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G.R. No. 134330 March 1, 2001

SPOUSES ENRIQUE M. BELO and FLORENCIA G. BELO, petitioners,vs.PILIPPINE NA!IONAL BAN" and SPOUSES MARCOS and ARSENIAESLABON,respondents.

#E LEON, $R., J.%

Before us is a petition for review on certiorari of the Decision1and Resolution2inCA-G.R. No. 5!"5 of the Court of Appealsdated #a$ 21, 1%%! and &une 2%,1%%!, respectivel$, which 'odified the Decision(dated April ), 1%%" of theRe*ional +rial Court of Roas Cit$, Branch 1% in a suit5for Declaration of Nullit$ ofthe Contract of #ort*a*e.

+he facts are as follows

duarda Belo owned an a*ricultural land with an area of si hundred sit$ onethousand two hundred ei*ht$ ei*ht /""1,2!!0 suare 'eters located in +i'pas,anitan, Capi3, covered and descri4ed in +ransfer Certificate of +itle /+C+ for4revit$0 No. +-(%. 6he leased a portion of the said tract of land to respondentsspouses #arcos and Arsenia sla4on in connection with the said spouses7 su*arplantation 4usiness. +he lease contract was effective for a period of seven /0$ears at the rental rate of 6even +housand esos /,))).))0 per $ear.

+o finance their 4usiness venture, respondents spouses sla4on o4tained a loanfro' respondent hilippine National Ban8 /NB for 4revit$0 secured 4$ a realestate 'ort*a*e on their own four /(0 residential houses located in Roas Cit$, aswell as on the a*ricultural land owned 4$ duarda Belo. +he assent of duardaBelo to the 'ort*a*e was acuired throu*h a special power of attorne$ which sheeecuted in favor of respondent #arcos sla4on on &une 15, 1%!2.

9nas'uch as the respondents spouses sla4on failed to pa$ their loan o4li*ation,etra:udicial foreclosure proceedin*s a*ainst the 'ort*a*ed properties wereinstituted 4$ respondent NB. At the auction sale on &une 1), 1%%1, respondentNB was the hi*hest 4idder of the foreclosed properties at ;our


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. 9n all loan contracts *ranted and 'ort*a*e contracts eecuted underthe 1%5 Revised Charter /D "%(, as a'ended0, the proper rate ofinterest to 4e char*ed durin* the rede'ption period is the rate specified inthe 'ort*a*e contract 4ased on Sec. 25 of PD 694and the 'ort*a*econtract which incorporates 4$ reference the provisions of the NB

Charters. Additionall$, under 6ec. ! of the General Ban8in* Act /RA No., as a'ended0 'ade applica4le to NB pursuant to 6ec. ! of D No."%(, the rate of interest collecti4le durin* the rede'ption period is the ratespecified in the 'ort*a*e contract.

!. 6ince plaintiffs failed to tender and pa$ the reuired a'ount forrede'ption of the propert$ under the provisions of the General Ban8in*

Act, no rede'ption was validl$ effected?!

After trial on the 'erits, the trial court rendered its Decision dated April ), 1%%"*rantin* the alternative cause of action of spouses Belo, the decretal portion of

which reads

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=n the other hand, the court7s rulin* that the appellees, 4ein* theassi*nee of the ri*ht of repurchase of duarda Belo, were 4ound 4$ therede'ption price as provided 4$ 6ection 25 of .D. "%(, stands. +heattac8 on the constitutionalit$ of 6ection 25 of .D. "%( cannot 4e allowed,as the


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>AE =; +#N+6 #AD 9N G==D ;A9+< AND ;=R+, pp. to 2(0.

(. +hat NB did not advise duarda Belo of the a'ount of the loan*ranted to the sla4ons, did not 'a8e de'ands upon her for pa$'ent,did not advise her of sla4ons7 default. +he pre-auction sale noticeintended for duarda Belo was addressed and delivered to the address ofthe de4tors sla4ons residence at Ba$4a$ Roas Cit$, not to the Belo;a'il$


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;irst, the validit$ of the 6A and the 'ort*a*e contract cannot an$'ore 4eassailed due to petitioners7 failure to appeal the sa'e after the trial court renderedits decision affir'in* their validit$. After the trial court rendered its decision *rantin*petitioners their alternati&ecause of action, i.e., that the$ can redee' the su4:ectpropert$ on the 4asis of the winnin* 4id price of respondent NB, petitioners did

not an$'ore 4other to appeal that decision on their first cause of action. 9f the$ felta**rieved 4$ the trial court7s decision upholdin* the validit$ of the said two /20docu'ents, then the$ should have also partiall$ appealed therefro' 4ut the$ didnot. 9t is an a4use of le*al re'edies for petitioners to 4elatedl$ pursue a clai' thatwas settled with finalit$ due to their own shortco'in*. As held in *aliguia &.National +abor ,elations *ommission,1"where a part$ did not appeal fro' theEa4or Ar4iter7s decision den$in* clai's for actual, 'oral and ee'plar$ da'a*esand instead 'oved for i''ediate eecution, the decision then 4eca'e final as tohi' and 4$ as8in* for its eecution, he was estopped fro' reliti*atin* his clai's forda'a*es.

Second! (ell-entrenched is the rule that the findings of trial courts (hich arefactual in nature! especially (hen affirmed by the *ourt of ppeals! deser&e to berespected and affirmed by the Supreme *ourt! pro&ided it is supported by

substantial e&idence.1

/he finding of facts of the trial court to the effect that$duarda elo (as not induced by the manager of respondent PN but instead thatshe freely consented to the e"ecution of the SP is gi&en the highest respect as it(as affirmed by the appellate court. 9n the case at 4ar, the 4urden of proof was onthe petitioners to prove or show that there was alle*ed induce'ent and'isrepresentation 4$ the 'ana*er of respondent NB and the spouses sla4on.+heir alle*ation that duarda Belo onl$ a*reed to si*n the 6A after she wasassured that the spouses sla4on would not 4orrow 'ore than the value of theirown four /(0 residential lots in Roas Cit$ was properl$ o4:ected to 4$ respondentNB.1!Also their contention that duarda Belo si*ned the 6A in 4lan8 wasproperl$ o4:ected to 4$ respondent NB on the *round that the 4est evidence wasthe 6A. +here is also no proof to sustain petitioners7 alle*ation that respondentNB acted in 4ad faith and connived with the de4tors, respondents spousessla4on, to o4tain duarda Belo7s consent to the 'ort*a*e throu*h fraud. duarda

Belo ver$ well 8new that the respondents spouses sla4on would use her propert$as additional 'ort*a*e collateral for loans inas'uch as the 'ort*a*e contractstates that the consideration of this 'ort*a*e is here4$ initiallyfied at22%,))).)).1%+he 'ort*a*e contract sufficientl$ apprises duarda Belo that therespondents spouses sla4on can appl$ for 'ore loans with her propert$ ascontinuin* additional securit$. 9f she found the said provision uestiona4le, she

should have co'plained i''ediatel$. 9nstead, al'ost ten /1)0 $ears had passed4efore she and the petitioners sou*ht the annul'ent of the said contracts.

+hird, after havin* *one throu*h the records, this Court finds that the courts a'uodid not err in holdin* that the 6A eecuted 4$ duarda Belo in favor of the

respondents spouses sla4on and the Real state #ort*a*e eecuted 4$ therespondents spouses in favor of respondent NB are valid. 9t is stipulated inpara*raph three /0 of the 6A that duarda Belo appointed the sla4on spousesto 'a8e, si*n, eecute and deliver an$ contract of 'ort*a*e or an$ otherdocu'ents of whatever nature or 8ind . . . which 'a$ 4e necessar$ or proper inconnection with the loan herein 'entioned, or with an$ loan which '$ attorne$-in-fact 'a$ contract personall$ in his own na'e . . .2)+his portion of the 6A is uiterelevant to the case at 4ar. +his was the 'ain reason wh$ the 6A was eecutedin the first place inas'uch as duarda Belo consented to have her land 'ort*a*edfor the 4enefit of the respondents spouses sla4on. +he 6A was not 'eant to'a8e her a co-o4li*or to the principal contract of loan 4etween respondent NB,as lender, and the spouses sla4on, as 4orrowers. +he acco''odation real estate'ort*a*e over her propert$, which was eecuted in favor of respondent NB 4$the respondents spouses sla4on, in their capacit$ as her attorne$s-in-fact 4$

virtue of her 6A, is 'erel$ an accessor$ contract.

duarda Belo consented to 4e an acco''odation 'ort*a*or in the sense that shesi*ned the 6A to authori3e respondents spouses sla4ons to eecute a 'ort*a*eon her land. etitioners the'selves even ac8nowled*ed that the relation created4$ the 6A and the 'ort*a*e contract was 'erel$ that of 'ort*a*or-'ort*a*eerelationship. +he 6A for' of the NB was utili3ed to authori3e the spousessla4on to 'ort*a*e duarda Belo7s land as additional collateral of the sla4onspouses7 loan fro' respondent NB. +hus, the petitioners7 contention that the 6Ais void is untena4le. Besides, duarda Belo 4enefited, in si*nin* the 6A, in thesense that she was a4le to collect the rentals on her leased propert$ fro' thesla4ons.21

An acco''odation 'ort*a*e is not necessaril$ void si'pl$ 4ecause theacco''odation 'ort*a*or did not 4enefit fro' the sa'e. +he validit$ of anacco''odation 'ort*a*e is allowed under Article 2)!5 of the New Civil Codewhich provides that /t0hird persons who are not parties to the principal o4li*ation'a$ secure the latter 4$ pled*in* or 'ort*a*in* their own propert$. Anacco''odation 'ort*a*or, ordinaril$, is not hi'self a recipient of the loan,otherwise that would 4e contrar$ to his desi*nation as such. 9t is not alwa$s

