THIRD DIVISION

[G.R. No. 141974. August 9, 2004.]

BPI FAMILY SAVINGS BANK, INC. , petitioner, vs . SPS. JANUARIO

ANTONIO VELOSO AND NATIVIDAD VELOSO , respondents.

DECISION

CORONA , J : p

Before us is a petition for review of the decision 1 dated February 14, 2000 of the
Court of Appeals a rming the decision of the Regional Trial Court, Branch 94, Quezon City,
2 which upheld the validity of the extra-judicial foreclosure proceedings initiated by Family
Bank and Trust Company (Family Bank) on the mortgaged properties of respondent
spouses Januario Antonio Veloso and Natividad Veloso but allowed the latter to redeem
the same properties.
On January 8, 1983, respondent spouses obtained a loan of P1,300,000 from
petitioner’s predecessor-in-interest Family Bank and Trust Company. To secure payment
of the loan, respondent spouses executed in favor of the bank a deed of mortgage over
three parcels of land, with improvements, registered in their names under TCT Nos.
272227, 272228 and 272229 of the Registry of Deeds of Quezon City.
On February 9, 1983, respondents, for value received, executed a promissory note
for P1,300,000. Subsequently, however, respondents defaulted in the monthly installments
due on their loan. When efforts to update the account failed, Family Bank instituted extra-
judicial foreclosure proceedings on the respondents’ mortgaged properties.
On July 1, 1985, the properties were sold at public auction with Family Bank as the
highest bidder for P2,782,554.66.
On August 5, 1985, Family Bank assigned all its rights and interests in the
foreclosed properties to petitioner BPI Family Bank, Inc. (BPI).
On August 28, 1985, the sheriff’s certi cate of sale was registered with the Registry
of Deeds of Quezon City.
On July 24, 1986, respondents, through counsel, wrote BPI offering to redeem the
foreclosed properties for P1,872,935. This was, however, rejected by petitioner.
On August 27, 1986, respondents led in the RTC of Quezon City, Branch 94, a
complaint for annulment of foreclosure, with consignation and prayer for damages. On
motion of respondents, the trial court, in an order dated August 27, 1986, allowed
respondents to deposit with the clerk of court the sum of P1,500,000 representing the
redemption price. Thereafter, trial on the merits ensued.
Meanwhile, in Branch 76 of the Regional Trial Court of Quezon City, BPI was able to
secure a writ of possession over the foreclosed properties. This prompted respondents to
le with the Court of Appeals a petition for certiorari with preliminary injunction docketed
as CA-G.R. SP No. 22681. On October 8, 1990, the Court of Appeals resolved to grant
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 respondents’ motion for preliminary mandatory injunction.
Eventually, however, in a decision promulgated on May 31, 1991, the Court of
Appeals, in CA-G.R. SP No. 22681, resolved the issue of possession in favor of BPI and
accordingly lifted the preliminary mandatory injunction it had earlier issued, denying
altogether respondents’ petition. From this decision, respondents came to this Court via a
petition for review which was, however, denied in a resolution dated January 13, 1992. The
resolution affirmed, in effect, petitioner’s right to the possession of the subject properties.
On December 16, 1992, upon motion of respondents and despite the opposition of
petitioner, Branch 94 ordered the release of P1,400,000 of the consigned amount to
respondents, with the balance of P100,000 to take the place of the injunction bond to
answer for whatever damages petitioner might suffer because of the issuance of the
preliminary injunction (previously issued and later lifted) in favor of respondents.
Finally, on August 18, 1995, after almost a decade of protracted litigation, the trial
court rendered a decision declaring the validity of the extra-judicial foreclosure of the
mortgaged properties of respondents but allowed the redemption of the same at a
redemption price of P2,140,000.
BPI elevated the matter to the Court of Appeals which a rmed the trial court’s
decision, with modification:
WHEREFORE, subject to the modi cation declaring P2,678,639.80 as the
redemption price due the appellant, the decision appealed from is hereby
AFFIRMED in all other respects. 3

Hence, the instant petition based on the following assigned errors:

I

THE HONORABLE COURT OF APPEALS DECIDED A QUESTION OF SUBSTANCE

IN A WAY NOT IN ACCORD WITH LAW AND THE APPLICABLE DECISIONS OF
THIS HONORABLE COURT WHEN IT AFFIRMED THE DECISION OF THE TRIAL
COURT AND ALLOWED THE RESPONDENTS TO REDEEM THE FORECLOSED
PROPERTY.

