Delaying tactic

This is a case involving the right of redemption in the event of extrajudicial foreclosure of real estate mortgage and how it should be exercised before the expiration of the one year period from the date of the foreclosure sale especially if there is disagreement as to amount of the redemption price.

This case involved a parcel of land registered in the name of Mat under TCT No. 236351 which he mortgaged in favor of a bank (ABC) to secure a loan of P950,000 covered by a promissory note. Mat however defaulted in the payment of the loan. So on July 21, 1999, the ABC foreclosed the property and sold it at public auction for P1,531,474.53 with ABC itself emerging as the highest bidder.

On August 10, 1999, Mat, through his attorney-in-fact Lita, sent a letter to ABC signifying his desire to redeem the foreclosed property for P1.1 million. Thereafter Max thru Lita also faxed several letters reiterating said intention. He even consigned the said amount by depositing it in another bank (LBP).

On July 21, 2000, or on the last day of the redemption period with no reply from ABC about his offer, Mat represented by Lita, filed with the Regional Trial Court (RTC) a case for legal redemption with a prayer for a TRO and Preliminary Injunction. At the pre-trial conference on September 2, 2002 Mat again offered to redeem the property this time for the foreclosed amount of P1,531,474.53. ABC however refused because even as of June 16, 2000, the redemption price of the property already amounted to P2,058,825.73. So the parties just agreed to submit the case for summary judgment.

On October 21, 2004, the RTC rendered a decision allowing Mat to redeem the property from ABC which had in the meantime already consolidated and obtained new title in its name, upon payment of the amount of P1,531,474.51 with one percent interest for one month only. The RTC ruled that Mat began to exercise his right to redeem on August 10, 1999 when he sent a letter thru Lita as in fact he had consigned P1.1 million. So Mat should be allowed to pay as redemption price said foreclosed amount plus one percent interest only for the month that lapsed until August 10, 1999. The RTC further ruled that the P1,531,474.51 which Mat offered to pay the pre-trial conference already covered ABC’s bid price at the auction sale. Was the RTC correct?

No. To constitute a valid exercise of the right of redemption there must be an unequivocal tender of payment for the full amount of the redemption price, i.e. the amount due under the mortgage deed with interest at the rate specified therein and all the cost and expenses incurred in the foreclosure sale. The amount of P1.1 million offered by Mat was ineffective, since not only did it not include the interest but it was even below the purchase price. Such offer was not a valid redemption and ABC was justified in refusing to accept it.

The filing of the court action in the RTC to enforce redemption before the expiration of the one year period, being equivalent to a formal offer to redeem, would have the effect of preserving Mat’s right to redeem and freezing the expiration of the redemptive period of one year only if it is done in good faith. This means that it must have been filed for the sole purpose of determining the redemption price and not to stretch the redemption period indefinitely. In this case Mat’s offer of P1.1 million was even below the amount paid by ABC at the foreclosure sale. During the pre-trial conference he merely offered P1,531,474.53 when the amount due as of June 16, 2000 according to ABC was already P2,058,825.73. In fact, Mat never even consigned such amount in court to show good faith. Thus Mat’s action for legal redemption was not filed in good faith. It was not filed for the purpose of determining the correct amount but to stretch the redemption period indefinitely. The RTC decision should be reversed and set aside and Mat’s action should be dismissed (Allied Banking Corp. vs. Mateo etc. G.R. 167420, June 5, 2009).

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