JOSE McMICKING, sheriff of Manila, Plaintiff-Appellee, v.

PEDRO MARTINEZ and

GO JUNA, Defendants. — GO JUNA, Appellant.

M. Legazpi Florendo, for Appellant.

Eugenio de Lara, for defendant Pedro Martinez.

SYLLABUS

DECISION

MORELAND, J. :

The defendant, Pedro Martinez, some time during the year 1908 obtained judgment in
the Court of First Instance of the city of Manila against one Maria Aniversario; that
thereafter execution was issued upon said judgment and the sheriff levied upon a
pailebot, Tomasa, alleged to be the property of said Maria Aniversario; that thereupon
the said defendant Go Juna intervened and claimed a lien upon said boat by virtue of a
pledge of the same to him by the said Maria Aniversario made on the 27th day of
February, 1907, which said pledge was evidenced by a public instrument bearing that
date.

This action was brought by the sheriff against go Juna and Pedro Martinez to determine
the rights of the parties to the funds in his hands. Maria Aniversario was not made a
party.

The said Pedro Martinez alleged as a defense that the pledge which said document was
intended to constitute had not been made effective by delivery of the property pledged,
as required by article 1863 of the Civil Code, and that, therefore, there existed no
preference in favor of said Go Juna.

The court below found with the contention of the said Pedro Martinez, declared a
preference in his favor, and ordered the sheriff to pay over the said funds in consonance
therewith. An appeal was taken from said judgment.

The conclusion of the court below that the property was not delivered in accordance
with the provisions of article 1863 of the Civil Code is sustained by the proofs. His
conclusion that the pledge was ineffective against Martinez is correct. It appears,
however, that the document of pledge is a public document which contains an
admission of indebtedness. In other words, while it is intended to be a pledge, it is also
a credit which appears in a public document. Article 1924, paragraph 3, letter a, is
therefore applicable; and, said public document antedating the judgment of defendant
Martinez, takes preference thereover. The validity of that document in so far as it shows
1
an indebtedness against Maria Aniversario and its effectiveness against her have not,
however, been determined. She is not a party to this action. No judgment can be
rendered affecting her rights or liabilities under said instrument. If said instrument is
invalid or for any other cause unenforceable against her, it would be wholly unjust, by
declaring its preference over a debt acknowledged by and conclusive against her, to
require that said funds be paid over to the holder of said document. That would be to
require her to pay a debt which has not only been shown to be enforceable against her
but which, as a witness for the defendant Martinez on the trial of this cause, she
expressly and vehemently repudiated as a valid claim against her.

The judgment is, therefore, reversed; and it is ordered that the cause be returned to the
court below; that the plaintiff bring in Maria Aniversario as a party to this action, and that
she be given an opportunity to make her defense, if she have any, to the document in
question under proper procedure. No finding as to costs. So ordered.

Arellano, C.J., Torres, Mapa, Johnson and Carson, JJ., concur.

