Sy v. Court of Appeals
REITERATIONFacts
The Antecedents: Carlos Coquinco executed a real estate mortgage in favor of State Investment House, Inc. (SIHI) to secure a P1,000,000.00 loan. Upon failure to pay the outstanding balance, SIHI extrajudicially foreclosed the property, which was sold at public auction for P760,000.00 to SIHI. The certificate of sale was registered. SIHI later filed an action for deficiency judgment. Procedural History: Petitioner Arnel Sy acquired Carlos Coquinco's right of redemption. Petitioner offered to redeem the property from SIHI by tendering P851,200.00 (purchase price plus 1% monthly interest for 12 months). SIHI rejected the offer. Petitioner filed an action for consignation, which was dismissed by the RTC for lack of valid tender of payment. Subsequently, SIHI consolidated ownership and obtained a new title. Petitioner filed another action for annulment of title, which was also dismissed by the RTC, holding that petitioner failed to effect a valid redemption under Section 78 of the General Banking Act, as amended by P.D. No. 1828. The RTC awarded damages and attorney's fees. The Court of Appeals affirmed the dismissal but set aside the award for temperate and exemplary damages. The Petition: Petitioner filed a petition for review on certiorari, raising issues on the applicable law for redemption price, the effect of res judicata from the consignation case, the liability of the Register of Deeds, and the propriety of attorney's fees.
Issue(s)
Whether Act No. 3135, as amended, in relation to Section 30, Rule 39 of the Revised Rules of Court, or Section 78 of Rep. Act No. 337 (General Banking Act), as amended by P.D. No. 1828, is the applicable law in determining the redemption price. Whether the dismissal of Civil Case No. 84-22839 (consignation case) had the effect of res judicata with respect to Civil Case No. 51169. Whether the Register of Deeds for the province of Rizal may be held liable for damages for cancelling TCT No. 2782 and issuing TCT No. 44775 in favor of SIHI. Whether the award of attorney's fees and expenses of litigation assessed against petitioner is proper.
Ruling
The Supreme Court affirmed the decision of the Court of Appeals with the modification that the award of attorney's fees and expenses of litigation was set aside.
Ratio Decidendi
On the applicable law for redemption price: The Court held that Section 78 of the General Banking Act, as amended by P.D. No. 1828, is the applicable law. This section applies not only to banks but also to credit institutions like SIHI, which was certified as such by the Central Bank. The provision mandates that redemption must be made by paying the amount due under the mortgage deed, with interest specified in the mortgage, and all costs and expenses incurred by the bank, less income received from the property. Petitioner, as assignee of the mortgagor's right of redemption, was subrogated to the mortgagor's obligations and bound by the same conditions. Therefore, the amount tendered by the petitioner, which was merely the purchase price at the auction sale plus 1% monthly interest, was insufficient for a valid redemption. The Court distinguished this from the case of Philippine National Bank v. The Honorable Court of Appeals, which was specific to PNB foreclosures under its prior charter. On the effect of res judicata: The Court deemed it unnecessary to pass upon the issue of res judicata, given its categorical finding that the petitioner failed to effect a valid redemption. The failure to effect a valid redemption rendered the subsequent proceedings and claims moot or without basis. On the liability of the Register of Deeds: The Court found no liability on the part of the Register of Deeds. The cancellation of the original title and the issuance of a new one in favor of SIHI were performed in fulfillment of official functions and in accordance with law, following the consolidation of ownership after a valid foreclosure and the failure of redemption. On the award of attorney's fees: The Court found the petitioner's contention regarding attorney's fees to be meritorious. While the petitioner's theory on the redemption price was untenable, his action was not clearly unfounded, nor was bad faith established. The Court agreed with the appellate court that the filing of the action was a misapprehension of a legal remedy within the bounds of permissible legal procedure. Therefore, the award of attorney's fees and expenses of litigation was set aside, as it is generally predicated on exceptional circumstances like evident bad faith or a clearly unfounded action, which were not present in this case.
Main Doctrine
The redemption price for a foreclosed property mortgaged to a credit institution is governed by Section 78 of the General Banking Act, as amended by P.D. No. 1828, which requires payment of the amount due under the mortgage deed, with interest, costs, and expenses, and not merely the purchase price at the auction sale plus 1% monthly interest as provided under Act No. 3135 and the Rules of Court.