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

July 13, 1992

FACTS

Spouses Fortunato and Virginia Veneracion obtained a loan from Metropolitan Bank and Trust Company (Metrobank) secured by a real estate mortgage over their property. They defaulted on the loan. Metrobank extrajudicially foreclosed the mortgage, and the property was sold at a public auction where Metrobank was the highest bidder. A certificate of sale was issued and registered. Within the one-year redemption period, the Veneracions 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 total obligation from the date of foreclosure sale until actual redemption, pursuant to a provision in the mortgage contract. The Veneracions contended that the applicable legal rate of interest (12% per annum) under Act No. 3135 , as amended, should apply, not the contractual 1% monthly. They filed an action for consignation of the redemption price. The trial court ruled in favor of the Veneracions, ordering Metrobank to accept the redemption price based on the legal rate of interest. The Court of Appeals affirmed the trial court’s decision.

ISSUE

Whether the stipulation in the mortgage contract providing for 1% monthly interest on the total obligation from the date of foreclosure sale until redemption is valid and binding for the purpose of determining the redemption price in an extrajudicial foreclosure.

RULING

No. The Supreme Court affirmed the decision of the Court of Appeals. The redemption price in an extrajudicial foreclosure of mortgage is governed specifically by Section 6 of Act No. 3135 , as amended. The law mandates that the mortgagor may redeem the property by paying the amount due under the mortgage deed, with interest thereon at the rate specified in the mortgage, but from the date of the sale, the interest shall be at the rate agreed upon, if stipulated, and if not, twelve per centum per annum. The Court held that the phrase “if stipulated” refers to an interest rate stipulated for the loan obligation secured by the mortgage, not a separate stipulation imposing an additional interest charge specifically for the redemption period. The mortgage contract in this case contained no such stipulation for the post-foreclosure redemption period. Therefore, in the absence of a specific agreement on the interest rate applicable during the redemption period, the legal rate of 12% per annum under Act No. 3135 applies. The contractual 1% monthly interest was part of the loan obligation, which was consolidated into the foreclosure sale price. To allow the bank to impose this rate during redemption would be to exact double interest and would contravene the equitable nature of the right of redemption. The consignation made by the Veneracions was valid and discharged their obligation.