PNB VS ROCHA
55 Phil. 497

AVANCEÃ'A, C.J.:
The plaintiff has brought this action to foreclose a mortgage against the defendant
Pablo Rocha. Magin Riosa and Consolacion Riosa intervened as third-party claimants.
The lower court sentenced the defendant to pay the plaintiff the sum due, and in default
thereof, the mortgaged property described in the first cause of action should be sold at
public auction and the proceeds applied to the amount of the judgment; provided, that
said mortgaged property shall be subject to the reserved right of Magin Riosa and
Consolacion Riosa, and any person who may acquire said property shall do so subject
to this lien. Both the plaintiff and the intervenors Magin Riosa and Consolacion Riosa
appealed from this judgment.
The present case is related to that of Riosa vs. Rocha, decided by this court on
February 18, 1926 (48 Phil., 737).
Maria Corral was married only once, and her husband was the late Mariano Riosa, by
whom she had three children, named Santiago, Jose, and Severina. The last named
died during infancy, while the other two survived their father Mariano Riosa. .Santiago
Riosa, now deceased, married Francisca Villanueva, who bore him two children, named
Magin Riosa and Consolacion Riosa. Jose Riosa, also deceased, married Marcelina
Casas, who bore him a son who died before him without leaving any heir.
The lands mortgaged to the plaintiff originally belonged to Mariano Riosa and upon his
death, they were inherited by will by his son Jose Riosa. When the latter died, his
mother, Maria Corral, inherited the lands, and the court adjudicated them to her by the
resolution of November 12, 1920, in the probate proceedings of Jose Riosa's will.
2
In the case of Riosa vs. Rocha mentioned above, this court held that the lands in
question having been inherited by Maria Corral from her son Jose Riosa, who had
received them gratuitously from his father Mariano Riosa, were reservable in favor of
Magin Riosa and Consolacion Riosa, being the relatives within the third degree
belonging to the line from which such property came.
On the 26th of October, 1920, Maria Corral sold that property to Marcelina Casas, who,
on November 3d, of the same year, transferred it to Pablo Rocha. Therefore, when
Maria Corral sold this property to Marcelina Casas, and when the latter transferred it to
Pablo Rocha, it had not yet been adjudicated to Maria Corral and she was not yet the
owner thereof.
On November 6, 1920, the defendant Pablo Rocha mortgaged this property to the
plaintiff, and the mortgage was registered, under Act No. 2837, on the 10th of the same
month and this mortgage constitutes the cause of the present action. According to this,
the mortgage of said property was executed by Pablo Rocha in favor of the plaintiff
before the property passed to the ownership of Maria Corral, and when the latter had no
right as yet to dispose of it to Marcelina Casas, nor the latter to transfer it to Pablo
Rocha. Wherefore, the mortgage of the property to the bank was executed by one who
was not the owner thereof at the time, and the mortgage is, for that reason, without legal
existence.
It is true that Maria Corral having afterwards acquired the property, her sale thereof to
Marcelina Casas, and the latter's transfer to Pablo Rocha, as well as the mortgage
executed by Rocha in favor of the plaintiff, were all ratified; nevertheless, this should be
understood, in connection With the extent and condition in which the acquisition was
effected. Since Maria Corral acquired the property subject to the reservation in favor of
Magin Riosa and Consolacion Riosa, said property passed first to Marcelina Casas and
later to Pablo Rocha, as reservable property, and, consequently, the mortgage thereof
to the bank must also be subject to the same reservation. In this sense we find the
judgment appealed from to be correct, in so far as it is ordered that should Pablo Rocha
be unable to pay his debt to the plaintiff, this property was to be sold subject to this
reservation.
But since Maria Corral has died, the property has, in consequence of this reservation,
passed to the full and absolute ownership of Magin Riosa and Consolacion Riosa, and
can no longer be sold to satisfy the judgment rendered against Pablo Rocha in favor of
the plaintiff.
We find no merit in the plaintiff's contention that Consolation Riosa is under estoppel in
this case, on account of having opposed, as defendant, in the case of Riosa vs. Rocha,
the holding that this property was subject to reservation ; for, if it is true that such an
answer was indeed filed in that case, Consolacion Riosa denied that she had authorized
it, and her statement has not been contradicted. Furthermore, while she was included
as defendant in that case, it was precisely for the purpose of having the holding of
reservation extend to her in the proper proportion.
Neither do we find any merit in the contention that said Consolacion Riosa shared in
P7,000 of the P20,000 received by Pablo Rocha from the plaintiff, for we find that while

3
she received this amount, she did so not as a share, but as a deposit, having returned it
to Maria Corral, according to receipts signed by the latter, which we consider genuine.
It has been proved that the plaintiff paid the land tax upon the property in question in the
amount of P2,698.22. This amount was paid for the benefit of the property, which
otherwise would have been forfeited. The intervenors Magin Riosa and Consolacion
Riosa must reimburse the plaintiff for this sum.
In view of the stand we have taken in deciding this case, we deem it unnecessary to
pass upon the other questions raised by both parties on appeal.
For the foregoing, the judgment appealed from is modified, and it is held that in case of
failure to satisfy the amount of the judgment rendered against Pablo Rocha in favor of
the plaintiff, the mortgaged property cannot be sold. The intervenors Magin Riosa and
Consolacion Riosa are hereby ordered to reimburse the plaintiff in the amount of
P2,698.22, and it is held that this obligation is a lien upon the property in question. We
make no special pronouncement as to costs. So ordered.

