Goldenway Merchandising Corporation vs. Equitable PCI Bank;
G.R. No. 195540. March 13, 2013
The new redemption period commences from the date of foreclosure sale, and expires upon registration of the certificate of sale or three months after foreclosure, whichever is earlier. There is likewise no retroactive application of the new redemption period because Section 47 exempts from its operation those properties foreclosed prior to its effectivity and whose owners shall retain their redemption rights under Act No. 3135.
In 1985, Goldenway Merchandising executed a Real Estate Mortgage in favor of Equitable PCI Bank over 3 of its real properties. The mortgage secured the Two Million Pesos (P2,000,000.00) loan granted by respondent to petitioner and was duly registered.
As petitioner failed to settle its loan obligation –
- respondent extrajudicially foreclosed the mortgage on December 13, 2000.
- In a public auction, the mortgaged properties were sold for P3,500,000.00 to respondent. Accordingly, a Certificate of Sale was issued on January 26, 2001.
- On February 16, 2001, the Certificate of Sale was registered and inscribed on TCT Nos. T-152630, T-151655 and T-214528.
On March 8, 2001, petitioner offered to redeem the foreclosed properties by tendering a check in the amount of P3,500,000.00. However, petitioner was told that such redemption is no longer possible because the certificate of sale had already been registered. The foreclosed properties had already been consolidated in favor of respondent and that new certificates of title were issued in the name of respondent on March 9, 2001.
On December 7, 2001, petitioner filed a complaint for specific performance and damages against the respondent, asserting that it is the one-year period of redemption under Act No. 3135 which should apply and not the shorter redemption period provided in Republic Act (R.A.) No. 8791. That applying Section 47 of R.A. 8791 to the real estate mortgage executed in 1985 would result in the impairment of obligation of contracts and violation of the equal protection clause under the Constitution.
The RTC rendered its decision dismissing the complaint as well as the counterclaim. It noted that the issue of the constitutionality of Sec. 47 of R.A. No. 8791 was never raised by the petitioner during the pre-trial and the trial.
The CA affirmed the trial court’s decision. According to the CA, petitioner failed to justify why Section 47 of R.A. No. 8791 should be declared unconstitutional.
Whether applying Section 47 of R.A. No. 8791 to the present case would be a substantial impairment of its vested right of redemption under the real estate mortgage contract.
NO. Section 47 did not divest juridical persons of the right to redeem their foreclosed properties but only modified the time for the exercise of such right by reducing the one-year period originally provided in Act No. 3135. The new redemption period commences from the date of foreclosure sale, and expires upon registration of the certificate of sale or three months after foreclosure, whichever is earlier. There is likewise no retroactive application of the new redemption period because Section 47 exempts from its operation those properties foreclosed prior to its effectivity and whose owners shall retain their redemption rights under Act No. 3135.
Petitioner’s claim that Section 47 infringes the equal protection clause as it discriminates mortgagors/property owners who are juridical persons is equally bereft of merit. The equal protection clause is directed principally against undue favor and individual or class privilege. It is not intended to prohibit legislation which is limited to the object to which it is directed or by the territory in which it is to operate.
The legislature clearly intended to shorten the period of redemption for juridical persons whose properties were foreclosed and sold in accordance with the provisions of Act No. 3135. The difference in the treatment of juridical persons and natural persons was based on the nature of the properties foreclosed―whether these are used as residence, for which the more liberal one-year redemption period is retained, or used for industrial or commercial purposes, in which case a shorter term is deemed necessary to reduce the period of uncertainty in the ownership of property and enable mortgagee-banks to dispose sooner of these acquired assets. It must be underscored that the General Banking Law of 2000, crafted in the aftermath of the 1997 Southeast Asian financial crisis, sought to reform the General Banking Act of 1949 by fashioning a legal framework for maintaining a safe and sound banking system.
The freedom to contract is not absolute; all contracts and all rights are subject to the police power of the State and not only may regulations which affect them be established by the State, but all such regulations must be subject to change from time to time, as the general well-being of the community may require, or as the circumstances may change, or as experience may demonstrate the necessity.32 Settled is the rule that the non-impairment clause of the Constitution must yield to the loftier purposes targeted by the Government.
The law governing cases of extrajudicial foreclosure of mortgage is Act No. 3135, as amended by Act No. 4118. Section 6 thereof provides:
SEC. 6. In all cases in which an extrajudicial sale is made under the special power hereinbefore referred to, the debtor, his successors-in-interest or any judicial creditor or judgment creditor of said debtor, or any person having a lien on the property subsequent to the mortgage or deed of trust under which the property is sold, may redeem the same at any time within the term of one year from and after the date of the sale; xxx
However, Section 47 of R.A. No. 8791 otherwise known as “The General Banking Law of 2000” which took effect on June 13, 2000, amended Act No. 3135.
Notwithstanding Act 3135, juridical persons whose property is being sold pursuant to an extrajudicial foreclosure, shall have the right to redeem the property in accordance with this provision until, but not after, the registration of the certificate of foreclosure sale with the applicable Register of Deeds which in no case shall be more than three (3) months after foreclosure, whichever is earlier. Owners of property that has been sold in a foreclosure sale prior to the effectivity of this Act shall retain their redemption rights until their expiration.