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Republic of the Philippines the case on the following issues: (1) Whether plaintiff can still collect the deficiencies after the
SUPREME COURT
Manila
G.R. No. L-51768 September 14, 1990
PRUDENTIAL BANK, plaintiff-appellee,
vs.
RENATO M. MARTINEZ and VIRGINIA J. MARTINEZ, defendants-appellants.
MEDIALDEA, J.:
This case is certified to Us by the Court of Appeals in its Resolution dated August 30, 1979, for the
reason that only pure questions of law are involved.
The Court of Appeals adopted the findings of fact of the trial court as follows:
This is a case for sum of money filed by plaintiff Prudential Bank against defendants Renato M.
Martinez and Virginia J. Martinez, seeking to recover a deficiency of P25,775.10 with daily interest
thereon of P15.35.
The plaintiff in its complaint alleged that on January 27 and February 2, 1970 defendants obtained
a loan from the plaintiff in the total sum of P48,000.00 and in consideration thereof, the said
defendants executed on said dates promissory notes in favor of the plaintiff, promising to pay
jointly and severally, the sum of P48,000.00 on or before January 27, 1971 with interest thereon at
12% per annum, partially secured by a real estate mortgage on the property covered by Transfer
Certificate of Title No. 97467 of the Register of Deeds of Manila; that the loan became due and
defendant defaulted despite plaintiffs demand letters; that as a consequence, the mortgage was
extra-judicially foreclosed; that the plaintiff was the highest and lone bidder at the auction sale, for
the sum of P52,760.00; that after deducting therefrom the attorney's fees, registration fees, sheriffs
fees, and publication expense, there still remained a balance of P25,775.10 due to plaintiff, which
plaintiff now seeks to recover plus interest and attorney's fees.
The defendants admit the allegations in the complaint, except paragraphs 8 and 9 thereof and
alleged that plaintiff has no cause of action and therefor not entitled to recover and pray for
P3,000.00 attorney's fees plus costs of litigation in the amount of P1,000.00.
When the issues were joined a pre-trial was conducted and the Court issued the following pre-trial
order, to wit:
With the admission in the answer of paragraphs 1 to 5 of the complaint, the parties believed that
there are no controversies as to the facts. From the point of view of the defendants, they will submit
extra-judicial foreclosure of mortgage; (2) What should be the basis of the computation of the
attorney's fees? Should it be the principal or should the 10% be based on the principal plus
interest; and (3) Whether the plaintiff can still collect attorney's fees in its effort to recover the
deficiencies. However, plaintiff, counsel believes there is only one issue and that is whether any
deficiency amount can be collected after extra-judicial foreclosure of mortgage.
WHEREFORE, it is hereby ordered that the parties be given a period of thirty (30) days from today
within which to file their respective memoranda simultaneously.
SO ORDERED. (Rollo, pp. 30-32)
On July 8, 1977 the lower Court rendered a decision, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants,
ordering the latter to pay the former, jointly and severally, the amounts of P25,775.10 with daily
interest thereon of P15.85 from September 10, 1976 until fully paid and P2,500.00 for and as
attorney's fees, plus costs of suit. (Records, p. 18)
Thereupon, defendants appealed to the Court of Appeals with these two assignments of errors,
namely —
I
THE LOWER COURT ERRED IN HOLDING THAT THE PLAINTIFF-APPELLEE 19 ENTITLED TO
RECOVER THE DEFICIENCY IN THE SUM OF P 25,775.1 0 AFTER THE EXTRA-JUDICIAL
FORECLOSURE OF MORTGAGE TO SATISFY THE INDEBTEDNESS, AND AFTER THE MORTGAGED
PROPERTY HAD BEEN CONVEYED TO THE PLAINTIFF- APPELLEE IN SATISFACTION OF THE
LOANS.
II
THE LOWER COURT ERRED IN AWARDING THE SUM OF P2,500.00 AS ATTORNEYS FEES TO
PLAINTIFF-APPELLEE. (Appellants' Brief, p. 9, Rollo)
Appellants argue that the Legislature never intended to grant to a mortgagee the right to recover
the deficiency arising from an extrajudicial foreclosure of mortgage inasmuch as such recovery is
not a natural right of the mortgagee, hence, the need to expressly grant the same in a judicial
foreclosure proceedings; that consequently, an express prohibition against such claim would be
quite superfluous and that besides, there is no need to enumerate negative remedies or solutions in
the law. Further, they aver that if mortgagees were allowed such right, the debtors would be at the
mercy of their creditors considering the summary nature of extrajudicial foreclosure proceedings.
They, likewise, point to the limited readership of auction sale notices which lead to the sale of
mortgaged properties for much less than their actual value notwithstanding that the mortgage
value of the said properties is higher than its fair market value. Finally, appellants assail the award
of attorney's fees in the sum of P2,500.00 as unconscionable. They claim that the computation of

the attorney's fees should have been based on the terms of promissory note which provided for a
ten percent (10%) award of the principal obligation; and that since the attorney's fees were already
collected by the appellee when it foreclosed the mortgage, such fees should no longer be awarded
in this case. (Appellants Brief, pp. 4-11, Rollo, p. 9)
We affirm.