II

ASSUMING FOR THE SAKE OF ARGUMENT, BUT WITHOUT ADMITTING, THAT

THE HONORABLE COURT OF APPEALS DID NOT ERR IN AFFIRMING THE
DECISION OF THE TRIAL COURT, NEVERTHELESS IT DECIDED A QUESTION OF
SUBSTANCE IN A WAY NOT IN ACCORD WITH LAW AND THE APPLICABLE
DECISIONS OF THIS HONORABLE COURT WHEN IT FIXED THE REDEMPTION
PRICE TO BE PAID BY RESPONDENTS TO PETITIONER AT ONLY P2,678,639.80
AND SHALL ONLY EARN 1% PER MONTH UNDER SECTION 28, RULE 39 OF THE
1997 RULES OF CIVIL PROCEDURE.

The fact is that, at the time of the foreclosure sale on July 1, 1985, respondent
spouses Veloso had already defaulted on their loan to petitioner’s predecessor-in-interest
Family Bank. In a real estate mortgage, when the principal obligation is not paid when due,
the mortgagee has the right to foreclose on the mortgage and to have the property seized
and sold, and to apply the proceeds to the obligation. 4 Foreclosure is proper if the debtor
is in default in the payment of his obligation. 5 And in this case, the validity of the extra-
judicial foreclosure on July 1, 1985 was con rmed by both the trial court and the Court of
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 Appeals. We find no reason to question it.
The sole question therefore that remains to be resolved is: did respondent spouses
comply with all the requirements for the redemption of the subject properties?
We answer in the negative.
The general rule in redemption is that it is not su cient that a person offering to
redeem manifests his desire to do so. The statement of intention must be accompanied
by an actual and simultaneous tender of payment. This constitutes the exercise of the right
to repurchase. 6
In several cases 7 decided by the Court where the right to repurchase was held to
have been properly exercised, there was an unequivocal tender of payment for the full
amount of the repurchase price. Otherwise, the offer to redeem is ineffectual. 8 Bona de
redemption necessarily implies a reasonable and valid tender of the entire repurchase
price, otherwise the rule on the redemption period xed by law can easily be circumvented.
As explained by this Court in Basbas vs. Entena: 9
. . . the existence of the right of redemption operates to depress the market
value of the land until the period expires, and to render that period inde nite by
permitting the tenant to le a suit for redemption, with either party unable to
foresee when nal judgment will terminate the action, would render nugatory the
period of two years xed by the statute for making the redemption and virtually
paralyze any efforts of the landowner to realize the value of his land. No buyer
can be expected to acquire it without any certainty as to the amount for which it
may be redeemed, so that he can recover at least his investment in case of
redemption. In the meantime, the landowner’s needs and obligations cannot be
met. It is doubtful if any such result was intended by the statute, absent clear
wording to that effect.CIHAED

Consequently, in this case, the offer by respondents on July 24, 1986 to redeem the
foreclosed properties for P1,872,935 and the subsequent consignation in court of
P1,500,000 on August 27, 1986, while made within the period 1 0 of redemption, was
ineffective since the amount offered and actually consigned not only did not include the
interest but was in fact also way below the P2,782,554.66 paid by the highest
bidder/purchaser of the properties during the auction sale.
In Bodiongan vs. Court of Appeals, 1 1 we held:
In order to effect a redemption, the judgment debtor must pay the
purchaser the redemption price composed of the following: (1) the price which the
purchaser paid for the property; (2) interest of 1% per month on the purchase
price; (3) the amount of any assessments or taxes which the purchaser may have
paid on the property after the purchase; and (4) interest of 1% per month on such
assessments and taxes . . .

Furthermore, Article 1616 of the Civil Code of the Philippines provides:

The vendor cannot avail himself of the right to repurchase without
returning to the vendee the price of the sale . . .

