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DBP V. CA- GOOD FAITH

Category: Property, Ownership and Its Modifications

DBP V. CA- Good Faith and Redemption

A mistake upon a doubtful or difficult question of law may be the basis of good faith.

FACTS:

Spouses Piñedas are registered owners of a parcel of land in Capiz, which they mortgaged to DBP to
secure the loan (P20,000) they obtained from the latter. Piñedas eventually defaulted, prompting DBP to
extra-judicially foreclose and take possession of such property. The Ministry of Justice, then, opined
through its Opinion No. 92 (’78) that lands covered by P.D. No. 27, to which the subject property was
included, may not be the object of foreclosure proceedings. The Piñedas, then, sought to redeem such
property (with P10,000 as downpayment) but was denied as the land was allegedly tenanted. They then
sought the cancellation of the title and specific performance, stating that DBP acted in bad faith when it
took possession of the property andcaused the consolidation of its title in spite of the fact that the 5-
year redemption period expressly stated in the Sheriff’s Certificate of Sale had not yet lapsed and that
their offer to redeem was within the redemption period.
ISSUE:

Whether or not DBP acted in bad faith when it took possession of the property

RULING: NO.

DBP’s act of consolidating its title and taking possession of the property after the expiration of the
redemption period was in accordance with Sec. 6 of Act No. 3135, which states that if no redemption of
a foreclosed property is made within one year, the purchaser (DBP) is entitled as a matter of right to
consolidate and to possess the property. In addition to this, it was in consonance with Sec. 4 of the
mortgage contract between DBP and the Piñedas where they agreed the appointment of DBP as
receiver to take charge and to hold possession of the mortgaged property in case of foreclosure. In fact,
without DBP’s act of consolidating its title, the Piñedas would not be able to assert their right to
repurchase the property within 5 years, which would begin to run after the expiration of the one-year
period. Thus, its acts cannot be tainted with bad faith nor did it impair Piñedas’ right to repurchase.

It may also be argued that P.D. No. 27 was already in effect when DBP foreclosed the property.
However, the legal propriety of the foreclosure of the land was questioned only after Opinion No. 92
(’78) was issued, which happened almost 2 months after DBP consolidated its title to the property. By
law and jurisprudence, a mistake upon a doubtful or difficult question of law may properly be the basis
of good faith.
Art. 526 of NCC states that “a possessor in good faith is one who is not aware that there exists in his title
or mode of acquisition any flaw, which invalidates it.” Moreover, Art. 527 of NCC provides “good faith is
always presumed, and upon him who alleges bad faith on the part of the possessor rests the burden of
proof.” Thus, it is incumbent on the Piñedas to prove that DBP was aware of the flaw in its title (nullity of
the foreclosure), but this they failed to do.

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MORE ABOUT THIS TOPIC:

Right Of Redemption

Character of the relationship between a lawyer and his client

Right Of Legal Redemption

The Mirror Doctrine

PRUDENCIO V. CA 143 SCRA 7 - Accomodation party

CHATTEL MORTGAGE

FORECLOSURE of Mortgage - Redemption

ABUBAKAR V. AUDITOR GENERAL 81 PHIL. 359

SARMIENTO V. AGANA 129 SCRA 122

ACCESSION DISCRETA (RIGHT OF ACCESSION WITH RESPECT TO WHAT IS PRODUCED BY PROPERTY)

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