Bank of the Philippine Islands vs. LCL Capital, Inc.

Where the mortgagee is a banking institution, the redemption price in extrajudicial foreclosure is governed by Section 78 of the General Banking Act (RA No. 337, as amended), not the Rules of Court or Act No. 3135, and must be computed on the amount due under the mortgage deed plus interest at the stipulated rate, foreclosure expenses, and reimbursable real estate taxes.

LCL Capital, Inc. obtained a ₱3,000,000.00 loan from Far East Bank & Trust Co. in 1997, secured by a real estate mortgage over two condominium units. When BPI merged with FEBTC in 2000, BPI absorbed FEBTC's assets and liabilities, including the loan. The governing statutory framework for redemption where the mortgagee is a bank is Section 78 of RA No. 337, as amended by Presidential Decree No. 1828, later reenacted as Section 47 of RA No. 8791, which displaces Section 6 of Act No. 3135 on the redemption price.

In 1997, LCL Capital, Inc. obtained a ₱3,000,000.00 loan from Far East Bank & Trust Co., subject to 17% interest per annum. To secure the loan, LCL executed a deed of Real Estate Mortgage over its two condominium units. In 2000, the Bank of the Philippine Islands merged with FEBTC and, as the surviving corporation, absorbed FEBTC's assets and liabilities.

When LCL failed to pay the indebtedness, including interests and penalties, BPI applied for extrajudicial foreclosure of the real estate mortgage before the Office of the Clerk of Court and Ex-Officio Sheriff of the Regional Trial Court of Pasig City. At the public auction sale, BPI emerged as the highest bidder and was issued a Certificate of Sale on May 21, 2003. Almost two months later, on July 11, 2003, BPI executed an Affidavit of Consolidation of ownership over the foreclosed condominium units, and new condominium certificates of title were issued in BPI's name.

Aggrieved, LCL filed an action for annulment of the certificates of title before the RTC of Pasig City, Branch 161, docketed as Civil Case No. 69591. LCL alleged that the consolidation of ownership was premature because it was made before the lapse of the redemption period. The RTC declared the consolidation void and directed the Register of Deeds of Pasig City to reinstate LCL's certificates of title subject to LCL's exercise of its right of redemption. BPI appealed, but later withdrew the appeal; the CA considered the case closed and terminated and issued an entry of judgment stating that the RTC Decision was final and executory.

Later, LCL asked the RTC to determine the cost of redemption. BPI manifested that the redemption amount as of March 15, 2015 was ₱9,339,362.93. In its January 27, 2017 Order, the RTC computed the redemption price at ₱2,513,583.15, applying 6% interest per annum and excluding the real estate taxes that BPI had paid. The RTC reasoned that the bid price inclusive of foreclosure expenses was ₱2,380,287.07, and that the total amount due as of the date of finality, April 4, 2014, with legal interest of 6% counted from the one-year redemption period, plus legal interest after one year of ₱133,296.08, yielded ₱2,513,583.15. It excluded real estate taxes and incidental expenses because the consolidation had been declared void and making LCL pay them would put a premium on BPI's void act. BPI sought reconsideration, claiming that the redemption price as of March 10, 2017 was already ₱11,656,636.81 using the stipulated 17% interest per annum; the RTC denied the motion.

BPI elevated the case to the CA through a petition for certiorari. The CA partly granted the petition, holding that Section 78 of RA No. 337 governs the valuation of the redemption price when the creditor-mortgagee is a banking institution, and that the RTC should have imposed the stipulated 17% interest per annum. The CA nonetheless affirmed the exclusion of real estate taxes, citing Sps. Guevarra vs. The Commoner Lending Corporation, Inc. and ruling that the liability to reimburse realty taxes arises only when the mortgagor fails to redeem within one year from registration of the certificate of sale, and that BPI had deprived LCL of its right of redemption through the premature consolidation. Both parties sought partial reconsideration; BPI maintained that real estate taxes must be included, while LCL insisted that the applicable interest rate should be 6% and not 17%. The CA denied both motions for lack of merit.

