STATE INVESTMENT HOUSE, INC., PETITIONER, VS. COURT OF APPEALS AND SABINA VDA. DE CUENCA, RESPONDENTS.

The Decision and Amended Decision of the Court of Appeals in
CA-G.R. CV No. 24339, both reversing and affirming in part the Decision of
Branch 90 of the Regional Trial Court of Quezon City in “Sabina Vda. de Cuenca
vs. State Investment House, Inc.” (Civil Case No. Q-42552), for declaration of
nullity of the foreclosure sale with an
alternative prayer for redemption of the foreclosed property, are
assailed in the instant petition on questions of law.

As may be gleaned from the pleadings of the parties, the
antecedent facts are as follows:

On February 13, 1979, private respondent Sabina Vda. de Cuenca
(Cuenca) obtained a loan from petitioner State Investment House, Inc. (SIHI)
under a promissory note for P160,000.00, secured by a mortgage on Cuenca’s
property at Tandang Sora, Quezon City.

On November 15, 1979, Cuenca obtained another loan of
P500,000.00. This loan was secured by a
real estate mortgage executed by Cuenca on another property located along
Timog, Quezon City, with paragraph 6 of the contract expressly giving SIHI the
option of extra-judicially foreclosing the mortgaged property in the event of
Cuenca’s default in the payment of her indebtedness. Cuenca’s unpaid balance of P120,000.00 under the first loan was
deducted from the proceeds of the second loan. The mortgage on her property at Tandang Sora, Quezon City was cancelled.

Because of Cuenca’s failure to pay on the maturity date of the
loan, her account was restructured and rolled over twelve times through the
execution of various promissory notes. On November 29, 1982, the maturity date of the twelfth promissory note,
SIHI claimed that Cuenca’s obligations, inclusive of interest, service charges,
and penalties, reached a total of P621,483.57. The loan was not anymore restructured and SIHI, on December 2 and 15,
1982, made written demands on Cuenca for the payment of her outstanding
obligation.

Cuenca did not heed SIHI’s demands for payment. SIHI thus initiated extra-judicial
foreclosure of Cuenca’s mortgaged property for which the corresponding notice of sheriff’s sale was issued on
February 23, 1983, setting the auction sale on March 22, 1983. The scheduled foreclosure sale was, however,
deferred by SIHI on account of Cuenca’s request to be given time to pay the
loan. Although Cuenca did make some
payments, these were not enough to fully pay her outstanding obligation and as
of July 28, 1983, SIHI claimed that Cuenca’s outstanding loan amounted to
P637,793.86. Consequently, SIHI
proceeded with the auction sale on August 8, 1983 where it as declared the
highest bidder for P742,181.55, Cuenca’s outstanding debt at that time per
SIHI’s computation.

The certificate of sale was registered with the Register of Deeds
of Quezon City on August 24, 1983.

On July 10, 1984, SIHI received a letter (Exhibit 54, p. 18, Vol. I, Record) from Cuenca requesting
that she be furnished a Statement of Account “before and after the
foreclosure/auction sale” for her to be able to redeem the foreclosed property
from SIHI. This was followed by another
letter (Exhibit 54-A; also Exhibit J, p. 20, Vol. I, Record) from Cuenca on
July 17, 1984 wherein she signified her intention to redeem the property for
P500,000.00, payable in the following manner:

“1. P100,000.00 payable within thirty (30) days upon receipt of (SIHI’s)
approval of this proposal.

“2. The balance of P400,000.00 shall be paid
in eight (8) monthly installments. Each
installment payment shall be due on the 30th day of each month, the first
monthly payment to be reckoned from the date the amount stated in No. 1 has
been paid.”

In a letter dated
August 16, 1984 (Exhibit K, p. 22, Vol.
I, Record), SIHI rejected Cuenca’s offer to redeem, reasoning that she
should pay her total outstanding obligation amounting at that time to
P870,739.36.

On August 23, 1984, Cuenca, through counsel, sent another letter
to SIHI (Exhibit 54-B; also Exhibit L, pp. 23-24, Vol. I, Record) and
reiterated her offer to redeem the property by stating:

“… we are now finally offering and tendering to you the full sum
of P426,874.72 as the redemption price of the property. This sum of P426,874.72 is the difference
between the redemption price of P870,739.36 which you fixed in your letter of 16 August 1984, and
the sum of P441,312.76 which is the aggregate of the payment which our client
made to you on account of her loan of P500,000.00 ….”

