G.R. No. L-21362 - Development Bank of the Philippines vs. Bautista

Case Summary (G.R. No. L-21362)

Facts of Mortgage and Extrajudicial Foreclosure

• In June 1949, respondent obtained Sales Patent No. V-132 and Original Certificate of Title No. P-389 for a 12-hectare parcel in Barangay Sta. Barbara, San Jose, Nueva Ecija.
• In July 1949, respondent secured a ₱4,000 loan from the RFC, granting a mortgage over the property.
• Upon respondent’s default, RFC foreclosed extrajudicially under Act 3135. At the June 27, 1951 auction, RFC acquired the land and, one year later, consolidated ownership by registering Torrens Certificate No. NT-12108.

Subsequent Annulment of Titles

• Civil Case No. 870 was filed by Ramos and Ramos against the Republic and RFC, seeking annulment of:
– Government’s Torrens Certificate No. 2336
– Respondent’s O.C.T. No. P-389
– RFC’s T.C.T. No. NT-12108
• On June 27, 1955, the Court of First Instance declared all three certificates null and void. Respondent Bautista was not cited or made party to that proceeding.

Legal Issue

Whether a creditor, having satisfied its mortgage claim by extrajudicial foreclosure and acquiring title, may recover the indebtedness when that title is later annulled in a suit to which the mortgagor was not made a party.

Applicable Law

• 1935 Constitution: Due process guarantees
• Act 3135 (foreclosure procedures)
• Act 496 (Land Registration Act), especially Sec. 101 on Assurance Fund liability
• Civil Code Art. 1558: Vendor’s warranty enforceable only if summoned in eviction suit

Trial Court’s Holding

The lower court dismissed the bank’s complaint for recovery of unpaid mortgage indebtedness, ruling that the annulment judgment was void as to respondent Bautista because she had not been given due process. It declined to hold the Director of Lands or National Treasurer liable under the Assurance Fund.

Supreme Court’s Rationale

Due Process Violation
• An ex parte annulment cannot bind a person not summoned; respondent was never given her “day in court.”
• Precedents (e.g., Cruzcosa v. Concepcion; Sicat v. Reyes; Hamoy v. Batingolo) establish that judgments rendered without personal jurisdiction are void and unenforceable against absent parties.
Satisfaction of Debt by Foreclosure
• By foreclosing and acquiring title, the bank extinguished respondent’s mortgage obligation. It cannot revive the debt simply because a subsequent, void decree annulled the title.
Vendor’s Warranty Under Civil Code
• Art. 1558 requires the vendor to be summoned in any eviction or annulment proceeding if warranty is to be