Tambunting v. Rehabilitation Finance Corporation
REITERATIONFacts
The Antecedents: Spouses Jose and Eleuteria Escueta obtained loans from the Rehabilitation Finance Corporation (RFC), securing them with a mortgage over their land. Subsequently, with RFC's consent, they executed a second mortgage over the same property to secure a loan from Spouses Antonio and Aurora Tambunting. The Escuetas defaulted on both loans. Procedural History: The RFC foreclosed its first mortgage extra-judicially, with the RFC itself becoming the highest bidder, subject to the Escuetas' right of redemption. The Tambuntings initiated judicial foreclosure of their second mortgage. The RFC took possession of the foreclosed property. Approximately eight months after the foreclosure sale, the Tambuntings offered to redeem the property from the RFC. The RFC agreed, subject to the Escuetas' right of redemption, executing a Deed of Conditional Sale in favor of the Tambuntings. This deed stipulated that the contract could be revoked within one year if the former owners exercised their right to redeem, in which case the Tambuntings would be refunded. The Tambuntings took possession and collected rentals. Three days before the redemption period expired, the Escuetas assigned their right to repurchase to Spouses Demetrio Hernandez and Candelaria Paguio. The following day, Hernandez deposited the redemption price with the RFC and undertook to pay the balance. The RFC then notified the Tambuntings that their contract was revoked due to the redemption by Hernandez. The Tambuntings filed two actions: one for foreclosure of their second mortgage (which was amended) and another seeking nullification of the assignment, the redemption by Hernandez, and the RFC's revocation of the conditional sale, among other reliefs. The two cases were consolidated and jointly decided by the trial court, which ruled against the Tambuntings, declaring the Deed of Conditional Sale null and void, the Deed of Assignment valid, and ordering the Tambuntings to refund excess rentals. The Court of Appeals affirmed the trial court's decision. The Tambuntings appealed to the Supreme Court. The Petition: The Tambuntings argued that the assignment of the right of redemption was fictitious and violated their second mortgage. They also contended that the redemption by the Hernandezes was invalid and that they were entitled to damages.
Issue(s)
Whether the assignment of the Escuetas' right of redemption to the Hernandez Spouses was fictitious or simulated. Whether the assignment of the right of redemption violated the terms of the Tambuntings' second mortgage. Whether the redemption exercised by the Hernandez Spouses was valid. Whether the Tambuntings were entitled to damages.
Ruling
The petition for review on certiorari is denied, and the judgment of the Court of Appeals is affirmed, with a modification regarding the determination of excess rentals and the balance of the Tambuntings' mortgage credit, which the Hernandezes are bound to pay within ninety (90) days from finality of the determination, failing which the property shall be sold at public auction.
Ratio Decidendi
On the validity of the assignment and the nature of the redemption: The Court held that the issue of whether the assignment was fictitious is a question of fact, and the Court of Appeals' resolution thereof is final and conclusive. The assignment did not enlarge the scope or extend the period of the right of redemption; it merely placed the transferee in the shoes of the original owner with the same obligations and timeframe. Therefore, even if the assignment were fictitious, it would be inconsequential as the redemption was made strictly according to the terms set by the RFC. The Court emphasized that the Deed of Conditional Sale explicitly provided for its revocation upon the former owner's exercise of the right to redeem, and the Tambuntings were bound by this stipulation. On the alleged violation of the second mortgage: The Court clarified that a mortgagor does not lose the right to sell the property or create another mortgage, provided the prior mortgagee's rights are preserved. While the second mortgage contained a stipulation against subsequent agreements without written permission, this was construed to apply to subsequent mortgages or encumbrances, not to an alienation of the immovable itself, as stipulations forbidding alienation are void under Article 2130 of the Civil Code. Furthermore, the assignment of the right of redemption was considered to have "connection with the first mortgage with the RFC," thus falling under an exception in the prohibitory stipulation. The Tambuntings' acceptance of the Deed of Conditional Sale, which allowed for revocation upon redemption by the former owner or successor-in-interest, estopped them from later challenging the validity of such redemption. On the validity of the redemption by the Hernandezes: The Court found no dispute that the redemption by the Hernandezes, as assignees of the Escuetas, was made within the time and manner prescribed by law and the RFC. The RFC's acceptance of this redemption and subsequent revocation of its contract with the Tambuntings were in accordance with the explicit provisions of their Deed of Conditional Sale. The Tambuntings' claim that the redemption amount was not the full redemption price was not substantiated, and the terms of redemption were those set by the RFC itself, which the Tambuntings had initially accepted. On the Tambuntings' right to damages and refund: The Court affirmed that as a consequence of the valid redemption by the Hernandezes, the Tambuntings acquired the right to a refund of all amounts paid to the RFC under the conditional sale, with interest. Their credit against the Escuetas and their right to foreclose the second mortgage remained unaffected, subject to the equity of redemption that the Hernandezes possessed as assignees. The trial court's order for the Tambuntings to refund excess rentals collected was upheld, with the modification that the determination of these rentals and the balance of the Tambuntings' mortgage credit would be made by the trial court, and the Hernandezes would have a period to pay the latter.
Main Doctrine
A contract, if not contrary to law, morals, good customs, public order, or public policy, shall be enforced to the letter. A stipulation in a deed of conditional sale, allowing revocation upon the former owner's exercise of the right of redemption, is valid and binding. The assignment of the right of redemption does not alter the conditions or period for its exercise.