Without, however, waiting for SIHI’s reply, Cuenca, on August 24,1984, filed a complaint
with the Regional Trial Court of Quezon City seeking annulment of the
foreclosure sale on the ground that she had not defaulted in the payment of her
loan to SIHI. Alternatively, Cuenca
prayed that the trial court fix the redemption price in the event it is found
that she is still indebted to SIHI.

After the expiration of the one-year redemption period, the
Register of Deeds issued a new title on the foreclosed property in SIHI’s name.

On October 19, 1989, Judge Abraham P. Vera, presiding judge of
Branch 90 of the Regional Trial Court of the National Capital Judicial Region
stationed in Quezon City, promulgated his decision declaring the foreclosure
sale, as well as SIHI’s title obtained in such sale, null and void.

In its decision, the trial court made the following essential
findings: (a) that the filing of the
petition for extrajudicial foreclosure was valid because as of the date of the
filing thereof, Cuenca was still indebted to SIHI in the sum of P222,890.41
based on the trial court’s own computation; and (b) that the foreclosure sale
held on August 8, 1983 was not valid because at that time, Cuenca no longer
owed any amount to SIHI, as in fact from the computations made by the trial
court, Cuenca had made an overpayment to SIHI in the amount of P27,054.14.

The dispositive portion of the trial court’s decision stated:

“ACCORDINGLY, judgment is hereby rendered:

(a) Declaring
plaintiff to have fully paid her obligations under the promissory notes, marked
Exhs. 1 and 4, and all of those deriving their being from Exh. 4;

(b) Declaring the
sale of the mortgaged property of plaintiff under the foreclosure proceedings
and of the resultant Certificate of Sale executed and issued by the foreclosing
Sheriff by reason of such foreclosure to be null and void;

(c) Directing the Register of Deeds of Quezon
City to cancel Transfer Certificate of Title No. 325372 (Exh. N) in the name of
SIHI, and to reinstate Transfer Certificate of Title No. T-12678 (Exh. B) in
the name of plaintiff;

(d) Directing
defendant SIHI to refund to plaintiff the sum of P27,054.14, which was the
overpayment she made on account of her loans with SIHI, with interest at 12%
per annum from the date of the filing of the complaint until the same is fully
paid;

(e) Directing the defendant SIHI to pay to plaintiff the sums of: P50,000.00 as moral damages; P50,000.00 as
exemplary damages; and P50,000.00, as attorney’s fees;

(f) Directing defendant SIHI to pay plaintiff
the sum of P62,903.18, as a refund of the penalties which it had collected from
plaintiff, with interest thereon at 6% per annum from date of this decision
until the same is fully paid;

(g) Directing plaintiff to pay to defendant SIHI
the sum P14,645.00, in reimbursement of SIHI’s expenses in the foreclosure of
the mortgaged property, which includes attorney’s fees, with interest thereon
at 6% per annum from date of the decision until it is fully paid, which amount
shall, however, be offset by an equivalent amount from the amounts due from
SIHI to plaintiff; and

(h) Directing defendant SIHI to pay the costs of
this suit.

All other claims which the parties may have against each other are
hereby denied and dismissed.

SO ORDERED.” (pp. 681-682, Vol. II, Record.)

SIHI appealed the decision to the Court of Appeals in CA-G.R. CV No. 24339. In its Original Decision, the Court of Appeals (Campos [P], Lantin,
Sempio-Diy, JJ) rectified several errors
committed by the trial court in its computation of Cuenca’s account with
SIHI, but nevertheless affirmed the trial court’s finding that at the time of
the foreclosure sale, Cuenca had already paid in full her indebtedness so that
the foreclosure sale and the transmission
of title to SIHI were null and void.

Both parties asked for a reconsideration of the appellate Court’s ruling.

SIHI’s Motion for Reconsideration contended that on the basis of
the computations made by the trial court and as corrected by the Court of Appeals
in its decision, the net result showed that as of the date of the foreclosure
sale on August 8, 1983, Cuenca was still indebted to SIHI, and such being the
case, the foreclosure sale was valid.

