G.R. No. 214163 - Lim vs. Lim

On March 19, 1979, Randolph C. Tajanlangit and Esteban C. Tajanlangit (mortgagors) executed a Deed of Real Estate Mortgage over Lot No. 1901-E-61-B-1-F, subdivision plan Psd-274802, Molo, Iloilo City (TCT No. T-50324), securing a promissory note for ₱40,000.00 payable to Rodolfo T. Ganzon (mortgagee) in two installments (₱20,000.00 on May 25, 1979 and ₱20,000.00 on August 25, 1979).
On August 28, 1979, mortgagee Ganzon initiated extra-judicial foreclosure; ex-officio Provincial Sheriff Gregorio Lira served personal notices and published the Notice of Extra-Judicial Sale, scheduling public auction on September 28, 1979.

On August 25, 1978, Ganzon had sold Lot No. 1900, Cadastral Survey of Iloilo (TCT No. T-39579) to Esteban Tajanlangit, with a vendor’s warranty to clear occupants within 120 days.
Private respondents filed CFI Case No. 13053 on September 27, 1979, seeking to annul the extrajudicial foreclosure, demanding specific performance, damages, prohibition, and a writ of preliminary injunction, alleging:

The ₱40,000.00 note secured by the mortgage was part of the purchase price of Lot No. 1900;
Ganzon breached his warranty to clear occupants;
The mortgage lacked a stipulation for extrajudicial foreclosure and was thus void.

After pre-trial, respondents moved for release of the real estate and acceptance of a surety bond in lieu of the mortgage.
On November 20, 1980, the CFI granted the motion, ordering the Register of Deeds to cancel the mortgage lien on TCT No. T-50324 upon posting an ₱80,000.00 surety bond.
Respondents posted the bond on January 28, 1981; on February 24, 1981, the CFI denied petitioners’ motion for reconsideration, approved the bond, and ordered surrender of the TCT owner’s copy for cancellation of the mortgage annotation.
Petitioners elevated the matter to the Supreme Court, which on March 18, 1981, issued a TRO and, on July 25, 1983, resolved the petition.

Whether the trial court, before trial on the merits, may order substitution of a real estate mortgage lien on a Torrens-titled property with a surety bond securing the same obligation.
Whether cancellation of the annotated mortgage lien upon posting of a surety bond violates the nature of a mortgage and the constitutional non-impairment of contracts clause.