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RURAL BANK OF DAVAO CITY, vs. THE HONORABLE COURT OF APPEALS case

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G.R. No. 83992 January 27, 1993
RURAL BANK OF DAVAO CITY, INC. petitioner,
vs.
THE HONORABLE COURT OF APPEALS and GABRIEL
ABELLANO and FRANCISCO SEQUITAN, respondents.
DAVIDE, JR., J.:
Two (2) issues are presented for Our resolution in this petition for
review under Rule 45 of the Rules of Court, viz:(1) whether or not
the two-year redemption period fixed by the Rural Banks' Act
1
in a
foreclosure sale of property acquired through a homestead patent
superseded or repealed the
five-year repurchase period prescribed in Section 119 of the Public
Land Act
2
and (2) if it did not, whether, in the event of the
expropriation by the Government of the subject property during
the redemption or repurchase period, a homesteader, who
thereafter exercised his right to redeem or repurchase, is entitled
to the compensation for such expropriation less the redemption or
repurchase amount. The trial court ruled in the negative for the
first issue and in the affirmative for the second. The respondent
Court of Appeals affirmed the trial court. Hence, We have the
instant petition seeking for a contrary ruling.
The undisputed facts generative of this controversy are as follows:
On 18 April 1978, private respondents Gabriel Abellano and
Francisca Sequitan obtained a loan in the amount of P45,000.00
from the petitioner, a rural bank organized and existing under the
Rural Banks' Act. The terms thereof called for payment of the loan
in two (2) equal installments on 21 October 1978 and 21 April
1979.
As security for the loan, the private respondents mortgaged with
the petitioner a parcel of land, belonging to them, with an area of
one (1) hectare, more or less, located at Matina, Davao City and
covered by Original Certificate of Title No. P-7392. The land was
acquired through a homestead patent.
On 1 July 1978, the National Housing Authority (NHA) filed with the
then Court of First Instance (CFI) of Davao City a complaint for the
expropriation of several parcels of land located in Davao City to
carry out its Slum Improvement and Resettlement Program; said
action was directed against the private respondents, with respect
to the mortgaged property, and fifteen (15) other persons. The
case was docketed as Special Civil Case No. 11157 and was raffled
off to Branch II of said court. As mortgagee, the petitioner filed
therein a motion to intervene, which the court granted.
Upon arrival of the loan's maturity dates, private respondents
failed to pay their obligation to the petitioner. The latter therefore
caused the extrajudicial foreclosure of the subject property in
accordance with Act No. 3135, as amended. During the foreclosure
sale held on 9 November 1979, the petitioner submitted the
highest bid; consequently, the Deputy Sheriff executed in its favor
a certificate of sale for the total amount of P54,883.00 which
included the unpaid interest and other charges.
The certificate of sale was registered in the Registry of Deeds of
Davao City on 7 December 1979. Private respondents, however,
failed to redeem the foreclosed property within the period of two
(2) years from the date of registration, or up to 7 December 1981,
as provided for in Section 5 of the Rural Banks' Act. Despite such
failure, the petitioner extended the period to October 1982. The
private respondents still failed to redeem the property. Petitioner
then asked for the consolidation of its title over the same. In due
course, the private respondents' certificate of title was canceled
and in lieu thereof, Transfer Certificate of Title No. T-92487 in the
name of the petitioner was issued on 3 November 1982.
On 24 February 1983, Branch II of the CFI of Davao City issued an
order in Special Civil Case No. 11157 requiring the NHA to pay the
amount of P85.00 per square meter for the properties sought to be
expropriated, which included the aforementioned foreclosed
property. This amount was subsequently reduced to P49.00 per
square meter. Thus, the price to be paid for the foreclosed
property was P490,000.00.
On 9 November 1983, private respondents notified the petitioner of
their desire to repurchase the foreclosed property pursuant to