In her Motion for Reconsideration, Cuenca asked the appellate
court to reconsider its finding that she had obtained a third loan from SIHI
for P61,500.00. She further asked that
she be credited two amounts
which were disallowed by respondent court.

On April 30, 1991, respondent court promulgated its Amended Decision,
reversed its earlier ruling and held that in accordance with its own
computations, Cuenca was still indebted to SIHI in the amount of P279,963.42 as
of the date of the foreclosure sale. The dispositive portion of this Amended Decision reads:

“The decision of this Court is hereby modified as follows:

a)   
Plaintiff-appellee is ordered to pay defendant-appellant the
sum of P279,963.42, consisting of the unpaid balance of her outstanding
obligation within 30 days from receipt of this Amended Decision with payment of
interest at the legal rate from date of this decision until final judgment.

b)   
The foreclosure proceedings and the resultant Certificate of
Sale executed and issued by the foreclosing sheriff by reason of such
foreclosure are rendered null and void.

c)   
Transfer Certificate of Title No. 324372 issued in the name of
SIHI is declared null and void and the Register of Deeds of Quezon City is ordered
to reinstate Transfer Certificate of Title No. 126578 in the name of plaintiff.

d)   
No pronouncement as to payment of damages and attorney’s fees.

SO ORDERED.” (p. 49, Rollo.)

Dissatisfied, SIHI filed
the instant petition and as
clarified in pages 4 and 5 of the petition, the appeal is limited to the following aspects:

“(i) The original Decision in C.A.-G.R. CV No. 24339, ‘Sabina Vda de
Cuenca, plaintiff-appellee v. State Investment House, Inc., et al., defendants;
State Investment House, Inc., defendant-appellant,’ promulgated by respondent
Court on 28 February 1991, only insofar
as the decision voided the foreclosure sale of the mortgaged property
and SIHI’s title acquired by
virtue of such foreclosure sale,
the challenged part of the dispositive portion reading as follows:

‘(b) Declaring
the sale of the mortgaged property of plaintiff under the foreclosure proceeding
and of the resultant Certificate of Sale executed and issued by the foreclosing
Sheriff by reason of such foreclosure to be null and void;

(c) Directing the Register of Deeds of Quezon
City to cancel Transfer Certificate of Title No. 325372 (Exhibit N) in the name
of SIHI, and to reinstate Transfer Certificate of Title No. T-12678 (Exhibit B)
in the name of the plaintiff.’

(ii) And the Amended Decision in the same
appealed case, promulgated on 30 April
1991, only insofar as it adjudicated as follows:

‘(a) Plaintiff-appellee is ordered to pay
defendant-appellant the sum of P279,963.42, consisting of the unpaid balance of
her outstanding obligation within 30 days from receipt of this Amended Decision
with payment of interest at the legal rate from date of this decision until
final judgment.

(b)   
The foreclosure
proceedings and the resultant Certificate of Sale executed and issued by the
foreclosing Sheriff by reason of such foreclosure are rendered null and void.

(c)   
Transfer Certificate
of Title No. 324372 issued in the name of SIHI is declared null and void and
the Register of Deeds of Quezon City is ordered to reinstate Transfer
Certificate of Title No. 126578 in the name of plaintiff.’

(b) Petitioner is not appealing the rest of the dispositive portions of the
Decision and Amended Decision.”

SIHI presents the following as grounds for its petition:

“MAIN GROUND OF THE PETITION

RESPONDENT COURT MANIFESTLY ERRED AND
MISAPPLIED THE LAW WHEN IT REFUSED TO DECLARE THE FORECLOSURE PROCEEDINGS VALID
DESPITE ITS OWN DETERMINATION THAT RESPONDENT CUENCA WAS TRULY AND GENUINELY
INDEBTED TO PETITIONER WHEN THE FORECLOSURE PROCEEDINGS WERE INSTITUTED.

