Natino vs. Intermediate Appellate Court

An oral assurance by a bank's president that mortgagors may redeem their foreclosed property "when their means permit," given after the statutory redemption period has expired, constitutes at most an unenforceable unilateral promise to resell, not an extension of the right of redemption, and is not binding on the bank absent Board approval and absent a consideration distinct from the repurchase price.

Spouses Trinidad and Epifanio Natino were borrowers and mortgagors of a parcel of land in Pangasinan; respondent Rural Bank of Aguilar, Inc. was the mortgagee that foreclosed the property extrajudicially after default. The Provincial Sheriff Ex-Officio of Pangasinan conducted the foreclosure sale and thereafter issued the certificates of sale and final deed of sale. The dispute centered on whether the statutory two-year redemption period under the extrajudicial foreclosure rules had been extended by the bank through assurances of its president and manager, Mrs. Brodeth, and whether the mortgagors could still redeem after the period lapsed.

On October 12, 1970, spouses Trinidad and Epifanio Natino executed a real estate mortgage in favor of Rural Bank of Aguilar, Inc. as security for a loan of ₱2,000.00. They failed to pay the loan on due date, prompting the bank to apply for extrajudicial foreclosure of the mortgage. At the foreclosure sale on December 11, 1974, the bank was the highest and winning bidder with a bid of ₱2,945.11. A certificate of sale was executed in its favor by the sheriff and registered with the Office of the Register of Deeds on January 29, 1975. The certificate of sale, a copy of which was furnished the petitioners by registered mail, expressly provided that the redemption period shall be two years from the date of registration.

Since no redemption was made within the two-year period, which expired on January 29, 1977, the sheriff issued a Final Deed of Sale on February 15, 1977. Petitioners claimed that the bank had granted them an extension of the redemption period, but the bank denied this. On November 22, 1979, the bank filed a petition for a writ of possession, which petitioners opposed on the ground that they had consigned the redemption money of ₱4,000.00 on December 12, 1979. The court rejected the opposition and issued the writ of possession.

To prevent execution of the writ, petitioners filed a complaint with the Court of First Instance of Pangasinan, docketed as Civil Case No. 15573 and raffled to Branch II, seeking annulment of the final deed of sale and a writ of preliminary injunction. They alleged that the final deed was prematurely issued because they had been granted an extension of time to redeem the property. The trial court, in its decision of December 1, 1981, found that an agreement to extend the redemption period had been reached between the petitioners and the bank through its president and manager, Mrs. Brodeth, who allegedly told them they could redeem the property when their means permitted. Applying Articles 1180 and 1197 of the Civil Code, the trial court annulled the sheriff's final deed of sale, fixed a new 90-day redemption period, and ordered petitioners to pay the purchase price with interest.

The bank appealed to the Intermediate Appellate Court, where petitioners did not file their appellee's brief. The IAC, in its decision of June 4, 1985, reversed the trial court, holding that the offers to redeem were made after the expiration of the redemption period and that the assurances given by the bank's officers related to a resale of the property, not to an extension of the right of redemption. The IAC noted that the ₱4,000.00 deposit was made on December 12, 1979, long after the redemption period had expired and after the sheriff's final sale had been registered on November 14, 1979. Petitioners' motion for reconsideration was denied on December 23, 1985, leading to the present petition.

• Correctness of IAC's Factual Conclusion: Petitioners submitted the sole issue of whether the conclusion drawn by the Intermediate Appellate Court from proven facts is correct, contending that the IAC erred in reversing the trial court's finding that an extension of the redemption period had been granted.
• Extension of Redemption Period: Petitioners maintained that the bank, through its president and manager and other personnel, had agreed to extend the period for redemption, and that the final deed of sale was prematurely issued before the agreed-upon period had lapsed.

• Offers Made After Expiration: Respondent bank argued that the offers to redeem were made only after the redemption period had already expired and after the execution of the sheriff's final deed of sale.
• No Extension Granted: Respondent bank maintained that no extension of the redemption period was granted, and that the testimony of Epifanio Natino was uncorroborated and contrary to his own admissions in open court.
• Inapplicability of Articles 1180 and 1197: Respondent bank argued that Articles 1180 and 1197 of the Civil Code have no relevance or materiality to the case.
• Lack of Board Approval: Respondent bank contended that any assurance by its officers could bind the bank only through action by its Board of Directors, and no evidence showed such approval or ratification.

