Metrobank v. Tan
REITERATIONFacts
The Antecedents: Spouses Marcial See and Lilian Tan executed real estate mortgages over their property (TCT No. 105233) to secure loans obtained by Ylang-Ylang Merchandising Company (later Ajax Marketing Company, then Ajax Marketing and Development Corporation) from Metropolitan Bank and Trust Company (Metrobank). These loans were consolidated into one loan under Promissory Note (PN) No. BDS-3605, with spouses Antonio Tan and Elisa Tan as solidary co-obligors. Due to failure to pay, Metrobank foreclosed the mortgaged property, which was sold at public auction on June 19, 1984, to Metrobank as the highest bidder. Procedural History: On December 11, 1984, Ajax Marketing and the spouses See and Tan filed a case for Annulment and Cancellation of Extra-judicial Foreclosure Sale, arguing that the mortgages were extinguished or novated by PN No. BDS-3605. This case was affirmed by the Court of Appeals and subsequently by the Supreme Court in G.R. No. 118585 on September 14, 1995, which upheld the validity of the foreclosure but found the inclusion of an unsecured loan (PN No. BDS-3583) in the bid price improper. On September 12, 1997, spouses Elisa and Antonio Tan and spouses Lilian Tan and Marcial See filed a case for Specific Performance, Injunction, and Damages, seeking to exercise their right of redemption and alleging Metrobank rejected their offer of ₱1,609,334.61 and sold the property to other siblings for ₱11,500,000.00. On November 6, 1997, spouses Marcial See and Lilian Tan executed a Deed of Redemption and Reconveyance, paying Metrobank ₱11,500,000.00. The RTC declared the Deed of Redemption and Reconveyance null and void, reinstated spouses Elisa and Antonio Tan as redemptioners, and ordered them to pay ₱1,609,334.61, while ordering Metrobank to refund ₱11,500,000.00 to spouses Marcial and Lilian Tan. The Court of Appeals affirmed the RTC decision. Metrobank appealed to the Supreme Court. The Petition: Metrobank filed a Petition for Review on Certiorari seeking to set aside the decision of the Court of Appeals, arguing that the lower courts erred in declaring that the redemption period was tolled and that spouses Elisa and Antonio Tan exercised their right of redemption within the legal period.
Issue(s)
Whether the filing of Civil Case No. 85-33933 interrupted the running of the one-year redemption period. Whether spouses Elisa and Antonio Tan exercised their right of redemption within the one-year period allowed by law. Whether the Court of Appeals erred in declaring that Metrobank must be legally capacitated to surrender possession and title for an offer to redeem to be binding. Whether the Court of Appeals erred in declaring that Metrobank is liable to pay attorney's fees.
Ruling
The Supreme Court GRANTED the petition, REVERSED and SET ASIDE the Decision of the Court of Appeals and its Resolution, and DISMISSED the complaint in Civil Case No. 97-85012.
Ratio Decidendi
On the interruption of the redemption period: The Supreme Court held that the filing of Civil Case No. 85-33933 for Annulment and Cancellation of Extra-judicial Foreclosure Sale did not toll the running of the one-year redemption period. The Court clarified that settled jurisprudence dictates that the period for redemption is not suspended by the institution of an action to annul the foreclosure sale. The complaint in Civil Case No. 85-33933 primarily sought to nullify the foreclosure proceedings on the ground that the obligations were no longer secured by any mortgage, and it did not contain any issue or prayer related to the right of redemption. Therefore, the lower courts erred in ruling that the redemption period was interrupted. On the exercise of the right of redemption: The Supreme Court found that spouses Elisa and Antonio Tan failed to exercise their right of redemption within the one-year period allowed by law. The certificate of sale was registered on June 20, 1984, meaning the redemption period expired on June 20, 1985. The Court noted that the only credible evidence of an offer to redeem was a letter dated February 2, 1995, proposing a settlement in installments, which was long after the redemption period expired. The Court emphasized that a mere offer to redeem is insufficient; it must be accompanied by an actual and simultaneous tender of the full redemption price. The installment proposal was invalid as it lacked Metrobank's agreement and would extend the redemption period indefinitely. Furthermore, no actual tender of payment or consignment of any amount was made within the statutory period. On Metrobank's capacity to surrender possession: The Supreme Court found the Court of Appeals' ruling that Metrobank had to be legally capacitated to surrender possession and title for an offer to redeem to be binding to be flawed. The Court explained that Metrobank, as the highest bidder, had the right to demand the purchase price and taxes paid, with interest, within the redemption period. Failure to pay within this period resulted in the loss of the right to redeem, making Metrobank the absolute owner. The subsequent transaction with spouses Marcial See and Lilian Tan, for ₱11,500,000.00, was considered a sale, not a redemption, as the price was significantly higher than the redemption price. This sale was valid because Metrobank had already consolidated its ownership after the redemption period expired without a valid redemption. On attorney's fees: The Supreme Court reversed the award of attorney's fees. Since the primary claim of the respondents for redemption was dismissed, the basis for awarding attorney's fees was removed. The Court found no other grounds to sustain the award of attorney's fees in favor of the respondents.
Main Doctrine
The filing of an action to annul an extrajudicial foreclosure sale does not toll the one-year redemption period. Furthermore, a mere offer to redeem is insufficient; it must be accompanied by an actual and simultaneous tender of the full redemption price within the statutory period. Failure to do so results in the loss of the right to redeem, and the buyer becomes the absolute owner with the right to dispose of the property.