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SECOND DIVISION

[G.R. No. L-51767. June 29, 1982.]


LETICIA CO, assisted by her husband MUI YUK KONG, in substitution of CITADEL INSURANCE & SURETY CO.,
INC., Plaintiff-Appellee, v. PHILIPPINE NATIONAL BANK,Defendant-Appellant.
SYNOPSIS
Standard Parts Manufacturing Corporation obtained several loans from the Philippine National Bank in the total amount of
P4,296,103.36 and as security therefor, mortgaged its real properties in Batuio City and in Makati, Rizal and executed in
addition thereto, a chattel mortgage over its personal properties. For its failure to pay its obligation, the appellant bank
foreclosed extra-judicially the mortgaged properties and purchased the same as the highest bidder leaving a deficiency claim
in the amount of P1,434,321.07. The certificates of sale were registered on March 11, 1973. Due to the mortgagors failure
to redeem the properties, appellant bank consolidated its title to the same. Citadel Insurance and Surety Co., to whom
Standard Parts Manufacturing Corporation had assigned its right of redemption over the Makati property, offered to redeem
the same for Pl,621,970.00 in a letter dated March 3, 1976 accompanied by a check as payment. The appellant bank refused
as the amount was very much lower than its total claim. Citadel filed a complaint before the trial court and judgment was
rendered ordering the appellant bank to accept payment.
On petition for review, the Supreme Court held that Citadels tender of redemption, made in a letter addressed to the
Philippine National Bank, dated March 3, 1976, accompanied by a managers check covering the redemption price was made
on time; that Act 3133 and Sections 29-32 of Rule 39 of the Rules of Court are the applicable legal precepts to its right of
redemption, but it cannot be faulted for non-inclusion in its tender the amount of assessments or taxes the bank might have
paid before redemption as it was not supplied such data; than Pl,621,970.00 tendered by Citadel was the correct redemption
price, but to prevent unjust enrichment on the part of the debtor-mortgagor, and for reasons of equity and substantial
justice, appellant bank should be paid the full amount of P3,366,346.32 without any interest as of March 11, 1976, when it
refused the redemption legally and validly tendered without need however of accounting to Citadel and/or Leticia Co. rentals
it had earned from the time it took possession of the property.
Judgment modified.

SYLLABUS

1. CIVIL LAW; MORTGAGE; EXTRAJUDICIAL FORECLOSURE; REDEMPTION PERIOD IS ONE YEAR UNDER ACT 3133, AS
AMENDED; CASE AT BAR. STANDARDs/CITADELs period of redemption was up to March 10, 1976. That CITADEL filed its
complaint to compel Philippine National Bank to accept its redemption only on March 11, 1976 is of no moment. The
unequivocal tender of redemption was made in the letter of Francisco S. Corpus, its President, of March 3, 1976 accompanied
by a managers check of the Rizal Commercial Banking Corporation for the amount it believed it should pay as redemption
price. The Supreme Court holds that the redemption was made on time, that is, within one year (or even twelve months)
from the date appearing as the date of the registration of the certificate of sale.
2. ID.; ID.; ID.; FORECLOSURE OF MORTGAGE IN CASE AT BAR MADE UNDER ACT 3133. When PNB foreclosed the
mortgage at issue, it chose Act 3133 and it was exercised before PD 694 came into being. To make the redemption subject to
a subsequent law would be obviously prejudicial to the party exercising the right to redeem. Without considering the date the
loan was secured and the date of the mortgage contract, and taking into account only the dates of the foreclosures and
auction sales, it is quite obvious that any change in the law governing redemption that would make it more difficult than
under the law at the time of the sale cannot be given retroactive effect.
3. ID.; ID.; ID.; ID.; TERMS AND CONDITIONS UNDER WHICH REDEMPTION MAY BE EXERCISED ARE DEEMED PART AND
PARCEL OF MORTGAGE CONTRACT; ALTERATION THEREOF IMPAIRS OBLIGATIONS OF CONTRACTS. Under the terms of
the mortgage contract, the terms and conditions under which redemption may be exercised are deemed part and parcel
thereof whether the same be merely conventional or imposed by law. To alter those terms in a manner prejudicial to the
mortgagor or the person redeeming the property as his successor-in-interest after the foreclosures and sales would definitely
come within the constitutional proscription against impairment of the obligations of contracts.
4. ID.; ID.; ID.; ID.; REDEMPTION BY CHECKS ALLOWED. In Javellana v. Mirasol, 40 Phil. 761, the Supreme Court has
already sanctioned redemption by check.
5. ID.; ID.; ID.; ID.; EXECUTION DEBTOR CAN SELL HIS RIGHT OF REDEMPTION. In Lichauco v. Olegario, Et Al., 43 Phil.

340, the Supreme Court held than "whether or not . . . an execution debtor was legally authorized to sell his right of
redemption is a question already decided by this Court in the affirmative in numerous decisions on the precepts of Sections
463 and 464 and other sections related thereto, of the Code of Civil Procedure."
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6. ID.; ID.; ID.; APPELLANT SHOULD BE PAID THE FULL AMOUNT OF REDEMPTION PRICE WITHOUT INTEREST; CASE AT
BAR. It is but just and proper that PNB should be paid the full amount of P3,366,546.42 without any interest as of March
11, 1976, when it refused a redemption legally and validly tendered. On the other hand, the amount of P1,621,970.00
tendered by CITADEL on March 5, 1976 and which was deposited in a savings account, drawing interest apparently less than
12% p.a., in the name of PNB by order of the trial court should be computed to have earned legal interest or 12% p.a.,
compounded annually, since March 11, 1976, provided however that should such amount including the compounded interest
at 12% p.a., so earned be less than P3,366,546.42, petitioner herein should pay PNB such difference, and provided, on the
other hand, that with this arrangement, PNB does not have to account to CITADEL/LETICIA CO for any of the rentals it had
earned from the time it took possession of the property. In the final analysis, instead of PNB losing P1,744,576.42, under
strict technical legal reasoning, as explained above, applying hereto the principle of unjust enrichment, which We deem in the
peculiar circumstances at this instant case to be the fairest way of resolving this controversy, it would still be paid by
petitioner a certain amount, not to mention what must be quite substantial and considerable, the rentals the said bank it has
earned, which it does not have to account for.

DECISION

BARREDO, J.:

Direct appeal to this Supreme Court pursuant to Republic Act 5440 from the decision of the Court of First Instance of Rizal,
Branch XXI in its Civil Case No. 23101 entitled "Citadel Insurance & Surety Co., Inc. v. Philippine National Bank", the
dispositive portion of which reads:
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"WHEREFORE, this Court finds that plaintiff has validly exercised the right of redemption herein-before discussed and orders
the defendant to:
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(a) Accept the amount consigned and deposited pursuant to the Order of this Court on March 11, 1976;
(b) Execute and specifically comply to the effects of the exercise of the right of redemption so that whatever title is due to
the plaintiff after redemption may properly accrue to plaintiff;
(c) Deliver and surrender to plaintiff possession over the property in question.
"Considering that this case has been submitted for decision based upon four (4) limited questions of law and there being no
evidence presented and submitted to support any claim for damages, there is no pronouncement and award of damages as
well as costs.
"SO ORDERED." (Pp. 180-181, Record on Appeal.)
It goes without saying that under the Act aforementioned by virtue of which this appeal is before Us, the issues We are called
upon to resolve are only questions of law.
Briefly stated, the undisputed material facts of this case, as may be culled from the decision of the trial court and elsewhere
in the record, are as follows:
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On November 10, 1961, the Standard Parts Manufacturing Corporation, hereinafter to be referred to simply as STANDARD,
executed a real estate mortgage in favor of herein defendant-appellant Philippine National Bank, hereinafter to be referred to
simply as PNB, over properties covered by Transfer Certificates of Title Nos. T-5108 and T-5320, both situated in Baguio City,
as collateral for a loan consideration of P500,000.00. On February 20, 1963, the same debtor corporation executed an
amended real estate mortgage to include as collateral for the increase of the above loan to P1,000,000.00 a property located
at Pasong Tamo Extension within the Municipality of Makati (then part of Rizal Province and now of Metro Manila) covered by
Transfer Certificate of Title No. 54474. Additionally, on February 20, 1963, the same corporation executed in favor of PNB a
chattel mortgage of its personal properties listed on pages 96 to 108 of the Record on Appeal. On pages 6-7 of appellants
brief it is stated that as of July 19, 1974, the "borrowed loan" of STANDARD totalled P4,296,803.56, and that the said
obligation was secured, as aforementioned, by the mortgages on the Baguio and Makati real estates of STANDARD and the
chattel mortgage on its personal properties above referred to.
When STANDARD failed to pay its obligation, PNB extra-judicially foreclosed the mortgage on the Baguio properties as well as
the chattel mortgage on July 19, 1974, with PNB as the highest bidder for P1,514,305.00. Subsequently, on August 8, 1974,
PNB also foreclosed the mortgage on the Makati property and purchased the same, as highest bidder, for P1,363,000.00.
We quote further from appellants brief:

