White Marketing Development Corporation vs. Grandwood Furniture & Woodwork, Inc.

The shortened redemption period under Section 47 of R.A. No. 8791 for juridical persons whose property is sold in extrajudicial foreclosure is not extended by the mortgagee bank's assignment of its credit and mortgage to a non-banking institution; the assignee and the auction purchaser step into the bank's shoes and acquire the same shortened redemption period.

Grandwood is a juridical person and the mortgagor-debtor under a real estate mortgage originally held by Metrobank, a banking institution. The statutory backdrop is Section 47 of R.A. No. 8791, which fixes a shorter redemption period for juridical persons whose property is sold in extrajudicial foreclosure. The dispute concerns whether that statutory period remains applicable after the bank's credit and mortgage are assigned to a non-banking entity.

On May 26, 1995, respondent Grandwood Furniture & Woodwork, Inc. (Grandwood) obtained a loan in the amount of ₱40,000,000.00 from Metropolitan Bank and Trust Company (Metrobank). The loan was secured by a real estate mortgage over a parcel of land covered by Transfer Certificate of Title (TCT) No. 63678. Metrobank eventually sold its rights and interests over the loan and mortgage contract to Asia Recovery Corporation (ARC). The latter then assigned the same rights and interests to Cameron Granville 3 Asset Management, Inc. (CGAM3).

On July 24, 2013, after Grandwood failed to pay the loan which already amounted to ₱68,941,239.46, CGAM3 initiated extrajudicial foreclosure proceedings of the real estate mortgage. During the September 17, 2013 Auction Sale, petitioner White Marketing Development Corporation (White Marketing) was declared the highest bidder and a certificate of sale was issued in its favor. On September 30, 2013, the certificate of sale was registered and annotated on TCT No. 63678.

On November 21, 2013, White Marketing received a letter from the sheriff informing it that Grandwood intended to redeem the foreclosed property. In response, White Marketing sent a letter informing the sheriff that Grandwood no longer had the right to redeem. Insisting on its right to redeem the property, Grandwood sent a letter, dated December 3, 2013, to the Office of the Clerk of Court of the RTC (OCC-RTC) insisting that it was the latter's ministerial duty to recognize its right of redemption, to accept the tender of payment and to issue a certificate of redemption. The OCC-RTC, however, refused to accept the tender of payment on the ground that it was confronted with the conflicting applicable laws on the matter of the redemption period.

Thus, Grandwood was prompted to file its Petition for Consignation, Mandamus and Damages before the RTC. It reiterated its right to redeem the property subject of the foreclosure sale under Act No. 3135 in relation to Republic Act (R.A.) No. 337 and Sections 27 and 28 of Rule 39 of the Rules of Court.

• Contractual Stipulation: Petitioner argued that under the mortgage contract, the parties agreed that the same would be governed by R.A. No. 8791, and that this voluntary stipulation was binding on them.
• Assignment of Credit: Petitioner argued that when Metrobank assigned its rights, its assignees acquired whatever rights Metrobank had under the real estate mortgage, including the shorter redemption period under Section 47 of R.A. No. 8791.
• Redemption Period: Petitioner argued that under Section 47, Grandwood should have redeemed the foreclosed property before the registration of the certificate of sale on September 30, 2013.
• Binding Terms After Assignment: Petitioner countered that Grandwood remained bound by the real estate mortgage provisions and that the assignment to CGAM3 neither modified the terms of the mortgage contract nor excluded Grandwood from those provisions.

• Pro Forma Provisions: Respondent argued that the provisions of the real estate mortgage were pro forma because the original mortgagee, Metrobank, was a banking institution, and the contract would necessarily contain a provision indicating that the mortgagor would be bound by R.A. No. 8791.
• Non-Banking Assignee: Respondent argued that White Marketing could not enjoy the Section 47 redemption period because it was not a banking institution; its exercise of redemption rights was not against Metrobank under the real estate mortgage but against White Marketing as the highest bidder in the foreclosure sale.
• Spirit and Intent of R.A. No. 8791: Respondent argued that the shorter redemption period applied in favor of banking institutions only, and that R.A. No. 8791 applied only when the mortgagee bank itself foreclosed the property, not when the bank had already assigned or conveyed its mortgage rights for a consideration.

• Applicability of Section 47 of R.A. No. 8791: Whether Section 47 of R.A. No. 8791's shortened redemption period applies where the mortgagee bank has assigned its credit and mortgage to a non-banking institution and the property is foreclosed by the assignee, such that the juridical mortgagor's redemption after registration of the certificate of sale is late.

• Applicability of Section 47 of R.A. No. 8791: Yes. The CA erred. Section 47 of R.A. No. 8791 applies because the assignee of the bank's credit and mortgage steps into the bank's shoes and acquires the shortened redemption period; Grandwood's redemption after the September 30, 2013 registration was out of time.

