Heirs of Canque v. Court of Appeals
REITERATIONFacts
The Antecedents: Spouses Marcelino and Felicidad Canque owned a parcel of land under Original Certificate of Title No. P-(20559)-3409, issued by virtue of Free Patent No. 40336. They sold a portion, and a new title (T-8730) was issued for the remaining 23,608 square meters. On October 12, 1977, they obtained a P15,000.00 loan from the Rural Bank of Matanao, secured by a mortgage on this land. This loan was paid. On February 2, 1980, Felicidad Canque died. On March 7, 1980, Marcelino Canque obtained another loan of P25,000.00 from the same bank, using the same property as collateral. The bank considered this a continuation of the first loan, as the mortgage was uncancelled. For failure to pay the second loan, the bank extrajudicially foreclosed the mortgage. The Sheriff's Certificate of Sale was registered on September 9, 1983. On October 18, 1985, the bank executed an affidavit of consolidation of ownership and deed of absolute sale, and a new title (T-18357) was issued in the bank's name on December 23, 1985. Procedural History: Seven years after the registration of the Sheriff's Certificate of Sale, the heirs of Felicidad Canque offered to redeem the property, but the bank refused. They filed a complaint on September 7, 1990. The Regional Trial Court (RTC) issued a partial judgment allowing redemption and/or repurchase under Section 119 of Commonwealth Act 141. Subsequently, the RTC issued an amended decision allowing redemption by paying the purchase price with interest. The Court of Appeals (CA) reversed the RTC decision, ruling that the right of redemption had prescribed, as the five-year period should be reckoned from September 9, 1983 (registration of the sheriff's certificate of sale), and the suit was filed almost seven years later. However, the CA also declared the second mortgage void concerning Felicidad Canque's 50% share, which passed to her heirs, and ordered the cancellation of the bank's title and issuance of two new titles for 50% each. The Petition: The Heirs of Felicidad Canque filed a petition for review with the Supreme Court, seeking to annul the CA decision and reinstate the RTC's ruling.
Issue(s)
Whether the Court of Appeals erred in holding that the period to repurchase foreclosed lands issued through free patent by Rural Banks is only five (5) years. Whether the Court of Appeals erred in not passing upon the issue of whether the Real Estate Mortgage is a continuing mortgage so as to also secure future loans by the husband after the death of the wife.
Ruling
The petition is granted. The assailed Decision of the Court of Appeals is set aside. The dispositive portion of the Decision of the Regional Trial Court of Digos, Davao del Sur, allowing the petitioner to redeem the subject property, is reinstated.
Ratio Decidendi
On the first issue (Prescriptive Period to Repurchase): The Supreme Court reiterated its ruling in Rural Bank of Davao City vs. Court of Appeals. For lands mortgaged to a rural bank under R.A. No. 720, as amended, the mortgagor has two (2) years from the registration of the sheriff's certificate of sale to redeem the property if it is covered by a Torrens title. If this right is not exercised, the mortgagor or their heirs have an additional five (5) years from the expiration of the two-year redemption period to repurchase the property, pursuant to Section 119 of the Public Land Act (C.A. No. 141). In this case, the sheriff's certificate of sale was registered on September 9, 1983. Therefore, the redemption period was until September 9, 1985, and the repurchase period extended until September 9, 1990. Since the suit was filed on September 7, 1990, the petitioners' right to redeem had not yet expired. The Court of Appeals erred in failing to consider this established jurisprudence and in reckoning the prescriptive period solely from the registration date without accounting for the two-year redemption period followed by the five-year repurchase period. On the second issue (Factual Finding of Continuing Mortgage): The Supreme Court deferred to the factual findings of the trial court, which had determined that the parties intended the mortgage to be a continuing security for future loans. The trial court reasoned that if this were not the intention, the mortgagor would have asked for the return of the title and cancellation of the mortgage after paying the first loan. The trial court also found it unlikely that the bank would grant a P25,000.00 loan without collateral when it required collateral for a P15,000.00 loan. The argument that the surviving spouse could not mortgage the property for the second loan after his wife's death was dismissed for lack of proof that the bank was aware of the wife's death at the time the second loan was obtained. The Court found no overlooked facts or circumstances that would warrant disturbing the trial court's factual finding regarding the continuing credit arrangement. However, the Court noted that this issue became academic in light of its ruling on the first issue concerning the redemption period.
Main Doctrine
The mortgagor of titled real estate acquired under the Public Land Act, foreclosed by a rural bank, may redeem the property within two (2) years from the registration of the sheriff's certificate of sale. If the mortgagor fails to exercise this right, they or their heirs may still repurchase the land within five (5) years from the expiration of the two-year redemption period.