GR 132287; (January, 2006) (Digest)
G.R. No. 132287 ; January 24, 2006
SPOUSES BONIFACIO and FAUSTINA PARAY, and VIDAL ESPELETA, Petitioners, vs. DRA. ABDULIA C. RODRIGUEZ, et al., Respondents.
FACTS
Respondents, owners of shares in Quirino-Leonor-Rodriguez Realty Inc., pledged these shares to petitioners Bonifacio and Faustina Paray to secure loans from 1979 to 1980. Upon respondents’ default, the Parays initiated foreclosure. Respondents sued to nullify the pledges, but the Regional Trial Court (RTC) dismissed their complaint and authorized the foreclosure and public auction. This decision became final after affirmance by the Court of Appeals and Supreme Court. Notices of sale scheduled the auction for November 4, 1991.
Before the auction, respondents attempted to tender payments to the Parays, which were refused. They then consigned various amounts with the RTC Clerk of Court in October and November 1991. Despite these consignations, the public auction proceeded as scheduled on November 4, 1991, with petitioner Vidal Espeleta winning the bid for all pledged shares. Respondents did not participate in the auction.
ISSUE
Whether the consignation of payments by respondents extinguished their loan obligations and nullified the subsequent public auction sale of the pledged shares.
RULING
No. The Supreme Court reversed the Court of Appeals and reinstated the RTC decision. The appellate court erred in applying rules on redemption to the consignations. A pledge is an accessory contract securing a principal obligation. Foreclosure of a pledge, governed by Articles 2112-2115 of the Civil Code, is a judicial or notarial sale to satisfy the debt from the proceeds. It is not a sale with a right of redemption. The debtor’s right is to have the pledge sold at public auction and to receive any surplus, not to redeem the property after sale.
The final and executory judgment in the prior cases expressly authorized the foreclosure and auction. Respondents’ consignations, made years after default and only after the judgment became final, were untimely and ineffective to extinguish the obligations. The proper recourse for respondents was to participate in the auction to potentially recover the shares. The collective sale of all shares was permissible as the judgment treated the pledges collectively, and the law does not require individual sales for shares owned by different pledgors when sold pursuant to a single judicial decree. The auction was valid, and the consignations merely entitle respondents to recover the deposited amounts.