Reyes vs. Tolentino

In an extrajudicial foreclosure of registered land under Act No. 3135, as amended, the one-year redemption period runs from the date of registration of the certificate of sale in the office of the Register of Deeds, not from the date of the public auction. This rule applies to the owner-mortgagor entitled to redeem.

Enrique R. Tolentino and Leonora P. Tolentino, spouses, owned a registered parcel of land in Quezon City covered by Transfer Certificate of Title No. 39624. To secure a loan of P8,500.00 from the Government Service Insurance System, they executed a real estate mortgage in its favor containing a special power to sell the property upon non-payment. The mortgage was subject to extrajudicial foreclosure under Act No. 3135, as amended, and Section 6 of that Act, as amended by Act No. 4118, governed the debtor’s one-year redemption period. The controversy concerns whether that period is reckoned from the auction sale or from registration of the certificate of sale.

On November 25, 1957, Enrique R. Tolentino and Leonora P. Tolentino, spouses, obtained a loan of P8,500.00 from the Government Service Insurance System. In its favor they executed a real estate mortgage over a parcel of land and all its improvements, situated in Quezon City and covered by Transfer Certificate of Title No. 39624, with a special power to sell the same in case of non-payment.

The Tolentinos failed to pay some of the loan amortizations on their due dates, making the whole indebtedness due and payable. Because of their failure to pay the whole obligation, the Government Service Insurance System extrajudicially foreclosed the mortgage in accordance with Act No. 3135, as amended. On November 11, 1963, Benito Macrohon, as Sheriff of Rizal, sold the mortgaged property at a public auction to Arsenio Reyes as the highest bidder for P9,905.00. On December 26, 1963, Sheriff Macrohon issued the corresponding certificate of sale dated December 26, 1963, containing a condition that the period of redemption would expire one year from and after the date of registration thereof. On the same day, Reyes protested against that condition in the certificate of sale.

On May 14, 1964, the sheriff’s certificate of sale was registered with the office of the Register of Deeds of Quezon City. On March 4, 1965, the Tolentino spouses paid to the defendant Sheriff the total amount of P11,460.00, representing the redemption price of the foreclosed property. Reyes initiated this action because of the refusal of the defendants to vacate the property and to pay him monthly rental from the time the period for them to redeem expired, which he claimed was November 11, 1964, up to the time they actually vacate the premises. According to Reyes, since the auction sale took place on November 11, 1963, but the Tolentinos redeemed only on March 4, 1965, the redemption was invalid for having been made beyond the one-year period under Section 6 of Act No. 3135, as amended by Act No. 4118.

The lower court found no evidence that Reyes paid taxes, assessments, documentary stamps, and registration expenses. The record also did not show whether the Tolentinos’ adoption of Sheriff Macrohon’s answer was already late.

• Commencement of Redemption Period: Petitioner argued that because the auction sale occurred on November 11, 1963, the one-year redemption period under Section 6 of Act No. 3135, as amended by Act No. 4118, should be reckoned from that date, making the Tolentinos’ March 4, 1965 redemption invalid; he urged re-examination of Reyes vs. Noblejas and Rosario vs. Tayug Rural Bank in light of earlier contrary rulings in Metropolitan Insurance vs. Pigtain, Manuel vs. Philippine National Bank, and Aparri vs. Court of Appeals.
• Registration Unnecessary Between Immediate Parties: Petitioner maintained that registration of the auction sale was unnecessary between immediate parties because the mortgage contract was voluntary, the Government Service Insurance System acted as the Tolentinos’ agent with power to sell, the sale was within their knowledge, and actual notice was equivalent to registration.
• Insufficient Redemption Amount: Petitioner contended that even if timely, the redemption was invalid because the money tendered to the sheriff was short by P29.71 and should have included taxes, assessments, documentary stamps, and registration expenses.
• Sheriff’s Authority: Petitioner argued that the sheriff had no authority to accept the redemption money for him or to accept less than the proper amount.
• Creditor-Debtor Relationship: Petitioner advanced that his relationship with the Tolentinos was creditor-debtor, so tender should have been made to him under Civil Code Articles 1256 and 1257, and the tender to the sheriff was invalid.
• Default: Petitioner argued that the lower court erred in denying his motion to declare the Tolentinos in default because Section 1, Rule 18, Rules of Court, made such declaration mandatory upon motion and proof of failure to answer on time.
• Supplemental Argument: Petitioner cited Lazo vs. Republic Surety & Insurance Co. as sustaining his view.

