(1) G.R. No. L-17072 October 31, 1961CRISTINA MARCELO VDA. DE BAUTISTA,plaintiff-appellee,vs.BRIGIDA MARCOS, ET AL.,defendants-appellants.Aladin B. Bermudez for defendants-appellants.Cube and Fajardo for plaintiff-appellee.REYES, J.B.L.,J.:The main question in this appeal is whether or not a mortgagee may foreclose a mortgage on a piece of land covered by a free patent where the mortgage was executed before the patent was issued and is sought to be foreclosed within five years from its issuance.The facts of the case appear to be as follows:On May 17, 1954, defendant Brigida Marcos obtained a loan in the amount of P2,000 from plaintiff Cristina Marcel Vda. de Bautista and to secure payment thereof conveyed to the latter by way of mortgage a two (2)-hectare portion of an unregistered parcel of land situated in Sta. Ignacia, Tarlac. The deed of mortgage, Exhibit "A", provided that it was to last for three years, that possession of the land mortgaged was to be turned over to the mortgagee by way of usufruct, but with no obligation on her part to apply the harvests to the principal obligation; that said mortgage would be released only upon payment of the principal loan of P2,000 without any interest; and that the mortgagor promised to defend and warrant the mortgagee's rights over the land mortgaged.Subsequently, or in July, 1956, mortgagor Brigida Marcos filed in behalf of the heirs of her deceased mother Victoriana Cainglet (who are Brigida herself and her three sisters), an application for the issuance of a free patent over the land in question, on the strength of the cultivation and occupation of said land by them and their predecessor since July, 1915. As a result, Free Patent No. V-64358 was issued to the applicants on January 25, 1957, and on February 22, 1957, it was registered in their names under Original Certificate of Title No. P-888 of the office of Register of Deeds for the province of Tarlac.Defendant Brigida Marcos' indebtedness of P2,000 to plaintiff having remained unpaid up to 1959, the latter, on March 4, 1959, filed the present action against Brigida and her husband (Civil Case No. 3382) in the court below for the payment thereof, or in default of the debtors to pay, for the foreclosure of her mortgage on the land give as security. Defendants moved to dismiss the action, pointing out that the land in question is covered by a free patent and could not, therefore, under the Public Land Law, be taken within five years from the issuance of the patent for the payment of any debts of the patentees contracted prior to the expiration of said five-year period; but the lower court denied the motion to dismiss on the ground that the law cited does not apply because the mortgage sought to be foreclosed was executed before the patent was issued. Defendants then filed their answer, reiterating the defense invoked in their motion to dismiss, and alleging as well that the real contract between the parties was an antichresis and not a mortgage. Pre-trial of the case followed, after which the lower court rendered judgment finding the mortgage valid to the extent of the mortgagor's pro-indiviso share of 15,333 square meters in the land in question, on the theory that the Public Land Law does not apply in this case because the mortgage in question was executed before a patent was issued over the land in question; that the agreement of the parties could not be antichresis because the deed Exhibit "A" clearly shows a mortgage with usufruct in favor of the mortgagee; and ordered the payment of the mortgage loan of P2,000 to plaintiff or, upon defendant's failure to do so, the foreclosure of plaintiff's mortgage on defendant Brigida Marcos' undivided share in the land in question. From this judgment, defendants Brigida Marcos and her husband Osmondo Apolocio appealed to this Court.There is merit in the appeal.The right of plaintiff-appellee to foreclose her mortgage on the land in question depends not so much on whether she could take said land within the prohibitive period of five years from the issuance of defendants' patent for the satisfaction of the indebtedness in question, but on whether the deed of mortgage Exhibit "A" is at all valid and enforceable, since the land mortgaged was apparently still part of the public domain when the deed of mortgage was constituted. As it is an essential requisite for the validity of a mortgage that the mortgagor be the absolute owner of the thing mortgaged (Art. 2085), the mortgage here in question is void and ineffective because at the time it was constituted, the mortgagor was not yet the owner of the land mortgaged and could not, for that reason, encumber the same to the plaintiff-appellee. Nor could the subsequent acquisition by the mortgagor of title over said land through the issuance of a free patent validate and legalize the deed of mortgage under the doctrine of estoppel (cf. Art. 1434, New Civil Code,1since upon the issuance of said patient, the land in question was thereby brought under the operation of the Public Land Law that prohibits the taking of said land for the satisfaction of debts contracted prior to the expiration of five years from the date of the issuance of the patent (sec. 118, C.A. No. 141). This prohibition should include not only debts contracted during the five-year period immediately preceding the issuance of the patent but also those contracted before such issuance, if the purpose and policy of the law, which is "to preserve and keep in the family of the homesteader that portion of public land which the State has gratuitously given to him" (Pascua v. Talens, 45 O.G. No. 9 [Supp.] 413; De los Santos v. Roman Catholic Church of Midsayap, G.R. L-6088, Feb. 24, 1954), is to be upheld.The invalidity of the mortgage Exhibit "A" does not, however, imply the concomitant invalidity of the collate agreement in the same deed of mortgage whereby possession of the land mortgaged was transferred to plaintiff-appellee in usufruct, without any obligation on her part to account for its harvests or deduct them from defendants' indebtedness of P2,000. Defendant Brigida Marcos, who, together with her sisters, was in possession of said land by herself and through her deceased mother before her since 1915, had possessory rights over the same even before title vested in her as co-owner by the issuance of the free patent to her and her sisters, and these possessory right she could validly transfer and convey to plaintiff-appellee, as she did in the deed of mortgage Exhibit "A". The latter, upon the other hand, believing her mortgagor to be the owner of the land mortgaged and not being aware of any flaw which invalidated her mode of acquisition, was a possessor in good faith (Art. 526, N.C.C.), and as such had the right to all the fruits received during the entire period of her possession in good faith (Art. 544, N.C.C.). She is, therefore, entitled to the full payment of her credit of P2,000 from defendants, without any obligation to account for the fruits or benefits obtained by her from the land in question.WHEREFORE, the judgment appealed from is reversed insofar as it orders the foreclosure of the mortgage in question, but affirmed in all other respects. Costs again defendants-appellants.

