EN BANC
G.R. No. L-27365 January 30, 1970
FELIX L. LAZO, MERCEDES CASTRO DE LAZO, and JOSE ROBLES, plaintiffs-appellees,
vs.
REPUBLIC SURETY & INSURANCE CO., INC. represented by ANTONIO M. KOH, General Manager and as Attorney-in-Fact of plaintiffs, FELIX and MERCEDES LAZO defendants-appellants.
Felix L. Lazo for himself and his co-plaintiffs-appellees.
Jose S. Sarte for other plaintiff-appellee.
Koh Law Offices for defendants-appellants.
Separate Opinions
TEEHANKEE, J., dissenting:
I vote for the affirmance of the appealed judgment.
I do so on the basis of the issues squarely raised by the parties in the case below, i.e., whether or not the right of redemption with respect to the foreclosed property was still available to plaintiffs-appellees, and corollarily, whether or not plaintiffs were therefore entitled to the accounting of rents and profits, pending redemption, sought by them under Rule 39, section 34 of the Rules of Court.
It being undisputed that the sheriff's certificate of sale, upon extra-judicial foreclosure, was registered in the Office of the Register of Deeds of Manila only on March 28, 1963, the present action for accounting and redemption filed on December 12 of the same year was timely filed within the one year period of legal redemption. Actual knowledge by plaintiffs mortgagors of the auction sale held on July 1, 1958 is not equivalent to registration and does not derogate from the doctrine "explicitly and emphatically" enunciated by the Court in Rosario vs. Tayug Rural Bank and a long line of cases1 and most recently reiterated on October 4, 1969 in Reyes vs. Mandas"2 "that the redemption period should be reckoned from the date of registration of the certificate of sale and not from the date of the auction sale."
Plaintiffs' payment of rents to defendant-appellant beginning July, 1958 immediately after the extra-judicial foreclosure sale (which was provided for in the mortgage), and their several request for extensions of time to redeem their property should not be taken as an abandonment of the concept of legal redemption and its conversion into one of conventional redemption. Such conversion into conventional redemption, which entails a waiver of the mandatory requirement of registration of the sheriff's certificate of sale and a voluntary agreement on the mortgagors' part to reckon the period for redemption from the date of the auction sale, rather than from the date of registration of the certificate of sale, thus cutting drastically their period to effect redemption, assuming that such waiver and agreement would not be void as being against public policy, should be shown indubitably.
This is not the case here. The record evinces that plaintiffs, in making their requests for extension, were laboring under the mistaken notion that defendant had duly registered the sheriff's sale and that their period to redeem their property had expired on July 2, 1959. And defendant nurtured their mistaken impression as shown in its letter of March 30, 1960, giving plaintiffs a "last call" and categorically stating that "the redemption period has expired on the 2nd day of July, 1959." (Exhibit "1").
Plaintiffs, thus mistaken, cannot be deemed to have opted for conventional redemption and to have freely waived the legal period for redemption, which had not even commenced law, due to defendants' failure to comply with the mandatory requirement of registration. In Point of fact, the first indication of plaintiff learning that the sale had been registered only on March 28, 1963, is in their letter to defendant of October 25, 1963, (Exhibit "K" wherein they asked for an accounting and forthwith asserted their counsel's "theory" that the one-year period for redemption of the foreclosed property available to the mortgagor is one year from the date the title was registered in the Register of Deeds — that is — March 28, 1963. So he maintains that Robles and myself have still a period up to March 28, 1964, to exercise this right of redemption.3
I find the equities of the case in favor of plaintiffs. They were but guarantors for the P12,0,00.00 loan secured by Jose Robles.ℒαwρhi৷ No prejudice would be incurred by defendant under the appealed judgment, for it would not be receiving a centavo less than what plaintiffs had undertaken to pay it in accordance with its usual business. The payments made by them on account of interests and various expenditures before foreclosure amounted to P13,561.37 and after foreclosure for rents amounted to P17,250.00 or a total of P30,811.37 during the 10-year period. The differential between 12% interest or P1,440.00 per annum that they should pay defendant on account of the loan discharged by defendant and the P250.00 monthly rental or P3,000.00 annually that they were paying for occupancy of their property was quite substantial, and such rents received by defendant should be "a credit upon the redemption money to be paid" under Rule 39, section 34 of the Rules of Court.