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"When Standard Parts failed to pay its obligation, PNB foreclosed the Baguio properties and chattels on July 19, 1974 with it
as the highest bidder for P1,514,305.00 and the Pasong Tamo property on August 8, 1974 also with it as the highest bidder
for P1,363,000.00. Hence, after foreclosure of the above-mentioned mortgage, the deficiency claim of the Bank against
Standard Parts as of August 8, 1974 amounted to P1,434,521.07. Subsequently, a Certificate of Sale dated July 19, 1974 was
issued by the Sheriff of Baguio City covering TCT Nos. T-5708 and T-5320 (Annex C, P.S.F.). A Certificate of Sale dated
August 8, 1974 covering TCT No. 54474 was also issued by the Sheriff of Rizal (Annex D, P.S.F.) and registered on March 14,
1976 in the Registry of Deeds. Upon failure of Standard Parts to redeem the foreclosed properties within the reglementary
period, the PNB consolidated titles to the Baguio properties and TCT Nos. 26080 and 26081 (Annexes E and E-1,
respectively, P.S.F.) were issued by the Register of Deeds of Baguio City on May 5, 1976 in the name of the Bank. On May 14,
1976, TCT No. 54474 was cancelled and TCT No. S-28133 issued in the name of the PNB.
"Meantime, on March 5, 1976, Citadel wrote PNB a letter (Annex H, P.S.F.) stating therein its desire to redeem the property
covered by TCT No. 54474, it being the alleged assignee of the right of redemption of Standard Parts with respect only to
said property. Citadel, however, offered to redeem the property for only P1,621,970.00. In its reply to said letter, PNB, in a
letter dated March 5, 1976 (Annex I, P.S.F.), justifiably refused to accept the tender of payment of Citadel considering that
the amount of P1,621,970.00 was very much lower than the Banks total claim of P3,366,546.42 as of March 5, 1976 per the
Statement of Account of Standard Parts (Annex G, P.S.F.)." (Pp. 7-9, Brief of PNB)
To Our mind then, the facts that are decisive herein are the following:

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1. The mortgages here in question were constituted way back in 1961 to 1963.
2. The foreclosure sale of the Baguio properties and the chattels took place on July 19, 1974 and that of the Makati estate on
August 8, 1974.
3. Citadel Insurance & Surety Co., Inc. (CITADEL, for short) to whom STANDARD had in the meanwhile (or on February 20,
1976) transferred its rights in the mortgages here in issue, wrote PNB on March 5, 1976 stating that it was redeeming the
Makati property, offering to pay therefor as redemption price P1,621,970.00. The letter of CITADEL in this regard reads
thus:
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"CITADEL INSURANCE & SURETY CO., INC.


Suite 202 Sikatuna Bldg., Ayala Ave.
Makati, Rizal
Tel. No. 87-33-07 & 87-34-44.
March 5, 1976
PHILIPPINE NATIONAL BANK
Escolta, Manila
Re: Legal Redemption of Extra-Judicial
Foreclosed Property of Standard
Parts Manufacturing Corporation
Under Act No. 3135, As amended
Gentlemen:

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In connection with the above-mentioned property which is covered by TCT No. 54474 of the Register of Deeds For the
Province of Rizal, we wish to inform you that the CITADEL INSURANCE & SURETY CO., INC., is the Assignee of the right of
redemption, which will expire on March 11, 1976, by virtue of a Deed of Assignment and Waiver of Redemption Rights dated
February 29, 1976, photostat copy of which is attached to this letter as Annex A.
As assignee of the aforementioned Right of Redemption, our Company is now exercising the same by tendering to you the
redemption price computed as follows:
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P1,363,000,00 total bid of the PNB per its letter to the Sheriff dated August 8, 1974;
P 258,970.00 interest at the rate of 1% a month from the date of auction, August 8, 1974, up to the time of redemption;
________________

P1,621,970.00 TOTAL
as evidenced by RCBC Managers Check No. MC 194188 dated March 4, 1976, which is attached to this letter as Annex B.
In view of the foregoing, kindly acknowledge the receipt of the redemption amount and cause the issuance of the
corresponding Certificate of Redemption in favor of our Company.
Thank you.
Very truly yours
(Sgd.)FRANCISCO S CORPUS
President
Att.: a/s" (Pages 131-133, Record on Appeal)
4. Immediately or on even date PNB rejected the above tender, contending that the offered price was much lower than
P3,366,546.42, 1 as of said date March 6, 1976, which PNB maintained was the correct redemption price. The following was
the reply of PNB:
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"PHILIPPINE NATIONAL BANK


LEGAL DEPARTMENT
March 5, 1976
Mr. Francisco S. Corpus
President
Citadel Insurance & Surety Co., Inc.
202 Sikatuna Bldg., Ayala Ave.
Makati, Rizal
Dear Mr. Corpus:

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This refers to your letter of March 5, 1976 wherein you expressed your desire to redeem the property covered by TCT No.
54474 of the Register of Deeds of Rizal which we acquired from Standard Parts Manufacturing Corp. in the amount of
P1,621,970.00 in the form of RCBC Managers Check No. MC 194188 dated March 4, 1976.
We feel that the Legal Department is in no position to decide the acceptance of your offer because it appears that the amount
offered is less than our total claim. We suggest, therefore, that you see either Vice President Andres L. Africa or Asst. Vice
Pres. Raul Leveriza on Monday, March 8, 1976.
Very truly yours,
(Sgd.) ARTEMIO S. TIPON
Senior Supervising Atty."

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(Pp. 133-134, Record on Appeal.)


5. The Certificate of Sale dated August 8, 1974 covering TCT No. 54474 was issued by the Sheriff of Rizal and registered on
March 14, 1976 in the Registry of Deeds. (Page 8, PNBs brief) Notably, however, according to the decision of the trial court,
the certificate of sale was registered on March 11, 1976. (Page 176, Record on Appeal.)
6. On March 11, 1976, CITADEL filed the instant action in the court below with the following prayer:

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"PRAYER
"WHEREFORE, it is respectfully prayed that upon the filing of this complaint this Honorable Court forthwith issue an order
authorizing its Branch Clerk to accept a Managers Check in the amount of P1,621,970.00 and deposit the same with the
Rizal Commercial Banking Corporation under a Savings Account in order that the same shall not remain idle, and in the name
of defendant PNB, subject to the control and disposition of this Honorable Court; and after hearing, judgment be rendered;
"(a) Ordering defendant to accept the amount so deposited, and/or such amount as may be found by this Honorable Court to

be the lawful redemption price for the particular property in question;


"(b) Ordering defendant to turn over the title and possession of the property in question to plaintiff, together with its fruits
from March 11, 1976 up to the time possession is actually surrendered to the plaintiff, plus the interests thereon counted
from the date of filing of this complaint;
"(c) Ordering defendant to execute such documents and papers that may be necessary for the transfer of the title and
possession of the property in question to plaintiff;
"(d) Ordering defendant to pay plaintiff damages in the form of attorneys fees and expenses of litigation, the amount of
which is left to the sound discretion of this Honorable Court;
"(e) Ordering the defendant to pay the costs of suit.
"PLAINTIFF FURTHER PRAYS for such other relief as may be found just and equitable in the premises." (Pp. 6-8, Record on
Appeal.)
7. There is no dispute that a managers check of the Rizal Commercial Banking Corporation No. MC 194188 dated March 4,
1976 and in the amount of P1,621,970.00 (Pp. 14-15, Record on Appeal) accompanied the complaint and was actually
deposited under a savings account with the same bank by order of the trial court of the same date "in the name of the PNB
subject to the control and disposition of the Court." (p. 20, Record on Appeal.)
In the light of the foregoing facts, the parties stipulated in the partial stipulation facts they submitted to the trial court that;
"B. Limitation of

Issues

"The parties agreed that the issues raised by the pleadings are one of law, to wit:

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"1. Whether the redemption period has expired.