(2) [G.R. Nos. 115981-82.August 12, 1999]RUBEN LAGROSA,petitioner, vs. COURT OF APPEALS, SPOUSES ROMULO & EVELYN A. BANUA, and CESAR OROLFO,respondents.D E C I S I O NGONZAGA-REYES,J.:Petitioner seeks to review and set aside the Decision[1]of respondent Court of Appeals dated January 7, 1994 affirming the July 12, 1993 decision of the Regional Trial Court of Manila (Branch 42) in Civil Case No. 93-65646 (CA-G.R. SP No. 31683); and reversing the decision dated March 15, 1993 of the Regional Trial Court of Manila (Branch 12) in Civil Case No. 92-62967 (CA-G.R. SP No. 32070).The two petitions for review of two (2) conflicting decisions rendered by two different branches of the Regional Trial Court of Manila in ejectment suits involving the same parties and property were consolidated before the Court of Appeals upon motion of one of herein respondents, Cesar Orolfo.The consolidation was granted considering the property involved is one and the same in both petitions and Ruben Lagrosa, petitioner in CA-G.R. SP No. 31683 is the same Ruben Lagrosa, who is the private respondent in CA G. R. SP No. 32070; in the same manner that Evelyn Arizapa Banua is the private respondent in CA-G. R. SP No. 31683 while Cesar Orolfo who is the caretaker of the subject property representing Evelyn Arizapa Banua, is the petitioner in CA-G. R. SP No. 32070.[2]Both petitions involve the possession of sixty-five (65) square meters of residential lot located in Paco, Manila, originally owned by the City of Manila which, in due course, following its land and housing program for the under-privileged, awarded it to one Julio Arizapa who constructed a house and upholstery shop thereon.The award was in the nature of a Contract to Sell payable monthly for a period of twenty (20) years.Julio Arizapa is the predecessor-in-interest of respondent Evelyn Arizapa Banua in CA-G.R. SP No. 31683, while Cesar Orolfo, petitioner in CA-G.R. SP No. 32070, is the caretaker of the same subject property as authorized and appointed by Evelyn Arizapa Banua, in whose name Transfer Certificate of Title No. 197603 covering the said property is registered.Cesar Orolfo, as aforestated, represented Evelyn Arizapa Banua, in CA-G.R. SP No. 32070.[3]As found by the trial court, the title of respondent Evelyn Arizapa Banua to the subject property is evidenced by the Deed of Sale executed by the City of Manila in her favor and the Transfer Certificate of Title No. 197603, issued to her by the Register of Deeds of Manila.[4]Respondent Evelyn Arizapa Banua derived her title as follows:Before Julio Arizapa could make the full payment for the said lot, he died on January 20, 1987, intestate, at the age of 67 and was survived by his wife, Josefa Albaytar Arizapa and children[5]His wife Josefa Alabaytar Arizapa died intestate on January 21, 1988.On February 17, 1988, Evelyn Arizapa and her brothers and sisters executed a Deed of Extrajudicial Partition adjudicating unto themselves as the sole heirs of the deceased, the aforesaid lot and a Renunciation in favor of Evelyn Arizapa under which they renounced and waived all their rights over the aforesaid lot in favor of Evelyn Arizapa.The Notice of Extrajudicial Settlement of Estate of Deceased Julio Arizapa and Josefa Albaytar was duly published in the BALITA in its March 4, 11 and 18, 1988 issues.On March 22, 1988, the heirs of Julio Arizapa wrote a letter to the City of Manila, through the City Tenants Security Committee, requesting that the award of said lot be placed under the name of Evelyn Arizapa based on said Deed of Extrajudicial Partition and the Renunciation.On December 26, 1988, the Committee approved the request by Resolution.On January 8, 1990, Evelyn Arizapa paid the amount of P29,500.00 to the City of Manila which constituted the full payment of the lot for which Evelyn Arizapa was issued Official Receipt No. 738608 by the City Treasurer.On April 8, 1991, the City of Manila executed a Deed of Sale over the lot in favor of Evelyn Arizapa and, on the basis thereof, Transfer Certificate of Title No. 197603 was issued to Evelyn Arizapa.Petitioner Ruben Lagrosa claims to be the lawful possessor of the subject property by virtue of the Deed of Assignment of Real Estate Mortgage executed in his favor by Presentacion Quimbo on the basis of a Contract of Real Estate Mortgage executed by Julio Arizapa in favor of the latter.Lagrosa posits that he cannot be evicted from the subject property because he had prior possession as assignee of the said Assignment of Real Estate Mortgage executed by Presentacion Quimbo in his favor, and with the consent of Mauricia Albaytar, the sister of the deceased Josefa Albaytar Arizapa, after the demise of the spouses Julio Arizapa and Josefa Albaytar.The first petition (CA-G.R. SP No. 31683) sought the review of the decision rendered by the Regional Trial Court of Manila, Branch 49, with the Honorable Romeo J. Callejo presiding in Civil Case No. 93-65646 entitled Spouses Romulo and Evelyn Arizapa-Banua, plaintiffs-appellees, vs. Ruben Lagrosa, et al., defendants-appellants, affirmingin totothe judgment dated March 24, 1993 of the Metropolitan Trial Court of Manila, Branch 2, the dispositive portion of which reads:WHEREFORE, judgment is rendered for the PLAINTIFFS.The DEFENDANTS and all other persons claiming rights under them are hereby ordered:(a)To vacate the land covered by T.C.T. No. 197603 situated in Paco, Manila;(b)To pay the amount of P1,000.00 per month as reasonable compensation for the use and enjoyment of the premises, from the filing of this complaint until possession is restored to the plaintiffs;(c)To pay the amount of P2,000.00 as attorneys fees; and costs of suit.SO ORDERED. (Rollo, 73-74)[6]The second petition (CA-G.R. SP No. 32070) sought the review of the decision rendered on March 15, 1993 by the Regional Trial Court of Manila, Branch 12, with the Honorable Edgardo Sundiam presiding in Civil Case No. 92-62967 entitled Ruben Lagrosa, plaintiff, versus, Cesar Orolfo, defendant, affirmingin totoon appeal thejudgment of the Metropolitan Trial Court of Manila, Branch 5, the dispositive portion of which reads:WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against the defendant Cesar Orolfo ordering the said defendant and all the persons claiming rights under him to vacate the leased premises located at 1765 La Purisima Concepcion, Pedro Gil, Paco, Manila; ordering the Defendant to pay the plaintiff the sum of P5,950.00 representing the arrears in monthly rental from October 1989 up to February 1991; ordering the defendant to pay the monthly rental of P350.00 starting March 1991 until the defendant actually vacates the leased premises in question and, ordering the defendant to pay plaintiff the sum of P5,000.00 as attorneys fees plus the costs of suit.[7]In sum, in Civil Case No. 93-65646 (subject of CA-G.R. SP No. 31683), the trial court upheld the rightful possession of Evelyn Arizapa Banua over the subject lot and accordingly ordered the immediate execution of its judgment against Ruben Lagrosa, et al.On the other hand, in Civil Case No. 92-62967 (subject of CA-G.R. SP No. 32070), the trial court opined that a preponderance of evidence tilted on the side of Ruben Lagrosa and gave judgment in his favor, all because defendant therein, Cesar Orolfo, through utter negligence of his former counsel, failed to submit countervailing evidence on time, i.e. prior to the rendition of judgment by the Metropolitan Trial Court.[8]After a careful review of the records, the respondent Court of Appeals proceeded to determine which of the two conflicting decisions should be sustained and given effect, the decision in Civil Case No. 93-65646 in favor of Evelyn Arizapa Banua, or the decision in Civil Case No. 92-62967 in favor of Ruben Lagrosa.The controlling operative facts as found by the respondent Court of Appeals are:1.The subject property involved in both petitions is more particularly described as Lot No. 2, Block No. 29 of the former Fabmar Estate owned by the City of Manila.Subject property contains an area of 65 square meters.2.On June 24, 1977, the City of Manila awarded said lot to Julio Arizapa under its land for the landless program.It was payable in monthly installments for a period twenty (20) years.3.Julio Arizapa obtained a loan of P17,000.00 from one Presentacion B. Quimbo and he executed on August 2, 1985 a Contract of Real Estate Mortgage of his right over the subject property in favor of the latter.He failed to pay his loan and on top of which he borrowed more from Presentacion Quimbo until his account reached P28,000.00.4.Julio Arizapa died intestate on January 20, 1987, leaving no other property except the lot in question.Meanwhile, his wife Josefa Albaytar, on account of her deteriorating health, borrowed P40,000.00 from Ruben Lagrosa, for which she executed a deed mortgaging her one-half right to the lot.When Quimbo was poised to foreclose the mortgage, Albaytar convinced her to execute instead a Deed of Assignment of Mortgage in favor of Ruben Lagrosa for a certain consideration, which she did.5.Josefa Albaytar died on January 21, 1988.For her burial expenses, Mauricia Albaytar sister of the deceased, borrowed P65,000.00 from Ruben Lagrosa.In the meantime, Ruben Lagrosa with the permission of Mauricia Albaytar, allowed his relatives, to occupy and take possession of the subject property.Ruben Lagrosa himself was never in actual physical possession or occupation of the property.6.Thus, the tenuous claim of Ruben Lagrosa over the subject property rests on the Deed of Assignment of Mortgage executed by Presentacion B. Quimbo in his favor.This deed of assignment was correctly declared illegal by the Honorable Romeo Callejo in SP No. 31683.It was declared illegal for the simple reason that the Deed of Mortgage executed by the late Julio Arizapa in favor of Presentacion D. Quimbo was fatally defective in that the property subject thereof was still owned by the City of Manila when said deed of mortgage was executed.7.Concerning the issue of possession of the subject property, the rightful possession thereof of Evelyn Arizapa Banua is traceable to the possession of the City of Manila, then to her father Julio Arizapa; whereas, the possession claimed by Ruben Lagrosa is founded on that illegal Deed of Assignment of Mortgage (which was not even notarized), and the permission given him by Mauricia Albaytarafterthe death of her sister Josefa Albaytar, a permission which derives no legal authority or validity because Mauricia, apart from her being a sister of the deceased, was not and has never been appointed as a legal representative or administratrix of the deceased spouses.[9]In light of the foregoing, the respondent Court of Appeals affirmed the decision of the Regional Trial Court of Manila (Branch 49) in Civil Case No. 93-65646 finding for spouses Romulo and Evelyn Arizapa Banua.The dispositive portion of said decision reads:WHEREFORE, considering that respondent court has committed no error of law or fact in the decision under review, the same is affirmed and the petition is hereby DISMISSED.Costs against petitioner.[10]On the other hand, the respondent Court of Appeals reversed the decision of the Regional Trial Court of Manila (Branch 12) in Civil Case No. 92-62967 which ruled in favor of Ruben Lagrosa.The dispositive portion of said decision reads:WHEREFORE, the decision under review in SP No. 32070 is reversed and set aside, and another one is hereby entered dismissing the complaint for ejectment against petitioner Cesar Orolfo.Accordingly, the writ of execution and notice to vacate issued by respondent court in Civil Case No. 92-12917[11]are hereby declared null and void and set aside.Costs against private respondents.[12]Thus, the conflict between the two decisions as to who is entitled to the possession of the subject property, Ruben Lagrosa on the one hand, or Evelyn Arizapa-Banua on the other, with Cesar Orolfo merely representing the latter in Civil Case No. 92-62967, was resolved.Hence, the instant petition on grounds that may be summarized as follows:(1) that the respondent Court of Appeals erred in declaring the Contract of Real Estate Mortgage and the Assignment of Mortgage as illegal; (2) that the respondent Court of Appeals erred in upholding the validity of Transfer Certificate of Title No. 197603 in the name of Evelyn Arizapa Banua despite the fact that Josefa Arizapa was the only legal wife of Julio Arizapa and that they were childless; (3) that the respondent Court of Appeals erred in declaring that Cesar Orolfo was appointed caretaker of the subject property and that he was not given a chance to present his evidence before the lower court.The petition is bereft of merit.The only issue to be resolved in ejectment cases is the question as to who is entitled to the physical or material possession of the premises or possessionde facto.[13]In the event the issue of ownership is raised in the pleadings, such issue shall be taken up only for the limited purpose of determining who between the contending parties has the better right of possession.[14]As it were, herein petitioner Ruben Lagrosa also filed before the Regional Trial Court of Manila (Branch 32), in Civil Case No. 90-55315 entitled Ruben Lagrosa, versus, City Tenants Security Committee, represented by its Chairman, Hon. Gemiliano Lopez, Jr., Intestate Estate of Julio Arizapa represented by Mauricia Albaytar, Evelyn Arizapa Banua and Register of Deeds of Manila, a Complaint for Foreclosure of the Real Estate Mortgage, Annulment of Awards with Damages, and Cancellation of Title and Reconveyance of Real Property.[15]As mentioned earlier, petitioner Lagrosa claims to be the lawful possessor of the subject property by virtue of the Deed of Assignment of Real Estate Mortgage executed by Julio Arizapa in favor of the latter.Lagrosa posits that he cannot be evicted from the subject property because he had prior possession as assignee of the said Assignment of Real Estate Mortgage executed by Presentacion Quimbo in his favor, and with the consent of Mauricia Albaytar, the sister of the deceased Josefa Albaytar Arizapa, after the demise of the spouses Julio Arizapa and Josefa Albaytar.On the other hand, Evelyn Arizapa Banuas title to the property is evidenced by a Deed of Sale executed by the City of Manila in her favor and the Transfer Certificate of Title No. 197603 issued to her by the Register of Deeds.Evelyn Arizapa Banua sought to evict Lagrosa from the subject property citing, among others, the need to repossess the property for her own personal use.We agree with the respondent Court of Appeals that petitioner Lagrosas right to possess the subject property is clearly inferior to or inexistent in relation to Evelyn Arizapa Banua.As correctly held by the lower courts, the Deed of Real Estate Mortgage executed by Julio Arizapa is null and void, the property mortgaged by Julio Arizapa being then owned by the City of Manila under Transfer Certificate of Title No. 91120.For a person to validly constitute a valid mortgage on real estate, he must be the absolute owner thereof as required by Article 2085 of the Civil Code of the Philippines.[16]Since the mortgage to Presentacion Quimbo of the lot is null and void, the assignment by Presentacion Quimbo of her rights as mortgagee to Lagrosa is likewise void.Even if the mortgage is valid as insisted by herein petitioner, it is well-settled that a mere mortgagee has no right to eject the occupants of the property mortgaged.[17]This is so, because a mortgage passes no title to the mortgagee.Indeed, by mortgaging a piece of property, a debtor merely subjects it to lien but ownership thereof is not parted with.[18]Thus, a mortgage is regarded as nothing more than a mere lien, encumbrance, or security for a debt, and passes no title or estate to the mortgagee and gives him no right or claim to the possession of the property.Petitioner Lagrosa now contends that what was mortgaged by Julio Arizapa in favor of Presentacion Quimbo was his right as an awardee over the homelot in question, and not the homelot itself." Petitioner would have this Court uphold the validity and legality of the mortgage over the right as an awardee rather than the homelot itself.The agreement between the City of Manila and Julio Arizapa was in the nature of a contract to sell, the price for the lot being payable on installment for a period of twenty (20) years which could yet prevent, such as by the non-fulfillment of the condition, the obligation to convey title from acquiring any obligatory force.[19]Hence, there is no right as awardee to speak of, and there is no alienable interest in the property to deal with.The further allegation in petitioners memorandum that Evelyn Arizapa Banua is not the lawful owner of the lot and residential house in question because the Extrajudicial Partition and the Renunciation on the basis of which the Deed of Sale was executed by the City of Manila and the Transfer Certificate of Title No. 197603 was issued, are all falsified because Julio Arizapa and Josefa Albaytar Arizapa were childless up to their demise deserves no prolonged consideration, being factual in nature.Factual findings of the Court of Appeals are conclusive on the parties and carry even more weight when said court affirms the factual findings of the trial court.[20]We quote the following findings of the trial court as adopted by the respondent Court of Appeals, to wit:The Court cannot accord its imprimatur to the stance of the Defendants-Appellants.As borne by the evidence of the Plaintiff-Appellee, Julio Arizapa and Bernardita Iigo Arizapa were married on May 9, 1963 in Manila (Exhibit GG).Julio Arizapa, during his lifetime, wrote a letter to the Plaintiff-Appellee and her brothers and sisters and addressing them as his children, thus:Mahal kong mga anak magmahalan kayong mabuti at magtulungan habang buhay.Ala-ala ko kayo kailan mang.-Exhibit RR.The bare fact that, after the demise of Bernardita Iigo Arizapa in 1984, Julio Arizapa and Josefa Albaytar lived together as husband and wife but bore no children does not necessarily mean that Julio Arizapa was incapable of procreation.Indeed, there is persuasive authority to the effect that it is presumed in the absence of evidence to the contrary, that a male person of mature years, is capable of sexual intercourse and procreation, even though he has reached a very advanced age (Francisco, The Revised Rules of Court in the Philippines, Volume VII, Part II, at pages 142-143, citing Love versus Mcdonald, 148 S.W. 2d. 170, 201 Ark. 882).While it is true in their Extrajudicial Partition, the Plaintiff-Appellee and her brothers and sisters called Julio Arizapa and Josefa Arizapa, as their parents, however, this is not unusual because, after all, after the demise of Bernardita Iigo, Josefa Albaytar and Julio Arizapa lived together as husband and wife and, in the process, the Plaintiff-Appellee must have considered Josefa Albaytar as their step-mother in deference and out of respect to their father.(Resolution, at page 348, Records).[21]Moreover, it is a well-known doctrine that the issue as to whether title was procured by falsification or fraud as advanced by petitioner can only be raised in an action expressly instituted for the purpose.Torrens title can be attacked only for fraud, within one year after the date of the issuance of the decree of registration.Such attack must be direct, and not by a collateral proceeding.[22]The title represented by the certificate cannot be changed, altered, modified, enlarged, or diminished in a collateral proceeding.[23]Thus, the arguments of petitioner Lagrosa in the ejectment suit are misplaced.As to Lagrosas prior possession of the subject property, their stay in the property as correctly found by the respondent Court of Appeals was by mere tolerance or permission.It is well-settled that a person who occupies the land of another at the latters tolerance or permission, without any contract between them, is necessarily bound by an implied promise that he will vacate upon demand, failing which, a summary action for ejectment is the proper remedy against him.[24]The trial court rationalized thus:On the other hand, the possession of the Plaintiff-Appellee retroacted to the possession of the City of Manila of the property in question because the Plaintiff-Appellee merely stepped into the shoes of the owner of the property when she purchased the said property from the City of Manila and thus may cause the eviction of the Defendants-Appellants from said property (Caudal versus Court of Appeals, et al., 175 SCRA 798).It must be borne in mind that, as mere assignee of the mortgage rights of Presentacion Quimbo, the Defendant-Appellant is not entitled to the physical possession of the mortgaged property.The same is true even if the Defendant-Appellant was himself the mortgagee.In point of fact, during the lifetime of Julio Arizapa and Josefa Albaytar, they had possession of the property.The Defendant-Appellant managed to take possession of the property only because of the alleged consent thereto by Mauricia Albaytar, who was merely the sister of Josefa Albaytar.By then, the couple, Julio Arizapa and Josefa Albaytar were already dead.Mauricia Albaytar thus had no lawful authority to allow anybody to enter into and occupy the property.There is no evidence in the records that Mauricia Albaytar had been appointed by any Court as the Administratrix of the estate of the Spouses.[25]By Lagrosas own admission, he is merely an assignee of the rights of the mortgagee of the lot and that, consequently, the respondent Court of Appeals correctly ruled that the only right of action of Lagrosa as such assignee of the mortgagee, where the mortgagor is already dead, is that provided for in Section 7 of Rule 86[26]and Section 5 of Rule 87[27]of the Rules of Court.Thus, the mortgagee does not acquire title to the mortgaged real estate unless and until he purchases the same at public auction and the property is not redeemed within the period provided for by the Rules of Court.The issues raised by petitioner in CA G. R. SP No. 32070 that the respondent Court of Appeals erred in declaring Cesar Orolfo as the caretaker of the subject property and that he was not given a chance to present his evidence before the lower courts are also factual.The jurisdiction of this court is limited to reviewing errors of law unless there is a showing that the findings complained of are totally devoid of support in the record or that they so glaringly erroneous as to constitute serious abuse of discretion.[28]We find no such showing in this case.More importantly, whether Cesar Orolfo is the caretaker of the property as appointed by Evelyn Arizapa Banua and the representative of the latter is now beside the point.As was discussed by this Court, petitioner Ruben Lagrosas right to possess the subject property is clearly inexistent in relation to herein respondent Evelyn Arizapa Banua.WHEREFORE,the joint decision of the Court of Appeals in CA-G.R. SP Nos. 31683 and 32070 promulgated on January 7, 1994 is AFFIRMEDin toto.SO ORDERED.

