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587 Phil. 1
SPECIAL SECOND DIVISION
[ G.R. Nos. 152359 & 174103, September 16, 2008 ]
DEVELOPMENT BANK OF THE PHILIPPINES, PETITIONER, VS. WEST NEGROS COLLEGE, INC., RESPONDENT.
R E S O L U T I O N
TINGA, J.:
The Development Bank of the Philippines (DBP) questions the Resolution[1] dated 5 July 2006 issued by the Court of Appeals in CA-G.R. CV No. 38277, entitled West Negros College, Inc. v. Development Bank of the Philippines, which declared that the computation of the redemption price for the property subject of this case should be reckoned from the date of the public auction on 24 August 1989 and that after this date, DBP could no longer collect interest from respondent West Negros College, Inc. (WNC). DBP also assails the Resolution[2] dated 8 August 2006 which denied its motion for reconsideration.
The following antecedent facts are lifted from the Resolution[3] of the Court of Appeals in the same case dated 14 February 2006:
Among the issues raised at the hearing conducted by the appellate court to determine the total redemption price is the interpretation of the cut-off date in the imposition and computation of the agreed interest rate to be paid by WNC. Expectedly, it was WNC's position that interest should not be imposed beyond the date of the auction sale as allegedly gleaned from the tenor of the 28 October 2002 Decision of the Supreme Court. DBP for its part contended that the computation of interest and expenses would continue to run after the foreclosure sale until the redemption of the mortgaged properties.
The Court of Appeals initially resolved this issue in DBP's favor, stating in its 14 February 2006 Resolution[7] that the Supreme Court had intended the interest to accrue even after the foreclosure sale.
However, in the assailed Resolution[8] dated 5 July 2006, the appellate court reversed its 14 February 2006 Resolution and ruled instead that DBP could no longer collect any interest after the date of the public auction sale for three (3) reasons: first, because with the finality of the 28 October 2002 Decision of the Supreme Court, DBP is, in legal contemplation, deemed to have been placed in possession of the subject property, which possession retroacts to the date of the foreclosure sale; second, because the provisions of Section 31 of Commonwealth Act No. 459 granting DBP the right, on redemption, to recover interest on the total indebtedness at the rate agreed upon from the date of the auction sale had not been carried over to the present DBP charter, Executive Order (E.O.) No. 81 (1986), as amended; and third, because DBP had expressed and adopted a policy as early as 11 October 1996 not to charge interest after the foreclosure of properties mortgaged in its favor.
In its Petition for Review[9] dated 21 September 2006, DBP claims that the appellate court went beyond the remand authority given to it by this Court which is allegedly limited to the determination of the propriety of the imposition of compounded interest, penalties and other charges. DBP further asserts that apart from the fact that the "legal possession" theory adduced by the Court of Appeals was not raised by WNC itself, DBP was not in actual or material possession of the property even after the certificate of redemption dated 13 November 1991 in favor of WNC was nullified by the Court. No benefit allegedly inured to DBP from the "legal possession" the appellate court deems it to have had, which justifies the elimination of DBP's right to collect interest from WNC.
There is also allegedly no basis for the appellate court's conclusion that it is now DBP's policy not to impose interest on a mortgage obligation after foreclosure. In fact, its Board Resolution No. 0319 dated 7 March 2000, a certified copy of which was submitted by DBP, clarifies that the instruction not to continue accruing interest after foreclosure was intended for internal booking purposes only but that all interests and charges accruing to the foreclosed account are considered in determining the redemption price of the property.
WNC, in its Comment[10] dated 29 January 2007, avers that it already acquired a vested right over the policy of non-accrual of interest as expressed in DBP's Resolutions adopted on 11 October 1996 and 26 June 1998. This right allegedly cannot be impaired by Resolution No. 0319 which was issued only in 2000. WNC insists that DBP cannot collect interest and penalties after 24 August 1989 in view of DBP's own policy.
In its Reply[11] dated 17 May 2007, DBP reiterates that the appellate court went beyond the power given to it by the Court in its 21 May 2004 Resolution to determine the validity of the imposition of compounded interest, penalties and other charges. DBP also alleges that WNC cannot claim any vested right in its internal policy.
