Case Summary (G.R. No. 131679)
Key Dates
• June 15, 1983 – Rodolfo obtains P 90,000 loan from CDB, mortgages property under TCT No. 300809.
• March 15, 1984 – CDB forecloses, acquires property as highest bidder.
• March 23, 1984 – RTC Branch 83 cancels TCT No. 300809, restores Perfecto’s title (TCT No. 91148).
• March 2, 1987 – Title consolidation issued to CDB as TCT No. 355588.
• June 16–17, 1988 – Lim offers P 300,000, pays P 30,000 “option money.”
• August 29, 1989 – Lims file for specific performance and damages in RTC Branch 96 (Q-89-2863).
• March 10, 1993 – RTC grants relief to Lims.
• October 14 & December 9, 1997 – Court of Appeals affirms and denies reconsideration.
• February 1, 2000 – Supreme Court decision.
Applicable Law
1987 Constitution (property rights, due process); Civil Code provisions on contracts (Arts. 1370, 1409, 1412, 1434, 1459, 1482), mortgage requisites (Art. 2085), nemo dat quod non habet, Torrens system indefeasibility, and damages (Arts. 21, 2208, 2209, 2219, 2232).
Facts
Rodolfo Guansing mortgaged the subject land to secure a bank loan, defaulted, and CDB foreclosed. Unbeknownst to CDB, his title had been annulled in 1984 for fraud, restoring the father’s title. CDB, with FEBTC’s concurrence, later offered the property to Lim, who paid P 30,000 as “option money.” Learning of the prior annulment, Lim pursued specific performance and damages. Trial and appellate courts found a perfected contract of sale, recognized impossibility of performance, held petitioners negligent, and awarded restitution plus damages.
Issues
- Did the written “option” constitute a contract of sale?
- Could CDB transfer title given prior annulment?
- Were petitioners mortgagees in good faith excused from inquiry?
- Consequences of a void sale: restitution, interest, damages, attorney’s fees.
Contract Nature and Perfection
The deposit, though called “option money,” functioned as earnest money toward P 300,000, evidencing a sale. Acceptance and partial payment perfected the sale (Art. 1475). However, perfection does not require ownership at that moment; delivery (consummation) demands that the seller hold title (Art. 1459). CDB’s title was void ab initio due to the 1984 RTC decision.
Nemo Dat and Mortgagee Diligence
“Nemo dat quod non habet” barred CDB’s ability to transfer ownership. The foreclosure sale was likewise void because Rodolfo lacked title at foreclosure. The mortgagee-in-good-faith doctrine did not protect CDB: banks must exercise heightened due diligence (Tomas v. Tomas), investigate anomalies (self-executed settlement waiving the father’s rights), and note contested occupancy. CDB failed this duty.
Void Sale and Restitution
The sale’s nullity under Arts. 1409 and 14
Case Syllabus (G.R. No. 131679)
Factual Background
- Cavite Development Bank (CDB) and Far East Bank and Trust Company (FEBTC) are duly organized Philippine banking institutions.
- On June 15, 1983, Rodolfo Guansing obtained a ₱90,000 loan from CDB, mortgaging a parcel at No. 63 Calavite Street, La Loma, Quezon City (TCT No. 300809).
- Guansing defaulted; CDB foreclosed and became highest bidder at the March 15, 1984 sale.
- After failure to redeem, CDB consolidated title as owner; TCT No. 355588 was issued on March 2, 1987.
- On June 16, 1988, Lolita Chan Lim (assisted by broker Remedios Gatpandan) offered ₱300,000 to purchase the property, paying ₱30,000 (10%) as “Option Money” under conditions including clearance of occupants.
Discovery of Title Defect
- Lim learned that the parcel was originally registered to Perfecto Guansing (TCT No. 91148).
- Rodolfo had fraudulently secured TCT No. 300809; Perfecto sued in Civil Case No. Q-39732, RTC Branch 83.
- On March 23, 1984, the RTC reinstated Perfecto’s title (TCT No. 91148) and canceled TCT No. 300809; decision became final and executory.
Procedural History
- August 29, 1989: Lim spouses filed for specific performance and damages in RTC Branch 96, QC (Civil Case No. Q-89-2863).
- April 20, 1990: Amended complaint adding the Register of Deeds of Quezon City.
- March 10, 1993 RTC Decision:
• Perfected contract of sale existed between CDB and Lim.
• Performance impossible due to cancellation of title.
• CDB/FEBTC liable despite impossibility; failure to discharge banking duties.
• Awarded return of ₱30,000 + interest, moral damages ₱250,000, exemplary ₱50,000, attorney’s fees ₱30,000, costs. - October 14, 1997 CA affirmed the RTC decision in toto; denied reconsideration on December 9, 1997.
- Petition for review on certiorari filed before the Supreme Court (G.R. No. 131679).
Issues
- Whether the contract between CDB and Lim was a perfe