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necessar$ that the acco''odation 'ort*a*or 4e appraised 4eforehand of theentire a'ount of the loan nor should it first 4e deter'ined 4efore the eecution ofthe 6A for it has 4een held that

/real0 'ort*a*es *iven to secure future advance'ents are valid and

le*al contracts? that the a'ounts na'ed as consideration in said contractdo not li'it the a'ount for which the 'ort*a*e 'a$ stand as securit$ iffro' the four corners of the instru'ent the intent to secure future andother inde4tedness can 4e *athered. A 'ort*a*e *iven to secureadvance'ents is a continuin* securit$ and is not dischar*ed 4$repa$'ent of the a'ount na'ed in the 'ort*a*e, until the full a'ount ofthe advance'ents are paid.22

;ourth, the courts a 'uocorrectl$ held that the letter of duarda Belo addressed torespondent NB 'anifestin* her intent to redee' the propert$ is a waiver of herri*ht to uestion the validit$ of the 6A and the 'ort*a*e contract as well as theforeclosure and the sale of her su4:ect propert$. etitioners clai' that her letterwas not an offer to redee' as it was 'erel$ a declaration of her intention toredee'. Respondent NB7s answer to her letter would have carried certain le*al

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6ection 2! of Rule % of the 1%% Revised Rules of Civil rocedure states that

6C+9=N 2!. /ime and manner of! and amounts payable on! successi&eredemptions0 notice to be gi&en and filed. I +he :ud*'ent o4li*or, orrede'ptioner, 'a$ redee' the propert$ fro' the purchaser, at an$ ti'e

within one /10 $ear fro' the date of the re*istration of the certificate ofsale, by paying the purchaser the amount of his purchase , within one percentu' per 'onth interest thereon in addition, up to the ti'e ofrede'ption, to*ether with the a'ount of an$ assess'ents or taes whichthe purchaser 'a$ have paid thereon after purchase, and interest onsuch last na'ed a'ount at the sa'e rate? and if the purchaser 4e also acreditor havin* a prior lien to that of the rede'ptioner, other than the

:ud*'ent under which such purchase was 'ade, the a'ount of suchother lien, with interest. /9talic supplied0

+his Court finds the petitioners7 position on that issue to 4e 'eritorious.

+here is no dou4t that duarda Belo, assi*nor of the petitioners, is anacco''odation 'ort*a*or. +he re-trial =rder and respondent NB7s 4rief containa declaration of this fact. +he dispute 4etween the parties is whether 6ection 25 of.D. No. "%( applies to an acco''odation 'ort*a*or, or her assi*nees. +he saidle*al provision does not 'a8e a distinction 4etween a de4tor-'ort*a*or and anacco''odation 'ort*a*or as it uses the 4road ter' 'ort*a*or. +he appellatecourt thus ruled that the provision applies even to an acco''odation 'ort*a*orinas'uch as the law does not 'a8e an$ distinction. @e disa*ree. @here a wordused in a statute has 4oth a restricted and a *eneral 'eanin*, the *eneral 'ustprevail over the restricted unless the nature of the sub)ect matter or the conte"t in(hich it is employed clearly indicates that the limited sense is intended.2"9t ispresu'ed that the le*islature intended eceptions to its lan*ua*e which wouldavoid a4surd conseuences of this character.29n the case at 4ar, the ualification

to the *eneral rule applies. +he sa'e provision of 6ection 25 of .D. No. "%(provides that the 'ort*a*or shall have the ri*ht to redee' the propert$ 4$pa$in* all claims of the ank against him. ;ro' said provision can 4e deducedthat the 'ort*a*or referred to 4$ that law is one fro' who' the 4an8 has a clai'in the for' of outstandin* or unpaid loan? he is also called a 4orrower or de4tor-'ort*a*or. =n the other hand, respondent NB has no clai' a*ainst

acco''odation 'ort*a*or duarda Belo inas'uch as she onl$ 'ort*a*ed herpropert$ to acco''odate the sla4on spouses who are the loan 4orrowers of theNB. +he principal contract is the contract of loan 4etween the sla4on spouses,as 4orrowersJde4tors, and the NB as lender. +he acco''odation real estate'ort*a*e /which secures the loan0 is onl$ an accessor$ contract. 9t is our view and

we hold that the ter' 'ort*a*or in 6ection 25 of .D. No. "%( pertains onl$ to ade4tor-'ort*a*or and not to an acco''odation 'ort*a*or.

9t is well settled that courts are not to *ive a statute a 'eanin* that would lead toa4surdities. 9f the words of a statute are suscepti4le of 'ore than one 'eanin*, thea4surdit$ of the result of one construction is a stron* ar*u'ent a*ainst itsadoption, and in favor of such sensi4le interpretation.2!@e test a law 4$ its result.

A law should not 4e interpreted so as not to cause an in:ustice. +here are lawswhich are *enerall$ valid 4ut 'a$ see' ar4itrar$ when applied in a particular case4ecause of its peculiar circu'stances. @e are not 4ound to appl$ the'insla&isho4edience to their lan*ua*e.2%

+he interpretation accorded 4$ respondent NB to 6ection 25 of .D. No. "%( isunfair and un:ust to acco''odation 'ort*a*ors and their assi*nees. ;orcin* an

acco''odation 'ort*a*or li8e duarda Belo to pa$ for what the principal de4tors/sla4on spouses0 owe to respondent 4an8 is to punish her for theacco''odation and *enerosit$ she accorded to the sla4on spouses who werethen hard pressed for additional collateral needed to secure their 4an8 loan.Respondents NB and spouses sla4ons ver$ well 8new that she 'erel$consented to 4e a 'ere acco''odation 'ort*a*or.

+he circu'stances of the case at 4ar also provide for a'ple reason wh$petitioners cannot 4e 'ade to pa$ the entire lia4ilit$ of the principal de4tors,sla4on spouses, to respondent NB.

+he trial court found that respondent NB7s application for etra:udicial foreclosureand pu4lic auction sale of duarda Belo7s 'ort*a*ed propert$)was filed under Act

No. 15, as a'ended 4$ .D. No. !5. +he notice of etra:udicial sale, theCertificate of 6heriff7s 6ale, and the letter it sent to duarda Belo did not 'ention .D. No. "%( as the 4asis for rede'ption. As aptl$ ruled 4$ the trial court I

9n fairness to these 'ort*a*ors, their successors-in-interest, or innocentpurchasers for value of their rede'ption ri*hts, NB should have at least

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advised the' that rede'ption would 4e *overned 4$ its Revised Charteror D "%, and not 4$ Act 15 and the Rules of Court, as co''onl$practiced . . . +his practice of defendant Ban8 is 'anifestl$ unfair andun:ust to these rede'ptioners who are cau*ht 4$ surprise and usuall$ta8en a4ac8 4$ the enor'ous clai's of the Ban8 not shown in the Notice

of tra:udicial 6ale or the Certificate of 6heriff7s 6ale as in this case.1

#oreover, the 'ort*a*e contract eplicitl$ provides that . . . the 'ort*a*ee 'a$i''ediatel$ foreclose this 'ort*a*e :udiciall$ in accordance with the Rules ofCourt or etra:udiciall$ in accordance with Act No. 15, as a'ended andresidential Decree No. !5 . . .26ince the 'ort*a*e contract in this case is in thenature of a contract of adhesion as it was prepared solel$ 4$ respondent, it has to4e interpreted in favor of petitioners. +he respondent 4an8 however tries to rene*eon this contractual co''it'ent 4$ see8in* refu*e in the 1%!% case of Sy &. *ourtof ppealswherein this Court ruled that the rede'ption price is eual to the totala'ount of inde4tedness to the 4an87s clai' inas'uch as 6ection ! of the GeneralBan8in* Act is an a'end'ent to 6ection " of Act No. 15, despite the fact thatthe etra:udicial foreclosure procedure followed 4$ the NB was eplicitl$ under orin accordance with Act No. 15.

9n the 1%%" case of *hina anking *orporation &. *ourt of ppeals,(where theparties also stipulated that Act No. 15 is the controllin* law in case offoreclosure, this Court ruled that?

B$ invo8in* the said Act, there is no dou4t that it 'ust *overn the'anner in which the sale and redemptionshall 4e effected. Clearl$, thefunda'ental principle that contracts are respected as the law 4etween thecontractin* parties finds application in the present case, speciall$ wherethe$ are not contrar$ to law, 'orals, *ood custo's and pu4lic polic$.5

#ore i'portantl$, the rulin* pronounced in Sy &. *ourt of ppealsand othercases,"that the General Ban8in* Act and .D. No. "%( shall prevail over Act No.

15 with respect to the rede'ption price, does not appl$ here inas'uch as in thesaid cases the rede'ptioners were the de4tors the'selves or their ass i*nees, andnot an acco''odation 'ort*a*or or the latter7s assi*nees such as in the case at4ar. 9n the said cases, the de4tor-'ort*a*ors were reuired to pa$ as rede'ptionprice their entire lia4ilit$ to the 4an8 inas'uch as the$ were o4li*ated to pa$ theirloan which is a principal o4li*ation in the first place. =n the other hand,

acco''odation 'ort*a*ors as such are not in an$wa$ lia4le for the pa$'ent ofthe loan or principal o4li*ation of the de4torJ4orrower +he lia4ilit$ of theacco''odation 'ort*a*ors etends onl$ up to the loan value of their 'ort*a*edpropert$ and not to the entire loan itself.


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Neither can the creditor7s heir who received his share of the de4t returnthe pled*e or cancel the 'ort*a*e, to the pre:udice of the other heirs whohave not 4een paid.

;ro' these provisions is ecepted the case in which, there 4ein* several

thin*s *iven in 'ort*a*e or pled*e, each one of the' *uarantees onl$ adeter'inate portion of the credit.

+he de4tor, in this case, shall have a ri*ht to the etin*uish'ent of thepled*e or 'ort*a*e as the portion of the de4t for which each thin* isspeciall$ answera4le is satisfied.

