GR 138053; (May, 2000) (Digest)
G.R. No. 138053 May 31, 2000
CORNELIO M. ISAGUIRRE, petitioner, vs. FELICITAS DE LARA, respondent.
FACTS
The property dispute originated from a 1960 “Deed of Sale and Special Cession of Rights and Interests” executed by respondent Felicitas de Lara in favor of petitioner Cornelio Isaguirre over a 250-square-meter portion of a lot. In a prior case (G.R. No. 120832), the Supreme Court affirmed the Court of Appeals’ ruling that this transaction was an equitable mortgage, not a sale, due to grossly inadequate consideration and payment patterns. Consequently, Isaguirre’s title (OCT No. P-11566) was declared null and void. After this final judgment, de Lara moved for a writ of possession, which the trial court granted. Isaguirre opposed, claiming a right to retain possession until reimbursement of the loan amount secured by the mortgage and the value of improvements he introduced on the property.
ISSUE
The primary issue is whether a mortgagee in an equitable mortgage is entitled to retain physical possession of the mortgaged property pending payment of the secured loan by the mortgagor.
RULING
The Supreme Court denied the petition and affirmed the Court of Appeals. A mortgagee, whether under a formal or an equitable mortgage, is not entitled to retain possession of the mortgaged property. The essence of a real estate mortgage is that it is merely an accessory security for a loan; it does not confer ownership or a right to possess the property upon the mortgagee. The mortgagor remains the owner with full rights of possession and enjoyment. The mortgagee’s security is the lien created on the property, which can be annotated on the title to protect against third parties. The proper remedy for the mortgagee to recover the loan is to institute foreclosure proceedings, not to withhold possession. The Court clarified that the prior declaration of the contract as an equitable mortgage gave it effect as if it had complied with all formal requisites, thus the lien was deemed constituted. Regarding improvements, the Court found Isaguirre could not be considered a builder in good faith, as he was aware of the defect in his title from the outset. His claim for reimbursement for useful expenses must be pursued in a separate appropriate action, not as a ground to resist the writ of possession rightfully issued to the registered owner.