Case Summary (G.R. No. 98147)
Factual Background
On 16 February 1976, the Philippine National Bank (PNB) granted a loan/credit accommodation to Ronnie Garcia in the amount of P30,000.00, secured by a first mortgage over the property under TCT No. 120745. The loan was increased to P40,000.00 on 1 April 1976. The deed of real estate mortgage and its amendment were registered and annotated on the title on 17 February 1976 and 12 April 1976, respectively.
When Ronnie Garcia failed to comply with the mortgage conditions, PNB extra-judicially foreclosed the first mortgage. A Certificate of Sale was issued to PNB on 8 November 1977, as sole and highest bidder. The foreclosure sale was annotated on 12 February 1979.
Before the first foreclosure, Ronnie Garcia executed a Deed of Second Mortgage on 18 August 1977 in favor of Teodoro Marmeto for P100,000.00, payable within three months from execution. That second mortgage was recorded and annotated on 20 April 1978. Like the first mortgage, it was later extra-judicially foreclosed. In a public auction on 27 June 1978, Marmeto was issued a Certificate of Sale as the highest bidder for P125,000.00, and the sale was annotated on 28 June 1978.
On 1 February 1980, Ronnie Garcia executed a “Waiver and Renunciation of Rights” covering his right of redemption of the property under the first mortgage in favor of his father, Jesus Garcia, who later assigned that right to Nimfa Garcia Ramirez (one of the petitioners). Neither assignment was registered with the Register of Deeds.
On 9 August 1980, Nimfa Ramirez paid PNB the total redemption price. PNB accepted the payment. Since no redemption had been made with respect to the second mortgage, Marmeto filed, on 9 August 1989, with the Regional Trial Court of Manila, a petition for consolidation of ownership against Ronnie Garcia and PNB in Civil Case No. 89-50013.
Trial Court Proceedings in Civil Case No. 89-50013
PNB moved to dismiss on 19 October 1989, contending that Nimfa Ramirez had paid the redemption price of the first mortgage and that PNB therefore had no more interest or lien on the property, so Marmeto had no cause of action against PNB. On 6 November 1989, the trial court dismissed the case as to PNB.
Ronnie Garcia was later declared in default. On 20 December 1989, the trial court directed the consolidation of ownership of the property in favor of Marmeto and ordered the Register of Deeds to register the consolidated ownership.
On 12 March 1990, the trial court issued a writ of execution directing Ronnie Garcia to surrender TCT No. 120745 to Marmeto. On 22 May 1990, the trial court directed the Register of Deeds to cancel the existing title in Ronnie Garcia’s possession and to issue a new one in Marmeto’s name, while also ordering Ronnie Garcia and all persons claiming rights under him to surrender possession to Marmeto.
Petitioners’ Claim and the Certiorari Proceedings
On 29 May 1990, petitioner Nimfa Ramirez filed a third-party/adverse claim over the property under TCT No. 120745, alleging ownership based on her payment of the first mortgage redemption price to PNB. On 6 June 1990, she filed an urgent motion to hear the third-party/adverse claim and to suspend execution, asserting that she was an indispensable party, that the trial court had jurisdiction to hear her claim, and that she should have been made a defendant after the trial court was formally notified of her interest through PNB’s motion to dismiss.
Before that urgent motion could be resolved, petitioner filed in the Court of Appeals a petition for certiorari, docketed as CA-G.R. SP No. 21003, alleging that the trial court orders and writs were issued “in excess of jurisdiction, if not with grave abuse of authority.”
The Court of Appeals dismissed the petition for lack of merit on 7 August 1990. A motion for reconsideration was denied on 22 April 1991. Petitioners then elevated the matter to the Supreme Court, seeking reversal and the nullification of both the Court of Appeals ruling and the trial court orders and writs.
The Parties’ Contentions Before the Supreme Court
Petitioners argued that the Court of Appeals’ disposition did not accord with law and controlling jurisprudence, and that the Court of Appeals, in rendering its decision dated 7 August 1990, acted without jurisdiction. Their core position centered on the effect and validity of Nimfa Ramirez’s redemption payment and the consequences flowing therefrom to Marmeto’s claim for consolidation of ownership.