• Commencement of Redemption Period: Whether the one-year redemption period in an extrajudicial foreclosure sale under Act No. 3135, as amended, should be reckoned from the date of the auction sale or from the date of registration of the certificate of sale in the Register of Deeds.
• Sufficiency of Redemption Amount: Whether the redemption was invalid because the amount tendered was allegedly short by P29.71 and did not include taxes, assessments, documentary stamps, and registration expenses.
• Authority of Sheriff to Receive Tender: Whether the sheriff had authority to accept the redemption money on behalf of the purchaser and to accept less than the proper amount.
• Nature of Relationship and Tender: Whether the relationship between appellant and appellees is creditor-debtor, requiring tender to appellant under Civil Code Articles 1256 and 1257.
• Default: Whether the lower court erred in denying appellant’s motion to declare the Tolentinos in default for failure to file an answer on time under Section 1, Rule 18, Rules of Court.

• Commencement of Redemption Period: Registration. The one-year redemption period runs from the date of registration of the certificate of sale in the office of the Register of Deeds, not from the date of the public auction, under Section 6 of Act No. 3135, as amended, read with the Land Registration Act and Rules of Court.
• Sufficiency of Redemption Amount: No. The alleged P29.71 shortage was too unsubstantial, and appellant did not explain its computation; the lower court also found no evidence that appellant paid taxes, assessments, documentary stamps, and registration expenses.
• Authority of Sheriff to Receive Tender: Yes. Under the last sentence of Section 31, Rule 39, Revised Rules of Court, tender of redemption money may be made to the purchaser or redemptioner, or to the sheriff who made the sale, whose duty is to accept it and execute the certificate of redemption.
• Nature of Relationship and Tender: No. The relationship is not creditor-debtor; appellant merely purchased the property at auction, and the relationship is governed by special law, not Civil Code Articles 1256 and 1257.
• Default: No. Assuming the Tolentinos’ answer was late, the denial of default did not matter because no substantial question of fact was involved; even if appellant’s factual allegations were proved or admitted, he would not be entitled to judgment, the issue being legal and the complaint dismissible for lack of cause of action.

• Commencement of Redemption Period: Section 6 of Act No. 3135, as amended by Act No. 4118, allows redemption “within the term of one year from and after the date of sale.” The Court nevertheless held that for registered land sold extrajudicially, the period is counted from registration of the certificate of sale in the Register of Deeds. The rule was applied in Santos vs. Rehabilitation Finance Corporation and Garcia vs. Ocampo, and followed in Reyes vs. Noblejas, Rosario vs. Tayug Rural Bank, and Quimson vs. Philippine National Bank. The rationale is to counteract the practice of purchasers withholding registration until after the one-year period, which would deprive the owner of notice and opportunity to redeem; registration prompts the Register of Deeds to advise the owner to surrender the title for annotation, awakening the owner in time. The contrary rulings in Metropolitan Insurance vs. Pigtain and Manuel vs. Philippine National Bank were deemed pro tanto overruled. Aparri vs. Court of Appeals did not resolve the issue. Lazo vs. Republic Surety & Insurance Co. was inapplicable because the parties there abandoned legal redemption and converted it into conventional redemption. Petitioner’s argument that registration is unnecessary between immediate parties was rejected in Reyes vs. Manas because the rule protects the person entitled to redeem, the owner, not third parties; and extrajudicial foreclosure is governed by Act No. 3135, the Land Registration Act, and the Rules of Court, which require registration as mandatory, not by the Civil Code or general law. Thus, because the certificate of sale was registered on May 14, 1964, the Tolentinos’ March 4, 1965 redemption was within one year and valid.
• Sufficiency of Redemption Amount: The Court declined to pass on the alleged P29.71 shortage because the amount was too unsubstantial and appellant did not explain to the court a quo how he computed it. The foreign authorities on insufficient redemption need not be discussed. The claim that the redemption price should include taxes, assessments, documentary stamps, and registration expenses failed because the lower court found no evidence that appellant paid those items.
• Authority of Sheriff to Receive Tender: Under the last sentence of Section 31, Rule 39, Revised Rules of Court (formerly Section 27, Rule 39, old Rules; formerly Section 466, Code of Civil Procedure), tender of redemption money may be made either to the purchaser or redemptioner, or to the sheriff who made the sale, and the sheriff has the duty to accept the tender and execute the certificate of redemption. Enage vs. Vda. e Hijos de Escaño, 38 Phil. 657, was cited. Thus, the tender to the sheriff was proper.
• Nature of Relationship and Tender: The relationship between appellant and appellees was not creditor-debtor. Appellant did not lend money to appellees and was not made assignee of the mortgagee corporation; he merely purchased the property at the auction sale. Their relationship is governed by special law, so Civil Code Articles 1256 and 1257 on tender of payment to a creditor and consignation do not apply.
• Default: Section 1, Rule 18, Rules of Court, provides that if a defendant fails to answer within the time specified, the court shall, upon motion and proof of failure, declare the defendant in default. The record did not show whether the Tolentinos’ adoption of Sheriff Macrohon’s answer was already late. Assuming it was late and default was warranted, the denial made no difference because there was no substantial question of fact. Even if all appellant’s factual allegations were proved or admitted, he would not be entitled to judgment in his favor; the issue was legal and his complaint could have been dismissed for lack of cause of action, as in Reyes vs. Manas. The fourth assignment of error was merely a recapitulation of the previous ones.

