GR 34294; (March, 1932) (Digest)
G.R. No. 34294; March 19, 1932
MARIA LUISA MEDINA, CARMEN MEDINA, EDUARDO ATIENZA and VICENTE VELEZ, plaintiffs-appellants, vs. THE PHILIPPINE NATIONAL BANK, defendant-appellee.
FACTS
On October 30, 1920, Manila Commercial Co. and La Yebana Co. mortgaged four parcels of land to the Philippine National Bank (PNB) to secure a debt. The mortgage contract allowed PNB to extrajudicially foreclose and sell the property upon default. On May 27, 1927, Manila Commercial Co. defaulted on its debt of P794,256. PNB extrajudicially foreclosed the mortgage under Act No. 3135, and at the public auction on September 24, 1927, PNB itself purchased the properties for P30,000. The certificate of sale noted a one-year right of redemption. Meanwhile, the plaintiffs had obtained a money judgment against Manila Commercial Co. and, in execution thereof, purchased at a sheriff’s sale on September 1, 1928, the “right of redemption” over the four parcels for P28,000. When plaintiffs later sought to redeem the properties from PNB, the bank demanded payment of the entire debt of Manila Commercial Co. (P794,256.80), not just the auction price. Plaintiffs filed an action to compel PNB to accept a redemption price based on the auction sale amount, after accounting for income from the properties.
ISSUE
1. Whether the plaintiffs, as judgment creditors/successors of Manila Commercial Co., acquired the right of redemption over all four mortgaged parcels.
2. What is the proper redemption price the plaintiffs must pay to PNB: the auction sale price (P30,000) or the entire outstanding debt of the mortgagor (P794,256.80)?
RULING
1. On the Right of Redemption: The Supreme Court affirmed the trial court’s ruling that the plaintiffs acquired the right of redemption only over the two parcels registered in the name of Manila Commercial Co. (the judgment debtor), and not over the two parcels registered in the name of La Yebana Co. (which was not a party to the plaintiffs’ suit). The right of redemption is personal to the owner/debtor whose property is sold.
2. On the Redemption Price: The Supreme Court ruled that the plaintiffs must pay PNB the entire outstanding debt of Manila Commercial Co. (P794,256.80), plus interest and costs, to redeem the two parcels. The Court held that the Philippine National Bank’s charter (a special law) grants the debtor a right of redemption, but requires payment of the entire debt, not merely the auction price. This right applies whether the foreclosure sale is judicial or extrajudicial, as agreed in the mortgage contract. By using the procedure under the general law (Act No. 3135) to conduct the extrajudicial sale, PNB did not waive its right under its charter to demand full payment of the debt for redemption. The judgment of the trial court was affirmed.
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