MARIA LUISA MEDINA, CARMEN MEDINA, EDUARDO ATIENZA AND VICENTE VELEZ, PLAINTIFFS AND APPELLANTS, VS. THE PHILIPPINE NATIONAL BANK, DEFENDANT AND APPELLEE.

On October 30, 1920 the Manila Commercial Co. and La Yebana Co. mortgaged
four parcels of land with Torrens titles, described in the complaint, to the
Philippine National Bank, the first and fourth parcels being in the name of the
La Yebana Co. and the second and third in the name of the Manila Commercial Co.
The mortgage was given to secure the payment of P680,000 or for whatever amount
the Manila Commercial Co. might be indebted to the Philippine National Bank. One
of the clauses of the mortgage provides that in case of a violation by the
Manila Commercial Co. of any of the conditions of the contract, the Philippine
National Bank may take possession of the mortgaged property and sell or dispose
of it by public or private sale, without first having to file a complaint or to
give any notice, and at such sale, if public, it may acquire for itself all or
any of the parcels of land.

On May 27, 1927, the Manila Commercial Co. being unable to pay its debt which
amounted to P794,256, the Philippine National Bank asked the sheriff to sell the
mortgaged property in accordance with Act No. 3135.

On September 24, 1927, the mortgaged property was sold to the Philippine
National Bank itself for P30,000. On September 26, 1927 this sale was
registered, and the proper deed of sale issued in favor of the bank. Upon the
page intended for the annotation of encumbrances, an entry was made to the
effect that the title of the bank was subject to redemption within one year.

On December 10, 1926, the plaintiffs Maria Luisa Medina, Carmen Medina,
Eduardo Atienza, and Vicente Velez, brought an action against the Manila
Commercial Co. for a sum of money, and obtained judgment. On July 14, 1928, the
writ of execution of this judgment was issued. On the 21st of the same month,
the sheriff notified the bank that in pursuance of the judgment for the
plaintiffs, the four parcels of land mortgaged to it were attached. The bank
answered that it had already purchased these parcels and that the only thing the
sheriff could sell was the right of redemption, adding that, should this right
be sold, the public be informed that the successful bidder must pay the entire
amount owed to the bank by the Manila Commercial Co. On September 1, 1928, the
right of redemption was sold at public auction, and the plaintiffs being the
highest bidders, offering P28,000, the sheriff made out the corresponding
certificate of the sale in their favor. On the 4th of the same month, the
plaintiffs proposed to repurchase the four parcels from the bank, to which the
latter objected unless the total debt of the Manila Commercial Co., were paid,
which amounted to P794.256.80.

On April 20, 1929, the plaintiffs brought this action praying that the
Philippine National Bank be ordered to render an accounting of the income,
rents, benefits, and profits derived from the four parcels of land mortgaged and
later sold to it, the amount thereof to be deducted from the redemption price;
and once the exact amount of the redemption price is determined, that the bank
be also ordered to accept the same and to execute in favor of the plaintiffs the
corresponding deed of sale and conveyance of said parcels of land. Subsequently,
however, the plaintiffs and the defendant agreed to drop the petition for the
accounting, reserving to the plaintiffs the right to petition for it at another
time.

The dispositive part of the judgment in this case provides :

“1. That the plaintiffs acquired at an auction sale held by the sheriff, the
Manila Commercial Company’s right of redemption in the second and third parcels
of land described in the complaint and hence, were entitled to repurchase such
parcels of land from the Philippine National Bank, but had no right whatsoever
to repurchase the first and fourth parcels from said bank, because they belonged
exclusively to the La Yebana Company, against which the plaintiffs had not
obtained any judgment.

“2. That the plaintiffs are entitled to demand that the Philippine-National
Bank render an accounting of the income derived from the second and third
parcels of land described in the complaint, but that before they could be
allowed to repurchase such property from the bank, they must pay to the bank the
amount of the debt of the Manila Commercial Company upon the date of the
repurchase, We sides the stipulated interest and the costs incurred by the bank
in connection with the sale of said property, according to section 32 of Act No.
2938.”

The plaintiffs appealed from this judgment.

It is unnecessary to consider whether or not the plaintiffs as successors in
interest of the Manila Commercial Co. possess the right of redemption. The bank
charter as amended (Acts Nos. 2612, 2747, and 2838) declares that the debtors
have this right. The bank’s title to these parcels of land also recites that
such title is subject to that right. Furthermore, the bank makes no objection to
this redemption.

We have seen, however, that the trial court declared the plaintiffs entitled
only to repurchase the parcels covered by transfer certificates of title Nos.
137 and 139, thereby denying this right with reference to the two other parcels
in question. We are of opinion that in this respect the judgment appealed from
is correct.

