DEVELOPMENT BANK OF THE PHILIPPINES, plaintiff appellant, vs.

LOURDES GASPAR
BAUTISTA, THE DIRECTOR OF LANDS and THE NATIONAL TREASURER OF THE
PHILIPPINES, defendants-appellees. [G.R. No. L-21362. November 29, 1968.]

Topic: Claim Against Assurance Fund

Facts: DBP is a creditor of Lourdes Gaspar Bautista for the recovery of a sum of money
representing the unpaid mortgage indebtedness, which previously had been wiped out with the
creditor bank acquiring the title of the mortgaged property in an extrajudicial sale. Thereafter, the
title was nullified in a judicial proceeding, the land in question being adjudged as belonging to
another claimant Rufino Ramos, without, however, such debtor, having been cited to appear in
such court action.

BautistaRehabilitation Finance Corporation (RFC)  DBP Conrada (sold via foreclosure)

RTC: Dismissed. Due process requirement flagrantly disregarded.

Issue:
What is the right, if any, of a creditor which previously satisfied its claim by foreclosing
extrajudicially on a mortgage executed by the debtor, whose title was thereafter nullified in a
judicial proceeding where she was not brought in as a party?

If no right existed as against appellee Bautista, could recovery be had from the Assurance
Fund? (LTD topic)

Held:
1.) The fundamental due process requirement having been disregarded, Bautista could not
in any wise be made to suffer, whether directly or indirectly, from the effects of such decision.
After the DBP had acquired her title by such extrajudicial foreclosure sale, through its own
act, seen to it that her obligation had been satisfied, it could not thereafter, seek to revive
the same on the allegation that the title in question was subsequently annulled,
considering that she was not made a party on the occasion of such nullification. If it were
otherwise, then the cardinal requirement that no party should he made to suffer in person or
property without being given a hearing would be brushed aside. The doctrine consistently adhered
to by this Court whenever such a question arises in a series of decisions is that a denial of due
process success to cast on the official act taken by whatever branch of the government the
impress of nullity

Article 1558 of the Civil Code reads: "The vendor shall not be obliged to make good the proper
warranty, unless he is summoned in the suit for eviction at the instance of the vendee." In effect,
the DBP would hold Bautista liable for the warranty on her title, its annulment having the same
effect as that of an eviction. In such a case, it is wisely provided by the Civil Code that Bautista,
as vendor, should have been summoned and given the opportunity to defend herself. In view of
her being denied her day in court, it would follow, if the intent of the above codal provision
were to be respected, that she is not obliged to make good the proper warranty.

2.) Applicable allows recovery only upon a showing that there be no negligence on the part
of the party sustaining any loss or damage or being deprived of any land or interest therein by the
operation of the Land Registration Act This certainly is not the case here, plaintiff- appellant being
solely responsible for the plight in which it now finds itself. Accordingly, the Director of Lands and
the National Treasurer of the Philippines are likewise exempt from any liability.