Development Bank of the Philippines v. West Negros College

G.R. No. 174103 (December 23, 2008)

Facts:

The case involves a dispute between the Development Bank of the Philippines (DBP) and West Negros College, Inc. (WNC) regarding the computation of the redemption price for a property that was foreclosed. The property in question was foreclosed on January 30, 1989, and subsequently auctioned on August 24, 1989. Following the auction, WNC, as the assignee of Bacolod Medical Center, was involved in a legal battle concerning the amount owed to DBP.

The primary issue arose when the Court of Appeals ruled that the redemption price should be calculated as of the date of the public auction, and that DBP could no longer collect interest from WNC after this date. DBP filed a Motion for Reconsideration, arguing that the appellate court's decision was inconsistent with previous rulings and the provisions of Executive Order No. 81 (E.O. No. 81), which governs the rights of the bank in such foreclosure cases.

WNC opposed the motion, asserting that DBP's arguments were merely a reiteration of previously settled issues and that earlier decisions were already final and executory.

Legal Issues:

1. Whether the Court of Appeals was correct in ruling that the computation of the redemption price should be reckoned as of the date of the public auction and that DBP could no longer collect interest from WNC after this date.
2. Whether DBP was entitled to collect accrued interest even after the foreclosure sale, given that it did not take possession of the property during the redemption period.

Arguments:

• Petitioner (DBP): DBP contended that the provisions of E.O. No. 81 entitled it to collect interest on the total indebtedness during the redemption period. It argued that the deletion of the phrase regarding interest from the total indebtedness in the current charter did not negate its right to collect interest, especially since it had the right to take possession of the property during the redemption period. DBP emphasized that had it taken possession, it would have been entitled to the fruits of the property as compensation for the interest that would otherwise accrue.

• Respondent (WNC): WNC argued that DBP's motion was pro forma and that the previous decisions were final and executory. WNC maintained that the appellate court's ruling was correct and that DBP's entitlement to interest was limited to the date of the auction, as established in earlier decisions.

Court's Decision and Legal Reasoning:

The Supreme Court found merit in DBP's Motion for Reconsideration. It ruled that DBP was indeed entitled to collect accrued interest even after the foreclosure sale. The Court highlighted that the relevant provision of E.O. No. 81 explicitly allowed DBP to take possession of the foreclosed property during the redemption period and to claim the fruits of the property as compensation for the interest that would otherwise accrue.

The Court noted that the deletion of the phrase regarding interest in the current charter did not eliminate DBP's right to collect interest during the redemption period, especially since the law intended to protect the government's investment in the lending institution. The Court also clarified that the previous decisions did not violate the immutability principle, as they recognized DBP's entitlement to interest during the redemption period.

As a result, the Court reversed the resolutions of the Court of Appeals and directed it to resume proceedings in the case.

Significant Legal Principles or Doctrines Established:

1. The right of a bank to collect interest on the total indebtedness during the redemption period, even after a foreclosure sale, provided that the bank did not take possession of the property.
2. The interpretation of provisions in E.O. No. 81 concerning the rights of the Development Bank of the Philippines in foreclosure cases.
3. The principle of immutability of final judgments does not preclude the court from clarifying its previous rulings when new arguments or interpretations arise.