Philippine National Bank v. Filemon Remigio
REITERATIONFacts
The Antecedents: Private respondent obtained a P65,000.00 loan from petitioner Philippine National Bank (PNB), secured by a real estate mortgage over five parcels of land. Private respondent defaulted, leading PNB to extrajudicially foreclose the mortgage on November 17, 1970. PNB acquired the properties for P87,082.00, with the sheriff's sale registered on October 11, 1972. Private respondent made initial payments towards redemption starting November 18, 1970. On October 21, 1972, Presidential Decree No. 27 (P.D. No. 27) was enacted, mandating agrarian reform and covering some of the foreclosed parcels. Private respondent offered to buy the property for P284,000.00, and a Deed of Promise to Sell was executed on December 24, 1974. Private respondent continued making payments, totaling P207,243.85 by November 2, 1977. PNB also received payments from the Land Bank of the Philippines for parcels covered by P.D. No. 27. Procedural History: Private respondent filed an action for annulment of foreclosure deed, breach of contract, sum of money, and damages against PNB. The trial court declared the foreclosure sale valid, extinguished the right of redemption, upheld the deed of promise to sell, and determined the outstanding obligation, ordering payment of any balance by the plaintiff and refund of any excess by the bank. The Court of Appeals reversed the trial court, declaring the foreclosure without force and effect, ordering the release of properties, rescinding the deed of promise to sell, and directing recalculation of payments due under P.D. No. 27. The Petition: PNB filed a petition for review on certiorari, questioning the Court of Appeals' decision.
Issue(s)
Whether the Court of Appeals erred in holding that the foreclosure proceedings were not completed due to the registration date of the sheriff's sale. Whether the Court of Appeals erred in ruling that the properties covered by P.D. No. 27 were not subject to foreclosure or that the foreclosure was invalid. Whether the Court of Appeals erred in determining the amount due to the bank.
Ruling
The Supreme Court affirmed the decision of the Court of Appeals. It held that the period of redemption begins from the date of registration of the sheriff's sale, which in this case was October 11, 1972. Consequently, the properties fell under the ambit of P.D. No. 27 when it was enacted. The Court also upheld the principle that the exercise of police power under P.D. No. 27 can subordinate the non-impairment clause of the Constitution. The Court found no reversible error in the appellate court's determination of the amounts due and the recalculation of payments.
Ratio Decidendi
On the commencement of the redemption period: The Court reiterated the established rule that the period of redemption in extrajudicial foreclosure of registered land commences not from the date of the sale but from the date of its registration in the Office of the Register of Deeds. In this case, the registration occurred on October 11, 1972. Therefore, the redemption period would expire on October 12, 1973. This timing was crucial because Presidential Decree No. 27 was enacted on October 21, 1972, which was within the redemption period. The Court cited previous rulings such as Salazar vs. Meneses and Reyes vs. Noblejas to support this principle. The appellate court's finding that the foreclosure proceedings were not completed because the redemption period had not yet expired was thus deemed correct. On the applicability of P.D. No. 27 and police power: The Court acknowledged the opinion of the Secretary of Justice regarding the effect of P.D. No. 27 on mortgage contracts. It affirmed that the government's agrarian reform program, accelerated under P.D. No. 27 and mandated by the Constitution, is an exercise of the state's police power. The Court emphasized that the constitutional guaranty of non-impairment of contracts is limited by the exercise of police power, as public welfare is superior to private rights. This principle was supported by numerous Supreme Court decisions, including Ortigas and Co. Ltd. Partnership vs. Feati Bank and Trust Co.. Therefore, even if P.D. No. 27 affected existing mortgage contracts, it was a valid exercise of state power. On the determination of amounts due: The Court found no error in the Court of Appeals' approach to determining the amounts due. The appellate court noted that the bank had received substantial payments in cash and bonds from both the private respondent and the Land Bank, exceeding the original loan amount and even the foreclosure price. The Court of Appeals correctly pointed out that the PNB was entitled to the redemption price of P87,012.00, as offered by the bank itself in its letter dated February 15, 1971, for the release of the properties for redistribution to qualified tenants. The appellate court's order for a recalculation of payments due, considering the provisions of P.D. No. 27 and the mechanics of the Operation Land Transfer, was deemed appropriate. The Court also referred to Section 20 of PNB's charter, which outlines the right of redemption by paying the amount fixed by the court, with interest and costs.
Main Doctrine
The period of redemption in extrajudicial foreclosure sales of registered land begins from the date of registration of the sheriff's sale in the Office of the Register of Deeds, and not from the date of the sale itself. Properties falling under the Operation Land Transfer program pursuant to Presidential Decree No. 27 are subject to the exercise of police power, which may subordinate the non-impairment clause of the Constitution.