G.R. No. 101083
METROPOLITAN BANK AND TRUST COMPANY, petitioner, vs. HON. COURT OF APPEALS AND SPOUSES VIRGILIO AND GLORIA LIM, respondents.

July 8, 1996

FACTS

Spouses Virgilio and Gloria Lim obtained a loan from Metropolitan Bank and Trust Company (Metrobank) secured by a real estate mortgage over their property. The mortgage contract contained an acceleration clause stating that upon default of any installment, the entire principal sum with interest would become immediately due and payable at the mortgagee’s option. The Lims defaulted. Metrobank extrajudicially foreclosed the mortgage. 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 Lims offered to redeem the property by tendering payment equivalent to the amount of the purchase price plus interest. Metrobank refused the tender, insisting that the redemption price should include not only the auction price and interest, but also attorney’s fees, liquidated damages, and other charges stipulated in the mortgage contract but not included in the foreclosure sale bid. The Lims filed an action for consignation and specific performance. The trial court ruled in favor of the Lims, ordering Metrobank to accept the redemption amount tendered. The Court of Appeals affirmed. Metrobank appealed to the Supreme Court.

ISSUE

Whether the redemption price in an extrajudicial foreclosure of a real estate mortgage under Act No. 3135 includes only the purchase price at the auction sale plus interest, or whether it also includes other charges and expenses stipulated in the mortgage contract but not included in the bid.

RULING

The Supreme Court DENIED the petition and AFFIRMED the decision of the Court of Appeals. The redemption price is limited to the purchase price at the foreclosure sale plus interest, and does not include attorney’s fees, liquidated damages, and other charges stipulated in the mortgage contract but not included in the bid.

The Court held that the right of redemption in extrajudicial foreclosure is governed specifically by Act No. 3135 , as amended. Section 6 of the Act explicitly states that the redemptioner shall pay the purchaser the amount of the purchase price plus interest at the rate of one percent per month. The law is clear and leaves no room for interpretation. It does not authorize the inclusion of other amounts not part of the bid. To allow the mortgagee-purchaser to add other charges would be to amend the law by judicial fiat and would violate the policy of the law to aid redemption and give the mortgagor a chance to recover his property. The mortgagee is free to bid an amount that includes all claims, charges, and expenses to protect its interest. If it chooses to bid a lower amount, it cannot later demand additional payments as a condition for redemption. The stipulated charges and attorney’s fees remain as personal obligations of the mortgagor, recoverable in a separate personal action, but they cannot be added to the statutory redemption price.