GR 150097; (February, 2007) (Digest)
G.R. No. 150097 . February 26, 2007.
DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner, vs. ALEJANDRO and ADELAIDA LICUANAN, Respondents.
FACTS
Respondent spouses obtained several loans from petitioner DBP, secured by real estate mortgages on various parcels of land. The loans matured between 1979 and 1985. On July 6, 1981, DBP sent a letter via registered mail informing the respondents that the mortgage conditions had been breached and that the properties would be foreclosed. The extrajudicial foreclosure sale proceeded on December 16, 1981, with DBP as the highest bidder. After consolidating ownership, DBP eventually sold the properties to a third party, Emelita Peralta, in 1984.
Respondents filed a complaint for recovery of properties and damages. The Regional Trial Court ruled in their favor, finding the foreclosure proceedings null and void due to the absence of a valid demand for payment prior to foreclosure. The Court of Appeals affirmed the RTC decision. DBP appealed to the Supreme Court, arguing that demand was unnecessary as the promissory notes specified maturity dates.
ISSUE
The principal issue is whether a demand for payment was necessary before DBP could validly foreclose the mortgages, given that the promissory notes stipulated specific maturity dates.
RULING
The Supreme Court denied the petition and affirmed the lower courts’ decisions. The legal logic is anchored on the rules governing default and the accrual of a cause of action for foreclosure. The Court held that even with stipulated maturity dates, a demand for payment is essential to place the debtor in default and make the obligation due and demandable for the purpose of foreclosure. A cause of action requires not just a right and a duty but also an act or omission violating that right. Here, the maturity date alone does not constitute a violation; the debtor’s failure to pay upon a valid demand does.
The Court emphasized that the factual finding of both the RTC and CA—that no such demand was proven—is binding in a petition for review under Rule 45, which is limited to questions of law. Since DBP failed to prove a valid demand, the respondents were not in default. Consequently, the foreclosure was premature and invalid. The Court also upheld the award of nominal damages, finding that DBP did not deal with the respondents fairly, and attorney’s fees, as respondents were compelled to litigate.