• Redemption Period in Extrajudicial Foreclosure of Registered Land — Under Section 6 of Act No. 3135, as amended by Act No. 4118, the one-year redemption period for registered land sold at an extrajudicial foreclosure sale runs from the date of registration of the certificate of sale in the office of the Register of Deeds, not from the date of the public auction. The Court applied this rule to hold the Tolentinos’ redemption valid because it was made on March 4, 1965, within one year from the May 14, 1964 registration. The doctrine counteracts the practice of purchasers withholding registration to defeat the owner’s right of redemption.
• Mandatory Registration Under Special Law — Extrajudicial foreclosure under Act No. 3135, as amended, is governed by that special law in conjunction with the Land Registration Act and the pertinent Rules of Court, which require registration as mandatory. Even if the mortgage is voluntary and the sale is known to the owner-mortgagor, actual notice does not dispense with registration for purposes of the redemption period.
• Tender of Redemption Money to the Sheriff — Under the last sentence of Section 31, Rule 39, Revised Rules of Court, the redemption money may be tendered either to the purchaser or redemptioner, or to the sheriff who made the sale; the sheriff is duty-bound to accept the tender and execute the certificate of redemption. The Court applied this to uphold the tender to Sheriff Macrohon.
• No Creditor-Debtor Relationship Between Foreclosure Purchaser and Owner-Mortgagor — A purchaser at an extrajudicial foreclosure sale is not a creditor of the owner-mortgagor and is not the assignee of the mortgagee; the relationship is governed by the special law on extrajudicial foreclosure, not by the Civil Code provisions on tender of payment and consignation. Thus Articles 1256 and 1257 were inapplicable.
• Denial of Default Motion Harmless Where No Substantial Factual Issue — Even if a defendant’s answer is late and default is technically warranted under Section 1, Rule 18, denial of the default motion is harmless where the case presents no substantial question of fact and the plaintiff would not be entitled to judgment even if all factual allegations were proved or admitted. The Court applied this to reject appellant’s third assignment of error.
• Pro Tanto Overruling — Earlier rulings in Metropolitan Insurance vs. Pigtain and Manuel vs. Philippine National Bank, which reckoned the redemption period from the auction sale, were deemed pro tanto overruled by the later doctrine reckoning it from registration.

• "Section 6. In all cases in which the 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 sale; and such redemption shall be governed by the provisions of section 464 to 466, inclusive, of the Code of Civil Procedure, (now Sections 29 to 31, Rule 39 of the Revised Rules of Court) in so far as these are not inconsistent with the provisions of this Act." — This is the statutory text quoted by the Court; it frames the one-year period construed in the decision.
• "No reason is given why this salutary view should now be abandoned in favor of the strict construction of the law; and in so far as contrary thereto, the Pigtain and Manuel cases should be deemed pro tanto overruled." — The Court expressly overrules the contrary line of cases and adopts registration as the reckoning point.
• "Upon the assumption that in the case of a tax sale the period commences from the actual date set for the auction, it has been the common practice among purchasers, from whom the property may be redeemed, to withhold the registration of the deed or certificate of sale until after the lapse of one year, when the sale becomes final thinking that if registration were to be done earlier the owner or holder of the title would be awakened in time, for incidentally he would be advised by the Register of Deeds to surrender the title for annotation of the sale, preparatory to its consolidation in the vendee after the lapse of one year. On the other hand, if registration takes place after the lapse of the statutory period, the owner would no longer have any more opportunity to exercise his legal right of redemption." — This passage, quoted from Peña in Santos vs. Rehabilitation Finance Corporation, supplies the policy rationale for counting from registration.
• "The relationship is not that of creditor-debtor; appellant did not lend any money to appellees; nor was he made the assignee of the mortgagee corporation. He merely purchased the property at the auction sale and his relationship with the appellees is, to repeat, governed by special law." — The Court rejects the Civil Code tender theory and confirms the special-law governance of extrajudicial foreclosure redemption.

