G.R. No. 157330 - Calilap-Asmeron vs. Development Bank of the Philippines

Case Summary (G.R. No. 157330)

Factual Background

The parties initially created a real estate mortgage on March 17, 1975 over two parcels of land titled as TCT No. T-164117 and TCT No. T-160929 to secure a loan from Development Bank of the Philippines. Upon default, DBP foreclosed and purchased the properties at foreclosure. The one-year statutory redemption period expired on September 1, 1981. Thereafter, Lina Calilap-Asmeron sought to reacquire the foreclosed property. She transmitted letters and telegrams to DBP expressing an intention to repurchase and proposing payment terms for both parcels. On August 31, 1982 she offered to buy both lots for P157,000, with a downpayment of P55,500 and the balance payable by quarterly amortizations. DBP accepted the offer and the parties executed a deed of conditional sale on January 21, 1983 covering both TCT Nos. T-160929 and T-164117 with specified downpayment, amortization schedule, interest, and a contractual right allowing DBP to declare the contract annulled upon specified defaults.

Performance, Default, and Rescission

The deed of conditional sale contemplated quarterly amortizations and provided for the vendor’s option to rescind the contract upon the vendee’s failure to pay specified installments. The records show that the petitioner paid the initial quarterly amortization but thereafter incurred delays and made sporadic payments, with the last recorded remittance of P4,500 on March 12, 1985, leaving several quarterly amortizations unpaid. DBP demanded payment and, after the petitioner failed to remit the outstanding installments despite notices and correspondence, declared rescission of the deed and sought possession. DBP secured a writ of possession in November 1986 and subsequently sold the lot covered by TCT No. T-164117 to Pablo Cruz by deed of absolute sale on November 25, 1987. Cruz later transferred his interest to other purchasers.

Procedural History

The petitioner filed a complaint on January 30, 1987 seeking annulment of DBP’s rescission and of the subsequent sales. The complaint was later amended to implead Emerenciana Cabantog and Eni S.P. Atienza as additional defendants. The Regional Trial Court, Branch 11, Malolos, Bulacan dismissed the complaint on December 28, 1994. The Court of Appeals affirmed that dismissal in a decision promulgated June 21, 2002. The petitioner sought certiorari review in the Supreme Court by a petition filed on April 28, 2003. The Supreme Court resolved the present petition on November 23, 2011.

The Parties’ Contentions

The petitioner advanced that she had been accorded a preferential right to repurchase only the lot covered by TCT No. T-164117 and that she was misled into signing the deed of conditional sale covering both parcels. She asserted that she had already paid a substantial portion of the purchase price—allegedly about PHP 100,000 or roughly two-thirds of P157,000—and that her subsequent defaults were slight or casual and did not justify rescission. She further alleged bad faith by DBP in selling the property to Cruz and by Cruz in conveying to the other respondents, and faulted the Court of Appeals for disregarding her testimonial evidence. DBP answered that the petitioner’s allegations raised factual questions inappropriate for review under Rule 45 and that the deed expressly authorized rescission; DBP maintained that it validly exercised that contractual right after the petitioner’s failure to pay the required amortizations. The purchasers from Cruz asserted good faith acquisition relying on DBP’s title.

Trial Court and Court of Appeals Findings

The RTC found the petitioner’s complaint wanting and dismissed the suit. It concluded that the petitioner’s written communications to DBP, including the August 31, 1982 letter, plainly manifested an intention to reacquire both foreclosed parcels and that the contractual terms were clear and not susceptible to any other interpretation. The Court of Appeals affirmed, emphasizing that the petitioner failed to present documentary or testimonial evidence to corroborate her allegation that she had been misled into signing the deed. The CA observed that DBP had properly exercised the contractual right of rescission after the petitioner defaulted on the amortizations and that bad faith could not be presumed but must be established by clear and convincing evidence.

Issues on Review

The petitioner posed principally two issues: first, that the Court of Appeals erred in disregarding her testimonial evidence and in failing to annul DBP’s rescission and the subsequent sales; and second, that the CA erred in upholding DBP’s rescission despite her having paid a substantial portion of the purchase price and despite the alleged slightness of her breach.