+here is no dispute that the 'ort*a*e on the four /(0 parcels of land 4$ thesla4on spouses and the other 'ort*a*e on the propert$ of duarda Belo 4othsecure the loan o4li*ation of respondents spouses sla4on to respondent NB.


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G.R. No. L&3211' A(r)* 2*, 1+1

RURAL BAN" OF CALOOCAN, INC. and $OSE O. #ESI#ERIO,$R., petitioners,vs.

!E COUR! OF APPEALS and MA-IMA CAS!RO, respondents.

#E CAS!RO, J.:

+his is a petition for review 4$ wa$ of certiorari of the decision 1of the Court ofAppeals in CA-G.R. No. %")-R entitled a"ima *astro! plaintiff-appellee!&ersus Se&erino alencia! et al.! defendants0 ,ural ank of *aloocan! nc.! 7oseDesiderio! 7r. and rsenio ,eyes! defendants-appellants! which affir'ed intoto the decision of the Court of ;irst 9nstance of #anila in favor of plaintiff-appellee, the herein private respondent #ai'a Castro.

=n Dece'4er , 1%5%, respondent #ai'a Castro, acco'panied 4$ 6everino>alencia, went to the Rural Ban8 of Caloocan to appl$ for an industrial loan. 9t was6everino >alencia who arran*ed ever$thin* a4out the loan with the 4an8 and whosupplied to the latter the personal data reuired for Castro7s loan application. =nDece'4er 11, 1%5%, after the 4an8 approved the loan for the a'ount of ,))).)),Castro, acco'panied 4$ the >alencia spouses, si*ned a pro'issor$ notecorrespondin* to her loan in favor of the 4an8.

=n the sa'e da$, Dece'4er 11, 1%5%, the >alencia spouses o4tained fro' the4an8 an eual a'ount of loan for ,))).)). +he$ si*ned a pro'issor$ note/hi4it 20 correspondin* to their loan in favor of the 4an8 and had Castro affiedthereon her si*nature as co-'a8er.

+he two loans were secured 4$ a real-estate 'ort*a*e /hi4it "0 on Castro7shouse and lot of 15) suare 'eters, covered 4$ +ransfer Certificate of +itle No.(1% of the =ffice of the Re*ister of Deeds of #anila.

=n ;e4ruar$ 1, 1%"1, the sheriff of #anila, thru Actin* Chief Deput$ 6heriffBasilio #a*sa'4ol, sent a notice of sheriff7s sale addressed to Castro, announcin*

that her propert$ covered 4$ +.C.+. No. (1% would 4e sold at pu4lic auction on#arch 1), 1%"1 to satisf$ the o4li*ation coverin* the two pro'issor$ notes plusinterest and attorne$7s fees.

pon reuest 4$ Castro and the >alencias and with confor'it$ of the 4an8, the

auction sale that was scheduled for #arch 1), 1%"1 was postponed for April 1),1%"1. But when April 1), 1%"1 was su4seuentl$ declared a special holida$, thesheriff of #anila sold the propert$ covered 4$ +.C.+. No. (1% at a pu4lic auctionsale that was held on April 11, 1%"1, which was the net succeedin* 4usiness da$followin* the special holida$.

Castro alle*ed that it was onl$ when she received the letter fro' the Actin* Deput$6heriff on ;e4ruar$ 1, 1%"1, when she learned for the first ti'e that the 'ort*a*econtract /hi4it "0 which was an encu'4rance on her propert$ was for".))).)) and not for ,))).)) and that she was 'ade to si*n as co-'a8er ofthe pro'issor$ note /hi4it 20 without her 4ein* infor'ed of this.

=n April (, 1%"1, Castro filed a suit deno'inated Re 6u' of #one$, a*ainstpetitioners Ban8 and Desiderio, the 6pouses >alencia, Basilio #a*sa'4ol and

Arsenio Re$es as defendants in Civil Case No. (""%! 4efore the Court of ;irst9nstance of #anila upon the char*e, a'on*st others, that thru 'ista8e on her partor fraud on the part of >alencias she was induced to si*n as co-'a8er of apro'issor$ note /hi4it 20 and to constitute a 'ort*a*e on her house and lot tosecure the uestioned note. At the ti'e of filin* her co'plaint, respondent Castrodeposited the a'ount of ,!.)) with the court a 'uo in full pa$'ent of herpersonal loan plus interest.

9n her a'ended co'plaint, Castro pra$ed, a'on*st other, for the annul'ent as faras she is concerned of the pro'issor$ note /hi4it 20 and 'ort*a*e /hi4it "0insofar as it eceeds ,))).))? for the dischar*e of her personal o4li*ation withthe 4an8 4$ reason of a deposit of ,!.)) with the court a 'uo upon the filin* ofher co'plaint? for the annul'ent of the foreclosure sale of her propert$ covered 4$

+.C.+. No. (1% in favor of Arsenio Re$es? and for the award in her favor ofattorne$7s fees, da'a*es and cost.

9n their answers, petitioners interposed counterclai's and pra$ed for the dis'issalof said co'plaint, with da'a*es, attorne$7s fees and costs. 2

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+he pertinent facts arrived fro' the stipulation of facts entered into 4$ the partiesas stated 4$ respondent Court of Appeals are as follows

6pawnin* the present liti*ation are the facts contained in thefollowin* stipulation of facts su4'itted 4$ the parties the'selves

1. +hat the capacit$ and addresses of all the parties in this caseare ad'itted .

2. +hat the plaintiff was the re*istered owner of a residentialhouse and lot located at Nos. 12"!-12) Carola 6treet,6a'paloc, #anila, containin* an area of one hundred fift$ /15)0suare 'eters, 'ore or less, covered 4$ +.C.+. No. (1% of the=ffice of the Re*ister of Deeds of #anila?

. +hat the si*natures of the plaintiff appearin* on the followin*docu'ents are *enuine

a0 Application for 9ndustrial Eoan with the Rural Ban8 ofCaloocan, dated Dece'4er , 1%5% in the a'ount of ,))).))attached as Anne A of this partial stipulation of facts?

40 ro'issor$ Note dated Dece'4er 11, 1%5% si*ned 4$ theplaintiff in favor of the Rural Ban8 of Caloocan for the a'ount of,))).)) as per Anne B of this partial stipulation of facts?

c0 Application for 9ndustrial Eoan with the Rural Ban8 ofCaloocan, dated Dece'4er 11, 1%5%, si*ned onl$ 4$ thedefendants, 6everino >alencia and Catalina >alencia, attachedas Anne C, of this partial stipulation of facts?

d0 ro'issor$ note in favor of the Rural Ban8 of Caloocan, datedDece'4er 11, 1%5% for the a'ount of ))).)), si*ned 4$ thespouses 6everino >alencia and Catalina >alencia as 4orrowers,and plaintiff #ai'a Castro, as a co-'a8er, attached as Anne Dof this partial stipulation of facts?

e0 Real estate 'ort*a*e dated Dece'4er 11, 1%5% eecuted 4$plaintiff #ai'a Castro, in favor of the Rural Ban8 of Caloocan,to secure the o4li*ation of ",))).)) attached herein as Anne of this partial stipulation of facts?

All the parties herein epressl$ reserved their ri*ht to presentan$ evidence the$ 'a$ desire on the circu'stances re*ardin*the eecution of the a4ove-'entioned docu'ents.

(. +hat the sheriff of #anila, thru Actin* Chief Deput$ 6heriff,Basilio #a*sa'4ol, sent a notice of sheriff7s sale, address to theplaintiff, dated ;e4ruar$ 1, 1%"1, announcin* that plaintiff7spropert$ covered 4$ +C+ No. (1% of the Re*ister of Deeds ofthe Cit$ of #anila, would 4e sold at pu4lic auction on #arch 1),1%"1 to satisf$ the total o4li*ation of 5,2!.5), plus interest,attorne$7s fees, etc., as evidenced 4$ the Notice of 6heriff7s 6aleand Notice of tra:udicial Auction 6ale of the #ort*a*edpropert$, attached herewith as Annees ; and ;-1, respectivel$,of this stipulation of facts?

5. +hat upon the reuest of the plaintiff and defendants-spouses6everino >alencia and Catalina >alencia, and with theconfor'it$ of the Rural Ban8 of Caloocan, the 6heriff of #anilapostponed the auction sale scheduled for #arch 1), 1%"1 forthirt$ /)0 da$s and the sheriff re-set the auction sale for April 1),1%"1?

". +hat April 1), 1%"1 was declared a special pu4lic holida$?/Note No. is o'itted upon a*ree'ent of the parties.0

!. +hat on April 11, 1%"1, the 6heriff of #anila, sold at pu4licauction plaintiff7s propert$ covered 4$ +.C.+. No. (1% and

defendant, Arsenio Re$es, was the hi*hest 4idder and thecorrespondin* certificate of sale was issued to hi' as per AnneG of this partial stipulation of facts?

%. +hat on April 1", 1%"2, the defendant Arsenio Re$es,eecuted an Affidavit of Consolidation of =wnership, a cop$ of

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which is hereto attached as Anne < of this partial stipulation offacts?

1). +hat on #a$ %, 1%"2, the Rural Ban8 of Caloocan9ncorporated eecuted the final deed of sale in favor of the

defendant, Arsenio Re$es, in the a'ount of ,))).)), a cop$ ofwhich is attached as Anne 9 of this partial stipulation of facts?

11. +hat the Re*ister of Deeds of the Cit$ of #anila issued the+ransfer Certificate of +itle No. "2% in favor of the defendant,

Arsenio Re$es, in lieu of +ransfer Certificate of +itle No. (1%which was in the na'e of plaintiff, #ai'a Castro, which wascancelled?