We have already ruled in several cases that in extrajudicial foreclosure of mortgage, where the
proceeds of the sale are insufficient to pay the debt, the mortgagee has the right to recover the
deficiency from the debtor (Philippine Bank of Commerce v. De Vera, L-18816, December 29, 1962,
6 SCRA 1026; Development Bank of the Philippines v. Vda. de Moll L25802, January 31, 1972, 43
SCRA 82; Development Bank of the Philippines v. Murang, L-29130, August 8,1975, 66 SCRA 141;
Development Bank of the Philippines v. Zaragoza, L-23493, August 23, 1978, 84 SCRA 668; and DBP
v. Tomeldan, G.R. No. 51269, November 17,1980, 101 SCRA 171). A careful scrutiny of the
arguments presented in the case at bar yields no substantial and convincing reasons for Us to
depart from Our previous ruling. Appellants' arguments merely rehashed the objections already
considered and overruled in the aforementioned cases. Thus, in Philippine Bank of Commerce v. De
Vera (supra), We declared that:
A reading of the provisions of Act No. 3135, as amended (re extrajudicial foreclosure) discloses
nothing, it is true, as to the mortgagee's right to recover such deficiency. But neither do we find any
provision thereunder which expressly or impliedly prohibits such recovery.
Article 2131 of the new Civil Code, on the contrary, expressly provides that 'The form, extent and
consequences of a mortgage, both as to its constitution, modification and extinguishment, and as to
other matters not included in this Chapter, shall be governed by the provisions of the Mortgage Law
and of the Land Registration Law.' Under the Mortgage Law, which is still in force, the mortgagee
has the right to claim for the deficiency resulting from the price obtained in the sale of the real
property at public auction and the outstanding obligation at the time of the foreclosure
proceedings. (See Soriano v. Enriquez, 24 Phil. 584; Banco de Islas Filipinos v. Concepcion e Hijos,
53 Phil. 86; Banco Nacional v. Barreto, 53 Phil. 101). Under the Rules of Court (Sec. 6, Rule
70),"Upon the sale of any real property, under an order for a sale to satisfy a mortgage or other
incumbrance thereon, if there be a balance due to the plaintiff after applying the proceeds of the
sale, the court, upon motion, should render a judgment against the defendant for any such balance
for which, by the record of the case, he may be personally liable to the plaintiff, ..." It is true that this
refers to a judicial foreclosure, but the underlying principle is the same, that the mortgage is but a
security and not a satisfaction of indebtedness. ...
Let it be noted that when the legislature intends to foreclose the right of a creditor to sue for any
deficiency resulting from the foreclosure of the security given to guarantee the obligation, it so
expressly provides. Thus, in respect to pledges, Article 2115 of the new Civil Code expressly states:
... If the price of the sale is less (than the amount of the principal obligation) neither shall the
creditor be entitled to recover the deficiency, notwithstanding any stipulation to the contrary.
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"Likewise in the event of the foreclosure of a chattel mortgage on the thing sold in installments 'he
(the vendor) shall have no further action against the purchaser to recover any unpaid balance of
the price. Any agreement to the contrary shall be void" (Article 1484, paragraph 3, Ibid). It is then
clear that in the absence of a similar provision in Act No. 3135, as amended, it can not be concluded
that the creditor loses his right given him under the Mortgage Law and recognized in the Rules of
Court, to take action for the recovery of any unpaid balance on the principal obligation, simply
because he has chosen to foreclose his mortgage extra- judicially pursuant to a special power of
attorney given him by the mortgagor in the mortgage contract, (pp. 1029-1030)
Moreover, the fact that the mortgaged property is sold at an amount less than its actual market
value should not militate against the right to such recovery. We fail to see any disadvantage going
for the mortgagor. On the contrary, a mortgagor stands to gain with a reduced price because he
possesses the right of redemption. When there is the right to redeem, inadequacy of price should
not be material, because the judgment debtor may reacquire the property or also sell his right to
redeem and thus recover the loss he claims to have suffered by the reason of the price obtained at
the auction sale (De Leon v. Salvador, L-30871, December 28, 1970 and Bernabe v. Cruz, et al., L-
31603, December 28, 1970; 36 SCRA 567). Generally, in forced sales, low prices are usually offered
and the mere inadequacy of the price obtained at the sheriffs sale unless shocking to the conscience
will not be sufficient to set aside a sale if there is no showing that in the event of a regular sale, a
better price can be obtained (Ponce de Leon v. Rehabilitation Finance Corporation, L-24571,
December 18, 1970, 36 SCRA 289).
Lastly, We find that the award of attorney's fees is proper. It can not be disputed that the
proceedings in the extrajudicial foreclosure and the deficiency suit are altogether different. The
first is extrajudicial and summary in nature while the second is a court action. Hence, the efforts
exerted by the lawyer in these two separate courses of action should be recognized. Besides, the
basis of the extrajudicial foreclosure proceeding was the Deed of Real Estate Mortgage, particularly
condition No. 7 thereof, where the parties stipulated for a ten percent (10%) attorney's fees to be
collected in the event that the mortgage is foreclosed or a legal action is taken to foreclose the
mortgage (Appellee's Brief, Rollo, p. 9, italics supplied). However, the proceeds in that sale were
insufficient to pay the debt contained in the appellant's promissory note. The appellee was,
therefore, constrained to file a deficiency suit, an eventuality not covered by the Deed of Real Estate
Mortgage. Necessarily, the basis of this case is the promissory note executed by the appellants. We
find that the note itself shows that appellants obligated themselves to pay the sum of ten percent as
attorney's fees whether incurred or not, exclusive of cost and other expenses of collection (Records,
p. 7). Clearly, the trial court's award of attorney's fees was not without basis. The amount of
P2,500.00 awarded as attorney's fees being less than ten percent (10%) of the deficiency sued for is
just and proper in the premises.
ACCORDINGLY, the decision appealed from is hereby AFFIRMED. Costs against the appellants.
SO ORDERED.
Narvasa (Chairman), Cruz, Gancayco and Griño-Aquino, JJ., concur.