Two questions present themselves for resolution in this case. The first is whether the appellate court was correct in ruling that only the interest rate agreed upon in the loan documents as of the time of the auction sale on 24 August 1989 should be computed as part of the redemption price, minus the amount of P4,300,000.00 and costs of foreclosure which had already been paid by Bacolod Medical Center (BMC), the assignee of WNC. The second is whether the Court of Appeals erred in excluding from the computation of the redemption price the interest inputted by DBP after 24 August 1989.
It should be recalled that equitable considerations have been weighed by the Court when it decided to remand the case to the Court of Appeals notwithstanding the fact that the questions raised in the petition were largely factual in nature. The 28 October 2002 Decision of this Court and its 21 May 2004 Resolution set out definite boundaries as to the scope of the remand of the case to the Court of Appeals. Specifically, the purpose of the remand was solely to determine the basis for or the propriety of the imposition of compounded interest, penalties and other charges to the end that the total redemption price may finally be arrived at. With these parameters, the appellate court should not have revisited the already settled reckoning date in the computation of the total redemption price. Sadly, the final disposition of this case had been sidetracked by a question which a clear-headed reading of this Court's Decision and Resolution would have readily answered.
In its 28 October 2002 Decision, the Court held that in redeeming the foreclosed property, WNC, as assignee of BMC, should pay the balance of the amount owed by the latter to DBP with interest thereon at the rate agreed upon as of the date of the public auction on 24 August 1989.[12] This was reiterated in the Resolution dated 21 May 2004.[13]
As clearly spelled out by the Court in these dispositions, the redemption price shall be the balance of BMC's obligation, plus expenses and interest, as of the date of the public auction on 24 August 1989. It comes as an unwelcome surprise, therefore, that despite the clear directive of the Court, the Court of Appeals deemed it necessary to require the parties to submit their position papers[14] to solicit their interpretation regarding the cutoff date in the imposition and computation of the agreed interest rate, thus unnecessarily spawning this petition.
Still and all, the ultimate conclusion arrived at by the Court of Appeals was fortunately correct. It is consistent with the Decision and Resolution of this Court in G.R. No. 152359, and in harmony with Section 16 of the present DBP charter, E.O. No. 81 which provides:
The Court, however, did not deem the omission of the phrase "with interest on the total indebtedness at the rate agreed upon in the obligation from said date" and its replacement in Section 16 of E.O. No. 81 by the phrase "all of the latter's (Bank's) claims against him, as determined by the Bank" a setback in its determination of the redemption price payable to DBP. It resolved, quite categorically, that WNC, as the assignee of BMC, should pay the balance of the amount owed by the latter to DBP with interest thereon at the rate agreed upon as of the date of the public auction on 24 August 1989. There was no mention at all in the Decision that contractual interest from the date of the public auction until redemption is actually effected shall continue to accrue and be considered as part of the total redemption price. This is the unmistakable mandate of the Court when it ordered the appellate court to compute the total redemption price.
Given the foregoing, the Court finds it unnecessary to discuss the other arguments raised in the petition.
WHEREFORE, the Resolutions of the Court of Appeals in CA-G.R. CV No. 38277 dated 5 July 2006 and 8 August 2006 are AFFIRMED. The Court of Appeals is DIRECTED to resume and terminate the proceedings as well as submit its report thereon to this Court in accordance with our Resolution dated 21 May 2004 with deliberate dispatch. No pronouncement as to costs.
SO ORDERED.
Puno, C.J., Quisumbing, Chico-Nazario, and Velasco, Jr., JJ., concur.
[1] Rollo (G.R. No. 174103), pp. 81-97.
[2] Id. at 99-101.
[3] Id. at 106-116.
[4] Id.
[5] Rollo (G.R. No. 152359), pp. 205-219.
[6] Id. at 511-528.
[7] Supra note 3.
[8] Supra note 1.
[9] Rollo (G.R. No. 174103), pp. 40-78.
[10] Id. at 165-192.
[11] Id. at 205-219.
[12] Development Bank of the Philippines vs. West Negros College, Inc., G.R. No. 152359, October 28, 2002, 391 SCRA 330, 342.
[13] 429 SCRA 50, 60-61.