"2 What is the correct redemption amount required under the law?
"3. Whether there was a valid and effective tender of payment.
"4. Whether the Deed of Assignment is binding and enforceable against defendant PNB." (P. 151, Record on Appeal.)
Timeliness of the redemption
To be sure, We find the opposing postures of the parties on the timeliness of the redemption here in question a little blurred
and confusing. So, rather than to try to extricate Ourselves out of such maze, We feel it is sufficient to point out that
according to the brief of appellant, the foreclosure sale of the subject property was made on August 8, 1974 (pp. 7-8) and
the corresponding certificate of sale was issued by sheriff on the same day and "registered on March 14, 1976 in the Register
of Deeds." (p. 8, Record on Appeal.) "On May 14, 1976 TCT 54474 was cancelled and TCT No. S-28133 issued in the name of
PNB." (id.) 2
In such ambiguous premises, We have no alternative than to use March 11, 1975 3 as point of reference regarding the date
of the registration of the certificate of sale. Appellant assumes that on this basis the period of redemption was up to March
10, 1976. Well, the truth of the matter is that this detail is tied up inextricably to the main question of law that pervades the
whole of this controversy.
What is the law applicable to this case as to the period of redemption?
Let us not forget that the mortgage at issue was executed in 1963. True it is that as underscored by counsel for PNB,
STANDARD, the predecessor-in-interest of CITADEL, who signed the deed of mortgage agreed, and CITADEL is bound by such
agreement, "to abide and to be bound by the provisions of the Charter of the PNB." Specifically paragraph (g) of said real
estate mortgage provides:
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"(g) The mortgagor hereby waives the right granted him under Section 119 of Commonwealth Act No. 141, known as the
Public Land Act, as amended and agrees to abide to be bound by the provisions of Act No. 3135 or Act No. 2933, which
amended Act No. 1612, or Republic Act No. 1300, as amended, known as the New Charter." (Page 15, PNBs Brief.)
Going by the literal terms of this quoted provision, STANDARD/CITADEL stand bound by the same. In other words, paragraph
(g) of the mortgage contract made the provisions of Act No. 3135 or Act 2933, which amended Act No. 1612, or Republic Act
1300, as amended, known as the new Charter part and parcel of the mortgage contract. Now, what is the legal import or
consequence of such express incorporation of and submission to Act 3135 and Republic Act 1300 by STANDARD/CITADEL?
Republic Act 1300 entitled "An Act Revising the Charter of the Philippine National Bank" was approved and made effective on

June 16, 1955. It was therefore the law when in 1963 the mortgage here in dispute was executed. It was the very law that
the above-quoted paragraph (g) of the mortgage contract made reference to. In this connection, evidently overlooked by
counsel for PNB is that Republic Act 1300 does not contemplate extrajudicial procedure. Clearly indicative of this is Section
20 thereof which provides:
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"Sec. 20. Right of redemption of property foreclosed. The mortgagor shall have the right, within the year after the sale of
real estate as a result of the foreclosure of a mortgage, to redeem the property by paying the amount fixed by the court in
the order of execution, with interest thereon at the rate specified in the mortgage, and all the costs and other judicial
expenses incurred by the Bank by reason of the execution and sale and for the custody of said property."
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Indeed, conventional legal and banking business sense dictates that it must have been because of such omission that
paragraph (g) above had to expressly incorporate Act 3135 which provides for extrajudicial foreclosure. We cannot,
therefore, escape the conclusion that what STANDARD agreed to in respect to the possible foreclosure of its mortgage was to
subject the same to the provisions of Act 3135 should the PNB opt to utilize said law instead of Republic Act 1300.
On the other hand, Act 3135, as amended by Act 4018, is of 1924 vintage. Its Section 6 very clearly governs the right of
redemption in extrajudicial foreclosures thus:
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"Sec. 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."
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Sections four hundred sixty-four to four hundred sixty-six, inclusive, of the Code of Civil Procedure, since the promulgation of
the Rules of Court of 1940, became Sections 29, 30 and 34 of Rule 39. The same sections were reiterated in the Revised
Rules of Court in July 1964.
From all the foregoing, We are of the considered opinion and so hold that STANDARDs/CITADELs period of redemption was
up to March 10, 1976. 4 That CITADEL filed its complaint to compel PNB to accept its redemption only on March 11, 1976 is
of no moment. The unequivocal tender of redemption was made in the letter of Francisco S. Corpus, its President, of March
5, 1976 accompanied by a managers check of the Rizal Commercial Banking Corporation, a well known, big and reputable
banking institution, for the amount it believed it should pay as redemption price. PNB rejected it on the sole and only ground
that it considered the amount insufficient. The Court, therefore, holds that the redemption was made on time, that is, within
one year (or even twelve months) from the date appearing as the date of the registration of the certificate of sale.
How about the amount needed for such redemption?
On this score, PNB insists on p. 9 et. seq. of its brief on the applicability to this case of "Section 25 of Presidential Decree No.
694, otherwise known as the new PNB Charter" which provides:
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Section 25. Right of Redemption of Foreclosed Property Right of Possession During Redemption Period Within one year
from the registration of the foreclosure sale of real estate, the mortgagor shall have the right to redeem the property by
paying all claims of the Bank against him on the date of the sale including all the costs and other expenses incurred by
reason of the foreclosure sale and custody of the property, as well as charges and accrued interests."
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But P.D. 694 took effect only on May 8, 1975. PNBs counsel himself has, as already mentioned above, taken the position that
it was the old PNB Charter, Republic Act 1300, that was expressly made part of the contract. In other words, it was by virtue
of such contractual stipulation and not ex propio vigore that the provisions of the banks then current charter bound the
mortgagor STANDARD. But prescinding from possible legal flaw in such pose, and that all provisions of the charter are
enforceable and must be read into all mortgages with the PNB as integral parts thereof, in this instant case, the Court finds
its hands inert and shackled in the face of the constitutional proscription against the impairment of contracts. (Sec. 11, Art.
IV, New Constitution) Stated otherwise, since the contract of mortgage herein was entered into under a specific law, Republic
Act 1300, even the principle that no law is unamendable nor unrepealable cannot hold, when the subsequent legislative
enactment, P.D. 694, would alter and modify to the prejudice of any of the parties the terms of the contract under the aegis
of the prior law. Indisputably, the application of P.D. 694 to the mortgage herein involved would violate the Constitution.
Hence, it simply cannot apply.
Stated otherwise, by virtue of the provision of the mortgage contract precisely cited by PNB, namely, its paragraph (g),
quoted earlier, PNB had the contractually acquired option to resort either to its Charter, Republic Act 1300 or to Act 3135.
When it foreclosed the mortgage at issue, it chose Act 3135. That was an option it freely exercised without the least
intervention of appellee. And it was exercised before P.D. 694 came into being. In fact, the foreclosure sales took place in
1974 yet. And so, to make the redemption subject to a subsequent law would be obviously prejudicial to the party exercising
the right to redeem. Without considering the date the loan was secured and the date of the mortgage contract, and taking
into account only the dates of the foreclosures and auction sales, it is quite obvious that any change in the law governing
redemption that would make it more difficult than under the law at the time of the sale cannot be given retroactive effect.
Under the terms of the mortgage contract, the terms and conditions under which redemption may be exercised are deemed
part and parcel thereof whether the same be merely conventional or imposed by law. To alter those terms in a manner

prejudicial to the mortgagor or the person redeeming the property as his successor-in-interest after the foreclosures and
sales would definitely come within the constitutional proscription against impairment of the obligations of contracts.
Having thus come to the ineludible conclusion that Act 3135 and Sections 29 to 32 of Rule 39 of the Rules of Court rather
than P.D. 694 are the laws applicable to the right of redemption invoked by appellee in this case, 5 it would appear that all
that remains for Us to do is to apply the said legal precepts. Pursuant to Section 30 of Rule 39, "the judgment debtor (or
his successor-in-interest per Section 29, here Leticia Co,) may redeem the property from the purchaser, (here PNB) at any
time within twelve months after the sale, on paying the purchaser the amount of his purchase, with one per centum per
month interest thereon in addition, up to the time of redemption, together with the amount of any assessments or taxes
which the purchaser may have paid thereon after the purchase, and interest on such last-named amount at the same
rate; . . ."
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In this connection, lest it be argued that CITADEL did not include in its tender the amount of assessments or taxes PNB might
have paid before the redemption, His Honor, We note that the trial judge, has pointed out that in spite of the requirement in
the certificate of sale issued by the sheriff that the purchaser or highest bidder submits within 30 days immediately preceding
the expiration of the period of redemption, an appropriate statement of the amount of such assessments or taxes, PNB failed
to comply with such requirement, hence it would be unfair to fault CITADEL for the non-inclusion thereof in its tender. PNB
argues, however, that it did furnish CITADEL on March 5, 1976 the required data. We note, however, that the statement of
P3,366,546.42 specified by PNB in its reply of March 5, 1976 is not clear enough to show the details on taxes and
assessments under discussion. In any event, considering that as earlier pointed out by Us, there could be a possibility that
March 5, 1976 should be considered as the last day of redemption, the explanation of PNB is, at least in equity, unavailing.
There was no more time for CITADEL to have a breakdown of the P3,366,546.42 to find out what items were included
therein. Anyway, this discussion is practically academic because in the manner We are resolving this case, this point would be
of no moment.
Before passing to another aspect of this case, it may not be amiss to mention here that in Morans Comments on the Rules of
Court (p. 326-327, 1979 ed.), it is stated that where the judgment debtor, which necessarily includes his successor-ininterest (Section 29, a, Rule 39) validly tenders the necessary payment for the redemption and the tender is refused, it is not
necessary that it be followed by the deposit of the money in court or elsewhere (Enage v. Vda. de Escano, 38 Phil. 687) and
no interest after such tender is demandable on the redemption money. (Martinez v. Campbell, 10 Phil. 626; Fabros v.
Agustin, 18 Phil. 336).
The jurisprudence cited by PNB are not applicable
Even as We have so far focused Our discussion and resolution of the issues herein on the pertinent statutory provisions, We
have not really closed Our eyes to the jurisprudence cited by PNB in its brief, four of which are worthy of mention, namely:
Medina v. PNB, 56 Phil. 655; Nepomuceno v. RFC, G.R. No. L-14877, Nov. 23, 1960; Perez v. PNB, 17 SCRA 833 and DBP v.
Mirang, 66 SCRA 141.
The case of Perez, supra, did not involve a redemption in the sense that it is in issue in this case. In fact, the point involved
in the instant case is not even touched in the syllabus thereof in SCRA. This is because what was fundamentally the problem
therein was whether or not it was obligatory on the part of the bank-mortgagee to foreclose judicially the mortgage inasmuch
as the mortgagor died. As the Court said, "the main issue in this appeal is the application of Section 7, Rule 87 of the Rules
of 1940 (now Section 7 of Rule 68), a reproduction of Section 708 of the Code of Civil Procedure." Hence, anything said
therein at issue may be deemed as obiter. If anything in that opinion is relevant hereto, it is that portion thereof that justly
and equitably holds that from whatever amount should be payable to the mortgagee Bank, should be deducted "the value of
any rents and profits derived by the (said) bank from the property in question." (at p. 840)
In the Nepomuceno case, supra, what confronted the Court was a question relative to a mortgage with the Rehabilitation
Finance Corporation (RFC for short, now the Development Bank of the Philippines). The Court found no difficulty in not
applying Section 6 of Act 3135 because it found that there is in Section 31 of the Charter of the RFC a provision basically
similar to Section 25 of Presidential Decree 694, now being invoked here by PNB. Naturally, the Court upheld the RFCs
contention that the whole amount of the mortgagors indebtedness should be paid. But in the instant case, as already
discussed earlier, P.D. 694 came too late.
DBP v. Mirang, supra, follows in principle the Nepomuceno ruling that the special provisions in the charter of DBP govern in
matters of redemption of property acquired by it in a foreclosure sale. So, We need not elucidate any further on its
inapplicability hereto.
It is the earlier case of Medina v. PNB, supra, that nearly approximates the position PNB is pressing on Us now, because in a
portion of the opinion thereof, Chief Justice Avencea, as correctly underlined by PNB in its brief, stated:
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"As we have indicated above, there is no question with regard to the plaintiffs right, as successors of the Manila Commercial
Company, to repurchase the parcels covered by the transfer certificates of title Nos. 137 and 139. The question is whether, as
the bank contends and the trial court has held, the redemption should be made by paying to the bank the entire amount
owed to it by the Manila Commercial Company. The appellants contend that this redemption may be made by only
reimbursing the bank what it has paid for the sale made to it. In this respect we are also of the opinion that the judgment
appealed from is correct." (Page 655)