G.R. No. 94247 September 11, 1991
DIONISIO MOJICA, in behalf of Spouses LEONARDO MOJICA (now deceased) and MARINA
RUFIDO,petitioner,
vs.
HON. COURT OF APPEALS, and RURAL BANK OF YAWIT, INC., respondents.
PARAS, J.:
This is a petition for review on certiorari which seeks to reverse and set aside: the decision * of the Court
of Appeals dated February 15, 1990 in AC-G.R. CV No. 05987 entitled "Dionisio Mojica, in behalf of
spouses Leonardo Mojica (now deceased) and Marina Rufido v. Rural Bank of Kawit, Inc.", which
affirmed in toto the decision of the trial court and (2) the resolution dated June 4, 1990 denying the
motion for reconsideration.
The facts of the case as gathered from the records are as follows:
On February 1, 1971, plaintiff Leonardo Mojica (now deceased) contracted a loan of P20,000.00 from
defendant Rural Bank of Kawit, Inc. (now respondent). This loan was secured by a real estate mortgage
executed on the same date by the plaintiffs spouses Leonardo Mojica and Marina Rufido (Rollo, Annex
"C" p. 40).
The real estate mortgage contract states among others:
... agreement for the payment of the loan of P20,000.00 and such other loans or other advances
already obtained or still to be obtained by the mortgagors ...
2. ... but if the mortgagors shall well and truly fulfill the obligation above stated according to the
terms thereof then this mortgage shall become null and void. (Rollo Petitioner's Memorandum,
pp. 86-87)
The spouses mortgaged to the Rural Bank of Kawit, a parcel of land consisting of 218,794 square meters,
located in Naic, Cavite, covered by Transfer Certificate of Title No. RT-155 (Rollo, Annex "A", p. 31). The
real estate mortgage was duly registered under Entry No. 74661 of the Registry of Deeds of Cavite (Rollo,
Annex "C", p. 41).
The loan of P20,000.00 by the plaintiffs spouses was fully and completely paid (Ibid.).
On March 5, 1974, a new loan in the amount of P18,000.00 was obtained by plaintiffs spouses from the
defendant Rural Bank which loan matured on March 5, 1975 (Rollo, pp. 32; 41).
No formal deed of real mortgage was constituted over any property of the borrowers, although the top of
the promissory note dated March 5, 1974, contained the following notation.
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This promissory note is secured by a Real Estate Mortgage executed before the Notary Public of
the Municipality of Kawit, Mrs. Felisa Senti under Doc. No. 62, Page No. 86, Book No.__, Series of
1971.
The Real Estate Mortgage mentioned above is the registered mortgage which guaranteed the already
paid loan of P20,000.00 granted on February 1, 1971 (Rollo, p. 8,7).
The spouses Leonardo Mojica and Marina Rufido failed to pay their obligation after its maturity on
March 5, 1975. Respondent rural bank extrajudicially foreclosed the real estate mortgage on the
justification that it was adopted as a mortgage for the new loan of P18,000.00 (Rollo, pp. 32; 41).
The subject property was set for auction sale by the Provincial Sheriff of Cavite for June 27, 1979. In that
auction sale, defendant rural bank was the highest bidder, and its bid corresponded to the total
outstanding obligation of plaintiffs spouses Mojica and Rufido (Reno, p. 32).
The proceeds from the sale of the piece of land of plaintiffs spouses were applied to their outstanding
obligation with defendant bank (Ibid.)
The corresponding certificate of sale in favor of defendant bank was executed by the Provincial Sheriff
also on June 27, 1979, and the instrument was recorded in the Office of the Register of Deeds of Cavite on
June 29, 1979. The one year period for redemption elapses after June 1980 without plaintiffs spouses
having redeemed the foreclosure property (Ibid.)
Meanwhile, on July 19, 1980, Dionisio Mojica, the son of petitioners-spouses, in an apparent attempt to
pay the debt of P18,000.00 made a partial payment in the amount of P24,658.00 (P19,958.00 of this
amount in check bounced) which the defendant rural bank received and accepted with the issuance of
the defendant's official receipt No. 101 269, ackowledging the payment as partial payment of 'past due
loan', together with the "interest on past due lose (Rollo, p. 33).
On August 11, 1980, another partial payment was made by Dionisio Mojica in the amount of P9,958.00 in
payment also of 64 past due loan' plus "interest on past due loan 7 which payment was received by the
defendant rural bank and acknowledged with the issuance of official receipt No. 101844. These
payments were, however, considered by the bank as deposit for the repurchase of the foreclosed
property (Ibid., p. 33).
On August 14, 1981, upon inquiry by Dionisio Mojica on the unpaid balance of the loan, the respondent
rural bank issued a 'Computation Slip" indicating therein, that as of August 14, 1981, the outstanding
balance plus interest computed from March 5, 1975 was P21,272.50 (Ibid.).
On November 10, 1981, said bank executed an affidavit of consolidation of ownership, which it
subsequently filed with the Register of Deeds of Cavite. As a result, Transfer Certificate of Title No. T-
123964, covering the foreclosed piece of land, was issued in its favor by the Register of Deeds on January
19, 1982. After having consolidated its ownership over the foreclosed property, defendant bank
scheduled the parcel of land to be sold at public auction on February 26, 1982, pursuant to the

requirement of the law regarding the disposal by a bank of its acquired assets. Dionisio Mojica and one
Teodorico Rufido, brother-in-law of plaintiff Leonardo Mojica, were notified of such auction sale
However, no sale was consummated during that scheduled sale and the property concerned up to now
still remains in the possession of respondent bank (Ibid.).
The refusal of the same bank to allow Dionisio Mojica to pay the unpaid balance of the loan as per the
"Computation Slip" amounting to P21,272.50, resulted in the filing of a complaint (Rollo, p. 42).
