Case Summary (G.R. No. 224138)
Loan Agreement and Drawdowns
• Article 2.01: Commitment up to P5 million to finance poultry houses.
• Article 2.02: Proceeds to be used exclusively for poultry house construction.
• Article 2.03 & Article 7: Disbursement subject to execution of promissory note, mortgage registration, certifications of financial correctness and no adverse change.
Catherine issued a P3 million note and received that amount on November 17, 1995, building four poultry houses, a bodega, water tank, machinery, and generator.
Denial of Additional Drawdown and Foreclosure
By February 1996, Catherine requested P500,000 more to settle creditors. DBP refused, claiming respondents failed to meet unwritten requirements—construction of twelve houses (60,000 birds) and proportional equity infusion—allegedly first communicated at that time. DBP then accelerated the loan, declared default, foreclosed on November 22, 1996, and had titles transferred to its name.
Proceedings Below
• Trial Court (Oct. 20, 2006): Held foreclosure premature; DBP acted in bad faith by unilaterally altering contract terms; declared foreclosure and title transfer void; ordered reconveyance; awarded P5 million moral damages and P500,000 attorney’s fees.
• Court of Appeals (Sept. 28, 2015): Affirmed nullity of foreclosure, required DBP to account for fruits and proceeds, ordered respondents to repay P3 million plus interest, reduced moral damages to P500,000, added P300,000 exemplary and P3,713,200 compensatory damages, P500,000 attorney’s fees.
Issues on Appeal
- Timeliness of DBP’s petition for certiorari.
- Whether respondents were in default and DBP acted in bad faith.
- Validity of DBP’s denial of the P500,000 drawdown.
- Legitimacy of foreclosure and title transfer.
- Proper remedies and damages.
Supreme Court Ruling: Timeliness
DBP’s motion for extension and petition were filed within the extended period. Computation under Rule 22 excludes the triggering day and extends to the next working day if the deadline falls on a weekend.
Scope of Review
Under Rule 45, only questions of law are reviewable. Factual findings of both lower courts—affirming DBP’s bad faith and absence of default—are final and binding unless unsupported by evidence.
Contract Interpretation and Parol Evidence
• The loan agreement is clear and unambiguous: proceeds were for poultry houses, without mention of specific house count, bird capacity, or equity amounts.
• Under the parol evidence rule, extrinsic evidence (e.g., Catherine’s February 2, 1996 letter) cannot alter or add to written terms. No exception applies: DBP did not allege intrinsic ambiguity, mistake, or invalidity.
• DBP’s own counsel admitted at trial there was no contract clause on twelve houses or 60,000 broilers; no rider existed.
Contract of Adhesion and Interpretation Against Drafter
As drafter of the adhesion contract, DBP bears ambiguities. Interpretive doctrine holds ambiguities against the party who prepared the instrument. Even evidence of industry practice (Vitarich standard of 20,000 birds for new growers) confirms no agreed commitment to 60,000 birds.
Absence of Default and Premature Foreclosure
DBP breached its reciprocal obligation by withholding P500,000 without contractual basis. Under Civil Code and jurisprudence, a lender must perform its duty to disburse before declaring borrower in default and foreclosing. The foreclosure was therefore premature and void.
Final Declaration on Title
The foreclosure and title transfers are annulled. The Register of Deeds must cancel DBP’s titles (TCT Nos. 300166 and 300167) and reinstate respondents’ original titles (TCT Nos. 239080 and 239081).
Damages and Remedies
• Actual Damages: Remand to the RTC for appraisal o
Case Syllabus (G.R. No. 224138)
Facts
- Evelina Togle and her daughter Catherine Geraldine Togle owned two agricultural lots in Bangkas Heights, Toril, Davao City, under TCT Nos. 239080 and 239081, planted with durian, marang, lanzones, chico, rambutan, and coconut.
- On April 5, 1995, Catherine applied by letter to DBP–Davao City for a P5,000,000 agricultural loan to fund a poultry grower project on their 36-hectare farm, proposing to build four poultry houses with 20,000 broiler capacity, endorsed by Vitarich.
- DBP required loan proceeds be used “exclusively for the construction of poultry houses” and set conditions in Article 7 on lending, including promissory note, mortgage registration, financial certifications, and no default.
- Catherine issued a promissory note for P3,000,000 on November 15, 1995; DBP disbursed that amount two days later, which funded four poultry houses, a bodega, water tank, equipment, and a generator set.
- By letter of February 2, 1996, Catherine requested an additional drawdown of P500,000, claiming outlays of over P5,000,000 to date and credit obligations; DBP denied it, alleging respondents had failed to infuse equity proportionate to the P3,000,000 drawdown and had not built the required 12 poultry houses for 60,000 broilers.
- DBP applied the acceleration clause after notice, declared default, foreclosed the mortgage on November 22, 1996, became highest bidder at auction, consolidated title, cancelled TCT Nos. 239080 and 239081, and obtained TCT Nos. 300166 and 300167.
- DBP stationed guards on the lots, removed wiring, pipes, iron bars, lights, and speakers, and prevented respondents from harvesting or leasing the farm.
- Catherine faced criminal charges for violations of BP 22 and estafa by unpaid suppliers, leading to her arrest during her father’s funeral.
Procedural History
- Trial Court (RTC, Davao City, Branch 15): On October 20, 2006, rendered Decision declaring foreclosure and consolidation void; ordered reinstatement of original titles, reconveyance, moral damages (P5,000,000), attorney’s fees (P500,000), costs, and accounting of farm income; denied DBP’s motion for reconsideration on July 22, 2008.
- Court of Appeals (CA-G.R. CV No. 01726): On September 28, 2015, affirmed with modification—nullified foreclosure, canceled DBP’s titles, ordered reconveyance; directed DBP to account and turn over proceeds; ordered respondents to pay DBP P3,000,000 with interest; awarded respondents P500,000 moral, P300,000 exemplary, P3,713,200 actual, P500,000 attorney’s fees, all with 6% interest; denied DBP’s motion for reconsideration on March 17, 2016.
- Supreme Court: Development Bank filed a Rule