(3) HEIRS OF EDUARDO MANLAPAT, G.R. No. 125585represented by GLORIA MANLAPAT- BANAAG and LEON M. BANAAG, JR., Petitioners,Present: PUNO,J.,* Chairman, - versus - AUSTRIA-MARTINEZ,Acting Chairman, CALLEJO, SR., TINGA, and CHICO-NAZARIO,JJ.HON. COURT OF APPEALS, RURAL BANK OF SAN PASCUAL,INC., and JOSE B. SALAZAR,CONSUELO CRUZ and Promulgated:ROSALINA CRUZ-BAUTISTA,and the REGISTER OF DEEDS ofMeycauayan, Bulacan, June 8, 2005Respondents.x-------------------------------------------------------------------xD E C I S I O NTINGA,J.:Before this Court is a Rule 45 petition assailing theDecision[1]dated 29 September 1994 of the Court of Appeals that reversed theDecision[2]dated 30 April 1991 of the Regional Trial Court (RTC) of Bulacan, Branch 6, Malolos. The trial court declared Transfer Certificates of Title (TCTs) No. T-9326-P(M) and No. T-9327-P(M) as voidab initioand ordered the restoration of Original Certificate of Title (OCT) No. P-153(M) in the name of Eduardo Manlapat (Eduardo), petitioners predecessor-in-interest.The controversy involves Lot No. 2204, a parcel of land with an area of 1,058 square meters, located at Panghulo, Obando, Bulacan. The property had been originally in the possession of Jose Alvarez, Eduardos grandfather, until his demise in 1916. It remained unregistered until 8 October 1976 when OCT No. P-153(M) was issued in the name of Eduardo pursuant to a free patent issued in Eduardos name[3]that was entered in the Registry of Deeds of Meycauayan, Bulacan.[4]The subject lot is adjacent to a fishpond owned by one

