excess proceeds received in the public sale, third person, tapos kotse ung nakapledge na kailangang gamitin for
UNLESS it is otherwise agreed maintenance/preservation, the expenses includes gas na magagamit para
from time to time ay gamitin ung car.
6. TERMINATION OF PLEDGE: e. The usufructuary may retain the property until he is reimbursed for the
a. In general, the EXTINGUISHMENT of the PRINCIPAL obligation amount paid for taxes levied on the capital (Art. 597, NCC) and for
extraordinary repairs (Art. 594, NCC)
b. Payment by a THIRD PERSON who has any right in or to the thing pledged
c. Return of the thing pledged (See REO Reviewer)
d. Renunciation or Abandonment of pledge (See REO Reviewer)
e. In case of DEFAULT in payment, the sale of the thing pledged

7. FORECLOSURE SALE:
a. Under the NCC, the foreclosure of PLEDGE occurs EXTRAJUDICIALLY,
without intervention by the courts.
b. There is NO REDEMPTION in pledge.

8. ILLUSTATION: (See REO Reviewer) If the proceeds of the foreclosure sale is P120,000,
what are the rights of C or D?
ANSWER: As a general rule, C will be entitled to all the proceeds of the sale, except
if there is a stipulation that the debtor-pledgor will be entitled to the excess.

9. ILLUSTATION: (See REO Reviewer) If the proceeds of the foreclosure sale is P80,000,
what are the rights of C or D?
ANSWER: C is not entitled to the deficiency regardless of stipulation.

10. ILLUSTATION: (See REO Reviewer) On September 30, 2020, the promissory note
becoming due, what are the rights of C or D as to such note?
ANSWER: C will be allowed to collect the amount of the promissory note and apply
the P10,000 to the obligation of D and return the excess to D.

NOTE: Here, there was no foreclosure. This is different from foreclosure sale
where the creditor-pledgor is entitled to the excess as a general rule.

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Credit Transactions: Pledge, Real Estate Mortgage & Chattel Mortgage Credit Transactions: Pledge, Real Estate Mortgage & Chattel Mortgage

D Real Estate Mortgage (REM)

1. DEFINITION:
Additional requirement as to form for the SOLE purpose of affecting third persons
[NOT part of the ESSENTIAL requisites]:
The REM must appear in a public instrument and recorded in the Registry of
This is a contract whereby the debtor secures to the creditor the fulfillment of a Property.
principal obligation, specially subjecting to such security immovable property or real 6. FORM:
rights over immovable property in case the principal obligation is not complied with a. TRUE OR FALSE. Considering that real estate mortgage involved real
at the time stipulated. property, the contract must be in a public instrument and recorded in the
2. CHARACTERISTICS: Registry of Property for it to be valid.

a. TRUE OR FALSE. In mortgage, delivery is required for the perfection of the b. AS BETWEEN THE PARTIES:
contract. i. NO FORM is required.
b. TRUE OR FALSE. A real estate mortgage is an inseparable contract such that ii. The execution of a public instrument is merely for the convenience of
it subjects the property upon which it is imposed, whoever the possessor may the parties.
be, to the fulfillment of the obligation for whose security it was constituted.
c. TO BIND THIRD PERSONS:
c. Characteristics of a Contract of REM: i. The REM must appear in a public instrument and recorded in the
i. Consensual v. Unilateral Registry of Property.
ii. Nominate vi. Indivisible
iii. Accessory vii. Inseparable 7. DISTINCTIONS:
iv. Subsidiary a. REM vs PLEDGE
3. There are three types of real estate mortgage: REM PLEDGE
a. Conventional REM or Voluntary REM Subject
b. Legal REM Constituted on immovables Constituted on movables
Matter
c. Equitable mortgage Property is delivered to
Conventional REM are those REM agreed to between the parties or imposed Delivery Delivery is NOT necessary pledgee or by common
at the will of the owner of the property over which they are constituted consent, to a third person
Legal REM are those which the law requires to be constituted or executed in Not valid against third
favor of certain persons [Example, Art. 2242, NCC] Not valid against third persons without
Equitable mortgage are those which lacks one or some of those formalities Validity persons without knowledge, unless a
or other requisites prescribed by law but show the intention of the parties to against third knowledge, unless description of the thing
charge real property or real rights as security for the payment of debt and persons registered with the pledged and the date of
contains nothing which is impossible or contrary to law Registry of Property/Deeds pledge appear in a public
instrument
4. POSSESSION: Mortgagor can sell the
a. GR: The mortgagor retains possession of the property mortgaged Pledgor can sell the thing
Authority to property mortgaged even
pledged ONLY with the
WHY? The debtor merely subjects the property to a lien or burden but Sell without the consent of the
CONSENT of the pledgee
ownership thereof is not parted with. mortgagee
b. EXCEPTION: There is a stipulation to the contrary
b. REM vs. PACTO DE RETRO
5. What are the essential requisites of REM? (Art. 2085, NCC)
a. That they be constituted to secure the fulfillment of a principal obligation; REM PACTO DE RETRO SALE
b. That the pledgor or mortgagor be absolute owner of the thing pledged or Nature of the
Made as a security Not a contract of security
mortgaged; contract
c. That the persons constituting the pledge or mortgage have the free disposal Divisibility Indivisible Redemption can be partial
of their property, and in the absence thereof, that they be legally authorized Subject Applies only to real Applies to real and
for the purpose; matter property personal property
d. It can cover only immovable property and alienable real rights imposed upon There is transfer of
Transfer of There is NO transfer of
immovable. ownership PROVIDED
ownership ownership
ADDITIONAL NATURAL ELEMENT: there is already delivery
Transfer of Generally, there is no Generally, there is transfer
When the principal obligation becomes due, the subject matter of the
Possession transfer of possession of possession
mortgage may be ALIENATED for the payment to the creditor [See B7 above]

