BIR Ruling [DA-114-01]

June 20, 2001 BIR RULING [DA-114-01] Ruling 177-99 The International Commercial Bank of China 3/F Pacific Star Building Sen. Gil Puyat Ave., cor. Makati Avenue Makati City Attention: Mr . Bonnie S . Santos Deputy Manager Gentlemen : This refers to your letter dated June 1, 2000 requesting for a clarificatory ruling that the "One Year Redemption Period" provided in Section 6 of Act No. 3135, as amended by Act No. 4118, in relation to Revenue Regulations No. 4-99, shall be reckoned from the date of the issuance of the Certificate of Sale or the Registration of the said Certificate of Sale with the Registry of Deeds. It is represented that on June 10, 1997, a Deed of Mortgage was executed by Spouses Rolando Valdez Palaypay and Dyna S. Karasig Palaypay (Spouses Palaypay) in favor of International Commercial Bank of China (ICBC), a foreign commercial banking corporation duly licensed to do business in the Philippines, involving a parcel of land together with the improvements thereon covered by TCT No. RT-113093 (249975) and containing an area of 400 square meters, to secure the loans and other credit accommodations obtained from the latter; that for failure of the Spouses Palaypay to settle their obligation, on April 8, 1999, the said property was sold at public auction to the highest bidder, Integrated Credit and Corporate Services, an assignee of ICBC, for the sum of P1,350,000.00; that Atty. Josephine C. Caranzo-Olivar, a notary public for and in Quezon City, executed a Certificate of Sale in favor of Integrated Credit and Corporate Services, subject to the right of redemption within the period provided for by law; that on May 21, 1999, the said Certificate of Sale was registered with the Registry of Deeds; and that on May 22, 2000, both the capital gains tax and the corresponding documentary stamp tax were paid by ICBC in the respective amounts of P81,000.00 and P20,250.00 as evidenced by Official Receipt Nos. 36904 and 36903 duly issued by RCBC, Makati City. In reply thereto, please be informed that in BIR Ruling No. 177-99 dated November 17, 1999, this Office has already occasioned to rule on the matter, when it said that "xxx xxx xxx "(1) In extra-judicial foreclosure of mortgage under Act No. 3135, as amended, the mortgagor has the right to redeem the property within one year from the date of sale. The date of sale has been construed to mean the date of registration of the certificate of sale in the Registry of Deeds. (Santos vs. Register of Deeds of Manila, L-26752, March 19, 1971; Reyes vs. Tolentino et al., L-29142, November 29, 1971) "xxx xxx xxx "Thus, the counting of the one year period of redemption in the case of an extra-judicial foreclosure of mortgage under Section 6 of Act No. 3135, as amended, as well as judicial and extra-judicial foreclosure of mortgage by banks, finance and insurance companies shall be the date of the registration of the certificate of sale in the Registry of Deeds. ATCEIc "xxx xxx xxx" The above-cited ruling is in line with the numerous decisions of the Supreme Court, not to mention the case of Bernardez vs. Reyes G.R. No. 71832, September 24, 1991 where the Court held that "Well-settled is the rule that where a mortgage is foreclosed extra-judicially. Act 3135 grants to the mortgage the right of redemption within one (1) year from the registration of the sheriff's certificate of foreclosure sale . . . The statutory period of redemption counted from the registration of the Certificate of Sale remains fixed at one year from the date of registration of the certificate of foreclosure sale . . ." Thus, the one-year redemption period will start from the date of registration of the certificate of sale with the Registry of Decision May 21, 1999 and not from the issuance of the certificate of sale on April 8, 1999 because it is only then that the certificate of sale takes effect as a conveyance and therefore since ICBC paid the capital gains tax and the documentary stamp tax on May 22, 2000, ICBC is no longer liable to the payment of the surcharge, penalties and interest assessed by the BIR examiner. Very truly yours, Commissioner of Internal Revenue By: (SGD.) EDMUNDO P. GUEVARA Deputy Commissioner Legal and Inspection Group