ALTERNATIVE GROUND

SHOULD THE SUPREME COURT AFFIRM THE VOIDING
OF THE FORECLOSURE SALE AND OF PETITIONER’S TITLE, PETITIONER IS ENTITLED, IN
LAW AND EQUITY TO THE PAYMENT OF LEGAL INTEREST ON THE PRINCIPAL SUM OF
P279,963.42 (THE SUM ADJUDGED IN
PETITIONER’S FAVOR BY RESPONDENT COURT) COMPUTED FROM THE DATE OF THE
FORECLOSURE SALE UP TO THE DATE OF ACTUAL PAYMENT OF THE PRINCIPAL SUM.” (pp. 15-16, Rollo)

On July 25, 1991, shortly after she filed her Comment, Cuenca
consigned with this Court Metrobank Cashier’s Check No. CC-17743 in the sum of
P279,963.42, representing the amount ordered by the Court of Appeals (in its
Amended Decision) to be paid to SIHI. Thereafter, SIHI filed its Reply on August 15, 1991, to which a
Rejoinder was filed by Cuenca on August 27, 1991.

As correctly formulated by SIHI, the principal issue in this case
is the effect upon the validity of the extra­-judicial foreclosure proceedings
of a judicial determina­tion that the debtor-mortgagor (Cuenca), at the time of
the foreclosure, was still indebted and in default in the payment of the
obligations to the creditor-mortgageee (SIHI).

Cuenca’s loan with SIHI was restructured and rolled over twelve
(12) times, with the last promissory note indicating the maturity date of
November 29, 1982. The recomputation
(attached to the Amended Decision) of the Court of Appeals shows, however, that
on the said date Cuenca still had an outstanding indebtedness of
P416,188.08. SIHI, in its letters to
Cuenca dated December 2 and 15, 1982 (Exhibits 36 and 36-A, pp. 435 and 436,
Vol. I, Record) demanded the payment of this unpaid amount. Cuenca, however, failed to make any payments
and thus, even at that point in time, was already a debtor in default under
Article 1168 of the New Civil Code.

The extra-judicial foreclosure instituted by SIHI in February
1983 was, therefore, valid as at that time, Cuenca’s loan being then already
almost three (3) months overdue (Bonnevie
vs. Court of Appeals, 125 SCRA 122 [1983]). Aside from the fact that Cuenca was already
in default, the Real Estate Mortgage executed by the parties expressly granted
SIHI the option to foreclose when it provided that:

“6.   In the event that the Mort­gagor/Debtor
herein, should fail or refuse to pay any of the sums of money secured by this
mortgage, or any part thereof, in accordance with the terms and conditions herein
set forth or those stipulated in the correlative promissory note(s), or should
he/it fail to perform any of the conditions stipulated herein, or those in the
promissory note(s), then and in such case the Mortgagee shall have the right,
at its election, to foreclose this mortgage ….”

SIHI, however, deferred the auction sale when Cuenca subsequently
asked for more time to pay her obligation. Cuenca’s account, however, was not restructured and she herself gave
SIHI permission to proceed with the auction sale on August 8, 1983 should she
not be able to pay her account by then (Exhibit 47, p. 457, Vol. I,
Record). As of that date, the Court of
Appeals computed Cuenca’s unpaid account with SIHI to be P279,963.42. It is worth noting that this computation is
not challenged or questioned by either SIHI or Cuenca and We find no reason to
disturb the same.

The obvious implication is that, at the time of the foreclosure
sale on August 8, 1983, Cuenca had defaulted in the payment of
P279,963.42. Thus, SIHI had the option,
under the aforequoted provision of the Real Estate Mortgage, to foreclose on
the mortgaged property. SIHI cannot be
faulted for having chosen that option.

The Court of Appeals, therefore, erred in concluding that despite
Cuenca’s default, the foreclosure sale and the resultant issuance of the
certificate of sale by the foreclosing Sheriff were null and void. Foreclosure is valid where the debtor is in
default in the payment of his obligation (Cf, Bicol Savings and Loan
Association vs. Court of Appeals, 171 SCRA 630 [1989]). In a real estate mortgage when the principal
obligation is not paid when due, the mortgagee has the right to foreclose the
mortgage and to have the property seized and sold with the view of applying the
proceeds to the payment of the obligation (Commodity Financing Co., Inc. vs.
Jimenez, 91 SCRA 57 [1979]). Once
the proceeds have been applied to the payment of the obligation, the debtor
cannot anymore be required to pay, unless, of course, there is a deficiency
between the amount of the loan
and the foreclosure sale price, because the obligation has already been
extinguished.

