Alfaro Fortunado vs. Court of Appeals

A check may be used to exercise the right of redemption—a privilege, not an obligation—and the sheriff’s acceptance of the check within the redemption period validly effects redemption even though Article 1249 of the Civil Code does not apply; the tender of the check, however, does not itself constitute payment that extinguishes the redemptioner’s liability for the redemption price.

The petitioners were the purchasers at a public auction conducted to satisfy a damages judgment rendered in Civil Case No. Q-22367, entitled “Alfaro Fortunado vs. Angel Bautista,” in favor of Alfaro Fortunado against Angel Bautista. The levied properties were two parcels of land registered in Bautista’s name in Iligan City, one of which National Steel Corporation had already purchased but not yet registered in its name. The dispute concerns the redemption of property sold at public auction under Rule 39 of the Rules of Court.

On April 21, 1981, the Regional Trial Court of Quezon City rendered judgment in Civil Case No. Q-22367, entitled “Alfaro Fortunado vs. Angel Bautista,” ordering Bautista to pay damages to Alfaro Fortunado. To execute the judgment, Basilisa Campano, City Sheriff of Iligan City, levied upon two parcels of land registered in Bautista’s name in Iligan City, covered by TCT Nos. T-7625 and T-14133. National Steel Corporation (NSC) had already purchased the lot covered by TCT No. T-14133 as of August 17, 1983, but had not yet registered it in its name.

After due notice, the lots were sold at public auction to the petitioners as the only bidder on April 23, 1984. A certificate of sale was issued to them and registered on April 25, 1984.

On January 10, 1985, NSC gave the sheriff notice of its intention to redeem the lot covered by TCT No. T-14133. The sheriff suggested that because the two lots had been sold together for the lump sum of P267,013.00, both should be redeemed by NSC. On February 11, 1985, NSC filed with the trial court an urgent motion to redeem both lots, which the petitioners opposed on the ground that the movant had no personality to intervene. The motion remained unresolved, and the redemption period would expire on April 18, 1985. On March 20, 1985, NSC issued to the sheriff PNB Check No. 313551 in the amount of P296,384.43 as the redemption price for the lot covered by TCT No. T-14133; the sheriff acknowledged receipt on the same date.

On March 21, 1985, Bautista sent the sheriff a letter bearing NSC’s conformity, availing himself of NSC’s check—which was sufficient to cover the full redemption price for both lots—to redeem the other lot covered by TCT No. T-7625. The letter contained the reservation that the redemption was made solely to effect the execution and delivery of the necessary certificate of redemption and would not be taken as an acknowledgment of the validity of the writ of execution and sale, which he continued to contest, nor as a waiver of any legal rights and remedies. The sheriff acknowledged receipt of the check as redemption money for the two parcels on March 21, 1985, and on March 22, 1985 issued a certificate of redemption in favor of NSC and Bautista.

On March 25, 1985, Bautista wrote the sheriff that he would no longer effect the redemption because there was nothing to redeem, the auction sale being null and void. On March 27, 1985, he filed an Urgent Motion praying that the P296,384.43 covered by the PNB check be delivered to and kept by the Clerk of Court of the Regional Trial Court of Quezon City until all incidents relative to the validity of the auction sale were finally resolved; the amount was to be considered the sufficient redemption price if the plaintiffs were finally adjudged entitled to it, otherwise it was to be returned. On March 29, 1985, the sheriff wired the petitioners’ counsel, notifying him of the deposit of the PNB check. Counsel rejected the check because it was not legal tender and was not intended for payment but merely for deposit, as evidenced by Bautista’s Urgent Motion.

On April 25, 1985, the petitioners requested the sheriff to issue a final deed of sale over the two lots and deliver it to them on the ground that no valid redemption had been effected within the 12-month period from the registration of the sale. When the request was not granted, the petitioners filed with the Court of Appeals a petition for mandamus. While the case was pending, NSC manifested that the certificate of redemption had already been registered and that TCT No. T-27154 had been issued in its favor on September 12, 1985. The trial court records were later reported totally burned in the June 11, 1988 fire that razed Quezon City Hall, a circumstance the Supreme Court cited in declining to resolve the validity of the certificate of sale.

