SECOND DIVISION
G.R. No. 194152, June 05, 2017
MAKILITO B. MAHINAY, Petitioner, v. DURA TIRE & RUBBER INDUSTRIES, INC., Respondent.
D E C I S I O N
LEONEN, J.:
The period to redeem a property sold in an extrajudicial foreclosure sale is not extendible. A pending action to annul the foreclosure sale does not toll the running of the one (1)-year period of redemption under Act No. 3135.1
This resolves a Petition for Review on Certiorari2 directly filed before this Court, assailing the Judgment on the Pleadings3 dated April 13, 2010 and Order4 dated September 2, 2010 rendered by Branch 20 of the Regional Trial Court of Cebu City in Civil Case No. CEB-33639. The trial court dismissed the Complaint filed by Makilito B. Mahinay (Mahinay), declaring that he already lost his right to redeem a parcel of land sold in an extrajudicial foreclosure sale.5
The parcel of land, with an area of 3,616 square meters and located in Barrio Kiot, Cebu City, was covered by Transfer Certificate of Title (TCT) No. 111078 under the name of A&A Swiss International Commercial, Inc. (A&A Swiss).6 The property was mortgaged to Dura Tire and Rubber Industries, Inc. (Dura Tire), a corporation engaged in the supply of raw materials for tire processing and recapping, as security for credit purchases to be made by Move Overland Venture and Exploring, Inc. (Move Overland).7 Under the mortgage agreement, Dura Tire was given the express authority to extrajudicially foreclose the property should Move Overland fail to pay its credit purchases.8
On June 5, 1992, A&A Swiss sold the property to Mahinay for the sum of P540,000.00.9 In the Deed of Absolute Sale,10 Mahinay acknowledged that the property had been previously mortgaged by A&A Swiss to Dura Tire, holding himself liable for any claims that Dura Tire may have against Move Overland.11
On August 21, 1994, Mahinay wrote Dura Tire, requesting a statement of account of Move Overland's credit purchases. Mahinay sought to pay Move Overland's obligation to release the property from the mortgage.12 Dura Tire, however, ignored Mahinay's request.13
For Move Overland's failure to pay its credit purchases, Dura Tire applied for extrajudicial foreclosure of the property on January 6, 1995.14 Mahinay protested the impending sale and filed a third-party claim before the Office of the Provincial Sheriff of Cebu.15
Despite the protest, Sheriff Romeo Laurel (Sheriff Laurel) proceeded with the sale and issued a Certificate of Sale in favor of Dura Tire, the highest bidder at the sale.16 The property was purchased at P950,000.00, and the Certificate of Sale was registered on February 20, 1995.17
On March 23, 1995, Mahinay filed a Complaint18 for specific performance and annulment of auction sale before the Regional Trial Court of Cebu City. According to Mahinay, there was no proof that Dura Tire supplied raw materials to Move Overland after the property was mortgaged.19 Mahinay added that Dura Tire allegedly deprived him of the opportunity to release the property from the mortgage by failing to furnish him with Move Overland's statement of account.20 Dura Tire, therefore, had no right to foreclose the mortgage and the foreclosure sale was void.
In its Answer,21 Dura Tire mainly argued that Mahinay had no cause of action to file the Complaint to annul the foreclosure sale since he was not privy to the mortgage agreement.22
Acting on Dura Tire's affirmative defense, Branch 15 of the Regional Trial Court of Cebu City initially dismissed the Complaint.23 However, on mandamus and certiorari, the Court of Appeals set aside the order of the trial court and remanded the case for further proceedings.24 The case was then re-raffled to Branch 12 of the Regional Trial Court of Cebu City.25
After pre-trial proceedings, the trial court again ordered the dismissal of the Complaint due to Mahinay's failure to prosecute the case. However, upon Mahinay's Motion for Reconsideration, the case was reinstated.26
The case was again re-raffled, this time to Branch 58.27 After due proceedings, the trial court ultimately dismissed Mahinay's Complaint in the Decision28 dated July 29, 2004. The trial court held that Dura Tire was entitled to foreclose the property because of Move Overland's unpaid credit purchases.29
Mahinay's appeal was dismissed by the Court of Appeals in the Decision30 dated June 16, 2006. The Court of Appeals held that Mahinay had no right to question the foreclosure of the property.31 Mahinay, as "substitute mortgagor,"32 was fully aware that the property he purchased from A&A Swiss was previously mortgaged to Dura Tire to answer for Move Overland's obligation. Considering that Move Overland failed to pay for its credit purchases, Dura Tire had every right to foreclose the property.33
Mahinay filed a Petition for Review on Certiorari34 before this Court. In G.R. No. 173117, this Court denied Mahinay's Petition as well as his Motion for Reconsideration.35 The June 16, 2006 Decision of the Court of Appeals thus became final and executory on August 8, 2007, 15 days after Mahinay received a copy of the Resolution denying his Motion for Reconsideration filed before this Court.36
