Development Bank of the Philippines vs Bautista

On July 16, 1949, Bautista applied for a loan with the Rehabilitation Finance Corporation (now DBP) with a parcel of land
as a form of security. Bautista submitted her certificate of title, tax declaration and the blueprint of the land. RFC
approved a loan of 4,000.00 in favor of Bautista. When she failed to pay, RFC acted and took steps to foreclose the
mortgage extrajudicially. On June 26, 1952, RD replaced the TCT in the name of RFC. However, an action was filed by
Juan and Rufino Ramos in the CFI of Nueva Ecija against the Republic and RFC (now successors of Bautista) claiming that
they are the owners of the land and seeking annulment of the TCT. A decision was rendered on June 25, 1995 which
declared the TCTs were null and void. Now, the DBP (as creditor) filed against Bautista for the recovery of money for
unpaid indebtedness.

Lower court: DISMISSED. According to the LC, the due process requirement was disregarded since Bautista was not
made as a party when her title was set aside. Therefor, the judgment could not be binding upon her and be the source
of the claim from the bank.

ISSUES:

(1) WON Bautista can be bound from the decision despite her not being a party of the case (the collateral was not
hers and she must pay the remaining balance).
(2) WON DBP can recover the sum of money from the Assurance Fund if Bautista cannot be compelled to pay her
remaining due.

Ruling:

(1) NO. The annulment of Bautista’s title was a proceeding ex-parte (in personam) as far as she was concerned. It
cannot be considered binding upon her. Her mortgage was foreclosed and the bank realized on it, when the
bank afterwards acquiesced in the annulment if the title and took it upon itself to reimburse Conrada. It acted
on its own and it could not bind Bautista. The fundamental due process have been disregarded and Bautista
should not suffer from the effects of the decision. When the bank acquired title through the extrajudicial
foreclosure, her obligation had been satisfied. The cardinal requirement that no party should be made to duffer
without being heard should be upheld.

On Macabingkil vs Yatco
- CA found petitioners to be the co-owners of a building which was in question. Being interested parties, they
should have participated with the ejectment proceedings to give them the equal opportunities to protect their
rights. Since they weren’t able to participate, then they are not bound and cant be affected by the judgment
against their co-owner. These cases deal with execution and they should not be enforced against them because
they weren’t given the chance to be heard in court.

(2) The case before the lower court, the DL and National Treasurer of the Philippines were made defendants by the
bank because it believed that if they did not have any right against Bautista, then recovery could be taken from
the Assurance Fund. Their belief cannot be supported the applicable law which allows recovery ONLY when
shown that there has been NO NEGLIGENCE on the party sustaining loss or being deprived of any land or
interest therein by the operation of the Land Registration Act. In this case, the plaintiff-appellant is SOLELY
RESPONSIBLE.