PERSONS ABUSE OF RIGHTS

G.R. No. 137916 (449 SCRA 57)

DBP V CA
Date: December 8, 2004

Ponente: Callejo Sr., J.

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner Court of Appeals,Elpidio O. Cucio, Spouses Jacinto
Gotangco and Charity Bantug , respondents

Nature of the case: Petition for review of the Decision of the Court of Appeals which affirmed, with
modification, the decision of the Regional Trial Court of Palayan City, Branch 40, in Civil Case No. 0062-
P

FACTS

-Spouses Jacinto Gotangco and Charity Bantug were the owners of 7 parcels of lands located in Palayan
City, which they loaned to DBP for a poultry project. They then executed a real estate mortgage over the
parcels of land.

-On July 1982, the Spouses Gotangco as vendors, executed in favor of Elpidio Cucio a contract to sell over
the 7 parcels of land mortgaged to DBP for 50,000 php, payable directly to DBP and applied to the
mortgage indebtedness. Upon full payment of the purchase price, they shall execute a Deed of Sale over
the said parcels of land in favor of Cucio. The contract to sell was known to DBP.

-In 1988, the poultry project was burned to the ground. Insurance companies accredited by DBP offered
to settle claim for the proceeds of insurance on their poultry. The Spouses had no response.

-DBP wrote the spouses twice in 1989 to demand payment of their balances and to update their
statement of account. The spouses again had no response.

-Cucio then filed a complaint against the spouses Gotangco and DBP, for injunction and damages
claiming that despite payment of the full purchase price of the 7 parcels of land and his demand for the
turnover of the owner’s duplicate title to the spouses Gotangco, DBP refused to do so.He also alleged
that DBP even demanded the payment of interest on the loan of the account of the spouses Gotangco.
Furthermore, the spouses Gotangco refused to execute a deed of absolute sale of the said parcels of land
in his favour.

-While the case was pending, DBP informed the spouses Gotangco that it was going to have the
mortgage foreclosed for their failure to settle their account. On June 8, 1990, the spouses wrote DBP
requesting for an updated statement of their account and the application of their payments, inclusive of
the proceeds of their insurance claims. On the same date, DBP filed an application for the extrajudicial
foreclosure of the real estate mortgage executed in its favour by the spouses Gotangco.

-The spouses Gotangco forthwith filed a petition for a writ of preliminary injunction to enjoin the public
auction, alleging that the extrajudicial foreclosure of the real estate in favour of DBP would render the
decision of the court on the merits moot and academic.

-During the trial, Jacinto Gotangco testified that he suffered mental anguish and serious anxieties
because of the threatened extra judicial foreclosure.
-Trial court ordered DBP to pay the Gotangcos 250,000 php for moral damages.

-On appeal by DBP, Ca affirmed the decision, but reduced the amount to 50,000 php.

ISSUE/S

1.)…

2.) WON there is factual or legal basis for the grant of moral damages in favor of the Gotangcos.

RATIO

Supreme Court held that there is no sufficient basis for the award of moral damages.

1.) Charity Bantug did not testify, so there is no factual basis for the award of moral damages in her
favour.

Abuse of Rights under Art 19 of the New Civil Code on which the RTC anchored its ruling on the
awarding of damages and attorney’s fees, provides

Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with
justice, give everyone his due, and observe honesty and good faith.

Elements of abuse of rights: a.) existence of a legal right

b.) which is exercised in bad faith
c.) for the sole intent of prejudicing or injuring another

-Malice or bad faith is at the core of the provision

-Good faith is presumed & he who alleges bad faith has the duty to prove the same
-Malice connotes ill-will or spite & speaks not in response of duty
—>implies an intention to do ulterior & unjustifiable harm
-Malice is bad faith or bad motive

2.) Spouses Gotangco failed to prove malice on the part of Petitioner.

-the bare fact that the petitioner filed its application of the extrajudicial foreclosure of the mortgage
cannot give rise to the conclusion that petitioner did so with malice, to harass the spouses Gotangco.
-records show that time and again, DBP has sent notices to the spouses to update their account but the
spouses failed to comply
-under the terms of the real estate mortgage & its charter, DBP had the right to foreclose
-DBP was constrained to file its application for the foreclosure because of the spouses past due
obligation
-Instead of settling their account, the spouses filed a petition for a writ of preliminary injunction which
in turn aborted the foreclosure proceedings. Under this circumstances, it cannot be concluded that DBP
acted with malice or bad faith in seeking the extrajudicial foreclosure of the mortgage in its favour.

IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The assailed Decision of the
Court of Appeals is AFFIRMED WITH MODIFICATION. The permanent injunction issued by the Regional
Trial Court, as affirmed by the Court of Appeals; and the award for moral damages in favor of the
Spouses Jacinto Gotangco and Charity Bantug are DELETED. No costs.

Notes
Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act with
justice, give everyone his due, and observe honesty and good faith.

DAMNUM ABSQUE INJURIA - a loss or damage without injury

1-C 2015-16 (Avendano)