transaction involving the property had been entered into. Where the party has knowledgeof a prior existing interest which is unregistered at the time he acquired a right to the sameland, his knowledge of that prior unregistered interest has the effect of registration as tohim.Further, the heirs of Eduardo cannot be considered third persons for purposes ofapplying 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 actualnotice or knowledge thereof.Not only are petitioners the heirs of Eduardo, some of themwere actually parties to the Kasulatan executed in favor of Ricardo. Thus, the annotation ofthe adverse claim of the Cruzes on the OCT is no longer required to bind the heirs ofEduardo, petitioners herein. Petitioners had no right to constitute mortgage over disputed portionThe requirements of a valid mortgage are clearly laid down in Article 2085 of theNew Civil Code, viz:ART. 2085. The following requisites are essential to thecontracts of pledge and mortgage:(1) That they be constituted to secure the fulfillment ofa principal obligation;(2) That the pledgor or mortgagor be the absoluteowner of the thing pledged or mortgaged;(3) That the persons constituting the pledge ormortgage have the free disposal of theirproperty, and in the absence thereof, that theybe legally authorized for the purpose.Third persons who are not parties to the principalobligation may secure the latter by pledging or mortgagingtheir own property. (emphasis supplied)For a person to validly constitute a valid mortgage on real estate, he must be the absoluteowner thereof as required by Article 2085 of the New Civil Code.The mortgagor must bethe owner, otherwise the mortgage is void.In a contract of mortgage, the mortgagorremains to be the owner of the property although the property is subjected to a lien.Amortgage is regarded as nothing more than a mere lien, encumbrance, or security for adebt, and passes no title or estate to the mortgagee and gives him no right or claim to thepossession of the property.In this kind of contract, the property mortgaged is merelydelivered to the mortgagee to secure the fulfillment of the principal obligation.Suchdelivery does not empower the mortgagee to convey any portion thereof in favor of anotherperson as the right to dispose is an attribute of ownership.The right to dispose includesthe right to donate, to sell, to pledge or mortgage. Thus, the mortgagee, not being theowner of the property, cannot dispose of the whole or part thereof nor cause theimpairment of the security in any manner without violating the foregoing rule.Themortgagee only owns the mortgage credit, not the property itself.
Petitioners submit as an issue whether a mortgagor may be compelled to receivefrom 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 orauthority of the mortgagor as registered owner. This formulation is disingenuous,