Philbancor Finance, Inc. v. Court of Appeals

G.R. No. 129572 (June 26, 2000)

Facts:

Private respondents Alfredo Pare, Pablo Galang, and Amado Vie filed a complaint for maintenance of possession with redemption and tenancy right of pre-emption against petitioners Philbancor Finance, Inc. and Vicente Hizon, Jr. They claimed to be legitimate and bona fide tenants of two parcels of agricultural land located in Balite, San Fernando, Pampanga, which were owned by Vicente Hizon. The private respondents alleged that on October 13, 1983, Hizon mortgaged the disputed lots to Philbancor without their knowledge. Hizon subsequently defaulted on his obligations, leading to the public auction of the mortgaged properties, which were acquired by Philbancor. The private respondents only learned of the auction when Philbancor notified them to vacate the premises. They asserted that they had been tenants for over fifty years and that they would suffer substantial and irreparable injury if Philbancor proceeded with eviction.

In response, Vicente Hizon admitted the tenancy but contended that he was no longer the owner of the properties after the foreclosure. He claimed that the private respondents were aware of the mortgage and the foreclosure proceedings. Philbancor, on the other hand, argued that it had no tenancy relationship with the private respondents and that their right to redeem the properties had expired, as per Section 12 of Republic Act No. 3844, which stipulates a two-year period for exercising the right of redemption from the registration of the sale.

The Provincial Agrarian Reform Adjudication Board (PARAB) ruled in favor of the private respondents, allowing them to redeem the properties at a specified price. This decision was affirmed by the Department of Agrarian Reform Adjudication Board (DARAB) upon appeal. Petitioners subsequently filed a petition for review with the Court of Appeals, which dismissed the petition. The petitioners then sought a review from the Supreme Court.

Legal Issues:

The primary legal issue was whether the private respondents could still exercise their right of redemption for the parcels of land sold at public auction due to foreclosure, given that they invoked their right to redeem seven years after the registration of the certificate of sale.

Arguments:

• Petitioners' Arguments:

  1. The right of redemption had expired as the private respondents filed their complaint five years after the two-year redemption period, which ended on July 31, 1987.
  2. Philbancor contended that it had no agricultural relationship with the private respondents and thus was not bound by the provisions of the agrarian reform laws.

• Private Respondents' Arguments:

  1. They claimed that they were unaware of the mortgage and subsequent foreclosure, and thus their right to redeem should be recognized despite the expiration of the two-year period.
  2. They maintained their status as legitimate tenants, which should afford them protection under agrarian laws.

Court's Decision and Legal Reasoning:

The Supreme Court granted the petition for review and reversed the decision of the Court of Appeals. The Court held that the private respondents could not exercise their right of redemption as they had failed to do so within the two-year period mandated by law. The certificate of sale was registered on July 31, 1985, and the private respondents only filed their complaint on July 14, 1992, which was beyond the allowable period.

However, the Court emphasized that the private respondents retained their rights as agricultural tenants. The tenancy relationship was not extinguished by the sale of the land, as the right of tenancy attaches to the land by operation of law. The leasehold relationship continues despite the transfer of ownership, thus allowing the private respondents to remain in possession and enjoyment of the land.

Significant Legal Principles Established:

1. The right of redemption under Republic Act No. 3844 must be exercised within the two-year period from the registration of the sale; failure to do so results in the loss of that right.
2. The tenancy relationship is protected by law and is not extinguished by the sale or transfer of the landholding, allowing tenants to continue their possession despite changes in ownership.