Ricardo Cruz (Ricardo), predecessor-in-interest of respondents Consuelo Cruz and Rosalina Cruz-Bautista (Cruzes).[5]On 19 December 1954, before the subject lot was titled, Eduardo sold a portion thereof with an area of 553 square meters to Ricardo. The sale is evidenced by a deed of sale entitled Kasulatan ng Bilihang Tuluyan ng Lupang Walang Titulo (Kasulatan)[6]which was signed by Eduardo himself as vendor and his wife Engracia Aniceto with a certain Santiago Enriquez signing as witness. The deed was notarized by Notary Public Manolo Cruz.[7]On 4 April 1963, theKasulatanwas registered with the Register of Deeds of Bulacan.[8]On 18 March 1981, anotherDeed of Sale[9]conveying another portion of the subject lot consisting of 50 square meters as right of way was executed by Eduardo in favor of Ricardo in order to reach the portion covered by the first sale executed in 1954 and to have access to his fishpond from the provincial road.[10]The deed was signed by Eduardo himself and his wife Engracia Aniceto, together with Eduardo Manlapat, Jr. and Patricio Manlapat. The same was also duly notarized on 18 July 1981 by Notary Public Arsenio Guevarra.[11]In December 1981, Leon Banaag, Jr. (Banaag), as attorney-in-fact of his father-in-law Eduardo, executed a mortgage with the Rural Bank of San Pascual, Obando Branch (RBSP), forP100,000.00 with the subject lot as collateral. Banaag deposited the owners duplicate certificate of OCT No. P-153(M) with the bank.On 31 August 1986, Ricardo died without learning of the prior issuance of OCT No. P-153(M) in the name of Eduardo.[12]His heirs, the Cruzes, were not immediately aware of the consummated sale between Eduardo and Ricardo.Eduardo himself died on 4 April 1987. He was survived by his heirs, Engracia Aniceto, his spouse; and children, Patricio, Bonifacio, Eduardo, Corazon, Anselmo, Teresita and Gloria, all surnamed Manlapat.[13]Neither did the heirs of Eduardo (petitioners) inform the Cruzes of the prior sale in favor of their predecessor-in-interest, Ricardo. Yet subsequently, the Cruzes came to learn about the sale and the issuance of the OCT in the name of Eduardo.Upon learning of their right to the subject lot, the Cruzes immediately tried to confront petitioners on the mortgage and obtain the surrender of the OCT. The Cruzes, however, were thwarted in their bid to see the heirs. On the advice of the Bureau of Lands, NCR Office, they brought the matter to thebarangaycaptain ofBarangayPanghulo, Obando, Bulacan. During the hearing, petitioners were informed that the Cruzes had a legal right to the property covered by OCT and needed the OCT for the purpose of securing a separate title to cover the interest of Ricardo. Petitioners, however, were unwilling to surrender the OCT.[14]Having failed to physically obtain the title from petitioners, in July 1989, the Cruzes instead went to RBSP which had custody of the owners duplicate certificate of the OCT, earlier surrendered as a consequence of the mortgage. Transacting with RBSPs manager, Jose Salazar (Salazar), the Cruzes sought to borrow the owners duplicate certificate for the purpose of photocopying the same and thereafter showing a copy thereof to the Register of Deeds. Salazar allowed the Cruzes to bring the owners duplicate certificate outside the bank premises when the latter showed theKasulatan.[15] The Cruzes returned the owners duplicate certificate on the same day after having copied the same. They then brought the copy of the OCT to Register of Deeds Jose Flores (Flores) of Meycauayan and showed the same to him to secure his legal opinion as to how the Cruzes could legally protect their interest in the property and register the same.[16]Flores suggested the preparation of a subdivision plan to be able to segregate the area purchased by Ricardo from Eduardo and have the same covered by a separate title.[17]Thereafter, the Cruzes solicited the opinion of Ricardo Arandilla (Arandilla), Land Registration Officer, Director III, Legal Affairs Department, Land Registration Authority at Quezon City, who agreed with the advice given by Flores.[18]Relying on the suggestions of Flores and Arandilla, the Cruzes hired two geodetic engineers to prepare the corresponding subdivision plan. The subdivision plan was presented to the Land Management Bureau, Region III, and there it was approved by a certain Mr. Pambid of said office on 21 July 1989.After securing the approval of the subdivision plan, the Cruzes went back to RBSP and again asked for the owners duplicate certificate from Salazar. The Cruzes informed him that the presentation of the owners duplicate certificate was necessary, per advise of the Register of Deeds, for the cancellation of the OCT and the issuance in lieu thereof of two separate titles in the names of Ricardo and Eduardo in accordance with the approved subdivision plan.[19]Before giving the owners duplicate certificate, Salazar required the Cruzes to see Atty. Renato Santiago (Atty. Santiago), legal counsel of RBSP, to secure from the latter a clearance to borrow the title. Atty. Santiago would give the clearance on the condition that only Cruzes put up a substitute collateral, which they did.[20]As a result, the Cruzes got hold again of the owners duplicate certificate.After the Cruzes presented the owners duplicate certificate, along with the deeds of sale and the subdivision plan, the Register of Deeds cancelled the OCT and issued in lieu thereof TCT No. T-9326-P(M) covering 603 square meters of Lot No. 2204 in the name of Ricardo and TCT No. T-9327-P(M) covering the remaining 455 square meters in the name of Eduardo.[21]On 9 August 1989, the Cruzes went back to the bank and surrendered to Salazar TCT No. 9327-P(M) in the name of Eduardo and retrieved the title they had earlier given as substitute collateral. After securing the new separate titles, the Cruzes furnished petitioners with a copy of TCT No. 9327-P(M) through thebarangaycaptain and paid the real property tax for 1989.[22]The Cruzes also sent a formal letter to Guillermo Reyes, Jr., Director, Supervision Sector, Department III of the Central Bank of the Philippines, inquiring whether they committed any violation of existing bank laws under the circumstances. A certain Zosimo Topacio, Jr. of the Supervision Sector sent a reply letter advising the Cruzes, since the matter is between them and the bank, to get in touch with the bank for the final settlement of the case.[23]In October of 1989, Banaag went to RBSP, intending to tender full payment of the mortgage obligation. It was only then that he learned of the dealings of the Cruzes with the bank which eventually led to the subdivision of the subject lot and the issuance of two separate titles thereon. In exchange for the full payment of the loan, RBSP tried to persuade petitioners to accept TCT No. T-9327-P(M) in the name of Eduardo.[24]As a result, three (3) cases were lodged, later consolidated, with the trial court, all involving the issuance of the TCTs, to wit:(1) Civil Case No. 650-M-89, for reconveyance with damages filed by the heirs of Eduardo Manlapat against Consuelo Cruz, Rosalina Cruz-Bautista, Rural Bank of San Pascual, Jose Salazar and Jose Flores, in his capacity as Deputy Registrar, Meycauayan Branch of the Registry of Deeds of Bulacan;(2) Civil Case No. 141-M-90 for damages filed by Jose Salazar against Consuelo Cruz, et. [sic] al.; and(3) Civil Case No. 644-M-89, for declaration of nullity of title with damages filed by Rural Bank of San Pascual, Inc. against the spouses Ricardo Cruz and Consuelo Cruz, et al.[25]After trial of the consolidated cases, the RTC of Malolos rendered a decision in favor of the heirs of Eduardo, the dispositive portion of which reads:WHEREFORE, premised from the foregoing, judgment is hereby rendered:1.Declaring Transfer Certificates of Title Nos. T-9326-P(M) and T-9327-P(M) as voidab initioand ordering the Register of Deeds, Meycauayan Branch to cancel said titles and to restore Original Certificate of Title No. P-153(M) in the name of plaintiffs predecessor-in-interest Eduardo Manlapat;2.-Ordering the defendants Rural Bank of San Pascual, Jose Salazar, Consuelo Cruz and Rosalina Cruz-Bautista, to pay the plaintiffs Heirs of Eduardo Manlapat, jointly and severally, the following:a)P200,000.00 as moral damages;b)P50,000.00 as exemplary damages;c)P20,000.00 as attorneys fees; andd)the costs of the suit.3.Dismissing the counterclaims.SO ORDERED.[26] The trial court found that petitioners were entitled to the reliefs of reconveyance and damages. On this matter, it ruled that petitioners werebona fidemortgagors of an unclouded title bearing no annotation of any lien and/or encumbrance. This fact, according to the trial court, was confirmed by the bank when it accepted the mortgage unconditionally on 25 November 1981. It found that petitioners were complacent and unperturbed, believing that the title to their property, while serving as security for a loan, was safely vaulted in the impermeable confines of RBSP. To their surprise and prejudice, said title was subdivided into two portions, leaving them a portion of 455 square meters from the original total area of 1,058 square meters, all because of the fraudulent and negligent acts of respondents and RBSP. The trial court ratiocinated that even assuming that a portion of the subject lot was sold by Eduardo to Ricardo, petitioners were still not privy to the transaction between the bank and the Cruzes which eventually led to the subdivision of the OCT into TCTs No. T-9326-P(M) and No. T-9327-P(M), clearly to the damage and prejudice of petitioners.[27]Concerning the claims for damages, the trial court found the same to be bereft of merit. It ruled that although the act of the Cruzes could be deemed fraudulent, still it would not constitute intrinsic fraud. Salazar, nonetheless, was clearly guilty of negligence in letting the Cruzes borrow the owners duplicate certificate of the OCT. Neither the bank nor its manager had business entrusting to strangers titles mortgaged to it by other persons for whatever reason. It was a clear violation of the mortgage and banking laws, the trial court concluded.The trial court also ruled that although Salazar was personally responsible for allowing the title to be borrowed, the bank could not escape liability for it was guilty of contributory negligence. The evidence showed that RBSPs legal counsel was sought for advice regarding respondents request. This could only mean that RBSP through its lawyer if not through its manager had known in advance of the Cruzes intention and still it did nothing to prevent the eventuality. Salazar was not even summarily dismissed by the bank if he was indeed the sole person to blame. Hence, the banks claim for damages must necessarily fail.[28] The trial court granted the prayer for the annulment of the TCTs as a necessary consequence of its declaration that reconveyance was in order. As to Flores, his work being ministerial as Deputy Register of the Bulacan Registry of Deeds, the trial court absolved him of any liability with a stern warning that he should deal with his future transactions more carefully and in the strictest sense as a responsible government official.[29]Aggrieved by the decision of the trial court, RBSP, Salazar and the Cruzes appealed to the Court of Appeals. The appellate court, however, reversed the decision of the RTC. The decretal text of the decision reads:THE FOREGOING CONSIDERED, the appealed decision is hereby reversed and set aside, with costs against the appellees.SO ORDERED.[30]The appellate court ruled that petitioners were notbona fidemortgagors since as early as 1954 or before the 1981 mortgage, Eduardo already sold to Ricardo a portion of the subject lot with an area of 553 square meters. This fact, the Court of Appeals noted, is even supported by a document of sale signed by Eduardo Jr. and Engracia Aniceto, the surviving spouse of Eduardo, and registered with the Register of Deeds of Bulacan. The appellate court also found that on 18 March 1981, for the second time, Eduardo sold to Ricardo a separate area containing 50 square meters, as a road right-of-way.[31]Clearly, the OCT was issued only after the first sale. It also noted that the title was given to the Cruzes by RBSP voluntarily, with knowledge even of the banks counsel.[32]Hence, the imposition of damages cannot be justified, the Cruzes themselves being the owners of the property. Certainly, Eduardo misled the bank into accepting the entire area as a collateral since the 603-square meter portion did not anymore belong to him. The appellate court, however, concluded that there was no conspiracy between the bank and Salazar.[33]Hence, this petition for review on certiorari.Petitioners ascribe errors to the appellate court by asking the following questions, to wit: (a) can a mortgagor be compelled to receive from the mortgagee a smaller portion of the originally encumbered title partitioned during the subsistence of the mortgage, without the knowledge of, or authority derived from, the registered owner; (b) can the mortgagee question the veracity of the registered title of the mortgagor, as noted in the owners duplicate certificate, and thus, deliver the certificate to such third persons, invoking an adverse, prior, and unregistered claim against the registered title of the mortgagor; (c) can an adverse prior claim against a registered title be noted, registered and entered without a competent court order; and (d) can belief of ownership justify the taking of property without due process of law?[34]The kernel of the controversy boils down to the issue of whether the cancellation of the OCT in the name of the petitioners predecessor-in-interest and its splitting into two separate titles, one for the petitioners and the other for the Cruzes, may be accorded legal recognition given the peculiar factual backdrop of the case. We rule in the affirmative.Private respondents (Cruzes) ownthe portion titled in their namesConsonant with law and justice, the ultimate denouement of the property dispute lies in the determination of the respective bases of the warring claims. Here, as in other legal disputes, what is written generally deserves credence.A careful perusal of the evidence on record reveals that the Cruzes have sufficiently proven their claim of ownership over the portion of Lot No. 2204 with an area of 553 square meters. The duly notarized instrument of conveyance was executed in 1954 to which no less than Eduardo was a signatory. The execution of the deed of sale was rendered beyond doubt by Eduardos admission in hisSinumpaang Salaysaydated 24 April 1963.