Supreme Court’s Legal Analysis — Scope of Review

The Supreme Court held that the petition primarily raised issues of fact that required reappraisal of evidence, and thus fell outside the proper scope of review under Rule 45, Rules of Court, which authorizes this Court to decide only questions of law. The Court reiterated settled exceptions permitting factual re-examination only in narrowly defined circumstances — for example, when findings rest on conjecture or are manifestly mistaken — and concluded that none of those exceptions obtained. The Court found that the CA’s findings were supported by the record, particularly by the petitioner’s letters and telegrams expressing an intention to repurchase both lots and by the clear terms of the deed of conditional sale.

Supreme Court’s Legal Analysis — Article 1332 and Capacity to Understand

Addressing the petitioner’s plea invoking Article 1332 of the Civil Code on the ground that she lacked legal or technical knowledge and therefore did not give full consent, the Court rejected the claim. The Supreme Court observed that the petitioner was not illiterate, had composed written co

Case Syllabus (G.R. No. 157330)

Parties and Procedural Posture

Lina Calilap-Asmeron was the petitioner who filed suit to set aside the rescission by Development Bank of the Philippines and to annul subsequent sales of foreclosed property.
Development Bank of the Philippines, Pablo Cruz, Trinidad Cabantog, Eni S.P. Atienza, and Emerenciana Cabantog were the respondents impleaded in the action.
The petition arose from Civil Case No. 50-M-87 in the Regional Trial Court, Branch 11, Malolos, Bulacan, which dismissed the complaint on December 28, 1994.
The Court of Appeals affirmed the RTC decision in a judgment promulgated on June 21, 2002.
The petitioner filed a verified petition for review on certiorari under Rule 45, Rules of Court, which raised only questions of law before the Supreme Court.

Key Factual Allegations

The petitioner and her brother executed a real estate mortgage on March 17, 1975 over parcels covered by TCT Nos. T-164117 and T-160929 to secure a loan from DBP and the properties were foreclosed and purchased by DBP as highest bidder.
The statutory one-year redemption period expired on September 1, 1981.
The petitioner asserted that she sought to repurchase only the lot covered by TCT No. T-164117 and that she offered P15,000 as downpayment in August 1982 but was required to pay P55,500 within ten days.
The petitioner alleged that she signed a deed of conditional sale covering both lots for P157,000 believing DBP would release TCT No. T-164117 after two amortizations and that she paid a total of P40,000 before DBP rescinded the contract on August 7, 1985.
DBP produced written communications from the petitioner, including letters dated September 14, 1981 and August 31, 1982 and telegrams, evidencing her expressed intention to reacquire both parcels under installment terms and her deposit of P55,500 on September 10, 1982.
The deed of conditional sale executed January 21, 1983 set a first quarterly amortization of P7,304.15 and provided that default in two quarterly amortizations would permit rescission; DBP presented receipts showing partial payments and delinquency in subsequent installments.
DBP demanded payment of outstanding obligations, applied for and obtained a writ of possession on November 18, 1986, rescinded the deed, and later sold the lot to Pablo Cruz, who thereafter transferred it to Cabantog and Atienza.

Statutory Framework

Article 1332, Civil Code governed contracts where one party is unable to read or does not understand the language of the document and where mistake or fraud is alleged.
Article 1191, Civil Code provided the injured party the option to rescind obligations in reciprocal contracts and authorized courts to fix a period for compliance.
Article 1370, Civil Code governed the literal interpretation of clear contractual stipulations.
Rule 45, Rules of Court limited petitions for review on certiorari before the Supreme Court to questions of law.
The Court cited authorities including Lim v. Court of Appeals and Pangilinan v. Court of Appeals in construing the respective articles.

Issues Presented

Whether the Court of Appeals erred in disregarding the petitioner’s testimonial evidence and in upholding the sales to Pablo Cruz, Cabantog, and Atienza.
Whether the Court of Appeals erred in affirming DBP’s rescission of the