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. L-49081 December 13, 1988

ALLIED BANKING CORPORATION, petitioner,

vs.
HON. EMILIO V. SALAS, in his capacity as Presiding Judge of the CFI of Rizal,
Branch I, Pasig, Metro Manila and METROPOLITAN BANK AND TRUST
CO., respondents.

Soller, Carreon, Ramirez & Associates for petitioner.

Arturo A. Alafriz & Associates for respondent Metropolitan Bank and Trust Co.

FERNAN, C.J.:

Petition for certiorari, prohibition and mandamus directed against the Order dated July
27, 1978 of the Hon. Emilio V. Salas, Presiding Judge of the Court of First Instance
(now Regional Trial Court) of Rizal, Branch I in Civil Case No. 25988 entitled
"Metropolitan Bank and Trust Company, Plaintiff, versus Clarencio S. Yujuico and Jesus
Z. Yujuico, Defendants" restraining the Sheriff of Quezon City, who apparently was not
a party in the aforesaid case, from selling at public auction on July 28, 1978 certain
printing machineries and equipment claimed to have been previously levied upon

4
pursuant to a writ of attachment dated April 22, 1977 issued by said respondent Judge
Emilio V. Salas in Civil Case No. 25988.

The aforesaid order of July 27, 1978 is assailed on jurisdictional grounds centering on
the propriety of its issuance.

Briefly, the antecedent facts are:

Petitioner's predecessor, General Bank and Trust Company granted Gencor Marketing,
Inc., a time loan in the principal amount of P400,000.00 evidenced by a Promissory
Note executed by the latter through its President, Dr. Clarencio S. Yujuico. 1 As security
for the time loan and pursuant to a resolution of the Board of Directors of Gencor
Marketing,2 a Deed of Chattel Mortgage 3 was executed by Gencor Marketing in favor of
General Bank and Trust Company involving the following personal properties:

1. Linotype Machine-Model 32
2. Aurelia 46-Offset Machine
3. Solna 125-Offset Machine
4. Dainippon Camera D.S.C. 24-D
5. Heidelberg-Letterpress 19" x 127"
6. Titan Automatic Cylinder Press 15-½" x 21-½"
7. Minerva Conventional Letterpress 12" x 18"
8. Hdner—Conventional Letterpress 12" x 15-½"
9. Printex Guilotene Cutter Model 107 31" x 42"
10. Saeg-Paper Stitching Machine
11. Von Yong Die Cutting Machine
12. Punching Machine
13. Embossing Machine
14. Graining Machine
15. Horizontal Plate Making
16. Stamping Machine

The Deed of Chattel Mortgage was duly recorded in the Chattel Mortgage Registry of
Quezon City on February 7, 1974 under Page No. 365, Volume No. 104, File No. 5884.

On maturity date of Gencor's name Loan and allegedly after several subsequent
extensions of time for Gencor to settle its account, Gencor failed to pay its obligations
either to General Bank and Trust Company or to herein petitioner which took over the
affairs and/or acquired all the assets and assumed the liabilities of General Bank and
Trust Company.

Consequently, on June 15, 1978, petitioner extrajudicially foreclosed the aforesaid

Chattel Mortgage and requested the City Sheriff of Quezon City to effect the said
foreclosure. The City Sheriff of Quezon City, through Deputy Sheriff A. Tabbada levied
upon the afore-described mortgaged personal properties in question and issued the
corresponding Notice of Sheriff s Sale dated July 13, 1978.4

5
It appears, however, that prior to the extrajudicial foreclosure effected by petitioner
involving the personal properties in question, private respondent Metropolitan Bank and
Trust Company filed Civil Case No. 25988, an action for a sum of money in the amount
of P5,402,740.17 with preliminary attachment against Clarencio Yujuico and Jesus
Yujuico. On April 29, 1977, a writ of preliminary attachment was issued in said case and
the Sheriff of the Court of First Instance of Rizal levied upon the personal properties in
question.