But this statement needs clarification. Towards the concluding portion of the opinion, he explained that:

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"It will be remembered that the mortgage contract between the bank and the Manila Commercial Company was executed on
October 30, 1920, before the approval of Act No. 3135 in March, 1924. If, before Act No. 3135 took effect, the Manila
Commercial Company had violated the contract, beyond all doubt the bank would have been able to sell the mortgaged
property, without the necessity of a judicial action, and the sale thus made would carry the right of repurchase on the part of
the debtor through the payment of the entire amount of the debt.
"When the banks right to foreclose the mortgage of the Manila Commercial Company accrued, Act No. 3135 was already in
force. Of course, this law, being general, did not affect the charter of the bank, which was a special law. Thus, when the
bank, in order to sell the mortgaged property extrajudicially, resorted to Act No. 3135, it did so merely to find a proceeding
for the sale; but that action cannot be taken to mean a waiver of its right to demand the payment of the whole debt before
the property can be redeemed. The record contains nothing to show that the bank made this waiver of said right." (Pp. 656657)
There is here an implication that in undertaking the foreclosure therein involved, the PNB relied on Act 3135. This is not quite
accurate, for in the opening paragraph of the same opinion, it is stated that:
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"On October 30, 1920 the Manila Commercial Co. and La Yebana Co. mortgaged four parcels of land with Torrens titles,
described in the complaint, to the Philippine National Bank, the first and fourth parcels being in the name of the La Yebana
Co. and the second and third in the name of the Manila Commercial Co. The mortgage was given to secure the payment of
P680,000 or for whatever amount the Manila Commercial Co. might be indebted to the Philippine National Bank. One of the
clauses of the mortgage provides that in case of a violation by the Manila Commercial Co. of any of the conditions of the
contract, the Philippine National Bank may take possession of the mortgaged property and sell or dispose of it by public or
private sale, without first having to file a complaint or to give any notice, and at such sale, if public, it may acquire for itself
all or any of the parcels of land." (Page 651) (Emphasis supplied)
Thus, it is to Our mind closer to the truth that it was by virtue of such contractual clause, rather than Act 3135, even if the
request to the sheriff did mention said Act that PNB foreclosed. In any event, the Court did take into account that the
mortgage at issue in that case was executed before the approval of Act 3135 and observed that without such Act, the right of
the bank to full payment would have been indisputable. This is the same principle of non-impairment of the contracts by
subsequent legislative action. We have made reference to above in precluding the applicability hereto of P.D. 694.
On the minor issues
We are not impressed that PNB is really serious in its pose that the tender by managers check by CITADEL was inefficacious.
For one thing, that obligation was waived when in its letter of rejection, the bank did not invoke it. (Gregorio Araneta, Inc. v.
De Paterno and Vidal, 91 Phil. 786) More importantly, this Court has already sanctioned redemption by check. (Javellana v.
Mirasol, 40 Phil. 761)
Neither do We find any substantial weight in PNBs pose that the transfer or conveyance of STANDARDs right of redemption
to CITADEL and the latter to Leticia Co is not binding on it. In Lichauco v. Olegario, Et Al., 43 Phil. 540, this Court held that
"whether or not . . . an execution debtor was legally authorized to sell his right of redemption, is a question already decided
by this Court in the affirmative in numerous decisions on the precepts of Sections 463 and 464 and other sections related
thereto, of the Code of Civil Procedure." (The mentioned provisions are carried over in Rule 39 of the Revised Rules of Court.)
That the transfers or conveyances in question were not registered is of miniscule significance, there being no showing that
PNB was damaged or could be damaged by such omission. When CITADEL made its tender on May 5, 1976, PNB did not
question the personality of CITADEL at all. It is now too late and purely technical to raise such an innocuous failure to comply
with Article 1625 of the Civil Code.
The foregoing discussion inexorably points to the conclusion that the price of redemption of P1,621,970.00 tendered by
CITADEL on March 5, 1976 was the correct amount. Since PNB refused to allow the redemption thus legally tendered,
applying the law strictly, it would stand to lose P1,744,576.42 of what it claims was the total indebtedness or outstanding
obligation of CITADEL as of March 11, 1976.
To avoid this loss, PNB invokes, as already stated above, P.D. No. 694, but We have also pointed out earlier that to apply said
decree would result in the impairment of the contractual obligation of CITADEL, which cannot be allowed under the
Constitution.
However, We are persuaded that all such considerations would render the result of this case short of what appears to be
substantial justice in the light of the situation on hand. It strikes Us as rather unconscionable that by a literal application of
the law and perhaps due to a mistake in the amount of the bid made by PNB, 6 the bank would not get full satisfaction of its
credit. Indeed, there would be unjust enrichment on the part of the debtor-mortgagor in such an eventuality. Our sense of
justice cannot permit such inequitous advantage.
With this point in mind, We deem it fairer and so hold that considering the unique factual milieu of this case, Articles 22 and
2142 of the Civil Code should be the guideposts of Our decision here. Said articles provide:
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"ART. 22. Every person who through an act of performance by another, or any other means, acquires or comes into
possession of something at the expense of the latter without just or legal ground, shall return the same to him."

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"ART. 2142. Certain lawful, voluntary and unilateral acts give rise to the juridical relation of quasi-contract to the end that no
one shall be unjustly enriched or benefited at the expense of another."
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Although the report of the Code Commission states that:

