Lamb Construction Consortium Corporation obtained a P5.5M loan from Metropolitan Bank & Trust Co. To secure the loan, respondent executed a Real Estate Mortgage involving six parcels of land. Lamb failed to pay the loan upon maturity hence petitioner filed a petition for the extra-judicial foreclosure of the said properties. During the auction sale MBTC emerged as the highest bidder with the bid amount of P6.7M.
During the period of redemption, MBTC filed a verified petition for issuance of a writ of possession. It alleged that notwithstanding its demands, Lamb refused and failed to turn over actual possession of the foreclosed properties. The RTC denied the issuance of the writ on the ground that because MBTC had not yet deposited the surplus (1.4M) from the foreclosure sale. The CA reversed and allowed the issuance of the writ, but still ordered MBTC to pay the surplus.
MBTC appealed to the SC, arguing that in a petition for the issuance of a writ of possession, it is improper to rule upon the surplus or excess of the purchase price because the only issue that must be resolved is the purchaser’s entitlement to the writ. If there is any surplus or excess, the remedy of the respondent is to file an independent action for collection of surplus.
ISSUE
Whether or not the above statement is correct, and whether the writ of possession should be issued.
HELD
YES, the only issue to be resolved is the purchaser's entitlement to the writ. But for peculiar reasons, the writ of possession should NOT be a matter of right, but a matter of discretion. However, since the period to redeem has already lapsed, this point has become moot and the writ must now be issued. As a general rule, the issuance of a writ of possession is ministerial. However, there are exceptions.
In Sulit v. Court of Appeals we withheld the issuance of a writ of possession because the mortgagee failed to deliver the surplus from the proceeds of the foreclosure sale which is equivalent to approximately 40% of the total mortgage debt.
In Barican v. IAC, long before the mortgagee bank had sold the disputed property to the respondent therein, it was no longer the judgment debtor who was in possession but the petitioner spouses who had assumed the mortgage, and that there was a pending civil case involving the rights of
third parties. Hence, it was ruled therein that under the circumstances, the obligation of a court to issue a writ of possession in favor of the purchaser in a foreclosure of mortgage case ceases to be ministerial, because under Act 3135, the possession of the mortgaged property may be awarded to a purchaser in the extrajudicial foreclosure "unless a third party is actually holding the property adversely to the judgment debtor."
In Cometa v. IAC, where the properties in question were found to have been sold at an unusually lower price than their true value, that is, properties worth at least P500K were sold for only P57K, the court decided to withhold the issuance of the writ of possession on the ground that it could work injustice because the petitioner might not be entitled to the same.
The general rule that mere inadequacy of price is not sufficient to set aside a foreclosure sale is based on the theory that the lesser the price the easier it will be for the owner to effect the redemption. The same thing cannot be said where the amount of the bid is in excess of the total mortgage debt. The reason is that in case the mortgagor decides to exercise his right of redemption. The redemption price should be equivalent to the amount of the purchase price, plus 1% monthly interest up to the time of the redemption, plus assessments or taxes which the purchaser may have paid, and interest. Applying this to the present case would be highly iniquitous because that would mean exacting payment at a price unjustifiably higher than the real amount of the mortgage obligation. Simply put, such a construction will undeniably be prejudicial to the substantive rights of private respondent and it could even effectively prevent it from exercising the right of redemption. HOWEVER, since the period to redeem has already lapsed, as in this case, the writ must be granted.
The failure of the mortgagee to deliver the surplus proceeds does not affect the validity of the foreclosure sale. It gives rise to a cause of action for the mortgagee to file an action to collect the surplus proceeds. An action to collect the surplus proceeds is improper where there is a pending action for the nullification of the foreclosure proceedings.
(iii) Extension of Redemption Period Cases
Lazo v Republic Surety and Insurance Co, 31 SCRA 329 (1970) FACTS
Jose Robles obtained a loan (12k) from Philippine Bank of Commerce. Republic Surety & Insurance Co (Respondent) acted as the surety/co-debtor for Robles with respect the loan obtained from the bank. On the other hand, lazo spouses (petitioners) are the guarantors of Robles for the surety contract and, in connection therewith, petitioner spouses executed a Real Estate Mortgage over their property in favor of Respondent.