On September 3, 1984, the trial court rendered judgment dismissing the complaint. On November 5,
1984, petitioner filed a motion for reconsideration of the decision, which motion was denied in the order
dated November 17, 1984. On January 2, 1985, a notice of appeal was filed in the Intermediate Appellate
Court (Rollo, p. 42).
On February 15, 1990, the Appellate Court, rendered its decision, aiming in toto the decision of the trial
court. The dispositive portion of the decision of the appellate court reads:
WHEREFORE, finding no reversible error in the decision appealed from, the game is hereby
AFFIRMED in toto. With costs against plaintiffs-appellants.
The motion for reconsideration of said decision was denied in a resolution dated June 4, 1990 (Rollo,
Annex "B", p. 39).
Hence, this petition.
This Court in its resolution dated September 3, 1990 dismissed the petition for non-compliance with
certain requisites but later in its resolution dated November 5, 1990, it reinstated the petition (Rollo,
Petition pp. 9-28); Resolutions, pp. 52-53; 61).
The petition is devoid of merit.
The pivotal issue in this case is whether or not the foreclosure sale by the Sheriff on June 27, 1979, had
for its basis, a valid and subsisting mortgage contract. Otherwise stated, there is a need to ascertain the
intention of the parties as to the coverage of the mortgage in question with respect to future
advancements.
Contracts which are not ambiguous are to be interpreted according to their literal meaning and should
not be interpreted beyond their obvious intendment (Plastic Town Center Corp. v. NLRC, 172 SCRA 580
[1989]). Thus, where the intent of the parties has been shown unmistakably with clarity by the language
used, the literal meaning shall control (Paramount Surety & Ins. Co., Inc. v. Ago, 171 SCRA 481 [1989]).
Correspondingly, stipulations in the mortgage document constitute the law between the parties, which
must be complied with faithfully (Community and Loan Assn., Inc. v. Court of Appeals, 153 SCRA 564
[1987]).
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As earlier stated, the Real Estate Mortgage in the case at bar expressly stipulates that it serves as
guaranty —
... for the payment of the loan ... of P20,000.00 and such other loans or other advances already
obtained or still to be obtained by the mortgagors as makers ... (Rollo, p. 14).
It has long been settled by a long line of decisions that mortgages given to secure future advancements
are valid and legal contracts; that the amounts named as consideration in said contract do not limit the
amount for which the mortgage may stand as security if from the four corners of the instrument the
intent to secure future and other indebtedness can be gathered. A mortgage given to secure
advancements is a continuing security and is not discharged by repayment of the amount named in the
mortgage, until the full amount of the advancements are paid (Lim Julian v. Lutero, 49 Phil. 704-705
[1926]). In fact, it has also been held that where the annotation on the back of a certificate of title about a
first mortgage states "that the mortgage secured the payment of a certain amount of money plus interest
plus other obligations arising there under' there was no necessity for any notation of the later loans on
the mortgagors' title. It was incumbent upon any subsequent mortgagee or encumbrances of the
property in question to e e the books and records of the bank, as first mortgagee, regarding the credit
standing of the debtors Tady-Y v. PNB, 12 SCRA 19-20 [1964]).
The evidence on record shows that the amounts of P4,700.00 and P9,958.00 were accepted by the bank
on July 19 and August 11, 1980 as deposits for conventional redemption after the property covered by
real estate mortgage became the acquired asset of the bank and priced at P85,000.00 and after petitioner
had lost all rights of legal redemption because more than one year had already elapsed from June 29,
1979, the date the certificate of sale was registered in the office of the Registry of Deeds of Cavite.
Indeed, the conventional redemption was subject to be exercised up to March 3, 1982 and was extended
up to April 19, 1982 for a fixed amount of P85,000.00. The respondent bank even favored the petitioner
by giving them the first preference to repurchase the property but they failed to avail of this opportunity,
although the bank "is certainly disposed to release at anytime" the deposits.
Further, the evidence on record also shows that the mortgage property was auctioned on June 27, 1979.
The only bidder was the respondent bank which bid for P26,387.04. As the highest bidder, the
respondent bank can rightfully consolidate its title over the property. As aptly stated by respondent
Court:
It would then be unfair to impute that the trial court allowed defendant bank to appropriate the
mortgage property, because after the plaintiff-appellants failed to repurchase the property and
filed this action with 'lis pendens', the actions prevented the bank from negotiating for the sale
of the property to other buyers. (p. 36, Rollo)
PREMISES CONSIDERED, the petition is DISMISSED and the assailed decision and resolution of the
Intermediate Appellate Court (Court of Appeals) are AFFIRMED.
SO ORDERED.
Melencio-Herrera (Chairperson), Padilla and Regalado, JJ., concur.
Sarmiento, J., is on leave.

G.R. No. 97872 March 1, 1994
STA. IGNACIA RURAL BANK, INC., petitioner,
vs.
THE HONORABLE COURT OF APPEALS and SPS. CONRADO PABLO and JUANITA
GONZALES, respondent.
MELO, J.:
Aired in the petition for certiorari before us is the propriety of sustaining the decretal portion of the
decision in CA-G.R. CV No. 25653 rendered on February 1, 1991 by the Court of Appeals (Mendoza
V., Chua, Victor [P], JJ.) which authorized private respondents to repurchase the subject realty from
petitioner in this manner:
WHEREFORE, the decision appealed from is hereby REVERSED, and in its stead judgment is
rendered as follows:
1. Annulling and cancelling the sale made by the appellee Sta. Ignacia Rural Bank, Inc. of the
subject house and lots to and in favor of appellee-spouses Alberto Lucas and Nelia Rico as well
as Transfer Certificates of Title Nos. 184687 and 184688 issued by the Register of Deeds of
Tarlac;
2. Ordering said appellee Sta. Ignacia Rural Bank, Inc. to allow the appellants to repurchase the
subject house and lots for such amount as may correspond to the principal obligation and the
accumulated interests up to and including the time of actual repurchase;
3. Ordering the appellee Sta. Ignacia Rural Bank, Inc. to return to the appellee-spouses the
purchase price of said house and lots which is P47,500.00 including all the expenses incident
thereto.
