G.R. No. 101083 , July 30, 1993
METROPOLITAN BANK AND TRUST COMPANY, Petitioner, vs. HON. COURT OF APPEALS AND SPOUSES FORTUNATO AND VIRGINIA VANGUARDIA, Respondents.

FACTS

Spouses Fortunato and Virginia Vanguardia 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 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 Vanguardias filed a complaint for annulment of the foreclosure sale and damages against Metrobank, alleging irregularities. They did not, however, consign or offer to pay the redemption price. After the redemption period expired, Metrobank executed an affidavit of consolidation of ownership and a new title was issued in its name. Metrobank then moved to dismiss the Vanguardia’s complaint, arguing that the action was essentially one for redemption which had already been barred by the expiration of the redemption period and their failure to consign the redemption price. The trial court denied the motion to dismiss. The Court of Appeals affirmed the denial, holding that the action was not for redemption but for annulment based on alleged irregularities, which could be pursued independently.

ISSUE

Whether an action for annulment of an extrajudicial foreclosure sale, filed within the redemption period but without a tender or consignation of the redemption price, can prosper after the expiration of the statutory redemption period.

RULING

No. The Supreme Court granted Metrobank’s petition and reversed the Court of Appeals. The Court held that the Vanguardias’ action, although denominated as one for annulment, was in substance an action for redemption. The alleged irregularities in the foreclosure sale (e.g., inadequacy of price, lack of proper notices) are legal grounds that can be raised to set aside the sale, but such an action must be filed within the redemption period. More importantly, a party seeking to annul a foreclosure sale on such grounds must show a clear right to the relief, which includes the ability and willingness to redeem the property. This requires a valid tender or consignation of the redemption price as a condition precedent for maintaining the suit. By filing the suit without consigning the redemption price and allowing the redemption period to lapse, the Vanguardias lost their right to redeem the property. Consequently, Metrobank’s consolidation of title became proper and the action for annulment could no longer be maintained. The expiration of the redemption period extinguished any right to challenge the validity of the sale, as the remedy of annulment is ancillary to the right of redemption. The Court emphasized that the policy of the law is to give stability to foreclosure proceedings.