• BPI (G.R. No. 243396) — Real Estate Taxes: BPI contended that LCL must reimburse the realty taxes as part of the redemption price because LCL retained possession of the foreclosed properties.
• BPI (G.R. No. 243396) — Interest Rate: BPI argued that the RTC committed grave abuse of discretion in computing the interest rate at 6% instead of the stipulated 17% per annum.
• LCL (G.R. No. 243409) — Immutability of Final Judgment: LCL argued that the CA can no longer remand the case for recomputation of the redemption price lest it violate the immutability of the RTC's final judgment which declared void the consolidation of ownership.
• LCL (G.R. No. 243409) — Interest Rate: LCL insisted that the applicable interest rate should be 6% and not the stipulated 17% per annum.

• LCL (Respondent in G.R. No. 243396) — Interest Rate and Immutability: LCL insisted that the applicable interest rate should be 6% and not the stipulated 17% per annum, and argued that remand for recomputation would violate the immutability of the final RTC judgment.
• BPI (Respondent in G.R. No. 243409) — Real Estate Taxes: BPI maintained that the real estate taxes must be included in the computation of the redemption price because LCL retained possession of the foreclosed properties.

• Immutability of Final Judgment: Whether the CA's remand for recomputation of the redemption price violates the doctrine of immutability of the RTC's final judgment declaring the consolidation void.
• Governing Law on Redemption Price: Whether the redemption price in the extrajudicial foreclosure of a real estate mortgage to a banking institution is governed by Section 78 of RA No. 337, as amended, rather than the Rules of Court in relation to Section 6 of Act No. 3135.
• Basis of Redemption Price: Whether the redemption price must be computed based on the amount due under the mortgage deed or on the bid price at the auction sale.
• Real Estate Taxes: Whether the real estate taxes paid by BPI must be included in the redemption price and reimbursed by LCL.
• Applicable Interest Rate: Whether the applicable interest rate is the stipulated 17% per annum or the legal interest of 6% per annum.

• Immutability of Final Judgment: No. The recomputation does not violate immutability because the RTC Decision dated November 14, 2008 did not fix the actual redemption price; no final determination on the correct computation existed.
• Governing Law on Redemption Price: Section 78 of RA No. 337, as amended, governs where the mortgagee is a bank, not the Rules of Court in relation to Section 6 of Act No. 3135.
• Basis of Redemption Price: The amount due under the mortgage deed, not the bid price. The redemption price must be based on the principal obligation of ₱3,000,000.00 or the amount due under the mortgage deed.
• Real Estate Taxes: Yes. Real estate taxes paid by BPI must be included in the redemption price; LCL, having retained use and control, must reimburse BPI.
• Applicable Interest Rate: 17% per annum. The stipulated rate in the contract of loan and mortgage deed applies; the 6% legal interest was erroneous.

