In Josefina Tando, et al. vs. Hon. Court of Appeals and Benjamin Tagle, the Supreme Court affirmed the right of a mortgagor to redeem property based on a Deed of Assignment allowing a five-year redemption period. The Court nullified subsequent deeds of sale that transferred ownership to third parties, emphasizing that the original redemption agreement must be honored. This decision protects mortgagors by ensuring their redemption rights are upheld according to the agreed terms, even if the property changes hands.

Mortgage Redemption: Can a Verbal Agreement Override a Written Deed?

The case revolves around a parcel of land originally owned by Fernando Tagle, who mortgaged it to Kalibo Rural Bank. After he failed to pay, the bank foreclosed the property. Esperanza Tando, mother of the petitioners, redeemed the land from the bank, purportedly through a Deed of Assignment of Right of Redemption from Fernando Tagle. Later, Fernando’s son, Benjamin Tagle, attempted to redeem the property from Esperanza Tando, but she refused. This led to a legal battle over the validity of the redemption and the applicable redemption period, with conflicting claims about the true agreement between the parties.

The central legal issue was whether the Deed of Assignment presented by Benjamin Tagle, which stipulated a five-year redemption period, was the authentic agreement. The petitioners argued that the redemption was based on a verbal agreement with a much shorter redemption period, while the respondent insisted on the validity of the written deed. The trial court initially sided with the petitioners, but the Court of Appeals reversed this decision, a ruling which the Supreme Court ultimately upheld.

The Supreme Court scrutinized the evidence, noting the conflict between the findings of the trial court and the Court of Appeals. The Court emphasized the significance of Esperanza Tando’s redemption of the property from Kalibo Rural Bank. It highlighted the unlikelihood that the bank would allow a stranger to the mortgage contract to redeem the property without proper written authorization. The Court quoted:

Banks are known to be strictly protective of their interests. Under no circumstance would a bank allow a stranger to a mortgage contract to redeem a foreclosed property upon a mere verbal representation of the mortgagor. The Bank will certainly require a written authority which will be attached to its records in support of the transaction.

Moreover, the testimony of Atty. Suferido Roldan, former assistant manager of Kalibo Rural Bank, supported the claim that Esperanza Tando presented written authorization from Fernando Tagle when she redeemed the property. The Court found this evidence compelling, reinforcing the validity of the Deed of Assignment.

The Supreme Court also addressed the authenticity of the Deed of Assignment presented by Benjamin Tagle. His testimony, corroborated by Araceli Gonzales and Atty. Roldan, provided a more logical and credible account of the events. The Court noted inconsistencies in the testimony of Alejo Terencio, the petitioners’ principal witness, further undermining their claim. The Court stated:

…Why should he (Fernando Tagle) agree to only a period of five (5) months to redeem it from Tando when that is the same period left for him to redeem it from the Bank? He might as well deal directly with the Bank for the remaining five (5) months and in that way still hold on to the possession and enjoyment of his property. The five-year period of redemption is the more likely period agreed upon since that logically jibes with the purpose of Tagle in extending to Tando the right of redemption in order not to lose his property to the Bank.

Building on the principle that the Deed of Assignment presented by private respondent was the authentic document, the Court affirmed the right of Benjamin Tagle to redeem the property within the agreed five-year period. The Court then addressed the issue of the annual income from the property. The Court found that as the private respondent’s right of redemption was subject to a five-year period, which had not yet expired when the complaint for redemption was initiated, the Tagles did not lose ownership over the property. Therefore, they were entitled to enjoy it, including the income derived from it. The basis of this is the Civil Code, which states:

Article 428: The owner has the right to enjoy and dispose of a thing, without other limitations than those established by law.

The owner has also a right of action against the holder and possessor of the thing in order to recover it.

The Court held that the Court of Appeals did not err in awarding the private respondent P20,000 per annum representing the income of the property from the date the petition for redemption was filed up to the final transfer of the property in his favor, noting that petitioners did not dispute the amount.

In summary, the Supreme Court’s decision underscores the importance of honoring written agreements, especially concerning redemption rights in mortgage contracts. It protects mortgagors by ensuring their right to redeem property is upheld according to the terms of the agreement, even if the property is transferred to another party. This ruling sets a precedent for future cases involving redemption rights and the enforcement of contractual agreements.

FAQs

What was the key issue in this case?	The key issue was whether the Deed of Assignment providing a five-year redemption period was the valid agreement between the parties, entitling the mortgagor to redeem the property. The Supreme Court affirmed the appellate court decision and found it was a valid agreement.
What is a Deed of Assignment of Right of Redemption?	A Deed of Assignment of Right of Redemption is a legal document where a mortgagor transfers their right to redeem a foreclosed property to another party. This allows the assignee to redeem the property from the mortgagee or the buyer in the foreclosure sale within the redemption period.
Why did the Court of Appeals reverse the trial court’s decision?	The Court of Appeals reversed the trial court because it found that the Deed of Assignment presented by the private respondent was authentic and contained the real agreement for a five-year redemption period. This invalidated the trial court’s finding that the redemption period was only five months.
What was the significance of Esperanza Tando’s redemption of the property?	Esperanza Tando’s redemption was crucial because it removed any rights the bank had over the property. This meant the subsequent deeds of sale transferring the property to the Tandos were invalid since the bank no longer had the right to sell the property.
How did the court determine the authenticity of the Deed of Assignment?	The court relied on corroborating testimonies from witnesses, including the bank’s former assistant manager and the wife of the other mortgagee. These testimonies supported the private respondent’s claim that the deed with a five-year redemption period was the actual agreement.
What is the legal basis for awarding annual income to the private respondent?	The legal basis is Article 428 of the Civil Code, which grants the owner the right to enjoy and dispose of their property, including the income derived from it. Since the private respondent’s right to redeem the property had not expired, he was entitled to the income generated from the land.
Can verbal agreements override written contracts in property redemption cases?	Generally, written contracts prevail over verbal agreements, especially in real estate transactions due to the Statute of Frauds. The court favored the written Deed of Assignment as it provided a clearer and more reliable record of the agreed-upon terms.
What practical lesson does this case offer to mortgagors?	This case illustrates the need for mortgagors to ensure redemption agreements are clearly documented in writing. This protects their rights and prevents disputes over redemption periods and other critical terms.

This ruling serves as a reminder of the importance of documenting agreements in property transactions. It clarifies that redemption rights are protected by the agreed terms and that these rights cannot be easily dismissed. It encourages parties to create clear, written records of their agreements to avoid future disputes.

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: JOSEFINA TANDO, ET AL. VS. HON. COURT OF APPEALS AND BENJAMIN TAGLE, G.R. No. 127984, December 14, 2001