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Credit Transactions: Pledge, Real Estate Mortgage & Chattel Mortgage Credit Transactions: Pledge, Real Estate Mortgage & Chattel Mortgage
8. DOCTRINE OF MORTGAGEE IN GOOD FAITH 3. The mortgagor has every right to sell his mortgaged property
a. DOCTRINE: A mortgagee has a right to rely in good faith on the Certificate which the mortgagee cannot oppose. HOWEVER, if the
of Title of the mortgagor of the property given as security, and in the absence mortgaged is not registered, the mortgagee can cause its
of any sign that might arouse suspicion, the mortgagee has no obligation to registration/annotation to protect his right.
undertake further investigation. 4. In case of alienation, the transferee is bound to respect the
encumbrance because being a real right, the property
b. BASIS: Mirror Doctrine
remains subject to the fulfillment of the obligation for whose
i. MIRROR DOCTRINE provided the rule that all persons dealing with guaranty it was constituted.
the property covered by a Torrens Certificate of Title as buyers or
ii. Stipulation Requiring Mortgagee’s Consent Before Alienation
mortgagees are not required to go beyond what appears on the face
of the title. 1. STATUS: VOID

ii. This doctrine presupposes, however, that the mortgagor, who is not 2. What cannot be done directly, cannot be done indirectly.
the rightful owner of the property, has already succeeded in Thus, if Pactum De Non Alienando is void, the mortgagee
obtaining a Torrens Title over the property in his name and cannot be allowed to have the right to withhold consent
succeeded in mortgaging the property to another. thereby preventing any sale of the property mortgaged.
iii. Grant of First Refusal to Mortgagee
c. When is the Doctrine of Mortgagee in Good Faith not applicable?
i. If there is an incident which give rise to suspicion and should have 1. STATUS: VALID
made him to investigate 2. The mortgagor has the obligation under the right of first
ii. Banks by nature of their functions to exercise the highest degree of refusal provision to notify the mortgagee of his intention to
diligence (utmost/extraordinary diligence) sell the property and give him priority over other buyers.

9. EXTENT OF REM: b. Possession of Mortgagee

a. REM covered: i. STATUS: VALID
i. Property mortgaged ii. If not stipulated, possession remains with the mortgagor-owner or his
ii. Natural Accessions, Improvements, Growing fruits, Rents or income authorized representative.
not yet received when the obligation becomes due; and iii. WHY? Since mortgage is MERELY A LIEN and title to the property
iii. Amount of indemnity granted or owing to the proprietor from: does not pass to the mortgagee.
1. The insurers of the property managed c. Second/Subsequent Mortgage
2. Expropriation for public use i. STATUS: VALID, WON with the consent of the mortgagee
b. PROBLEM: A debt secured with mortgage upon real property of the debtor ii. EFFECTS:
fell due on a certain date and was not paid. 1. Subjects the same property to the payment of two (2) or more
i. Q: Do you think that fruits harvested from the mortgaged land on the obligations
date of maturity are subjected to the mortgage, no mention thereof 2. All mortgagees have the right to foreclose BUT subsequent
having been made in the contract? mortgages are inferior and subordinate to the first mortgage
ANSWER: Fruits harvested from the mortgaged land on the date 3. Prior foreclosure by the second/subsequent mortgagees
of maturity are not covered by the contract of mortgage since the could not affect the first mortgagee’s right
fruits pertains to the mortgagor as owner of the land. 4. If the first mortgagee foreclosed the property, the second or
ii. Q: How about pending fruits? subsequent mortgagees has the right to redeem
ANSWER: Pending fruits or those which are not yet harvested d. Including after-acquired properties
when the obligation becomes due are covered by the contract of i. STATUS: VALID
real estate mortgage. ii. AFTER-ACQUIRED PROPERTIES refer to improvements or accessions
to a property that is already mortgaged.
10. STIPULATIONS [SO, GENERAL RULE, DI NAKASAAD SA REM CONTRACT] iii. PURPOSE: To maintain, to the extent allowed by the circumstances,
a. Alienation (Art. 2130, NCC) the original values of the property given as security
i. Pactum De Non Alienando iv. Such stipulation is common where the properties given as collateral
1. Forbidding Alienation of Mortgaged Property are perishable or subject to inevitable wear and tear