Respondents, through the Court of Appeals’ reasoning, maintained that the determinative issue was whether petitioner had acquired any enforceable right by virtue of her redemption payment. The Court of Appeals held that unrecorded assignments of the right of redemption could not prejudice Marmeto. It also assumed arguendo that petitioner’s redemption right vested in her, but found that she failed to redeem within the legally granted period because she paid on August 19, 1980.
Petitioners, however, invoked the principle that PNB accepted the redemption price after the one-year period had lapsed, and argued that such acceptance constituted a waiver of the one-year period, with redemption thus being valid. They further maintained that the trial court erred by consolidating title in Marmeto’s name and treating Marmeto as if he had satisfied or assumed the first mortgage obligation.
Doctrinal Framework Applied by the Court
The Court treated the redemption question as the pivot for determining ownership. It recognized that a second mortgagee generally holds only an equity of redemption and must wait until after the debtor’s obligation to the first mortgagee is fully settled, because the second mortgagee’s rights are strictly subordinate to the first mortgagee’s superior lien.
The Court also explained that, once the first mortgage was properly foreclosed, both the mortgagor and subsequent lien holders acquired the statutory right to redeem within the redemption period. The Court then addressed whether the redemption made by petitioner extinguished the basis for Marmeto’s consolidation claim.
Legal Reasoning and Resolution
The Court held that the redemption payment made by petitioner Nimfa Ramirez was valid in light of PNB’s conduct. It accepted petitioners’ argument that when PNB accepted the redemption money after the statutory one-year period had expired, PNB was considered to have waived the period. The Court ruled that nothing in the law prevented such a waiver, and it adopted the policy underlying the cited jurisprudence that redemption should be treated in a manner that aids rather than defeats the right of redemption, even after the lapse of the statutory period when the foreclosure buyer did not object but even consented to redemption.
Turning to the consequences for Marmeto, the Court held that Marmeto, as a second mortgagee, could not consolidate ownership in his name on the premise that the first mortgagor failed to redeem within the statutory period, because redemption had actually been made—first through the right of redemption that petitioner had acquired, and then through PNB’s acceptance of the redemption payment. The Court emphasized that while Marmeto did not redeem himself, petitioner did redeem the property from PNB. It further held that the recording of the deeds of assignment of the right of redemption was immaterial, because the foreclosure of the first mortgage was recorded, which charged Marmeto with knowledge of the redemption right.
The Court also found that Marmeto’s attempt to consolidate title without redeeming could not properly substitute for the requirement that the first mortgage lien be settled or that redemption be made. Since the first mortgage was involved, and petitioner’s redemption had validly been accepte
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Case Syllabus (G.R. No. 98147)
- Petitioners Nimfa G. Ramirez and Felito S. Ramirez sought to annul a Court of Appeals decision dated 7 August 1991 in CA-G.R. SP No. 21003 which dismissed their petition for certiorari.
- The certiorari petition had assailed several orders of the Regional Trial Court (RTC), Branch 14, Manila in Civil Case No. 89-50013 dated 20 December 1989, 12 March 1990, and 22 May 1990.
- The Court of Appeals dismissed for lack of merit, and its denial of petitioners’ motion for reconsideration occurred on 22 April 1991.
- Petitioners then elevated the matter for review and reversal of the Court of Appeals ruling and the questioned RTC orders and writs.
Parties and Procedural Posture
- Petitioners were the persons claiming ownership through a redemption of the property after a foreclosure of the first mortgage.
- Respondents included the Court of Appeals, Hon. Inocencio D. Mailiaman as Presiding Judge of RTC Branch 14, the Register of Deeds for the City of Manila, and Regio B. Ruefa as Deputy Sheriff of the RTC.
- Respondent private mortgagee was Teodoro Marmeto, who had filed for consolidation of ownership in the RTC.
