In the described mortgage scenario where a land worth P5M secures a P6M debt and is later sold to a third party, which statements are true?

• A. I only
• B. II only
• C. Neither
• D. Both

Answer: (D)

When a land is mortgaged to secure a debt and the property is later sold to a third party, the security interest stays attached to the land unless the lender releases it or the debt is fully paid. A buyer who purchases encumbered land generally takes title subject to the existing mortgage, meaning the lien remains and the purchaser does not automatically assume the loan unless there is an explicit loan assumption or release. Here the land is worth 5M but secures a 6M debt, so there would be a deficiency of 1M if the property were sold for 5M or foreclosed. The lender’s security remains intact, and the borrower still bears primary liability for the deficiency, while the third-party buyer is not automatically liable for the full debt unless they agree to assume it. Given these points, both statements are true: the mortgage continues to secure the debt, and the third party purchases the land subject to the mortgage.