The Philippine National Bank acquired the four parcels of land with the
understanding that those covered by transfer certificates of title Nos. 137 and
139 belonged to the Manila Commercial Company, and the rest to the La Yebana.
The right of redemption arising from the sale of these parcels to the bank must
appertain to the Manila Commercial Co. with reference to the parcels belonging
to it, and to La Yebana with reference to its parcels, inasmuch as such right
appertains to the respective owners. The action through which the plaintiffs
acquired the right of redemption was brought against the Manila Commercial Co.
and the La Yebana was no party to it. In that action only the right of the
Manila Commercial Co. could have been sold, and not that of La Yebana, as it was
not a party thereto. Therefore, the plaintiffs could not have acquired any more
than the right of redemption with reference to the parcels covered by transfer
certificates of title Nos. 137 and 139, for only with respect to these parcels
did the Manila Commercial Company hold that right.

It is contended that when the plaintiffs acquired the right of redemption
with reference to all the parcels of land now in question as belonging to the
Manila Commercial Company, the Philippine National Bank admitted that the Manila
Commercial Company had that right. We find that the bank made no such admission.
In support of their Contention, the plaintiffs rely upon a portion of the
correspondence interchanged with the bank when the execution proceedings were
being carried out in connection with the action they had brought against the
Manila Commercial Co. But it may be noted that in such correspondence the bank
referred to the right of redemption held by the Manila Commercial Company, and
if the latter had no such right over the property not belonging to it but to La
Yebana, it is clear that the bank could only have referred to the parcels
covered by the certificates of title 137 and 139, which belonged to the Manila
Commercial Company.

As we have indicated above, there is no question with regard to the
plaintiffs’ right, as successors of the Manila Commercial Company, to repurchase
the parcels covered by the transfer certificates of title Nos. 137 and 139. The
question is whether, as the bank contends and the trial court has held, the
redemption should be made by paying to the bank the entire amount owed to it by
the Manila Commercial Company. The appellants contend that this redemption may
be made by only reimbursing the bank what it has paid for the sale made to it.
In this respect we are also of the opinion that the judgment appealed from is
correct.

The Code of Civil Procedure establishes a special proceeding .for the
foreclosure of mortgage, culminating, in case of non-payment of the debt, in the
sale of the mortgaged property. This court has held that sales in cases of this
kind do not carry with them the right of redemption on the part of the owners,
as in ordinary actions. Nevertheless, when the Philippine National Bank was
organized, its charter gave the mortgagor the right to redeem the property
within the year following the judicial sale. This provision was included for the
benefit of the bank’s debtor, establishing in his favor a right he would riot
otherwise have. But in order to protect the bank’s interest as well, the
condition was added that the amount fixed by the court in the writ of attachment
should first be paid, with the stipulated interest, and all the costs and other
judicial expenses incurred by the bank in connection with the attachment and
sale, and for the custody of the property.

It is true that this provision in the bank’s charter refers to the sale of
the mortgaged property at a judicial sale, But in the case of El Hogar Filipino
vs. Paredes (45 Phil., 178), this court ruled that although there is a
judicial procedure established by the law for the foreclosure of a mortgage, the
contracting parties may validly agree to have the mortgaged property sold
without the necessity of an action in court. Hence, when, the Legislature
established this right of redemption in favor of the bank’s debtor, it had in
mind that the sale of mortgaged property could be made; either by a judicial
proceeding or without a judicial action, if the contracting parties so agreed,
and it must be presumed that the law grants this right of redemption in both
cases under the same conditions, because the same legal motive holds good in
both. In this connection it should be borne in mind that this right of
redemption was recognized in the original law and all its amendments before and
after the Supreme Court promulgated the judgment in the case of El Hogar
Filipino vs. Paredes, on October 3, 1923.

Later, on March 6, 1924, the Legislature passed Act No. 3135, establishing
the procedure for extra judicial sales of mortgaged property and providing that
the same are subject to the right of redemption established for sales in
ordinary actions, that is, through the reimbursement only of the price paid.

It will be remembered that the mortgage Contract between the bank and the
Manila Commercial Company was executed on October 30, 1920, before the approval
of Act No. 3135 in March, 1924. If, before Act No. 3135 took effect, the Manila
Commercial Company had violated the contract, beyond all doubt the bank would
have been able, to sell the mortgaged property, without the necessity of a
judicial action,, and the sale thus made would carry the right of repurchase on
the part of the debtor through the payment of the entire amount of the debt.

When the bank’s right to foreclose the mortgage of the Manila Commercial
Company accrued, Act No. 3135 was already in force. Of course, this law, being
general, did not affect the charter of the bank, which was a special law. Thus,
when the bank, in order to sell the mortgaged property extra judicially,
resorted to Act No. 3135, it did so merely to find a proceeding for the sale;
but that action cannot be taken to mean a waiver of its right to demand the
payment of the whole debt before the property can be redeemed. The record
contains nothing to show that the bank made this waiver of said right.

For these reasons, the judgment appealed from is hereby affirmed, with costs
against the appellants. So ordered.

Johnson, Street, Malcolm, Villamor, Ostrand, Romualdez, Villa-Real,
and Imperial, JJ., concur.