4. No costs.
SO ORDERED.
(pp. 27-28, Rollo.)
The generative facts of the legal controversy, as synthesized by respondent court, are acceptable to
herein petitioner, and are accordingly adopted thusly:
On January 14, 1980, the defendants Sta. Ignacia Rural Bank, Inc. extended to the plaintiff-
spouses Conrado Pablo and Juanita Gonzales a loan totalling P12,109.75. As a security, the
plaintiff-spouses executed in favor of the defendant bank a Real Estate Mortgage (Exh. "A") over
Page |5
their residential house and two (2) lots covered by Free Patent Title, OCT No. P-7941 (Exh. "E")
located at Poblacion Norte, Mayantoc, Tarlac. The plaintiff-spouses defaulted in the payment of
their obligation, as a result of which, the defendant bank filed with the Provincial Sheriff of
Tarlac a petition for extra-judicial foreclosure of their real estate mortgage under Act 3135. On
July 28, 1981, the aforecited house and lots of the plaintiff-spouses were sold at public auction
with the defendant bank as the highest bidder for P13,168.35 (Exhs. "B"-"D", inclusive).
Thereafter, the Certificate of Sale (Exh. "D") was executed in favor of the defendant bank on
September 29, 1981 and the same was registered with the Register of Deeds of Tarlac on
November 5, 1981 (Exh. "E-2"). The ownership of the subject house and lots was consolidated in
favor of the defendant bank virtue of the final deed of sale executed on November 5, 1983 (Exh.
"I"). On December 19, 1984, the defendant bank sold the aforementioned real estates to
defendant-spouses Alberto Lucas and Nelia Rico for P47,500.00 (Exh. "K"), and Transfer
Certificates of Title Nos. 184687 and 184688 (Exhs. "L" and "M") over the house and lots were
subsequently issued in the name of said defendant-spouses.
Hence, the complaint for the repurchase of the subject house and lots, annulment of title and
damages filed on March 20, 1986 by the plaintiff-spouses. After trial, the lower court rendered
the appealed decision, the decretal portion of which states:
WHEREFORE, this case is hereby DISMISSED without pronouncement as to costs.
SO ORDERED. (pp. 21-22, Rollo.)
With respect to the principal question of redemption, the court of origin expressed the view that
private respondents' cause of action could no longer prosper because:
While Section 119, C.A. 141 provides for a five-year period of redemption involving homestead
and free patent lands, Section 5, R.A. No. 720, as amended, provides for a two-year redemption
period in mortgage loans with rural banks. R.A. 720, as amended, being a special law and of
later enactment prevails over C.A. 141 which is a general law.
The Certificate of Sale was registered on November 5, 1981. The redemption period is counted
from the registration of the certification of foreclosure sale (Gorospe vs. Santos, 69 SCRA 191).
Pursuant to Section 5, R.A. 720, therefore, plaintiffs' right to redeem within the two-year period
has already expired.
(pp. 9-10, Rollo.)
When the same issue was ventilated by private respondents on appeal, respondent Court of
Appeals saw no conflict between the pertinent provisions of the Public Land Act and the Rural
Banks Act. In consequence, reversal followed upon the following apt observations:

. . . The lower court failed to consider that the subject parcels of residential lots were acquired by
the appellants under the provisions of the Public Land Law (C.A. 141). Section 119 thereof
provides, inter alia:
Every conveyance of land acquired under the Free Patent provisions, when proper, shall be
subject to repurchase by the applicants, his widow, or legal heirs within a period of five
years from date of the conveyance.
Accordingly, we do not sustain the trial court's above pronouncement. We base our finding on
the case of Oliva vs. Lamadrid, 21 SCRA 737, a case in point, in which the High Tribunal ruled
that there is no conflict between Section 119 of C.A. 141 and Section 5, R.A. 720, as amended,
thus:
It should be noted that the period of two (2) years granted for the redemption of property
foreclosed under Section 5 of Republic Act No. 720, as amended by Republic Act No. 2670,
refers to lands "not covered by a Torrens Title, a homestead or free patent", or to owners
of lands "without torrens title", who can "show five years or more of peaceful, continuous
and uninterrupted possession thereof in the concept of an owner, or of homesteads or
free patent lands pending the issuance of titles but already approved", or "of lands
pending homestead or free patent titles". Plaintiff, however, had, on the land in question, a
free patent and a Torrens title, which were issued over 26 years prior to the mortgage
constituted in favor of the Bank. Accordingly, there is no conflict between Section 119 of
Commonwealth Act No. 141 and Sections 5 of Republic Act No. 720, as amended, and the
period of two (2) years prescribed in the latter is not applicable to him.
The case before us indubitably shows that the disputed house and lots were covered by a Free
Patent Title, Original Certificate of Title No. P-7941 (Exh. "E"). Thus, Section 5 of R.A. 720, as
amended, which provides for two (2) years from the date of foreclosure within which to
redeem, is clearly not applicable as said section refers to lands "not covered by a torrens title, a
homestead or free patent", or to owners of land "without torrens titles" who can "show five
years or more of peaceful, continuous, and uninterrupted possession in the concept of an
owner, or of homesteads or free patent lands pending the issuance of titles but already
approved", or "lands pending homestead or free patent titles". The applicable law, therefore, is
Section 119 of the Public Land Law (C.A. 141), and not Section 5 of R.A. 720, as amended.
