Case Digest (G.R. No. 167238)
Facts:
Development Bank of the Philippines v. Spouses Jesus and Anacorita Doyon, G.R. No. 167238, March 25, 2009, First Division, Corona, J., writing for the Court.In the early 1990s, respondents Spouses Jesus and Anacorita Doyon obtained several loans totaling P10 million from petitioner Development Bank of the Philippines (DBP), secured by real estate mortgages and chattel mortgages over the motor vehicles of JD Bus Lines. After defaults, the parties restructured the indebtedness and executed three promissory notes on June 29, 1994, which contained strict default clauses making the whole balance immediately due upon nonpayment of an installment.
Because respondents failed to pay the scheduled quarterly amortizations, DBP sought collection. In 1995 DBP filed an application for extrajudicial foreclosure in the Regional Trial Court (RTC) of Ormoc City, but respondents filed Civil Case No. 3314-O in the same RTC seeking nullification on the ground that they had already paid the loans. That case was not acted upon by the RTC for about three years.
In 1998 DBP withdrew its RTC application for extrajudicial foreclosure and moved for dismissal of Civil Case No. 3314-O; the RTC granted the motion in an order dated March 2, 1998 stating the case was dismissed with prejudice by agreement. Weeks later DBP renewed collection efforts by availing of foreclosure through its deputized special sheriff (pursuant to Executive Order No. 81, Sec. 12), took constructive possession of the foreclosed properties (posting guards at respondents’ compound where the buses were parked), and issued notices of sale at public auction (notices dated 1998 with sales on September 16, 1998).
Respondents then filed Civil Case No. 3592-O in the RTC of Ormoc City for damages, alleging DBP acted in bad faith in foreclosing after having withdrawn and caused dismissal of the earlier RTC action; they also argued the possession clause in the mortgage contracts constituted a pactum commissorium (void) and that the public auctions were invalid for not lasting seven continuous hours as they read Act 3135, Sec. 4.
The RTC (Presiding Judge Fortunito L. Madrona) rendered judgment on January 25, 2002 in favor of respondents, finding DBP acted in bad faith and awarding actual, compensatory, exemplary and moral damages and costs. DBP appealed to the Court of Appeals (CA-G.R. CV No. 74660). In a decision dated November 23, 2004 the Court of Appeals affirmed the RTC decision but modified liability for damages, holding that only DBP (and not the DBP special sheriff) was liable. The CA denied DBP’s motion for reconsideration in a February 18, 2005 resolution.
DBP filed a p...(Pro-only)
Issues:
- Did the petition present a justiciable ground to overturn the factual finding that DBP acted with bad faith in conducting foreclosure, i.e., did DBP exercise its rights in bad faith under Article 19 of the Civil Code?
- Is the contractual stipulation permitting the mortgagee to take actual or constructive possession of the mortgaged property upon default a void pactum commissorium?
- Were the public auctions conducted by DBP's special sheriff valid despite being held at specific hours (10:00–11:00 a.m. and 2:00–3:30 p.m.) rather than for a continuous seven-hour pe...(Pro-only)
Ruling:
- (Pro-only)
Ratio:
- (Pro-only)
Doctrine:
- (Pro-only)