Union Bank of the Philippines v. Gregorio
REVERSALFacts
The Antecedents: On March 2, 1990, spouses Gonzalo Vincoy and Trinidad Gregorio Vincoy mortgaged their urban residence in Pasay City to Union Bank of the Philippines (Union Bank) to secure a P2,000,000 loan extended to Delco Industries (Phils.), Inc., where Gonzalo was involved. The property was allegedly constituted as a family home on October 27, 1989, with beneficiaries including Trinidad's sisters, Apolonia and Luciana De Jesus Gregorio, whose consent to the mortgage was not obtained. Upon maturity without payment, Union Bank extrajudicially foreclosed the mortgage, scheduling the auction for April 10, 1991 (held April 19, 1991), where it bid P3,290,000 as highest bidder. A certificate of sale was issued and annotated on TCT No. 128610 on May 8, 1991, starting the one-year redemption period until May 8, 1992. Respondents claimed the mortgage was void under Article 158 of the Family Code for lack of majority beneficiary consent, while Union Bank countered that the property's value exceeded P300,000, disqualifying it as a protected family home under Article 157. Procedural History: Prior to redemption period expiration, on or before May 8, 1992, respondents filed a complaint for annulment of mortgage with damages and injunction before the lower court, solely praying for nullity of the March 2, 1990 mortgage, injunction against title consolidation, and damages including attorney's fees; no prayer for redemption was made. The case was submitted on pleadings without trial. The lower court declared the family home constitution void due to excess value, upheld the mortgage valid, and ordered Gonzalo Vincoy/Delco to pay Union Bank P4,816,194.44 as of February 15, 1993, plus interests/penalties, with no mention of redemption. On appeal, CA upheld mortgage validity and family home disqualification but, sua sponte, fixed redemption price at P3,290,000 plus 1% monthly interest from April 19, 1991 per Rule 39, Section 30, despite no redemption prayer below. The Petition: Union Bank petitioned for review on certiorari under Rule 45, arguing: (1) CA erred in resolving unraised redemption issue contrary to pleadings and evidence, as respondents consistently sought only annulment, not redemption; (2) respondents lost redemption right by not exercising within one year from May 8, 1991 registration; and (3) assuming redemption, Section 78 of the General Banking Act (not Rule 39) governs price as amount due under mortgage plus interest/costs/expenses less income. Initially dismissed July 12, 1999 as factual, Union Bank moved for reconsideration, emphasizing no evidence beyond pleadings and respondents' inconsistent stance.
Issue(s)
Whether the Court of Appeals could grant redemption rights not prayed for in the trial court complaint or raised on appeal, contrary to respondents' annulment theory. Whether respondents' right of redemption under Section 78 of the General Banking Act lapsed due to non-exercise within one year from sale registration, untolled by the annulment action. Whether Section 78 of the General Banking Act or Rule 39, Section 30 governs the redemption price in bank foreclosures.
Ruling
The motion for reconsideration is granted; the July 12, 1999 resolution is modified by declaring respondents lost their right to redeem the foreclosed property, as the issue was not raised below, the redemption period lapsed untolled, and Section 78 of the General Banking Act (not Rule 39) would govern redemption price if applicable.
Ratio Decidendi
On Issue 1 (Redemption not raisable on appeal): The Court scrutinized pleadings, noting respondents' complaint solely sought annulment of the mortgage, injunction, and damages, never praying for redemption; they persisted in nullity theory throughout trial on pleadings. Appellate courts under Rule 45 review only for reversible error, cannot resolve unpleaded/untried issues, as this offends due process, fair play, and justice (citing Roman Catholic Archbishop of Manila v. CA; Gevero v. IAC). CA's sua sponte grant contradicted respondents' case theory, allowing them to 'have their cake and eat it too' by challenging validity yet seeking redemption post-foreclosure. No trial evidence on redemption existed, limiting review to pleadings. Thus, CA reversibly erred by ignoring this procedural bar. On Issue 2 (Lapse of redemption right): Section 78, General Banking Act limits redemption to one year from sale registration (May 8, 1991-1992), requiring payment of mortgage debt amount, interest at mortgage rate, costs/expenses less income. Respondents never attempted redemption during period, instead filing annulment, failing to deposit amount. Period not tolled by annulment suit, per Sumerariz v. DBP (no statute/jurisprudence supports suspension; unlike Rule 39, no extension in bank law) and Vaca v. CA (annulment pendency no bar to possession post-consolidation). Allowing tolling invites frivolous annulments to extend time, dangerous precedent undermining foreclosure certainty. Respondents divested of right post-May 8, 1992. On Issue 3 (Applicable redemption law): Though moot, Section 78, General Banking Act governs bank foreclosures as special/subsequent law amending Act 3135, Section 6 (Ponce de Leon v. RFC; Sy v. CA); redemption price is mortgage debt due, not mere bid plus 1% (Rule 39, Section 30). CA erred applying general rule over special banking provision.
Main Doctrine
The right of redemption for properties foreclosed extrajudicially by banks to secure loans is strictly governed by Section 78 of the General Banking Act, which provides a one-year period from the registration of the sale, during which the mortgagor must pay the amount due under the mortgage deed with interest, costs, and expenses, less income from the property. This period is not tolled or extended by the filing of an action for annulment of the mortgage, as held in Sumerariz v. Development Bank of the Philippines and Vaca v. Court of Appeals, to prevent abuse through frivolous litigation. Issues of redemption cannot be raised for the first time on appeal if not pleaded or tried in the lower court, violating due process and fair play principles under settled jurisprudence. For family homes, only those not exceeding P300,000 in urban areas at constitution qualify for Article 158's consent requirement; exceeding properties are unprotected, rendering mortgages valid without beneficiary consent. The General Banking Act prevails as special subsequent legislation over the general provisions of Act No. 3135 and Rule 39, Section 30, in determining redemption price and period for bank mortgagees.