G.R. No. L-14897; November 23, 1960
Jesus Nepomuceno, et al., plaintiffs-appellees, vs. Rehabilitation Finance Corporation (now Development Bank of the Philippines), defendant-appellant.

FACTS

On September 17, 1952, spouses Jose Nepomuceno and Isabel Acuña, along with their children, obtained a P300,000.00 loan from the Rehabilitation Finance Corporation (RFC). As security, they executed a chattel mortgage on six fishing boats. Additionally, Jesus Nepomuceno, by way of accommodation, executed a real estate mortgage on his land in Quezon City. A note on the document stated he signed to guarantee the loan. The borrowers defaulted, prompting the RFC to extrajudicially foreclose the mortgages under Act 3135. At the foreclosure sale, the RFC acquired one fishing boat for P15,000.00, 105 Gray Marine engines for P10,000.00, and Jesus Nepomuceno’s land for P14,000.00. The total claim against the borrowers on the sale date was P309,013.42. On March 20, 1958, the last day of the redemption period, Jesus Nepomuceno assigned his redemption right to spouses Rizalino and Adelaida R. Mendoza. The Mendozas offered to redeem the land for P16,000.00 (the sale price plus interest and taxes), but the RFC refused, citing Section 31 of Commonwealth Act No. 459 , which requires payment of the entire outstanding obligation. The Mendozas filed an action in the Court of First Instance of Quezon City, consigning P16,000.00. The trial court ordered the RFC to accept the consigned amount and reconvey the property. The RFC appealed.

ISSUE

Considering Jesus Nepomuceno was merely an accommodation mortgagor and not a principal debtor, for what amount may he (or his assigns) redeem his foreclosed property? Is it for the price at which the property was sold at auction (as per general redemption laws) or for the entire outstanding balance of the loan secured by the mortgage (as per the RFC’s charter)?

RULING

The Supreme Court reversed the trial court’s decision. The applicable law is the special provision, Section 31 of Commonwealth Act No. 459 (the RFC’s charter), not the general redemption provisions in Section 6 of Act 3135 and Section 26, Rule 39 of the Rules of Court. Under the rule that a special law prevails over a general law, Section 31 governs. It states that a “mortgagor or debtor” may redeem by paying the bank “all the amount he owed the latter on the date of the sale.” The terms “mortgagor or debtor” encompass both a debtor who mortgages his own property and an accommodation mortgagor who pledges his property to secure another’s debt. Therefore, to redeem the land, the mortgagor (Jesus Nepomuceno) or his assigns must pay the balance of the total indebtedness to the RFC as of the foreclosure sale date, not merely the auction sale price of the specific property. The Court granted appellees a 30-day grace period to effect redemption under these terms.