GR L 11721; (April, 1918)

EN BANC

G.R. No. L-11721; April 3, 1918

ANDRES GRIMALT, plaintiff-appellee,

vs.
MACARIA V. VELAZQUEZ, and SY QUIO, defendants-appellants.

Varela Calderon & Moreno Lacalle for the appellant Velasquez.
Francisco & Lualhati for the appellant Sy Quio.
No appearance for appellee.

STATEMENT OF THE FACTS.

FISHERS, J.:

The plaintiff, Grimalt, brought an action to foreclose a mortgage upon defendant’s property. Judgment was rendered for plaintiff and, not having paid within the time limited, the mortgaged property was offered for sale. The highest bidder at the sale was Sy Quio, the appellant, who paid the Sheriff the full amount of his bid. The court, without notice to the mortgagor, affirmed the sale upon the motion of the purchaser. Shortly after the mortgagor moved to set aside the order of affirmance upon the ground that it was void for lack of notice, and at the same time deposited the full amount due under the judgment of foreclosure, with interest and costs. The court granted the motion to set aside the affirmance of the foreclosure sale, but imposed upon the mortgagor the condition of paying Sy Quio interest at the rate of 10 per cent per annum upon the amount of his bid from the time it was paid to the sheriff until its return to the bidder. From that part of the decision decreeing the payment of interest the judgment debtor appealed, as did the bidder. Sy Quio, from that part of the decree by which the affirmance of the sale to him was set aside. The appeal of Sy Quio was disposed of by a decision dated October 2, 1917 (36 Phil. Rep., 936) The present decision relates only to the appeal of the mortgagor.

DECISION.

Acting upon the petition filed by the appellant, Macaria Velazquez, under date of October 11, 1917, the dispositive part of the decision rendered herein, under date of October 2, 1917, is hereby modified to read as follows:

The appealed judgment is hereby affirmed in so far as it denies the affirmance of the sale of the mortgaged property, but is reversed in so far as it requires upon the defendant, Macaria V. Velazquez, to pay the appellant, Sy Quio, interest upon the money deposited by him to cover his bid at the sale so set aside, and the action of the said Sy Quio against defendant with respect to such interest is dismissed.

Persons who bid at a foreclosure sale are assumed to know that the mere fact of being the highest bidder does not vest such bidder with the ownership of the property. The action by which the ownership of the property is conveyed is the approval of the sale by the court. If the debtor discharges the obligation at any time before a valid order is entered, confirming the sale, the right of the bidder is limited to the return of the money paid by him to cover his bid. The debtor, in paying the creditor the amount of the judgment for the purpose of discharging his property from the lien of the mortgage of discharging his property from the lien of the mortgage, infringes no right whatever of the bidder. Consequently, it is error to require the mortgagor to pay the bidder interest upon sum deposited by him. Interest is payable by virtue of a contractual undertaking, or as a result of the breach of an obligation after the obligor has been put in default. With respect to one who becomes a bidder at a foreclosure sale, the owner of the mortgaged property is in no sense a debtor of any person who voluntarily takes part in the bidding. The mortgagor by paying to the plaintiff the amount of her debt, for the purpose of freeing her property from the lien of the mortgage, makes use of a right which in no sense violates any right of the bidder. The latter, by making his bid and depositing the money, does not acquire a right but a mere expectancy, subject to the contingency of a valid approval of the sale by the court before the mortgage on the property is discharged by payment.

Arellano, C.J., Torres, Street, Malcolm and Avanceña, JJ., concur.

Batas Pinas