G.R. No. 159636 - Victory Liner, Inc. vs. Gammad

Eduarda Belo owned an agricultural land of 661,288 square meters in Timpas, Panitan, Capiz, as evidenced by Transfer Certificate of Title No. T-7493.
The case involves multiple parties:

Petitioners – Spouses Enrique M. Belo and Florencia G. Belo, who later acquired Eduarda Belo’s right of redemption through a deed of absolute sale.
Respondents – Philippine National Bank (PNB) and Spouses Marcos and Arsenia Eslabon.

The dispute arose from a suit for the declaration of nullity of the contract of mortgage.

Eduarda Belo leased a portion of her land to the Eslabons for their sugar plantation business on a seven-year contract at a rental rate of P7,000 per year.
To finance their business venture, the Eslabons obtained a loan from PNB secured by a real estate mortgage on:

The mortgage was executed based on a Special Power of Attorney (SPA) executed by Eduarda Belo in favor of Marcos Eslabon on June 15, 1982, which purportedly allowed the Eslabons to borrow and mortgage her land.

When the Eslabons failed to pay their loan obligation, PNB initiated extrajudicial foreclosure proceedings against the mortgaged properties.
At an auction sale conducted on June 10, 1991, PNB placed a winning bid at P447,632 for the foreclosed properties.
A letter dated August 28, 1991, informed Eduarda Belo of the sale, the registration of the Certificate of Sheriff’s Sale (dated July 1, 1991), and the one-year period allowed for redemption.
Eduarda Belo subsequently sold her redemptive right to the petitioners.
Before the expiration of the redemption period, the petitioners tendered a payment of P484,482.96 (comprising the bid price plus interest and expenses under Act No. 3135) to redeem the property.
PNB rejected this tender, contending that the redemption price should cover its entire claim as of the auction date, amounting to P2,779,978.72.

On June 18, 1992, petitioners filed an action in the Regional Trial Court of Roxas City (Civil Case No. V-6182) for:

Declaration of the nullity of the contract of mortgage; or, alternatively,
Compelling respondent PNB to accept the tendered redemption price based solely on the winning bid price plus interest and expenses, less the loan value appraised from the four foreclosed residential lots.

The trial court rendered its Decision on April 30, 1996, granting the alternative cause of action in favor of the petitioners.
Dissatisfied with this ruling, PNB appealed to the Court of Appeals.
The Court of Appeals, in its Decision dated May 21, 1998, affirmed the validity of the mortgage and foreclosure but modified the trial court’s finding regarding the redemption price, requiring payment of the entire bank claim.
Petitioners sought reconsideration of the appellate decision, but the appellate court denied their motion in a Resolution dated June 29, 1998.

The allegation that the SPA was null and void because it authorized an unlimited amount and was used for the benefit of the Eslabons rather than Eduarda Belo.
That the mortgage contract executed under the SPA lacked valid consent, object, and consideration.
That PNB acted in bad faith and connived with the Eslabons to secure Eduarda Belo’s consent through fraudulent means.
That PNB was negligent in advising Eduarda Belo—evidenced by its failure to directly notify her about the loan details and defaults.
That by offering to pay for redemption, Eduarda Belo (and by extension her assignees) waived the right to later contest the validity of the mortgage.
That the proper redemption price should be limited to the auction bid price (plus the prescribed interest and expenses) rather than the entire bank claim.

The SPA and the mortgage contract were valid and effective.
The redemption process was governed by Section 25 of Presidential Decree No. 694 and Section 78 of the General Banking Act.
Under these provisions, the petitioners were obligated to pay the full bank claim.

Whether the SPA executed by Eduarda Belo in favor of the Eslabons, and the real estate mortgage executed under it, are null and void due to vitiated consent or other defects.
Whether petitioners, as assignees of Eduarda Belo’s right of redemption, are required to pay the entire bank claim (P2,779,978.72) as the redemption price, or whether they may redeem the property by paying only the auction bid price (with additional interest and expenses) less the loan value of the foreclosed residential lots.