12. +hat after defendant, Arsenio Re$es, had consolidated histitle to the propert$ as per +.C.+. No. "2%%, plaintiff filed a noticeof lis pendens with the Re*ister of Deeds of #anila and thesa'e was annotated in the 4ac8 of +.C.+. No. "2%% as per

Anne & of this partial stipulation of facts? and

1. +hat the parties here4$ reserved their ri*hts to presentadditional evidence on 'atters not covered 4$ this partialstipulation of facts.

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2, 1%""0. 6he wept, there to inuire if she could *et a loan fro'the 4an8. +he clai's he as8ed the a'ount and the purpose ofthe loan and the securit$ to he *iven and plaintiff said she wouldneed .))).)) to 4e invested in a dru*store in which she was apartner /t.s.n., p. !11. 6he offered as securit$ for the loan her lot

and house at Carola 6t., 6a'paloc, #anila, which was pro'ptl$investi*ated 4$ the defendant 4an87s inspector. +hen a few da$slater, plaintiff ca'e 4ac8 to the 4an8 with the wife of defendant>alencia A date was alle*edl$ set for plaintiff and the defendantspouses for the processin* of their application, 4ut on the da$fied, plaintiff ca'e without the defendant spouses. 6he si*nedthe application and the other papers pertinent to the loan aftershe was interviewed 4$ the 'ana*er of the defendant. After theapplication of plaintiff was 'ade, defendant spouses had theirapplication for a loan also prepared and si*ned /see h. 10. 9nhis interview of plaintiff and defendant spouses, the 'ana*er ofthe 4an8 was a4le to *ather that plaintiff was in :oint venture withthe defendant spouses wherein she a*reed to invest ,))).))as additional capital in the la4orator$ owned 4$ said spouses/t.s.n., pp. 1"-10 3

+he Court of Appeals, upon evaluation of the evidence, affir'ed in toto thedecision of the Court of ;irst 9nstance of #anila, the dispositive portion of whichreads

;=R AEE +alencia andCatalina >alencia to pa$ defendant Rural Ban8 of Caloocan, 9nc.the a'ount of ,))).)) plus the correspondin* 12L interestthereon per annu' fro' Dece'4er 11, 1%") until full$ paid? and

=rders defendants Rural Ban8 of Caloocan, 9nc., &ose Desiderio,&r. and spouses 6everino D. >alencia and Catalina >alencia topa$ plaintiff, :ointl$ and severall$, the su' of ")).)) 4$ wa$ ofattorne$7s fees, as well as costs.

9n view of the conclusion that the court has thus reached, thecounterclai's of defendant Rural Ban8 of Caloocan, 9nc., &oseDesiderio, &r. and Arsenio Re$es are here4$ dis'issed, as acorollar$

+he Court further denies the 'otion of defendant Arsenio Re$esfor an =rder reuirin* #ai'a Castro to deposit rentals filed on

Nove'4er 1", 1%", resolution of which was held in a4e$ancependin* final deter'ination of the case on the 'erits, also as aconseuence of the conclusion aforesaid. 4

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etitioners Ban8 and &ose Desiderio 'oved for the reconsideration /of respondentcourt7s decision. +he 'otion havin* 4een denied, 'the$ now co'e 4efore thisCourt in the instant petition, with the followin* Assi*n'ent of rrors, to wit

9

+alencias who had a4used her confidence, ta8in* advanta*e of her

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15/28

old a*e and i*norance of her financial need. Respondent court added that the'andate of fair pla$ decrees that she should 4e relieved of her o4li*ation underthe contract pursuant to Articles 2( and 12 of the Civil Code.

+he decision in effect relieved Castro of an$ lia4ilit$ to the pro'issor$ note /hi4it

20 and the 'ort*a*e contract /hi4it "0 was dee'ed valid up to the a'ount of,))).)) onl$ which was euivalent to her personal loan to the 4an8.

etitioners ar*ued that since the >alencias were solel$ declared in the decision to4e responsi4le for the fraud a*ainst Castro, in the li*ht of the res inter aliosacta rule, a findin* of fraud perpetrated 4$ the spouses a*ainst Castro cannot 4eta8en to operate pre:udiciall$ a*ainst the 4an8. etitioners concluded thatrespondent court erred in not *ivin* effect to the pro'issor$ note /hi4it 20 insofaras the$ affect Castro and the 4an8 and in declarin* that the 'ort*a*e contract/hi4it "0 was valid onl$ to the etent of Castro7s personal loan of ,))).)).

+he records of the case reveal that respondent court7s findin*s of fraud a*ainst the>alencias is well supported 4$ evidence. #oreover, the findin*s of fact 4$respondent court in the 'atter is dee'ed final. ++he decision declared the

>alencias solel$ responsi4le for the defraudation of Castro. etitioners7 contentionthat the decision was silent re*ardin* the participation of the 4an8 in the fraud is,therefore, correct.

@e cannot a*ree with the contention of petitioners that the 4an8 was defrauded 4$the >alencias. ;or one, no clai' was 'ade on this in the lower court. ;or another,petitioners did not su4'it proof to support its contention.

At an$ rate, @e o4serve that while the >alencias defrauded Castro 4$ 'a8in* hersi*n the pro'issor$ note /hi4it 20 and the 'ort*a*e contract /hi4it "0, the$also 'isrepresented to the 4an8 Castro7s personal ualifications in order to secureits consent to the loan. +his 'ust 4e the reason which pro'pted the 4an8 tocontend that it was defrauded 4$ the >alencias. But to reiterate, @e cannot a*ree

with the contention for reasons a4ove-'entioned. alencias. +hus, in the case of 8ill &s.eloso, 10this Court declared that a contract 'a$ 4e annulled on the *round of

vitiated consent if deceit 4$ a third person, even without connivance or co'plicit$with one of the contractin* parties, resulted in 'utual error on the part of theparties to the contract.

etitioners ar*ued that the a'ended co'plaint fails to contain even a *eneralaver'ent of fraud or 'ista8e, and its 'ention in the pra$er is definitel$ not asu4stantial co'pliance with the reuire'ent of 6ection 5, Rule ! of the Rules ofCourt. +he records of the case, however, will show that the a'ended co'plaintcontained a particular aver'ent of fraud a*ainst the >alencias in full co'pliancewith the provision of the Rules of Court. Althou*h, the a'ended co'plaint 'adeno 'ention of 'ista8e 4ein* incurred in 4$ the 4an8 and Castro, such 'ention isnot essential in order that the pro'issor$ note /hi4it 20 'a$ 4e declared of no4indin* effect 4etween the' and the 'ort*a*e /hi4it "0 valid up to the a'ount of,))).)) onl$. +he reason is that the 'ista8e the$ 'utuall$ suffered was a 'ereconseuence of the fraud perpetrated 4$ the >alencias a*ainst the'. +hus, thefraud particularl$ averred in the co'plaint, havin* 4een proven, is dee'edsufficient 4asis for the declaration of the pro'issor$ note /hi4it 20 invalid insofaras it affects Castro vis-a-vis the 4an8, and the 'ort*a*e contract /hi4it "0 validonl$ up to the a'ount of ,))).)).

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16/28

+he second issue raised in the fourth ass i*n'ent of errors is who 4etween Castroand the 4an8 should suffer the conseuences of the fraud perpetrated 4$ the>alencias.

9n attri4utin* to Castro an conseuences of the loss, petitioners ar*ue that it was

her ne*li*ence or acuiescence if not her actual connivance that 'ade the fraudpossi4le.

etitioners7 ar*u'ent utterl$ disre*ards the findin*s of respondent Court ofAppeals wherein petitioners7 ne*li*ence in the contracts has 4een aptl$de'onstrated, to wit

A witness for the defendant 4an8, Rodolfo Desiderio clai's hehad su4:ected the plaintiff-appellee to several interviews. 9f thiswere true wh$ is it that her a*e was placed at "1 instead of )?wh$ was she descri4ed in the application /h. B-1-%0 as dru*'anufacturer when in fact she was not? wh$ was it placed in theapplication that she has inco'e of 2),))).)) when accordin*to plaintiff-appellee, she his not even *iven such 8ind of

infor'ation -the true fact 4ein* that she was 4ein* paid 1.2)per picul of the su*arcane production in her hacienda and 5))cavans on the pala$ production. 11

;ro' the fore*oin*, it is evident that the 4an8 was as 'uch , *uilt$ as Castro was,of ne*li*ence in *ivin* its consent to the contracts. 9t apparentl$ relied onrepresentations 'ade 4$ the >alencia spouses when it should have directl$o4tained the needed data fro' Castro who was the ac8nowled*ed owner of thepropert$ offered as collateral. #oreover, considerin* Castro7s personalcircu'stances her lac8 of education, i*norance and old a*e she cannot 4econsidered utterl$ ne*lectful for havin* 4een defrauded. =n the contrar$, it isde'anded of petitioners to eercise the hi*hest order of care and prudence in its4usiness dealin*s with the >alencias considerin* that it is en*a*ed in a 4an8in*4usiness a 4usiness affected with pu4lic interest. 9t should have ascertainedCastro7s awareness of what she was si*nin* or 'ade her understand whato4li*ations she was assu'in*, considerin* that she was *ivin* acco''odation to,without an$ consideration fro' the >alencia spouses.

etitioners further ar*ue that Castro7s act of holdin* the >alencias as her a*ent ledthe 4an8 to 4elieve that the$ were authori3ed to spea8 and 4ind her. 6he cannotnow 4e per'itted to den$ the authorit$ of the >alencias to act as her a*ent for onewho clothes another with apparent authorit$ as her a*ent is not per'itted to den$such authorit$.

