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G. R. No. 131679
February 1, 2000
One Rodolfo Guansing obtained a loan in the amount of
P90,000.00 from Cavite Development Bank (CDB). As a security, he
mortgaged a parcel of land situated La Loma, Quezon City and covered
by TCT No. 300809 registered in his name. Guansing defaulted on the
payment of the loan, which led CDB to foreclose the mortgage and
later on emerged as the highest bidder and subsequently, the owner of
the lot after Guansing failed to redeem the same.
The Spouses Lim, through a broker, offered to purchase the
property from CDB. The formal written offer stated a payment of
P30,000 (10% of P300,000) as option money, provided that the land
be cleared of illegal occupants. For payment of the option money, CDB
issued an official receipt. However, after following up on the sale, Lim
discovered that the original owner of the land is PERFECTO
GUANSING, the father of Rodolfo. In a civil case instituted by Perfecto
for the cancellation of Rodolfos title, the Supreme Court adjudged
Perfecto as the real owner after proving that Rodolfo fraudulently
obtained it. Thus, Rodolfos title was cancelled and a new one was
issued to Perfecto.
Aggrieved, the Spouses Lim instituted an action for specific
performance and damages questioning the ability of CDB, and its
mother company Far East Bank and Trust Company (FEBTC), to sell the
subject property.
The Regional Trial Court rendered a decision in favor of the
Spouses Lim, which was affirmed by the Court of Appeals.
(1)What is the legal relation between the parties?
(2)Whether or not Rodolfo Guansing/CDB was the absolute owner of
the subject property as required under Art. 2085 to effect a valid
(3)Whether or not CDB is a mortgagee in good faith?
(1)The parties entered into a CONTRACT OF SALE.
The formal written offer of the Spouses Lim was accepted by
The Spouses Lim paid the option money, which left only the
balance of the purchase price to be paid.
Prepared by Ma. Jillian C. Gandingco1

In the Law on Sales, one does not need to be the owner at the
perfection of the contract.
what he does not have]. At the consummation stage, it was
impossible for CDB to comply with its legal obligation.
(2) NO. The sale by CDB to Lim of the property mortgaged in
1983 by Rodolfo Guansing must, therefore, be deemed a
nullity for CDB did not have a valid title to the said property.
CDB never acquired a valid title to the property because the
foreclosure sale, by virtue of which the property had been
awarded to CDB as highest bidder, is likewise void since the
mortgagor was not the owner of the property foreclosed
A forced sale is still a sale within the contemplation of the
law. Thus, the principle that the seller must be the owner of
the thing sold also applies.
(3)NO. CDB cannot be considered as a mortgagee in good faith.
CDB was remiss in its duty as bank and failed to exercise the
due diligence required of it. In short, CDB was negligent.
Citing jurisprudence, it is standard practice for banks,
before approving a loan, to send representatives to the
premises of the land offered as collateral and to investigate
who are the real owners thereof, noting that banks are
expected to exercise more care and prudence than private
individuals in their dealings, even those involving registered
lands, for their business is affected with public interest
No evidence to the contrary.
o Extrajudicial Settlement of the Estate With Waiver, a
self-executed deed by Rodolfo, should have placed CDB
on guard.
o Report of the purported ocular inspection by its
representatives was never admitted into evidence.

Prepared by Ma. Jillian C. Gandingco2