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Petitioner Vitug mortgaged property he owned to Respondent Abuda to secure a loan. However, Vitug's title had restrictions from the National Housing Authority as part of a conditional contract to sell. Vitug argued this meant he lacked free disposal of the property, invalidating the mortgage. The Court ruled that the restrictions were merely limitations on Vitug's ownership rights, not a divestment, so he could still encumber the property. The mortgage contract was valid as it contained all necessary elements and the restrictions at most made it voidable by the NHA, not by Vitug. The Court upheld the validity of the mortgage.
Petitioner Vitug mortgaged property he owned to Respondent Abuda to secure a loan. However, Vitug's title had restrictions from the National Housing Authority as part of a conditional contract to sell. Vitug argued this meant he lacked free disposal of the property, invalidating the mortgage. The Court ruled that the restrictions were merely limitations on Vitug's ownership rights, not a divestment, so he could still encumber the property. The mortgage contract was valid as it contained all necessary elements and the restrictions at most made it voidable by the NHA, not by Vitug. The Court upheld the validity of the mortgage.
Petitioner Vitug mortgaged property he owned to Respondent Abuda to secure a loan. However, Vitug's title had restrictions from the National Housing Authority as part of a conditional contract to sell. Vitug argued this meant he lacked free disposal of the property, invalidating the mortgage. The Court ruled that the restrictions were merely limitations on Vitug's ownership rights, not a divestment, so he could still encumber the property. The mortgage contract was valid as it contained all necessary elements and the restrictions at most made it voidable by the NHA, not by Vitug. The Court upheld the validity of the mortgage.
GR No. 201264, January 11, 2016 property must be used to secure the fulfillment of an obligation.
ecure the fulfillment of an obligation. Article 2085 of the Civil
Florante Vitug (Petitioner) v Evangeline Abuda (Respondent) Code provides: Second Division Ponente: Leonen, J. Art. 2085. The following requisites are essential to contracts of pledge and mortgage: Nature of Action: An action for the nullification and cancellation of mortgage. (1) That they be constituted to secure the fulfillment of a principal obligation; FACTS: (2) That the pledgor or mortgagor be the absolute owner of the thing pledged or mortgaged; Abuda loaned P250,000.00 to Vitug and his wife, Narcisa Vitug. As security for the (3) That the persons constituting the pledge or mortgage have the free disposal of loan, Vitug mortgaged to Abuda his property. The property was then subject of a conditional their property, and in the absence thereof, that they be legally authorized for the Contract to Sell between the National Housing Authority and Vitug. That, upon purpose. consummation and completion of the sale by the NHA of said property, the title-award thereof, shall be received by the Mortgagee by virtue of a Special Power of Attorney, executed Petitioner's undisputed title to and ownership of the property is sufficient to give him by Mortgagor in her favor. The parties executed a "restructured" mortgage contract on the free disposal of it. As owner of the property, he has the right to enjoy all attributes of property to secure the amount of P600,000.00 representing the original P250,000.00 loan, ownership including jus disponendi or the right to encumber, alienate, or dispose additional loans, and subsequent credit accommodations given by Abuda to Vitug with an his property "without other limitations than those established by law." Petitioner's claim that interest of five (5) percent per month. By then, the property was covered by Transfer he lacks free disposal of the property stems from the existence of the restrictions imposed on Certificate of Title under Vitug's name. Spouses Vitug failed to pay their loans despite Abuda's his title by the National Housing Authority. These restrictions do not divest petitioner of his demands. ownership rights. They are mere burdens or limitations on petitioner's jus disponendi. Thus, petitioner may dispose or encumber his property. However, the disposition or encumbrance of Abuda filed a Complaint for Foreclosure of Property before the Regional Trial Court his property is subject to the limitations and to the rights that may accrue to the National of Manila. On December 19, 2008, the Regional Trial Court promulgated a Decision in favor Housing Authority. When annotated to the title, these restrictions serve as notice to the whole of Abuda. On appeal, the RTC ruled in favor of Abuda and ordered Vitug to pay the principal world that the National Housing Authority has claims over the property, which it may enforce sum with interest and upon default of the defendant to fully pay the aforesaid sums, the against others. Contracts entered into in violation of restrictions on a property owner's subject mortgaged property shall be sold at public auction to pay off the mortgage debt. The rights do not always have the effect of making them void ab initio. Contracts that contain judgement was affirmed with the modification as to the payment of interest. Petitioner argues provisions in favor of one party may be void ab initio or voidable. Contracts that lack that not all the requisites of a valid mortgage are present. He contends that a mortgagor must consideration, those that are against public order or public policy, and those that are have free disposal of the mortgaged property. That the existence of a restriction clause in his attended by illegality or immorality are void ab initio. title means that he does not have free disposal of his property. Contracts that only subject a property owner's property rights to conditions or ISSUE: limitations but otherwise contain all the elements of a valid contract are merely voidable Whether the restriction clause in petitioner's title rendered invalid the real estate by the person in whose favor the conditions or limitations are made. The mortgage mortgage he and respondent Evangeline Abuda executed. contract entered into by petitioner and respondent contains all the elements of a valid contract of mortgage. The trial court and the Court of Appeals found no irregularity in its execution. RULING: There was no showing that it was attended by fraud, illegality, immorality, force or No. Petitioner may dispose or encumber his property. The restrictions are mere intimidation, and lack of consideration. At most, therefore, the restrictions made the contract burden or limitations on petitioners jus disponendi. entered into by the parties voidable by the person in whose favor they were madein this case, by the National Housing Authority. Petitioner has no actionable right or cause of action All the elements of a valid mortgage contract were present. For a mortgage contract based on those restrictions. to be valid, the absolute owner of a property must have free disposal of the property. That