- The case proceeded through (a) an RTC petition for consolidation of ownership, (b) dismissal against PNB and later consolidation orders, (c) issuance of execution and orders affecting the certificate of title and possession, and (d) a Court of Appeals certiorari dismissal for lack of merit.
- The Supreme Court granted the petition, set aside the Court of Appeals decision, and reversed the RTC orders and writs.
Key Factual Allegations
- On 16 February 1976, the Philippine National Bank (PNB) granted a loan to Ronnie Garcia in the amount of P30,000.00 secured by a first mortgage on land covered by TCT No. 120745.
- On 1 April 1976, the loan was increased to P40,000.00, and the deed of real estate mortgage and its amendment were registered and annotated on TCT No. 120745 on 17 February 1976 and 12 April 1976, respectively.
- PNB extra-judicially foreclosed the first mortgage due to non-compliance and issued a Certificate of Sale to PNB on 8 November 1977 as sole and highest bidder.
- The foreclosure sale was annotated on TCT No. 120745 on 12 February 1979.
- Before the PNB foreclosure, Ronnie Garcia executed a Deed of Second Mortgage over the same property on 18 August 1977 in favor of Teodoro Marmeto, for P100,000.00 payable within three (3) months, which was recorded on 20 April 1978.
- The second mortgage was also extra-judicially foreclosed, and on 27 June 1978 Marmeto was issued a Certificate of Sale as highest bidder at P125,000.00, with annotation on 28 June 1978.
- On 1 February 1980, Ronnie Garcia executed a “Waiver and Renunciation of Rights” regarding the first mortgage, specifically his right of redemption, in favor of his father, Jesus Garcia, who later assigned that right to petitioner Nimfa Garcia Ramirez.
- Neither assignment of the redemption right was registered with the Register of Deeds.
- On 9 August 1980, petitioner Nimfa Ramirez paid the total redemption price to PNB, which accepted the payment.
- Because no redemption was made with respect to the second mortgage, Teodoro Marmeto filed on 9 August 1989 with the RTC a Petition for Consolidation of Ownership against Ronnie Garcia and PNB.
- On 19 October 1989, PNB moved to dismiss on the ground that Nimfa Ramirez paid the redemption price of the first mortgage and, since PNB had no remaining interest or lien, it had no cause of action against PNB.
- On 6 November 1989, the trial court dismissed the case against PNB.
- Ronnie Garcia later defaulted, and on 20 December 1989, the trial court directed consolidation of ownership in favor of Teodoro Marmeto and ordered the Register of Deeds to register the consolidated ownership.
- On 12 March 1990, a writ of execution issued directing Ronnie Garcia to surrender TCT No. 120745 to Marmeto.
- On 22 May 1990, the RTC ordered the Register of Deeds to cancel TCT No. 120745 in Ronnie Garcia’s possession, issue another title in Marmeto’s name, and require Ronnie Garcia and all persons claiming under him to surrender possession.
- On 29 May 1990, petitioner filed a Third-Party/Adverse Claim, alleging she became the legal owner after paying the redemption price of the first mortgage.
- On 6 June 1990, petitioner filed an Urgent Motion to hear the third-party/adverse claim and to suspend execution, asserting she was an indispensable party and that the RTC should have made her a party after formal notice through PNB’s motion to dismiss.
- Before the urgent motion could be resolved, petitioner filed a petition for certiorari in the Court of Appeals, alleging the RTC orders were issued “in excess of jurisdiction, if not with grave abuse of authority.”
Issues Raised
- Petitioners contended that the Court of Appeals acted erroneously in sustaining the RTC despite alleged jurisdictional defects.
- Petitioners invoked the position that petitioner Ramirez was an indispensable party whose rights were implicated by the RTC consolidation orders and execution.
- The controlling issue for review centered on whether petitioner acquired any enforceable right by reason of the redemption payment.
- A secondary issue involved the legal effect of the timing of the redemption and PNB’s acceptance of the redemption price beyond the one-year statutory period as found in the records.
- The case also necessarily required determination of the effect of valid redemption on the subsequent lienholder Teodoro Marmeto, who sought consolidation in his own favor.