G.R. No. 194152 - Mahinay vs. Dura Tire and Rubber Industries, Inc.

Case Summary (G.R. No. 194152)

Facts of the Transaction

A&A Swiss mortgaged the subject property to Dura Tire as security for Move Overland’s credit purchases and expressly authorized extrajudicial foreclosure under the mortgage agreement. On June 5, 1992, A&A Swiss sold the property to Mahinay by Deed of Absolute Sale; Mahinay acknowledged the existing mortgage and assumed liability for claims of Dura Tire against Move Overland. Mahinay sought a statement of account from Dura Tire on August 21, 1994 to pay Move Overland’s obligations and remove the mortgage but received no response. Dura Tire initiated extrajudicial foreclosure; the sheriff sold the property to Dura Tire at public auction for P950,000 and the Certificate of Sale was registered on February 20, 1995.

Procedural History

Mahinay filed a Complaint for specific performance and annulment of auction sale on March 23, 1995, alleging lack of proof that Dura Tire supplied raw materials to Move Overland after the mortgage and asserting denial of the opportunity to redeem. After multiple trial-court proceedings, dismissals and remands, the Regional Trial Court dismissed the annulment complaint on July 29, 2004; the Court of Appeals affirmed on June 16, 2006. Mahinay’s Petition for Review to the Supreme Court was denied and became final and executory on August 8, 2007. Mahinay then filed on August 24, 2007 a Complaint for judicial declaration of right to redeem. The RTC (Branch 20) granted judgment on the pleadings and dismissed Mahinay’s redemption complaint by Judgment dated April 13, 2010; the denial of reconsideration was dated September 2, 2010. Mahinay filed a direct Petition for Review on Certiorari to the Supreme Court, which rendered the decision under review.

Issue Presented

Whether the one-year statutory period of redemption under Section 6 of Act No. 3135 was tolled by the pendency of Mahinay’s earlier action to annul the extrajudicial foreclosure sale, thereby preserving his right to redeem after the registration of the Certificate of Sale.

Petitioner’s Contentions

Mahinay contended that the one-year redemption period was tolled by his March 23, 1995 action to annul the foreclosure sale and that the period should resume when the Court of Appeals’ June 16, 2006 decision became final and executory on August 8, 2007. Alternatively, he argued that his right to redeem only crystallized upon judicial declaration that he was a “substitute mortgagor,” and hence the one-year redemption period should be counted from August 8, 2007, making his August 24, 2007 filing timely. He relied on Consolidated Bank & Trust Corp. v. Intermediate Appellate Court as supportive precedent.

Respondent’s Contentions

Dura Tire argued that the statutory one-year redemption period is fixed and non-extendible, that nothing prevented Mahinay from exercising his redemption right within one year from registration of the Certificate of Sale (February 20, 1995), and that the filing of an annulment action did not toll or suspend the redemption period. Dura Tire raised res judicata by reason of the prior litigation and maintained that Mahinay’s right of redemption had lapsed.

Legal Framework and Governing Statute

Section 6 of Act No. 3135 provides that following an extrajudicial sale, “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 that the redemption is governed by applicable provisions of the Code of Civil Procedure insofar as consistent. The “date of the sale” for registered land is the date the Certificate of Sale is registered with the Register of Deeds; the redemption right is statutory, and the prescribed mode of exercise must be followed (e.g., tender to the sheriff if purchaser refuses to sell back).

Court’s Analysis and Precedents Applied

The Court reiterated that the redemption right arises by force of Section 6 at the time the extrajudicial sale is effected and registered; Mahinay, as a person having a lien subsequent to the mortgage and as successor-in-interest, had a one-year window from February 20, 1995 to redeem. The Court emphasized that the redemption period is fixed and non-extendible to avoid prolonged uncertainty and to deter friv

Case Syllabus (G.R. No. 194152)

Case Citation and Procedural Posture

Reported at 810 Phil. 57, Second Division; G.R. No. 194152; Decision dated June 05, 2017.
Petition for Review on Certiorari directly filed before the Supreme Court, assailing: (a) the Judgment on the Pleadings dated April 13, 2010, and (b) the Order dated September 2, 2010 rendered by Branch 20, Regional Trial Court (RTC), Cebu City, in Civil Case No. CEB-33639.
The Supreme Court DENIED the petition and AFFIRMED the RTC Judgment and Order.
Opinion authored by Justice Leonen; concurred in by Carpio (Chairperson) and Peralta, JJ.; Mendoza and Martires, JJ., on official leave.

