Unregistered right

If a real estate is sold at public auction in an extrajudicial foreclosure sale, it may be redeemed within a period of one year from the date of registration of the certificate of sale with the register of deeds. Who are entitled to redemption? And how much should be the redemption price? These are the questions raised in this case of Gerry and Celia.

The case involved a parcel of land and house with an area of 375 square meters titled in the name of Vic and Lulu which was mortgaged to a bank (FSB) to secure a P150,000 loan. The real estate mortgaged was annotated on the couple’s title.

On July 21, 1981, a levy on attachment was also annotated on the title pursuant to a writ of preliminary attachment issued by a court (RTC Pasay) in favor of a trading company (ZTC) which filed a case against Vic and Lulu for recovery of a sum of money.

On September 1, 1981, Vic and Lulu sold the said property to Gerry and Celia for P160,000 pursuant to a Deed of Absolute Sale with Assumption of Mortgage where the couple also assumed payment of the loan amortization to FSB and the real estate taxes. Gerry and Celia however failed to register the Deed because the owner’s duplicate of the title was with FSB.

In the meantime, on February 3, 1984, decision was already rendered by RTC Pasay in favor of ZTC ordering Vic and Lulu to pay them P168,000.

On the other hand, Gerry and Celia defaulted in the payment of the amortization to FSB. So on April 23, 1984, the property was extra-judicially foreclosed and sold at public auction with Gerry and Celia emerging as the highest bidder-purchaser. A certificate of sale was thus issued in their favor and annotated in the TCT.

Then on April 15, 1985 Gerry and Celia filed an action in RTC Makati against ZTC to quiet their title and remove any cloud thereon. They claimed that with the execution of the Deed of Absolute Sale on September 1, 1981 and their assumption of the mortgage to FSB, all rights, interest and participation over the property had been transferred to them by Vic and Lulu including the right of redemption. Hence ZTC had no more right of redemption.

Nevertheless on April 18, 1985, ZTC, as judgment creditor in the February 3, 1984 RTC Pasay decision, offered to redeem the property by tendering P106,400 representing the purchase price at the extrajudicial sale and accrued interest. Later on it also paid the accrued real estate tax amounting to P2, 175 when Gerry and Celia pointed out that there was no valid redemption for non-payment of said taxes.

On March 20, 2001, the RTC Makati rendered a decision in favor of Gerry and Celia and declared that ZTC has no right of redemption over the property as against them; that Gerry and Celia are the legitimate owners of the property as successor in interest of Vic and Lulu and therefore had a better right to redeem it. Was the RTC Makati correct?

No. Indeed, Gerry and Celia are successors-in-interest of Vic and Lulu. However their supposed title or right over the property as evidenced by the Deed of Absolute Sale dated September 1, 1981, is unregistered and as such cannot affect third persons. Such Deed shall not take effect as a conveyance or bind the land but shall operate only as a contract between the parties therein and as authority of the Register of Deeds to register the sale and transfer title. Registration is the operative act to convey the land insofar as third persons are concerned. The unregistered sale of the house and lot by Vic and Lulu to Gerry and Celia cannot prejudice the right of redemption granted by law in favor of ZTC which has a levy on attachment duly recorded on the TCT.

ZTC has acquired by operation of law the right of redemption over the foreclosed property by virtue of the RTC Pasay’s decision in its favor and against Vic and Lulu the original titled owner. The writ of attachment entitles the attaching creditor to exercise the right to redeem the foreclosed property (Section 6, Act 3135).

To constitute valid redemption, payment must be for the full amount of the purchase price paid by the highest bidder or purchaser with 1% interest per month up to the time of redemption together with the assessment and taxes paid by the purchaser, interest on said taxes and the amount of any other creditor’s lien prior to that of the redemptioner.  

In this case, the amount tendered by ZTE may be deemed sufficient for purposes of redemption although it failed to include the amount of taxes paid by Gerry and Celia. The payment of the full amount of the purchase price and interest thereon is already a substantial compliance considering that ZTE immediately paid the taxes when apprised of the deficiency (Cayton etc. vs. Zoennix Trading Corp. et. al., G.R. 169541, October 9, 2009).

Note: Books containing compilation of my articles on Labor Law and Criminal Law (Vols. I and II) are now available. Call tel. 7249445.

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