2. STATUS: VOID

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Credit Transactions: Pledge, Real Estate Mortgage & Chattel Mortgage Credit Transactions: Pledge, Real Estate Mortgage & Chattel Mortgage
e. Blanket or Dragnet Clause b. RIGHT OF REDEMPTION
i. STATUS: VALID i. DEFINITION: This is the right of the mortgagor to redeem the
ii. It is specifically phrased to subsume all debts of past or future origins. property in an EXTRAJUDICIAL foreclosure of real mortgage
Mortgages of this character enable the parties to provide continuous ii. Applies only to EXTRAJUDICIAL FORECLOSURE
dealings, the nature or extent of which may not be known or
iii. PERIODS:
anticipated at the time, and they avoid the expense and
inconvenience of executing a new security on each new transaction. 1. NATURAL PERSON: Within One (1) Year from the date of
[Source: De Leon] registration of the certificate of sale with the Register of
Property
f. Acceleration Clause
i. STATUS: VALID 2. JURIDICAL PERSON: Same rules as with natural persons

ii. A stipulation stating that on the occasion of the mortgagor’s default, 3. JURIDICAL PERSON (Mortgagor) AND Bank (Mortgagee)
the whole sum remaining unpaid automatically becomes due and Until, but not after the registration of the certificate of
payable. foreclosure sale with the Register of Property or Within Three
(3) Months after foreclosure sale, whichever is EARLIER
g. Stipulation of Upset Price or TIPO
[General Banking Law]
i. STATUS: VOID
ii. An Upset Price or TIPO is the MINIMUM price at which the property 15. ILLUSTATION: (See REO Reviewer) What will be the applicable period of
shall be sold at a public auction. redemption?
iii. It is a stipulation in a mortgage of real property providing from an ANSWER: Within One (1) Year from the date of registration of the certificate of sale
Upset Price or Tipo, to become operative in the event of a foreclosure with the Register of Property
sale at public auction. It must be noted that in this case, the bank is the MORTGAGOR, not the MORTGAGEE.
iv. WHY? The property must be sold and awarded to the HIGHEST Thus, the general period of 1 year applies.
BIDDER, regardless of the minimum price bid at the auction.
11. ILLUSTATION: (See REO Reviewer) Can D dispose the property during the pendency
of the real estate mortgage?
ANSWER: YES. D can validly dispose or transfer the lot to third persons. Any
stipulation prohibiting him shall be void.
12. ILLUSTATION: (See REO Reviewer) If D sells the property to X, is X bound by the
mortgage?
ANSWER: IT DEPENDS.
If the REM Deed is registered in the Registry of Property, X shall be bound by such
registered mortgage. OTHERWISE, X shall not be bound by the mortgage.
13. ILLUSTATION: (See REO Reviewer) If the Deed is registered, and the property is sold
in a foreclosure, is X liable for the deficiency, if any?
ANSWER: NO. While the REM affect third persons, X cannot be liable on the
deficiency, nor be entitled to the excess.
14. REDEMPTION
a. EQUITY OF REDEMPTION
i. DEFINITION: This is the right of the mortgagor in case of JUDICIAL
foreclosure to redeem the mortgaged property after his default in the
performance of the conditions of the REM but before the confirmation
of sale.
ii. Applies only to JUDICIAL FORECLOSURE
iii. PERIOD to exercise: Within 90 to 120 days from the date of service of
the order of foreclosure OR even thereafter BUT BEFORE the order of
confirmation of the sale.

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