G.R. No. 175792 - Spouses Magtoto vs. Court of Appeals

This litigation marks the third time the subject matter—Development Bank of the Philippines (DBP) v. West Negros College (WNC), later substituted by V-2 SAC Management and Development Corporation (V2)—has been before the Court.
Previous decisions include:

The Decision in G.R. No. 152359 (promulgated 28 October 2002) and its Resolution (21 May 2004).
The Decision in G.R. No. 174103 (promulgated 16 September 2008) and its Resolution (23 December 2008).

The main dispute centers on the correct computation of the redemption price, particularly whether it should consist of the total indebtedness plus contractual interest.

On 12 December 1967, Bacolod Medical Center (BMC) secured a loan of Php2.4 million from DBP with a mortgage on two parcels of land (Lot Nos. 1397-A and 1397-B-1) covered by Transfer Certificates of Title Nos. T-25053 and T-29169.
BMC’s succession:

DBP foreclosed the mortgage extrajudicially on 30 January 1989 due to BMC’s unpaid obligation amounting to Php32,526,133.62.
At the public auction held on 24 August 1989, DBP bid Php4,090,117.36 as the highest and sole bidder, and the sale was later registered on 11 July 1990.

A provisional agreement was reached between BMC and DBP-Bacolod prior to the expiration of the redemption period (11 July 1991), setting the redemption price at Php21,500,000.00.
Despite this agreement, on 10 July 1991 BMC, without DBP’s approval, assigned its interests and the right of redemption to WNC.
Dispute arose when WNC later requested a Certificate of Redemption amidst disagreements over the computation of interest and additional charges, with DBP insisting that the redemption price must include the full outstanding indebtedness plus contractual interest.
The subsequent actions in the lower courts:

The Regional Trial Court in Bacolod City ruled in favor of WNC by ordering the cancellation of DBP’s titles and the issuance of new ones.
The Court of Appeals (CA) had issued Resolutions (dated 14 March 2018 and 04 September 2018) that computed the redemption price at Php23,099,850.82.

DBP filed a petition for review on certiorari challenging the CA’s computation in light of the Supreme Court’s earlier decisions.

The redemption price comprises the total indebtedness (the unpaid loan amount) plus contractual interest from the date of the public auction (24 August 1989).
DBP is entitled to collect accrued interest even after the foreclosure sale if it did not take material possession of the property.

A commission was appointed to submit a computation report based on the restructured promissory note dated 06 January 1975, which provided for compounded interest, penalties, and fees.
The commission’s report computed the redemption price, taking into account:

The base principal of Php32,526,133.62 as of the foreclosure date.
Accrued 12% interest from the public auction to the expiry of the statutory redemption period.
Additional amounts for attorney’s fees, liquidated damages, and compounded interest, arriving at a figure of Php23,099,850.82 for part of the proceedings.

Ultimately, DBP argued that the proper computation must adhere to the already settled obligation as determined by its charter and earlier Supreme Court decisions.

Whether the redemption price for properties mortgaged with DBP is limited only to the amount computed by the Court of Appeals (i.e., Php23,099,850.82) or should be based on the total indebtedness (Php32,526,133.62) as of the foreclosure sale plus contractual interest from the auction date onward.
Whether DBP is entitled to collect contractual interest after the foreclosure sale given that it did not take material possession of the property during the redemption period.
Whether the imposition of compounded interest, penalties, and additional charges by virtue of the terms in the promissory note should apply, notwithstanding the earlier CA and commission computations.
Whether the Court of Appeals’ rulings and computations adequately adhered to the binding Supreme Court decisions and the provisions of DBP’s charter (as embodied in EO 81 and RA 8523).