• Applicability of Article 1249: Petitioners argued that Article 1249 of the Civil Code applies to redemption under Rule 39, Section 30, of the Rules of Court, so payment of the redemption price had to be in legal tender; NSC’s check, not being legal tender, could not be considered payment.
• Conditional Tender: Petitioners maintained that the tender was invalid because it was conditional under Bautista’s letter to the sheriff dated March 21, 1985.
• Withdrawal of Tender: Petitioners argued that even if the tender were valid, it was withdrawn when Bautista filed his Urgent Motion on March 27, 1985 to deposit the redemption money with the clerk of court.
• No Delivery or Payment: Petitioners added that since there was no delivery of the redemption price to the creditor, there was no payment within the meaning of Article 1233 of the Civil Code.
• Validity of Certificate of Sale: Petitioners also prayed that the Court rule on the validity of the certificate of sale because it covered more than one lot and did not indicate the price paid for each parcel; they contended that Bautista had not shown the parcels would have sold for a better price if offered separately and had not asked that they be sold by parcels, and that the Court had ancillary jurisdiction to resolve the sale’s validity.

• Inapplicability of Article 1249: Private respondents contended that Article 1249 deals with a mode of extinction of debts, while the right to redeem is not an obligation nor is it intended to discharge a pre-existing debt.
• Check in Redemption: They relied on Javellana vs. Mirasol, where the Court held that redemption of property sold under execution is not rendered invalid by the fact that payment to the sheriff for redemption is effected by a check for the amount due.

• Validity of Redemption: Whether redemption had been validly effected by private respondents.
• Applicability of Article 1249: Whether Article 1249 of the Civil Code applies to the payment of the redemption price of property sold at public auction.
• Payment by Check: Whether a check, not being legal tender, can validly be used to exercise the right of redemption.
• Conditional Tender and Reservation: Whether Bautista’s reservation in his March 21, 1985 letter and subsequent repudiation rendered his redemption invalid or conditional.
• Delivery to Sheriff: Whether failure to deliver the redemption price directly to petitioners invalidated the redemption.
• Validity of Certificate of Sale: Whether the Court should rule on the validity of the certificate of sale because it covered more than one lot and did not indicate the price paid for each parcel.

• Validity of Redemption: Yes. Redemption was validly effected by private respondents; the right of redemption is a privilege, not an obligation, and Article 1249 does not govern its exercise.
• Applicability of Article 1249: No. Article 1249 applies to payment of debts in money, but redemption is not an obligation and is not intended to discharge a pre-existing debt.
• Payment by Check: Yes. A check accepted by the sheriff within the redemption period is sufficient to exercise redemption, although the tender is not itself payment that extinguishes liability for the redemption price.
• Conditional Tender and Reservation: No. Bautista’s reservation did not invalidate his redemption; it preserved his challenge to the sale and avoided estoppel, and his March 27, 1985 Urgent Motion backtracked from his repudiation; his redemption was also unconditional like NSC’s.
• Delivery to Sheriff: No. Payment to the sheriff is legally sanctioned under Rule 39, Section 31, which allows payment to the purchaser or to the officer who made the sale.
• Validity of Certificate of Sale: Not passed upon. The facts surrounding the sale were not before the Court, and the Court is not a trier of facts.