Now, as to whether the appellants had exercised their right to redeem within the redemption
period or whether such right had already prescribed, We again cite the ruling of the Supreme
Court in the recent case of Belisario vs. Intermediate Appellate Court, 165 SCRA 101, in which it
was held, inter alia:
The subject piece of land was sold at public auction to respondent PNB on January 31,
1963. However, the Sheriff's Certificate of Sale was registered only on July 22, 1971. The
redemption period, for purposes of determining the time when a final Deed of Sale may
Page |6
be executed or issued and the ownership of the registered land consolidated in the
purchaser at an extrajudicial foreclosure sale under Act 3135, should be reckoned from
the date of the registration of the Certificate of Sale in the Office of the Register of Deeds
concerned and not from the date of public auction (PNB vs. CA, et. al., G.R. L-30831 and
L-31176, Nov. 21, 1979, 94 SCRA 357, 371). In this case, under Act 3135, petitioners
may redeem the property until July 22, 1972. In addition, Section 119 of
Commonwealth Act 141 provides that every conveyance of land acquired under the free
patent or homestead patent provisions of the Public Land Act, when proper, shall be
subject to repurchase by the applicant, his widow or legal heirs, within the period of
five years from the date of conveyance.
The five-year period of redemption fixed in Section 119 of the Public Land Law of
homestead sold at extrajudicial foreclosure begins to run from the day after the
expiration of the one-year period of repurchase allowed in an extrajudicial foreclosure.
(Manuel vs. PNB, et al., 101 Phil. 968). Hence, petitioners still had five (5) years from
July 22, 1972 (the expiration of the redemption period under Act 3135) within which to
exercise their right to repurchase under the Public Land Act.
In this case, it will be recalled that the mortgaged house and lots were sold at public auction to
the appellee bank on July 28, 1981. However, the Sheriff's Certificate of Sale was registered
only on November 5, 1981. Under Act 3135, the appellants may redeem the subject house and
lots until November 5, 1982 being the last day of the one-year period of repurchase allowed by
said law. Following, then, the ruling of the Supreme Court in the case of Belisario vs.
Intermediate Appellate Court, supra, the appellants still had five (5) years from November 5,
1982 (the expiration of the redemption period under Act 3135), or until November 5, 1987,
within which to exercise their right to repurchase under the Public Land Act.
Moreover, for purposes of ascertaining whether appellants exercised their right to repurchase
effectively, we have only to consider their filing of the action for the "repurchase of the subject
house and lots, annulment of title and damages" on March 20, 1986 against the appellee bank
and the appellee-spouses, which was filed within the five-year period to repurchase. The
question now of whether the appellant had actually tendered, deposited or consigned in court
the redemption price for the subject house and lots becomes immaterial in view of the filing of
said action to repurchase which has been equivalent to an offer to redeem and has the
effect per se of preserving their right of recovering the disputed house and lots. (Tolentino vs.
Court of Appeals, 106 SCRA 513; Tioseco vs. Court of Appeals, 143 SCRA 705).
Foregoing considered, the issue of whether or not the appellants are still entitled to
redeem the subject house and lots is already settled in their favor. The question to be
determined now at this juncture is whether the appellants should repurchase the
property from the appellee bank or from the appellee-spouses because the amount to be
paid by the appellants as consideration for the repurchase would depend upon whether
the appellants should repurchase from the former or from the latter. In the case of
Philippine National Bank vs. Landeta, 18 SCRA 272, the Supreme Court concurring with

this Court held, inter alia, that the mortgagor is entitled to repurchase the mortgaged
property from the mortgagee bank and the amount to be paid therefor should be only
"such amount as may correspond to the principal obligation and the accumulated
interest up to and including the time of actual repurchase". The High Tribunal
rationalized that a different ruling would render it easy for the buyer at the foreclosure
sale to render nugatory the right of repurchase granted by law to the owner who
acquired the property under the Public Land Act, by making conveyance of the property
for amounts beyond the capacity of said owner to pay. The High Court further stated that
this right of repurchase, as long as within the redemption period, may be exercised
irrespective of whether or not the mortgagee bank had subsequently conveyed the
property to some other party. (Villaflor vs. Barreto, 92 Phil. 297).
Following the above pronouncement, it is correct to state that herein appellants may
redeem the subject house and lots from the appellee bank despite the conveyance
thereof to and in favor of the appellee-spouses. Anent the redemption price, as held in
PNB vs. Landeta, supra, it should be only such amount as may correspond to the principal
obligation and the accumulated interest thereon up to and including the time of actual
repurchase. Hence, the appellants should pay as redemption price, the amount of the
principal obligation which is P10,000.00 plus 12% interest per annum thereon, in
addition, up to and including the time of actual repurchase.
(pp. 23-26, Rollo.)
Petitioner's motion for reconsideration did not merit favorable action
(p. 30, Rollo), hence the petition at bench which practically reiterates the similar disquisition below
towards upholding the supremacy of the 2-year period under the Rural Banks Act over the 5-year
limit for repurchase fixed by the Public Land Act (pp. 66-67, Rollo).
