ChanRobles Virtual law Library

GO TO FULL LIST OF DECISIONS and RESOLUTIONS

BPI FAMILY SAVINGS BANK, INC.,
                   Petitioner,

G.R. No. 141974
August 9, 2004

-versus-

  chanroblesvirtualawlibrary

CORONA, J.:chanroblesvirtuallawlibrary

Before us is a petition for review of the Decision[1] dated February 14, 2000 of the Court of Appeals affirming the decision of the Regional Trial Court, Branch 94, Quezon City,[2] which upheld the validity of the extra-judicial foreclosure proceedings initiated by Family Bank and Trust Company (Family Bank) on the mortgaged properties of respondent spouses Januario Antonio Veloso and Natividad Veloso but allowed the latter to redeem the same properties.

On January 8, 1983, respondent spouses obtained a loan of P1,300,000 from petitioner’s predecessor-in-interest Family Bank and Trust Company. To secure payment of the loan, respondent spouses executed in favor of the bank a deed of mortgage over three parcels of land, with improvements, registered in their names under TCT Nos. 272227, 272228 and 272229 of the Registry of Deeds of Quezon City.chanrobles virtuallaw libraryred

On February 9, 1983, respondents, for value received, executed a promissory note for P1,300,000. Subsequently, however, respondents defaulted in the monthly installments due on their loan. When efforts to update the account failed, Family Bank instituted extra-judicial foreclosure proceedings on the respondents’ mortgaged properties.cralaw:red

On July 1, 1985, the properties were sold at public auction with Family Bank as the highest bidder for P2,782,554.66.cralaw:red

On August 5, 1985, Family Bank assigned all its rights and interests in the foreclosed properties to petitioner BPI Family Bank, Inc. (BPI).cralaw:red

On August 28, 1985, the sheriff’s certificate of sale was registered with the Registry of Deeds of Quezon City.cralaw:red

On July 24, 1986, respondents, through counsel, wrote BPI offering to redeem the foreclosed properties for P1,872,935.  This was, however, rejected by petitioner.cralaw:red

On August 27, 1986, respondents filed in the RTC of  Quezon City, Branch 94, a complaint for annulment of foreclosure, with consignation and prayer for damages. On motion of respondents, the trial court, in an order dated August 27, 1986, allowed respondents to deposit with the clerk of court the sum of P1,500,000 representing the redemption price. Thereafter, trial on the merits ensued.cralaw:red

Meanwhile, in Branch 76 of the Regional Trial Court of Quezon City, BPI was able to secure a writ of possession over the foreclosed properties. This prompted respondents to file with the Court of Appeals a petition for certiorari with preliminary injunction docketed as CA-G.R. SP No. 22681. On October 8, 1990, the Court of Appeals resolved to grant respondents’ motion for preliminary mandatory injunction.chanrobles virtuallaw libraryred

Eventually, however, in a decision promulgated on May 31, 1991, the Court of Appeals, in CA-G.R. SP No. 22681, resolved the issue of possession in favor of BPI and accordingly lifted the preliminary mandatory injunction it had earlier issued, denying altogether respondents’ petition. From this decision, respondents came to this Court via a petition for review which was, however, denied in a resolution dated January 13, 1992.  The resolution affirmed, in effect, petitioner’s right to the possession of the subject properties.cralaw:red

On December 16, 1992, upon motion of respondents and despite the opposition of petitioner, Branch 94 ordered the release of P1,400,000 of the consigned amount to respondents, with the balance of P100,000 to take the place of the injunction bond to answer for whatever damages petitioner might suffer because of the issuance of the preliminary injunction (previously issued and later lifted) in favor of respondents.cralaw:red

Finally, on August 18, 1995, after almost a decade of protracted litigation, the trial court rendered a decision declaring the validity of the extra-judicial foreclosure of the mortgaged properties of respondents but allowed the redemption of the same at a redemption price of P2,140,000.cralaw:red

