Teoco v. Metropolitan Bank
MODIFICATIONFacts
The Antecedents: Ramon Co mortgaged two parcels of land to Metropolitan Bank and Trust Company (Metrobank). The properties were sold to Metrobank in an extrajudicial foreclosure sale. After the redemption period expired, Metrobank consolidated ownership and obtained new titles. Procedural History: Metrobank filed a petition for a writ of possession. The brothers Teoco intervened, claiming they had redeemed the properties within the reglementary period. The Regional Trial Court (RTC) dismissed Metrobank's petition, ruling that the brothers Teoco had legally redeemed the properties. Metrobank appealed to the Court of Appeals (CA), which reversed the RTC decision, annulled the redemption, and ordered the issuance of a writ of possession in favor of Metrobank. The Petition: The brothers Teoco filed a petition for review on certiorari, seeking to reverse the CA decision.
Issue(s)
Whether the brothers Teoco failed to redeem the subject properties within the reglementary period and if the redemption price tendered was insufficient. Whether the brothers Teoco were obligated to pay not only the principal obligation but also previous extended obligations. Whether the brothers Teoco sufficiently showed that the right of redemption was properly transferred to them. Whether the CA erred in reversing the RTC decision and granting the writ of possession to Metrobank.
Ruling
The Supreme Court set aside the decision of the Court of Appeals and reinstated the decision of the Regional Trial Court with modification. The redemption by the brothers Teoco was upheld, but it was declared without prejudice to Metrobank's right to foreclose the properties anew for other secured loans.
Ratio Decidendi
On the sufficiency of the redemption price and coverage of future advancements: The Court found that neither party presented sufficient evidence to prove whether additional loans were covered by the mortgage. Metrobank merely relied on a stipulation for future advancements, but failed to prove that subsequent obligations were secured by the mortgage. To prevent injustice, the Court ruled that the redemption should be based on the foreclosure amount plus interest. This is without prejudice to Metrobank's right to foreclose anew for subsequent loans if proven to be covered by the mortgage, citing Articles 2127 and 2129 of the Civil Code which state that a mortgage extends to improvements and binds third persons possessing the property. On the obligation to pay previous extended obligations: The Court found that neither party presented sufficient evidence to prove whether additional loans were covered by the mortgage. Metrobank merely relied on a stipulation for future advancements, but failed to prove that subsequent obligations were secured by the mortgage. To prevent injustice, the Court ruled that the redemption should be based on the foreclosure amount plus interest. This is without prejudice to Metrobank's right to foreclose anew for subsequent loans if proven to be covered by the mortgage. On the transfer of the right of redemption: The Court found that the brothers Teoco, being brothers of Lydia Teoco Co (one of the registered owners), were included in the assignment of the right of redemption to "parents, brothers and sisters." While the assignment was a private document executed abroad and not properly authenticated as a public document, Metrobank did not challenge its content, due execution, or genuineness. Therefore, Metrobank was deemed to have admitted it. The Court reiterated that the requirement for a public document for assignments involving real property (Article 1625 of the Civil Code) is for effect against third persons, and Metrobank would not be prejudiced by the assignment, as the brothers Teoco would merely step into the shoes of the original debtors. The Court cited Co v. Philippine National Bank and Ansaldo v. Court of Appeals in support of this reasoning. On the CA's alleged error in reversing the RTC decision: The CA ruled that summons to the spouses Co was unnecessary as their titles were already cancelled. However, the Supreme Court's decision focused on the redemption and transfer of rights, implicitly addressing the procedural issues by reinstating the RTC's dismissal of the writ of possession based on the valid redemption.
Main Doctrine
The redemption by third parties of foreclosed properties is valid if the redemption price is sufficient and the right of redemption was properly transferred, even if the assignment was in a private document, provided its due execution and genuineness are not challenged and it does not prejudice third parties. The redemption is without prejudice to the mortgagee's right to foreclose anew for other secured obligations.