It is not di cult to understand why the redemption price should either be fully
offered in legal tender or else validly consigned in court. Only by such means can the
auction winner be assured that the offer to redeem is being made in good faith.
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 The sum of P1,400,000 consigned by respondents in Branch 94 was subsequently
withdrawn by them, leaving only P100,000 to take the place of the injunction bond. This
would have been tantamount to requiring petitioner to accept payment by installments as
there would have necessarily been an inde nite extension of the redemption period. 1 2 If a
partial payment can bind the winning bidder or purchaser in an auction sale, by what rule
can the payment of the balance be determined? Petitioner could not be expected to
entertain an offer of redemption without any assurance that respondents could pay the
repurchase price immediately. A contrary rule would leave the buyers at foreclosure sales
open to harassment by expectedly angry debtors and cause unnecessary prolongation of
the redemption period, contrary to the policy of the law.
Whether or not respondents were diligent in asserting their willingness to pay is
irrelevant. Redemption within the period allowed by law is not a matter of intent but a
question of payment or valid tender of the full redemption price within said period.

The disposition of the instant case in the trial court unnecessarily dragged for
almost a decade. Now, it is on its 18th year and still respondents have not tendered the full
redemption price. Nor have they consigned the full amount, if only to prove their
willingness and ability to pay. This would have evidenced their good faith.
The law granted respondents the right of redemption. But in so granting that right,
the law intended that their offer to redeem be valid and effective, accompanied by an
actual tender of the redemption price. Fixing a de nite term within which the property
should be redeemed is meant to avoid prolonged economic uncertainty over the
ownership of the thing sold. In the case at bar, the offer was not a legal and effective
exercise of the right of redemption contemplated by law, hence, refusal of the offer by
petitioner was completely justified.
Finally, respondents cannot argue that the law on equity should prevail. Equity
applies only in the absence of, and never against, statutory law or judicial rules of
procedure. 1 3
WHEREFORE, the appealed decision of the Court of Appeals is hereby REVERSED
and SET ASIDE. The complaint led by respondents, the spouses Veloso, is hereby
dismissed.
SO ORDERED.
Panganiban and Carpio Morales, JJ ., concur.
Sandoval-Gutierrez, J ., is on leave.

Footnotes

1. Penned by Presiding Justice Cancio C. Garcia and concurred in by then Associate

Justices Romeo J. Callejo, Sr. and Presbitero J. Velasco, Jr. (now Associate Justice of
the Supreme Court and Court Administrator, respectively) of the Second Division.
2. Presided by Judge Romeo F. Zamora.

3. Rollo, p. 53.
4. Commodity Financing Co., Inc. vs. Jimenez, 91 SCRA 57 [1979].
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 5. Bicol Savings and Loan Association vs. Court of Appeals, 171 SCRA 630 [1989].
6. Angao vs. Clavano, 17 Phil. 152 [1910].
7. Fructo vs. Fuentes, 15 Phil. 362 [1910]; Retes vs. Suelto, 20 Phil. 394 [1911]; Rosales vs.
Reyes, et al., 25 Phil. 495 [1913]; Canuto vs. Mariano, 37 Phil. 840 [1918]; Dela Cruz, et al.
vs. Resurreccion, et al., 98 Phil. 975 [1956].
8. Rumbaoa vs. Argaza, 84 Phil. 812 [1949].
9. 28 SCRA 665 [1969].

10. Sec. 28, Rule 39, Rules of Court. “. . . redemptioner may redeem the property from the
purchaser, at any time within one (1) year from the date of the registration of the
certificate of sale, by paying the purchaser the amount of his purchase, with one per
centum per month interest thereon in addition up to the time of redemption, together with
the amount of any assessments or taxes . . .”

11. 248 SCRA 496 [1995].

12. Conejero, et al. vs. Court of Appeals, et al., 16 SCRA 775 [1996].
13. Pilipinas Hino, Inc. vs. Court of Appeals, 338 SCRA 355 [2000]; Smith, Bell & Co., Inc. vs.
Court of Appeals, 267 SCRA 530 [1997]; David-Chan vs. Court of Appeals, 268 SCRA 677
[1997].

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