DBP vs CA and LYDIA CUBA
G.R. No. 118367
January 5, 1998
FACTS OF THE CASE
Plaintiff Lydia P. Cuba is a grantee of a Fishpond Lease Agreement No. 2083 (new) dated May 13, 1974
from the Government; Cuba obtained loans from the Development Bank of the Philippines in the amounts
of P109,000.00; P109,000.00; and P98,700.00 under the terms stated in the Promissory Notes dated
September 6, 1974; August 11, 1975; and April 4, 1977; As security for said loans, plaintiff Lydia P. Cuba
executed two Deeds of Assignment of her Leasehold Rights; Plaintiff failed to pay her loan on the
scheduled dates thereof in accordance with the terms of the Promissory Notes; Without foreclosure
proceedings, whether judicial or extra-judicial, defendant DBP appropriated the leasehold Rights of
plaintiff Lydia Cuba over the fishpond in question; After defendant DBP has appropriated the Leasehold
Rights of plaintiff Lydia Cuba over the fishpond in question, defendant DBP, in turn, executed a Deed of
Conditional Sale of the Leasehold Rights in favor of plaintiff Lydia Cuba over the same fishpond in
question; In the negotiation for repurchase, plaintiff Lydia Cuba addressed two letters to the Manager
DBP, Dagupan City dated November 6, 1979 and December 20, 1979. DBP thereafter accepted the offer
to repurchase in a letter addressed to plaintiff dated February 1, 1982; After the Deed of Conditional Sale
was executed in favor of plaintiff Lydia Cuba, a new Fishpond Lease Agreement No. 2083-A dated March
24, 1980 was issued by the Ministry of Agriculture and Food in favor of plaintiff Lydia Cuba only,
excluding her husband; Plaintiff Lydia Cuba failed to pay the amortizations stipulated in the Deed of
Conditional Sale; After plaintiff Lydia Cuba failed to pay the amortization as stated in Deed of Conditional
Sale, she entered with the DBP a temporary arrangement whereby in consideration for the deferment of
the Notarial Rescission of Deed of Conditional Sale, plaintiff Lydia Cuba promised to make certain
payments as stated in temporary Arrangement dated February 23, 1982; Defendant DBP thereafter sent
a Notice of Rescission thru Notarial Act dated March 13, 1984, and which was received by plaintiff Lydia
Cuba; After the Notice of Rescission, defendant DBP took possession of the Leasehold Rights of the
fishpond in question; That after defendant DBP took possession of the Leasehold Rights over the
fishpond in question, DBP advertised in the SUNDAY PUNCH the public bidding dated June 24, 1984, to
dispose of the property; That the DBP thereafter executed a Deed of Conditional Sale in favor of
defendant Agripina Caperal on August 6, 1984; Thereafter, defendant Caperal was awarded Fishpond
Lease Agreement No. 2083-A on December 28, 1984 by the Ministry of Agriculture and Food.
ISSUE OF THE CASE
1. Whether or not the two Deed of Assignment executed by Cuba in favor of DBP would operate as
a mortgage or some other contract.
2. Whether or not condition No. 12 of the Assignment of the Leasehold Rights would operate as
case of pactum commissorium
3. Whether the act of DBP in appropriating to itself Cubas leasehold rights over the fishpond in
question without foreclosure proceeding was contrary to Article 2088 of the Civil Code, and
therefore, invalid.
RULING
Lydia executed the 2 Deeds of Assignment as a security for the loans that she obtained from DBP,
according the case of Peoples Bank and Trust Co. vs. Odom an assignment to guaranty an
obligation is in effect a mortgage.
And it was also indicated in the provisions of the promissory note executed by Cuba, that the her
assigned leasehold rights were referred to as mortgaged properties and the instrument itself a
mortgagecontract.2&3. The act of DBP under condition No. 12 of the Assignment of Leasehold Rights did
not constitute as a case of pactum commissorium, when appropriated for itself Cubas leasehold rights
over the subject fishpond, because condition No. 12 only gave DBP the authority to sell the said
property and use the proceeds of the sale to satisfy Cubas obligation, it did not operate as an automatic
transfer of ownership of the said property to DBP. However, DBP exceeded its authority granted under
condition No. 12, when it appropriated for itself such rights without judicial or extrajudicial foreclosure,
thereby making his acts violative of Article 2088 of the Civil Code, which forbids a creditor from
appropriating, or disposing of, the thing given as security for the payment of a debt.