• Validity of Redemption Attempts: Whether the petitioners' attempts to redeem the foreclosed property were made within the statutory redemption period or after it had expired.
• Extension of Redemption Period: Whether the respondent bank granted an extension of the redemption period through assurances of its president and manager.
• Binding Effect of Oral Assurance: Whether an oral assurance by the bank's president that petitioners could redeem the property when their means permitted could bind the bank absent Board approval and absent a consideration distinct from the repurchase price.

• Validity of Redemption Attempts: No. The attempts to redeem were made after the expiration of the two-year redemption period, and the ₱4,000.00 consignation on December 12, 1979 was a belated attempt to exercise a right that had long expired.
• Extension of Redemption Period: No. No extension of the redemption period was granted; the assurances given by the bank's president related to a resale of the property, not to redemption, and were given after the redemption period had lapsed.
• Binding Effect of Oral Assurance: No. Even assuming the president made such a promise, it could bind the bank only if approved or ratified by the Board of Directors, and, more decisively, it was a unilateral promise to sell unsupported by a consideration distinct from the price, rendering it unenforceable under Article 1479 of the Civil Code.

• Validity of Redemption Attempts: The certificate of sale was registered on January 29, 1975, starting a two-year redemption period that expired on January 29, 1977. The sheriff issued the Final Deed of Sale on February 15, 1977. The only evidence of compliance was the deposit of ₱4,000.00 with the Clerk of Court on December 12, 1979 — nearly three years after the redemption period expired and after the sheriff's final sale had been registered on November 14, 1979. The right to redeem becomes functus officio upon its expiry; any exercise after the period is not redemption but a repurchase, which imposes no obligation on the purchaser to accept. The trial court's contrary conclusion was based on inferences not supported by adequate facts, including its silence on the specific dates when Epifanio Natino went to the bank to offer payment. Had a genuine tender been made within the redemption period and refused, the petitioners should have tendered the money to the sheriff, who had the duty to accept it and execute a certificate of redemption; no such tender was made.

• Extension of Redemption Period: The trial court inferred an extension from the delay between the expiry of the redemption period on January 29, 1977, and the registration of the sheriff's final sale on November 14, 1979. The Supreme Court rejected this inference as based on erroneous assumptions. The assurances attributed to Mrs. Brodeth, the bank's president and manager, were given sometime in May 1978 — well after the redemption period had expired on January 29, 1977. Such assurances could not and did not extend the expired redemption period. Mrs. Brodeth herself denied making any assurance and testified that Epifanio neither mentioned the loan nor offered to redeem during that meeting, although she had earlier told him he would need to pay ₱30,000.00 to "redeem" the property — a figure far exceeding the original bid price, which supports the conclusion that this was an offer to resell, not to allow redemption.

• Binding Effect of Oral Assurance: Even assuming arguendo that Mrs. Brodeth promised to allow petitioners to buy the property at any time they had the money, the bank was not bound for two independent reasons. First, the promise could bind the bank only if its Board of Directors approved or ratified it, and no evidence of such action was presented. Second, and more decisively, the promise was a unilateral promise to sell unsupported by a consideration distinct from the repurchase price. Under the second paragraph of Article 1479 of the Civil Code, an accepted unilateral promise to buy or sell a determinate thing for a price certain is binding upon the promisor only if the promise is supported by a consideration distinct from the price. Pursuant to Rural Bank of Parañaque, Inc. vs. Remolado, a commitment by a bank to resell property, although accepted, was considered an option not supported by a consideration distinct from the price and therefore not binding; and under Southwestern Sugar and Molasses Co. vs. Atlantic Gulf and Pacific Company, such an unsupported option was void.

