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. Metrobank extrajudicially foreclosed the mortgage, and the property was sold at 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 and 2% monthly penalty from the date of foreclosure sale to the date of redemption, as stipulated in the mortgage contract. The Veneracions contended that under Act No. 3135 (the law governing extrajudicial foreclosure), the redemption price is limited to the purchase price plus interest at 1% per month, and does not include penalties. They filed an action for consignation. The trial court ruled in favor of the Veneracions, ordering Metrobank to accept the redemption amount without penalties. 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 includes penalties stipulated in the mortgage contract, in addition to the purchase price and 1% monthly interest as provided under Act No. 3135 .

RULING

No. The Supreme Court DENIED the petition and AFFIRMED the decision of the Court of Appeals. The redemption price is governed exclusively by Section 6 of Act No. 3135 , as amended, which states that the mortgagor may redeem the property “by paying the amount of the purchase price, with interest thereon at the rate of one per centum per month, together with the amount of any assessments or taxes which the purchaser may have paid thereon after purchase, and interest on such last named amount at the same rate.” The law is clear and does not include penalties. The contractual stipulation imposing penalties is effective only between the parties to enforce the obligation, but upon foreclosure and during the statutory redemption period, the right to redeem and the redemption price are fixed by law. To allow the imposition of penalties would be to add a condition not prescribed by law and would undermine the equity of redemption, a right favored in law. The redemptioner need only pay the statutory price to exercise the right of redemption.