We now come to the second issue posed by the parties: with the auction sale having been done on
August 8, 1992 and the certificate of foreclosure sale having been validly
registered with the Register of Deeds of Quezon City on August 24, 1983,
was Cuenca able to redeem the property in the manner and within the period
provided by law?

With the aforequoted provision of the Real Estate Mortgage having expressly authorized
SIHI to extra-judicially foreclose the mortgage in case of Cuenca’s failure to
comply with her obligation to pay, the law governing the foreclosure is
Republic Act No. 3135 (An Act To Regulate The Sale Of Property Under Special Powers
Inserted In Or Annexed To Real Estate Mortgages), as amended by Republic Act
No. 4118 (See Luna vs. Encarnacion, 91 Phil. 531 [1952]). Section 6 of the said Act states:

“Sec. 6. In all cases in
which an extrajudicial sale is made under the special power hereinbefore
referred to, the debtor, his successors in interest or any judicial creditor or
judgment creditor of said debtor, or any person having a lien on the property
subsequent to the mortgage or deed of trust under which the property is sold, may
redeem the same at any time within the term of one year from and after the date
of the sale ….” (Underscoring supplied.)

In a long line of
cases, We have consistently held that this one-year redemption period should be
counted not from the date of foreclosure sale, but from the time the
certificate of sale is
registered with the Register of Deeds (Agbulos vs. Alberto, 5 SCRA 790
[1962]; Salazar vs. Meneses, 8 SCRA 495 [1963]; Reyes vs. Noblejas,
21 SCRA 1027 [1970]; Quimson vs.
Philippine National Bank, 36 SCRA 26 [1970]). In this case, therefore, the one-year
redemption period should be reckoned from the time the certificate of sale was
registered on August 24, 1983 (Bernardez vs. Reyes, 201 SCRA 648
[1991]).

Under Article 13 of the
New Civil Code, a year is understood to be of three hundred sixty-five (365)
days. Thus, excluding the first day and
counting from August 25, 1983 (under paragraph 3 of Article 13 of the New Civil
Code), and bearing in mind that 1984 was a leap year, Cuenca had only
until August 23, 1984,
the 365th day after registration of the sale on August 24, 1983, within which
to redeeem the foreclosed property in accordance with law. It was thus already beyond the redemption
period when Cuenca filed her suit below on August 24, 1984.

It should be stressed in this regard that it is not proper to
count, as Cuenca submits in her Rejoinder, the period on the basis of 30 days per month. The law speaks of a
“one year” period within which to redeem, not twelve months as in the case of redemption by a judgment debtor under
Section 30 of Rule 39. Applying Article
13 of the Civil Code, the period of one year within which to redeem in the case
at bar is to count 365 days from August 24, 1983. Consequently, the last day to redeem would be and indeed fell on August
23, 1984, said year being a leap year (cf Go vs. Dizon, et al, G.R.
No. 75915-16, Sept. 18, 1992).

Cuenca, however, was not able to exercise her right of redemption
on or before August 23, 1984. Although
she wrote to SIHI twice on July 17 and August 23, 1984 and offered to redeem
her property, these offers were not accompanied by simultaneous bona fide
tender or delivery of the redemption price to SIHI. In Belisario vs. Intermediate Appellate Court (165 SCRA
101 [1988]), this Court, through Justice Medialdea, held:

“The general rule in redemption is that in making a repurchase, it
is not sufficient that a person offering to redeem makes manifestation of his
desire to repurchase; this statement of intention must be accompanied by an
actual and simultaneous tender of payment, which constitutes the legal use of
exercise of the right to repurchase (Angao vs. Clavano, 17 Phil.
152). Likewise, in several cases
decided by this Court (Fructo vs. Fuentes, 15 Phil. 362; Retes vs.
Suelto, 20 Phil. 394; Rosales vs. Reyes, et al., 98 Phil. 975) where
the right to repurchase was held to have been properly exercised, there was a
definite finding of tender of payment having been made by the vendor. The tender of payment must be for the full
amount of the repurchase price, otherwise the offer to redeem will be held
ineffectual. (Rumbaoa vs. Arzaga,
84 Phil. 812). Bona fide redemption
necessarily imports a reasonable and valid tender of the entire repurchase
price. There is no cogent reason for
requiring the vendee to accept payment by installments from the redemptioner,
as it would ultimately result in an indefinite extension of the redemption
period (Conejero, et al. vs. Court of Appeals,et al., L-21812, April 29,
1966, 16 SCRA 775, 780).

