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

July 8, 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 payment to Metrobank. Metrobank refused to accept the payment, insisting that the redemption price must include 1% monthly interest on the purchase price, attorney’s fees, and foreclosure expenses, as stipulated in the mortgage contract. The Vital spouses contended that the redemption price should be limited to the purchase price plus interest at the rate of 1% per month from the date of sale to the date of redemption, as provided under Act No. 3135 (the law governing extrajudicial foreclosure). They consigned the amount they computed with the trial court and filed an action for consignation and damages.

ISSUE

Whether, in an extrajudicial foreclosure of a real estate mortgage, the redemption price is governed solely by Act No. 3135 , or whether the contracting parties may validly stipulate additional charges (such as attorney’s fees and expenses) to be included in the redemption price.

RULING

The redemption price in an extrajudicial foreclosure of a real estate mortgage is governed exclusively by Act No. 3135 , as amended. The Supreme Court ruled that the right of redemption is a statutory privilege, and the terms and conditions for its exercise are prescribed by law, not by contract. Section 6 of Act No. 3135 provides that the redemption price is the purchase price plus interest at the rate of 1% per month up to the time of redemption. The law makes no provision for adding attorney’s fees, litigation expenses, or other charges. Contractual stipulations that expand the statutory redemption price by imposing additional burdens on the mortgagor are void as contrary to law and public policy. The purpose of the redemption law is to give the mortgagor a chance to recover his property, and this right cannot be diminished or rendered illusory by contractual provisions. Therefore, Metrobank could not validly require the Vital spouses to pay amounts beyond those specified in Act No. 3135 as a condition for redemption. The consignation made by the spouses based on the statutory computation was valid and effected the redemption.