+he authorit$ of the >alencias was onl$ to follow-up Castro7s loan application withthe 4an8. +he$ were not authori3ed to 4orrow for her. +his is apparent fro' the factthat Castro went to the Ban8 to si*n the pro'issor$ note for her loan of ,))).)).9f her act had 4een understood 4$ the Ban8 to 4e a *rant of an authorit$ to the>alencia to 4orrow in her 4ehalf, it should have reuired a special power ofattorne$ eecuted 4$ Castro in their favor. 6ince the 4an8 did not, @e can ri*htl$assu'e that it did not entertain the notion, that the >alencia spouses were in an$'anner actin* as an a*ent of Castro.

@hen the >alencias 4orrowed fro' the Ban8 a personal loan of ,))).))evidenced 4$ a pro'issor$ note /hi4it 20 and 'ort*a*ed /hi4it "0 Castro7spropert$ to secure said loan, the >alencias acted for their own 4ehalf. Considerin*however that for the loan in which the >alencias appeared as principal 4orrowers, it

was the propert$ of Castro that was 4ein* 'ort*a*ed to secure said loan, the Ban8should have eercised due care and prudence 4$ 'a8in* proper inuir$ if Castro7sconsent to the 'ort*a*e was without an$ taint or defect. +he possi4ilit$ of her not8nowin* that she si*ned the pro'issor$ note /hi4it 20 as co-'a8er with the>alencias and that her propert$ was 'ort*a*ed to secure the two loans instead ofher own personal loan onl$, in view of her personal circu'stances i*norance,lac8 of education and old a*e should have placed the Ban8 on prudent inuir$ toprotect its interest and that of the pu4lic it serves. @ith the recent occurrence ofevents that have supposedl$ affected adversel$ our 4an8in* s$ste', attri4uta4le tolait$ in the conduct of 4an8 4usiness 4$ its officials, the need of etre'e cautionand prudence 4$ said officials and e'plo$ees in the dischar*e of their functionscannot 4e over-e'phasi3ed.

Huestion is, li8ewise, raised as to the propriet$ of respondent court7s decision

which declared that Castro7s consi*nation in court of the a'ount of ,!.)) wasvalidl$ 'ade. 9t is contended that the consi*nation was 'ade without prior offer ortender of pa$'ent to the Ban8, and it therefore, not valid. 9n holdin* that there is asu4stantial co'pliance with the provision of Article 125" of the Civil Code,respondent court considered the fact that the Ban8 was holdin* Castro lia4le forthe su' of ",))).)) plus 12L interest per annu', while the a'ount consi*ned

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was onl$ ,))).)) plus 12L interest? that at the ti'e of consi*nation, the Ban8had lon* foreclosed the 'ort*a*e etra:udiciall$ and the sale of the 'ort*a*epropert$ had alread$ 4een scheduled for April 1), 1%"1 for non-pa$'ent of theo4li*ation, and that despite the fact that the Ban8 alread$ 8new of the deposit'ade 4$ Castro 4ecause the receipt of the deposit was attached to the record ofthe case, said Ban8 had not 'ade an$ clai' of such deposit, and that therefore,Castro was ri*ht in thin8in* that it was futile and useless for her to 'a8e previousoffer and tender of pa$'ent directl$ to the Ban8 onl$ in the aforesaid a'ount of,))).)) plus 12L interest. nder the fore*oin* circu'stances, the consi*nation'ade 4$ Castro was valid. if not under the strict provision of the law, under the'ore li4eral considerations of euit$.

+he final issue raised is the validit$ or invalidit$ of the etra:udicial foreclosure saleat pu4lic auction of the 'ort*a*ed propert$ that was held on April 11, 1%"1.

etitioners contended that the pu4lic auction sale that was held on April 11, 1%"1which was the net 4usiness da$ after the scheduled date of the sale on April 1),1%"1, a special pu4lic holida$, was per'issi4le and valid pursuant to the provisionsof 6ection 1 of the Revised Ad'inistrative Code which ordains

reter'ission of holida$. @here the da$, or the last da$, fordoin* an$ act reuired or per'itted 4$ law falls on a holida$, theact 'a$ 4e done on the net succeedin* 4usiness da$.

Respondent court ruled that the aforesaid sale is null and void, it not havin* 4eencarried out in accordance with 6ection % of Act No. 15, which provides

6ection %. Notice shall 4e *iven 4$ postin* notices of the salefor not less than twent$ da$s in at least three pu4lic places of the'unicipalit$ or cit$ where the propert$ is situated, and if suchpropert$ is worth 'ore than four hundred pesos, such noticeshall also 4e pu4lished once a wee8 for at least three

consecutive wee8s in a newspaper of *eneral circulation in the'unicipalit$ or cit$.

@e a*ree with respondent court. +he preter'ission of a holida$ applies onl$where the da$, or the last da$ for doin* an$ act re'uired or permitted by la( fallson a holida$, or when the last da$ of a *iven period for doin* an act falls on a

holida$. 9t does not appl$ to a da$ fied 4$ an office or officer of the *overn'ent foran act to 4e done, as distin*uished fro' a period of ti'e within which an actshould 4e done, which 'a$ 4e on an$ da$ within that specified period. ;orea'ple, if a part$ is reuired 4$ law to file his answer to a co'plaint within fifteen/150 da$s fro' receipt of the su''ons and the last da$ falls on a holida$, the lastda$ is dee'ed 'oved to the net succeedin* 4usiness da$. But, if the court fiesthe trial of a case on a certain da$ 4ut the said date is su4seuentl$ declared apu4lic holida$, the trial thereof is not auto'aticall$ transferred to the netsucceedin* 4usiness da$. 6ince April 1), 1%"1 was not the da$ or the last da$ set4$ law for the etra:udicial foreclosure sale, nor the last da$ of a *iven period 4ut adate fied 4$ the deput$ sheriff, the aforesaid sale cannot le*all$ 4e 'ade on thenet succeedin* 4usiness da$ without the notices of the sale on that da$ 4ein*posted as prescri4ed in 6ection %, Act No. 15.

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G.R. No. L&1+22 Frar 1, 1+'

#IOS#A#O 5ULIONGSIU,plaintiff-appellant,vs.PILIPPINE NA!IONAL BAN" 6C Branch7,defendant-appellee.

icente 7aime! ,egino 8ermosisima $. +umontad! Sr. for plaintiff-appellant./omas esa! ,. . de los ,eyes and *. $. edina for defendant-appellee.

BENG8ON, $.P., J.:

laintiff-appellant Diosdado Fulion*siu 1 was the owner of two /20 vessels,na'el$ +he #J6 6uri*ao, valued at 1)%,%25.! and the #J6 Don Dino, valued at",))).)), and operated the ;6-2), valued at 21),"2.2(, which waspurchased 4$ hi' fro' the hilippine 6hippin* Co''ission, 4$ install'ent or onaccount. As of &anuar$ or ;e4ruar$, 1%(, plaintiff had paid to the hilippine6hippin* Co''ission onl$ the su' of ",5)) and the 4alance of the purchaseprice was pa$a4le at 5),))) a $ear, due on or 4efore the end of the current $ear.2

=n &une ), 1%(, plaintiff o4tained a loan of 5),))) fro' the defendanthilippine National Ban8, Ce4u Branch. +o *uarantee its pa$'ent, plaintiff pled*edthe #J6 6uri*ao, #J6 Don Dino and its euit$ in the ;6-2) to the defendant 4an8,as evidenced 4$ thepledge contract, hi4it A O 1-Ban8, eecuted on the sa'eda$ and dul$ re*istered with the office of the Collector of Custo's for the ort ofCe4u.

6u4seuentl$, plaintiff effected partial pa$'ent of the loan in the su' of2),))). +he re'ainin* 4alance was renewed 4$ the eecution of two /20pro'issor$ notes in the 4an87s favor. +he first note, dated Dece'4er 1!, 1%(, for2),))), was due on April 1", 1%(! while the second, dated ;e4ruar$ 2", 1%(!,for 1),))), was due on &une 25, 1%(!. /hese t(o notes (ere ne&er paid at all by

plaintiff on their respecti&e due dates.(

=n April ", 1%(!, the 4an8 filed cri'inal char*es a*ainst plaintiff and twoother accused for estafa thru falsification of co''ercial docu'ents, 4ecauseplaintiff had, as last indorsee, deposited with defendant 4an8, fro' #arch 11 to#arch 1, 1%(!, se&en Ban8 of the hilippine 9slands checks totalling 1!(,))).

+he drawer thereof I one of the co-accused I had no funds in the drawee 4an8.


19/28

his re'ainin* account 4alance, or set-off these su's a*ainst the inde'nit$ whichplaintiff was ordered to pa$ to it in the cri'inal cases.

@hen his 'otion for reconsideration and new trial was denied, plaintiff4rou*ht the appeal to s, the a'ount involved 4ein* 'ore than 2)),))).)).

9n support of the first assi*n'ent of error, plaintiff-appellant would have thisCourt hold that hi4it A O 1-Ban8 is a chattel 'ort*a*e contract so that thecreditor defendant could not ta8e possession of the chattels o4:ect thereof untilafter there has 4een default. +he su4'ission is without 'erit. +he partiesstipulated as a fact that hi4it A O 1-Ban8 is a pled*e contract I

. +hat a credit line of 5),))).)) was etended to the plaintiff 4$the defendant Ban8, and the plaintiff o4tained and received fro' the saidBan8 the su' of 5),))).)), and in order to guarantee the payment ofthis loan! the pledge contract! $"hibit :: $"hibit :1-ank:! (ase"ecuted and dul$ re*istered with the =ffice of the Collector of Custo'sfor the ort of Ce4u on the date appearin* therein? /'phasissupplied01;(pht

Necessaril$, this :udicial ad'ission 4inds the plaintiff. @ithout an$ showin*that this was 'ade thru palpa4le 'ista8e, no a'ount of rationali3ation can offsetit.%

+he defendant 4an8 as pled*ee was therefore entitled to the actualpossession of the vessels. @hile it is true that plaintiff continued operatin* thevessels after the pled*e contract was entered into, his possession was epressl$'ade su4:ect to the order of the pled*ee. 1) +he provision of Art. 211) of thepresent Civil Code 114ein* new I cannot appl$ to the pled*e contract here whichwas entered into on &une ), 1%(. =n the other hand, there is an authorit$supportin* the proposition that the pled*ee can te'poraril$ entrust the ph$sicalpossession of the chattels pled*ed to the pled*or without invalidatin* the pled*e.