Thus, upon teaming of the Notice sent by City Sheriff Tabbada for the sale of the
foreclosed personal properties in question, private respondent filed in Civil Case No.
25988 an Urgent Motion to Enjoin the Sheriff of Quezon City from foreclosing and
selling at public auction the said properties, alleging that the printing machineries and
equipment previously levied and attached by the Sheriff of Rizal belonged exclusively to
defendant Clarencio S. Yujuico, doing business under the firm name of Gencor Printing
and as such, may not legally be foreclosed and sold at auction by the Sheriff of Quezon
City. The hearing of said Motion was set on July 27, 1978.

Meanwhile, on July 29, 1978, private respondent Metropolitan Bank and Trust Company
filed a Third Party Claim with the Quezon City Sheriff 's Office over the personal
properties in question levied upon and sought to be sold at public auction by City Sheriff
A.Tabbada, alleging that these same personal properties had been previously levied
upon by the Deputy sheriff of Branch I of the Court of First Instance of Rizal, pursuant to
a Writ of Attachment issued by herein respondent Judge Emilio V. Salas in Civil Case
No. 25988.

Allegedly to protect petitioner's rights over the personal properties in question,

petitioner's counsel entered a special appearance during the scheduled hearing on July
27, 1978 for the exclusive purpose of opposing private respondent's motion on
jurisdictional grounds and gross irregularity of procedure amounting to lack of
jurisdiction. However, over petitioner's opposition, respondent Judge rendered the
assailed Order dated July 27, 1978, which reads:

ORDER

Before this Court is plaintiff's "Urgent Motion to Enjoin the Sheriff of

Quezon City from Foreclosing and Selling at Public Auction Properties
Previously Levied Under Writ of Attachment Issued Herein by This Court."
When the motion was called for hearing today, Atty. Arturo A. Alafriz,
counsel for the plaintiff and Atty. Joselito Generoso, counsel for Allied
Banking Corp. appeared. Atty. Alafriz claims that the properties sought to
be sold at public auction by the Sheriff of Quezon City which were
allegedly mortgaged by Gencor Marketing, Inc., to General Bank and
Trust predecessor-in-interest of Allied Banking Corp. belong exclusively to
the Gencor Printing, a sole proprietorship of defendant Clarencio Yujuico,
and not to the mortgagor, Gencor Marketing, Inc. This fact is admitted by
Atty. Generoso. Such being the case, Gencor Marketing Inc. had no

6
 authority to mortgage the properties in question and, consequently, the
same cannot be sold at public auction in an extra-judicial foreclosure of
the mortgage to the General Bank and Trust Co.

PREMISES CONSIDERED, the Sheriff of Quezon City is restrained from

selling at public auction on July 28, 1978 the printing machineries and
equipment previously levied pursuant to the writ of attachment of April 22,
1 977 issued in this case.

SO ORDERED. 5

On the same day, petitioner's counsel received a copy of a "Notice of Issuance of

Restraining Order" from private respondent addressed to the Sheriff of Quezon City
stating, among others, that: Pending official service upon you of the restraining order of
the Court, this advance notice is being served upon you to subserve all legal effects. 6

Finding that to seek reconsideration of the assailed Order of July 27, 1978 would be an
exercise in futility, petitioner filed the instant petition for certiorari, prohibition and
mandamus with preliminary injunction, asserting that respondent judge lacks jurisdiction
over the person of petitioner and the city sheriff of Quezon City, and that the respondent
judge acted without and/or in excess of jurisdiction and/or with grave abuse of discretion
amounting to lack of jurisdiction in acting upon the motion of respondent Metropolitan
Bank and Trust Company dated July 24, 1978 and consequently erred as well in issuing
the disputed Order of July 27, 1978 enjoining the sale at public auction on July 28, 1978
of the printing machineries and equipment previously mortgaged to herein petitioner.
Further, petitioner maintains that respondent court could not pass upon the validity and
authenticity of the Deed of Chattel Mortgage as these were not in issue in Civil Case
No. 25988, the same being merely an action for a sum of money. Moreover, petitioner
argues that granting arguendo that the mortgaged properties were owned by Clarencio
Yujuico, the same did not make the chattel mortgage void since Clarencio Yujuico, as
the owner thereof, in effect ratified the mortgage because he signed the Board
Resolution authorizing the execution of the mortgage and he himself signed the
promissory note which was the principal obligation secured by the chattel mortgage.