[35] These documents make the affirmance of the right of the Cruzes ineluctable. The apparent irregularity, however, in the obtention of the owners duplicate certificate from the bank, later to be presented to the Register of Deeds to secure the issuance of two new TCTs in place of the OCT, is another matter.Petitioners argue that the 1954 deed of sale was not annotated on the OCT which was issued in 1976 in favor of Eduardo; thus, the Cruzes claim of ownership based on the sale would not hold water. The Court is not persuaded.Registration is not a requirement for validity of the contract as between the parties, for the effect of registration serves chiefly to bind third persons.[36]The principal purpose of registration is merely to notify other persons not parties to a contract that a transaction involving the property had been entered into. Where the party has knowledge of a prior existing interest which is unregistered at the time he acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to him.[37]Further, the heirs of Eduardo cannot be considered third persons for purposes of applying the rule. The conveyance shall not be valid against any person unless registered, except (1) the grantor, (2) his heirs and devisees, and (3) third persons having actual notice or knowledge thereof.[38] Not only are petitioners the heirs of Eduardo, some of them were actually parties to theKasulatanexecuted in favor of Ricardo. Thus, the annotation of the adverse claim of the Cruzes on the OCT is no longer required to bind the heirs of Eduardo, petitioners herein.Petitioners had no right to constitutemortgage over disputed portionThe requirements of a valid mortgage are clearly laid down in Article 2085 of the New Civil Code,viz:ART. 2085. The following requisites are essential to the contracts of pledge and mortgage:(1)That they be constituted to secure the fulfillment of a principal obligation;(2)That the pledgor or mortgagor be theabsolute ownerof the thing pledged or mortgaged;(3)That the persons constituting the pledge or mortgage have thefree disposal of their property, and in the absence thereof, that they be legally authorized for the purpose.Third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their own property. (emphasis supplied) For a person to validly constitute a valid mortgage on real estate, he must be the absolute owner thereof as required by Article 2085 of the New Civil Code.[39]The mortgagor must be the owner, otherwise the mortgage is void.[40]In a contract of mortgage, the mortgagor remains to be the owner of the property although the property is subjected to a lien.[41]A mortgage is regarded as nothing more than a mere lien, encumbrance, or security for a debt, and passes no title or estate to the mortgagee and gives him no right or claim to the possession of the property.[42]In this kind of contract, the property mortgaged is merely delivered to the mortgagee to secure the fulfillment of the principal obligation.[43]Such delivery does not empower the mortgagee to convey any portion thereof in favor of another person as the right to dispose is an attribute of ownership.[44]The right to dispose includes the right to donate, to sell, to pledge or mortgage. Thus, the mortgagee, not being the owner of the property, cannot dispose of the whole or part thereof nor cause the impairment of the security in any manner without violating the foregoing rule.[45]The mortgagee only owns the mortgage credit, not the property itself.[46]Petitioners submit as an issue whether a mortgagor may be compelled to receive from the mortgagee a smaller portion of the lot covered by the originally encumbered title, which lot was partitioned during the subsistence of the mortgage without the knowledge or authority of the mortgagor as registered owner. This formulation is disingenuous, baselessly assuming, as it does, as an admitted fact that the mortgagor is the owner of the mortgaged property in its entirety. Indeed, it has not become a salient issue in this case since the mortgagor was not the owner of the entire mortgaged property in the first place.Issuance of OCT No. P-153(M), improperIt is a glaring fact that OCT No. P-153(M) covering the property mortgaged was in the name of Eduardo, without any annotation of any prior disposition or encumbrance. However, the property was sufficiently shown to be not entirely owned by Eduardo as evidenced by theKasulatan. Readily apparent upon perusal of the records is that the OCT was issued in 1976, long after theKasulatanwas executed way back in 1954. Thus, a portion of the property registered in Eduardos name arising from the grant of free patent did not actually belong to him. The utilization of the Torrens system to perpetrate fraud cannot be accorded judicial sanction.Time and again, this Court has ruled that the principle of indefeasibility of a Torrens title does not apply where fraud attended the issuance of the title, as was conclusively established in this case. The Torrens title does not furnish a shied for fraud.[47]Registration does not vest title. It is not a mode of acquiring ownership but is merely evidence of such title over a particular property. It does not give the holder any better right than what he actually has, especially if the registration was done in bad faith. The effect is that it is as if no registration was made at all.[48]In fact, this Court has ruled that a decree of registration cut off or extinguished a right acquired by a person when such right refers to a lien or encumbrance on the landnot to the right of ownership thereofwhich was not annotated on the certificate of title issued thereon.[49]Issuance of TCT Nos. T-9326-P(M)and T-9327-P(M), ValidThe validity of the issuance of two TCTs, one for the portion sold to the predecessor-in-interest of the Cruzes and the other for the portion retained by petitioners, is readily apparent from Section 53 of the Presidential Decree (P.D.) No. 1529 or theProperty Registration Decree.It provides:SEC 53.Presentation of owners duplicate upon entry of new certificate. No voluntary instrument shall be registered by the Register of Deeds, unless the owners duplicate certificate is presented with such instrument, except in cases expressly provided for in this Decree or upon order of the court, for cause shown.The production of the owners duplicate certificate, whenever any voluntary instrument is presented for registration, shall be conclusive authority from the registered owner to the Register of Deeds to enter a new certificate or to make a memorandum of registration in accordance with such instrument, and the new certificate or memorandum shall be binding upon the registered owner and upon all persons claiming under him, in favor of every purchaser for value and in good faith.In all cases of registration procured by fraud, the owner may pursue all his legal and equitable remedies against the parties to such fraud without prejudice, however, to the rights of any innocent holder of the decree of registration on the original petition or application, any subsequent registration procured by the presentation of a forged duplicate certificate of title, or a forged deed or instrument, shall be null and void. (emphasis supplied)Petitioners argue that the issuance of the TCTs violated the third paragraph of Section 53 of P.D. No. 1529. The argument is baseless. It must be noted that the provision speaks offorged duplicate certificate of titleandforged deed or instrument. Neither instance obtains in this case. What the Cruzes presented before the Register of Deeds was the very genuine owners duplicate certificate earlier deposited by Banaag, Eduardos attorney-in-fact, with RBSP. Likewise, the instruments of conveyance are authentic, not forged. Section 53 has never been clearer on the point that as long as the owners duplicate certificate is presented to the Register of Deeds together with the instrument of conveyance, such presentation serves as conclusive authority to the Register of Deeds to issue a transfer certificate or make a memorandum of registration in accordance with the instrument.The records of the case show that despite the efforts made by the Cruzes in persuading the heirs of Eduardo to allow them to secure a separate TCT on the claimed portion, their ownership being amply evidenced by theKasulatanandSinumpaang Salaysaywhere Eduardo himself acknowledged the sales in favor of Ricardo, the heirs adamantly rejected the notion of separate titling. This prompted the Cruzes to approach the bank manager of RBSP for the purpose of protecting their property right. They succeeded in persuading the latter to lend the owners duplicate certificate. Despite the apparent irregularity in allowing the Cruzes to get hold of the owners duplicate certificate, the bank officers consented to the Cruzes plan to register the deeds of sale and secure two new separate titles, without notifying the heirs of Eduardo about it.Further, the law on the matter, specifically P.D. No. 1529, has no explicit requirement as to the manner of acquiring the owners duplicate for purposes of issuing a TCT. This led the Register of Deeds of Meycauayan as well as the Central Bank officer, in rendering an opinion on the legal feasibility of the process resorted to by the Cruzes. Section 53 of P.D. No. 1529 simply requires the production of the owners duplicate certificate, whenever any voluntary instrument is presented for registration, and the same shall be conclusive authority from the registered owner to the Register of Deeds to enter a new certificate or to make a memorandum of registration in accordance with such instrument, and the new certificate or memorandum shall be binding upon the registered owner and upon all persons claiming under him, in favor of every purchaser for value and in good faith.Quite interesting, however, is the contention of the heirs of Eduardo that the surreptitious lending of the owners duplicate certificate constitutes fraud within the ambit of the third paragraph of Section 53 which could nullify the eventual issuance of the TCTs. Yet we cannot subscribe to their position.Impelled by the inaction of the heirs of Eduardo as to their claim, the Cruzes went to the bank where the property was mortgaged. Through its manager and legal officer, they were assured of recovery of the claimed parcel of land since they are the successors-in-interest of the real owner thereof. Relying on the bank officers opinion as to the legality of the means sought to be employed by them and the suggestion of the Central Bank officer that the matter could be best settled between them and the bank, the Cruzes pursued the titling of the claimed portion in the name of Ricardo. The Register of Deeds eventually issued the disputed TCTs.The Cruzes resorted to such means to protect their interest in the property that rightfully belongs to them only because of the bank officers acquiescence thereto. The Cruzes could not have secured a separate TCT in the name of Ricardo without the banks approval. Banks, their business being impressed with public interest, are expected to exercise more care and prudence than private individuals in their dealings, even those involving registered lands.[50]Thehighestdegree of diligence is expected, and high standards of integrity and performance are even required of it.[51]Indeed, petitioners contend that the mortgagee cannot question the veracity of the registered title of the mortgagor as noted in the owners duplicate certificate, and, thus, he cannot deliver the certificate to such third persons invoking an adverse, prior, and unregistered claim against the registered title of the mortgagor. The strength of this argument is diluted by the peculiar factual milieu of the case.A mortgagee can rely on what appears on the certificate of title presented by the mortgagor and an innocent mortgagee is not expected to conduct an exhaustive investigation on the history of the mortgagors title. This rule is strictly applied to banking institutions. A mortgagee-bank must exercise due diligence before entering into said contract. Judicial notice is taken of the standard practice for banks, before approving a loan, to send representatives to the premises of the land offered as collateral and to investigate who the real owners thereof are.[52]Banks, indeed, should exercise more care and prudence in dealing even with registered lands, than private individuals, as their business is one affected with public interest. Banks keep in trust money belonging to their depositors, which they should guard against loss by not committing any act of negligence that amounts to lack of good faith. Absent good faith, banks would be denied the protective mantle of the land registration statute, Act 496, which extends only to purchasers for value and good faith, as well as to mortgagees of the same character and description.[53]Thus, this Court clarified that the rule that persons dealing with registered lands can rely solely on the certificate of title doesnotapply to banks.[54]Bank Liable for Nominal DamagesOf deep concern to this Court, however, is the fact that the bank lent the owners duplicate of the OCT to the Cruzes when the latter presented the instruments of conveyance as basis of their claim of ownership over a portion of land covered by the title. Simple rationalization would dictate that a mortgagee-bank has no right to deliver to any stranger any property entrusted to it other than to those contractually and legally entitled to its possession. Although we cannot dismiss the banks acknowledgment of the Cruzes claim as legitimized by instruments of conveyance in their possession, we nonetheless cannot sanction how the bank was inveigled to do the bidding of virtual strangers. Undoubtedly, the banks cooperative stance facilitated the issuance of the TCTs. To make matters worse, the bank did not even notify the heirs of Eduardo. The conduct of the bank is as dangerous as it is unthinkably negligent. However, the aspect does not impair the right of the Cruzes to be recognized as legitimate owners of their portion of the property.Undoubtedly, in the absence of the banks participation, the Register of Deeds could not have issued the disputed TCTs. We cannot find fault on the part of the Register of Deeds in issuing the TCTs as his authority to issue the same is clearly sanctioned by law. It is thus ministerial on the part of the Register of Deeds to issue TCT if the deed of conveyance and the original owners duplicate are presented to him as there appears on theface of the instruments no badge of irregularity or

