Development Bank of the Philippines v. Court of Appeals

Summary

DBP granted loans to the Olidiana spouses secured by mortgages over Lot 2029, which was still subject to a Free Patent application when mortgaged. The Olidianas subsequently transferred their rights to respondents Quinto and Chupuico, who obtained the free patents and titles. When DBP foreclosed for non-payment, it discovered the lot was already titled to the respondents. The Supreme Court affirmed lower courts' rulings that the mortgages were null and void because they violated Art. 2085, par. 2 of the Civil Code, which requires the mortgagor to be the absolute owner of the mortgaged property. Since the lot remained public land when mortgaged, the Olidianas were not absolute owners and could not validly encumber it. The decision establishes that public lands subject to patent applications cannot be validly mortgaged until the patent is issued and registered.