• Right of Redemption vs. Repurchase — The right of redemption exists by force of law during the statutory period; the purchaser at a public auction is bound to accept a valid tender of redemption money. After the redemption period expires, the right becomes functus officio, and any subsequent attempt to recover the property is a repurchase, not a redemption. The purchaser is not obligated to resell and may set a price higher than the bid, as the property already belongs to him as owner. The Court applied this distinction to hold that the bank's ₱30,000.00 asking price was an offer to resell, not an acceptance of redemption.

• Unilateral Promise to Buy or Sell (Option Contract) — Under Article 1479, second paragraph, of the Civil Code, an accepted unilateral promise to buy or sell a determinate thing for a price certain is binding upon the promisor only if the promise is supported by a consideration distinct from the price. Without such distinct consideration, the promise is a mere unenforceable option. The Court held that Mrs. Brodeth's alleged assurance was unsupported by any consideration distinct from the repurchase price and was therefore not binding on the bank.

• Corporate Authority to Bind the Corporation — An assurance or promise made by a corporate officer, even one as senior as the president and manager, cannot bind the corporation unless approved or ratified by the Board of Directors. The Court found no evidence of Board approval or ratification of any alleged extension or resale promise.

• "The right to redeem becomes functus officio on the date of its expiry, and its exercise after the period is not really one of redemption but a repurchase." — This passage, drawn from the IAC decision as quoted and adopted by the Supreme Court, articulates the critical distinction between the legal right of redemption and a voluntary repurchase after the statutory period has lapsed.

• "An accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissory if the promise is supported by a consideration distinct from the price." — This is the Court's citation of Article 1479, second paragraph, of the Civil Code, applied to hold that the bank's alleged assurance to resell was an unenforceable option lacking distinct consideration.

• "Even if Mrs. Brodeth is to be understood to have promised to allow the petitioners to buy the property at any time they have the money, the Bank was not bound by the promise not only because it was not approved or ratified by the Board of Directors but also because, and more decisively, it was a promise unsupported by a consideration distinct from the re-purchase price." — This sentence encapsulates the two independent grounds on which the Court rejected petitioners' claim of an enforceable extension or resale promise.

• Rural Bank of Parañaque, Inc. vs. Remolado, et al., 135 SCRA 409 — Followed. A commitment by a bank to resell foreclosed property within a specified period, although accepted by the party in whose favor it was made, was held to be an option not supported by a consideration distinct from the price and therefore not binding on the promisor. The Court applied the same rationale to the bank president's alleged assurance.

• Southwestern Sugar and Molasses Co. vs. Atlantic Gulf and Pacific Company, 97 Phil. 249 — Followed. An option contract unsupported by consideration distinct from the price was held void. The Court cited this case to confirm that the bank's alleged promise to resell, lacking distinct consideration, was void and unenforceable.

• Enage vs. Vda. de Hijos de Escano, 38 Phil. 657 — Cited for the procedural rule that if a purchaser at a foreclosure sale refuses a valid tender of redemption money within the redemption period, the mortgagor must tender the money to the sheriff who conducted the sale, who then has the duty to accept it and execute a certificate of redemption. No such tender to the sheriff was made in this case.

• Article 1479, second paragraph, Civil Code of the Philippines — Provides that an accepted unilateral promise to buy or sell a determinate thing for a price certain is binding upon the promisor only if the promise is supported by a consideration distinct from the price. Applied to hold that the bank's alleged assurance to allow repurchase was an unenforceable option lacking distinct consideration.

• Rule 131, Section 5(e), Rules of Court — The presumption that if evidence is withheld by a party, it would be adverse to that party. The trial court invoked this presumption against the bank for not presenting certain witnesses, but the Supreme Court did not rely on this presumption in its ruling.

• Articles 1180 and 1197, Civil Code of the Philippines — Article 1180 provides that when a debtor binds himself to pay when his means permit, the obligation is deemed to be one with a period; Article 1197 allows the court to fix the period. The trial court applied these provisions to justify fixing a new redemption period, but the Supreme Court upheld the IAC's rejection of their applicability, since no valid extension had been granted.

Fernan, C.J., Gutierrez, Jr., Feliciano, and Bidin, JJ., concurred.