nullity.[55]If there is someone to blame for the shortcut resorted to by the Cruzes, it would be the bank itself whose manager and legal officer helped the Cruzes to facilitate the issuance of the TCTs.The bank should not have allowed complete strangers to take possession of the owners duplicate certificate even if the purpose is merely for photocopying for a danger of losing the same is more than imminent. They should be aware of the conclusive presumption inSection 53. Such act constitutes manifest negligence on the part of the bank which would necessarily hold it liable for damages under Article 1170 and other relevant provisions of the Civil Code.[56]In the absence of evidence, the damages that may be awarded may be in the form of nominal damages. Nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.[57]This award rests on the mortgagors right to rely on the banks observance of the highest diligence in the conduct of its business. The act of RBSP of entrusting to respondents the owners duplicate certificate entrusted to it by the mortgagor without even notifying the mortgagor and absent any prior investigation on the veracity of respondents claim and

character is a patent failure to foresee the risk created by the act in view of the provisions of Section 53 of P.D. No. 1529. This act runs afoul of every banks mandate to observe the highest degree of diligence in dealing with its clients. Moreover, a mortgagor has also the right to be afforded due process before deprivation or diminution of his property is effected as the OCT was still in the name of Eduardo. Notice and hearing are indispensable elements of this right which the bank miserably ignored.Under the circumstances, the Court believes the award ofP50,000.00 as nominal damages is appropriate.Five-Year Prohibition against alienationor encumbrance under the Public Land ActOne vital point. Apparently glossed over by the courts below and the parties is an aspect which is essential, spread as it is all over the record and intertwined with the crux of the controversy, relating as it does to the validity of the dispositions of the subject property and the mortgage thereon. Eduardo was issued a title in 1976 on the basis of his free patent application. Such application implies the recognition of the public dominion character of the land and, hence, the five (5)-year prohibition imposed by the Public Land Act against alienation or encumbrance of the land covered by a free patent or homestead[58]should have been considered.The deed of sale covering the fifty (50)-square meter right of way executed by Eduardo on 18 March 1981 is obviously covered by the proscription, the free patent having been issued on 8 October 1976. However, petitioners may recover the portion sold since the prohibition was imposed in favor of the free patent holder. InPhilippine National Bank v. De los Reyes,[59]this Court ruled squarely on the point, thus: While the law bars recovery in a case where the object of the contract is contrary to law and one or both parties acted in bad faith, we cannot here apply the doctrine ofin pari delictowhich admits of an exception, namely, that when the contract is merely prohibited by law, not illegalper se, and the prohibition is designed for the protection of the party seeking to recover, he is entitled to the relief prayed for whenever public policy is enhanced thereby. Under the Public Land Act, the prohibition to alienate is predicated on the fundamental policy of the State to preserve and keep in the family of the homesteader that portion of public land which the State has gratuitously given to him, and recovery is allowed even where the land acquired under the Public Land Act was sold and not merely encumbered, within the prohibited period.[60]The sale of the 553 square meter portion is a different story. It was executed in 1954, twenty-two (22) years before the issuance of the patent in 1976. Apparently, Eduardo disposed of the portion even before he thought of applying for a free patent. Where the sale or transfer took place before the filing of the free patent application, whether by the vendor or the vendee, the prohibition should not be applied. In such situation, neither the prohibition nor the rationale therefor which isto keep in the family of the patentee that portion of the public land which the government has gratuitously given him, by shielding him from the temptation to dispose of his landholding, could be relevant. Precisely, he had disposed of his rights to the lot even before the government could give the title to him.The mortgage executed in favor of RBSP is also beyond the pale of the prohibition, as it was forged in December 1981 a few months past the period of prohibition. WHEREFORE, theDecisionof the Court of Appeals is AFFIRMED, subject to the modifications herein. Respondent Rural Bank of San Pascual is hereby ORDERED to PAY petitioners Fifty Thousand Pesos (P50,000.00) by way of nominal damages. Respondents Consuelo Cruz and Rosalina Cruz-Bautista are hereby DIVESTED of title to, and respondent Register of Deeds of Meycauayan, Bulacan is accordingly ORDERED to segregate, the portion of fifty (50) square meters of the subject Lot No. 2204, as depicted in the approved plan covering the lot, marked as Exhibit A, and to issue a new title covering the said portion in the name of the petitioners at the expense of the petitioners. No costs.SO ORDERED.

(4) [G.R. No. L-22001. November 4, 1924. ]

CHINA BANKING CORPORATION, in substitution of Filipinas Compania de Seguros,Plaintiff-Appellee, v. FAUSTINO LICHAUCO ET AL.,Defendants-Appellants.

Jose a. Espiritu forAppellants.

Feria & La O and P. J. Sevilla forAppellee.

SYLLABUS1. INTEREST; INTEREST UPON INTEREST DUE. --The interest due at the time of the filing of the complaint for the recovery thereof, earns legal interest from said date, under article 1109 of the Civil Code, although the obligation is silent on this point, and the action of the trial court is in accordance with law, which includes in its judgment an order for the payment of legal interest upon the interest due on the amount claimed, at the time of the filing of the complaint.