Relying on the Court of Appeals' finding that he was a "substitute mortgagor," Mahinay filed a Complaint37 for judicial declaration of right to redeem on August 24, 2007. "As the admitted owner of the [property] at the time of the foreclosure,"38 Mahinay argued that he "must have possessed and still continues to possess the absolute right to redeem the [property]."39
Dura Tire answered40 the Complaint, raising the affirmative defense of res judicata. Dura Tire argued that the Complaint for judicial declaration of right to redeem had identical parties, subject matter, and causes of action with that of the Complaint for annulment of foreclosure sale.41 Furthermore, the period of Mahinay's right of redemption had already lapsed. Therefore, Mahinay could not be allowed to belatedly redeem the property.42
During the hearing on October 27, 2008, Mahinay and Dura Tire jointly moved for a judgment on the pleadings. The trial court granted the motion and deemed the case submitted for decision after the filing of memoranda.43
Mahinay having acquired the property from A&A Swiss before Dura Tire foreclosed the property, the trial court ruled that Mahinay became a "successor-in-interest" to the property even before the foreclosure sale. Therefore, by operation of law, Mahinay was legally entitled to redeem the property.44 However, considering that one (1) year period of redemption had already lapsed, Mahinay could no longer exercise his right of redemption.45
Despite Dura Tire's refusal to accept his offer to pay Move Overland's unpaid credit purchases, the trial court said that "there was nothing to stop [Mahinay] from redeeming the property as soon as he became aware of the foreclosure sale. [Mahinay] could have . . . filed an action to compel [Dura Tire] to accept payment by way of redemption."46
Hence, in the Judgment on the Pleadings47 dated April 13, 2010, Branch 20 of the Regional Trial Court of Cebu City dismissed Mahinay's Complaint for judicial declaration of right to redeem. The dispositive portion of the Judgment read:
Upon the foregoing considerations, the court finds no factual and legal basis to grant the plaintiffs plea to be allowed to redeem the foreclosed property subject of this case.Mahinay filed a Motion for Reconsideration, which the trial court denied in the Order49 dated September 2, 2010.
IN CONSEQUENCE, Judgment is hereby rendered DISMISSING the plaintiffs Complaint.
SO ORDERED.48 (Emphasis in the original)
Section 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore referred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of said debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold, may redeem the same at any time within the term of one year from and after the date of the sale; and such redemption shall be governed by the provisions of sections four hundred and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure, in so far as these are not inconsistent with the provisions of this Act.The "date of the sale" referred to in Section 6 is the date the certificate of sale is registered with the Register of Deeds. This is because the sale of registered land does not "'take effect as a conveyance, or bind the land' until it is registered."60
Endnotes:
1An Act to Regulate the Sale of Property Under Special Powers Inserted in or Annexed to Real-Estate Mortgages (1924).
2Rollo, pp. 9-32.
3 Id. at 34-37. The Judgment on the Pleadings was penned by Presiding Judge Bienvenido R. Saniel, Jr.
4 Id. at 38.
5 Id. at 37.
6 Id. at 46.
7 Id.
8 Id. at 46-^7.
9 Id. at 43.
10 Id. at 43-44.
11 Id. at 43.
12 Id. at 45, Letter dated August 21, 1994.
13 Id. at 91, Court of Appeals Decision dated June 16, 2006.
14 Id. at 154, Comment.
15 Id. at 90 and 91.
16 Id.
17 Id. at 48.
18 Id. at 49-54.
19 Id. at 51-52.
20 Id. at 50.
21 Id. at 55-64, Answer with Special and Affirmative Defenses and Counterclaims.
22 Id. at 57.
23 Id. at 66-67. The Order was penned by Presiding Judge German G. Lee, Jr. of Branch 15, Regional Trial Court of Cebu, Cebu City.
24 Id. at 68-74. The Decision was promulgated on November 27, 1998, docketed as CA-G.R. SP No. 42944, and was penned by Associate Justice Corona Ibay Somera and concurred in by Associate Justice (subsequently Associate Justice of this Court) Romeo J. Callejo, Sr. and Associate Justice Salvador J. Valdez, Jr. of the Former Special 8th Division, Court of Appeals, Manila.
25 Id. at 92, Court of Appeals Decision dated June 16, 2006.
26 Id.
27 Id. at 93, Court of Appeals Decision dated June 16, 2006.
28 Id. at 75-89. The Decision, docketed as Civil Case No. CEB-17248, was penned by Presiding Judge Gabriel T. Ingles of Branch 58, Regional Trial Court, Cebu City.
29 Id. at 89.
30 Id. at 90-98. The Decision, docketed as CA-G.R. CV No. 00662, was penned by Associate Justice Isaias P. Dicdican and was concurred in by Associate Justices Apolinario D. Bruselas, Jr. and Agustin S. Dizon of the 19th Division, Court of Appeals, Cebu City.
