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

July 30, 1996

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 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 Vanguardias offered to redeem the property by tendering a manager’s check for the full redemption price. Metrobank refused to accept the tender, insisting that the redemption must be made in legal tender (cash) only. The Vanguardias filed an action for consignation. The trial court ruled in their favor, ordering Metrobank to accept the manager’s check and execute the deed of redemption. The Court of Appeals affirmed. Metrobank appealed, arguing that redemption under Act No. 3135 must be made in “legal tender.”

ISSUE

Whether a manager’s check is a proper medium for tendering payment to effect an equitable redemption of foreclosed property under Act No. 3135.

RULING

YES. The Supreme Court affirmed the decision of the Court of Appeals. The one-year redemption period is a substantive right in favor of the mortgagor, which must be liberally construed in his favor. While Act No. 3135 states redemption should be made by paying the amount due “in legal tender,” the Court held that a manager’s check is “as good as cash” and constitutes a valid tender of payment. A manager’s check is a check drawn by the bank upon itself, accepted in advance by the act of issuance, and is considered a cash equivalent in commercial and banking transactions. Metrobank’s refusal to accept it was unjustified and in bad faith, as the check was a secure and immediate form of payment. The Court emphasized that the law’s intent is to allow redemption, not to prescribe a rigid and technical form of payment that would defeat the mortgagor’s equity of redemption. The consignation by the Vanguardias was valid and discharged their obligation.