• Validity of Redemption: The Court found Javellana vs. Mirasol applicable. The cases cited by petitioners did not involve redemption by check: Belisario vs. Natividad involved an option to repurchase; Villanueva vs. Santos involved a pacto de retro; Legarda vs. Miailhe and New Pacific Timber and Supply Co., Inc. vs. Seneris involved payment of mortgage indebtedness; and Philippine Air Lines vs. Court of Appeals involved satisfaction of a judgment. Tolentino vs. Court of Appeals stressed liberality in redemption cases and held that Article 1249 should not apply because the mortgage indebtedness had been extinguished and what remained was the right of redemption, an absolute privilege dependent on the will of the redemptioner. There was no legal obligation to redeem, and the relationship between purchaser and redemptioner was not that of creditor and debtor. The policy of the law is to aid rather than defeat redemption, and where no injury follows, a liberal construction is given to redemption laws and to the exercise of the right of redemption. The redemption was therefore valid.
• Applicability of Article 1249: Article 1249 governs payment of debts in money. Redemption is not payment of a debt but the exercise of a privilege; no pre-existing debt exists between the purchaser at the auction sale and the redemptioner. Article 1249 was thus inapplicable.
• Payment by Check: Javellana and Tolentino held that redemption is not invalidated by the officer’s acceptance of a check instead of money. The officer could have required lawful money, and by accepting a check he might be liable to the purchaser for any damage suffered, but this does not affect the validity of the payment. The check as a medium of payment in commercial transactions is firmly established by usage. A stop-payment order or the withdrawal of redemption money deposited does not forfeit the right to redeem, because redemption is optional and not compulsory. United States authorities likewise recognize that payment by check, draft, bank bills, or currency not legal tender is effective if the officer accepts it; if a good-faith redemptioner pays by ordinary banker’s check before expiration of the redemption period, the payment is sufficient. The Court clarified that a check may be used for the exercise of the right of redemption, and the tender of a check is sufficient to compel redemption, but it is not in itself payment that relieves the redemptioner from liability to pay the redemption price.
• Conditional Tender and Reservation: The Court found nothing wrong with Bautista’s March 21, 1985 letter, in which he made his redemption of TCT No. T-7625 subject to the reservation that it was not an acknowledgment of the validity of the writ of execution and sale and not a waiver of legal rights and remedies. Had he not made the reservation, estoppel might have operated against him. Cometa vs. IAC held that redemption is an implied admission of the regularity of the sale and would estop the petitioner from later impugning its validity on that ground. In questioning the writ of execution and sale while at the same time redeeming his property, Bautista was exercising alternative reliefs. Javellana held that positions based on alternative rather than opposed pretensions are permissible and that the right of redemption is compatible with ownership. Ybanez vs. CA reiterated that alternative causes of action are not inconsistent. Although Bautista repudiated the redemption in his March 25, 1985 letter, he backtracked in his March 27, 1985 Urgent Motion, praying that the check be deposited with the Clerk of Court and considered sufficient redemption price if plaintiffs were finally adjudged entitled to it. His redemption was therefore unconditional.
• Delivery to Sheriff: Rule 39, Section 31, of the Rules of Court provides that payment of the redemption money may be made to the purchaser or to the officer who made the sale. The sheriff acknowledged receipt of the check as redemption money for the two parcels. Delivery directly to petitioners was not required.
• Validity of Certificate of Sale: The facts surrounding the sale were not before the Court. In response to a query from the Court regarding the status of Civil Case No. Q-22367, the clerk of the trial court replied that the records were totally burned during the fire that razed Quezon City Hall on June 11, 1988. Apart from the circumstance that the Court is not a trier of facts, the facts asked to be tried were not at hand. The Court therefore did not rule on the validity of the certificate of sale.

• Right of redemption is a privilege, not an obligation — The right of redemption is not an obligation and is not intended to discharge a pre-existing debt; the relationship between the purchaser at the auction sale and the redemptioner is not that of creditor and debtor. The exercise of the right depends on the will and discretion of the redemptioner, and no one can compel its exercise. Because redemption is not payment of a debt, Article 1249 of the Civil Code does not apply. The Court applied this doctrine to uphold the redemption by NSC and Bautista despite the use of a check.
• Check as sufficient medium for redemption — A check accepted by the sheriff within the redemption period validly effects redemption even if it is not legal tender. The officer may require payment in lawful money, but acceptance of a check does not invalidate the payment; the check as a commercial medium is firmly established. The Court applied this to PNB Check No. 313551 accepted by the sheriff.
• Tender of check is not payment — The tender of a check is sufficient to compel redemption but is not in itself payment that relieves the redemptioner from liability to pay the redemption price. The Court applied this by holding that private respondents properly exercised the right of redemption but remain liable for the redemption price.
• Liberal construction of redemption laws — Redemptions should be looked upon with favor, and where no injury follows, a liberal construction is given to redemption laws and to the exercise of the right of redemption. The Court applied this policy in upholding the redemption despite the use of a check and the reservation.
• Alternative reliefs and reservation against estoppel — A redemptioner may question the validity of the execution sale while at the same time redeeming the property, because these are alternative reliefs rather than inconsistent positions. Redemption is an implied admission of the regularity of the sale and would estop a later challenge absent a reservation. The Court applied this to Bautista’s March 21, 1985 reservation, which preserved his challenge and did not invalidate his redemption.
• Payment to sheriff in redemption — Under Rule 39, Section 31, of the Rules of Court, payment of the redemption money may be made to the purchaser or to the officer who made the sale. The Court applied this to uphold payment to the sheriff rather than directly to petitioners.

