The Supreme Court has clarified that heirs cannot claim co-ownership of a property that their predecessors lost due to foreclosure and failure to redeem it within the statutory period. Once the redemption period expires, ownership consolidates with the mortgagee bank. A subsequent purchase of the property by one of the heirs from the bank is considered a new contract of sale, not an act of redemption, and does not establish co-ownership among the heirs.

From Foreclosure to Inheritance: Who Owns the Land After Redemption Rights Expire?

In this case, the Dela Peña family found themselves in a dispute over a parcel of land previously owned by their parents, Ignacio and Engracia Dela Peña. The land was mortgaged to San Fernando Rural Bank, which later foreclosed due to non-payment. After the parents passed away, some of the heirs purchased the foreclosed property from the bank, leading other heirs to claim co-ownership and demand partition. The core legal question was whether the heirs could claim co-ownership of the land, despite the previous foreclosure and the expiration of the redemption period.

The petitioners, Victoriano, Agustina, Elena, Jose, Noel and Filomena Dela Peña, argued that their parents’ debt with the San Fernando Rural Bank involved the whole family and the repurchase was to benefit all of them. The respondents, Spouses Vicente Alonzo and Ligaya Dela Peña, contended that their purchase of the property from the bank did not create co-ownership. They asserted that the original owners, Ignacio and Engracia Dela Peña, lost their rights to the property when they failed to redeem it within the prescribed period.

The Regional Trial Court (RTC) initially sided with the petitioners, stating that the bank preferred to sell the land back to all the heirs. However, the Court of Appeals reversed this decision, finding that the Spouses Dela Peña had lost all rights and interests in the property due to the foreclosure and failure to redeem it. The Supreme Court affirmed the Court of Appeals’ ruling, emphasizing the distinction between the right of redemption and equity of redemption.

The Court explained that the **equity of redemption** applies in cases of judicial foreclosure, allowing the mortgagor to redeem the property after default but before the confirmation of sale. In contrast, the right of redemption exists in extrajudicial foreclosures, granting the mortgagor a specific period (usually one year) after the sale to redeem the property. The Supreme Court found that once this period lapses, ownership is consolidated with the mortgagee, extinguishing the former owner’s rights. The Court referred to existing jurisprudence like *Top-Rate International Services, Inc. v. Intermediate Appellate Court*, which details the nature of these redemption rights.

Here, the key factor was the **Certificate of Final Sale** issued to the San Fernando Rural Bank. This document solidified the bank’s ownership of a significant portion of the land. Because the predecessors of the petitioners failed to redeem their property, at the time of their death they did not own the property and had no claim over the land. Therefore, they could not have transferred any right of ownership to their heirs. Further, any internal policies a bank uses when selling a property to a third party cannot force ownership on other people or third parties outside of the sales contract.

As it is, the transaction between the respondents and the San Fernando Rural Bank on March 25, 1992 was purely a contract of sale. The fact that the bank exercised a policy of preferring the designated ‘heirs’ of their customers does not ipso facto make the same individuals co-owners of the property.

The Supreme Court addressed the petitioners’ claim of an oral agreement for collective repurchase, noting that the Court of Appeals found no evidence to support this. According to the Court of Appeals, the respondents purchased the property from the bank on their own behalf, without representing the other heirs. Since the property already belonged to the bank and the repurchase contract was not a collective venture, the petitioners’ plea to foist co-ownership lacked merit. The Court deferred to the Court of Appeals’ factual finding, as well-established jurisprudence like *Gold Loop Properties v. Court of Appeals* recognizes the CA’s role in findings of fact.

This case clarifies that a purchase of foreclosed property after the redemption period does not automatically grant co-ownership to all heirs of the original owner. Instead, it is a new transaction, and only those involved in the purchase become the new owners.

FAQs

What was the key issue in this case?	The central issue was whether heirs could claim co-ownership of a foreclosed property purchased by some of them after the redemption period had expired.
What is the right of redemption?	The right of redemption is the right of a mortgagor to recover foreclosed property within a specific period after the sale, usually one year.
What is equity of redemption?	Equity of redemption is the right of the mortgagor in case of judicial foreclosure to redeem the mortgaged property after default in the performance of the conditions of the mortgage but before the confirmation of the sale of the mortgaged property.
When does ownership consolidate with the mortgagee?	Ownership consolidates with the mortgagee after the redemption period expires without the mortgagor redeeming the property.
Does a bank’s policy of preferring heirs create co-ownership?	No, a bank’s policy of preferring heirs does not automatically create co-ownership among them; it is simply a preference in selling the property.
What happens when a property is sold after the redemption period?	The sale of the property after the redemption period is a new contract of sale, and the buyers become the new owners, not co-owners with other heirs.
Can an oral agreement establish co-ownership in such cases?	Only if it is sufficiently proven by evidence. In this case, the court did not find sufficient basis to assume the oral contract existed and decided against the party claiming such.
Who bears the burden of establishing co-ownership?	The party claiming co-ownership bears the burden of proving its existence. They must present sufficient evidence to support their claim.

In conclusion, this case underscores the importance of understanding and acting within the prescribed legal timelines for redeeming foreclosed properties. Failing to do so results in the loss of ownership rights and prevents heirs from automatically claiming co-ownership based on familial relations alone.

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

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: VICTORIANO DELA PEÑA vs. SPOUSES VICENTE ALONZO, G.R. No. 172640, July 03, 2009