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Development Bank of the Philippine VS. Spouses Jesus and Anacorita Doyon GR No. 167238

THE CASE DBP filed a petition for certiorari with prayer to set aside CA resolutions on denying motions for reconsideration dated Nov. 23, 2004 and Feb. 18, 2005 respectively. And asserts that it did NOT act in bad faith when it foreclosed respondents real and chattel mortgages anew because loans were past due, it had the right to satisfy credit in doing so. FACTS Respondents (Spouses Doyon) acquired several loans amounting to 10 million pesos with their real estate property and JD bus line motor vehicles mortgaged as security for loans Respondents failed to pay due obligations to the petitioners DBP past maturity date Respondents then requested petitioner to restructure their existing loan terms which were agreed upon by both parties resulting to the written promissory notes (contracted by both parties) by the respondents to petitioner Petitioner demanded respondent spouses Doyon to pay in full amount existing loans with their failure to meet their due payments agreed in the promissory notes With respondents adamant refusal to pay said loans, petitioner filed for extrajudicial foreclosure of the real and chattel mortgages in RTC, Ormoc City Respondents then filed for nullification of foreclosure claiming they had already paid the principle amount of their loans docketed as Civil Case No. 3314-0 Civil Case stalled for three years Petitioner due to inaction moved for the dismissal of the case and withdrew application for extrajudicial foreclosure to which the RTC granted both petitions Petitioners then filed for extrajudicial foreclosure of respondents real and chattel mortgages with DBP Sherrif of Makati Sheriff secured properties and subsequently issued notices of sale at public auction Respondents filed for damages suit against petitioner and DBP sheriff pointing out that petitioners motion for dismissal of their civil case led them to believe that their loans had been extinguished Court awarded the damages suit in favor of the respondents holding DBP with the exclusion of the Sheriff be held liable in paying due costs Petitioners file for motion for reconsideration denied then leading to existing petition for certiorari ISSUE WON petitioners exercising extrajudicial foreclosure and subsequent issuances for sale at public auction proceedings acted in bad faith. NO SC RULING Held that petitioners did NOT act in bad faith as they were merely acting on their legal right to remedy against a defaulting debtor, which is considered to be a known sound banking practice. Therefore, court rules that petitioners having acted their legal right dis so in good faith and are not in violation of Art. 19 of the Civil Code.

FURTHER REFRENCE: Under the provisions of Art. 19 of the Civil Code for an action for damages to prosper, complainant MUST prove that: a.) Defendant have the legal right or duty b.) Exercised his right/performed his duty with bad faith c.) Complainant was prejudiced/injured as result of the said exercise or performance by defendant With reference to the first requisite, defendant (respondents herein) in failing to comply with the stipulated contracts agreed and signed upon by both petitioner and respondents, which states that failure to comply with due loan obligations upon maturity date real and chattel mortgages are thereby subject to foreclosure by default for the purpose of satisfying his credit. Hence, respondents have no legal right to file for damages under said article. Regarding the second requisite, bad faith imports a dishonest purpose or some moral obliquity or conscious doing of a wrong that partakes the nature of fraud. However, petitioners have acted on their legal right, which respondents have duly recognized in signing the contract can not accuse the petitioners of having acted in bad faith.