• Immutability of Final Judgment: The doctrine of immutability of a final judgment generally bars modification once a judgment becomes final, and courts cannot modify it to correct perceived errors of law or fact. Here, however, the RTC Decision dated November 14, 2008 only declared the consolidation void and directed reinstatement of LCL's certificates of title subject to redemption; it did not state the actual amount of the redemption price. The computation of the redemption price was discussed only in the RTC Order dated January 27, 2017 and the CA Decision dated May 17, 2018. Although the RTC and CA agreed that the redemption price included the bid price and foreclosure expenses in the total amount of ₱2,380,287.07, excluding real estate taxes, they conflicted on the applicable interest rate. There was therefore no final determination yet on the correct computation of the redemption price, and remand for recomputation was proper.
• Governing Law on Redemption Price: Section 78 of RA No. 337, as amended by Presidential Decree No. 1828, now Section 47 of RA No. 8791, governs the redemption price where the mortgagee is a bank, banking institution, or credit institution. Ponce de Leon vs. Rehabilitation Finance Corp. explained that Section 78 of RA No. 337 amended Section 6 of Act No. 3135 on the redemption price when the mortgagee is a bank, and the conflict must be resolved in favor of RA No. 337 as a special and subsequent legislation. The ruling was cited and applied in Sy vs. Court of Appeals, Union Bank of the Phils. vs. Court of Appeals, Allied Banking Corporation vs. Mateo, and GE Money Bank, Inc. vs. Sps. Dizon. Since BPI is a banking institution and the loan and mortgage were executed in 1997, Section 78 of RA No. 337, as further amended by Presidential Decree No. 1828, applies.
• Basis of Redemption Price: Under Section 78, the redemption price must consist of (1) the principal obligation or the amount due under the mortgage deed; (2) interest at the rate specified in the mortgage; (3) expenses of foreclosure, i.e., Judicial Commission, Publication Fee, and Sheriffs Fee; and (4) other expenses as a result of the custody of the property less the income received. Both the CA and the RTC failed to adhere to the law: they used the total amount of ₱2,380,287.07, corresponding to the bid price and foreclosure expenses, which was below the principal loan of ₱3,000,000.00 stated in the mortgage deed. The redemption price must therefore be based on the amount due under the mortgage deed, not the bid price.
• Real Estate Taxes: The real estate taxes paid by BPI must be included as part of the redemption price. The RTC excluded them to avoid giving a premium to BPI's void act of consolidating ownership before the redemption period expired, but that ruling had no legal basis. At most, BPI's premature consolidation resulted in the reinstatement of LCL's certificates of title; the effect cannot extend to forfeiture of BPI's right to reimbursement for real estate taxes paid, lest the principle of unjust enrichment be undermined. Any unpaid real estate tax is chargeable against the taxable person who had actual or beneficial use and possession of the property regardless of ownership. LCL retained the use and control of the mortgaged properties and must be held liable for the real estate taxes; imposing them on BPI, which was neither the owner nor the beneficial user, would be contrary to law and unjust. The CA misread Sps. Guevarra vs. The Commoner Lending Corporation, Inc., which involved reimbursement of Capital Gains Tax and Documentary Stamp Tax after failure to redeem within the one-year period, not real estate taxes. Supreme Transliner, Inc. vs. BPI Family Savings Bank, Inc. also held that no actual transfer occurs until after the expiration of the one-year redemption period and that the issuance of the Certificate of Sale does not by itself transfer ownership.
• Applicable Interest Rate: Section 78 of RA No. 337, as amended, explicitly provides that the principal obligation shall earn interest at the rate specified in the mortgage contract. The RTC erred in applying the legal interest of 6% per annum because the stipulated interest of 17% per annum is neither excessive nor unconscionable. The CA's imposition of the 17% per annum rate specified in the contract of loan and mortgage deed was therefore affirmed.

• Immutability of Final Judgment — Once a judgment becomes final, no other action can be taken except to order its execution, and courts cannot modify it to correct perceived errors of law or fact. In this case, the doctrine did not bar remand for recomputation of the redemption price because the final RTC Decision did not fix the actual redemption price; the computation was discussed only in later orders and the CA decision, and no final determination on the correct amount had yet been made.
• Redemption Price in Extrajudicial Foreclosure by a Bank — Where the mortgagee is a bank, banking institution, or credit institution, Section 78 of RA No. 337, as amended, governs the redemption price, not the Rules of Court in relation to Section 6 of Act No. 3135. The redemption price consists of: (1) the principal obligation or the amount due under the mortgage deed; (2) interest at the rate specified in the mortgage; (3) expenses of foreclosure, i.e., Judicial Commission, Publication Fee, and Sheriffs Fee; and (4) other expenses as a result of the custody of the property less the income received. It must be based on the amount due under the mortgage deed, not the bid price, and must include real estate taxes paid by the bank.
• Real Estate Tax Liability Based on Actual or Beneficial Use and Possession — Any unpaid real estate tax is chargeable against the taxable person who had actual or beneficial use and possession of the property regardless of ownership. Because LCL retained the use and control of the mortgaged properties, it must be held liable for the real estate taxes; BPI, which was neither the owner nor the beneficial user, was entitled to reimbursement, and excluding the taxes from the redemption price would undermine the principle of unjust enrichment.
• Stipulated Interest Rate in Bank Foreclosure — Section 78 of RA No. 337, as amended, requires interest at the rate specified in the mortgage contract. The stipulated 17% per annum was neither excessive nor unconscionable, so the legal interest of 6% per annum applied by the RTC was erroneous.
• Unjust Enrichment — The exclusion of real estate taxes paid by BPI from the redemption price would result in unjust enrichment because LCL retained the use and control of the properties while BPI, neither owner nor beneficial user, paid the taxes. BPI's right to reimbursement could not be forfeited merely because it prematurely consolidated ownership.