2. MORTGAGE; CONSIDERATION OF; MAY SECURE OBLIGATION OF THIRD PERSON. --The consideration of a mortgage, which is an accessory contract, is that of the principal contract, from which it receives its life, and without which it cannot exist as an independent contract, even if the obligation thereby secured is of a third person, and therefore it will be valid, if the principal one is valid, and cannot be avoided on the ground of lack of consideration.

D E C I S I O N

AVANCEA,J.:

The dispositive part of the judgment appealed from is literally as follows:jgc:chanrobles.com.ph

"For all of the foregoing it is adjudged and decreed that the defendant Faustino Lichauco be, as is hereby, sentenced to pay the plaintiff the sum of P21,500, with interest at 12 per cent per year from September 13, 1922 until full payment thereof, and in addition, interest at 6 per cent per annum from the filing of the complaint upon P1,935, interest of the sum claimed for 9 months prior to the filing of the complaint, and of such sums as subsequently have become or may become due, from their respective dates of maturity until the payment of said interest; he is further sentenced to pay the sum of P14,200 as fees of plaintiffs attorney, expenses and troubles caused by the litigation for the collection of said sum of P21,500, with interest thereon; and all the defendants are sentenced to pay the sum of P50,000 with interest at the rate of 12 per cent annum from September 5, 1921, capitalized monthly to earn the same interest as the principal, until full payments thereof, and in addition 5 per cent of P50,000 and the interest due at the time of the filing of the complaint, as costs of suit and other expenses of whatever kind, including attorneys fees, incurred by the plaintiff for the recovery of said sum, and it is ordered that the payment of all these amounts be made within three months from the date of the judgment and that in case of non-payment of all these amounts within the aforesaid period, the mortgaged property be sold for the payment of the amount or amounts not paid."cralaw virtua1aw library

The judgment appealed from contains a complete and exact statement of all the facts from which the liability of the defendants arose.

There is no question in this appeal but that the defendant Faustino Lichauco owes the plaintiff the sum of P21,500, with interest thereon at the rate of 12 per cent per year from September 13, 1922. Nor is there about the fact that, at the filing of the herein complaint, Faustino Lichauco owed the sum of P1,935, as interest for the preceding nine months. But it is alleged that the lower court erred in allowing legal interest at the rate of 6 per cent from the filing of the complaint upon this sum of P1,935, the amount of interest due on that date. This is no error. Article 1109 of the Civil Code expressly provides that interest due shall earn legal interest from the date payment thereof is judicially demanded, although the obligation may be silent on the matter.

As to the part of the judgment sentencing all the defendants to pay the plaintiff the sum of P50,000, it is necessary to take into account the previous transactions that gave rise to this liability of the defendants. Lichauco & Company, Inc., owed the plaintiff a large sum by way of loan. On September 5, 1921, Faustino Lichauco and wife Luisa F. de Lichauco executed a document (Exhibit C) in favor of the plaintiff whereby they secured with a mortgage upon the property described in the document the payment of a part of this loan in the amount of P50,000 with interest at 9 per cent per year. It was agreed that in case of non-fulfillment of the contract, this mortgage would stand as security also for the payment of all the costs of the suit and expenses of any kind, including attorneys fees, which by way of liquidated damages are fixed at 5 per cent of the principal. It is stated lastly in this document that if Faustino Lichauco and Luisa F. de Lichauco should fail to pay this amount of P50,000, the mortgage shall be in full force and effect.

On the 20th of December, 1922, Lichauco & Co., Inc., Faustino Lichauco, and Luisa F. de Lichauco executed another document (Exhibit D) in which, among other things, they ratified the former mortgage and stated that the payment of the P50,000 shall continue to be secured in the same manner and with the same property, and shall earn interest at 12 per cent per year from October 20, 1920.

The appellants argue in this court that the obligation of Faustino Lichauco and Luisa F. de Lichauco lacked consideration, because what they guaranteed with this mortgage was a debt of Lichauco & Co., Inc. This contention does not find support in law. As a mortgage is an accessory contract, its consideration is the very consideration of the principal contract, from which it receives its life, and without which it cannot exist as an independent contract, although, as in the instant case, it may secure an obligation incurred by another (art. 1857 of the Civil Code). That this amount of P50,000 is to earn interest, and that 5 per cent must be paid in addition for judicial expenses and attorneys fees, was expressly stipulated in the contract. The trial court, however, fixed this interest at 12 per cent from September 5, 1921, which we believe is an error. In the contract of December 20, 1922, it was stipulated that from October 20, 1920, the interest must be 12 per cent. Undoubtedly a clerical error was committed in the writing of this date, inasmuch as then Faustino Lichauco and Luisa F. de Lichauco had not executed the mortgage yet. The lower court held that this date must be September 5, 1921, but this view is groundless, since in the contract of September 5, 1921, this interest was fixed at 9 per cent. This date must, therefore, be construed to be the date of the second contract, December 20, 1922, as it cannot be presumed that the parties ever intended to make it effective from a former date.

For the foregoing, it being understood that the defendants may pay interest at 9 per cent from September 5, 1921, and 12 per cent from December 20, 1922, the judgment appealed from is affirmed in all other respects, with out special pronouncement as to costs. So ordered.