[14] In its Resolution dated February 14, 2006, the Court of Appeals stated that at the hearing on May 18, 2005, the parties agreed "to file their respective position papers regarding their respective stand on the interpretation as to the cut-off date in the imposition and computation of the agreed rate of interest within fifteen (15) days." Rollo (G.R. No. 174103), p. 107.
[15] Sec. 31. The mortgagor or debtor to the Agricultural and Industrial Bank, whose real property has been sold at public auction, judicially or extra-judicially for the full or partial payment of an obligation to said Bank, shall, within one year from the date of the auction sale, have the right to redeem the real property by paying to the Bank all the amount he owed the latter on the date of the sale, with interest on the total indebtedness at the rate agreed upon in the obligation from said date, unless the bidder has taken material possession of the property or unless this had been delivered to him, in which case the proceeds of the property shall compensate the interest. If the Agricultural and Industrial Bank was not the highest bidder at the auction sale, the Bank shall, in case of redemption, return to the bidder the amount it received from him as a result of the auction sale with the corresponding interest paid by the debtor. [Emphasis supplied]
The following antecedent facts are lifted from the Resolution[3] of the Court of Appeals in the same case dated 14 February 2006:
On October 28, 2002, the Supreme Court rendered a decision in the above-entitled case docketed as G.R. No. 152359 (the "Decision"), setting aside and reversing the decision of this Court, declaring as void and of no effect the Certificate of Redemption issued in favor of West Negros College (WNC) and giving WNC the grace period of sixty (60) calendar days from notice of the finality of the decision within which to redeem the mortgaged properties by paying to Development Bank of the Philippines (DBP) "the balance of the credit of Bacolod Medical Center (as assumed by respondent West Negros College under a deed of assignment) secured by the properties plus the expenses and the agreed rate of interest, to be computed as of the date of the public auction on 24 August 1989, unless petitioner Development Bank of the Philippines has taken material possession of the properties in which case the proceeds of the properties shall compensate the interest but only during the period of their possession."The 28 October 2002 Decision[5] and the 21 May 2004 Resolution[6] of the Supreme Court became final and executory on 22 June 2004.
WNC filed a Motion for Reconsideration asking the Supreme Court to determine the propriety of the imposition of compounded interest, penalties and other charges. Ultimately, it asked for the determination of how much the redemption price should be. Acting on said Motion, the Supreme Court made a Resolution dated May 21, 2004, the dispositive portion of which reads as follows:"WHEREFORE, the instant Motion for Reconsideration is GRANTED only insofar as it seeks the determination of the total redemption price to be paid by West Negros College, Inc, to the Development Bank of the Philippines which, however, shall not be lower than P21,500,000.00. For this purpose, the case is hereby REMANDED to the Court of Appeals which is directed to proceed accordingly with all deliberate dispatch."[4]
Among the issues raised at the hearing conducted by the appellate court to determine the total redemption price is the interpretation of the cut-off date in the imposition and computation of the agreed interest rate to be paid by WNC. Expectedly, it was WNC's position that interest should not be imposed beyond the date of the auction sale as allegedly gleaned from the tenor of the 28 October 2002 Decision of the Supreme Court. DBP for its part contended that the computation of interest and expenses would continue to run after the foreclosure sale until the redemption of the mortgaged properties.
The Court of Appeals initially resolved this issue in DBP's favor, stating in its 14 February 2006 Resolution[7] that the Supreme Court had intended the interest to accrue even after the foreclosure sale.
However, in the assailed Resolution[8] dated 5 July 2006, the appellate court reversed its 14 February 2006 Resolution and ruled instead that DBP could no longer collect any interest after the date of the public auction sale for three (3) reasons: first, because with the finality of the 28 October 2002 Decision of the Supreme Court, DBP is, in legal contemplation, deemed to have been placed in possession of the subject property, which possession retroacts to the date of the foreclosure sale; second, because the provisions of Section 31 of Commonwealth Act No. 459 granting DBP the right, on redemption, to recover interest on the total indebtedness at the rate agreed upon from the date of the auction sale had not been carried over to the present DBP charter, Executive Order (E.O.) No. 81 (1986), as amended; and third, because DBP had expressed and adopted a policy as early as 11 October 1996 not to charge interest after the foreclosure of properties mortgaged in its favor.
