Where the party has knowledge of a prior existing interest which is

Where the party has knowledge of a prior existing

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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 the Kasulatan executed 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 constitute mortgage over disputed portion The 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 the absolute owner of the thing pledged or mortgaged; (3) That the persons constituting the pledge or mortgage have the free 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]
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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,
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