G.R. No. 152359 October 28, 2002
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. WEST NEGROS COLLEGE, INC., respondent.

FACTS

Bacolod Medical Center (BMC) obtained a loan from petitioner Development Bank of the Philippines (DBP) secured by a mortgage on two parcels of land. Due to BMC’s failure to pay, DBP extrajudicially foreclosed the mortgage. At the public auction on August 24, 1989, DBP was the highest bidder for P4,090,117.36, while BMC’s outstanding loan balance was P32,526,133.62. Prior to the expiration of the redemption period, BMC and DBP’s Bacolod branch agreed to a compromise redemption price of P21,500,000.00, subject to DBP head office approval. On July 10, 1991, BMC assigned its right to redeem the foreclosed properties to respondent West Negros College. On October 27, 1991, DBP’s head office rejected the compromise amount. West Negros College then sought to redeem the properties by paying the amount based on Section 30, Rule 39 of the Rules of Court and Act No. 3135 (the amount of purchase with 1% monthly interest plus expenses). The Ex-Officio Provincial Sheriff concurred with this computation. DBP objected, insisting that under its charter, the redemption price must be the total outstanding indebtedness as of the foreclosure sale with agreed interest. West Negros College filed a petition with the RTC, which ruled in its favor. The Court of Appeals affirmed the RTC decision. DBP appealed to the Supreme Court.

ISSUE

Whether the redemption price for a real property mortgaged to and foreclosed extrajudicially by the Development Bank of the Philippines should be based on Section 30, Rule 39 of the Rules of Court and Act No. 3135 (purchase price plus interest and expenses) or on the DBP’s charter (total indebtedness as of the sale date with contractual interest).

RULING

The Supreme Court ruled in favor of petitioner DBP. The redemption price must be based on the DBP’s charter, not on the general provisions of Act No. 3135 and the Rules of Court. The Court held that where a property is mortgaged to and foreclosed by the DBP, the mortgagor may redeem it only by paying to the Bank all the amount owed on the date of the sale, with interest on the total indebtedness at the rate agreed upon in the obligation. This rule, embodied successively in the charters of the DBP and its predecessor agencies ( Commonwealth Act No. 459 , Republic Act No. 85 , and Executive Order No. 81), is a special law that prevails over the general law ( Act No. 3135 ). The cases cited by respondent (Co v. Philippine National Bank and Philippine National Bank v. Court of Appeals) involved a different bank (PNB) with a distinct charter and were thus inapplicable. The Court emphasized the consistent jurisprudence upholding the DBP’s charter provision on redemption. Consequently, respondent West Negros College did not validly redeem the property by merely paying the auction price plus interest and expenses.