Core Issue Presented

Whether the one (1)-year period of redemption under Section 6 of Act No. 3135 was tolled by petitioner Mahinay’s earlier filing of a Complaint for annulment of the extrajudicial foreclosure sale, such that he could still exercise the statutory right of redemption.

Relevant Statutory Provision (Act No. 3135, Section 6)

Section 6 of Act No. 3135 provides that in extrajudicial sale under a special power, "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 redemption is governed by certain provisions of the Code of Civil Procedure insofar as not inconsistent with the Act.
The "date of the sale" under Section 6 is construed as the date the certificate of sale is registered with the Register of Deeds because sale of registered land does not take effect as a conveyance or bind the land until registered.

Facts — Property, Mortgage, and Sale

The subject property: a parcel of land of 3,616 square meters located in Barrio Kiot, Cebu City, covered by Transfer Certificate of Title (TCT) No. 111078 in the name of A&A Swiss International Commercial, Inc. (A&A Swiss).
A&A Swiss mortgaged the property to Dura Tire & Rubber Industries, Inc. (Dura Tire) as security for credit purchases made by Move Overland Venture and Exploring, Inc. (Move Overland). The mortgage gave Dura Tire express authority to extrajudicially foreclose if Move Overland failed to pay.
On June 5, 1992, A&A Swiss sold the property to Makilito B. Mahinay for P540,000.00; in the Deed of Absolute Sale Mahinay acknowledged the prior mortgage to Dura Tire and held himself liable for claims Dura Tire may have against Move Overland.
On August 21, 1994, Mahinay wrote Dura Tire requesting Move Overland’s statement of account and sought to pay Move Overland’s obligation to release the property from the mortgage; Dura Tire ignored the request.
Dura Tire applied for extrajudicial foreclosure on January 6, 1995. Despite Mahinay’s protest and a third-party claim filed with the Office of the Provincial Sheriff of Cebu, Sheriff Romeo Laurel proceeded with the sale.
At the auction, Dura Tire was the highest bidder at P950,000.00; a Certificate of Sale was issued and registered on February 20, 1995.

Procedural History Prior to RTC Decision Now on Review

March 23, 1995: Mahinay filed a Complaint for specific performance and annulment of auction sale in the RTC, alleging lack of proof that Dura Tire supplied raw materials to Move Overland after the mortgage and alleging Dura Tire deprived him of the opportunity to redeem by failing to furnish the statement of account.
Dura Tire answered, asserting Mahinay had no cause of action since he was not privy to the mortgage agreement.
Branch 15, RTC, initially dismissed the Complaint. On mandamus and certiorari, the Court of Appeals set aside the order and remanded for further proceedings.
The case was re-raffled to Branch 12, then later re-raffled to Branch 58 after interlocutory events including dismissal for failure to prosecute and reinstatement on reconsideration.
July 29, 2004: RTC (Branch 58) dismissed Mahinay’s Complaint, holding Dura Tire entitled to foreclose because of Move Overland’s unpaid credit purchases.
June 16, 2006: Court of Appeals dismissed Mahinay’s appeal, ruling Mahinay had no right to question the foreclosure sale; the Court of Appeals characterized Mahinay as a "substitute mortgagor" aware of the preexisting mortgage.
Mahinay filed a Petition for Review on Certiorari (G.R. No. 173117) to the Supreme Court which was denied, and the June 16, 2006 Court of Appeals Decision became final and executory on August 8, 2007 (15 days after Mahinay received copy of the Resolution denying his motion on July 24, 2007).

Subsequent Action — Complaint for Judicial Declaration of Right to Redeem

August 24, 2007: Relying on the Court of Appeals’ finding that he was a "substitute mortgagor," Mahinay filed a Complaint for judicial declaration of right to redeem, asserting as admitted owner at the time of foreclosure he possessed the absolute right to redeem the property.
Dura Tire answered, raising res judicata, asserting identical parties, subject matter, and causes of action with Mahinay’s earlier annulment action and argued the one (1)-year redemption period had lapsed.
October 27, 2008: Mahinay and Dura Tire jointly moved for judgment on the pleadings. The trial court granted the motion and took the case under submission after memoranda.
Trial court found Mahinay had become a successor-in-interest before foreclosure and thus had the statutory right to redeem; however, the court held the one (1)-year period of redemption had already lapsed.
The trial court observed Mahinay could have redeemed by tendering paym