31 Id. at 96.
32 Id.
33 Id.
34 Id. at 9-32.
35 Id. at 17-19.
36 Id. at 18. Mahinay received the copy of the Resolution denying his Motion for Reconsideration on July 24, 2007.
37 Id. at 100-110.
38 Id. at 105.
39 Id.
40 Id. at 111-122, Answer with Special and Affirmative Defenses and Counterclaims.
41 Id. at 114-115.
42 Id. at 115-116.
43 Id. at 34.
44 Id. at 35.
45 Id. at 36-37.
46 Id. at 37.
47 Id. at 34-37.
48 Id. at 37.
49 Id. at 38.
50 Id. at 9-32.
51 Id. at 153-173.
52 Id. at 174-190, Reply to the Comment.
53 Id. at 27-29.
54 234 Phil. 582 (1987) [Per J. Gutierrez, Jr., First Division].
55 Id. at 20-22.
56 An Act to Regulate the Sale of Property Under Special Powers Inserted in or Annexed to Real-Estate Mortgages (1924).
57 Id. at 163.
58 Id. at 168-170.
59 An Act to Regulate the Sale of Property Under Special Powers Inserted in or Annexed to Real-Estate Mortgages (1924).
60See Reyes v. Noblejas, 129 Phil. 256, 262 (1967) [Per J. Angeles, En Banc] citing Salazar v. Flor de Lis Meneses, 118 Phil. 512, 514 (1963) [Per J. Dizon, En Banc]. See also Agbulos v. Alberto, 115 Phil. 777, 780 (1962) [Per J. Dizon, En Banc].
61Mateo v. Court of Appeals, 99 Phil. 1042 (1956) [Per J. A.J. Reyes, En Banc].
62See Spouses Natino v. Intermediate Appellate Court, 274 Phil. 602, 611 (1991) [Per J. Davide, Jr., Third Division].
63 99 Phil. 1042 (1956) [Per J. A.J. Reyes, En Banc].
64 Id.
65BPI Family Savings Bank, Inc. v. Spouses Veloso, 479 Phil. 627, 635 (2004) [Per J. Corona, Third Division].
66See Union Bank of the Phils, v. Court of Appeals, 412 Phil. 64, 75 (2001) [Per J. De Leon, Jr., Second Division]. The case involved the right of redemption for property foreclosed as full or partial payment of an obligation to any bank governed by Section 78 of the General Banking Act. Section 78 of the General Banking Act and Section 6 of Act No. 3135 both provide for a fixed one (1)-year period of redemption.
67 341 Phil. 787 (1997) [Per J. Melo, Third Division].
68 Id. at 791.
69 Id.
70 Id.
71 Id.
72 Id. at 792-793.
73 Id. at 793.
74 Id.
75 Id. at 793.
76 Id. at 790.
77 Id. at 799.
78 478 Phil. 189 (2004) [Per J. Callejo, St., Second Division].
79 Id. at 191.
80 Id. at 192.
81 Id.
82 Id.
83 Id. at 192-193.
84 Id. at 193.
85 id at 194.
86 Id. at 199.
87 Id.
88 CIVIL CODE, art. 13 provides:
Article 13. When the laws speak of years, months, days or nights, it shall be understood that years are of three hundred sixty-five days each; months, of thirty days; days, of twenty-four hours; and nights from sunset to sunrise.
If months are designated by their name, they shall be computed by the number of days which they respectively have.
In computing a period, the first day shall be excluded, and the last day included.
89 234 Phil. 582 (1987) [Per J. Gutierrez, Jr., First Division].
90 Id. at 583-584.
91 Id. at 584-585.
92 Id. at 585.
93 Id. at 585-587.
94 Id. at 590.
95 Id. at 589.
96 Id. at 591.
97 53 Phil. 975 (1929) [Per J. Ostrand, En Banc].
98Consolidated Bank and Trust Corporation v. Intermediate Appellate Court, 234 Phil. 582, 590 (1987) [Per J. Gutierrez, Jr., First Division] citing Ong Chua v. Carr, 53 Phil. 975, 983 (1929) [Per J. Ostrand, En Banc].
99Ong Chua v. Carr, 53 Phil. 975, 976 (1929) [Per J. Ostrand, En Banc].
100 CIVIL CODE, arts. 1601 and 1606 provide:
Article 1601. Conventional redemption shall take place when the vendor reserves the right to repurchase the thing sold, with the obligation to comply with the provisions of Article 1616 and other stipulations which may have been agreed upon.
. . . .
Article 1606. The right referred to in Article 1601, in the absence of an express agreement, shall last four years from the date of the contract.
Should there be an agreement, the period cannot exceed ten years.
However, the vendor may still exercise the right to repurchase within thirty days from the time final judgment was rendered in a civil action on the basis that the contract was a true sale with right to repurchase.
101Consolidated Bank and Trust Corporation v. Intermediate Appellate Court, 234 Phil. 582, 589 (1987) [Per J. Gutierrez, Jr., First Division]. See CMS Stock Brokerage, Inc. v. Court of Appeals, 341 Phil. 787, 800 (1997) [Per J. Melo, Third Division].
102See CMS Stock Brokerage, Inc. v. Court of Appeals, 341 Phil. 787, 800 (1997) [Per J. Melo, Third Division].
103CMS Stock Brokerage was promulgated in 1997.
104Spouses Pahang was promulgated in 2004.
105Consolidated Bank was promulgated in 1987.