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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
Unlike in an ordinary sale, inadequacy of the price at a forced sale is immaterial and does not nullify a sale since, in a forced sale, a low price is more beneficial to the mortgage debtor for it makes redemption of the property easier. New Sampaguita Builders Construction Inc. v. Philippine National Bank, 479 Phil. 483, 514-515 (2004)
The general rule that mere inadequacy of price is not sufficient to set aside a foreclosure sale is based on the theory that the lesser the price the easier it will be for the owner to effect the redemption.
In other words, Unlike in an ordinary sale, inadequacy of the price at a forced sale is immaterial and does not nullify a sale since, in a forced sale, a low price is more beneficial to the mortgage debtor for it makes redemption of the property easier.
The same thing cannot be said where the amount of the bid is in excess of the total mortgage debt. The reason is that in case the mortgagor decides to exercise his right of redemption.
The law says –
Section 30 of Rule 39 provides that the redemption price should be equivalent to the amount of the purchase price, plus one percent monthly interest up to the time of the redemption, together with the amount of any assessments or taxes which the purchaser may have paid thereon after purchase, and interest on such last-named amount at the same rate.
Jurisprudence provides –
While in ordinary sales for reasons of equity a transaction may be invalidated on the ground of inadequacy of price, or when such inadequacy shocks one’s conscience as to justify the courts to interfere, such does not follow when the law gives to the owner the right to redeem, as when a sale is made at public auction, upon the theory that the lesser the price the easier it is for the owner to effect the redemption. And so it was aptly said: ‘When there is the right to redeem, inadequacy of price should not be material, because the judgment debtor may reacquire the property or also sell his right to redeem and thus recover the loss he claims to have suffered by reason of the price obtained at the auction sale.
In the cases of Cometa v. Court of Appeals and in Rosales v. Court of Appeals, wherein the Supreme Court declared that a sale price which is equivalent to more or less twelve percent (12%) of the value of the property is shockingly low, unconscionable and grossly inadequate, thus, warranting a nullification of the foreclosure sale. In both cases, the Court declared that where the inadequacy of the price is purely shocking to the conscience, such that the mind revolts at it and such that a reasonable man would neither directly nor indirectly be likely to consent to it, the sale shall be declared null and void.
On the other hand, in Cortes v. Intermediate Appellate Court and in Ponce De Leon v. Rehabilitation Finance Corporation, the Supreme Court upheld the validity of foreclosure sales in which the property subject thereof were sold at 11% and 17%, respectively, of their value.
Source:
Bank of the Philippine Islands vs. Cynthia L. Reyes, G.R. No. 182769, February 01, 2012; New Sampaguita Builders Construction Inc. v. Philippine National Bank, 479 Phil. 483, 514-515 (2004); Metropolitan Bank & Trust Co., vs. Lamb Construction Consortium Corporation, G.R. No. 170906, November 27, 2009
Read also: FORECLOSURE OF A REAL ESTATE MORTGAGE (REM)
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