In its Petition for Review[9] dated 21 September 2006, DBP claims that the appellate court went beyond the remand authority given to it by this Court which is allegedly limited to the determination of the propriety of the imposition of compounded interest, penalties and other charges. DBP further asserts that apart from the fact that the "legal possession" theory adduced by the Court of Appeals was not raised by WNC itself, DBP was not in actual or material possession of the property even after the certificate of redemption dated 13 November 1991 in favor of WNC was nullified by the Court. No benefit allegedly inured to DBP from the "legal possession" the appellate court deems it to have had, which justifies the elimination of DBP's right to collect interest from WNC.
There is also allegedly no basis for the appellate court's conclusion that it is now DBP's policy not to impose interest on a mortgage obligation after foreclosure. In fact, its Board Resolution No. 0319 dated 7 March 2000, a certified copy of which was submitted by DBP, clarifies that the instruction not to continue accruing interest after foreclosure was intended for internal booking purposes only but that all interests and charges accruing to the foreclosed account are considered in determining the redemption price of the property.
WNC, in its Comment[10] dated 29 January 2007, avers that it already acquired a vested right over the policy of non-accrual of interest as expressed in DBP's Resolutions adopted on 11 October 1996 and 26 June 1998. This right allegedly cannot be impaired by Resolution No. 0319 which was issued only in 2000. WNC insists that DBP cannot collect interest and penalties after 24 August 1989 in view of DBP's own policy.
In its Reply[11] dated 17 May 2007, DBP reiterates that the appellate court went beyond the power given to it by the Court in its 21 May 2004 Resolution to determine the validity of the imposition of compounded interest, penalties and other charges. DBP also alleges that WNC cannot claim any vested right in its internal policy.
Two questions present themselves for resolution in this case. The first is whether the appellate court was correct in ruling that only the interest rate agreed upon in the loan documents as of the time of the auction sale on 24 August 1989 should be computed as part of the redemption price, minus the amount of P4,300,000.00 and costs of foreclosure which had already been paid by Bacolod Medical Center (BMC), the assignee of WNC. The second is whether the Court of Appeals erred in excluding from the computation of the redemption price the interest inputted by DBP after 24 August 1989.
It should be recalled that equitable considerations have been weighed by the Court when it decided to remand the case to the Court of Appeals notwithstanding the fact that the questions raised in the petition were largely factual in nature. The 28 October 2002 Decision of this Court and its 21 May 2004 Resolution set out definite boundaries as to the scope of the remand of the case to the Court of Appeals. Specifically, the purpose of the remand was solely to determine the basis for or the propriety of the imposition of compounded interest, penalties and other charges to the end that the total redemption price may finally be arrived at. With these parameters, the appellate court should not have revisited the already settled reckoning date in the computation of the total redemption price. Sadly, the final disposition of this case had been sidetracked by a question which a clear-headed reading of this Court's Decision and Resolution would have readily answered.
In its 28 October 2002 Decision, the Court held that in redeeming the foreclosed property, WNC, as assignee of BMC, should pay the balance of the amount owed by the latter to DBP with interest thereon at the rate agreed upon as of the date of the public auction on 24 August 1989.[12] This was reiterated in the Resolution dated 21 May 2004.[13]
As clearly spelled out by the Court in these dispositions, the redemption price shall be the balance of BMC's obligation, plus expenses and interest, as of the date of the public auction on 24 August 1989. It comes as an unwelcome surprise, therefore, that despite the clear directive of the Court, the Court of Appeals deemed it necessary to require the parties to submit their position papers[14] to solicit their interpretation regarding the cutoff date in the imposition and computation of the agreed interest rate, thus unnecessarily spawning this petition.
