G.R. No. 119184 July 21, 1997
THE HEIRS OF FELICIDAD CANQUE namely: SURVIVING SPOUSE MARCELINO and children MARIANO, LEONILO, PERFECTA, MEXIQUELA, EMILIO, MARCELINO JR., ALEJANDRO, the Heirs of JESUS and ADRIANO, all surnamed CANQUE, petitioners,

vs.
COURT OF APPEALS, THE RURAL BANK OF MATANAO (DAVAO DEL SUR), INC. and/or CONRADO ANTONIO, respondents.

FACTS

Spouses Marcelino and Felicidad Canque were registered owners of a parcel of land acquired under the Public Land Act (Free Patent No. 40336). On October 12, 1977, they obtained a P15,000 loan from the Rural Bank of Matanao, secured by a real estate mortgage over the land. This loan was paid. Felicidad Canque died on February 2, 1980. On March 7, 1980, Marcelino Canque obtained a second loan of P25,000 from the same bank, using the same property as collateral, which the bank treated as an extension of the first loan under a continuing mortgage arrangement. For failure to pay the second loan, the bank extrajudicially foreclosed the mortgage. The Sheriff’s Certificate of Sale was registered on September 9, 1983. The bank executed an affidavit of consolidation and a deed of absolute sale on October 18, 1985, and a new title was issued in its name on December 23, 1985. Seven years after the registration of the sheriff’s sale, or on September 7, 1990, Marcelino Canque and his children (the heirs of Felicidad) offered to redeem the property, but the bank refused, prompting the filing of a complaint.
The Regional Trial Court allowed the plaintiffs to redeem the property. The Court of Appeals reversed the RTC, ruling that the right to redeem had prescribed. The CA held that the prescriptive period of five years for repurchase under Section 119 of the Public Land Act should be reckoned from the date of registration of the Sheriff’s Certificate of Sale (September 9, 1983). Since the complaint was filed almost seven years later (September 7, 1990), the right had prescribed. However, the CA also ruled that the second mortgage was void insofar as the 50% conjugal share of the deceased Felicidad was concerned, and ordered the cancellation of the bank’s title and the issuance of two new titles: one for the bank (covering Marcelino’s 50% share, which it acquired validly) and one for the Heirs of Felicidad (covering her 50% share).

ISSUE

1. Whether the Court of Appeals erred in holding that the period to repurchase foreclosed lands acquired under free patent and mortgaged to a rural bank is only five years from the registration of the sheriff’s certificate of sale.
2. Whether the Court of Appeals erred in not passing upon the issue of whether the real estate mortgage was a continuing mortgage securing future loans.

RULING

The Supreme Court GRANTED the petition, SET ASIDE the Decision of the Court of Appeals, and REINSTATED the dispositive portion of the Regional Trial Court’s decision allowing the petitioners to redeem the property.
1. On the Prescriptive Period to Repurchase: The Court of Appeals erred. Applying the doctrine established in Rural Bank of Davao City vs. Court of Appeals, the Supreme Court ruled that when land acquired under the Public Land Act (free patent/homestead) is mortgaged to a rural bank under R.A. No. 720 (as amended) and foreclosed, the mortgagor has a two-year redemption period from the date of registration of the sheriff’s certificate of sale. If the mortgagor fails to redeem within those two years, he or his heirs may still repurchase the property within five years from the expiration of the two-year redemption period, pursuant to Section 119 of the Public Land Act ( Commonwealth Act No. 141 ). Therefore, the total period available is seven years from the registration of the sheriff’s sale. In this case, the sheriff’s sale was registered on September 9, 1983. The two-year redemption period expired on September 9, 1985. The five-year repurchase period thus expired on September 9, 1990. The complaint was filed on September 7, 1990, which was within the seven-year period. Hence, the right to repurchase had not prescribed.
2. On the Continuing Mortgage Issue: The Supreme Court found this issue to be academic in light of its ruling on the first issue. Nonetheless, it upheld the factual finding of the trial court that the parties had a continuing credit arrangement secured by a real estate mortgage, whereby the same property secured the second loan after the first was paid. The Court deferred to the trial court’s factual findings, which were not shown to have overlooked any significant fact.