G.R. No. L-17082. April 30, 1962.
MERCEDES RAFFIÑAN, petitioner-appellee, vs. FELIPE L. ABEL, defendant, and FORTUNATO ROSILLOSA, defendant-appellant.

FACTS

Homesteader Fortunato Rosillosa sold his land in 1944. The subsequent purchasers, spouses Abel, mortgaged the property to Mercedes Raffiñan in 1947. Within the five-year statutory period, Rosillosa filed an action in 1949 to compel the Abels to resell the land to him. The trial court ruled in his favor, ordering the resale upon payment of P120.00, a decision affirmed by the Court of Appeals in 1951. Meanwhile, the Abels defaulted on the mortgage, prompting Raffiñan to file this foreclosure suit in 1956. Rosillosa was impleaded as a defendant due to his interest from the prior judgment.
In his answer, Rosillosa argued the mortgage was null and void for lack of approval from the Secretary of Agriculture and Natural Resources and for being executed in bad faith, as it was subject to his repurchase right. He contended his right to repurchase, having been judicially upheld, enjoyed preference over the mortgagee’s claim based on public policy. The trial court ruled for the mortgagee, declaring the mortgage valid and binding due to Rosillosa’s alleged failure to duly exercise his repurchase right, and ordered foreclosure.

ISSUE

The core issues were: (1) the validity of the mortgage executed by the purchaser Abel without the Secretary’s approval and during the repurchase period; and (2) whether homesteader Rosillosa had lost his right to repurchase the land.

RULING

The Supreme Court upheld the mortgage’s validity but reversed the finding that Rosillosa lost his repurchase right, declaring it a prior and superior claim. On the first issue, the Court ruled the requirement for the Secretary’s approval under Section 118 of Commonwealth Act No. 141 is merely directory for alienations made after five years from the patent’s issuance. More critically, the prohibition against encumbrance applies only to those made by the homesteader himself within five years from the patent. Here, the encumbrance was made by the purchaser, Abel, long after the patent was issued to Rosillosa. Such an encumbrance is permissible, though subject to the homesteader’s outstanding right to repurchase.
On the second issue, the Court held Rosillosa did not lose his right. His filing of the repurchase action in 1949 was a valid exercise of his right within the five-year period. The resulting final and executory judgment in Civil Case No. 4945 did not merely recognize his right; it ordered the vendees to resell the land to him. This judgment became the new source and security of his right, enforceable under the Rules of Court within the prescribed periods for execution. Therefore, his right was not extinguished by mere lapse of the original five-year period from the 1944 sale.
The Court modified the trial court’s decision. It affirmed the mortgage as valid and subject to foreclosure, but declared that such foreclosure and any subsequent sale were subject to Rosillosa’s prior and superior right to repurchase the land in accordance with the final judgment in his favor, provided that judgment remained enforceable. The decision was without prejudice to any personal action Raffiñan might pursue against Abel should Rosillosa successfully repurchase the property.