The query raised by petitioner is far from novel or unsettled, since the matter of whether the time
frame under the Rural Bank Act had superseded the repurchase period prescribed by the Public
Land Act involving the foreclosure sale property acquired via a homestead patent was again
recently resolved in the negative by this Division (Gutierrez, Bidin, Davide [P], Romero, Melo, JJ.) in
Rural Bank of Davao City. Inc. vs. Court of Appeals (217 SCRA 554 [1993]) in this fashion:
The policy of homestead laws and the reason behind the foregoing provision are expressed by
this Court in Pascua vs. Talens in this wise:
It is well-known that the homestead laws were designed to distribute disposable
agricultural lots of the State to land-destitute citizens for their home and cultivation.
Pursuant to such benevolent intention the State prohibits the sale or encumbrance of the
homestead (Section 116) within five years after the grant of the patent. After that five-
year period the law impliedly permits alienation of the homestead, but in line with the
primordial purpose to favor with the homesteader and his family the statute provides
Page |7
that such alienation or conveyance (Section 117) shall be subject to the right of
repurchase by the homesteader, his widow or heirs within five years. This Section 117 is
undoubtedly a complement of Section 116. It aims to preserve and keep in the family of
the homesteader that portion of public land which the State had gratuitously given to
him. It would, therefore, be in keeping with this fundamental idea to hold, as we hold,
that the right to repurchase exists not only when the original homesteader makes the
conveyance, but also when it is made by his widows or heirs. This construction is clearly
deducible from the terms of the statute.
As pointedly stated earlier in Jocson vs. Soriano, in connection with homestead statutes:
Acts Nos. 1120 and 926 were patterned after the laws granting homestead rights and
special privileges under the laws of the United States and the various states of the Union.
The statutes of the United States as well as of the various states of the Union contain
provisions for the granting and protection of homesteads. Their object is to provide a
home for each citizen of the Government, where his family may shelter and live beyond
the reach of financial misfortune, and to inculcate in individuals those feelings of
independence which are essential to the maintenance of free institutions. Furthermore,
the state itself is concerned that the citizens shall not be divested of a means of support,
and reduced to pauperism. (Cook and Burgwall vs. McChristian, 4 Ca., 24; Franklin vs.
Coffee, 70 Am.. Dec., 292; Richardson vs. Woodward, 104 Fed. Rep., 873; 21 Cyc., 459).
The conservation of a family home is the purpose of homestead laws. The policy of the
state is to foster families as the factors of society, and thus promote general welfare. The
sentiment of patriotism and independence, the spirit of free citizenship, the feeling of
interest in public affairs, are cultivated and fostered more readily when the citizen lives
permanently in his own home, with a sense of its protection and durability. (Waples on
Homestead and Exemptions, p. 3)
Because of such underlying policy and reason, the right to repurchase under Section 119
cannot be waived by the party entitled thereto, and applies with equal force to both voluntary
and involuntary conveyances. And, as early as 1951, in Cassion vs. Banco Nacional Filipino, this
Court declared that such right is available in foreclosure sales of lands covered by homestead
or free patent. Consistently therewith, We have ruled in a number of cases that said Section
119 prevails over statutes which provide for a shorter period of redemption in extrajudicial
foreclosure sales. We thus have consistent pronouncement in Paras vs. Court of Appeals, Oliva
vs. Lamadrid, Belisario vs. Intermediate Appellate Court and Philippine National Bank vs. De los
Reyes. These cases, with the exception of Oliva, involved the question of which between the
five (5) year repurchase period provided in Section 119 of C.A. No. 141 or the one (1) year
redemption period under Act No. 3135 should prevail. While Oliva is the only case, among
those cited, that involves the Rural Banks' Act, the other cases reveal the clear intent of the
law on redemption in foreclosure sales of properties acquired under the free patent or
homestead statutes which have been mortgaged to banks or banking institutions — i.e., to
resolutely and unqualifiedly apply the 5-year period provided for in Section 119 of C.A. No.

141 and, as categorically stated in Paras and Belisario, to reckon the commencement of the
said period from the expiration of the one-year period of redemption allowed in extrajudicial
foreclosure. If such be the case in foreclosure sales of lands mortgaged to banks other than
rural banks, then, by reason of the express policy behind the Rural Banks' Act, and following
the rationale of Our ruling in Oliva, it is with greater reason that the 2-year redemption period
in Section 5 of the Rural Banks' Act should yield to the period prescribed in Section 119 of C.A.
No. 141. Moreover, if this Court is to be consistent with Paras and Belisario, the 5-year
repurchase period under C.A. No. 141 should begin to run only from the expiration of the 2-
year period under the Rural Banks' Act. It may be observed in this connection that Oliva was
decided in 31 October 1967, before the Rural Banks' Act, as amended by R.A. No. 2670, the
pertinent portion of Section 5 only reads as follows:
Sec. 5. . . . Provided, That when a land not covered by a Torrens Title, a homestead or free
patent land is foreclosed, the homesteader or free patent holder, as well as their heirs shall
have the right to redeem the same within two years from the date of foreclosure: . . .
As amended later by R.A. No. 5939, it reads:
Sec. 5. . . . Provided, That when a homestead or free patent land is foreclosed, the homesteader
or free patent holder, as well as their heirs shall have the right to redeem the same within two
years from the date of foreclosure in case of a land not covered by a Torrens title or two years
from the date of the registration of the foreclosure in the case of a land covered by a Torrens
title: . . . .
The amendment clarifies the rather vague language of Section 5 as amended by R.A. No. 2670.
The ambiguity lies in the fact that although the latter seems to speak of three (3) classes of
lands, namely (a) those not covered by a Torrens title, (b) homesteads lands and (c) free patent
lands, the two-year redemption period may only be enjoyed by the homesteader, the free
patent holder or their heirs. Moreover, the clause does not clarify whether the land not covered
by a Torrens title refers to unregistered land merely, or includes land acquired by a homestead
or free patent not yet issued certificates of title under the Torrens system. As amended,
however, by R.A. No. 5939, land acquired under the free patent or homestead patent statutes
may be redeemed within a two-year period; however, the commencement of said period is
reckoned from the date of foreclosure, if such land is not yet covered by the Torrens title, or
from the registration of the foreclosure — meaning, the certificates of sale — if it is already
covered by Torrens title.