BPI elevated the matter to the Court of Appeals which affirmed the trial court’s decision, with modification:

WHEREFORE, subject to the modification declaring P2,678,639.80 as the redemption price due the appellant, the decision appealed from is hereby AFFIRMED in all other respects.[3]

Hence, the instant petition based on the following assigned errors:chanrobles virtuallaw libraryred

The fact is that, at the time of the foreclosure sale on  July 1, 1985, respondent spouses Veloso had already defaulted on their loan to petitioner’s predecessor-in-interest Family Bank. In a real estate mortgage, when the principal obligation is not paid when due, the mortgagee has the right to foreclose on the mortgage and to have the property seized and sold, and to apply the proceeds to the obligation.[4] Foreclosure is proper if the debtor is in default in the payment of his obligation.[5] And in this case, the validity of the extra-judicial foreclosure on July 1, 1985 was confirmed by both the trial court and the Court of Appeals. We find no reason to question it.cralaw:red

The sole question therefore that remains to be resolved is: did respondent spouses comply with all the requirements for the redemption of the subject properties?

We answer in the negative.cralaw:red

The general rule in redemption is that it is not sufficient that a person offering to redeem manifests his desire to do so. The statement of intention must be accompanied by an actual and simultaneous tender of payment. This constitutes the exercise of the right to repurchase.[6]chanrobles virtuallaw libraryred

In several cases[7] decided by the Court where the right to repurchase was held to have been properly exercised, there was an unequivocal tender of payment for the full amount of the repurchase price. Otherwise, the offer to redeem is ineffectual.[8] Bona fide redemption necessarily implies a reasonable and valid tender of the entire repurchase price, otherwise the rule on the redemption period fixed by law can easily be circumvented. As explained by this Court in Basbas vs. Entena:[9]

x x x the existence of the right of redemption operates to depress the market value of the land until the period expires, and to render that period indefinite by permitting the tenant to file a suit for redemption, with either party unable to foresee when final judgment  will terminate the action, would render nugatory the period of two years fixed by the statute for making the redemption and virtually paralyze any efforts of the landowner to realize the value of his land. No buyer can be expected to acquire it without any certainty as to the amount for which it may be redeemed, so that he can recover at least his investment in case of redemption. In the meantime, the landowner’s needs and obligations cannot be met. It is doubtful if any such result was intended by the statute, absent clear wording to that effect.cralaw:red

Consequently, in this case, the offer by respondents on July 24, 1986 to redeem the foreclosed properties for P1,872,935 and the subsequent consignation in court of P1,500,000 on August 27, 1986, while made within the period[10] of redemption, was ineffective since the amount offered and actually consigned not only did not include the interest but was in fact also way below the P2,782,554.66 paid by the highest bidder/purchaser of the properties during the auction sale.cralaw:red

In Bodiongan vs. Court of Appeals,[11] we held:

In order to effect a redemption, the judgment debtor must pay the purchaser the  redemption price composed of the following:chanrobles virtuallaw libraryred

(1) the price which the purchaser paid for the property; (2) interest of 1% per month on the purchase price; (3) the amount of any assessments or taxes which the purchaser may have paid on the property after the purchase; and (4) interest of 1% per month on such assessments and taxes x x x.cralaw:red

Furthermore, Article 1616 of the Civil Code of the Philippines provides:

The vendor cannot avail himself of the right to repurchase without returning to the vendee the price of the sale x x x.cralaw:red

It is not difficult to understand why the redemption price should either be fully offered in legal tender or else validly consigned in court. Only by such means can the auction winner be assured that the offer to redeem is being made in good faith.cralaw:red

The sum of P1,400,000 consigned by respondents in Branch 94 was subsequently withdrawn by them, leaving only P100,000 to take the place of the injunction bond. This would have been tantamount to requiring petitioner to accept payment by installments as there would have necessarily been an indefinite extension of the redemption period.[12] If a partial payment can bind the winning bidder or purchaser in an auction sale, by what rule can the payment of the balance be determined? Petitioner could not be expected to entertain an offer of redemption without any assurance that respondents could pay the repurchase price immediately. A contrary rule would leave the buyers at foreclosure sales open to harassment by expectedly angry debtors and cause unnecessary prolongation of the redemption period, contrary to the policy of the law.chanrobles virtuallaw libraryred

