Allied Banking Corp. v. Mateo
REITERATIONFacts
The Antecedents: Respondent Ruperto Jose Mateo obtained a loan from petitioner Allied Banking Corporation, secured by a real estate mortgage. Respondent defaulted, leading to the extrajudicial foreclosure of the mortgage. The property was sold at public auction to petitioner for ₱1,531,474.53, with the Certificate of Sale registered on July 21, 1999. Respondent, through his attorney-in-fact, Warlita Mateo, expressed his desire to redeem the property for ₱1.1 million through several faxed letters. On July 21, 2000, the last day of the redemption period, respondent filed a case for legal redemption with a prayer for injunctive relief. Procedural History: The Regional Trial Court (RTC) allowed respondent to redeem the property upon payment of ₱1,531,474.53 plus one percent interest for one month, ordering petitioner to accept the tender and pay attorney's fees. The RTC found that respondent had the right to redeem within the one-year period, had shown sincere desire to redeem through letters, and had offered to pay the foreclosed price, even consigning ₱1.1 million with the Land Bank. The RTC denied petitioner's motion for reconsideration. The Petition: Petitioner filed a petition for review on certiorari with the Supreme Court, arguing that the RTC erred in considering the ₱1.1 million offer as sufficient tender, in considering the Land Bank deposit as sufficient consignation, and in applying Section 28, Rule 39 of the Rules of Court instead of Section 78 of the General Banking Act (now Section 47 of RA 8791) for the computation of the redemption price.
Issue(s)
Whether respondent still has the right to redeem the subject property, and whether Section 78 of the General Banking Act should be applied to the computation of the redemption price. Whether the respondent filed the judicial action for redemption in good faith.
Ruling
The Supreme Court granted the petition, reversed and set aside the Decision and Order of the RTC, and dismissed the action for legal redemption filed by respondent. WHEREFORE, the petition for review is GRANTED. The Decision dated October 21, 2004, as well as the Order dated February 10, 2005 of the Regional Trial Court, Branch 35, Santiago City, are hereby REVERSED and SET ASIDE. The action for legal redemption filed by respondent is hereby DISMISSED.
Ratio Decidendi
On the right to redeem and the application of Section 78 of the General Banking Act: The Court held that when the mortgagee is a bank, the determination of the redemption price is governed by Section 78 of the General Banking Act, which supersedes Section 6 of Act No. 3135. Section 78 mandates that the mortgagor shall have the right to redeem the property by paying the amount due under the mortgage deed, with interest, and all costs and expenses incurred by the bank, less income received from the property. The Court reiterated the principle that a valid redemption requires an unequivocal tender of payment for the full amount of the repurchase price. An offer to redeem that is insufficient or not in accordance with the law is ineffectual. The Court found that respondent's offer of ₱1.1 million was ineffective because it was below the purchase price and did not include accrued interest and expenses. Furthermore, the Court noted that respondent never consigned the amount in court to show good faith. On the good faith in filing the judicial action for redemption: The Court clarified that while a redemptioner may preserve their right of redemption through judicial action if there is a disagreement over the redemption price, such action must be filed in good faith and within the redemption period. Good faith requires that the action be filed solely for the purpose of determining the redemption price, not to indefinitely extend the redemption period. In this case, the Court found that respondent's action was not filed in good faith because the offer of ₱1.1 million was significantly below the purchase price and did not include interest. Petitioner had already alleged that the redemption price, as of June 16, 2000, amounted to ₱2,058,825.73. The offer of ₱1,531,474.53 during the pre-trial conference, without any payment of interest or consignation, demonstrated an intent to merely delay rather than to redeem the property properly. Therefore, the action for legal redemption was dismissed.
Main Doctrine
A judicial action to preserve the right of redemption must be filed in good faith, meaning it is for the sole purpose of determining the redemption price and not to indefinitely extend the redemption period. An offer to redeem that is significantly less than the purchase price and does not include accrued interest and expenses is considered an ineffectual tender of payment.