PRUDENTIAL BANK V. PANIS G.R. No.

L-50008
August 31, 1987
PRUDENTIAL BANK V. PANIS
153 SCRA 390

FACTS:
Spouses Magcale secured a loan from Prudential Bank. To secure payment, they executed a real estate
mortgage over a residential building. The mortgage included also the right to occupy the lot and the
information about the sales patent applied for by the spouses for the lot to which the building stood. After
securing the first loan, the spouses secured another from the same bank. To secure payment, another
real estate mortgage was executed over the same properties.

The Secretary of Agriculture then issued a Miscellaneous Sales Patent over the land which was later on
mortgaged to the bank.

The spouses then failed to pay for the loan and the REM was extrajudicially foreclosed and sold in public
auction despite opposition from the spouses. The respondent court held that the REM was null and void.

ISSUE:
Whether or not a valid RE mortgage can be constituted on the building erected on the belonging to
another.

HELD:
A real estate mortgage can be constituted on the building erected on the land belonging to another.

The inclusion of building distinct and separate from the land in the Civil Code can only mean that the
building itself is an immovable property.

While it is true that a mortgage of land necessarily includes in the absence of stipulation of the
improvements thereon, buildings, still a building in itself may be mortgaged by itself apart from the land on
which it is built. Such a mortgage would still be considered as a REM for the building would still be
considered as immovable property even if dealt with separately and apart from the land.

The original mortgage on the building and right to occupancy of the land was executed before the
issuance of the sales patent and before the government was divested of title to the land. Under the
foregoing, it is evident that the mortgage executed by private respondent on his own
building was a valid mortgage.

As to the second mortgage, it was done after the sales patent was issued and thus prohibits pertinent
provisions of the Public Land Act.
PRUDENTIAL BANK V. PANIS 153
SCRA 390
Jun 28
FACTS:
Spouses Magcale secured a loan from Prudential Bank. To secure payment, they executed a real estate
mortgage over a residential building. The mortgage included also the right to occupy the lot and the information
about the sales patent applied for by the spouses for the lot to which the building stood. After securing the first loan,
the spouses secured another from the same bank. To secure payment, another real estate mortgage was
executed over the same properties.

The Secretary of Agriculture then issued a Miscellaneous Sales Patent over the land which was later on mortgaged
to the bank.

The spouses then failed to pay for the loan and the REM was extrajudicially foreclosed and sold in public auction
despite opposition from the spouses. The respondent court held that the REM was null and void.

HELD:

A real estate mortgage can be constituted on the building erected on the land belonging to another.

The inclusion of building distinct and separate from the land in the Civil Code can only mean that the
building itself is an immovable property.

While it is true that a mortgage of land necessarily includes in the absence

of stipulation of the improvements thereon, buildings, still a building in itself may be mortgaged by itself apart
from the land on which it is built. Such a mortgage would still be considered as a REM for the building would still
be considered as immovable property even if dealt with separately and apart from the land.

The original mortgage on the building and right to occupancy of the

land as executed before the issuance of the sales patent and before the
government was divested of title to the land. Under the foregoing, it is
evident that the mortgage executed by private respondent on his own building was a valid mortgage.

As to the second mortgage, it was done after the sales patent was issued and thus prohibits pertinent provisions of
the Public Land Act.
PRUDENTIAL BANK v. PANIS
An Real Estate Mortgage can be constituted on the building erected on the land belonging to
another.

FACTS:
Spouses Magcale secured a loan with Prudential Bank. To further secure said loan, the spouses
executed a Real Estate Mortgage over the residential building, with a right to occupy the lot.
The Real Estate Mortgage also included information about the Sales Patent applied for by the
spouses for the lot to which the building stood. The spouses got another loan, which was secured by
another Real Estate Mortgage over the same properties.

The Sec. of Agriculture issued a Miscellaneous Sales Patent over the lot which was then mortgaged
to the bank in favor of the Macales.

The spouses defaulted on both loans. Thus, the Real Estate Mortgage was extrajudicially
foreclosed, and sold in a public auction.

The RTC held that the Real Estate Mortgage was null and void.

ISSUE:
Whether or not a Real Estate Mortgage can be constituted on the building erected on a lot
belonging to another?

HELD:
Yes.
The fact that the spouses executed the Real Estate Mortgage over the building before executing
the second Real Estate Mortgage over the land proved that the spouses intended for the building to
be an immovable separate and distinct from the land on which it is built.
 Prudential Bank v. Panis, G.R. No. 5008 (August 31, 1988) Case
Digest
Article 415 of the Civil Code: Real Property

Facts:

The spouses Magcale obtained a Php 70, 000 loan from Prudential Bank secured by a Deed of Real
Estate Mortgage over a 2-storey, semi-concrete residential building including the right of occupancy
on the land.

When the spouses Magcale executed this mortgage, the land still belonged to the government as
the Sales Patent over the lot applied for by the spouses Magcale was not yet issued.

Issue:

Whether or not a real estate mortgage over a building erected on the land belonging to another is
valid.

Held:

Yes, a real estate mortgage over a building erected on the land belonging to another is valid.

Article 415 of the Civil Code provides the inclusion of "building" separate and distinct from the land,
which can only mean that a building is by itself an immovable property.

A mortgage of land necessarily includes buildings unless otherwise stipulated. A building by itself,
however, may be mortgaged apart from the land on which it has been built. Such a mortgage would
still be a real estate mortgage for the building alone would still be considered an immovable
property.