Even conceding that defendant co-signed the promissory note of August 14, 1954 (Exhibit "M") in favor of Republic Investment Co., Inc., (although technically defendant is barred from questioning the trial courts contrary finding of fact since it brought its appeal here, and raises only questions of law in its brief and did not ask the Court to remand the appeal to the Court of Appeals for review of the trial Court's adverse findings of fact), the undisputed fact remains and it is so borne out by the record, that the only mortgage executed by plaintiffs in favor of defendant, was that of August 18, 1953, Exhibit "A" in consideration of the P12,000.00-loan obtained from the Philippine Bank of Commerce, with defendant as co-signer therefor. The mortgage was expressly executed as security for defendant-mortgagee against any liability by virtue of the loan granted by the Philippine Drink of Commerce. When the defendant transferred the loan to its sister company, Republic Investment Co., Inc., on August 14, 1954, i.e. an entirely new loan for P12,000.00 was obtained from the latter creditor and the previous creditor, the Philippine Bank of Commerce, was paid off obviously from the proceeds, no new or separate mortgage in favor of defendant in consideration of its co-signing the new note and as security against any liability by virtue of this new loan granted by the Republic Investment Co., Inc. was executed.
The trial court was correct, I believe, in holding that the mortgage, Exhibit "A", was extinguished by the payment of the loan secured from the Philippine Bank of Commerce.ℒαwρhi৷ The effect of such payment was to extinguish the obligation of both plaintiffs and defendant as co-signers of the promissory note. The extinction of such obligation carried with it the extinction of the mortgage as an accessory obligation, which was subordinate to and dependent upon the principal obligation thus extinguished. "Being merely an accessory contract, a mortgage cannot exist without the principal obligation it seeks to guarantee (Article 2085, Civil Code).4
The Mortgage deed, Exhibit "A", executed on August 18, 1953 in favor of the old creditor, the bank, could not be considered as executed to secure defendant as surely against the eventuality of its liability under the new note co-signed by it with plaintiff one year later on August 14, 1954, in favor of the new creditor, the Republic Investment., Co., Inc., for at the time of the execution of the mortgage, such new obligation had not yet come into existence. The mortgage that defendant sought to foreclose had in law ceased to exist, so much so that when defendant's counsel wrote the sheriff to foreclose the same, it was stated therein, contrary to the content of the deed itself, that the same was "in favor of the REPUBLIC INVESTMENT CO., INC." (Exhibit "S").
But since the parties both submitted their case on the premise that the mortgage was valid and sub-existing, I view the fact that the mortgage had been extinguished by payment and that defendant therefore had no mortgage to foreclose, as a further equitable ground to uphold the substance of the appealed judgment. On the issue explicitly joined by the parties, I would hold that plaintiffs had timely filed their action for accounting and redemption within the one-year period of legal redemption. Defendant could not due to its own failing, belatedly cause only on March 28, 1963 the registration of the sheriff's certificate of sale and then one day later claim consolidation of title and cut off plaintiffs' one-year period of legal redemption. Such simultaneous registration and consolidation of title in extra-judicial foreclosure proceedings were squarely ruled out by the Court's established doctrine (see Reyes vs. Noblejas, supra), and the Register of Deeds grossly erred in instantly giving due course thereto and causing the cancellation of plaintiffs' title and issuing a new title in the name of defendant.
Footnotes
1 L-26538, March 21, 1968, citing Reyes vs. Noblejas, L-23691, Nov. 25, 1967; Garcia vs. Ocampo, L-13029, June 30, 1959; Agbulos vs. Alberto, L-17483, July 31, 1962; and Salazar vs. Flor de Lis Meneses, L-15378, July 31, 1963.
2 L-27755, 29 SCRA 736.
3 Emphasis copied.
4 Abustan vs. Ferrer, L-19519, Nov. 28, 1964. See Zabaljaurregui vs. Luzon Surety Co., Inc., L-16251, Aug. 31, 1963, 8 Manresa 441.
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