G.R. No. 101083
METROPOLITAN BANK AND TRUST COMPANY, petitioner, vs. HON. COURT OF APPEALS AND SPOUSES FORTUNATO AND VIRGINIA VITAL, respondents.

July 30, 1996

FACTS

Spouses Fortunato and Virginia Vital obtained a loan from Metropolitan Bank and Trust Company (Metrobank) secured by a real estate mortgage over their property. They defaulted. Metrobank extrajudicially foreclosed the mortgage and purchased the property as the highest bidder at the public auction. A certificate of sale was issued and registered. Within the one-year redemption period, the Vital spouses offered to redeem the property by tendering a manager’s check for the full redemption price. Metrobank refused to accept the tender, insisting that redemption could only be made in legal tender (cash). The Vital spouses filed an action for consignation. The trial court ruled in their favor, ordering Metrobank to accept the manager’s check and execute a deed of redemption. The Court of Appeals affirmed. Metrobank appealed, arguing that a manager’s check is not legal tender and redemption must be made in cash.

ISSUE

Whether a manager’s check constitutes legal tender sufficient to effect the redemption of a foreclosed property within the statutory redemption period.

RULING

No. The Supreme Court reversed the decisions of the lower courts. A manager’s check is not legal tender. Legal tender refers to currency (coins and notes) which the law compels a creditor to accept in payment of a debt when tendered by the debtor in the right amount. Under the Central Bank Act, checks are not legal tender. The right of redemption is statutory and must be exercised in the manner prescribed by law. Act No. 3135 , governing extrajudicial foreclosure, requires payment of the redemption price in “legal tender.” Therefore, to validly exercise the right of redemption, the mortgagor must pay the redemption price in cash or legal tender. A manager’s check, while a secure instrument, is still a check and a mere substitute for money, not money itself. The tender of a manager’s check does not constitute valid redemption. The Court emphasized that the one-year redemption period is peremptory, and failure to make a valid tender within that period extinguishes the right of redemption. Since the Vital spouses did not validly tender legal tender within the redemption period, their right of redemption was lost.