(5) G.R. NO. L-48276 September 30, 1987DR. PEDRO A. DANAO (substituted by his heirs MARTIN DANAO, MINDA DANAO and co-petitioner CONCEPCION S. DANAO) and CONCEPCION S. DANAO,petitioners,vs.HON. COURT OF APPEALS, BANK OF THE PHILIPPINE ISLANDS, Successor to the PEOPLES BANK & TRUST COMPANY,respondents.No. L-48980 September 30, 1987BANK OF THE PHILIPPINE ISLANDS, Successor to the PEOPLES BANK & TRUST COMPANY,petitioner,vs.HON. COURT OF APPEALS, DR. PEDRO A. DANAO (Substituted by his heirs MARTIN DANAO, MINDA DANAO and correspondent CONCEPCION S. DANAO) and CONCEPCION S. DANAO,respondents.PARAS,J.:These are two petitions for review on certiorari of the decision1of respondent Court of Appeals in CA-G.R. No. 59865-R promulgated on April 14, 1978 (Rollo, p. 22), affirming the decision2of the Court of First Instance of Manila with modifications. The dispositive portion of the appellate judgment reads;WHEREFORE, with the modifications that the actual and compensatory damages are eliminated the moral damages are reduced to P30,000.00, and the attorney's fees are likewise reduced to P5,000.00 the decision appealed from is affirmed.The facts of the cases involved are quoted from the decision of respondent Court of Appeals as follows:On February 27, 1963, spouses Pedro Danao and Concepcion S. Danao applied for a commercial credit line of P20,000.00 with the People's Bank and Trust Company. The application having been granted, the parties on March 14, 1963, executed a Commercial Credit Agreement and Mortgage in which, among others, they stipulated:WHEREFORE, the said mortgagor(s) have offered and agreed to secure the repayment of the said credits and advances with interest due or accruing thereon as well as any other liability or liabilities of the said mortgagors to the said mortgagee, now existing, due or to become due, or hereafter incurred by means of a good and valid mortgage as hereinafter stated, and the mortgagee has consented to grant the line of credit applied for a good and sufficient security;NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein set forth the parties do have agreed and do hereby agree, as follows:The said mortgagor(s) shall be and are hereby granted a line of credit not to exceed at any one time the sum total of TWENTY THOUSAND AND 00/000 (P20,000.00) at NINE (9%) per cent per annum, which credit shall be available to said Mortgagor(s) or EITHER OF THEM in the form of advances from time to time to be evidenced by promissory note or notes. ...and on the mortgage that--This mortgage shall continue as security for the payment of the indebtedness herein contracted by said Mortgagor(s) as aforesaid, and of all money expanded or abilities incurred by virtue hereof, with interest thereon, as well as security for the repayment of any other sums now or hereafter owing to the said Mortgagee in addition to or aside from the credit facilities herein granted by the Mortgagee to the Mortgagor(s).F.--In the event that the Mortgagor(s) should fail to pay the sums of money secured by the mortgage, or any part thereof, in accordance with the terms and conditions herein set forth, ..., the Mortgagee shall have the right, at its election, to foreclose this mortgage extrajudicially. ...The proceeds of such sale of the mortgaged properties shall be applied as follows: ... 3) To the satisfaction of the principal amount of obligation herein secured; and 4) To the satisfaction of all further obligations owing by the Mortgagor(s) to the Mortgagee.Given as a security for the credit line of P20,000.00 was a parcel of land in the City of Baguio, covered by Transfer Certificate of Title No. T-223, together with the buildings and improvements thereon.The spouses availed of the credit facility granted them by the People's Bank and Trust Company not only during the original term of one year, but also during the renewals or extensions thereof. The last promisory not signed by Pedro Danao during the extensions was fully paid on July 5, 1968.It appears the October 28, 1963, Antonio Co Kit and Pedro Danao signed a promissory not for P10,000.00. The two agreed to pay the note, jointly and severally, within 179 days after date. The check for the proceeds of the note was issued in the name of Antonio Co Kit alone. The note was renewed by Antonio Co Kit and Pedro Danao for the amount of P8,650.00 on April 27, 1964, payable within 91 days. The promised to pay the amount, jointly and severally.On September 30, 1968, counsel for the People's Bank and Trust Company wrote a demand letter to Antonio Co Kit a demand letter to Antonio Co Kit and Pedro Danao for the payment of the balance of the promissory note in the amount of P5,870.09.On July 14, 1969, the manager of the People's Bank and Trust Company wrote another demand letter, this time to Pedro Danao, for the payment of the balance of P4,225.15, excluding interest.On September 19, 1969, the People's Bank and Trust Company filed a complaint in the City Court of Baguio City against Antonio Co Kit and Pedro Danao, praying that judgment be rendered, ordering defendants, jointly and severally, to pay it (plaintiff) the sum of P4,225.15, plus interest thereon at the rate of 13.5% per annum from July 8, 1969, until full payment, attorney's fees in that sum equal 10% of the total amount due, and the cost of suit.On January 5, 1971 the City Court issued an order, dismissing the complaint "for lack of interest on the part of the plaintiff".On March 1, 1971, the branch manager of the People's Bank and Trust Company, Baguio Branch, wrote a letter to Pedro Danao, informing the latter that they had filed a petition for foreclosure to the City Sheriff of Baguio City, attaching therewith a copy of the petition. Stated therein is that the parcel of land covered by Transfer Certificate of Title No. 2033 will be sold at public auction. according to the petition, the land is security for the payment of any other sums owing to the Bank "in addition to or aside from ... credit facility." The indebtedness to be satisfied out of the proceeds of the foreclosure sales is P3,024.03, exclusive of interest.On March 4, 1971 notice of public auction sale was published in the Baguio Mid-land Courier, a weekly newspaper published and edited in the City of Baguio and which is of wide circulation in the City, province of Benguet and in the Philippines, for three consecutive weeks, once a week. Copies of the notice were also posted in three public and conspicuous places in Baguio for the information of the public. In the published notice of public auction sale, it is stated that in the petition for foreclosure it is alleged that Mortgagors' spouses PEDRO DANAO and CONCEPCION DANAO, ... failed to pay the ... loan when it fell due thereby violating the terms and conditions of the real estate mortgage above mentioned.On March 10, 1971, counsel for the People's Bank and Trust Company, Baguio Branch, wrote a letter, informing the Bank of the full payment of the obligations of Antonio Co Kit and Pedro Danao.On March 16, 1971, the branch manager of the People's Bank and Trust Company executed a cancellation of the real estate mortgage, stating therein that the mortgagors had fully paid the obligation or indebtedness secured by the mortgage.On June 16, 1972, Pedro Danao and Concepcion S. Danao filed a complaint for damages against the Bank of Philippine Islands, as successor to the People's Bank and Trust Company, in the Court of First Instance of Manila, where it was docketed as Civil Case No. 8781.The complaint alleged,inter alia, that both the petition for foreclosure and the notice of public auction sale published in the "Baguio Midland Courier" have neither legal nor factual bases, because (1) while the credit line was availed of from time to time in different amounts by promissory notes, the credits and loans obtained where duly paid in 1968 and since then no further loans were assailed of under the credit line secured by mortgage of the plaintiffs' properties; (2) the plaintiffs' alleged indebtedness mentioned in the defendant's petition for foreclosure and in the consequent notice of public auction sale was the balance due on a "clean loan" granted by the defendant to Antonio Co Kit, although admittedly the promissory note was co-signed by plaintiff Pedro Danao, and the same was a distinct and separate transaction from the plaintiffs' credit line, and was not covered nor secured by the plaintiffs' properties mortgaged to the defendant. The complaint further alleged that the publication of the notice of public auction sale in the "Baguio Midland Courier" was malicious and/or with deliberate intent, or was due to gross negligence, causing the plaintiffs, who are respected members of the community of Baguio Cities untold mental and moral anguish, serious anxiety, besmirched reputation and social humiliation; that as a result of his social humiliation, anxiety, mental and moral anguish, plaintiff Pedro Danao suffered serious heart attack and was hospitalized and confined in bed for a period of one year, causing him to incur hospitalization and medical expenses, and resulting in the loss of his income from his medical practice. The plaintiffs ask for actual or compensatory, moral and exemplars, damages, as well as attorney's fees.In its answer with counterclaim, the People's Bank and Trust Company contended that in firing the petition for extra-judicial foreclosure of the mortgage with the consequent publication of notice of public auction sale, it merely exercised its legal right as creditor-mortgagee after plaintiff Pedro Danao had defaulted, despite repeated demands, in the payment of the indebtedness or obligation contracted by him jointly and severally with Antonio Co Kit; that in exercising such right, it acted lawfully, in good faith and with full justification to protect its interest; and, as affirmative defense, alleged that, contrary to plaintiffs' allegations, the Commercial Credit Agreement and Mortgagee provides that the mortgage shall continue as security for the payment of the indebtedness therein contracted by the mortgagors, as well as security for the repayment of any other sums ... (then or thereafter) owing to the said mortgagee in addition to or aside from the credit facilities therein) granted by the Mortgagee to the Mortgagors: and that plaintiff Pedro Danao's solidarity obligation upon the promissory note signed by him as co-maker jointly and severally with Antonio Co Kit constitutes a further obligation secured by the aforementioned mortgage, in addition to the indebtedness arising from the commercial credit line, which additional obligation was subsisting at tile time the extrajudicial foreclosure proceeding was commenced.After the issues had been joined upon the filing of the answer to the counterclaim and reply to answer, the case was set for pre-trial.After trial on the merits, the Court of First Instance of Manila rendered a decision the dispositive part of which read as follows:WHEREFORE, in view of all the foregoing considerations, the Court hereby renders judgment in favor of the plaintiffs and against the defendant ordering the latter to pay the former the sum of P14,290.00 as actual and compensatory damages, P100,000.00, as moral damages, and P10,000.00, as exemplary damages, in addition to P20,000.00 as and for attorney's fees, as well as the costs of suit. The counterclaim is dismissed.SO ORDERED.From this decision only the Bank of the Philippine Islands as successor of Peoples Bank and Trust Company appealed. Respondent Court affirmed the trial court's decision with some modifications as earlier quoted. Both parties moved for reconsideration. The motion for reconsideration filed by Pedro and Concepcion Danao, as plaintiff-appellees (Rollo, p. 39) was denied in respondent Court's resolution dated May 9, 1978 (Rollo, P. 48), while the motion for reconsideration filed by the Bank of the Philippines Islands, as defendant-appellant (Rollo, p. 41), was also denied in the resolution of the same Appellate Court dated September 6, 1978 (rollo, p. 53).Hence, these petitions filed by both parties.The petition in G.R. No. L-48276 was filed with the Court by the spouses Dr. Pedro A. Danao and Concepcion S. Danao on June 7, 1978 (Rollo, p. 5); while the petition in G.R. No. L-48980 was filed by the Bank of the Philippine Islands on October 7, 1978 (Rollo, p. 7).In G.R. No. L-48276 respondent be filed its comment on the petition for review on certiorari (Rollo, L-48276, p. 114) in compliance with the resolution of the First Division of this Court dated June 27, 1978 (ibid,p. 107) on August 8, 1978 while the petitioners filed their reply on September 14, 1978 (ibid,p. 265) in compliance with the resolution of August 21, 1978 (ibid, p. 261). The Court gave due course to the petition in the resolution dated October 4, 1978 (ibid,p. 274). The brief for the petitioners was filed on December 5, 1978 (ibid,p. 277); while the brief for the respondent, was filed on February 3, 1979 (ibid, p. 301). Petitioner having failed to file the required reply brief within the period granted by the Court which expired on March 1, 1979, the Court resolved on April 16, 1979 (ibid, p. 305) to declare the case submitted for decision.In G.R. No. L-48980, respondents filed their comment on the petition for review on certiorari on November 15, 1978 (Rollo, L-48980, p. 62) in compliance with the resolution of the Second Division of this Court dated October 18, 1978 (ibid,p. 61) while petitioner filed its Reply on January 18, 1979 (ibid,p. 76) in compliance with the resolution of December 4, 1978 (Rollo, p. 73). The Court resolved to give due course to the petition in the resolution of March 21, 1979 respondent was filed on July 8, 1979 (ibid, P. 101). On September 14, 1979 the Court resolved to consider the case submitted for decision (ibid,p. 105), petitioner having failed to file its reply brief within the period granted by the Court which expired on August 7, 1979.On April 29, 1980, the spouses Pedro and Concepcion Danao, petitioners in L-8276 and private respondents in L-48980 moved for the consolidation of the two cases (Rollo, L-48276, p. 308) which was granted by the First Division of the Court in its resolution dated May 7, 1980 (ibid,p. 311). On July 2, 1980 the Second Division of the Court also ordered the consolidation of L-48980 with L-48276 and the transfer of the case to the First Division of the Court (Rollo, L-48980, p. 110).On August 16, 1985, counsel for the spouses Pedro and Concepcion Danao manifested to the Court the death of his client Pedro Danao and moved for the substitution of the heirs Martin Danao and Minda Danao as co-petitioners and co-respondents of Concepcion Danao in the instant cases (Rollo, L-48276, p. 327). On September 4, 1985 the heirs submitted to the Court a copy of the death certificate of Pedro A. Danao (ibid, p. 341), hence the effecting of the substitution.In L-48276, petitioners raised the following assignment of errors:FIRST THE COURT OF APPEALS ERRED IN FINDING THAT THE REAL ESTATE MORTGAGED UNDER THE COMMERCIAL CREDIT AGREEMENT & MORTGAGE BY AND BETWEEN THE PARTIES ALSO SECURED THE CLEAN LOAN EXTENDED TO MR. ANTONIO CO KIT, THE PROMISSORY NOTE FOR WHICH WAS CO-SIGNED BY PETITIONER DR. PEDRO A. DANAO.SECOND THE COURT OF APPEALS ERRED IN FINDING THAT THE ILLNESS AND HEART ATTACKS SUFFERED BY PETITIONER DR. PEDRO A. DANAO HAD NO CASUAL RELATIONSHIP TO THE FORECLOSURE OF MORTGAGE AND PUBLICATION OF THE NOTICE OF AUCTION SALE.THIRD THE COURT OF APPEALS ERRED IN REDUCING THE MORAL DAMAG