G.R. No. L-23764 December 26, 1967
JUAN SUMERARIZ and LUISA SUMERARIZ, plaintiffs-appellants, vs. DEVELOPMENT BANK OF THE PHILIPPINES and PHILIPPINE SURETY AND INSURANCE CO., INC., defendants-appellees.

FACTS

On September 15, 1948, plaintiffs Juan Sumerariz and Luisa Sumerariz mortgaged two parcels of land with a house to be constructed to the Rehabilitation Finance Corporation (now Development Bank of the Philippines or “the Bank”) to secure a P15,000.00 loan. Due to plaintiffs’ failure to comply with the loan terms, the Bank foreclosed on the mortgage. After several postponements at plaintiffs’ request, the auction sale was set for March 29, 1955. The Bank agreed to another postponement if a token payment of at least P100.00 was made by 9:00 a.m. on March 29. No payment was made, and the Bank bought the property at auction for P8,000.00. The Bank notified plaintiffs of their one-year right of redemption, expiring on March 29, 1956. Instead of redeeming, on March 26, 1956, plaintiffs filed Civil Case No. 29306 against the Bank and the Sheriff of Manila to annul the foreclosure sale, alleging the Bank violated an agreement to postpone the sale. While that case was pending, the Bank sold the property to Philippine Surety and Insurance Co., Inc. (“the Surety Co.”) on July 19, 1956. The trial court dismissed Civil Case No. 29306 on January 13, 1958, ruling plaintiffs failed to redeem within the statutory period and the Bank became the absolute owner. The Court of Appeals affirmed this dismissal on November 5, 1959, and the Supreme Court denied a petition for certiorari on February 5, 1960. On March 16, 1960, plaintiffs filed the present action against the Bank and the Surety Co. to annul the sale to the Surety Co. and to be allowed to redeem the property. The defendants pleaded res judicata and prescription. The trial court dismissed the complaint, ordered plaintiffs to vacate, and to pay monthly rentals to the Bank from March 30, 1960. Plaintiffs appealed.

ISSUE

1. Whether the decision in Civil Case No. 29306 constitutes res judicata and bars the present action.
2. Whether the filing of Civil Case No. 29306 suspended the one-year period of redemption.
3. Whether the appellants should be allowed to redeem the property based on an alleged willingness of the Bank.
4. Whether the appellants are liable to pay rents for the property.

RULING

1. YES. The Supreme Court held that the doctrine of res judicata applies. There is identity of parties because the Surety Co., as the Bank’s successor-in-interest, is in privity with the Bank, and the Sheriff, a formal party in the first case, is virtually a party in the present proceedings. There is identity of subject-matter (the same property) and identity of cause of action. In both cases, the plaintiffs’ cause of action was based on the alleged invalidity of the foreclosure sale due to a violated agreement, a predicate already rejected in the first case. The same evidence would support both causes of action. The issue of ownership was settled in the first case and cannot be relitigated.
2. NO. The Court found no statute or decision supporting the pretense that the institution of an action to annul the foreclosure sale suspends the redemption period. Plaintiffs never exercised their right of redemption by depositing the necessary amount. Unlike the Rules of Court governing ordinary executions, the charter governing the Bank ( Commonwealth Act No. 459 in relation to Republic Act No. 85 ) contains no provision for extending the redemption period. The decision in the previous case definitively held that the right of redemption was extinguished due to plaintiffs’ failure to exercise it within the statutory period.
3. NO. The alleged willingness of the Bank to allow redemption was a question of fact not raised in the lower court and therefore cannot be entertained on appeal. The Bank also denied having agreed to such redemption.
4. NO, but modified. The fourth assignment of error was premised on the plaintiffs’ alleged right of redemption, which was already held to have expired. However, the Court affirmed the trial court’s decision ordering plaintiffs to pay rents. The liability for rents stemmed from their failure to redeem and vacate, not from a subsisting right of redemption.
The Supreme Court AFFIRMED the decision of the Court of First Instance of Manila.