9n such a case, the pled*or is re*arded as holdin* the pled*ed propert$ 'erel$ astrustee for the pled*ee. 12

laintiff-appellant would also ur*e s to rule that constructive deliver$ isinsufficient to 'a8e pled*e effective.


20/28

the defendant 4an8 itself. 9t is contendedfirst, that the cases holdin* that thestatutor$ reuire'ents as to pu4lic sales with prior notice in connection withforeclosure proceedin*s are waiva4le, are no lon*er authoritative in view of thepassa*e of Act 15, as a'ended? second, that the charter of defendant 4an8does not allow it to 4u$ the propert$ o4:ect of foreclosure in case of private sales?and third, that the price o4tained at the sale is unconsciona4le.

+here is no 'erit in the clai's. +he rulin*s in Philippine National ank &. DePoli, (( hil. " and $l 8ogar Ailipino &. Paredes, (5 hil. 1! are stillauthoritative despite the passa*e of Act 15. +his law refers onl$, and is li'ited,to foreclosure ofreal estate mortgages. 15 6o, whatever for'alities there are in Act15 do not appl$ to pled*e. Re*ardin* the 4an87s authorit$ to 4e the purchaser inthe foreclosure sale, 6ec. of Act 2"12, as a'ended 4$ Acts 2( and 2%! onl$states that if the sale is pu4lic, the 4an8 could purchase the whole or part of thepropert$ sold free from any right of redemption on the part of the mortgagor or

pledgor. +his even ar*ues a*ainst plaintiff7s case since the i'port thereof is this ifthe sale were private and the 4an8 4eca'e the purchaser, the 'ort*a*or orpled*or could redee' the propert$.


21/28

G.R. No. 11342 $anar /, 1++

#E9ELOPMEN! BAN" OF !E PILIPPINES, petitioner,vs.COUR! OF APPEALS and L5#IA CUBA, respondents.

G.R. No. 113' $anar /, 1++

L5#IA P. CUBA, petitioner,vs.COUR! OF APPEALS, #E9ELOPMEN! BAN" OF !E PILIPPINES andAGRIPINA P. CAPERAL,respondents.

#A9I#E, $R., J.:

+hese two consolidated cases ste''ed fro' a co'plaint1filed a*ainst the

Develop'ent Ban8 of the hilippines /hereafter DB0 and A*ripina Caperal filed 4$E$dia Cu4a /hereafter CBA0 on 21 #a$ 1%!5 with the Re*ional +rial Court ofan*asinan, Branch 5(. +he said co'plaint sou*ht /10 the declaration of nullit$ ofDB7s appropriation of CBA7s ri*hts, title, and interests over a ((-hectaresfishpond located in Bolinao, an*asinan, for 4ein* violative of Article 2)!! of theCivil Code? /20 the annul'ent of the Deed of Conditional 6ale eecuted in her favor4$ DB? /0 the annul'ent of DB7s sale of the su4:ect fishpond to Caperal? /(0 therestoration of her ri*hts, title, and interests over the fishpond? and /50 the recover$of da'a*es, attorne$7s fees, and epenses of liti*ation.

After the :oinder of issues followin* the filin* 4$ the parties of their respectivepleadin*s, the trial court conducted a pre-trial where CBA and DB a*reed on thefollowin* facts, which were e'4odied in the pre-trial order2

1. laintiff E$dia . Cu4a is a *rantee of a ;ishpond EeaseA*ree'ent No. 2)! /new0 dated #a$ 1, 1%( fro' theGovern'ent?

2. laintiff E$dia . Cu4a o4tained loans fro' the Develop'entBan8 of the hilippines in the a'ounts of 1)%,))).))?1)%,))).))? and %!,)).)) under the ter's stated in thero'issor$ Notes dated 6epte'4er ", 1%(? Au*ust 11, 1%5?and April (, 1%?

. As securit$ for said loans, plaintiff E$dia . Cu4a eecuted twoDeeds of Assi*n'ent of her Eeasehold Ri*hts?

(. laintiff failed to pa$ her loan on the scheduled dates thereofin accordance with the ter's of the ro'issor$ Notes?

5. @ithout foreclosure proceedin*s, whether :udicial or etra-:udicial, defendant DB appropriated the Eeasehold Ri*hts ofplaintiff E$dia Cu4a over the fishpond in uestion?

". After defendant DB has appropriated the Eeasehold Ri*htsof plaintiff E$dia Cu4a over the fishpond in uestion, defendantDB, in turn, eecuted a Deed of Conditional 6ale of theEeasehold Ri*hts in favor of plaintiff E$dia Cu4a over the sa'efishpond in uestion?

. 9n the ne*otiation for repurchase, plaintiff E$dia Cu4aaddressed two letters to the #ana*er DB, Da*upan Cit$ datedNove'4er ", 1%% and Dece'4er 2), 1%%. DB thereafteraccepted the offer to repurchase in a letter addressed to plaintiffdated ;e4ruar$ 1, 1%!2?

!. After the Deed of Conditional 6ale was eecuted in favor ofplaintiff E$dia Cu4a, a new ;ishpond Eease A*ree'ent No.2)!-A dated #arch 2(, 1%!) was issued 4$ the #inistr$ of

A*riculture and ;ood in favor of plaintiff E$dia Cu4a onl$,

ecludin* her hus4and?

%. laintiff E$dia Cu4a failed to pa$ the a'orti3ations stipulatedin the Deed of Conditional 6ale?

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1). After plaintiff E$dia Cu4a failed to pa$ the a'orti3ation asstated in Deed of Conditional 6ale, she entered with the DB ate'porar$ arran*e'ent where4$ in consideration for thedefer'ent of the Notarial Rescission of Deed of Conditional6ale, plaintiff E$dia Cu4a pro'ised to 'a8e certain pa$'ents asstated in te'porar$ Arran*e'ent dated ;e4ruar$ 2, 1%!2?

11. Defendant DB thereafter sent a Notice of Rescission thruNotarial Act dated #arch 1, 1%!(, and which was received 4$plaintiff E$dia Cu4a?

12. After the Notice of Rescission, defendant DB too8possession of the Eeasehold Ri*hts of the fishpond in uestion?

1. +hat after defendant DB too8 possession of the EeaseholdRi*hts over the fishpond in uestion, DB advertised in the6NDAF NC< the pu4lic 4iddin* dated &une 2(, 1%!(, todispose of the propert$?

1(. +hat the DB thereafter eecuted a Deed of Conditional 6alein favor of defendant A*ripina Caperal on Au*ust 1", 1%!(?

15. +hereafter, defendant Caperal was awarded ;ishpond EeaseA*ree'ent No. 2)!-A on Dece'4er 2!, 1%!( 4$ the #inistr$ ofA*riculture and ;ood.

Defendant Caperal ad'itted onl$ the facts stated in para*raphs 1( and 15 of thepre-trial order.3

+rial was thereafter had on other 'atters.

+he principal issue presented was whether the act of DB in appropriatin* to itselfCBA7s leasehold ri*hts over the fishpond in uestion without foreclosureproceedin*s was contrar$ to Article 2)!! of the Civil Code and, therefore, invalid.CBA insisted on an affir'ative resolution. DB stressed that it 'erel$ eercisedits contractual ri*ht under the Assi*n'ents of Eeasehold Ri*hts, which was not acontract of 'ort*a*e. Defendant Caperal sided with DB.

+he trial court resolved the issue in favor of CBA 4$ declarin* that DB7s ta8in*possession and ownership of the propert$ without foreclosure was plainl$ violativeof Article 2)!! of the Civil Code which provides as follows

Art. 2)!!. +he creditor cannot appropriate the thin*s *iven 4$

wa$ of pled*e or 'ort*a*e, or dispose of the'. An$ stipulation tothe contrar$ is null and void.

9t disa*reed with DB7s stand that the Assi*n'ents of Eeasehold Ri*hts were notcontracts of 'ort*a*e 4ecause /10 the$ were *iven as securit$ for loans, /20althou*h the fishpond land in uestion is still a pu4lic land, CBA7s leaseholdri*hts and interest thereon are aliena4le ri*hts which can 4e the proper su4:ect of a'ort*a*e? and /0 the intention of the contractin* parties to treat the Assi*n'ent ofEeasehold Ri*hts as a 'ort*a*e was o4vious and un'ista8a4le? hence, uponCBA7s default, DB7s onl$ ri*ht was to foreclose the Assi*n'ent in accordancewith law.

+he trial court also declared invalid condition no. 12 of the Assi*n'ent ofEeasehold Ri*hts for 4ein* a clear case ofpactum commissoriumepressl$

prohi4ited and declared null and void 4$ Article 2)!! of the Civil Code. 9t thenconcluded that since DB never acuired lawful ownership of CBA7s leaseholdri*hts, all acts of ownership and possession 4$ the said 4an8 were void.

Accordin*l$, the Deed of Conditional 6ale in favor of CBA, the notarial rescissionof such sale, and the Deed of Conditional 6ale in favor of defendant Caperal, aswell as the Assi*n'ent of Eeasehold Ri*hts eecuted 4$ Caperal in favor of DB,were also void and ineffective.