To support its contention that no jurisdiction was acquired over the persons of petitioner
and City Sheriff Tabbada, petitioner asserts that its counsel appeared before
respondent judge on the scheduled hearing of herein private respondent's urgent
motion to enjoin the public sale of other personal properties in question by way of
special appearance precisely for the sole purpose of questioning the jurisdiction of the
court a quo. On the other hand, private respondent argues that counsel for petitioner
voluntarily appeared before respondent judge during said hearing thereby also
voluntarily submitting the person of petitioner to the authority of the court in said case.
The court considers these arguments immaterial. Regardless of the nature of counsel
for petitioner's appearance before respondent judge, the central thrust of the problem
and what we consider the pivotal issue in this case is whether respondent judge may
validly enjoin the public sale of the extrajudicially foreclosed properties, granting that

7
proper legal procedures were observed by private respondent in order that respondent
court may validly acquire jurisdiction over the person of petitioner.

While counsel for petitioner admitted during the hearing on July 27, 1978 that the
personal properties in question belonged to Clarencio Yujuico and not to Gencor
Marketing, Inc., the Court nevertheless finds that the chattel mortgage over the printing
machineries and equipment was ratified and approved by Clarencio Yujuico. As earlier
stated and as pointed out by petitioner, it was Clarencio Yujuico as president of Gencor
Marketing, Inc., who signed the promissory note evidencing the time loan granted by
petitioner's predecessor General Bank and Trust Company in favor of Gencor
Marketing, Inc.

Finding the chattel mortgage to be valid, the Court takes special note of the fact that
said chattel mortgage was registered and duly recorded in the Chattel Mortgage
Registry of Quezon City on February 7, 1974, prior to April 22, 1977, the date the writ of
attachment of the properties in question was issued. This is a significant factor in
determining who of two contending claimants should be given preference over the same
properties in question.

The registration of the chattel mortgage more than three years prior to the writ of
attachment issued by respondent judge is an effective and binding notice to other
creditors of its existence and creates a real right or a lien, which being recorded, follows
the chattel wherever it goes.7 The chattel mortgage lien attaches to the property
wherever it may be. Thus, private respondent as attaching creditor acquired the
properties in question subject to petitioner's mortgage lien as it existed thereon at the
time of the attachment.

In this regard, it must be stressed that the right of those who so acquire said properties
should not and cannot be superior to that of the creditor who has in his favor an
instrument of mortgage executed with the formalities of law, in good faith, and without
the least indication of fraud. 8

Applying the foregoing principle to the case at bar, the Court finds the lien of petitioner's
chattel mortgage over the mortgaged properties in question superior to the levy on
attachment made on the same by private respondent as creditor of chattel mortgagor
Clarencio Yujuico. What may be attached by private respondent as creditor of said
chattel mortgagor is only the equity or right of redemption of the mortgagor. 9

WHEREFORE, in view of the foregoing, the instant petition is GRANTED. The order
dated July 27, 1978 of the respondent judge restraining the Sheriff of Quezon City from
selling at public auction the printing machineries and equipment in question is hereby
annulled and set aside. Respondent judge is ordered to desist and refrain from further
interfering with petitioner's property rights in the aforesaid Deed of Chattel Mortgage
and to allow the Sheriff of Quezon City and his deputies to proceed with the auction sale
of the foreclosed personal properties. Costs against private respondent.

8
SO ORDERED.

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS,

MYLO O. QUINTO and JESUSA CHRISTINE S. CHUPUICO, respondents.