• “What we are saying is that a check may be used for the exercise of the right of redemption, the same being a right and not an obligation. The tender of a check is sufficient to compel redemption but is not in itself a payment that relieves the redemptioner from his liability to pay the redemption price.” — This is the Court’s central clarification: a check is valid for exercising redemption, but it does not extinguish the redemptioner’s obligation to pay the redemption price.
• “the right of redemption is not an obligation nor is it intended to discharge a pre-existing debt, the right of redemption being in fact a privilege.” — This states the doctrinal basis for holding Article 1249 of the Civil Code inapplicable to redemption.
• “redemption is an implied admission of the regularity of the sale and would estop the petitioner from later impugning its validity on that ground.” — This explains why Bautista’s reservation was proper and why his redemption did not bar his challenge to the sale.
• “It stands to reason therefore, that redemptions should be looked upon with favor and where no injury is to follow, a liberal construction will be given to our redemption laws as well as to the exercise of the right of redemption.” — This articulates the policy of liberal construction applied by the Court in upholding the redemption.

• Javellana vs. Mirasol, 40 Phil. 761 — Controlling precedent; held that redemption of property sold under execution is not rendered invalid by the officer’s acceptance of a check, and that alternative reliefs may be pursued by a litigant.
• Tolentino vs. Court of Appeals, 106 SCRA 513 — Followed Javellana; held Article 1249 inapplicable because the right of redemption is an absolute privilege, not an obligation; stressed liberal construction and held that a stop-payment order or withdrawal of deposited redemption money does not forfeit the right to redeem.
• Belisario vs. Natividad, 60 Phil. 156 — Distinguished; the check there was tendered in the exercise of an option to repurchase, not in redemption.
• Villanueva vs. Santos, 67 Phil. 648 — Distinguished; involved a pacto de retro.
• Legarda vs. Miailhe, 88 Phil. 637 — Distinguished; involved payment of a mortgage indebtedness.
• New Pacific Timber and Supply Co., Inc. vs. Seneris, 101 SCRA 686 — Distinguished; involved payment of a mortgage indebtedness.
• Philippine Air Lines vs. Court of Appeals, 181 SCRA 557 — Distinguished; involved satisfaction of a judgment.
• Cometa vs. IAC, 151 SCRA 563 — Cited; redemption is an implied admission of the regularity of the sale and would estop a later challenge absent a reservation.
• Ybanez vs. CA, 180 SCRA 464 — Cited; alternative causes of action are not inconsistent with one another.

• Article 1249, Civil Code — Provides that payment of debts in money shall be made in the currency stipulated and, if not possible, in legal tender. The Court held it inapplicable to redemption because redemption is not an obligation or payment of a pre-existing debt.
• Article 1233, Civil Code — Provides that a debt is not understood to have been paid unless the thing or service has been completely delivered or rendered. Petitioners invoked it to argue no payment; the Court held that tender of a check is sufficient to exercise redemption though not payment, and did not allow it to invalidate the redemption.
• Rule 39, Section 30, Rules of Court — Cited by petitioners as the redemption provision governing payment of the redemption price. The Court treated the redemption as valid under the redemption rules.
• Rule 39, Section 31, Rules of Court — Provides that payment of the redemption money “may be made to the purchaser x x x or x x x to the officer who made the sale.” The Court relied on this to uphold payment to the sheriff.

• Narvasa (Chairman)
• Gancayco
• Grino-Aquino
• Medialdea