Whether or not respondents were diligent in asserting their willingness to pay is irrelevant. Redemption within the period allowed by law is not a matter of intent but a question of payment or valid tender of the full redemption price within said period.cralaw:red

The disposition of the instant case in the trial court unnecessarily dragged for almost a decade. Now, it is on its 18th year and still respondents have not tendered the full redemption price. Nor have they consigned the full amount, if only to prove their willingness and ability to pay. This would have evidenced their good faith.cralaw:red

The law granted respondents the right of redemption. But in so granting that right, the law intended that their offer to redeem be valid and effective, accompanied by an actual tender of the redemption price. Fixing a definite term within which the property should be redeemed is meant to avoid prolonged economic uncertainty over the ownership of the thing sold.  In the case at bar, the offer was not a legal and effective exercise of the right of redemption contemplated by law, hence, refusal of the offer by petitioner was completely justified.chanrobles virtuallaw libraryred

 Finally, respondents cannot argue that the law on equity should prevail. Equity applies only in the absence of, and never against, statutory law or judicial rules of procedure.[13]

WHEREFORE, the appealed decision of the Court of Appeals is hereby REVERSED and SET ASIDE. The complaint filed by respondents, the spouses Veloso, is hereby dismissed.cralaw:red

SO ORDERED.
 
Panganiban, J., (Chairman), and Carpio-Morales, J., concur.
Sandoval-Gutierrez, J., on leave.
 

____________________________

Endnotes:
 

[1] Penned by Presiding Justice Cancio C. Garcia and concurred in by then Associate Justices Romeo J. Callejo, Sr. and Presbitero J. Velasco, Jr. (now Associate Justice of the Supreme Court and Court Administrator, respectively) of the Second Division.chanrobles virtuallaw libraryred
[2] Presided by Judge Romeo F. Zamora.chanrobles virtuallaw libraryred
[3] Rollo, p. 53.chanrobles virtuallaw libraryred
[4] Commodity Financing Co., Inc. vs. Jimenez, 91 SCRA 57 [1979].chanrobles virtuallaw libraryred
[5] Bicol Savings and Loan Association vs. Court of Appeals, 171 SCRA 630 [1989].
[6] Angao vs. Clavano, 17 Phil. 152 [1910].chanrobles virtuallaw libraryred
[7] Fructo vs. Fuentes, 15 Phil. 362 [1910]; Retes vs. Suelto, 20 Phil. 394 [1911]; Rosales vs. Reyes, et al., 25 Phil. 495 [1913]; Canuto vs. Mariano, 37 Phil. 840 [1918]; Dela Cruz, et al. vs. Resurreccion, et al., 98 Phil. 975 [1956].chanrobles virtuallaw libraryred
[8] Rumbaoa vs. Argaza, 84 Phil. 812 [1949].chanrobles virtuallaw libraryred
[9] 28 SCRA 665 [1969].chanrobles virtuallaw libraryred
[10] Sec. 28, Rule 39, Rules of Court. “x x x redemptioner may redeem the property from the purchaser, at any time within one (1) year from the date of the registration of the certificate of sale, by 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 x x x.”
[11] 248 SCRA 496 [1995].chanrobles virtuallaw libraryred
[12] Conejero, et al. vs. Court of Appeals, et al., 16 SCRA 775 [1996].chanrobles virtuallaw libraryred
[13] Pilipinas Hino, Inc. vs. Court of Appeals, 338 SCRA 355 [2000]; Smith, Bell & Co., Inc. vs. Court of Appeals, 267 SCRA 530 [1997]; David-Chan vs. Court of Appeals, 268 SCRA 677 [1997].