DECISION
BELLOSILLO, J.:

DEVELOPMENT BANK OF THE PHILIPPINES filed this petition for review on

certiorari assailing the decision of the Court of Appeals holding that the mortgages in favor
of the bank were void and ineffectual because when constituted the mortgagors, who
were merely applicants for free patent of the property mortgaged, were not the owners
thereof in fee simple and therefore could not validly encumber the same. [1]
On 20 April 1978 petitioner granted a loan of P94,000.00 to the spouses Santiago
Olidiana and Oliva Olidiana. To secure the loan the Olidiana spouses executed a real
estate mortgage on several properties among which was Lot 2029 (Pls-6 1) with Tax
Declaration No. 2335/1, situated ib Bo. Bago Capalaran, Molave, Zamboanga del Sur,
with an area of 84,108 square meters, more or less. At the time of the mortgage the
property was still the subject of a Free Patent application filed by the Olidianas with the
Bureau of Lands but registered under their name in the Office of the Municipal Assessor
of Molave for taxation purposes.[2]
On 2 November 1978 the Olidiana spouses filed with the Bureau of Lands a Request
for Amendment of their Free Patent applications over several parcels of land including
Lot No. 2029 (PIs-61). In this request they renounced, relinquished and waived all their
rights and interests over Lot No. 2029 (Pls-61) in favor of Jesusa Christine Chupuico and
Mylo O. Quinto, respondents herein. On 10 January 1979 Free Patent Nos. IX-5-2223
(covering one-half of Lot No. 2029 [Pls-61] and IX-5-2224 (covering the other half of the
same Lot No. 2029 [Pls-61]) were accordingly granted respectively to respondents
Jesusa Christine Chupuico and Mylo 0. Quinto by the Bureau
of Lands District Land Office No. IX-5, Pagadian City. Jesusa Christine Chupuico later
obtained Original Certificate of Title No. P-27,361 covering aforementioned property while
Mylo O. Quinto was also issued Original Certificate of Title No. P-27,362 in view of the
previous free patent.[3]
On 20 April 1979 an additional loan of P62,000 00 was extended by petitioner to the
Olidiana spouses. Thus on 23 April 1979 the Olidianas executed an additional mortgage
on the same parcels of land already covered by the first mortgage of 4 April 1978. This
second mortgage also included Lot No. 2029 (Pls-61) as security for the Olidiana spouses
financial obligation with petitioner.[4]
Thereafter, for failure of Santiago and Oliva Olidiana to comply with the terms and
conditions of their promissory notes and mortgage contracts, petitioner extrajudicially
foreclosed all their mortgaged properties. Consequently, on 14 April 1983 these
properties, including Lot No. 2029 (Pls-61) were sold at public auction for P88,650.00 and
awarded to petitioner as the highest bidder. A Certificate of Sale was thereafter executed
in favor of petitioner and an Affidavit of Consolidation of Ownership registered in its name.

