II.

With regard to the validity of the mortgage contracts entered into by the parties, Art. 2085, par. 2, of
the New Civil Code specifically requires that the pledgor or mortgagor be the absolute owner of the
thing pledged or mortgaged. Thus, since the disputed property was not owned by the Olidiana
spouses when they mortgaged it to petitioner the contracts of mortgage and all their subsequent
legal consequences as regards Lot No. 2029 (Pls-61) are null and void. In a much earlier case  we 13 

held that it was an essential requisite for the validity of a mortgage that the mortgagor be the
absolute owner of the property mortgaged, and it appearing that the mortgage was constituted
before the issuance of the patent to the mortgagor, the mortgage in question must of necessity be
void and ineffective. For, the law explicitly requires as imperative for the validity of a mortgage that
the mortgagor be the absolute owner of what is mortgaged.

III.

SSUE:
Would it be valid and effective to have a clause in a chattel mortgage that
purports to likewise extend its coverage to obligations yet to be contracted
or incurred?

HELD:
No. While a pledge, real estate mortgage, or antichresis may exceptionally
secure after-incurred obligations so long as these future debts are
accurately described, a chattel mortgage, however, can only cover
obligations existing at the time the mortgage is constituted. Although a
promise expressed in a chattel mortgage to include debts that are yet to be
contracted can be a binding commitment that can be compelled upon, the
security itself, however, does not come into existence or arise until after a
chattel mortgage agreement covering the newly contracted debt is
executed either by concluding a fresh chattel mortgage or by amending the
old contract conformably with the form prescribed by the Chattel Mortgage
Law. Refusal on the part of the borrower to execute the agreement so as to
cover the after-incurred obligation can constitute an act of default on the
part of the borrower of the financing agreement whereon the promise is
written but, of course, the remedy of foreclosure can only cover the debts
extant at the time of constitution and during the life of the chattel mortgage
sought to be foreclosed.

IV.
There is merit in the petition. In the redemption of properties sold at an execution sale, the amount
payable is no longer the judgment debt, but the purchase price. In the case of Castillo vs.
Nagtalon,   the Court said:
6

The procedure for the redemption of properties sold at execution sale is prescribed in
Sec. 26, Rule 39 of the Rules of Court. Thereunder, the judgment debtor or
redemptioner may redeem the property from the purchaser within 12 months after
the sale, by paying the purchaser the amount of his purchase, with I % per month
interest thereon up to the time of redemption, together with the taxes paid by the
purchaser after the purchase, if any. In other words, in the redemption of properties
sold at an execution sale, the amount payable is no longer the judgment debt but the
purchase price. Considering that appellee tendered payment only of the sum of
P317.44, whereas the 3 parcels of land she was seeking to redeem were sold for the
sums of P1,240.00, P24.00 and P30.00, respectively, the aforementioned amount of
P317.44 is insufficient to effectively release the properties. However, as the tender of
payment was timely made and in good faith, in the interest of justice We incline to
give the appellee opportunity to complete the redemption purchase of the 3 parcels
as provided in Sec. 26, Rule 39 of the Rules of Court, within 15 days from the time
this decision becomes final and executory.

Should appellee fail to complete the redemption price, the sheriff may either release
to appellee the 2 smaller lots and return the entire deposit without releasing any of
the 3 lots, as the appellee may elect.

The case of DBP vs. Mirang, relied upon by the respondent judge, wherein the Court ruled that the
mortgagor whose property has been sold at public auction, either judicially or extrajudicially, shall
have the right to redeem the property by paying an the amounts owed to the mortgage on the date of
the sale, with interest thereon at the rate specified in the contract and not the amount for which the
property was acquired at the foreclosure sale is not controlling because of different factual settings.
The Mirang case involves the redemption of mortgaged property sold at a foreclosure sale and the
mortgagor was ordered to pay his entire indebtedness to the mortgagee, plus the agreed interests
thereon, before redemption can be effected, because the charter of the mortgagee (DBP) required
the payment of such amount.

V.

The available assets of such a bank are held in trust, and so conserved that each
depositor or other creditor shall receive payment or dividend according to the amount
of his debt, and that none of equal class shall receive any advantage or preference
over another.

And with respect to a national bank under voluntary liquidation, the court noted in the Rohr case that
the assets of such a bank "become a trust fund, to be administered for the benefit of all creditors pro
rata and, while the bank retains its corporate existence, and may be sued, the effect of a judgment
obtained against it by a creditor is only to fix the amount of debt. He can acquire no lien which will
give him any preference or advantage over other general creditors. (245 Pac. 249). *

Considering that the deposits in question, in their inception, were not preferred credits, it does not seem logical and just that they should be
raised to the category of preferred credits simply because the depositors, taking advantage of the long interval between the declaration of
insolvency and the filing of the petition for judicial assistance and supervision, were able to secure judgments for the payment of their time
deposits.
The judicial declaration that the said deposits were payable to the depositors, as indisputably they
were due, could not have given the Elizes and Padilla spouses a priority over the other depositors
whose deposits were likewise indisputably due and owing from the insolvent bank but who did not
want to incur litigation expenses in securing a judgment for the payment of the deposits.

The circumstance that the Fidelity Savings Bank, having stopped operations since February 19,
1969, was forbidden to do business (and that ban would include the payment of time deposits)
implies that suits for the payment of such deposits were prohibited. What was directly prohibited
should not be encompassed indirectly. (See Maurello vs. Broadway Bank & Trust Co. of Paterson
176 Atl. 391, 114 N.J.L. 167).

It is noteworthy that in the trial court's order of October 3, 1972, which contains the Bank Liquidation
Rules and Regulations, it indicated in step III the procedure for processing the claims against the
insolvent bank. In Step IV, the court directed the Central Bank, as liquidator, to submit a Project of
Distribution which should include "a list of the preferred credits to be paid in full in the order of
priorities established in Articles 2241, 2242, 2243, 2246 and 2247" of the Civil Code (note that article
2244 was not mentioned). There is no cogent reason why the Elizes and Padilla spouses should not
adhere to the procedure outlined in the said rules and regulations.

WHEREFORE, the lower court's orders of August 20, 1973 and February 25, 1974 are reversed and
set aside. No costs.