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"Another rule is expressed in article 22 which compels the return of a thing acquired without just or legal ground. This
provision embodies the doctrine that no person should unjustly enrich himself at the expense of another, which has been one
of the mainstays of every legal system for centuries. It is most needful that this ancient principle be clearly and specifically
consecrated in the proposed Civil Code to the end that in cases not foreseen by the lawmaker, no one may unjustly benefit
himself to the prejudice of another. The German Civil Code has a similar provision (art. 812)."
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it may be said that whatever of the principle of unjust enrichment may not be covered by Article 22, Article 2142 makes its
enhancement in this jurisdiction most comprehensive.
Consequently, it is but just and proper that PNB should be paid the full amount of P3,366,546.42 without any interest as of
March 11, 1976, when it refused a redemption legally and validly tendered. On the other hand, the amount of P1,621,970.00
tendered by CITADEL on March 5, 1976 and which was deposited in a savings account, drawing interest apparently less than
12% p.a., in the name of PNB by order of the trial court should be computed to have earned legal interest or 12% p.a.,
compounded annually, since March 11, 1976, provided however that should such amount including the compounded interest
at 12% p.a., so earned be less than P3,366,546.42, petitioner herein should pay PNB such difference, and provided, on the
other hand, that with this arrangement, PNB does not have to account to CITADEL/LETICIA CO for any of the rentals it had
earned from the time it took possession of the property. In the final analysis, instead of PNB losing P1,744,576.42, under
strict technical legal reasoning, as explained above, applying hereto the principle of unjust enrichment, which We deem in the
peculiar circumstances at this instant case to be the fairest way of resolving this controversy, it would still be paid by
petitioner a certain amount, not to mention what must be quite substantial and considerable, the rentals the said bank it has
earned, which it does not have to account for.
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In closing, We may add that in Escao, supra, this Court laid down as a policy that "redemptions are looked upon with favor,
and when an injury is to follow, a liberal construction will be given to our redemption laws to the end that the property of the
debtor may pay as many of the debtors liabilities", PNB having foreclosed on the Baguio properties and the chattels of
STANDARD for what appears could have been a fairer price, it is but in consonance with the Escao policy that the
redemption herein involved be allowed on the basis of the injunction against unjust enrichment. 7 We may add here the
observation, taught by common business experience, that when a bank grants a loan, secured by any collateral, what is of
uppermost consideration to such lender is the borrowers capacity to pay according to the terms stipulated, and not really the
acquisition of the collateral, if only to maintain the banks liquidity position as conveniently as possible. Acquired assets
generally add to liquidity problems of banks. The foreclosure of the security is a measure of last resort, hence when by the
exercise of the right of redemption, the bank can recover the money it has loaned, nothing could be more proper than to
allow the borrower to retain his property. Of course, peculiar instances are naturally excepted. That is why this decision
cannot be invoked as a precedent for other parties not exactly similarly situated as the appellee in this case. Should there be
any thought that Our resolution of this case is not strictly according to legal principles, let everyone be reminded that this
Court has inherent equity jurisdiction it can always exercise in settings attended by unusual circumstances to prevent
manifest injustice that could result from bare technical adherence to the letter of the law and unprecise jurisprudence under
it.
WHEREFORE, the judgment of the trial court against the Philippine National Bank herein on appeal is hereby modified and
another one is hereby rendered in favor of the said defendant-appellant bank in accordance with the formula hereinabove
stated, and, accordingly, upon payment by LETICIA CO of the amount due it pursuant to the above computation, PNB is
hereby ordered to transfer the title to the property in question to LETICIA CO. This payment must be made within ten (10)
days from the finality of this judgment.
No costs.
Concepcion, Jr., Guerrero, De Castro and Escolin, JJ., concur.
Aquino and Abad Santos, JJ., took no part.
Endnotes:

1. How P1,434,521.07, the amount which, according to PNBs brief aforequoted, was its deficiency claim as of August 8, 1974
ballooned to P3,366,546.42 in practically over a year and a half only is not disclosed in the record.

2. Somewhere in the record, however, PNB claims that the last day for redemption was March 10, 1976, since the date of
registration was March 11, 1975, which is the date mentioned in the decision of the trial court.
3. We do not need further clarification from the parties because even following the data most favorable to appellant, We
consider Ourselves adequately prepared to render a just decision.
4. Although, there could be a legal problem in this regard, albeit inconsequential in this case. While Section 6 of Act 3135
speaks of one year, Section 465 of the Code of Civil Procedure, now Section 30 of Rule 39, limits the period to twelve
months, which under the Civil Code (Article 13) should he counted only as 360 days on the basis of 30 days a month.
However, We do not believe it essential in this case to resolve any point in connection with this conflict of periods, because
even if the period were to be deemed as 360 days, the proper tender of redemption here was made on March 5, 1976, the
360th day.
5. Leticia Cos substitution for CITADEL was approved by this Court in its resolution of December 15, 1980.
6. Presumably knowing the property to be worth much more than P3M, the bid was only P1,363,000.00.
7. The bank could have bidded the full amount of the indebtedness, there being indications it was worth at least that much.
(It is a 4,000 square-meter lot on Pasong Tamo very close to Buendia Avenue with considerable improvements existing
thereon.)

FIRST DIVISION
[G.R. No. 9806. January 19, 1916. ]
LEONIDES LOPEZ LISO, Plaintiff-Appellee, v. MANUEL TAMBUNTING, Defendant-Appellant.
Silvestre Apacible for Appellant.
Gibbs, McDonough & Blanco for Appellee.
SYLLABUS
1. EVIDENCE; PRESUMPTION; RECEIPT AS PROOF OF PAYMENT. Number 8 of section 334 of the Code of Civil Procedure
provides, as a legal presumption, "that an obligation delivered up to the debtor has been paid;" article 1188 of the Civil Code
prescribes that the voluntary surrender, by a creditor to his debtor, of a private instrument proving a credit, implies the
renunciation of his right of action against the debtor; and article 1189 of the same Code likewise prescribes that whenever
the private instrument which evidences the debt is in the possession of the debtor it shall be presumed that the creditor
delivered it of his own free will. Nevertheless, pursuant to the last cited article, this presumption cannot stand, when from
the evidence it appears that the evidence of the obligation was not returned to the debtor, but was sent to him solely for the
purpose of collecting the debt, and that the creditors purpose was not to leave the instrument evidencing the credit in the
possession of the debtor, if the latter did not forthwith pay the amount mentioned therein.

DECISION

ARAULLO, J. :

These proceedings were brought to recover from the defendant the sum of P2,000, amount of the fees, which, according to
the complaint, are owing for professional medical services rendered by the plaintiff to a daughter of the defendant from
March 10 to July 15, 1913, which fees the defendant refused to pay, notwithstanding the demands therefor made upon him
by the plaintiff.
The defendant denied the allegations of the complaint, and furthermore alleged that the obligation which the plaintiff
endeavored to compel him to fulfill was already extinguished.
The Court of First Instance of Manila, after hearing the evidence introduced by both parties, rendered judgment on December
17, 1913, ordering the defendant to pay to the plaintiff the sum of P700, without express finding as to costs. The defendant,
after entering a motion for a new trial, which was denied, appealed from said judgment and forwarded to this court the
proper bill of exceptions.
The first question raised by this appeal relates to the amount or value of the fees which the defendant was ordered to pay.
In the judgment appealed from, the medical services rendered by the plaintiff to the defendants daughter are given in detail,
in accordance with the statement Exhibit A, presented by the plaintiff. The latter claimed the sum of P2,000 as the
reasonable value of his services. The court, after discussing the matter of the service rendered and after taking into account
that the plaintiff, as soon as he had finished rendering them, asked for compensation in the sum of P700 only, and
furthermore, holding that it was in no wise proven that, because said amount was not paid the plaintiff was entitled to
recover from the defendant, by means of these proceedings, the sum of P2,000, held that the reasonable value of said
services could only be worth said P700. We agree with this finding of the trial court.
The second question raised by this appeal involves the question of whether the defendant has really paid the plaintiff, as he
claims to have done, the sum of P700 before mentioned, that is, whether the obligation alleged in the complaint has already
been extinguished.
The receipt signed by the plaintiff, for P700, the amount of his fees he endeavored to collect from the defendant after he had
finished rendering the services in question (which receipt was presented by the defendant at the trial as (Exhibit 1) was in
the latters possession, and this fact was alleged by him as proof that he had already paid said fees to the plaintiff.
With respect to this point, and as the trial court very correctly said in the judgment appealed from, the testimony given by

both the plaintiff and the defendant, as well as by their respective witnesses, is entirely contradictory.
The court, after hearing the testimony, reached the conclusion that, notwithstanding that the defendant was in possession of
the receipt, the said P700 had not been paid to the plaintiff.
After a careful examination of the evidence we find no reason whatever for changing or modifying this finding of the court
below. The trial judge had the plaintiff and the defendant and their witnesses before him, he heard them make their
respective statement and was in a position to know which of them was telling the truth and to determine on which side the
preponderance of the evidence lay.
It is true that number 8 of section 334 of the Code of Civil Procedure provides as a legal presumption "that an obligation
delivered up to the debtor has been paid." Article 1188 of the Civil Code also provides that the voluntary surrender by a
creditor to his debtor, of a private instrument proving a credit, implies the renunciation of the right of action against the
debtor; and article 1189 prescribes that whenever the private instrument which evidences the debt is in the possession of the
debtor, it will be presumed that the creditor delivered it of his own free will, unless the contrary is proven.
But the legal presumption established by the foregoing provisions of law cannot stand if sufficient proof is adduced against it.
In the case at bar the trial court correctly held that there was sufficient evidence to the contrary, in view of the
preponderance thereof in favor of the plaintiff and of the circumstances connected with the defendants possession of said
receipt Exhibit 1. Furthermore, in order that such a presumption may be taken into account, it is necessary, as stated in the
laws cited, that the evidence of the obligation be delivered up to the debtor and that the delivery of the instrument proving
the credit be made voluntarily by the creditor to the debtor. In the present case, it cannot be said that these circumstances
concurred, inasmuch as when the plaintiff sent the receipt to the defendant for the purpose of collecting his fee, it was not
his intention that that document should remain in the possession of the defendant if the latter did not forthwith pay the
amount specified therein.
By reason of the foregoing, we affirm the judgment appealed from, with the costs of this instance against the Appellant. So
ordered.
Arellano, C.J., Torres, Johnson, Moreland, and Trent, JJ., concur.

