STA. IGNACIA RURAL BANK, INC., PETITIONER, VS. THE HONORABLE COURT OF APPEALS AND SPS. CONRADO PABLO AND JUANITA GONZALES, RESPONDENTS.

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 defendant 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 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 by
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 certificate 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 Section 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 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 appellants 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 of 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 the homesteader and his family the statute
provides 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
pronouncements 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. x x x 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: x x x”

As amended later by R.A. No. 5939, it reads:

“Sec. 5. x x x 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: x x x.”

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 certificate 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.

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 a redemptioner’s failure to exercise his right of
redemption. Thus, in Paras vs. Court
of Appeals, this Court, adverting to 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 of 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, to
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 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 relevant proviso 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, (Chairman), Bidin, Romero, and Vitug, JJ., concur.