SPOUSES BONIFACIO and FAUSTINA PARAY, and VIDAL ESPELETA
vs. DRA. ABDULIA C. RODRIGUEZ et. al.
Facts: Respondents were the owners of shares of stock in the Quirino-Leonor-Rodriguez Realty
Inc. During the years 1979 to 1980, respondents secured by way of pledge of some of their
shares of stock to Bonifacio and Faustina Paray ("Parays") for the payment of certain loan
obligations. When the Parays attempted to foreclose the pledges on account of respondents’
failure to pay their loans, respondents filed complaints with the RTC of Cebu City praying for
the declaration of nullity of the pledge agreements. However the RTC, in its decision dated 14
October 1988, dismissed the complaint and gave "due course to the foreclosure and sale at public
auction of the various pledges subject of the cases." This decision attained finality after it was
affirmed by the Court of Appeals and the Supreme Court. Respondents then received Notices of
Sale which indicated that the pledged shares were to be sold at public auction on 4 November
1991. However, before the scheduled date of auction, all of respondents caused the consignation
with the RTC Clerk of Court of various amounts claiming that they had attempted to tender these
payments to the Parays, but had been rebuffed. Notwithstanding the consignations, the public
auction took place as scheduled, with Espeleta successfully bidding the amount of P6,200,000
for all of the pledged shares. None of respondents participated or appeared at the auction.
Respondents instead filed a complaint seeking the declaration of nullity of the concluded public
auction in the RTC arguing that their tender of payment and subsequent consignations served to
extinguish their loan obligations and discharged the pledge contracts.
The RTC dismissed the complaint stating that respondents had failed to tender or consign
payments within a reasonable period after default and that the proper remedy of respondents was
to have participated in the auction sale.
The Court of Appeals however reversed the RTC decision on appeal, ruling that the
consignations extinguished the loan obligations and the subject pledge contracts; and the auction
sale as null and void. The attempts at payment by respondents were characterized as made in the
exercise of the right of redemption.
Issues: Whether the pledged shares of stock auctioned off in the sale could still be redeemed by
their owners.
Supreme Court Ruling: The right of redemption as affirmed under Rule 39 of the Rules of
Court applies only to execution sales of real property. There is no law which vests the right of
redemption over personal property. The pledged shares of stocks are personal properties and not
real properties, hence, they are not subject to redemption.
The consignations made by the respondents were not sufficient to cover the interests due
on these loans, which were pegged at the rate of 5% per month or 60% per annum. The 5%
monthly interest rate was noted in the statement of facts in the 1988 RTC Decision which had
since become final. The finality of such decision is a settled fact, and thus the time to challenge
the validity of the 5% monthly interest rate had long passed. Under the circumstances, with the
high interest payments that accrued after several years, respondents were even placed in a
favorable position by the pledge agreements, since the creditor would be unable to recover any
deficiency from the debtors should the sale price be insufficient to cover the principal amounts
with interests.
Certainly, had respondents participated in the auction, there would have been a chance
for them to recover the shares at a price lower than the amount that was actually due from them
to the Parays. That respondents failed to avail of this beneficial resort wholly accorded them by
law is their loss. Now, all respondents can recover is the amounts they had consigned.
