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

July 8, 1996

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 purchased the property as the highest bidder at the public auction. A certificate of sale was issued and registered. Before the expiration of the one-year redemption period, the Veneracions filed a complaint for annulment of the foreclosure sale, alleging irregularities. They did not, however, consign or offer to redeem the property within the redemption period. After the redemption period expired, Metrobank consolidated its ownership and a new title was issued in its name. The trial court dismissed the complaint, ruling that the action was essentially one for redemption filed after the redemption period had lapsed. The Court of Appeals reversed, holding that the action was not for redemption but for annulment based on alleged defects in the foreclosure sale, which could be filed even after the redemption period.

ISSUE

Whether an action for annulment of an extrajudicial foreclosure sale, based on irregularities in its conduct, can prosper when filed after the expiration of the statutory redemption period without the mortgagor having exercised or consigned the redemption price.

RULING

No. The petition is granted. The decision of the Court of Appeals is reversed, and the trial court’s order of dismissal is reinstated.

The Supreme Court held that the alleged irregularities in the foreclosure sale (such as inadequacy of price, lack of proper notice, or violation of procedural requirements) are merely grounds to set aside the sale *within the redemption period*. After the expiration of the redemption period without the mortgagor having redeemed the property, the foreclosure sale becomes absolute and the mortgagor loses all interest in the property. The right to redeem is paramount and must be exercised within the period fixed by law. An action for annulment of the sale, filed after the redemption period without a tender of the redemption price, is essentially a substitute for redemption and is barred by the mortgagor’s failure to exercise the right of redemption within the statutory period. The Court emphasized that the policy of the law is to give finality to foreclosure sales after the redemption period. To allow an action for annulment based on irregularities to proceed after the lapse of the redemption period, without redemption, would circumvent the statutory redemption period and undermine the stability of foreclosure proceedings.