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Section 119 of the Public Land Act (C.A. No. 141). Rebuffed by the
latter, private respondents filed on 9 February 1984 with the
Regional Trial Court (RTC) of Davao City a complaint for
reconveyance of their foreclosed property under said Section 119.
The case was docketed as Civil Case No. 16693 and was raffled off
to Branch XIII of the said court.
In its Affirmative Defenses set up in the Answer to the complaint,
petitioner claimed that the private respondents' action will no
longer prosper because their right to repurchase had become moot
and academic as the property could no longer be physically,
materially and actually recovered or repurchased. This is so
because no less than the sovereign state needed the same
pursuant to its socialized housing program under P.D. No. 875, as
amended to be divided into smaller lots for distribution to a
greater number of recipients, and that "the right to repurchase
cannot be exercised without the actual, material and physical
recovery of the property itself, otherwise such an action, as the
instant action of the plaintiffs, is purely speculative, which our
Supreme Court, in a series of decisions, had frowned upon and
disallowed."
3
After the issues were joined, the trial court conducted a pre-trial
conference on 3 May 1984. On the same date, it issued an order
requiring the private respondents to deposit the sum of P54,883.00
as repurchase price which they complied with.
On 2 July 1984, private respondents filed a Motion to Amend the
Complaint and File Supplemental Pleading alleging therein, inter
alia, that since "there is a seeming impossibility for the plaintiffs
now to reacquire the property by reason of the order of
expropriation, justice also demands that the said amount of
P490,000.00 must be given to the plaintiffs, in lieu of the property
expropriated." Despite the petitioner's opposition, the trial court
issued on 2 August 1984 an order granting the motion and
admitting the amended complaint.
The trial court decided the case on 1 February 1985 on the basis of
the stipulation of facts submitted by the parties. The dispositive
portion of the decision reads:
WHEREFORE, decision is hereby rendered, declaring
plaintiffs entitled to the price paid by the National
Housing Authority for the property in question and
ordering the defendant:
1. To pay or remit the (sic) plaintiffs the sum of
P435,117.00, the remaining balance of said price of
the property paid by NHA after deducting the
obligation of plaintiffs in the sum of P54,883.00;
2. To pay plaintiff's interest on the P435,117.00 at
the rate defendant grants to its depositor
commencing on the date when defendant received
the sum of P490,000.00 from NHA in payment of the
property in question until the whole obligation is fully
paid;
3. To pay plaintiffs the sum of P10,000.00 as
attorney's fee plus costs.
SO ORDERED.
4
Petitioner seasonably appealed this decision to the then
Intermediate Appellate Court on both questions of fact and law.
The case was docketed as CA-G.R. CV No. 07689.
On 30 March 1988, the respondent Court of Appeals, as the
successor of the Intermediate Appellate Court, promulgated,
through a division of five (5) (Sixteenth Division), its decision in
CA-G.R. No. 07689 affirming the decision of the trial court in Civil
Case No. 16693.
5
In affirming the trial court's decision, the respondent Court held
that Section 5 of the Rural Banks' Act, as amended, did not reduce
the period of redemption of homestead lands from the five (5)
years prescribed in Section 119 of C.A. No. 141, as amended, to
two (2) years from the date of registration of the foreclosure sale
as fixed in the former; in support of such conclusion, it
summoned Oliva vs. Lamadrid
6
wherein this Court, speaking
through then Chief Justice Concepcion, held:

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G.R. No. 83992 January 27, 1993 RURAL BANK OF DAVAO CITY, INC. petitioner,  vs. THE HONORABLE COURT OF APPEALS and GABRIEL ABELLANO and FRANCISCO SEQUITAN, respondents. DAVIDE, JR., J.: Two (2) issues are presented for Our resolution in this petition for review under Rule 45 of the Rules of Court, viz:(1) whether or not the two-year redemption period fixed by the Rural Banks' Act 1 in a foreclosure sale of property acquired through a homestead patent superseded or repealed the five-year repurchase period prescribed in Section 119 of the Public Land Act 2 and (2) if it did not, whether, in the event of the expropriation by the Government of the subject property during the redemption or repurchase period, a homesteader, who thereafter exercised his right to redeem or repurchase, is entitled to the compensation for such expropriation less the redemption or repurchase amount. The trial court ruled in the negative for the first issue and in the affirmative for the second. The respondent Court of Appeals affirmed the trial court. Hence, We have the instant petition seeking for a contrary ruling. The undisputed facts generative of this controversy are as follows: On 18 April 1978, private respondents Gabriel Abellano and Francisca Sequitan obtained a loan in the amount of P45,000.00 from the petitioner, a rural bank organized and existing under the Rural Banks' Act. The terms thereof called for payment of the loan in two (2) equal installments on 21 October 1978 and 21 A ...
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