Carlos Lim v. Development Bank of the Philippines

Summary

This case involves the validity of an extrajudicial foreclosure conducted by Development Bank of the Philippines against borrowers who defaulted on cattle ranch loans totaling P1 million obtained in 1969-1970. Petitioners claimed their obligations were constructively fulfilled due to DBP's alleged prevention of performance through excessive charges and cancellation of restructuring agreements. The Supreme Court rejected the constructive fulfillment defense but declared the foreclosure void for failure to provide contractually-required notice to borrowers. The Court also nullified additional interest and penalties not stipulated in the original promissory notes, emphasizing that interest must be expressly stipulated in writing per Article 1956 of the Civil Code. The case was remanded for proper computation of the actual loan obligation based solely on stipulated terms, highlighting the importance of strict compliance with both statutory and contractual requirements in foreclosure proceedings.