Development Bank of the Philippines v. West Negros College
REITERATIONFacts
The Antecedents: Bacolod Medical Center (BMC) obtained loans from the Development Bank of the Philippines (DBP) secured by mortgages. West Negros College, Inc. (WNC) subsequently assumed the credit of BMC under a deed of assignment. Due to default, DBP extrajudicially foreclosed the properties, and a public auction was held on August 24, 1989. WNC attempted to redeem the properties, leading to a protracted legal battle over the validity of the redemption and the correct price. Procedural History: On October 28, 2002, the Supreme Court (SC) rendered a decision in G.R. No. 152359, voiding WNC's Certificate of Redemption but granting WNC a 60-day grace period to redeem by paying the balance of the credit plus interest 'to be computed as of the date of the public auction on 24 August 1989.' WNC moved for reconsideration regarding the computation of compounded interest and penalties. On May 21, 2004, the SC remanded the case to the Court of Appeals (CA) to determine the total redemption price, which was not to be lower than P21,500,000.00. The CA initially ruled that interest should accrue after the auction, but in a Resolution dated July 5, 2006, it reversed itself and ruled that interest stops at the auction date. The Petition: DBP filed a Petition for Review under Rule 45, docketed as G.R. No. 174103, challenging the CA's July 5, 2006 Resolution. DBP argued that the CA exceeded its remand authority by revisiting the interest cut-off date. DBP further contended that interest and expenses should continue to run after the foreclosure sale until the actual date of redemption, asserting that its internal policy (Board Resolution No. 0319) only stopped interest for internal booking purposes and not for calculating the redemption price.
Issue(s)
Whether the Court of Appeals exceeded its remand authority by determining the cut-off date for interest computation. Whether the interest on the loan obligation should continue to accrue after the date of the public auction for the purpose of calculating the redemption price.
Ruling
The Supreme Court AFFIRMED the Resolutions of the Court of Appeals and DIRECTED the appellate court to terminate the proceedings with deliberate dispatch.
Ratio Decidendi
On Issue 1: The Supreme Court held that while the Court of Appeals (CA) initially deviated by soliciting position papers on a matter already settled by the finality of the 2002 Decision, its ultimate conclusion was correct. The remand was specifically intended to determine the 'total redemption price,' which necessarily involved applying the parameters previously set by the Court. The SC noted that the 2002 Decision and 2004 Resolution had already established the August 24, 1989 auction date as the reckoning point for interest. Therefore, the CA's final adherence to this date was not an act in excess of authority but a proper execution of the SC's mandate. The Court emphasized that a clear reading of the previous dispositions would have avoided the unnecessary delay caused by the CA's initial hesitation. On Issue 2: The Court ruled that under the current Development Bank of the Philippines (DBP) Charter, interest does not accrue after the auction date for redemption purposes. The Court compared Section 31 of Commonwealth Act (C.A.) No. 459 with Section 16 of Executive Order (E.O.) No. 81. It observed that C.A. No. 459 explicitly included 'interest on the total indebtedness at the rate agreed upon... from said date [of auction],' but this phrase was conspicuously omitted in E.O. No. 81. The current law instead refers to 'all of the Bank's claims... as determined by the Bank.' The Court reiterated its 2002 ruling that WNC must pay the balance with interest 'as of the date of the public auction on 24 August 1989.' There is no legal basis in the current DBP Charter to impose contractual interest from the date of the auction until the actual redemption is effected. Consequently, the CA was correct in excluding post-auction interest from the total redemption price.
Main Doctrine
The redemption price for properties foreclosed by the Development Bank of the Philippines (DBP) is pegged to the Bank's claims as determined on the date of the public auction. Unlike the predecessor statute, Commonwealth Act No. 459, the current DBP Charter (Executive Order No. 81) omits the provision allowing for the accrual of interest from the date of the auction until the date of redemption. Consequently, once the auction is conducted, the interest component of the redemption price is frozen as of that date, ensuring that the mortgagor's right to redeem is not rendered illusory by ever-increasing post-auction interest charges.