As to da'a*es, the trial court found a'ple evidence on record that in 1%!( therepresentatives of DB e:ected CBA and her careta8ers not onl$ fro' thefishpond area 4ut also fro' the ad:oinin* 4i* house? and that when CBA7s sonand careta8er went there on 15 6epte'4er 1%!5, the$ found the said houseunoccupied and destro$ed and CBA7s personal 4elon*in*s, 'achineries,euip'ent, tools, and other articles used in fishpond operation which were 8ept in

the house were 'issin*. +he 'issin* ite's were valued at a4out 55),))). 9tfurther found that when CBA and her 'en were e:ected 4$ DB for the first ti'ein 1%%, CBA had stoc8ed the fishpond with 25),))) pieces of 4an*us fish/'il8fish0, all of which died 4ecause the DB representatives prevented CBA7s'en fro' feedin* the fish. At the conservative price of .)) per fish, the *ross

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value would have 4een "%),))), and after deductin* 25L of said value asreasona4le allowance for the cost of feeds, CBA suffered a loss of 51,5)). 9tthen set the a**re*ate of the actual da'a*es sustained 4$ CBA at 1,)",5)).

+he trial court further found that DB was *uilt$ of *ross 4ad faith in falsel$

representin* to the Bureau of ;isheries that it had foreclosed its 'ort*a*e onCBA7s leasehold ri*hts. 6uch representation induced the said Bureau toter'inate CBA7s leasehold ri*hts and to approve the Deed of Conditional 6ale infavor of CBA. And considerin* that 4$ reason of her unlawful e:ect'ent 4$ DB,CBA suffered 'oral shoc8, de*radation, social hu'iliation, and serious anietiesfor which she 4eca'e sic8 and had to 4e hospitali3ed the trial court found herentitled to 'oral and ee'plar$ da'a*es. +he trial court also held that CBA wasentitled to 1)),))) attorne$7s fees in view of the considera4le epenses sheincurred for law$ers7 fees and in view of the findin* that she was entitled toee'plar$ da'a*es.

9n its decision of 1 &anuar$ 1%%), 4the trial court disposed as follows

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CBA and DB interposed separate appeals fro' the decision to the Court ofAppeals. +he for'er sou*ht an increase in the a'ount of da'a*es, while the latteruestioned the findin*s of fact and law of the lower court.

9n its decision/of 25 #a$ 1%%(, the Court of Appeals ruled that /10 the trial courterred in declarin* that the deed of assi*n'ent was null and void and thatdefendant Caperal could not validl$ acuire the leasehold ri*hts fro' DB? /20contrar$ to the clai' of DB, the assi*n'ent was not a cession under Article 1255of the Civil Code 4ecause DB appeared to 4e the sole creditor to CBA Icession presupposes pluralit$ of de4ts and creditors? /0 the deeds of assi*n'entrepresented the voluntar$ act of CBA in assi*nin* her propert$ ri*hts in pa$'entof her de4ts, which a'ounted to a novation of the pro'issor$ notes eecuted 4$CBA in favor of DB? /(0 CBA was estopped fro' uestionin* the assi*n'entof the leasehold ri*hts, since she a*reed to repurchase the said ri*hts under adeed of conditional sale? and /50 condition no. 12 of the deed of assi*n'ent wasan epress authorit$ fro' CBA for DB to sell whatever ri*ht she had over thefishpond. 9t also ruled that CBA was not entitled to loss of profits for lac8 ofevidence, 4ut a*reed with the trial court as to the actual da'a*es of 1,)",5)).9t, however, deleted the a'ount of ee'plar$ da'a*es and reduced the award of'oral da'a*es fro' 1)),))) to 5),))) and attorne$7s fees, fro' 1)),))) to

5),))).

+he Court of Appeals thus declared as valid the followin* /10 the act of DB inappropriatin* Cu4a7s leasehold ri*hts and interest under ;ishpond Eease

A*ree'ent No. 2)!? /20 the deeds of assi*n'ent eecuted 4$ Cu4a in favor ofDB? /0 the deed of conditional sale 4etween CBA and DB? and /(0 the deed ofconditional sale 4etween DB and Caperal, the ;ishpond Eease A*ree'ent infavor of Caperal, and the assi*n'ent of leasehold ri*hts eecuted 4$ Caperal infavor of DB. 9t then ordered DB to turn over possession of the propert$ toCaperal as lawful holder of the leasehold ri*hts and to pa$ CBA the followin*a'ounts /a0 1,)",5)) as actual da'a*es? 5),))) as 'oral da'a*es? and5),))) as attorne$7s fees.

6ince their 'otions for reconsideration were denied,'

DB and CBA filedseparate petitions for review.

9n its petition /G.R. No. 11!(20, DB assails the award of actual and 'oralda'a*es and attorne$7s fees in favor of CBA.

pon the other hand, in her petition /G.R. No. 11!"0, CBA contends that theCourt of Appeals erred /10 in not holdin* that the uestioned deed of assi*n'entwas apactum commissoriumcontrar$ to Article 2)!! of the Civil Code? /40 inholdin* that the deed of assi*n'ent effected a novation of the pro'issor$ notes?/c0 in holdin* that CBA was estopped fro' uestionin* the validit$ of the deed ofassi*n'ent when she a*reed to repurchase her leasehold ri*hts under a deed of

conditional sale? and /d0 in reducin* the a'ounts of 'oral da'a*es and attorne$7sfees, in deletin* the award of ee'plar$ da'a*es, and in not increasin* thea'ount of da'a*es.

@e a*ree with CBA that the assi*n'ent of leasehold ri*hts was a 'ort*a*econtract.

9t is undisputed that CBA o4tained fro' DB three separate loans totallin*5,))), each of which was covered 4$ a pro'issor$ note. 9n all of these notes,there was a provision that 9n the event of foreclosure of the mortgagesecurin*this notes, 9J@e further 4ind '$selfJourselves, :ointl$ and severall$, to pa$ thedeficienc$, if an$.

6i'ultaneous with the eecution of the notes was the eecution of Assi*n'ents ofEeasehold Ri*htswhere CBA assi*ned her leasehold ri*hts and interest on a((-hectare fishpond, to*ether with the i'prove'ents thereon. As pointed out 4$CBA, the deeds of assi*n'ent constantl$ referred to the assi*nor /CBA0 as4orrower? the assi*ned ri*hts, as 'ort*a*ed properties? and the instru'ent itself,as 'ort*a*e contract. #oreover, under condition no. 22 of the deed, it wasprovided that failure to co'pl$ with the ter's and condition of an$ of the loansshall cause all other loans to 4eco'e due and de'anda4le and all mortgagesshall be foreclosed. And, condition no. provided that if :foreclosureis actuall$acco'plished, the usual 1)L attorne$7s fees and 1)L liuidated da'a*es of thetotal o4li*ation shall 4e i'posed. +here is, therefore, no shred of dou4t that a'ort*a*e was intended.

Besides, in their stipulation of facts the parties ad'itted that the assi*n'ent was

4$ wa$ of securit$ for the pa$'ent of the loans? thus

. As securit$ for said loans, plaintiff E$dia . Cu4a eecuted twoDeeds of Assi*n'ent of her Eeasehold Ri*hts.

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9n PeopleBs ank /rust *o.&s.Cdom,+this Court had the occasion to rule thatan assi*n'ent to *uarantee an o4li*ation is in effect a 'ort*a*e.

@e find no 'erit in DB7s contention that the assi*n'ent novated the pro'issor$notes in that the o4li*ation to pa$ a su' of 'one$ the loans /under the pro'issor$notes0 was su4stituted 4$ the assi*n'ent of the ri*hts over the fishpond /under thedeed of assi*n'ent0. As correctl$ pointed out 4$ CBA, the said assi*n'ent'erel$ co'ple'ented or supple'ented the notes? 4oth could stand to*ether. +hefor'er was onl$ an accessor$ to the latter. Contrar$ to DB7s su4'ission, theo4li*ation to pa$ a su' of 'one$ re'ained, and the assi*n'ent 'erel$ served assecurit$ for the loans covered 4$ the pro'issor$ notes. 6i*nificantl$, 4oth thedeeds of assi*n'ent and the pro'issor$ notes were eecuted on the sa'e datesthe loans were *ranted. Also, the last para*raph of the assi*n'ent stated +heassi*nor further reiterates and states all terms! co&enants! and conditionsstipulated in the promissory note or notescoverin* the proceeds of this loan,'a8in* said pro'issor$ note or notes, to all intent and purposes, an integral

parthereof.

Neither did the assi*n'ent a'ount to pa$'ent 4$ cessionunder Article 1255 of

the Civil Code for the plain and si'ple reason that there was onl$ one creditor, theDB. Article 1255 conte'plates the eistence of two or 'ore creditors and involvesthe assi*n'ent of all the de4tor7s propert$.

Nor did the assi*n'ent constitute dationin pa$'ent under Article 12(5 of the civilCode, which reads Dationin pa$'ent, where4$ propert$ is alienated to thecreditor in satisfaction of a de4t in 'one$, shall 4e *overned 4$ the law on sales.9t 4ears stressin* that the assi*n'ent, 4ein* in its essence a 'ort*a*e, was 4ut asecurit$ and not a satisfaction of inde4tedness.10

@e do not, however, 4u$ CBA7s ar*u'ent that condition no. 12 of the deed ofassi*n'ent constitutedpactum commissorium. 6aid condition reads

12. +hat effective upon the 4reach of an$ condition of thisassi*n'ent, the Assi*nor here4$ appoints the Assi*nee his

Attorne$-in-fact with full power and authorit$ to ta8e actualpossession of the propert$ a4ove-descri4ed, to*ether with alli'prove'ents thereon, su4:ect to the approval of the 6ecretar$of A*riculture and Natural Resources, to lease the sa'e or an$

portion thereof and collect rentals, to 'a8e repairs ori'prove'ents thereon and pa$ the sa'e, to sell or otherwisedispose of whatever ri*hts the Assi*nor has or 'i*ht have oversaid propert$ andJor its i'prove'ents and perfor' an$ other actwhich the Assi*nee 'a$ dee' convenient to protect its interest.