• Reyes vs. Noblejas, L-23691, November 25, 1967, 21 SCRA 1027 — Recent decision holding that the redemption period of registered land sold at extrajudicial foreclosure under Act No. 3135, as amended, is counted from registration of the certificate of sale; relied upon and followed.
• Rosario vs. Tayug Rural Bank, L-26538, March 21, 1968, 22 SCRA 1220 — Followed the registration rule and stated that the Court had already spelled out its position on the matter.
• Metropolitan Insurance vs. Pigtain, 101 Phil. 1110 (August 30, 1957) — Earlier contrary ruling reckoning redemption from the auction sale; deemed pro tanto overruled.
• Manuel vs. Philippine National Bank, 101 Phil. 968 (July 31, 1957) — Earlier contrary ruling; deemed pro tanto overruled.
• Garcia vs. Ocampo, 105 Phil. 1102 (June 30, 1959) — Impliedly abandoned the Pigtain doctrine and stated the rule that reckoning is from registration of the sale.
• Santos vs. Rehabilitation Finance Corporation, 101 Phil. 980 (July 31, 1957) — Applied the registration rule and supplied the policy rationale later quoted in the decision.
• Quimson vs. Philippine National Bank, L-24920, November 24, 1970, 36 SCRA 26 — Latest in the line of cases adhering to the registration rule.
• Reyes vs. Manas, L-27755, October 4, 1969, 29 SCRA 736 — Rejected the argument that registration is unnecessary between immediate parties; also cited for the proposition that the complaint could be dismissed for lack of cause of action.
• Lazo vs. Republic Surety & Insurance Co., L-27365, January 30, 1970, 31 SCRA 329 — Distinguished because the parties there abandoned legal redemption and converted it into conventional redemption.
• Aparri vs. Court of Appeals, L-15947, April 30, 1965, 13 SCRA 611 — Distinguished; the issue of reckoning date was not in issue.
• Enage vs. Vda. e Hijos de Escaño, 38 Phil. 657 — Cited to support the sheriff’s authority and duty to accept the tender of redemption money.

• Section 6, Act No. 3135, as amended by Act No. 4118 — Provides that the debtor, successors-in-interest, judicial creditor or judgment creditor, or person with subsequent lien may redeem extrajudicially sold property within one year from and after the date of sale. The Court construed this provision, together with registration laws, to mean that the period runs from registration of the certificate of sale, not the auction sale.
• Sections 464 to 466, Code of Civil Procedure (now Sections 29 to 31, Rule 39, Revised Rules of Court) — Section 6 of Act No. 3135 makes redemption governed by these provisions insofar as not inconsistent. The Court relied on Section 31, Rule 39, particularly its last sentence, to hold that tender of redemption money may be made to the sheriff who made the sale.
• Section 31, Rule 39, Revised Rules of Court (formerly Section 27, Rule 39, old Rules; formerly Section 466, Code of Civil Procedure) — The last sentence expressly allows tender of redemption money to the purchaser or redemptioner, or to the sheriff who made the sale, and imposes on the sheriff the duty to accept the tender and execute the certificate of redemption.
• Section 1, Rule 18, Rules of Court — Provides that if a defendant fails to answer within the time specified, the court shall, upon motion and proof of failure, declare the defendant in default. The Court assumed possible delay but held the denial harmless because no substantial factual issue existed and the complaint could be dismissed for lack of cause of action.
• Civil Code Articles 1256 and 1257 — Concern tender of payment to a creditor and consignation. The Court held them inapplicable because the purchaser at the foreclosure sale is not a creditor of the owner-mortgagor and the relationship is governed by special law.
• Land Registration Act — Cited as part of the statutory framework, together with Act No. 3135 and the Rules of Court, requiring registration as mandatory in extrajudicial foreclosure of registered land. No specific section is identified in the text.
• Act No. 3135, as amended — Special law governing extrajudicial foreclosure of mortgages with special power to sell; the Court held it, not the Civil Code or general law, governs the redemption right and procedure.

Concepcion, C.J.; Makalintal, J.; Zaldivar, J.; Castro, J.; Fernando, J.; Teehankee, J.; Barredo, J.; Villamor, J.; Makasiar, J.