G.R. No. 109946 - DEVELOPMENT BANK OF THE PHILIPPINES, VS. COURT OF APPEALS, MYLO O. QUINTO AND JESUSA CHRISTINE S. CHUPUICO.

Ruling

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. 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