• Applicability of Section 47 of R.A. No. 8791: The SC applied the rule that an assignee of credit is subrogated to the rights and obligations of the assignor and cannot acquire greater rights; the assignee acquires the power to enforce the credit to the same extent as the assignor and includes accessory rights such as mortgage. Metrobank assigned its rights to ARC, which assigned them to CGAM3; after Grandwood defaulted, CGAM3 foreclosed, and White Marketing became the highest bidder. White Marketing therefore stepped into Metrobank's shoes. The mortgage between Grandwood and Metrobank was subject to Section 47 of R.A. No. 8791, which gives juridical persons whose property is sold in extrajudicial foreclosure the right to redeem until, but not after, registration of the certificate of foreclosure sale, and in no case more than three months after foreclosure, whichever is earlier. Grandwood had three months from foreclosure or before registration, whichever came first; the certificate was registered on September 30, 2013, and Grandwood's redemption came after that. The SC held that the period was not extended by the assignment to a non-banking institution because the assignee merely steps into the shoes of the mortgagee bank and acquires all its rights, interests, and benefits under the mortgage, including the shortened redemption period; the benefit also redounded to White Marketing as highest bidder. The SC reasoned that the shorter period is additional security for banks to maintain solvency and liquidity, and extending it upon assignment would make it harder for banks to find assignees and quickly dispose of hard assets. Although redemption is generally liberally construed in favor of the mortgagor, the SC held that redemption is a statutory privilege and liberal construction cannot override the statutory period where the right was not exercised in time.

• Assignment of Credit and Subrogation — An assignee of credit is subrogated to the rights and obligations of the assignor and cannot acquire greater rights than the assignor; the assignee acquires the power to enforce the credit to the same extent as the assignor, including accessory rights such as mortgage or pledge. The SC applied this to hold that ARC, CGAM3, and White Marketing acquired Metrobank's rights under the mortgage, including the shortened redemption period under Section 47 of R.A. No. 8791.
• Shortened Redemption Period for Juridical Persons under Section 47 of R.A. No. 8791 — A juridical person whose property is sold in extrajudicial foreclosure has the right to redeem 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 months after foreclosure, whichever is earlier. The SC applied this to Grandwood, which failed to redeem before the September 30, 2013 registration.
• Purpose of the Shortened Redemption Period — The shorter period serves as additional security for banks to maintain solvency and liquidity and to reduce uncertainty in ownership of commercial or industrial property. The SC held that extending the period upon assignment to a non-bank would defeat this purpose by making it harder for banks to find assignees and quickly dispose of hard assets.
• Redemption as a Statutory Privilege — The right to redeem property sold to satisfy an unpaid obligation is a statutory privilege, not a natural or proprietary right, and must be exercised in accordance with the statute; liberal construction in favor of the mortgagor is not automatic where the statutory period has not been met. The SC applied this to reject Grandwood's late redemption despite the general policy favoring redemption.

• "By virtue of the Deed of Assignment, the assignee is deemed subrogated to the rights and obligations of the assignor and is bound by exactly the same conditions as those which bound the assignor." — The SC quoted this from Fort Bonifacio vs. Fong to explain why White Marketing, as assignee and auction purchaser, acquired Metrobank's rights under the mortgage, including the shortened redemption period.
• "The period is not extended by the mere fact that the bank assigned its interest to the mortgage to a non-banking institution because the assignee merely steps into the shoes of the mortgagee bank and acquires all its rights, interests and benefits under the mortgage-including the shortened redemption period." — This is the core holding rejecting Grandwood's argument that Section 47 ceased to apply after assignment to a non-bank.
• "Redemption is by force of law, and the purchaser at public auction is bound to accept it. Further, the right to redeem property sold as security for the satisfaction of an unpaid obligation does not exist preternaturally." — The SC used this to characterize redemption as a statutory privilege and to reject an automatic liberal construction in Grandwood's favor.

• Fort Bonifacio vs. Fong, G.R. No. 209370, March 25, 2015, 754 SCRA 544 — Relied on for the effects of assignment of credit; the SC quoted it to hold that the assignee is subrogated to the assignor's rights and obligations and is bound by the same conditions.
• Ledonio vs. Capitol Development Corporation, 553 Phil. 344 (2007) — Cited for the rule that in an assignment of credit, the assignee is subrogated to the rights of the original creditor and acquires the power to enforce the credit to the same extent as the assignor.
• Metropolitan Bank & Trust Company vs. G & P Builders, Incorporated, G.R. No. 189509, November 23, 2015 — Cited for the rule that the new creditor is entitled to the rights and remedies available to the previous creditor, including accessory rights such as mortgage or pledge.
• Goldenway Merchandising Corporation vs. Equitable PCI Bank, 706 Phil. 427 (2013) — Relied on for the purpose of the shortened redemption period under Section 47 of R.A. No. 8791: to maintain bank solvency and liquidity and reduce uncertainty in ownership of commercial or industrial property.
• City of Davao vs. The Intestate Estate of Amado S. Dalisay, G.R. No. 207791, July 15, 2015 — Relied on for the rule that redemption is a statutory privilege and that liberal construction in favor of the mortgagor is not automatic where the statutory requirements are not met.

• Section 47, R.A. No. 8791 (General Banking Law of 2000) — Provides that a juridical person whose property is sold in extrajudicial foreclosure has the right to redeem until, but not after, registration of the certificate of foreclosure sale with the applicable Register of Deeds, which in no case shall be more than three months after foreclosure, whichever is earlier. The SC applied it to Grandwood and held that its redemption after the September 30, 2013 registration was late.
• Act No. 3135 — The extrajudicial foreclosure law invoked by Grandwood; the SC applied Section 47 of R.A. No. 8791 notwithstanding Act No. 3135 because the provision expressly covers juridical persons whose property is sold in extrajudicial foreclosure.