PARAY V.
RODRIGUEZ
DOCTRINES:
(1) Under the Civil Code, the foreclosure of a pledge occurs extrajudicially
without the intervention of the courts.
(2) The right of redemption under Rule 39 of the ROC applies only to execution
sales, more precisely execution sales of REAL PROPERTY.
(3) No provision in the ROC or in any law requires that pledged properties sold
at auctions be sold separately.
FACTS:
 Respondents Rodriquez were the owners of shares of stock (personal
property) in Quirino-Leonor-Rodriguez Realty Inc. Respondents Rodriguez
secured by way of pledge some of their shares of stock to petitioners Paray
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 wherein they sought the declaration of nullity of the pledge
agreements. The RTC ruled for the foreclosure and sale at a public auction
of the various pledges. The decision attained finality after it was affirmed
by the CA and the SC. (CIVIL CASE 1)
 Respondents Rodriguez later on received Notices of Sale which indicated
that the pledged shares were to be sold at public auction. However, before
the scheduled date of the auction, the respondents consigned the various
amounts with the RTC and claimed that they had attempted to tender
these payments to the Parays, but had been rebuffed.
 Notwithstanding the consignations, the public auction took, with Petitioner
being the highest bidder. None of the respondents Rodriguez participated
or appeared in the auction. Respondents instead filed a complaint seeking
the declaration of nullity of the concluded public auction, arguing:
o That their tender of payment and subsequent consignations
served to extinguish their loan obligations and discharged the
pledge contracts.
 Petitioners, on the other hand, argued that:
o The auction sale was conducted pursuant to the final and
executory judgment in CIVIL CASE 1 and
o The tender of payment and consignation were made long after
their obligations had fallen due.
 RTC: ruled in favor of Petitioners Paray
o Respondents Rodriguez had failed to tender or consign the
payments within a reasonable period after default; and
o The proper remedy of the Respondents Rodriguez was to have
participated in the auction sale.
 CA: Reversed and ruled in favor of Respondents Rodriguez
o The act of consigning the payments with the RTC should be
deemed done in the exercise of their right of redemption;
o That the buyer at public auction does not ipso facto become the
owner of the pledged shares pending the lapse of the one-year
redemptive period;
o The collective sale of the shares of stock belonging to several
individual owners without specification of the apportionment in
the applications of payment deprives the individual owners of the
opportunity to know of the price they would have to pay for the
purpose of exercising the right of redemption.
 Petitioners now come to court presenting the following arguments:
o Their refusal to receive payment was on the ground that they
were currently undergoing the auction sale pursuant to the final
and executory order which did not authorize the payment of the
principal obligation.
o The amounts that were consigned were insufficient to cover the
interests pegged at 5% or 60% pa.
o The essential procedural requisites for the auction sale had been
satisfied.
ISSUES:
(1) W/N the auction was a judicial one. (EXTRAJUDICIAL)
(2) W/N there is a right of redemption over pledged properties. (NO)
(3) W/N the consignation made by Respondents Rodriguez extinguished their
principal obligation. (NO)
 o SIBAL V. VALDEZ: after the Court ruled that sugar cane crops are
HELD 1: personal property, and thus, not subject to the right of
redemption, all the cases after this have ruled that personal
EXTRA-JUDICIAL SALE JUDICIAL SALE property does not apply to right of redemption.
(1) A.K.A. Notarial Sale (1) A.K.A. Execution Sale o Sec. 39 of 1997 Rules of Civil Procedure: the right of redemption
(2) Foreclosure of a pledge occurs applies to real properties and not personal properties sold on
extrajudicially without the execution.
intervention by the courts.
(3) All the creditor needs to do, if  Since the pledged shares are not subject to redemption, the CA had no
the credit has not been business invoking and applying the right of redemption.
satisfied, is to proceed before
a Notary Public to the sale of HELD 3:
the thing pledged.
(4) No need for a public auction.  ARTICLE 2098: the right of the creditor to retain possession of the pledged
item exists only until the debt is paid.
 In the case at bar, petitioners attempted to proceed extrajudicially with the  ARTICLE 2105: clarifies that the debtor cannot ask for the return of the
sale of the pledged shares by public auction. thing pledged against the will of the creditor, unless and until he has paid
 At first glance, the Decision granting the petitioners the right to sell the the debt and its interest.
pledges shares will leave any person to believe that such sale should be  ARTICLE 2112: when the credit has not been satisfied in due time, the
done judicially. But upon closer inspection of the Decision, the final creditor may proceed with the sale by public auction through A2112’s
judgment did not expressly direct the sale by public auction, but instead procedure.
upheld the right of the Parays to conduct such sale at their own volition.  A 5% interest rate per month was stipulated between the parties and this
fact was not contested by respondents Rodriguez. Petitioners were correct
HELD 2: in arguing that the amounts consigned by respondents could not answer
for their respective principal loan obligations as they were not sufficient to
 The right of redemption involves payments made by debtors after the cover the interests due. Instead, they only paid for the principal amount.
foreclosure of their properties and not those made or attempted to be
made, as in this case, before the foreclosure sale. The right of redemption WHO WON? PARAY.
as affirmed by Rule 39 of the ROC applies only to execution sales, more
precisely, the sale of real property.

 The right to redeem property sold as a security for the satisfaction of an

unpaid obligation does not exist preternaturally. Neither is it predicated on
proprietary right, which, after the sale of property on execution, leaves the
judgment debtor and vests in the purchaser. Instead, it is a bare statutory
privilege to be exercised only by the persons named in the statute.

 Other evidence supporting this:

o Act No. 3135: The right of redemption over mortgaged real

property sold extrajudicially. The said law does not extend the
same benefit to personal property.