Robles defaulted in the payment of the note covering the obligation with the bank. It has been renewed several times until finally, the note was transferred by the bank to Republic Investment. Robles still defaulted in payment, hence, Respondent already paid the obligation. In turn, Respondent foreclosed extra-judicially the REM on July 1, 1958, respondent being the purchaser of the property. The sheriff cert. was issued on Aug. 2 1958. After which, due to the insistence of the petitioners, they started paying rent to respondent and they were able to secure an extension for the redemption of the foreclosed property. Several more extension were sought and granted until 1963 where Jose Robles still reneged in his obligation to redeem the property. The title to the property was consolidated in the name of Respondent via registration of the deed of absolute sale and sheriff’s cert. of sale on Mar. 28, 1963.
The Petitioner claims that the 1 year legal period of redemption should start to run from Mar. 28, 1963. Since, they filed their action on December of the same year (1968), then their right to redeem has not prescribed.
ISSUE
Whether the period of redemption already expired? RULING:
No it did not expire. The court ruled that the parties had abandoned entirely the concept of legal redemption in this case and converted it into one of conventional redemption, in which the only governing factor was the agreement between them. The registration of the certificate of sale on March 28, 1963 was entirely unnecessary and irrelevant to the question of when the period of redemption agreed upon expired. The record shows that the last request for extension approved by the defendant is that contained in the letter of Jose Robles dated May 30, 1960, at the bottom of which appears the handwrittten notation: "Ok for last extension one month. Please attach note of Mr. Lazo," this last evidently referring to the latter's confirmatory letter of May 31, 1960, Consequently, the period to redeem expired on June 30, 1960.
The plaintiffs' repeated requests for time within which to redeem, each with a definite date of expiration, generated binding contracts when approved by the defendant company. A contract, needles to say, has the force of law between the parties. In any event, the principle of estoppel would step in to prevent the plaintiffs from going back upon their own acts and representations to the prejudice of the other party who relied upon them. This is a principle of equity and natural justice, expressly adopted in our Civil Code and in Rule 31 of the Rules of Court.
Ibaan Rural Bank v CA, 321 SCRA 88 (1999) FACTS
The spouses Reyes were owners of 3 lots covered by 3 TCTs. The spouses mortaged these lots to Ibaan Rural Bank, Inc.
The spouses Reyes, as sellers, and the spouses Tarnate (private respondents) entered into a Deed of Absolute Sale with Assumption of Mortgage of the lots. Respondents failed to pay the assumed loan so Ibaan Rural Bank foreclosed on the property extra-judicially. The provincial Sheriff conducted a public auction of the lots and awarded the lots to the bank, the sole bidder. The certificate of sale stated that the redemption period expires in 2 years from the registration of the sale. No notice of extrajudicial foreclosure was given to the private respondents.
Private respondents then tried to redeem the properties and tendered payment. However, the bank refused the redemption on the ground that it had consolidated its tiles over the lot. Respondents then filed a complaint asking the foreclosure to be held void because there was no notice and that they were entitled to redeem the lots because they tendered payment for redemption before the 2-year period for redemption expired. TC ruled in favour of the private respondents.
ISSUE
Was there proper redemption despite the expiration of the 1 year right of redemption?
Was the 2-year redemption period unilaterally made by the sheriff valid despite neither party agreeing to such?
HELD
Yes, there was a proper redemption by the respondents.
When petitioner received a copy of the certificate of sale registered at the RD, it had actual and constructive knowledge of the certificate and its contents. For two years it did not object to the two-year extension of the redemption period. Thus it could be said that the petitioner consented to the two-year redemption period especially since It had time to object to it and did not.
When circumstances imply a duty to speak on the part of a person for whom an obligation is proposed, his silence can be construed as consent. By its silence and inaction, petitioner misled private respondent to believe that they had two years within which to redeem the mortgage. After the lapose of two years, petitioner is esopped from asserting that the period for redemption was only one year and that the period had already lapsed. Estoppel in pais arises when one, by his acts, representations or admissions, or by his own silence when he out to speak out, intentionally or though culpable negligence, induces another to believe certain facts to exist and
such other rightfully relies and acts on such belief, so that he will be prejudiced if the former is permitted to deny the existence of such facts. The CA in affirming decision of the TC relied on Lazo vs Republic surety, which stated that the one year period of redemption provided in act no. 3135 is only directory and can be extended by agreement of the parties. This is not so in the instant case. There was no voluntary agreement. The sheriff unilaterally and arbitrarily extended the period of redemption to two years in the certificate of sale. The parties were not privy to the extension made by the sheriff. Nonetheless, as above discussed, the bank can not after the lapse of two years insist that the redemption period was one year only. The rule on redemption is liberally interpreted in favor of the original owner of the property.
Such interpretation will be as loose as the morals of Alex as proven by his many homosexual advances on men.
(iv) Tolling of Redemption Period Cases
Sumerariz v DBP, 21 SCRA 1374 (1967)