9
However, when petitioner tried to register the sale and the affidavit of consolidation and
to have the tax declaration transferred in its name it was discovered that Lot No. 2029
(Pls-61) had already been divided into two (2) parcels, one-half (1/2) now known as Lot
2029-A and covered by OCT No. P-27,361 in the name of Jesusa Christine Chupuico,
while the other half known as Lot 2029-B was covered by the same OCT No. P-27,361 in
the name of Mylo 0. Quinto.[5]
In view of the discovery, petitioner filed an action for Quieting of Title and Cancellation
or Annulment of Certificate of Title against respondents. After trial the Regional Trial Court
of Molave, Zamboanga del Sur, Branch 23, rendered judgment against petitioner. [6] The
court ruled that the contracts of mortgage entered into by petitioner and the subsequent
foreclosure of subject property could not have vested valid title to petitioner bank because
the mortgagors were not the owners in fee simple of the property mortgaged. The court
also found the mortgages over Lot No. 2029 (Pls-61) of no legal consequence because
they were executed in violation of Art. 2085, par. 2, of the New Civil Code which requires
that the mortgagor be the absolute owner of the thing mortgaged. According to the court a
quo there was no evidence to prove that the mortgagors of the land in dispute were its
absolute owners at the time of the mortgage to petitioner.
The factual findings of the lower court disclose that when the Olidiana spouses
mortgaged Lot No. 2029 (Pls-61) to petitioner it was still the subject of a miscellaneous
sales application by the spouses with the Bureau of Lands. Since there was no showing
that the sales application was approved before the property was mortgaged, the trial court
concluded that the Olidiana spouses were not yet its owners in fee simple when they
mortgaged the property. The lower court also said that with the subsequent issuance of
the Free Patent by the Bureau of Lands in the name of respondents Chupuico and Quinto,
it could be gleaned that the property was indeed public land when mortgaged to petitioner.
Therefore petitioner could not have acquired a valid title over the subject property by
virtue of the foreclosure and subsequent sale at public auction.[7]
Resultantly, the trial court declared the following as null and void insofar as they
related to Lot No. 2029 (Pls-61) being a public land: the real estate mortgage dated 4
April 1978, the second mortgage dated 23 April 1979, the foreclosure sale on 14 April
1983, the certificate of sale registered with the Register of Deeds of Zamboanga del Sur
on 1 September 1983, and the affidavit of consolidation of ownership registered with the
Register of Deeds on 2 August 1985.
Petitioner then appealed to the Court of Appeals which likewise ruled in favor of
respondents, hence the instant petition.[8]
Petitioner now seeks to overturn the decision of respondent Court of Appeals holding
that Lot No. 2029 (Pls-61) could not have been the subject of a valid mortgage and
foreclosure proceeding because it was public land at the time of the mortgage, and that
the act of Jesusa Christine S. Chupuico and Mylo 0. Quinto in securing the patents was
not tainted with fraud. The crux of this appeal thus lies in the basic issue of whether the
land in dispute could have been validly mortgaged while still the subject of a Free Patent
Application with the government.[9]

10
 We agree with the court a quo. We hold that petitioner bank did not acquire valid title
over the land in dispute because it was public land when mortgaged to the bank. We
cannot accept petitioners contention that the lot in dispute was no longer public land when
mortgaged to it since the Olidrana spouses had been in open, continuous, adverse and
public possession thereof for more than thirty (30) years.[10] In Visayan Realty, Inc. v.
Meer[11] we ruled that the approval of a sales application merely authorized the applicant
to take possession of the land so that he could comply with the requirements prescribed
by law before a final patent could be issued in his favor. Meanwhile the government still
remained the owner thereof, as in fact the application could still be canceled and the land
awarded to another applicant should it be shown that the legal requirements had not been
complied with. What divests the government of title to the land is the issuance of the sales
patent and its subsequent registration with the Register of Deeds. It is the registration and
issuance of the certificate of title that segregate public lands from the mass of public
domain and convert it into private property.[12] Since the disputed lot in the case before
us was still the subject of a Free Patent Application when mortgaged to petitioner and no
patent was granted to the Olidiana spouses, LotNo. 2029 (Pis-61) remained part of the
public domain.
With regard to the validity of the mortgage contracts entered into by the parties, Art.
2085, par. 2, of the New Civil Code specifically requires that the pledgor or mortgagor be
the absolute owner of the thing pledged or mortgaged. Thus, since the disputed property
was not owned by the Olidiana spouses when they mortgaged it to petitioner the contracts
of mortgage and all their subsequent legal consequences as regards Lot No. 2029 (Pls-
61) are null and void. In a much earlier case[13] we held that it was an essential requisite
for the validity of a mortgage that the mortgagor be the absolute owner of the property
mortgaged, and it appearing that the mortgage was constituted before the issuance of the
patent to the mortgagor, the mortgage in question must of necessity be void and
ineffective. For, the law explicitly requires as imperative for the validity of a mortgage that
the mortgagor be the absolute owner of what is mortgaged.
Finally, anent the contention of petitioner that respondents fraudulently obtained the
property in litigation, we also find for the latter. As correctly found by the lower courts, no
evidence existed to show that respondents had prior knowledge of the real estate
mortgages executed by the Olidiana spouses in favor of petitioner. The act of respondents
in securing the patents cannot therefore be categorized as having been tainted with fraud.
WHEREFORE, the petition is DENIED and the questioned decision of the Court of
Appeals is AFFIRMED.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-13313 April 28, 1960

11
AGRICULTURAL CREDIT COOPERATIVE ASSOCIATION OF HINIGARAN, movant-
appellee,
vs.
ESTANISLAO YULO YUSAY, ET AL., oppositors-appellants.