The rule that tender of payment of the repurchase price is
necessary to exercise the right of redemption finds support in civil law. Article 1616 of the Civil Code of the
Philippines, in the absence of an applicable provision in Commonwealth Act No.
141, furnishes the guide, to wit: ‘The
vendor cannot avail himself of the right to repurchase without returning to the
vendee the price of the sale x x x’ (UY Lee vs. Court of Appeals,
L-28126, November 28, 1975, 68 SCRA 196, 204).” (at pp. 107-108.)

Cuenca’s use of the phrase “offering and tendering” in her letter
dated August 23, 1984 does not comply with the ruling in Belisario. There is no showing whatsoever here that the
redemption price was delivered to SIHI. Redemption is not a matter of intent but involves making the proper
payment or tender of the price of the land within the specified period (De
la Merced vs. De Guzman, 160 SCRA 87 [1988]).

Neither is Cuenca correct in contending that SIHI in effect
extended the redemption period when it stated in its letter dated August 16,
1984 that Cuenca had until August 24, 1984 within which to pay its outstanding
account in full. In Lazo vs.
Republic Surety & Insurance Co., Inc., (31 SCRA 329 [1970]), We held
that it is only where, by voluntary agreement of the parties, consisting of
extensions of the redemption period, followed by commitment by the debtor to
pay the redemption price at a fixed date, will the concept of legal redemption
be converted by the parties into one of conventional redemption such that it
generates binding contracts when approved by the creditor. In the instant case, however, there is no
showing that Cuenca agreed to pay the redemption price on or before August 24,
1984, as set by SIHI. On the contrary,
Cuenca’s filing of her complaint on August 24, 1984 principally seeking to
declare the nullity of the foreclosure sale is indicative of her refusal to pay
the redemption price on the deadline mistakenly set by SIHI.

Cuenca’s complaint filed
on August 24, 1984 (the 365th day from the registration of the
certificate of sale, having fallen on August 23, 1984), did not have the
effect of a formal offer to redeem. In Belisario
(supra), We further
explained,

“This case is different from Uy Lee vs. Court of Appeals, supra
where the action to compel redemption was filed
after the lapse of the period of redemption. Thus, the Court held in said case, to wit:

‘It is clear that the mere sending of letters by vendor Simeon
expressing his desire to repurchase the property without an accompanying tender
of redemption price fell short of the requirements of law. Having failed to properly exercise his right
of redemption within the statutory five-year period, the right is lost and the
same can no longer be revived by the filing of an action to compel redemption after the lapse of the period.’

The same factual antecedent obtained in Conejero, et al. vs.
Court of Appeals, supra, where the complaint seeking to be declared entitled
to redeem was filed after the expiration of the statutory period of
redemption. What was proper for
determination then in said cases was whether or not the right of redemption
sans judicial action was validly exercised. In said cases, the Court applied the general rule that bona fide
redemption necessarily imports a reasonable and valid tender of the entire
purchase price.” (at p. 109; emphasis added.)

Thus, it is only when the
complaint to enforce a repurchase is filed within the period of
redemption will it be equivalent
to an offer to redeem and have the effect of preserving the right of redemption (Belisario, supra,
citing Reoveros vs. Abel and Sandoval, 48 O.G. 5318). Where,
as in this case, the complaint for redemption was filed after the redemption period expired,
the complaint is a useless exercise which can not defeat the purchaser’s right
to have the title of the property transferred in his name. Cuenca’s reliance on the ruling in Hulganza
vs. Court of Appeals (147 SCRA 77 (1987]) is without any basis. The doctrine laid down in Hulganza
finds no applicability to the instant
case for unlike the complaint filed by Cuenca in the case at bar, the action
for redemption in Hulganza
was filed within the period of
redemption.

Moreover, it bears noting
that Cuenca sent letters (dated July 17 and August 23, 1984) to SIHI within the
redemption period in which she offered to redeem her property. In her letter dated July 17, 1984, she
offered to pay her indebtedness according to an installment plan which, if
carefully analyzed, had the effect of extending the period of redemption beyond
one year contrary to the policy of the law (Belisario, supra). In her other letter dated
August 23, 1984, she offered to pay the amount of P426,874.72 in full settlement
of her obligation, although, as
We earlier stated, this amount
was never properly delivered to SIHI in accordance with
law. There is thus no proof at that
time that Cuenca possessed the ability to pay the redemption amount she was
offering. This is especially true in
the light of the fact that in her first letter she merely offered to pay in
installments.

