DBP VS CA AND SPS.

TIMOTEO AND PINEDA

G.R. NO. 111737 ; OCTOBER 13, 1999 ; 316 SCRA 650
Facts:
Spouses Piedas are registered owners of a parcel of land in Capiz, which
they mortgaged to DBP to secure the loan of P20,000.The Piedas eventually
defaulted, prompting the 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 Piedas, 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 and caused the consolidation of its title
in spite of the fact that the 5-year redemption period expressly stated in the
Sheriffs Certificate of Sale had not yet lapsed and that their offer to redeem was
within the redemption period.
Issue:
Whether or not the DBP acted in bad faith when it took possession of the
property.
Held:
No. DBPs 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 is entitled as a matter of right to consolidate and to
possess the property. In addition to this, it was in consonance with Section 4 of the
mortgage contract between DBP and the Piedas 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 DBPs act of consolidating its title, the Piedas 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 Piedas 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.

Article 526 of the Civil Code 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, Article 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 Piedas to prove that DBP was
aware of the flaw in its title (nullity of the foreclosure), but this they failed to do.