G.R. No. 44072 - De la Paz vs. Macondray and Co., Inc.

The applicants, Gregorio de la Paz and Guadalupe Santiesteban, originally applied under Act No. 496 for the registration of eleven parcels of land situated in the municipality of Pasig, Province of Rizal.
Some portions of the application were opposed by the Province of Rizal and the Manila Railroad Company, but following segregation of the contested parcels, the oppositors abandoned their intervention.
The Court of First Instance of Rizal initially ordered the registration of the lands in favor of the applicants.

Prior to the finality of the registration decision, Macondray & Co., Inc. (the appellee) intervened by asking for the setting aside of the registration, permission to file its written opposition, and the reopening of the case.
The appellee’s claim was founded on mortgage transactions whereby the spouses Baltazar Raymundo and Agapita San Juan, who had been the exclusive owners of the land, executed a deed of mortgage in favor of Macondray & Co., Inc. to secure a loan of P5,000 plus interest at 12% per annum.
The mortgage deed, acknowledged by a notary public and registered on July 22, 1934, later became the basis of a foreclosure suit when the debt was not fully paid.

On March 26, 1928, the spouses Raymundo and San Juan sold the lands (described in the plans SWO-13145 and SWO-13414) to Ambrosio Santiesteban and Benita Lambengco, with the latter beginning possession and reaping the benefits of the property from that date until November 28, 1932.
Following the death of Benita Lambengco, intestate proceedings were instituted, resulting in a deed of partition that adjudicated the lands to the surviving spouse, Ambrosio Santiesteban.
On November 29, 1932, Ambrosio Santiesteban executed a deed of sale of the lands to the applicants, Gregorio de la Paz and Guadalupe Santiesteban, who have since continued in possession and enjoyed the products of the property.

In the foreclosure suit instituted by the appellee, the lands, originally mortgaged by the spouses Raymundo and San Juan, were sold by public auction for P1,100 after a writ of execution was issued; this sale was approved by the court on October 9, 1933.
The foreclosure proceeding did not include as defendants the predecessors in interest (neither Ambrosio Santiesteban and Benita Lambengco, nor the original mortgagors in full) whose interests were subordinate to the mortgage lien.
As a result, the appellants argued that, while the foreclosure affected the mortgages, it left intact their equitable right of redemption as purchasers from their predecessors in interest.

After the decision favoring the appellee was rendered, the appellants filed a motion for a new trial, introducing new evidence in the form of a sworn statement by Baltazar Raymundo.
In this statement, Raymundo asserted that almost all of his indebtedness to the appellee had been paid (except approximately P600), with payments made through an intermediary, Jose Perez, and that collateral securing the balance involved other properties pledged to El Hogar Filipino.
The motion for a new trial was denied by the trial court, and the appellate arguments contended that the evidence would not reverse the clear finding that the debt, as determined by the court, remained outstanding.

Whether the foreclosure proceeding, by failing to include all subordinate or precedent parties (such as the earlier owners/purchasers), affected and nullified the equitable right of redemption of the appellants.

Is the non-joinder of the predecessors in interest (the original mortgagors and subsequent purchasers) fatal to the foreclosure itself?
Does their exclusion leave their right of redemption intact despite the foreclosure ruling?

Whether the stipulation in the mortgage deed—the pact de non alienando—which prohibits the mortgagor from selling or encumbering the property without written consent, renders the subsequent sales null and void.

Does the pact de non alienando allow the mortgagee to proceed directly in a foreclosure without notice to third possessors?
Can subsequent purchasers claim better title despite such a stipulation?

Whether the trial court erred in denying the motion for a new trial on the basis of the newly discovered evidence presented by the appellants.

Was the evidence sufficient enough to influence the foreclosure outcome?
Did the court properly assess the evidence in context of the outstanding indebtedness?

Whether the act of reopening the proceedings and allowing the appellee to file its written opposition was proper under the circumstances.

Was justice served by granting the appellee an opportunity to be heard in light of the foreclosure's potential effects on all parties involved?