All epenses advanced 4$ the Assi*nee in connection with

purpose a4ove indicated which shall 4ear the sa'e rate ofinterest afore'entioned are also *uaranteed 4$ this Assi*n'ent.

An$ a'ount received fro' rents, ad'inistration, sale or disposalof said propert$ 'a$ 4e supplied 4$ the Assi*nee to the pa$'entof repairs, i'prove'ents, taes, assess'ents and otherincidental epenses and o4li*ations and the 4alance, if an$, tothe pa$'ent of interest and then on the capital of theinde4tedness secured here4$. 9f after disposal or sale of saidpropert$ and upon application of total a'ounts received thereshall re'ain a deficienc$, said Assi*nor here4$ 4inds hi'self topa$ the sa'e to the Assi*nee upon de'and, to*ether with allinterest thereon until full$ paid. +he power herein *ranted shallnot 4e revo8ed as lon* as the Assi*nor is inde4ted to the

Assi*nee and all acts that 'a$ 4e eecuted 4$ the Assi*nee 4$

virtue of said power are here4$ ratified.

+he ele'ents ofpactum commissoriumare as follows /10 there should 4e apropert$ 'ort*a*ed 4$ wa$ of securit$ for the pa$'ent of the principal o4li*ation,and /20 there should 4e a stipulation for auto'atic appropriation 4$ the creditor ofthe thin* 'ort*a*ed in case of non-pa$'ent of the principal o4li*ation within thestipulated period.11

Condition no. 12 did not provide that the ownership over the leasehold ri*hts wouldauto'aticall$ pass to DB upon CBA7s failure to pa$ the loan on ti'e. 9t 'erel$provided for the appoint'ent of DB as attorne$-in-fact with authorit$, a'on* otherthin*s, to sell or otherwise dispose of the said real ri*hts, in case of default 4$CBA, and to appl$ the proceeds to the pa$'ent of the loan. +his provision is astandard condition in 'ort*a*e contracts and is in confor'it$ with Article 2)! of

the Civil Code, which authori3es the 'ort*a*ee to foreclose the 'ort*a*e andalienate the 'ort*a*ed propert$ for the pa$'ent of the principal o4li*ation.

DB, however, eceeded the authorit$ vested 4$ condition no. 12 of the deed ofassi*n'ent. As ad'itted 4$ it durin* the pre-trial, it had without foreclosure

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proceedin*s, whether :udicial or etra:udicial, . . . appropriatedthe leaseholdri*hts of plaintiff E$dia Cu4a over the fishpond in uestion. 9ts contention that itli'ited itself to 'ere ad'inistration 4$ postin* careta8ers is further 4elied 4$ thedeed of conditional sale it eecuted in favor of CBA. +he deed stated

@endor DB by &irtue of a deed ofassignmenteecuted in its favor 4$ the herein vendees Cu4aspouses the for'er ac'uired all the right and interestof thelatter over the a4ove-descri4ed propert$?

+he titleto the real estate propert$ sic and all i'prove'entsthereon shall remain in the name of the endoruntil after thepurchase price, advances and interest shall have 4een full$ paid./'phasis supplied0.

9t is o4vious fro' the a4ove-uoted para*raphs that DB had appropriated andta8en ownership of CBA7s leasehold ri*hts 'erel$ on the stren*th of the deed of

assi*n'ent.

DB cannot ta8e refu*e in condition no. 12 of the deed of assi*n'ent to :ustif$ itsact of appropriatin* the leasehold ri*hts. As stated earlier, condition no. 12 did notprovide that CBA7s default would operate to vest in DB ownership of the saidri*hts. Besides, an assi*n'ent to *uarantee an o4li*ation, as in the present case,is virtuall$ a 'ort*a*e and not an absolutecon&eyance of titlewhich confersownership on the assi*nee.12

At an$ rate, DB7s act of appropriatin* CBA7s leasehold ri*hts was violative ofArticle 2)!! of the Civil Code, which for4ids a credit or fro' appropriatin*, ordisposin* of, the thin* *iven as securit$ for the pa$'ent of a de4t.

+he fact that CBA offered and a*reed to repurchase her leasehold ri*hts fro'DB did not estop her fro' uestionin* DB7s act of appropriation. stoppel isunavailin* in this case. As held 4$ this Court in so'e cases, 13estoppel cannot *ivevalidit$ to an act that is prohi4ited 4$ law or a*ainst pu4lic polic$.


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@e shall now ta8e up the issue of da'a*es.

Article 21%% provides

cept as provided 4$ law or 4$ stipulation, one is entitled to an

adeuate co'pensation onl$ for such pecuniar$ loss suffered 4$hi' as he has dul$ proved. 6uch co'pensation is referred to asactual or co'pensator$ da'a*es.

Actual or co'pensator$ da'a*es cannot 4e presu'ed, 4ut 'ust 4e proved withreasona4le de*ree of certaint$.1'A court cannot rel$ on speculations, con:ectures,or *uesswor8 as to the fact and a'ount of da'a*es, 4ut 'ust depend uponco'petent proof that the$ have 4een suffered 4$ the in:ured part$ and on the 4esto4taina4le evidence of the actual a'ount thereof.19t 'ust point out specific factswhich could afford a 4asis for 'easurin* whatever co'pensator$ or actualda'a*es are 4orne.1

9n the present case, the trial court awarded in favor of CBA 1,)",5)) as actualda'a*es consistin* of 55),))) which represented the value of the alle*ed lost

articles of CBA and 51,5)) which represented the value of the 2),))) piecesof 4an*us alle*edl$ stoc8ed in 1%% when DB first e:ected CBA fro' thefishpond and the ad:oinin* house. +his award was affir'ed 4$ the Court of

Appeals.

@e find that the alle*ed loss of personal 4elon*in*s and euip'ent was notproved 4$ clear evidence. =ther than the testi'on$ of CBA and her careta8er,there was no proof as to the eistence of those ite's 4efore DB too8 over thefishpond in uestion. As pointed out 4$ DB, there was not inventor$ of thealle*ed lost ite's 4efore the loss which is nor'al in a pro:ect which so'eti'es, ifnot 'ost often, is left to the care of other persons. Neither was a sin*le receipt orrecord of acuisition presented.

Curiousl$, in her co'plaint dated 1 #a$ 1%!5, CBA included losses of propert$as a'on* the da'a*es resultin* fro' DB7s ta8e-over of the fishpond. Fet, it wasonl$ in 6epte'4er 1%!5 when her son and a careta8er went to the fishpond andthe ad:oinin* house that she ca'e to 8now of the alle*ed loss of several articles.6uch clai' for losses of propert$, havin* 4een 'ade before8nowled*e of thealle*ed actual loss, was therefore speculative. +he alle*ed loss could have 4een a

'ere afterthou*ht or su4terfu*e to :ustif$ her clai' for actual da'a*es.

@ith re*ard to the award of 51,))) representin* the value of the alle*ed2),))) pieces of 4an*us which died when DB too8 possession of the fishpondin #arch 1%%, the sa'e was not called for. 6uch loss was not dul$ proved?4esides, the clai' therefor was dela$ed unreasona4l$. ;ro' 1%% until after thefilin* of her co'plaint in court in #a$ 1%!5, CBA did not 4rin* to the attention ofDB the alle*ed loss. 9n fact, in her letter dated 2( =cto4er 1%%, 1+she declared

1. +hat fro' ;e4ruar$ to #a$ 1%!, 9 was then seriousl$ ill in#anila and within the sa'e period 9 ne*lected the 'ana*e'entand supervision of the cultivation and harvest of the produce ofthe aforesaid fishpond there4$ resultin* to the irrepara4le loss inthe produce of the sa'e in the a'ount of a4out 5)),))).)) to'$ *reat da'a*e and pre:udice due to fraudulent acts of so'eof '$ fishpond wor8ers.

Nowhere in the said letter, which was written seven 'onths after DB too8possession of the fishpond, did CBA inti'ate that upon DB7s ta8e-over therewas a total of 2),))) pieces of 4an*us, 4ut all of which died 4ecause of DB7srepresentatives prevented her 'en fro' feedin* the fish.

+he award of actual da'a*es should, therefore, 4e struc8 down for lac8 ofsufficient 4asis.

9n view, however, of DB7s act of appropriatin* CBA7s leasehold ri*hts which wascontrar$ to law and pu4lic polic$, as well as its false representation to the then

#inistr$ of A*riculture and Natural Resources that it had foreclosed the'ort*a*e, an award of 'oral da'a*es in the a'ount of 5),))) is in orderconfor'a4l$ with Article 221%/1)0, in relation to Article 21, of the Civil Code.e'plar$ or corrective da'a*es in the a'ount of 25,))) should li8ewise 4e

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awarded 4$ wa$ of ea'ple or correction for the pu4lic *ood.20+here 4ein* anaward of ee'plar$ da'a*es, attorne$7s fees are also recovera4le. 21

@No. 2"55 is here4$ R>R6D, ecept as to the award of 5),))) as 'oralda'a*es, which is here4$ sustained. +he 1 &anuar$ 1%%) Decision of theRe*ional +rial Court of an*asinan, Branch 5(, in Civil Case No. A-15( is#=D9;9D settin* aside the findin* that condition no. 12 of the deed ofassi*n'ent constitutedpactum commissorium and the award of actual da'a*es?and 4$ reducin* the a'ounts of 'oral da'a*es fro' 1)),))) to 5),)))? theee'plar$ da'a*es, fro' 5),))) to 25,)))? and the attorne$7s fees, fro'1)),))) to 2),))). +he Develop'ent Ban8 of the hilippines is here4$ ordered

to render an accountin* of the inco'e derived fro' the operation of the fishpond inuestion.

Eet this case 4e R#ANDD to the trial court for the reception of the inco'estate'ent of DB, as well as the state'ent of the account of E$dia . Cu4a, and forthe deter'ination of each part$7s financial o4li*ation to one another.

6= =RDRD.

28

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