SECOND DIVISION
[G.R. No. L-793. April 27, 1949.]
FELISA R. PAEZ ET AL., Plaintiffs-Appellants, v. FRANCISCO MAGNO, Defendant-Appellee.
V. M. Fortich Zerda and Buenaventura Evangelista for Appellants.
Juan S. Rustia for Appellee.
SYLLABUS
1. OBLIGATION AND CONTRACT; PAYMENT; TENDER OF PAYMENT WITHOUT CONSIGNATION, EFFECT OF. "If a creditor to
whom tender of payment has been should refuse without reason to accept it, the debtor may relieve himself of the liability by
the deposit (consignacion) of the thing due." According to article 1177, "in order that the deposit (consignacion) of the thing
due may release the obligor, previous notice thereof must be given to the persons interested in the performance of the
obligation. And the consignation shall be made, according to article 1178, "by delivery to a judicial authority of the things
due, accompanied by proof of tender, when required, and of notice of the deposit in other cases."
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2. ID.; ID.; TENDER OF PAYMENT IS SUFFICIENT TO COMPEL REDEMPTION BUT IS NOT IN ITSELF A PAYMENT. Tender
does not in itself relieve the vendor from his obligation to pay the price when redemption is allowed by the court. In other
words, tender of payment is sufficient to compel redemption but is not in itself a payment that relieves the vendor from his
liability to pay the redemption price.

DECISION

MORAN, C.J. :

On October 1943, plaintiffs and appellants borrowed from defendant and appellee P4,000 in Japanese Military notes, with the
promise to pay within a period of five years. As a security, a parcel of land was mortgaged in favor of the creditor. On
September 1944, payment of this debt was offered and tendered, but was rejected by the creditor. For that reason, an action
was filed on November 18, 1945 asking that the obligation be declared as already paid and the deed of mortgage be
cancelled. Defendant filed a motion to dismiss upon the ground that plaintiffs have no cause of action, there being no
allegation that the thing due was consigned in court, as provided by law. The motion was granted, hence, this appeal by the
plaintiffs.
The order of dismissal is correct. Article 1176 of the Civil Code provides that "if a creditor to whom tender of payment has
been made should refuse without reason to accept it, the debtor may relieve himself of the liability by the deposit
(consignacion) of the thing due." According to article 1177, "in order that the deposit (consignacion) of the thing due may
release the obligor, previous notice thereof must be given to the persons interested in the performance of the obligation."
And the consignation shall be made, according to article 1178, "by delivery to a judicial authority of the things due,
accompanied by proof of tender, when required, and of notice of the deposit in other cases."
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In the complaint, there is no allegation that the amount of debt was consigned in court after tender of payment had been
made and rejected. Therefore, the debtor is not relieved of his liability.
The rule regarding payment of redemption prices is invoked. True that consignation of the redemption price is not necessary
in order that the vendor may compel the vendee to allow the repurchase within the time provided by law or by contract.
(Rosales v. Reyes and Ordoveza, 25 Phil., 495.) We have held that in such cases a mere tender of payment is enough, if
made on time, as a basis for action against the vendee to compel him to resell. But that tender does not in itself relieve the
vendor from his obligation to pay the price when redemption is allowed by the court. In other words, tender of payment is
sufficient to compel redemption but is not in itself a payment that relieves the vendor from his liability to pay the redemption
price.
From all the foregoing, the order appealed from is affirmed, with costs against plaintiffs and appellants.
Paras, Feria, Pablo, Perfecto, Bengzon, Briones, Tuason, Montemayor, and Reyes, JJ., concur.

FIRST DIVISION
[G.R. No. L-13783. May 18, 1960.]
FRANCISCO CAPALUNGAN, plaintiff and appellee, v. FULGENCIO MEDRANO, defendant andAppellant.
Conrado Rubio for Appellee.
Ruiz, Ruiz, Ruiz & Ruiz for Appellant.

SYLLABUS

1. JUDGMENTS; EXECUTION; WHEN IT IS IMPROPER. Since in the case at bar the Court of Appeals did not order appellant
to do anything for or to pay any amount to appellee, but merely specified the nature of the contract between the parties and
defined their rights, thereunder, there was nothing to be executed under said decision, and it was error for the lower court to
direct appellee to ask for the execution thereof.
2. OBLIGATIONS AND CONTRACTS; PAYMENT; TENDER OF PAYMENT AND FAILURE OF CONSIGNATION; EFFECT ON RIGHT
OF CREDITOR OVER THE PROPERTY MORTGAGED. One of the modes by which an obligation is extinguished is tender to
payment and consignation, which is a kind of payment. If the creditor to whom tender of payment has been made refuses
without just cause to accept it, the debtor shall be released from responsibility by the consignation of the thing due. Where
there is a failure to consign with the court, the indebtedness is not discharged and the effects of payment cannot take place.
Hence, the creditor has the right to enjoy the property mortgaged to secure the indebtedness, and he cannot be made liable
to the debtor for the fruits he may have received from the time tender of payment was made or for any other damage which
may have resulted from his non-acceptance of the proffer of payment. He would have been liable only from the moment valid
consignation had been made.
3. ID.; ID.; DISTINCTION BETWEEN MORTGAGE DEBTOR REDEEMING THE PROPERTY AND VENDOR A RETRO
REPURCHASING THE PROPERTY. The distinction between the case of a mortgage debtor attempting to redeem the
mortgaged property and the cases of the legal redemptioner and the vendor a retro trying to repurchase the property, is that
in the first case, the mortgage debtor is discharging an obligation, while in the latter two cases, the legal redemptioner and
the vendor a retro are exercising a privilege. So, in order to preserve their right, all the latter two have to do is to tender
payment within the prescribed period. Should the repurchase price be refused, they do not have to effectuate consignation,
whereas with respect to debts, tender of payment without consignation does not constitute valid payment.

DECISION

GUTIERREZ DAVID, J.:

This is an appeal by defendant Fulgencio Medrano from a decision of the Court of First Instance of Ilocos Norte.
On May 3, 1931, Francisco Capalungan executed in favor of Fulgencio Medrano a deed denominated "compraventa con pacto
de retro" whereby he transferred to the latter for P1,200.00 a parcel of land in San Laureano, No. 18, Dingras, Ilocos Norte,
with right to repurchase within ten years from the sale. The contract provided further that the vendee a retro shall have no
right to dispose of the land while the contract was in force but would only have the right to enjoy possession thereof. On
January 31, 1933, Francisco Capalungan executed in favor of Pedro Medrano a deed over another parcel of land in the same
sitio, which deed was similarly denominated and contained substantially the same provisions as the first mentioned contract.
On May 22, 1944, Francisco Capalungan paid and delivered to Pedro Medrano the total sum of P1,800.00 for the redemption
and/or repurchase of the two parcels of land subject matter of the two deeds.
Fulgencio and Pedro Medrano then filed in the Court of First Instance of Ilocos Norte a suit against Francisco and Paciano
Capalungan to annul the repurchase of the lands made from Pedro Medrano and to secure judgment declaring that Francisco
Capalungan has lost the right to repurchase said lands, and that ownership over them had been consolidated in the plaintiffs.
The trial court, after finding the two contracts to be equitable mortgages, declared valid the redemption of the land
mortgaged to Pedro Medrano and invalid the redemption of the land mortgaged to Fulgencio Medrano, ordered the
defendants to receive from the clerk of court the redemption price of P1,200.00 deposited there by Fulgencio Medrano and

