G.R. No. 132287 - Spouses Paray vs. Rodriguez

Respondents – Dra. Abdulia C. Rodriguez, Miguela R. Jariol (assisted by Antolin Jariol, Sr.), Leonora R. Nolasco (assisted by Feliciano Nolasco), Dolores R. Soberano (assisted by Jose Soberano, Jr.), Julia R. Generoso, Teresita R. Natividad, Genoveva R. Soronio (assisted by Alfonso Soronio) – owned shares in Quirino-Leonor-Rodriguez Realty Inc.
Between 1979 and 1980, they pledged these shares to spouses Bonifacio and Faustina Paray to secure loan obligations.

Miguel R. Jariol: 1,000 shares (Cert. Nos. 011, 060, 061 & 062)
Abdulia C. Rodriguez: 300 shares (Cert. Nos. 023 & 093)
Leonora R. Nolasco: 407 shares (Cert. Nos. 091 & 092)
Genoveva R. Soronio: 699 shares (Cert. Nos. 025, 059 & 099)
Dolores R. Soberano: 699 shares (Cert. Nos. 021, 053, 022 & 097)
Julia R. Generoso: 1,100 shares (Cert. Nos. 085, 051, 086 & 084)
Teresita R. Natividad: 440 shares (Cert. Nos. 054 & 055)

The Parays attempted extrajudicial foreclosure; respondents filed consolidated complaints (Civil Cases Nos. R-20120 & R-20131) before RTC Branch 14, Cebu City, seeking nullity of the pledge agreements.
On October 14, 1988, the RTC dismissed respondents’ complaints, validated the pledges, and “gave due course to the foreclosure and sale at public auction.” This judgment became final on August 14, 1991, after affirmations by the Court of Appeals and the Supreme Court.

Prior to the scheduled notarial sale on November 4, 1991, respondents claimed they attempted to tender payments but were refused; they then consigned the following amounts with the RTC Clerk of Court:

Abdulia C. Rodriguez: P 120,066.66 (Oct. 14, 1991)
Leonora R. Nolasco: P 277,381.82 (Oct. 14, 1991)
Genoveva R. Soronio: P 425,353.50 & P 38,385.44 (Oct. 14, 1991)
Julia R. Generoso: P 638,385.00 (Oct. 25, 1991)
Teresita R. Natividad: P 264,375.00 (Nov. 11, 1991)
Dolores R. Soberano: P 12,031.61 (Oct. 25, 1991) & P 520,216.39 (Nov. 11, 1991)
Miguela R. Jariol: P 490,000.00 & P 88,000.00 (Oct. 18, 1991)

On November 4, 1991, a public auction proceeded before a Notary Public; Vidal Espeleta bid P 6,200,000.00 for all shares. None of the pledgors participated.

Respondents filed Civil Case No. CEB-10926 on November 13, 1991, before RTC Branch 16, seeking nullity of the auction. They argued their consignations extinguished the debt and pledges.
The RTC, in a decision dated November 18, 1992, dismissed the complaint, finding respondents failed to tender or consign payments within a reasonable period and should have participated in the auction.
On appeal, the Court of Appeals (Decision dated December 29, 1997) reversed, ruling that:

The consignations extinguished the principal obligations and pledge contracts.
Respondents invoked a statutory “right of redemption,” warranting liberal construction.
The collective auction sale was defective for lack of apportionment by pledgor.

Petitioners argued that (a) consignations were made after default, (b) amounts were insufficient to cover accrued 5% monthly interest, (c) no statutory right of redemption exists for personal property, and (d) procedural requisites for the auction were satisfied.
On January 24, 2006, the Supreme Court granted the petition, set aside the CA decision, and reinstated the RTC ruling. Costs were imposed on respondents.

Whether respondents’ consignation of payments extinguished the principal loan obligations and discharged the pledge contracts.
Whether a right of redemption exists for pledged personal property sold extrajudicially.
Whether the public auction sale held in bulk without specifying apportionment among pledgors is valid.
Whether consignations must cover both principal and contractual interest to bar foreclosure.
Whether respondents’ non-participation in the auction forfeited their right to challenge its validity.