In Makilito B. Mahinay v. Dura Tire & Rubber Industries, Inc., the Supreme Court affirmed that the one-year period to redeem a property sold in an extrajudicial foreclosure sale is not extendable, and filing an action to annul the foreclosure does not suspend this period. This means property owners facing foreclosure must act quickly to redeem their property within one year of the sale’s registration, regardless of any pending legal challenges. Failure to do so results in the loss of redemption rights, underscoring the strict and time-sensitive nature of redemption laws in the Philippines.

Mortgage Disputes and Missed Deadlines: Can Redemption Rights Be Revived?

This case revolves around a parcel of land initially owned by A&A Swiss International Commercial, Inc. (A&A Swiss), which was mortgaged to Dura Tire & Rubber Industries, Inc. (Dura Tire) as security for credit purchases made by Move Overland Venture and Exploring, Inc. (Move Overland). When A&A Swiss sold the property to Makilito B. Mahinay, the Deed of Absolute Sale stipulated that Mahinay would be liable for any claims Dura Tire had against Move Overland. After Move Overland failed to pay its debts, Dura Tire foreclosed the property. Mahinay contested the foreclosure but ultimately failed in his legal challenges. Subsequently, he filed another complaint seeking a judicial declaration of his right to redeem the property, arguing that the one-year redemption period should be counted from the final decision of the Court of Appeals, which allegedly recognized his right to redeem. The central legal question is whether the filing of an action to annul a foreclosure sale tolls or extends the statutory one-year period for redemption.

The Supreme Court firmly rejected Mahinay’s arguments, emphasizing that the right to redeem a property arises by operation of law, specifically Section 6 of Act No. 3135, immediately upon the extrajudicial foreclosure and sale of the mortgaged property. This provision explicitly grants the debtor, their successors-in-interest, or any person with a subsequent lien on the property the right to redeem within one year from the date of sale. According to the Court, the “date of the sale” refers to the date when the certificate of sale is registered with the Register of Deeds. This registration is crucial because it is when the sale officially takes effect as a conveyance and binds the land.

Section 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore referred to, the debtor, his successors in interest or any judicial creditor or judgment creditor of said debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold, may redeem the same at any time within the term of one year from and after the date of the sale; and such redemption shall be governed by the provisions of sections four hundred and sixty-four to four hundred and sixty-six, inclusive, of the Code of Civil Procedure, in so far as these are not inconsistent with the provisions of this Act.

The Court underscored that the right of redemption is purely statutory, meaning it must be exercised strictly in accordance with the law. The mortgagor must compel the purchaser to sell back the property within the stipulated one-year period. Should the purchaser refuse, the mortgagor’s recourse is to tender payment to the Sheriff who conducted the foreclosure sale. In this case, Mahinay’s failure to tender payment to Sheriff Laurel, and instead insisting on direct payment of Move Overland’s debts to Dura Tire, was a critical misstep. The Supreme Court has consistently held that this right must be exercised in the mode prescribed by statute, as highlighted in Mateo v. Court of Appeals.

The Supreme Court addressed Mahinay’s reliance on Consolidated Bank & Trust Corp. v. Intermediate Appellate Court, where the filing of a motion to annul a writ of possession was deemed to have tolled the redemption period. The Court clarified that Consolidated Bank involved peculiar circumstances of fraud and conspiracy to defeat the petitioner’s lien and right of redemption, which are absent in the current case. Furthermore, the Court noted that subsequent cases like CMS Stock Brokerage, Inc. v. Court of Appeals and Spouses Pahang v. Judge Vestil have reinforced the principle that pending actions questioning the foreclosure’s legality do not suspend the redemption period. These more recent rulings solidify the doctrine that the redemption period remains fixed and is not subject to extensions due to ongoing legal disputes.

To further clarify the implications, the Supreme Court referenced CMS Stock Brokerage, Inc. v. Court of Appeals, where the filing of an action for quieting of title did not toll the redemption period. Similarly, in Spouses Pahang v. Judge Vestil, an action for annulment of the extrajudicial sale did not suspend the running of the one-year redemption period. These cases highlight a consistent legal stance that the statutory period for redemption is definitive and unaffected by related legal proceedings. The strict adherence to the one-year period aims to prevent prolonged uncertainty over property ownership, which could destabilize economic transactions and property rights.

Given that the Certificate of Sale in favor of Dura Tire was registered on February 20, 1995, Mahinay, as A&A Swiss’s successor-in-interest, had until February 20, 1996, to redeem the property. Failing to do so, his right to redeem expired, and the subsequent legal challenges did not revive or extend this right. The Court emphasized that allowing the filing of actions to toll the redemption period would set a dangerous precedent, potentially leading to frivolous suits intended solely to delay the redemption process.

The High Court explicitly stated that the one-year redemption period is fixed and non-extendible. Allowing a pending action to toll the period would encourage frivolous lawsuits aimed at prolonging the mortgagor’s opportunity to redeem, leading to economic uncertainty. The court emphasized that it is crucial to maintain the stability and predictability of property rights in foreclosure situations. This case underscores the importance of understanding and adhering to the strict deadlines associated with property redemption following a foreclosure sale.

FAQs

What is the main legal principle in this case?	The one-year period to redeem a property after an extrajudicial foreclosure sale cannot be extended, and filing a lawsuit to annul the foreclosure does not stop the clock on this period. This strict timeline ensures economic certainty and prevents frivolous lawsuits aimed at delaying redemption.
Who had the right to redeem the property in this case?	Makilito Mahinay, as the successor-in-interest to the original owner (A&A Swiss) who mortgaged the property, had the right to redeem it within one year of the foreclosure sale’s registration. This right is based on Section 6 of Act No. 3135, which allows successors to redeem.
When did the one-year redemption period begin?	The redemption period began on February 20, 1995, the date the Certificate of Sale was registered with the Register of Deeds. The date of registration is crucial because it marks the start of the one-year statutory period for redemption.
Why did Mahinay’s attempt to redeem the property fail?	Mahinay failed to redeem the property because he did not exercise his right within the one-year period from the registration of the Certificate of Sale. His filing of a complaint to annul the foreclosure sale did not suspend or extend this period.
What should Mahinay have done to properly exercise his right of redemption?	Mahinay should have tendered payment to the Sheriff who conducted the foreclosure sale within the one-year period. Insisting on direct payment of Move Overland’s debts to Dura Tire was not sufficient to fulfill the redemption requirements.
How did the court distinguish this case from previous rulings?	The court distinguished this case from Consolidated Bank & Trust Corp. v. Intermediate Appellate Court by noting that the previous case involved fraud and conspiracy, which were not present here. The court clarified that subsequent rulings such as CMS Stock Brokerage and Spouses Pahang support that a pending action does not toll the redemption period.
What is the significance of registering the Certificate of Sale?	The registration of the Certificate of Sale is significant because it officially marks the sale of the property and begins the one-year period for redemption. The sale is not legally binding until it is registered with the Register of Deeds.
What is the potential danger of allowing lawsuits to toll the redemption period?	Allowing lawsuits to toll the redemption period could encourage frivolous suits intended solely to delay the redemption process. This would create economic uncertainty and undermine the stability of property rights.

In conclusion, the Supreme Court’s decision in Mahinay v. Dura Tire reinforces the strict adherence to statutory deadlines in foreclosure cases. The non-extendable nature of the one-year redemption period serves to protect the economic stability of property transactions and prevent abuse through delaying legal tactics. Property owners must be diligent in understanding and complying with these timelines to safeguard their rights.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Makilito B. Mahinay v. Dura Tire & Rubber Industries, Inc., G.R. No. 194152, June 05, 2017