ordered Pedro Medrano to receive from the clerk of court the redemption price of P600.00 he had deposited there, and to
deliver to defendants possession of the land redeemed from him. On appeal, the Court of Appeals affirmed the lower courts
decision.
On June 23, 1954, Francisco Capalungan filed in the same court, Court of First Instance of Ilocos Norte, the present action
against Fulgencio Medrano, alleging substantially the facts outlined above, and further averring that he tried to redeem the
land from defendant by tendering the sum of P1,200.00 but defendant refused to accept it and to execute the corresponding
deed of redemption; and therefore prayed that defendant be ordered to receive said amount from plaintiff and to execute the
proper deed of release; to deliver to plaintiff the palay he received for the agricultural year 1953-1954 and all other palay he
may have received from that time until actual execution of the deed of release; and to pay plaintiff P2,500.00 as actual and
moral damages resulting from his unwarranted refusal. After trial, the lower court ordered defendant to give plaintiff 10 1/2
uyones of palay or their total value in the amount of P577.50; and to pay moral damages of P100.00 and the costs. The court
subsequently amended its decision by ordering plaintiff "to ask for the issuance of the corresponding writ of execution for the
satisfaction of the decision of the Court of Appeals rendered in Civil Case No. 235."
Defendant Fulgencio Medrano appealed to this Court, alleging that the lower court erred (1) in ordering appellee to ask for
the issuance of a writ of execution for the satisfaction of the decision of the Court of Appeals in Civil Case No. 235; (2) in
concluding that appellant was not justified in refusing the offer of payment; (3) in not finding that the redemption price
should be P1,205.50 and not P1,200.00 only; and (4) in ordering appellant to deliver to appellee 10 1/2 uyones of palay and
moral damages in the amount of P100.00.
As declared in the appellate courts decision in Civil Case No. 235, the contract between the parties is an equitable mortgage.
Appellee still owes appellant the sum of P1,200.00, which indebtedness is secured by the mortgage on the property of
appellee located in San Laureano, No. 18, Dingras, Ilocos Norte. The decision of the Court of Appeals did not order appellant
to do anything for or to pay any amount to appellee. It merely specified the nature of the contract between the parties and
defined their rights thereunder. Consequently, there was nothing to be executed under said decision, and the lower court
erred in directing appellee to ask for execution thereof.
Under the contract, appellee is still under obligation to pay the indebtedness of P1,200.00. One of the modes by which an
obligation is extinguished is tender of payment and consignation. This is a kind of payment. In May, 1953, appellee
personally approached appellant and offered to pay him the sum of P1,200.00, but the latter refused to accept the money. If
the creditor to whom tender of payment has been made refused without just cause to accept it, the debtor shall be released
from responsibility by the consignation of the thing due (Article 1256, N.C.C.) . Inasmuch as appellee never consigned the
sum due with the court, payment was never effected.
The contract expressly provided that the mortgage creditor, the appellant, has the right to possess the land and to enjoy the
fruits thereof, as long as the sum of P1,200.00 has not been paid to him. Consignation not having been made, the
indebtedness was not discharged and the effects of payment cannot take place. Hence appellant still has the right to enjoy
the property, and he cannot be made liable to appellee for the fruits he may have received from the time tender of payment
was made. Neither can he be made liable for other kinds of damages which may have resulted from his non-acceptance of
the proffer of payment. He would have been liable only from the moment valid consignation had been made.
We have to distinguish the case of a mortgage debtor attempting to redeem the mortgaged property, from the cases of the
legal redemptioner and the vendor a retro trying to repurchase the property. In the first case, the mortgage debtor is
discharging an obligation. In the latter two cases, the legal redemptioner and the vendor a retro are exercising a privilege.
So, in order to preserve their right, all they have to do is to tender payment within the prescribed period. Should the
repurchase price be refused, they do not have the effectuate consignation. [De Jesus v. Garcia (CA), 47 Off. Gaz. 2406;
Rosales v. Reyes, 25 Phil. 495], whereas with respect to debts, tender of payment without consignation does not constitute
valid payment (Paez v. Magno, 83 Phil., 104, 46 Off. Gaz. 5425).
There is no basis for appellants contention that appellee should pay him P1,205.50, the P5.50 representing the expenses
incurred by reason of the execution of the deed. The contract indeed provides that appellee should pay for such expenses.
And it is also true that the record discloses that said sum of P5.50 was spent for registering the document in the registry of
deeds. However, there is no showing that it was appellant who paid for the same, so we cannot order appellee to reimburse
him therefore.
Wherefore, the appealed decision is hereby modified. Appellant does not have to pay damages nor does he have to deliver to
appellee the products he received from the time payment was tendered. He is ordered, however, to accept payment and to
execute the proper release paper upon payment to him by appellee of the sum of P1,200.00. Without costs.
Paras, C.J., Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, and Barrera, JJ., concur.

SECOND DIVISION
[G.R. No. L-48448. February 20, 1984.]
CRESENCIO, MAGIN, JUANITO, SOCRATES, and IMELDA, all surnamed VELEZ, Petitioners, v. HON. CELSO
AVELINO, Presiding Judge, CFI Cebu Branch XIII, ALDING ACEDERA, FABIANA ALLISON, RAFAEL ALQUISALAS,
VICTOR ALFAFARA, FORTUNATO BARGAYO, NATIVIDAD BAJARIAS, ELISEO BELARMA, MAURA BELARMA, VIDAL
BUSTAMANTE, MARCIAL BURGOS, MAXIMO CABAHUG, FLORO COROCOTO, HILARIO GAVIOLA, ROSITA GARCIA,
LEOPOLDO LINES, MAGDALENA TESORO, RAMON TEJANO, PLACIDA TEJANO, JUANITA VERGARA, and AMBROSIO
VILLACES, Respondents.
E. P. Gabriel, Jr., for Petitioners.
Pedro L. Albino for Private Respondents.

SYLLABUS

1. CIVIL LAW; PROPERTY; ACCION PUBLICIANA; NATURE THEREOF AS DIFFERENTIATED FROM FORCIBLE ENTRY AND
UNLAWFUL DETAINER; CASE AT BAR. Whether or not respondent Judge acted with grave abuse of discretion must be
resolved in the affirmative. It should be recalled that this is a case of accion publiciana, the purpose of which is being to
establish who have a better right to possess. (Bernabe, Et. Al. v. Judge Dayrit, Et Al., G.R. No. 58399, Oct. 27, 1983). There
is no allegation of forcible entry in the complaint. Neither is it a case of unlawful detainer because the preponderance of
evidence shows that the occupancy of private respondents on the lot in question is due to the tolerance of the owners thereof
and against the latters will. Private respondents admit that they have no written contract of lease with the petitioners not
with petitioners predecessor in interest. Only Marcial Burgos alleged that he had an oral agreement with Rodrigo Velez, all
others surprisingly failed to testify that they had such an oral agreement of lease. They likewise admit that their houses were
constructed without building permits. In the true sense of the word, respondents are squatters. As such, their possession is
by tolerance. (Pangilinan v. Aguilar, 43 SCRA 136). Although respondents had been paying nominal rentals ranging from
P4.00 to P12.00 per month for some time, they did not thereby acquire the legal status of tenants. Squatting is unlawful and
no amount of acquiescence converts it into a lawful act. Illegal constructions constitute public nuisance per se. They pose
problems of health and sanitation. (Cf. City of Manila v. Garcia, Et Al., 19 SCRA 413).
2. ID.; LEASE; EJECTMENT UNDER PRESIDENTIAL DECREE NO. 20; NONPAYMENT OF RENTAL, A GROUND THEREFOR; CASE
AT BAR. Even if the case were to be decided as an ejectment case, the insistence of respondents that they are lessees
and, therefore, under the protective mantle of Presidential Decree No. 20 loses ground when We consider the finding of fact
that respondents had not been paying any consideration for the occupancy of their respective premises. Said Presidential
Decree No. 20 suspended ejectment when the lease is for an indefinite period. It did not suspend ejectment on other grounds
like lack of payment of the rental stipulated.
3. ID.; ID.; ID.; ID.; REMEDY OF LESSEES WHEN OWNERS OF LOT FAIL TO COLLECT OR REFUSE TO ACCEPT RENTALS.
The failure of the owners to collect, or their refusal to accept the rentals are not valid defenses. Article 1256 of the Civil Code
provides that "if the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor
shall be released from responsibility by the consignation of the thing or sum due."
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4. ID.; ID.; ID.; NEED OF OWNER/LESSOR TO REPOSSESS PROPERTY FOR HIS OWN USE OR FOR THE USE OF ANY MEMBER
OF HIS FAMILY AS A RESIDENTIAL UNIT, A GROUND THEREFOR; CASE AT BAR. The petitioners need of the premises for
their own use or for the use of any member of his family as a residential unit entitles them to the possession of the lots in
question. Batas Pambansa Blg. 25, which took effect on April 10, 1979, provides as additional ground for judicial ejectment
the need of the owner/lessor to repossess his property for his own use or for the use of any member of his family as a
residential unit, such owner or immediate member not being the owner of any other available residential unit.

DECISION

GUERRERO, J.:

This is a petition for certiorari filed by Cresencio, Magin, Juanito, Socrates and Imelda, all surnamed Velez, seeking the
reversal, for grave abuse of discretion, the decision dated May 22, 1978 of the Court of First Instance of Cebu, Branch XIII
dismissing their complaint for recovery of possession of five parcels of land pursuant to Presidential Decree No. 20.
The evidence shows that the five parcels of land all located at Katipunan Street, Cebu City, then assessed at P17,000.00 and
known as Lots 5311-A-2-A, 5311-A-2-B, 5311-A-2-C, 5311-A-2-D and 5311-A-2-F, were formerly owned by Rodrigo Velez,
the father of petitioners. In an extrajudicial partition, the said lots were adjudicated to petitioners herein on June 16, 1970.
As early as 1970, petitioners made a demand to vacate upon respondents who asked an extension of one year but thereafter,
respondents changed their minds and refused to vacate. Around the end of 1973, petitioners again advised respondents that
they needed the premises for their own use and ordered them to vacate the premises by removing their dwelling units from
the lots. Upon their refusal, petitioners filed an ejectment case before the City Court of Cebu, which case was docketed as
Civil Case No. R-17011. On motion of respondents, the City Court dismissed the case without prejudice in an Order dated
August 3, 1974 on the ground that there exists no cause of action, following the suspension of judicial ejectment by
Presidential Decree No. 20. On July 3, 1976, petitioners made again an extrajudicial demand in a letter which required
respondents to vacate the premises within 15 days at the same time threatening them with prosecution under Presidential
Decree No. 772 for the crime of squatting. On August 5, 1976, petitioners filed the complaint for recovery of possession of
the aforesaid five parcels of land alleging that except for Magin Velez, they have no other lot of their own and are living on
other persons premises; that respondents are not only occupying the premises but also accepting boarders and/or using the
same for commercial purposes and that several demands have been made to give way to the needs of petitioners and their
respective families but respondents maliciously, abusively and defiantly refused to accede to petitioners lawful demands.
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In their answer, respondents admitted the ownership of the land by petitioners. But in their special and affirmative defenses,
they alleged that they have been occupying portions of the lots by virtue of oral agreements of lease for an indefinite period,
paying monthly rentals for their respective portions ranging from P4.00 to P12.00; that the present action is barred by res
judicata and or prior judgment and that the present action, if at all there is any cause of action, is essentially one for
unlawful detainer since the last demand to vacate was made less than a year ago.
Eight of the twenty respondents testified that they are the original occupants of the lots while two of them, Segundo Macatol
and Hilario Gaviola, claimed to have bought their houses from third persons with the understanding that they should pay
rentals to the landowner, Rodrigo Velez. They also testified that they have been paying rentals for their respective portions
ranging from P4.00 to P12.00. In support of their claim of payment of rentals, at least six of them presented one or two
receipts dated 1973 or earlier (Exhibits 2, 2-A to 2-I) and claimed that other receipts were lost. But all respondents admitted
not having paid rentals since 1973, some reasoning out that nobody collected and others claiming that Fabiola Velez
Garganera, Rodrigo Velez daughter, refused to accept their rentals. At least one of them, Hilario Gaviola, produced what he
claimed as a building permit but the same turned out to be a mere application.
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After the case was submitted for decision, the trial court ruled:

