Cavite Development Bank v. Spouses Cyrus Lim

Summary

This case involves a void sale of foreclosed property by Cavite Development Bank to the Lim spouses. CDB had foreclosed on property mortgaged by Rodolfo Guansing, but Rodolfo's title was fraudulent and had been judicially cancelled before the sale. When Lolita Lim paid P30,000 as option money to purchase the property, CDB could not deliver valid title. The Supreme Court ruled the sale void under the principle 'nemo dat quod non habet' and found CDB negligent for failing to exercise due diligence required of banking institutions. The Court applied Article 1412(2) of the Civil Code, allowing the innocent party to recover their payment plus damages. The decision emphasizes banks' heightened duty of care and the importance of valid title in property transactions, while reducing the damage awards to reasonable amounts.