Philippine National Bank v.

Primitiva Mallorca
FACTS: In 1950, Ruperta Lavilles mortgaged a 48.965 square meter-parcel of land in
Iloilo to the PNB as security for a loan of Php 1,800.00. The lot was covered by Transfer
Certificate of Title 27070 in the name of Ruperta Lavilles. The mortgage was duly
recorded.
While the subject mortgage was in full force and effect, and without PNB's knowledge
and consent, Ruperta Lavilles sold the appellant Primitiva Mallorca 20,000 square
meters of the mortgaged land.
Mallorca moved the Iloilo cadastral court to have the sale to her duly annotated on the
title, and, for the purpose, to require PNB to surrender the owner's copy of TCT 27070
to the Register of Deeds. The Register of Deeds then cancelled TCT 27070, issued a
new one, TCT 24256, making two co-owner's copies of the title — one each for Ruperta
Lavilles and for Primitiva Mallorca. PNB's mortgage lien was annotated on both copies.
Ruperta Lavilles failed to pay her mortgage debt. PNB foreclosed the mortgage
extrajudicially. A certificate of sale was issued to PNB as the highest bidder in the
foreclosure sale. This certificate of sale was registered with the Register of Deeds of
Iloilo. Mallorca refused to surrender her co-owner’s copy of the property. Mallorca’s
stand is that her undivided interest consisting of 20,000 square meters of the mortgaged
lot, remained unaffected by the foreclosure and subsequent sale to PNB because she
was not a party to the real estate mortgage in favor of PNB, and she "neither secured
nor contracted a loan" with said bank. What PNB foreclosed, she maintains, "was that
portion belonging to Ruperta Lavilles only," not the part belonging to her.

ISSUE: Was Mallorca’s undivided interest consisting of 20,000 square meters of the
mortgaged lot unaffected by the foreclosure and subsequent sale to PNB?

RULING: No, Mallorca’s undivided interest consisting of 20,000 square meters of the
mortgaged lot is not unaffected by the foreclosure and subsequent sale to PNB. Article
2126 of the Civil Code states that, a "mortgage directly and immediately subjects the
property upon which it is imposed, whoever the possessor may be, to the fulfillment of
the obligation for whose security it was constituted." Sale or transfer cannot affect or
release the mortgage.
A purchaser is necessarily bound to acknowledge and respect the encumbrance to
which is subjected the purchased thing, and which is at the disposal of the creditor "in
order that he, under the terms of the contract, may recover the amount of his credit
therefrom."
For, a recorded real estate is a right in rem, a lien on the property whoever its owner
may be. Because the personality of the owner is disregarded; the mortgage subsists
notwithstanding changes of ownership; the last transferee is just as much of a debtor as
the first one; and this, independent of whether the transferee knows or not the person of
the mortgagee. So it is, that a mortgage lien is inseparable from the property
mortgaged. All subsequent purchasers thereof, must respect the mortgage, whether the
transfer to them be with or without the consent of the mortgagee. For, the mortgage,
until discharge, follows the property. And then, militating against appellant's cause is
one other special feature of a real mortgage — its indivisibility.
The Court has understood mortgage indivisibility in the sense that each and every
parcel under mortgage answers for the totality of the debt. Mallorca cannot rightfully
deny the mortgage lien on the portion of the land she purchased. First. Registration of
the mortgage in the Register of Deeds is notice to all persons of the existence thereof.
Second. By express provision of Section 39 of the Land Registration Act, "every
subsequent purchaser of registered land who takes a certificate of title for value in good
faith shall hold the same free of all encumbrance except those noted on said certificate."
Clear implication exists that if an encumbrance is so noted, that purchaser is bound
thereby. Therefore, Mallorca’s undivided interest consisting of 20,000 square meters of
the mortgaged lot is not unaffected by the foreclosure and subsequent sale to PNB.