EN BANC

[G.R. No. L-17072. October 31, 1961.]

CRISTINA MARCELO VDA. DE BAUTISTA, plaintiff-appellee, vs.

BRIGIDA MARCOS, ET AL., defendants-appellants.

Aladin B. Bermudez for defendants-appellants.

Cube & Fajardo for plaintiff-appellee.

SYLLABUS

1. HOMESTEAD; MORTGAGES; CONTRACT OF MORTGAGE

EXECUTED BEFORE ISSUANCE OF PATENT VOID AND INEFFECTIVE. — 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, N.C.C.), and it
appearing that the mortgage was constituted before the issuance of the
patent to the mortgagor, the mortgage in question is void and ineffective.
2. ID.; ID.; POSSESSION TRANSFERRED TO MORTGAGEE IN
USUFRUCT; INVALIDITY OF MORTGAGE CONTRACT DOES NOT INVALIDATE
TRANSFER OF POSSESSION; MORTGAGEE IS POSSESSOR IN GOOD FAITH
AND ENTITLED TO THE FRUITS. — The invalidity of the mortgage contract
does not imply the concomitant invalidity of the collateral agreement
whereby possession of the land mortgaged was transferred to the
mortgagee in usufruct, and the latter, not having been aware of any flaw in
her mode of acquisition, is a possessor in good faith (Art. 526, N.C.C.)
entitled to all the fruits received during the entire period of her possession in
good faith (Art. 544, N.C.C.).
3. OBLIGATIONS AND CONTRACTS; HOMESTEAD CANNOT BE MADE
TO ANSWER FOR DEBTS CONTRACTED WITHIN FIVE YEARS FROM ISSUANCE
OF PATENT; PROHIBITION INCLUDES DEBTS CONTRACTED BEFORE ISSUANCE
OF PATENT; PURPOSE AND POLICY OF THE LAW. — A homestead cannot be
taken for the satisfaction of debts contracted prior to the expiration of five
years from the issuance of the patent (Sec. 118, C.A. No. 141). This
prohibition should include debts contracted before such issuance because
the purpose and policy of the law 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 vs. Talens, 80 Phil., 792; 45 Off. Gaz., No. 9 (Supp.)
413; De los Santos vs. Roman Catholic Church of Midsayap, 94 Phil., 405; 50
Off. Gaz., [4] 1588.

DECISION

REYES, J.B.L., J : p

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 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 Marcelo 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 the 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 given 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 patent was issued
over the land in question; that the agreement of the parties could not be an
antichresis because the deed Exhibit "A" clearly shows a mortgage with
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 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 Apolonio 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 defendant's 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 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, 1 ), since upon the issuance of said patent, 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 following 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. No. 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 collateral 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 rights, 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
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 (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 against defendant-appellants.
Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Paredes,
and De Leon, JJ., concur.
Barrera, J., took no part.

Footnotes

1. Art. 1434, N.C.C. provides that "When a person who is not the owner of a
thing sells or alienates and delivers it, and later the seller or grantor acquires
title thereto, such title passes by operation of law to the buyer or grantee."

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