G.R. No. 152359 - Development Bank of the Philippines vs. West Negros College, Inc.

Case Digest (G.R. No. 152359)
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Facts:

Background and Parties

The petitioner is the Development Bank of the Philippines (DBP), a government lending institution, and the respondent is West Negros College, Inc.
Bacolod Medical Center (BMC) originally secured a loan from DBP on 12 December 1967 to finance the building and operation of a hospital.
The loan, amounting to P2,400,000.00, was secured by a mortgage covering two parcels of land (Lots Nos. 1397-A and 1397-B-1), a hospital building to be constructed, and associated medical equipment.
The mortgage was expressly constituted subject to the provisions of RA 85, which created the Rehabilitation Finance Corporation – the predecessor to DBP.

Extrajudicial Foreclosure and Auction

Due to BMC’s failure to pay the loan, DBP instituted an extrajudicial foreclosure on 30 January 1989 under Act 3135 (1924).
On 24 August 1989 the mortgaged properties were sold at public auction, where DBP emerged as the highest (and only) bidder, offering P4,090,117.36.
At the time of the auction, the outstanding loan balance of BMC was P32,526,133.62.
The ex-officio Provincial Sheriff executed the certificate of sale on 25 August 1989, and by 11 July 1990 the sale was registered in the Registry of Deeds.

Redemption Agreement and Subsequent Developments

Before the expiration of the redemption period (11 July 1991), BMC and DBP agreed to a compromise redemption price of P21,500,000.00, with BMC to pay 20% (P4,300,000.00) as an installment.
During the installment payment on 10 July 1991, BMC and West Negros College executed a “Deed of Assignment” transferring BMC’s interest in the foreclosed properties to West Negros College.
On 27 October 1991, West Negros College challenged the redemption price, demanding a reduction to P12,768,432.90 on the ground of alleged excessive interest charges.
In response, DBP’s head office rejected the compromise amount, maintaining that the redemption price should be based on the entire outstanding indebtedness as of the auction date with interest as agreed upon.
On 8 November 1991, West Negros College requested the issuance of a certificate of redemption based on its computation under Section 30, Rule 39 of the Rules of Court (i.e. the amount of purchase plus one per cent monthly interest and other expenses incurred at the auction).
The ex-officio Provincial Sheriff concurred with this computation but noted a shortfall of P358,128.58, which was subsequently paid on 12 November 1991.
Despite these proceedings, on 14 November 1991 DBP objected to issuing the certificate and refused surrender of the transfer certificates of title.
Possession of the foreclosed properties was vested in West Negros College on 3 December 1991.
West Negros College filed a petition with RTC-Br. 50, seeking the surrender of the transfer certificates of title or, alternatively, the cancellation of the existing certificates and the issuance of new ones on the basis that the redemption price had already been fully paid according to Section 30, Rule 39 and Act 3135.
The trial court ruled in favor of West Negros College by ordering DBP to surrender the transfer certificates (or issue new ones) and canceling DBP’s adverse claim and notice lis pendens.
DBP appealed these orders, contending that redemption was proper only upon payment of the total outstanding loan indebtedness.
The Court of Appeals, on 7 August 2001, rejected DBP’s appeal and affirmed that the redemption price should be computed as the purchase amount plus one per cent monthly interest and related charges.
On 21 February 2002, the appellate court denied DBP’s motion for reconsideration, leading to the instant petition for review.

Issues:

Nature of the Redemption Price

Whether, in the context of a property mortgaged to and foreclosed extrajudicially by a government lending institution (DBP), the mortgagor (or its assignee) is required to pay the entire outstanding indebtedness as of the auction sale date with interest at the contractual rate.
Or, whether it is sufficient for redemption that the redeemer reimburse the purchaser’s actual paid amount (the auction purchase price) plus one per cent monthly interest and other related expenses, as prescribed by Section 30, Rule 39 of the Rules of Court.

Application of Governing Law

Whether the special statutory provisions embedded in the charters of DBP (originally through CA 459, subsequently through RA 85, RA 2081, and EO 81 as amended by RA 8523) requiring full payment of the amount owed on the date of sale with interest override the more general provisions of Section 30, Rule 39 of the Rules of Court.
Whether precedents such as DBP v. Mirang, Dulay v. Cariaga, and Nepomuceno v. Rehabilitation Finance Corporation control the computation of the redemption price in the present case.

Rights and Remedies

Whether West Negros College, as assignee of BMC’s interest, can claim redemption at the computed price based on Section 30, Rule 39, thereby evading its obligation to pay the total outstanding indebtedness under DBP’s charter.
Whether DBP’s insistence on full payment, as provided by its charter, should prevail despite the actions and agreements executed between BMC and West Negros College.

Ruling:

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Ratio:

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Doctrine:

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