G.R. No. 178449 October 17, 2008
METROPOLITAN BANK AND TRUST COMPANY, petitioner, vs. SPOUSES ELISA TAN AND ANTONIO TAN and SPOUSES LILIAN TAN AND MARCIAL SEE, respondents.

FACTS

In June 1974, Ylang-Ylang Merchandising Company, a partnership, obtained a loan from petitioner Metropolitan Bank and Trust Company (Metrobank). Respondents spouses Marcial See and Lilian Tan secured this loan with a real estate mortgage over their property. Subsequent loans were obtained by the partnership (later converted into Ajax Marketing and Development Corporation) in 1976 and 1979, each secured by additional real estate mortgages over the same property executed by the same spouses. On December 2, 1980, the three loans were consolidated into a single loan evidenced by Promissory Note (PN) No. BDS-3605. For failure to pay this obligation, Metrobank foreclosed the mortgage on June 19, 1984, and purchased the property at public auction. Respondents filed a case (Civil Case No. 85-33933) seeking annulment of the foreclosure sale, arguing novation had extinguished the mortgages. The Supreme Court, in a Decision dated September 14, 1995, upheld the validity of the foreclosure but ruled that Metrobank improperly included another unsecured loan (PN No. BDS-3583) in the bid price. On September 12, 1997, respondents filed the present case for Specific Performance, seeking to redeem the foreclosed property by tendering ₱1,609,334.61. They alleged Metrobank rejected their tender and instead sold the property to “John and Peter Doe” for ₱11,500,000.00. Metrobank moved to dismiss, disclosing that the property was not sold to third parties but was redeemed on September 12, 1997, by respondents spouses Marcial See and Lilian Tan themselves through a “Deed of Redemption and Reconveyance” upon payment of ₱11,500,000.00. The trial court and the Court of Appeals dismissed the complaint, ruling that the redemption by the registered owners (spouses See) extinguished respondents’ cause of action.

ISSUE

Whether the Court of Appeals erred in affirming the dismissal of the complaint for Specific Performance filed by respondents (spouses Tan and spouses See) on the ground that the redemption of the foreclosed property by the registered owners (spouses See) extinguished the cause of action.

RULING

No, the Court of Appeals did not err. The Supreme Court denied the petition and affirmed the assailed Decision and Resolution of the Court of Appeals. The right of redemption under Act No. 3135 belongs to the mortgagor/debtor or their successors-in-interest. In this case, the mortgagors were the registered owners, spouses Marcial See and Lilian Tan. Their redemption of the property on September 12, 1997, by paying Metrobank ₱11,500,000.00, as evidenced by the “Deed of Redemption and Reconveyance,” was a valid exercise of their statutory right. This redemption effectively extinguished any separate right of redemption that the other respondents (spouses Antonio Tan and Elisa Tan) may have claimed. The redemption by the mortgagors rendered the complaint for specific performance to compel redemption moot and academic. The Court found no merit in the argument that the redemption price was excessive, noting that the redemptioners (spouses See) voluntarily paid the amount. Furthermore, the Court held that the consolidation of the three loans into PN No. BDS-3605 did not constitute novation that extinguished the original real estate mortgages, as there was no clear intent to novate, and the mortgage contracts expressly secured future advancements.