G.R. No. L-27365 January 30, 1970
FELIX L. LAZO, MERCEDES CASTRO DE LAZO, and JOSE ROBLES, plaintiffs-appellees, vs. REPUBLIC SURETY & INSURANCE CO., INC. represented by ANTONIO M. KOH, General Manager and as Attorney-in-Fact of plaintiffs, FELIX and MERCEDES LAZO, defendants-appellants.

FACTS

The plaintiffs-appellees (Felix L. Lazo, Mercedes Castro de Lazo, and Jose Robles) filed an action for accounting and redemption against the defendant-appellant (Republic Surety & Insurance Co., Inc.). The property in question was extra-judicially foreclosed, with the auction sale held on July 1, 1958. However, the sheriff’s certificate of sale was registered only on March 28, 1963. The plaintiffs filed their action on December 12, 1963. After the sale, plaintiffs paid rents to the defendant and requested extensions of time to redeem, under the mistaken belief that the redemption period had expired on July 2, 1959, a belief which the defendant’s letter of March 30, 1960, stating the redemption period had expired, reinforced. The plaintiffs were guarantors for a P12,000.00 loan secured by Jose Robles. The mortgage deed (Exhibit “A”) was executed on August 18, 1953, in favor of the Philippine Bank of Commerce. This loan was later transferred, and a new promissory note was executed on August 14, 1954, in favor of Republic Investment Co., Inc., with the defendant as co-signer, but no new mortgage was executed for this new obligation.

ISSUE

The primary issue is whether the plaintiffs’ right of legal redemption was still available, and corollarily, whether they were entitled to an accounting of rents and profits pending redemption under Rule 39, section 34 of the Rules of Court.

RULING

In his dissenting opinion, Justice Teehankee voted to affirm the appealed judgment. He held that the plaintiffs’ action was timely filed within the one-year period of legal redemption, which should be reckoned from the date of registration of the sheriff’s certificate of sale (March 28, 1963), not from the date of the auction sale (July 1, 1958), pursuant to the doctrine established in Rosario vs. Tayug Rural Bank and reiterated in Reyes vs. Mandas. The plaintiffs’ payment of rents and requests for extension did not constitute a waiver or conversion to conventional redemption, as they were laboring under a mistaken impression nurtured by the defendant. The equities favored the plaintiffs, who were merely guarantors and had made substantial payments. Furthermore, Justice Teehankee noted that the original mortgage (Exhibit “A”) was extinguished by the payment of the loan from the Philippine Bank of Commerce, and no new mortgage was executed for the subsequent obligation to Republic Investment Co., Inc. However, since the parties proceeded on the premise of a valid mortgage, this provided an additional equitable ground to uphold the judgment. The defendant’s simultaneous registration of the certificate of sale and consolidation of title was contrary to established doctrine.