Abuse of Rights in Philippine Law: A Case Study on Mortgage and Property Transactions

The principle of abuse of rights under Article 19 of the Civil Code is often invoked in disputes involving property and mortgage transactions. A 2020 Supreme Court decision, Spouses Cabasal v. BPI Family Savings Bank, Inc.* (G.R. No. 233846), provides a clear illustration of how this principle works in practice—and its limits. The case reminds property owners and borrowers that not every unpleasant or unhelpful act by a bank employee constitutes a legal wrong.

The Facts of the Case

Spouses Nestor and Ma. Belen Cabasal obtained a credit line from BPI Family Savings Bank for their build-and-sell business. They purchased two properties using this credit line and executed mortgage loan agreements for P5,000,000.00 and P3,360,000.00.

After three years, they found a buyer, Eloisa Guevarra Co, who agreed to purchase the properties through a sale with assumption of mortgage. Eloisa would pay a down payment of P7,850,000.00 and assume the remaining balance of about P4,462,226.00.

When the spouses and Eloisa went to BPI to process the transfer, bank employee Alma De Leon refused to recognize the arrangement. She told them the bank does not allow assumption of mortgage, explaining that the agreement was against bank policy and Section 35 of the Mortgage Loan Agreement. She even described the transaction as "illegal" because the loan remained under the spouses' names.

The deal fell through. The spouses later defaulted on their loan, the property was foreclosed, and BPI acquired the property at public auction.

The Issue

The central question was whether the bank and its employee were liable for damages under Articles 19, 20, and 21 of the Civil Code for causing the failed sale through bad faith or negligence.

The Ruling

The Supreme Court denied the petition and affirmed the Court of Appeals' decision. The Court held that the spouses failed to prove that the bank employee acted in bad faith or negligence.

Bad Faith Requires More Than Bluntness

The Court explained that bad faith is not simply bad judgment or negligence. It imports a dishonest purpose, moral obliquity, or conscious doing of a wrong. Bad faith must be established by clear and convincing evidence, as the law presumes good faith.

The employee's remark, while blunt, was based on her understanding of bank policy. She had warned the spouses beforehand that BPI would not approve the assumption of mortgage. The Court noted that it was the husband who insisted on bringing the buyer to the bank despite this warning.

The Bank Employee Was Under No Duty to Assist Further

The Court rejected the argument that the employee should have referred the spouses to the proper loan division. While such assistance would have been courteous, her failure to do so was not negligence or bad faith. The husband, described as an experienced engineer and businessman, should have known where to inquire.

No Proof the Employee's Words Caused the Failed Sale

Significantly, the buyer was never presented in court. The Court noted there could be many reasons why the sale fell through—the buyer may have been unable to obtain financing, may have found a cheaper property, or may have simply changed her mind. The spouses' claim that the employee's words caused the buyer to back out was self-serving and unsubstantiated.

Writ of Possession Is a Matter of Right

The Court also affirmed the issuance of the writ of possession to BPI. Once title is consolidated in the buyer's name after the mortgagor fails to redeem within the one-year period, the writ becomes a matter of right. Its issuance is a ministerial function that does not admit of court discretion.

The Limits of Article 19

The Court emphasized that Article 19 is not a cure for all human hurts and social grievances. To recover damages, the complaining party must show the act was done in bad faith or with intent to injure. Article 19 describes the degree of care required, but an actionable tort arises only when it is alleged together with Article 20 or Article 21.

Practical Takeaways

• Article 19 requires proof of bad faith. A party claiming abuse of rights must present clear and convincing evidence of dishonest purpose or intent to injure. Mere bluntness or unhelpfulness is not enough.
• Banks may enforce their own policies. A bank's refusal to allow assumption of mortgage, even if restrictive, is not automatically bad faith when it follows the loan agreement's terms.
• Document everything. The spouses lost partly because they failed to present the buyer as a witness. Evidence is critical in proving causation and damages.
• Writs of possession are ministerial. Even if a borrower questions the validity of the foreclosure, the writ of possession generally issues as a matter of course after title consolidation.
• Borrowers must act diligently. A businessman cannot pass blame for a failed transaction when he failed to explore other viable options, such as helping the buyer obtain a separate loan.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.