JOSE TEOFILO MERCADO, PETITIONER, VS. VALLEY MOUNTAIN MINES EXPLORATION, INC., RESPONDENT.

Mercado versus Valley Mountain Mines Exploration

The Case

This is a petition for review on certiorari brought by Jose Teofilo Mercado against Valley Mountain Mines Exploration, Inc., arising from competing claims over five parcels of land in Tagaytay City that were sold by the City Government at a public auction for non-payment of real property taxes. Mercado sought original registration of the lots on the strength of deeds of sale executed in his favor by the declared owners, while Valley Mountain Mines claimed the same lots as the purchaser at the tax delinquency sale. The case matters because it settles who acquires title when a tax sale is followed by a redemption that fails, and because it teaches the requisites of a valid redemption of property sold for delinquent taxes.

Procedural History

Mercado filed three separate petitions for judicial confirmation of title before the Regional Trial Court of Tagaytay City, Branch 18. Valley Mountain Mines filed its opposition to all three petitions and, on its own, filed a separate application for registration of the same parcels. The Republic of the Philippines, through the Solicitor General, entered its opposition in two of the cases, and the Heirs of Narciso Olimpiada and the Heirs of Juan Desengaño likewise opposed. The trial court rendered judgment confirming the ownership of Valley Mountain Mines over the five properties and granted its application for registration. Mercado appealed to the Court of Appeals. The Court of Appeals denied the motions for reconsideration filed by the Olimpiada heirs and the Plateros and ordered their pleadings stricken from the records. Aggrieved, the Olimpiada heirs and the Plateros brought their own petitions to the Supreme Court, which were denied. The present consolidated petitions stem from the contending claims over the same lots, and the Supreme Court resolved them in this decision.

Facts

Five parcels of land in Barangay Sungay, Iruhin, Tagaytay City were declared for taxation purposes in the names of the Heirs of Narciso Olimpiada and the Heirs of Juan Desengaño, who were in actual possession of the properties. For failure to pay real property taxes for several years, the City Government of Tagaytay sold the lots at a public auction held on November 28, 1983, and issued a Certificate of Sale of Delinquent Property to Purchaser in favor of Valley Mountain Mines Exploration, Inc. The certificate of sale was registered on December 9, 1983.

To save their property, the heirs, through their respective attorneys-in-fact, executed deeds of sale of unregistered parcels of land with assignment of rights and assumption of obligations in favor of Mercado. On December 7, 1984, Mercado paid the sums of 58,327 pesos and 33,841 pesos for the five parcels, and a Certificate of Redemption was issued by the Office of the City Treasurer, which returned the purchase price plus interest to Valley Mountain Mines on December 11, 1984. However, the checks Mercado issued were dishonored for the reason refer to drawer, and the City Treasurer advised him to replace the bounced checks. On August 7, 1986, the City Treasurer accepted 46,400 pesos from Mercado as partial cash payment for replacement of the checks.

Valley Mountain Mines then wrote the City Treasurer asserting its right to be reinstated as the highest bidder, since no effective redemption had been made, and expressed willingness to return the amount refunded to it. The repayment made by Valley Mountain Mines was eventually accepted, and the City Treasurer executed Final Bills of Sale in its favor. New tax declarations for the year 1988 were issued in its name. Mercado then filed his petitions for judicial confirmation of title, which the trial court resolved in favor of Valley Mountain Mines.

Issues

• Whether or not Mercado validly redeemed the properties sold at the tax delinquency auction, such that the Certificate of Redemption issued in his favor produced the effect of payment of the redemption price.
• Whether or not Valley Mountain Mines acquired ownership rights over the subject properties by virtue of the tax sale and the Final Bills of Sale executed in its favor.
• Whether or not Mercado acquired a valid title from the deeds of sale executed by the alleged attorneys-in-fact of the declared owners.

Applicable Provisions

Section 78 of Presidential Decree Number 1529, the Property Registration Decree, provides on the redemption of property sold for delinquent taxes:

Upon the expiration of the time allowed for redemption, the court may, upon motion of the purchaser or of any person interested, order the issuance of a writ of possession in favor of the purchaser, his heirs or assigns, and the possession of the property shall be delivered to such purchaser, his heirs or assigns.

This provision bears on the case because it fixes the point at which the purchaser at a tax sale may be placed in possession, which is after the period of redemption has lapsed without a valid redemption.

Article 1003 of the Civil Code of the Philippines, invoked by Valley Mountain Mines against the collateral relatives of Narciso Olimpiada, provides:

If there are no descendants, ascendants, illegitimate children, or a surviving spouse, the collateral relatives shall succeed to the entire estate of the deceased in accordance with the following articles.

This provision bears on the case because it determines who among the claimants may be considered heirs entitled to succeed to the properties of the deceased Narciso Olimpiada.

Ruling

On the first issue, the Court held that Mercado did not validly redeem the properties. The redemption price he tendered was paid by checks that were dishonored for the reason refer to drawer, and the partial cash payment of 46,400 pesos was grossly insufficient to cover the amounts of the bounced checks. A redemption is not complete until the redemption price is actually paid, and a payment by a check that is subsequently dishonored does not produce the effect of payment. Hence the Certificate of Redemption issued in his favor did not vest in him any right to the land.

On the second issue, the Court held that Valley Mountain Mines acquired ownership rights over the subject properties. It was the purchaser at the public auction, and when no effective redemption was made within the period allowed by law, its right as purchaser became absolute. This was confirmed when it returned the refunded purchase price to the City Treasurer, and the City Treasurer executed the Final Bills of Sale in its favor. The trial court correctly confirmed its ownership and granted its application for registration.

On the third issue, the Court held that Mercado acquired no valid title from the deeds of sale. The authority of the attorneys-in-fact who executed the deeds was put in question by the exclusion of certain heirs who did not sign the special power of attorney and the deed of sale, and the evidence showed that signatures on the special power of attorney were denied by the very persons whose names appeared on it. Since the sellers did not validly convey the properties, Mercado acquired no right that could defeat the title of Valley Mountain Mines.

Doctrine

A redemption of property sold at a tax delinquency sale is not complete until the redemption price is actually paid. Payment by check that is subsequently dishonored for the reason refer to drawer does not produce the effect of payment, and a partial cash payment insufficient to cover the redemption price does not cure the defect. When no effective redemption is made within the period allowed by law, the purchaser at the tax sale acquires an absolute right to the property, and the Final Bills of Sale executed in its favor confirm its ownership. A deed of sale executed by persons acting as attorneys-in-fact without valid authority from all the co-owners conveys no title to the buyer.

Disposition

The Supreme Court denied the petitions of Mercado and affirmed the ruling of the trial court confirming the ownership of Valley Mountain Mines Exploration, Inc. over the five parcels of land and granting its application for registration.

Remember This

The single line worth memorizing is that a redemption paid by a dishonored check is no redemption at all, and the tax sale purchaser's title becomes absolute once the redemption period lapses without actual payment. Examiners like to use this case to test the requisites of a valid redemption of property sold for delinquent taxes and the effect of a dishonored check as payment.