jgc:chanrobles.com .ph

"It appearing that the defendants are lessees of the portions of the land in question wherein their respective dwelling units
are erected, personal use by the plaintiffs and/or then families of the said land, cannot be a valid ground for judicial
ejectment of the former, pursuant to Presidential Decree No. 20, issued by the President on March 15, 1977." (sic, should be
October 12, 1972). (Decision of the CFI, p. 5; Rollo, p. 30).
On the ground that respondent Judge of the Court of First Instance of Cebu acted with grave abuse of discretion in the
exercise of his judicial functions by holding that private respondents are lessees and, therefore, privileged to continue staying
on the lots in question pursuant to Presidential Decree No. 20, the plaintiffs below brought this instant petition for certiorari.
Petitioners contend that the preponderance of evidence shows that the occupancy of private respondents on the lots in
question is due to the tolerance of the owners thereof and against the latters will.
Conceding that respondents are lessees, petitioners claim that Presidential Decree No. 20 does not mean that (1) they are
freed from paying rentals for the lots in question; (2) they can use the lots for commercial purposes; and (3) they can refuse
to adduce evidence specifically referring to the twelve respondents who did not testify on their behalf.
In answer to the argument of respondents that they are willing to pay rentals if petitioners send collectors, petitioners cite
Article 1256 of the Civil Code where mere willingness to pay is not payment, thus:
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"Art. 1256. If the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor
shall be released from responsibility by the consignation of the thing or sum due."
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Petitioners also claim that they had presented evidence that some respondents, particularly Natividad Bajaras, Maura
Belarma and Placida Tejano, are using the premises not only as residences but also stores while Alding Acedera is using her
residence as a boarding house, thereby removing said respondents from the protective mantle of Presidential Decree No. 20.
Finally, petitioners invoke the equal protection rights guaranteed by the Constitution contending that respondent Judges
undue application of Presidential Decree No. 20 in spite of the undisputed fact that petitioners have no other lot of their own
and are renting other peoples properties, except Magin Velez (who nevertheless wants to recover his property for the use of
one of his children who is married), constitutes a denial of said constitutional provision.
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Whether or not respondent Judge acted with grave abuse of discretion must be resolved in the affirmative. It should be
recalled that this is a case of accion publiciana, the purpose of which is being to establish who have a better right to possess.
(Bernabe, Et. Al. v. Judge Dayrit, Et Al., G.R. No. 58399, Oct. 27, 1983). There is no allegation of forcible entry in the
complaint. Neither is it a case of unlawful detainer because the preponderance of evidence shows that the occupancy of
private respondents on the lot in question is due to the tolerance of the owners thereof and against the latters will. Private
respondents admit that they have no written contract of lease with the petitioners not with petitioners predecessor in
interest. Only Marcial Burgos alleged that he had an oral agreement with Rodrigo Velez, all others surprisingly failed to testify
that they had such an oral agreement of lease. They likewise admit that their houses were constructed without building
permits. In the true sense of the word, respondents are squatters. As such, their possession is by tolerance. (Pangilinan v.
Aguilar, 43 SCRA 136). Although respondents had been paying nominal rentals ranging from P4.00 to P12.00 per month for
some time, they did not thereby acquire the legal status of tenants. Squatting is unlawful and no amount of acquiescence
converts it into a lawful act. Illegal constructions constitute public nuisance per se. They pose problems of health and
sanitation. (Cf. City of Manila v. Garcia, Et Al., 19 SCRA 413).
Even if the case were to be decided as an ejectment case, the insistence of respondents that they are lessees and, therefore,
under the protective mantle of Presidential Decree No. 20 loses ground when We consider the finding of fact that respondents
had not been paying any consideration for the occupancy of their respective premises. Said Presidential Decree No. 20
suspended ejectment when the lease is for an indefinite period. It did not suspend ejectment on other grounds like lack of
payment of the rental stipulated.
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The failure of the owners to collect, or their refusal to accept the rentals are not valid defenses. Article 1256 of the Civil Code
provides that "if the creditor to whom tender of payment has been made refuses without just cause to accept it, the debtor
shall be released from responsibility by the consignation of the thing or sum due."
cralaw virtua1aw library

Independently of the foregoing, the petitioners need of the premises for their own use or for the use of any member of his
family as a residential unit entitles them to the possession of the lots in question. Batas Pambansa Blg. 25, which took effect
on April 10, 1979, provides as additional ground for judicial ejectment the need of the owner/lessor to repossess his property
for his own use or for the use of any member of his family as a residential unit, such owner or immediate member not being
the owner of any other available residential unit.
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Even before the effectivity of Batas Pambansa Blg. 25, Presidential Decree No. 20 had been held to be not without exception.
In Ongchengco v. City Court of Zamboanga, 95 SCRA 313, this Court ruled that "extreme necessity for personal use of the
property entitles the owner to exemption from the operation of PD 20 which suspends the provision of Article 1673 of the
Civil Code on judicial ejectment." The case of Betts v. Matias, 97 SCRA 439, reaffirmed that "Presidential Decree No. 20 does
not sanction the deprivation of a lessor of residential property in extreme need of the leased premises for his own use of his
right to terminate the lease and recover possession of his property." Then, in Sinclair v. Court of Appeals, 115 SCRA 318, this
Court held that "a strict and rigid compliance with Presidential Decree No. 20 is not in order, for an exemption from its
provisions is warranted for humanitarian reasons." Again, in Tan Tok Lee v. CFI of Kaloocan City, 121 SCRA 438, this Court
said that "petitioners reliance on the provision of Presidential Decree No. 20 is not well taken. It could not have been the
intention of the said decree to deprive the owner of the rightful use of her home, more so, when petitioners reneged on their
promise to look for another house in the mistaken belief that PD 20 gave them a preferential right over that of the owner. To
deny the owner of the use and possession of her property would be tantamount to depriving her of her constitutional right to
abode." In Rantael v. Court of Appeals, Et Al., 97 SCRA 453, this Court upheld the right of the lessor to judicially eject the
lessee on the ground not only that "expiration of period of written lease contract is manifestly present" but also because
Batas Pambansa Blg. 25 which superseded P.D. 20 "buttresses the right of respondent Llave to judicially eject petitioner
Rantael from the leased premises." In Santos v. Court of Appeals and Paraguas, G.R. No. L-45071, May 30, 1983, this Court
held that "the retroactive application of Batas Pambansa Blg. 25 to pending ejectment cases is already a settled matter and
may no longer be questioned. (Alejandro Melchor, Jr., etc. v. Hon. Jose L. Morja, etc., Et Al., G.R. No. L-35256, March 17,
1983; Gutierrez v. Cantada, 90 SCRA 1; Ongchengco v. City Court of Zamboanga, 95 SCRA 313; Betts v. Matias, 97 SCRA
439). It was also held therein that "the right of the private respondents over the property which they own in order to use the
same as their residence, not being owners of any other dwelling place, may not be denied. Such right is expressly recognized
by Batas Pambansa Blg. 25. Elemental sense of justice and fairness dictates that it must be so."
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WHEREFORE, the petition for certiorari is granted. The decision of the defunct Court of First Instance of Cebu, Branch XIII,
dismissing the complaint of petitioners, is hereby REVERSED and SET ASIDE. A new judgment is hereby entered in favor of
petitioners, ordering respondents to vacate the premises in question and to remove their respective constructions and/or
improvements therefrom within sixty (60) days from notice.
SO ORDERED.
Makasiar (Chairman), Aquino, Concepcion, Jr., Abad Santos, De Castro and Escolin, JJ., concur.