GR 45919; (October, 1938) (Digest)
G.R. No. 45919 ; October 24, 1938
RODRIGO GARCIA MATTA and SOLEDAD LAGO, plaintiffs-appellants, vs. THE PHILIPPINE NATIONAL BANK and EMILIO RODRIGUEZ, defendants-appellants.
FACTS
Plaintiffs-spouses obtained two agricultural loans from the Philippine National Bank (PNB), secured by mortgages on fifteen parcels of land. Upon default, PNB foreclosed the mortgages, purchased the properties at the public auction, and later granted defendant Emilio Rodriguez an option to purchase the lands. Within the one-year redemption period under Act No. 2938 , the plaintiffs sought to redeem the properties. They filed an action seeking either (1) to be subrogated to Rodriguez’s position under his option contract with PNB, or (2) to redeem the lands directly from PNB under Section 32 of Act No. 2938 , after an accounting of the fruits and products received by PNB and Rodriguez during the redemption period.
ISSUE
1. Whether the plaintiffs are entitled to redeem the properties from PNB under Section 32 of Act No. 2938 , and whether PNB must account for the fruits and products received during the redemption period.
2. Whether the plaintiffs have the right to be subrogated to the rights of Emilio Rodriguez under his option contract with PNB.
RULING
1. Yes, the plaintiffs are entitled to redeem, and PNB must account for the fruits. The Supreme Court modified the trial court’s judgment. It held that under Section 32 of Act No. 2938 , the mortgagor has the right to redeem within one year from the sale. As the mortgagee-purchaser at the auction, PNB is obligated to render an accounting of the fruits and products of the mortgaged properties during the redemption period. The proceeds from these fruits must be credited to the mortgagors’ debt. Upon liquidation of the net balance, the mortgagors may redeem the properties in the manner prescribed by law. The Court clarified that a personal demand for accounting is sufficient; a court order is not necessary.
2. No, the plaintiffs are not entitled to subrogation. For a mortgagor to be subrogated to the rights of a third-party purchaser (or option holder), the mortgagor must pay not merely the price paid by that third party, but the full redemption amount as fixed by law—which includes the unpaid judgment debt, interest, and all costs and expenses incurred by the bank from the execution, sale, and custody of the properties. The plaintiffs’ offer to pay only the amount Rodriguez agreed to pay (P40,000 in installments) was insufficient.
The appeals of PNB and Rodriguez were dismissed.
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