If only to prove the
veracity of her claim that at that time she was capable of paying SIHI the full
amount of what she thought was a reasonable redemption price, the least that
Cuenca could have done was to consign payment in court simultaneous with her
filing of the action to redeem on August 24, 1992. In so stating, We do not here depart from our consistent ruling
that a formal offer to redeem, accompanied by a bona fide tender of the
redemption price, although proper, is not essential where the right to redeem is
exercised through the filing of a judicial action (Tolentino vs. Court of
Appeals, 106 SCRA 513 [1981]; Tioseco vs. Court of Appeals, 143 SCRA
705 [1986]; Hulganza, supra; Belisario, supra). As earlier stated, this rule only holds
where the action to redeem is filed within the redemption period. Where, as in the instant case, the action is
filed after the statutory period has expired,
the determination of whether the plaintiff consigned the redemption price with
the court simultaneous with the filing of the action is necessary to see if the
right of redemption sans judicial action was validly exercised (Belisario, supra).

Cuenca’s consignation with
this Court of the amount
ordered by the Court of Appeals to be paid to SIHI only eight (8) years after
her action to redeem was filed in 1984 is
a belated move which merely shows that in 1984 she had no ability to pay
SIHI the redemption price. Her filing
of the action was a mere devise and scheme to buy time to raise the amount
needed to redeem her property. In Conejero,
et al. vs. Court of Appeals, et al. (16 SCRA 775 [1966]), We precisely
stated that “a buyer can not be expected to entertain an offer of redemption
without attendant evidence that the redemptioner can, and is willing to
accomplish the repurchase immediately. A different rule would leave the buyer open to harassment by speculators
or crackpots, as well as to unnecessary prolongation
of the redemption period, contrary to the policy of the law. x x x. Of course, consignation of the price would remove all controversy as to the
redemptioner’s ability to pay at the proper time.” (at pp. 781-782.)

We further stated in Basbas
vs. Entena (28 SCRA 665, 671 [1969]) that:

“… the right of legal redemption must be exercised within
specified time limits: and the
statutory periods would be rendered meaningless and of easy evasion unless the
redemptioner is required to make an
actual tender in good faith of what he believed to be the reasonable price of
the land sought to be redeemed. The
existence of the right of redemption operates to depress the market value of
the land until the period expires, and to render that period indefinite by
permitting the tenant to file a suit for redemption, with either party unable
to foresee when final judgment will terminate the action, would render nugatory
the period of two years fixed by the statute for making the redemption and
virtually paralyze any efforts of the landowner to realize the value of his
land. No buyer can be expected to
acquire it without any certainty as to the amount for which it may be redeemed,
so that he can recover at least his investment in case of redemption. In the meantime, the landowner’s needs and
obligations cannot be met. It is
doubtful if any such result was intended by the statute, absent clear wording
to that effect.

The situation becomes worse when, as shown by the evidence in this
case, the redemptioner has no funds and must apply for them to the Land
Authority, which, in turn, must depend on the availability of funds from the
Land Bank. It then becomes practically
certain that the landowner will not be able to realize the value of his
property for an indefinite time beyond the two years redemption period.” (at
pp. 671-672.)

WHEREFORE, the appealed portions of the
Original Decision and the
Amended Decision are REVERSED and SET ASIDE and a new judgment is hereby
entered:

1)    Declaring valid and effective the extrajudicial
foreclosure of the mortgage of respondent Sabina Vda. de Cuenca’s property in
Timog, Quezon City on August 8, 1983; and

2)    Upholding and confirming the cancellation of
Transfer Certificate of Title No. 126578 of the Register of Deeds of Quezon City in the name of
Sabina Vda. de Cuenca, as well as its replacement by Transfer Certificate of
Title No. 324372 in the name of State Investment House, Inc.

Neither party is to recover damages or costs.

SO ORDERED.

Gutierrez, Jr., Acting C.J., (Chairman), Bidin, Davide, Jr., and Romero, JJ., concur.