Still and all, the ultimate conclusion arrived at by the Court of Appeals was fortunately correct. It is consistent with the Decision and Resolution of this Court in G.R. No. 152359, and in harmony with Section 16 of the present DBP charter, E.O. No. 81 which provides:
Sec. 16. Right of Redemption.--Any mortgagor of the Bank whose real property has been extrajudicially sold at public auction shall, within one (1) year counted from the date of registration of the certificate of sale, have the right to redeem the real property by paying to the Bank all of the latter's claims against him, as determined by the Bank.The above-quoted provision, as the Decision of this Court mentioned, is substantially a re-enactment of Section 31 of Commonwealth Act No. 459, the law that created DBP's predecessor agency, the Agricultural and Industrial Bank. Section 31 of Commonwealth Act No. 459 explicitly sets the redemption price to be the total indebtedness plus contractual interest as of the date of the auction sale, "with interest on the total indebtedness at the rate agreed upon in the obligation from said date."[15] Notably, however, Section 16 of E.O. No. 81 does not contain the phrase "with interest on the total indebtedness at the rate agreed upon in the obligation from said date" but instead vaguely pegs the redemption price as "all of the latter's (Bank's) claims against him, as determined by the Bank."
The Bank may take possession of the foreclosed property during the redemption period. When the Bank takes possession during such period, it shall be entitled to the fruits of the property with no obligation to account for them, the same being considered compensation for the interest that would otherwise accrue on the account. Neither shall the Bank be obliged to post a bond for the purpose of such possession. [Emphasis supplied]
The Court, however, did not deem the omission of the phrase "with interest on the total indebtedness at the rate agreed upon in the obligation from said date" and its replacement in Section 16 of E.O. No. 81 by the phrase "all of the latter's (Bank's) claims against him, as determined by the Bank" a setback in its determination of the redemption price payable to DBP. It resolved, quite categorically, that WNC, as the assignee of BMC, should pay the balance of the amount owed by the latter to DBP with interest thereon at the rate agreed upon as of the date of the public auction on 24 August 1989. There was no mention at all in the Decision that contractual interest from the date of the public auction until redemption is actually effected shall continue to accrue and be considered as part of the total redemption price. This is the unmistakable mandate of the Court when it ordered the appellate court to compute the total redemption price.
Given the foregoing, the Court finds it unnecessary to discuss the other arguments raised in the petition.
WHEREFORE, the Resolutions of the Court of Appeals in CA-G.R. CV No. 38277 dated 5 July 2006 and 8 August 2006 are AFFIRMED. The Court of Appeals is DIRECTED to resume and terminate the proceedings as well as submit its report thereon to this Court in accordance with our Resolution dated 21 May 2004 with deliberate dispatch. No pronouncement as to costs.
SO ORDERED.
Puno, C.J., Quisumbing, Chico-Nazario, and Velasco, Jr., JJ., concur.
[1] Rollo (G.R. No. 174103), pp. 81-97.
[2] Id. at 99-101.
[3] Id. at 106-116.
[4] Id.
[5] Rollo (G.R. No. 152359), pp. 205-219.
[6] Id. at 511-528.
[7] Supra note 3.
[8] Supra note 1.
[9] Rollo (G.R. No. 174103), pp. 40-78.
[10] Id. at 165-192.
[11] Id. at 205-219.
[12] Development Bank of the Philippines vs. West Negros College, Inc., G.R. No. 152359, October 28, 2002, 391 SCRA 330, 342.
[13] 429 SCRA 50, 60-61.
[14] In its Resolution dated February 14, 2006, the Court of Appeals stated that at the hearing on May 18, 2005, the parties agreed "to file their respective position papers regarding their respective stand on the interpretation as to the cut-off date in the imposition and computation of the agreed rate of interest within fifteen (15) days." Rollo (G.R. No. 174103), p. 107.
[15] Sec. 31. The mortgagor or debtor to the Agricultural and Industrial Bank, whose real property has been sold at public auction, judicially or extra-judicially for the full or partial payment of an obligation to said Bank, shall, within one year from the date of the auction sale, have the right to redeem the real property by paying to the Bank all the amount he owed the latter on the date of the sale, with interest on the total indebtedness at the rate agreed upon in the obligation from said date, unless the bidder has taken material possession of the property or unless this had been delivered to him, in which case the proceeds of the property shall compensate the interest. If the Agricultural and Industrial Bank was not the highest bidder at the auction sale, the Bank shall, in case of redemption, return to the bidder the amount it received from him as a result of the auction sale with the corresponding interest paid by the debtor. [Emphasis supplied]