G.R. No. 30823, December 28, 1929
ANGELO ANGELES and LUCIA A. DE ANGELES, plaintiffs-appellees, vs. ANATALIA LOZADA and her husband SEGUNDO SAGUISAG, defendants-appellants.

FACTS

The property in question was sold at a public auction on December 12, 1925, to defendants-appellants Anatalia Lozada and Segundo Saguisag for P405, following a levy under a writ of execution. The house on the lot was uninhabitable and nearly in ruins. The defendants repaired it, spending P259.74. On November 15, 1926, the judgment debtor sold her rights to the property to plaintiffs-appellees Angelo Angeles and Lucia A. de Angeles. On November 18, 1926, the plaintiffs tendered and deposited with the sheriff the redemption price of P457.19 (the auction price plus 1% monthly interest), but the defendants refused to resell the property. The plaintiffs filed an action to compel redemption, recover possession, and claim rents and damages. The defendants counterclaimed for reimbursement of repair costs. The trial court ordered the defendants to vacate the property upon payment of the redemption price and to pay the plaintiffs P10 monthly as rent from December 13, 1925, until delivery, dismissing the counterclaim.

ISSUE

1. Whether the plaintiffs are entitled to redeem the property under Section 465 of the Code of Civil Procedure without reimbursing the defendants for the useful and necessary repairs they made.
2. Whether the defendants are entitled to reimbursement for the repair costs and/or compensation via set-off against rents due for their occupation of the property during the redemption period.

RULING

1. Yes, the plaintiffs are entitled to redeem the property upon payment of the amount specified in Section 465 of the Code of Civil Procedure, without additional reimbursement for repairs. The Court held that Section 465, a subsequent law, supersedes Article 1518 of the Civil Code (made applicable to legal redemption by Article 1525) regarding reimbursement for necessary and useful expenses. Under Section 465, the redemption price includes only the purchase price, 1% monthly interest, taxes or assessments paid by the purchaser, and the amount of any prior lien held by the purchaser. The defendants’ claim for repair costs does not constitute a “prior lien” as required by the statute, and thus cannot be included in the redemption price.

2. Yes, the defendants are entitled to reimbursement for the useful and necessary repairs made in good faith under Article 453 of the Civil Code, but this claim is subject to compensation (set-off) with the rents they owe for unlawfully occupying the property during the redemption period. The Court affirmed that a purchaser at an execution sale is not entitled to possession of the property during the redemption period (citing Pabico v. Ong Pauco). Therefore, the defendants’ occupation was unlawful, and they are liable to pay rent. However, since the repairs were made in good faith and were necessary and useful (the house was uninhabitable), the defendants have a right to reimbursement under Article 453. This reimbursement claim is compensable with the rent due. The Court modified the trial court’s decision:
– The defendants must vacate the property upon payment of the redemption price (P457.19) deposited with the sheriff.
– The plaintiffs must pay the defendants P259.74 for repairs.
– The defendants must pay the plaintiffs rent at P10 monthly from November 18, 1926 (the date of tender/deposit), not from December 13, 1925, until they deliver possession.
– The amounts are to be set off, with the balance payable to the party entitled.

The demurrer was correctly overruled as the complaint stated a cause of action. No costs were awarded.

Separate Opinions:
– Justice Street dissented, arguing that allowing recovery for improvements contravenes Flores v. Lim and creates an unlawful clog on the right of redemption.
– Justice Ostrand dissented, viewing the defendants as trespassers not entitled to compensation for improvements.