Thus, following the clear intent of Oliva, since private respondents' foreclosed property was
acquired under the homestead laws, they had two (2) years from 7 December 1979 — when
the certificate of sale was registered — or until 7 December 1981, within which to redeem the
land. And, pursuant to Section 119 of C.A. No. 141, they had five (5) years from 7 December
1981, within which to repurchase it. Since the private respondents offer to repurchase was
made well within the said 5-year period, the two (2) courts below correctly ruled in their favor.
Page |8
Furthermore, We wish to stress here that We are unable to read in Section 5 of R.A. No. 720, as
amended, any legislative intent to modify or repeal Section 199 of the Public Land Act. Each
speaks of and deals with a different right. Specifically, the former merely liberalized the
duration of an existing right of redemption in extrajudicial foreclosure sales by extending the
period of one (1) year fixed in Act No. 3135, as amended by Act No. 4118, to two (2) years
insofar as lands acquired under free patent and homestead statutes are concerned. The second
speaks of the right to repurchase and prescribes the period within which it may be exercised.
These two (2) rights are by no means synonymous. Under Act No. 3135, the purchaser in a
foreclosure sale has, during the redemption period, only an inchoate right and not the absolute
right to the property with all the accompanying incidents. He only becomes an absolute owner
of the property if it is not redeemed during the redemption period. Upon the other hand, the
right to repurchase is based on the assumption that the person under obligation to reconvey
the property has the full title to the property because it was voluntarily conveyed to him or that
he had consolidated his title thereto by reason of redemptioner's failure to reason of a
redemptioner's failure to exercise his right of redemption. Thus, in Paras vs. Court of Appeals,
this Court, adverting the Gonzalez vs. Calimbas, stated:
After a careful study of the point raised in the present appeal by certiorari, we agree with
the Court of Appeals that the five-year period within which a homesteader or his widow or
heirs may repurchase a homestead sold at public auction or foreclosure sale under Act 3135
as amended, begins not at the date of the sale when merely a certificate is issued by the
Sheriff or other official, but rather on the day after the expiration of the period of
repurchase, when deed of absolute sale is executed and the property formally transferred to
the purchaser. As this Court said in the case of Gonzales (sic) vs. Calimbas and Poblete, 51
Phil. 355, the certificate of sale issued to the purchaser at an auction sale is intended to be a
mere memorandum of the purchase. It does not transfer the property but merely identifies
the purchaser and the property, states the price paid and the date when the right of
redemption expires. The effective conveyance is made by the deed of absolute sale executed
after the expiration of the period of redemption.
As a consequence of the inchoate character of the right during the redemption period, Act No.
3135 allows the purchaser at the foreclosure sale to take possession the property only upon
the filing of a bond in an amount equivalent to the use of the property for a period of twelve
(12) months, indemnify the mortgagor in case it be shown that the sale was made without
violating the mortgage or without complying with the requirements of the Act. That bond is not
required after the purchaser has consolidated his title to the property following the
mortgagor's failure to exercise his right of redemption for in such a case, the former has
become the absolute owner thereof.
Thus, the rules on redemption in the case of an extrajudicial foreclosure of land acquired under
free patent or homestead statutes may be summarized as follows: If the land is mortgaged to a
rural bank under R.A. No. 720, as amended, the mortgagor may redeem the property within
two (2) years from the date of foreclosure or from the registration of the sheriff's certificate of
sale at such foreclosure if the property is not covered or is covered, respectively, by a Torrens
 Page |9

title. If the mortgagor fails to exercise such right, he or his heirs may still repurchase the
property within five (5) years from the expiration of the two (2) year redemption period
pursuant to Section 119 of the Public Land Act (C.A. No. 141). If the land is mortgaged to parties
other than rural banks, the mortgagor may redeem the property within one (1) year from the
registration of the certificate of sale pursuant to Act No. 3135. If he fails to do so, he or his heirs
may repurchase the property within five (5) years from the expiration of the redemption
period also pursuant to Section 119 of the Public Land Act.

(pp. 563-569.)

Following the doctrine enunciated in the Rural Bank of Davao City case, it is clear from a perusal of
the factual antecedents at bar that the plea for repurchase was not time-barred at the time it was
made. When the certificate of sale in favor of petitioner was registered with the Register of Deeds
on November 5, 1981, private respondents had two years, reckoned from said date, within which to
redeem the property from petitioner, and another five years, under Commonwealth Act No. 141,
counted from the expiration of the redemption period, to effect repurchase which private
respondents precisely did when the suit below was initiated on March 20, 1986.

Neither can petitioner's invocation of Presidential Decree No. 1403 dated June 6, 1978, which
amended the relevantproviso on redemption under the Rural Banks Act, be of significant relevance
to the resolution of the perceived predicament at hand in default of any repealing clause therein.
Withal, it is axiomatic in statutory construction that repeals of statute by implication are not
favored (Valdez vs. Tuazon, 40 Phil., 943 [1920]); Philippine American Management Co., Inc., vs.
Philippine American Management Employees Association, 49 SCRA 194 [1973]; Agpalo, Statutory
Construction, 1986 ed., p. 295).

WHEREFORE, the petition is hereby DISMISSED and the decision of the Court of Appeals
AFFIRMED, with costs against petitioner.

SO ORDERED.

Feliciano, Bidin, Romero and Vitug, JJ., concur.