Development Bank of the Philippines v. West Negros College
REITERATIONFacts
The Antecedents: Bacolod Medical Center (BMC) obtained a loan from DBP, secured by a mortgage on two parcels of land. DBP foreclosed the mortgage due to unpaid loan amounting to Php32,526,133.62. At the auction sale, DBP was the highest bidder. BMC assigned its right of redemption to West Negros College (WNC), which later became V-2 SAC Management and Development Corporation (V2). BMC and DBP-Bacolod entered into a provisional agreement for a compromise settlement of Php21,500,000.00, but DBP's head office disapproved it. WNC demanded a reduction of the redemption price. WNC paid Php4,300,000.00, and after a deficit was noted, paid the balance, leading the Sheriff to issue a Certificate of Redemption. DBP objected, asserting its charter requires payment of total indebtedness plus contractual interest. Possession of the properties was vested in WNC, and DBP registered an adverse claim. Procedural History: WNC filed a complaint for the surrender of titles, which the Regional Trial Court (RTC) granted. The Court of Appeals (CA) upheld WNC's argument that it only needed to pay the purchase price plus interests and charges. This Court, in G.R. No. 152359, reversed the CA, declaring the Certificate of Redemption void and giving WNC a 60-day grace period to redeem by paying the total indebtedness plus agreed interest. A subsequent resolution remanded the case to the CA for determination of compounded interest and total obligation, with the redemption price not to be lower than Php21,500,000.00. In G.R. Nos. 152359 and 174103, this Court ruled that the CA erred in revisiting the reckoning date for the redemption price, which should be from the date of the auction sale. A later resolution in G.R. No. 174103 reversed the previous ruling, stating DBP is entitled to collect accrued interest even after the foreclosure sale, as DBP did not take possession of the property. The case was again remanded to the CA. The CA, adopting the commissioners' report, declared the redemption price at Php23,099,850.82 and imposed a 12% per annum interest during the 60-day grace period. The Petition: DBP filed a petition for review on certiorari, arguing the CA's resolutions were not in accord with this Court's final and executory decision dated December 23, 2008, particularly by applying a superseded resolution and limiting the accrual of interest.
Issue(s)
Whether the Court of Appeals erred in holding that the final judgment does not state that interest shall accrue until actual redemption of the foreclosed property, and whether the Court of Appeals erred in applying the Supreme Court's resolution dated September 16, 2008, which had been modified and set aside. Whether the redemption price should include accrued interest from the date of foreclosure sale until the date of actual redemption. Whether the redemption price should include compounded interest, penalties, and attorney's fees.
Ruling
The petition is meritorious. The Court of Appeals' Resolutions dated March 14, 2018, and September 4, 2018, are reversed and set aside. The redemption price as of August 24, 1989, the date of foreclosure, is Php32,526,133.62. In case of redemption, the total claim due to DBP should be computed as follows: Outstanding balance as of the date of public auction (8/24/89) Php 32,526,133.62 + Interest from 08/25/89 to expiry date of redemption (07/11/91) (686 days) (12%) Php 2,151,504.02 = Total Claim as of Expiry Date of Redemption 07/11/91 Php 34,677,637.64. Additionally, interest from 07/12/91 to the actual redemption date (actual number of days from 7/12/91 to actual redemption date divided by 365 days) (multiplied by 12%) should be added. The total claim as of actual redemption date is Php34,677,637.64 plus this additional interest. V2 is given a 60-day grace period from notice of the finality of this Decision to redeem the properties under these terms.
Ratio Decidendi
On the issue of whether the Court of Appeals erred in holding that the final judgment does not state that interest shall accrue until actual redemption of the foreclosed property and in applying a superseded resolution: The Court held that the CA's resolutions were not in accord with this Court's December 23, 2008 Resolution in G.R. No. 174103, which is the governing law of the case. The CA should have heeded the rulings in both G.R. Nos. 152359 and 174103, which established that DBP is entitled to collect accrued interest even after the foreclosure sale. The CA's reliance on the superseded September 16, 2008 resolution was erroneous. On the issue of the redemption price and accrual of interest: The Court reiterated its ruling in G.R. No. 152359 that the redemption price consists of the total indebtedness plus contractual interest. This is supported by Section 16 of EO 81, the DBP Charter. The base amount of the redemption price is BMC's unpaid loan as of the foreclosure date, Php32,526,133.62. Furthermore, the Court affirmed in G.R. No. 174103 that DBP is allowed to collect accrued interest even after the foreclosure sale on August 24, 1989, because DBP did not take possession of the property. Since DBP was deprived of the fruits of the property, it is entitled to contractual interest until the date of actual redemption. The CA's limitation of the computation to November 12, 1991, was incorrect. On the issue of compounding interest, penalties, and attorney's fees: The Court noted that the issue of compounded interest was previously remanded to the CA for determination. The CA, in turn, made a finding of fact that V2 admitted the restructured promissory note obligated the payment of compounded interest at 12% per annum, including penalties and other expenses. Therefore, there was no longer a need for further determination on the validity of compounded interest. The Court's computation of the redemption price, however, focused on straight interest as stipulated in the promissory note, excluding unsubstantiated expenses and interest on expenses claimed by DBP, but acknowledging the potential for penalties and attorney's fees if properly substantiated.
Main Doctrine
The redemption price for properties mortgaged with the Development Bank of the Philippines (DBP) consists of the total indebtedness plus contractual interest, which accrues from the date of the foreclosure sale until actual redemption, unless DBP takes possession of the property, in which case the fruits of the property compensate the interest.