Aritao, Garcia & Aritao for appellee.

Catalino A. Dayon and Arsenio Al. Acuna for appellant.

LABRADOR, J.:

This is an appeal from an order of the Court of First Instance of Negros Occidental,
Hon. Jose S. de la Cruz, presiding the Register of Deeds of Negros Occidental to
register a mortgage executed by Rafael Yulo in favor of the movant covering Lot No.
855, Pontevedra Cadastre, covered by Original Certificate of Title No. 4979.

The records disclose that on July 20, 1952, Rafaela Yulo executed in favor of the
movant a mortgage for P33,626.29, due from her, her mother, sisters, brothers, and
others, which amount she assumed to pay to the movant. A motion was presented to
the court by the movant demanding the surrender of the owner's duplicate certificate of
title that he may annotate said mortgage at the back of the certificate. Estanislao Yusay,
a part owner of the lot, opposed the petition on the ground that he is owner of a part of
the property in question; that the granting of the motion would operate to his prejudice,
as he has not participated in the mortgage cited in the motion; that Rafaela Yulo is
dead; that the motion is not verified and movant's rights have lapsed by prescription.
Finally it is argued that his opposition raises a controversial matter which the court has
no jurisdiction to pass upon. Margarita, Maria, Elena and Pilar, all surnamed Yulo,
joined the oppositor Estanislao Yusay, raising the same objections interposed by Yusay.

The existence of the mortgage is not disputed, and neither is the fact that the mortgagor
Rafaela Yulo is part owner of Lot No. 855 of the Cadastral Survey of Pontevedra. The
oppositors do not dispute that she is such a part owner, and their main objection to the
petition is that as part owners of the property, the annotation of the mortgage on the
common title will affect their rights.

The court held that even if the ownership of the deceased Rafaela Yulo over the portion
of the lot in question and the validity of the mortgage are disputed, such invalidity of the
mortgage is no proof of the non-existence of the mortgage nor a ground for objecting to
its registration, citing the case of Register of Deeds of Manila vs. Maxima Tinoco Vda.
de Cruz, et, al., 95 Phil., 818; 53 Off. Gaz., 2804.

In his Brief before this Court, counsel for appellants argue that the mortgage sought to
be registered was not recorded before the closing of the intestate proceedings of the
deceased mortgagor, but was so recorded only four months after the termination of said
proceedings, so that the claim of movant has been reduced to the character of a mere
money claim, not a mortgage, hence the mortgage may not be registered. In the first
place, as the judge below correctly ruled, the proceeding to register the mortgage does

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not purport to determine the supposed invalidity of the mortgage or its effect.
Registration is a mere ministerial act by which a deed, contract or instrument is sought
to be inscribed in the records of the Office of the Register of Deeds and annotated at
the back of the certificate of title covering the land subject of the deed, contract or
instrument.

The registration of a lease or mortgage, or the entry of a memorial of a lease or

mortgage on the register, is not a declaration by the state that such an instrument
is a valid and subsisting interest in land; it is merely a declaration that the record
of the title appears to be burdened with the lease or mortgage described,
according to the priority set forth in the certificate.

The mere fact that a lease or mortgage was registered does not stop any party to
it from setting up that it now has no force or effect. (Niblack, pp. 134-135, quoted
in Francisco Land Registration Act, l950 ed., p. 348.)

The court below, in ordering the registration and annotation of the mortgage, did not
pass on its invalidity or effect. As the mortgage is admittedly an act of the registered
owner, all that the judge below did and could do, as a registration court, is to order its
registration and annotation on the certificate of title covering the land mortgaged. By
said order the court did not pass upon the effect or validity of the mortgage — these can
only be determined in an ordinary case before the courts, not before a court acting
merely as a registration court, which did not have the jurisdiction to pass upon the
alleged effect or validity.

Wherefore, the order appealed from is hereby affirmed, with costs against oppositors-
appellants. So ordered.

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