• "Applying the above provision pertaining to extrajudicial foreclosure, the redemption price must consist of the following: (1) the principal obligation or the amount due under the mortgage deed; (2) interest at the rate specified in the mortgage; (3) expenses of foreclosure, i.e., Judicial Commission, Publication Fee, and Sheriffs Fee; and (4) other expenses as a result of the custody of the property less the income received." — This passage states the ratio decidendi for computing the redemption price under Section 78 of the General Banking Act and enumerates its mandatory components.
• "Foremost, the redemption price must be based on the amount due under the mortgage deed and not the bid price." — This is the controlling holding that corrected the RTC and CA's use of the bid price plus foreclosure expenses as the redemption price.
• "Similarly, the real estate taxes that the BPI paid must be included as part of the redemption price." — This passage resolves the dispute over real estate taxes and establishes that the mortgagor must reimburse the bank for taxes paid on property retained under its use and control.
• "Contrary to LCL's theory, the recomputation of the redemption price will not violate the doctrine of immutability of a final judgment." — This passage explains why remand for recomputation is permissible despite the finality of the RTC Decision voiding the consolidation.

• Ponce de Leon vs. Rehabilitation Finance Corp., 146 Phil. 862 (1970) — Controlling precedent holding that Section 78 of RA No. 337 amended Section 6 of Act No. 3135 on the redemption price when the mortgagee is a bank; the conflict is resolved in favor of RA No. 337 as a special and subsequent law.
• Sy vs. Court of Appeals, 254 Phil. 120 (1989) — Cited and applied the Ponce de Leon ruling on the governing redemption price for bank mortgagees.
• Union Bank of the Phils. vs. Court of Appeals, 412 Phil. 64 (2001) — Cited and applied the rule that Section 78 of RA No. 337 governs redemption price when the mortgagee is a bank.
• Allied Banking Corporation vs. Mateo, 606 Phil. 535 (2009) — Cited and applied for the redemption price rule and the stipulated interest rate in bank foreclosure.
• GE Money Bank, Inc. vs. Sps. Dizon, 756 Phil. 502 (2015) — Cited and applied for the same rule on redemption price and stipulated interest.
• Sps. Guevarra vs. The Commoner Lending Corporation, Inc., 754 Phil. 292 (2015) — Distinguished and misread by the CA; it concerned reimbursement of Capital Gains Tax and Documentary Stamp Tax after failure to redeem within the one-year period, not real estate taxes.
• Supreme Transliner, Inc. vs. BPI Family Savings Bank, Inc., 659 Phil. 126 (2011) — Cited for the rule that no actual transfer of the mortgaged property occurs until after the expiration of the one-year redemption period and that the issuance of the Certificate of Sale does not by itself transfer ownership.
• Government Service Insurance System vs. City Treasurer and City Assessor of the City of Manila, 623 Phil. 964 (2009) — Cited for the rule that real estate tax liability attaches to the actual or beneficial user and possessor of the property regardless of ownership.
• Meralco vs. Barlis, 410 Phil. 167 (2001) — Cited for the same real estate tax liability principle based on actual or beneficial use and possession.
• Sps. Agner vs. BPI Family Savings Bank, Inc., 710 Phil. 82 (2013) — Cited to distinguish excessive stipulated interest rates of 3% per month and higher from the 17% per annum rate, which was not excessive or unconscionable.

• Section 78, Republic Act No. 337 (General Banking Act), as amended by Presidential Decree No. 1828 — Governs the redemption price where the mortgagee is a bank, banking institution, or credit institution. It provides that the mortgagor may redeem by paying the amount due under the mortgage deed with interest at the rate specified in the mortgage, plus all costs and judicial and other expenses incurred by the bank by reason of the execution and sale and as a result of the custody of the property less income received. The Court applied it to require computation based on the amount due under the mortgage deed, stipulated interest, foreclosure expenses, and reimbursable real estate taxes.
• Section 47, Republic Act No. 8791 (General Banking Law of 2000) — Identified as the successor provision to Section 78 of RA No. 337. The Court noted that the rule now appears in Section 47 of RA No. 8791.
• Section 6, Act No. 3135, as amended by Act No. 4118 — The general redemption provision for extrajudicial foreclosure. The Court held that it does not govern the redemption price where the mortgagee is a bank because Section 78 of RA No. 337 is a special and subsequent law.
• Rule 45, Rules of Court — The procedural basis for the separate petitions for review on certiorari filed by BPI and LCL, which the Supreme Court consolidated.

Gesmundo, C.J. (Chairperson), Caguioa, Lazaro-Javier, and J. Lopez, JJ., concur.