Guevarra v. Commoner Lending Corp.
REITERATIONFacts
The Antecedents: Spouses Rodolfo and Marcelina Guevarra (Sps. Guevarra) obtained a loan of P320,000.00 from The Commoner Lending Corporation, Inc. (TCLC), secured by a real estate mortgage over a parcel of land. Sps. Guevarra defaulted, leading TCLC to extra-judicially foreclose the mortgage. TCLC was the highest bidder at P150,000.00 during the auction sale on June 15, 2000. The certificate of sale was registered on August 25, 2000. Sps. Guevarra failed to redeem the property within the one-year period, resulting in the cancellation of their title and the issuance of a new title in TCLC's name. Procedural History: TCLC applied for a writ of possession. Sps. Guevarra opposed, challenging the foreclosure proceedings and asserting a five-year repurchase period under Section 119 of the Public Land Act. They filed a petition for redemption, consigning P240,000.00. The RTC granted TCLC's writ of possession but later granted Sps. Guevarra's petition for redemption, recognizing their right to repurchase under Section 119 of the Public Land Act and ordering TCLC to reconvey the property upon payment of P150,000.00 plus interest and expenses. The CA affirmed the RTC's decision with modification, stating the repurchase price should be fixed by TCLC. The CA denied Sps. Guevarra's motion for reconsideration. The Petition: Sps. Guevarra filed a petition for review on certiorari, assailing the CA's ruling that the repurchase price should be fixed by TCLC.
Issue(s)
Whether the Court of Appeals committed a reversible error in ruling that the repurchase price for the subject property should be fixed by respondent TCLC, considering the applicability of Section 119 of the Public Land Act and Section 47 of the General Banking Law of 2000. What is the proper amount of the repurchase price for the subject property, taking into account the allowable interest rates, foreclosure expenses, and taxes, and considering the validity of the stipulated interest in the mortgage agreement.
Ruling
The petition is DENIED. The Decision dated October 3, 2011 and the Resolution dated October 17, 2012 of the Court of Appeals in CA-G.R. CV No. 02895 are AFFIRMED with MODIFICATION, allowing petitioners-spouses Rodolfo and Marcelina Guevarra to repurchase the subject property from respondent The Commoner Lending Corporation, Inc. (TCLC) within thirty (30) days from the finality of this Decision for the price of P689,460.11, less the amount of P240,000.00 previously consigned to the court a quo, or the net amount of P449,460.11, for which the corresponding deed of absolute conveyance shall be executed by TCLC.
Ratio Decidendi
On the issue of the Court of Appeals' ruling on the repurchase price: The Court clarified that the right of repurchase under Section 119 of the Public Land Act is distinct from the right of redemption under Act No. 3135. For properties acquired under free patent and mortgaged to entities other than rural banks, the redemption period is one year from the registration of the certificate of sale. However, the mortgagor or their heirs may still repurchase the property within five years from the expiration of this redemption period, pursuant to Section 119 of the Public Land Act. The filing of a judicial action within this five-year period is considered a sufficient offer to redeem, obviating the need for tender or consignation of the repurchase price. The Court reiterated that the repurchase price in such cases, when the mortgagee is a lending or credit institution like TCLC, is governed by Section 47 of the General Banking Law of 2000 (formerly Section 78 of the General Banking Act). On the issue of the proper amount of the repurchase price: This includes the purchase price at the auction sale, plus interest at the rate of one percent (1%) per month, all foreclosure expenses (Judicial Commission, Publication Fee, Sheriff's Fee), and taxes (Documentary Stamp Tax and Capital Gains Tax) paid by the mortgagee. The Court also emphasized that an action to foreclose must be limited to the amount stated in the mortgage, excluding amounts not specified therein, such as penalty charges. Furthermore, the Court found the stipulated three percent (3%) monthly interest to be excessive, unconscionable, iniquitous, and exorbitant, thus illegal and void. Consequently, the stipulated interest was equitably reduced to one percent (1%) per month or twelve percent (12%) per annum, reckoned from the execution of the mortgage until the filing of the petition. The Court computed the total repurchase price based on these parameters, including the principal, reduced interest, taxes, and foreclosure expenses, and then deducted the amount already consigned by the Sps. Guevarra.
Main Doctrine
The right of repurchase under Section 119 of the Public Land Act is distinct from the right of redemption under Act No. 3135. While the filing of a judicial action within the five-year period under Section 119 is equivalent to a formal offer to redeem, the repurchase price from lending or credit institutions is governed by Section 47 of the General Banking Law of 2000, which includes foreclosure expenses, and excessive interest rates are subject to equitable reduction.