Short answer. Yes, in most cases the bank can. Article 2129 of the Civil Code allows a creditor to claim payment of the portion of a mortgage debt secured by property even after it passes to a third person. A mortgage follows the land, not the seller — your purchase generally does not extinguish the bank's claim.
What the law says
The creditor may claim from a third person in possession of the mortgaged property, the payment of the part of the credit secured by the property which said third person possesses, in the terms and with the formalities which the law establishes.
Civil Code, Article 2129 — Claim Against a Third-Person Possessor. Read the full provision →
Why a mortgage survives a sale
A real estate mortgage is a real right — it attaches to the property itself, not just to the debtor who signed the loan. When the mortgagor (the original borrower) sells the property, the mortgage does not automatically disappear. The law under Article 2129 follows from this: the creditor retains the right to proceed against the property in whoever's hands it now rests. The third-party buyer acquires the land but also inherits the burden of the mortgage that was already registered on it.
What the bank can and cannot do
Article 2129 limits the bank's claim to the portion of the credit secured by the property you now possess. If the mortgage covered several parcels and you bought only one, the bank can claim only the part of the debt attributable to your parcel. The bank must also follow the formalities the law requires — it cannot simply take the property without proper foreclosure proceedings. Your possession does not prevent foreclosure, but it does give you the right to be notified and to participate in those proceedings.
Your right of recourse against the seller
If you bought the property without knowing it was mortgaged — especially if the seller concealed it — you may have a claim against the seller for breach of warranty against hidden encumbrances. The law obliges a seller to warrant the property against eviction and hidden defects. A registered mortgage is technically not a hidden defect if it appeared in the title, which is why due diligence before purchase is essential. Always check the certificate of title at the Register of Deeds and verify whether any annotations, liens, or encumbrances appear.
What to do now
If you bought mortgaged property without knowing, take stock of your options immediately: check the title for registered encumbrances, find out how much of the mortgage debt remains unpaid, and determine whether the seller misrepresented the property's status. You can attempt to negotiate with the bank to assume the mortgage on agreed terms, pay off the balance, or seek compensation from the seller. Acting early — before the bank commences foreclosure — gives you more choices. Get legal advice to protect your position.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Pablo P. Garcia vs. Yolanda Valdez Villar, G.R. No. 158891, June 27, 2012 — read the decision on LawPhil →
- Bienvenido C. Teoco, et al. vs. Metropolitan Bank and Trust Co, G.R. No. 162333, December 23, 2008 — read the decision on LawPhil →