G.R. No.

118375

October 3, 2003

CELESTINA T. NAGUIAT, petitioner, vs. COURT OF APPEALS and

AURORA QUEAO, respondents.
TINGA, J.:
Before us is a Petition for Review on Certiorari under Rule 45, assailing the
decision of the Sixteenth Division of the respondent Court of Appeals
promulgated on 21 December 19941, which affirmed in toto the decision
handed down by the Regional Trial Court (RTC) of Pasay City.2
The case arose when on 11 August 1981, private respondent Aurora Queao
(Queao) filed a complaint before the Pasay City RTC for cancellation of a
Real Estate Mortgage she had entered into with petitioner Celestina Naguiat
(Naguiat). The RTC rendered a decision, declaring the questioned Real
Estate Mortgage void, which Naguiat appealed to the Court of Appeals. After
the Court of Appeals upheld the RTC decision, Naguiat instituted the present
petition.1vvphi1.nt
The operative facts follow:
Queao applied with Naguiat for a loan in the amount of Two Hundred
Thousand Pesos (P200,000.00), which Naguiat granted. On 11 August 1980,
Naguiat indorsed to Queao Associated Bank Check No. 090990 (dated 11
August 1980) for the amount of Ninety Five Thousand Pesos (P95,000.00),
which was earlier issued to Naguiat by the Corporate Resources Financing
Corporation. She also issued her own Filmanbank Check No. 065314, to the
order of Queao, also dated 11 August 1980 and for the amount of Ninety
Five Thousand Pesos (P95,000.00). The proceeds of these checks were to
constitute the loan granted by Naguiat to Queao. 3
To secure the loan, Queao executed a Deed of Real Estate Mortgage dated
11 August 1980 in favor of Naguiat, and surrendered to the latter the owners
duplicates of the titles covering the mortgaged properties. 4 On the same day,
the mortgage deed was notarized, and Queao issued to Naguiat a
promissory note for the amount of TWO HUNDRED THOUSAND PESOS
(P200,000.00), with interest at 12% per annum, payable on 11 September
1980.5 Queao also issued a Security Bank and Trust Company check,
postdated 11 September 1980, for the amount of TWO HUNDRED
THOUSAND PESOS (P200,000.00) and payable to the order of Naguiat.
Upon presentment on its maturity date, the Security Bank check was
dishonored for insufficiency of funds. On the following day, 12 September
1980, Queao requested Security Bank to stop payment of her postdated

check, but the bank rejected the request pursuant to its policy not to honor
such requests if the check is drawn against insufficient funds. 6
On 16 October 1980, Queao received a letter from Naguiats lawyer,
demanding settlement of the loan. Shortly thereafter, Queao and one Ruby
Ruebenfeldt (Ruebenfeldt) met with Naguiat. At the meeting, Queao told
Naguiat that she did not receive the proceeds of the loan, adding that the
checks were retained by Ruebenfeldt, who purportedly was Naguiats agent. 7
Naguiat applied for the extrajudicial foreclosure of the mortgage with the
Sheriff of Rizal Province, who then scheduled the foreclosure sale on 14
August 1981. Three days before the scheduled sale, Queao filed the case
before the Pasay City RTC,8 seeking the annulment of the mortgage deed.
The trial court eventually stopped the auction sale.9
On 8 March 1991, the RTC rendered judgment, declaring the Deed of Real
Estate Mortgage null and void, and ordering Naguiat to return to Queao the
owners duplicates of her titles to the mortgaged lots. 10 Naguiat appealed the
decision before the Court of Appeals, making no less than eleven
assignments of error. The Court of Appeals promulgated the decision now
assailed before us that affirmed in toto the RTC decision. Hence, the present
petition.
Naguiat questions the findings of facts made by the Court of Appeals,
especially on the issue of whether Queao had actually received the loan
proceeds which were supposed to be covered by the two checks Naguiat
had issued or indorsed. Naguiat claims that being a notarial instrument or
public document, the mortgage deed enjoys the presumption that the recitals
therein are true. Naguiat also questions the admissibility of various
representations and pronouncements of Ruebenfeldt, invoking the rule on
the non-binding effect of the admissions of third persons. 11
The resolution of the issues presented before this Court by Naguiat involves
the determination of facts, a function which this Court does not exercise in an
appeal by certiorari. Under Rule 45 which governs appeal by certiorari, only
questions of law may be raised 12 as the Supreme Court is not a trier of
facts.13 The resolution of factual issues is the function of lower courts, whose
findings on these matters are received with respect and are in fact generally
binding on the Supreme Court. 14 A question of law which the Court may pass
upon must not involve an examination of the probative value of the evidence
presented by the litigants. 15 There is a question of law in a given case when
the doubt or difference arises as to what the law is on a certain state of facts;
there is a question of fact when the doubt or difference arises as to the truth
or the falsehood of alleged facts.16

Surely, there are established exceptions to the rule on the conclusiveness of

the findings of facts of the lower courts. 17 But Naguiats case does not fall
under any of the exceptions. In any event, both the decisions of the appellate
and trial courts are supported by the evidence on record and the applicable
laws.
Against the common finding of the courts below, Naguiat vigorously insists
that Queao received the loan proceeds. Capitalizing on the status of the
mortgage deed as a public document, she cites the rule that a public
document enjoys the presumption of validity and truthfulness of its contents.
The Court of Appeals, however, is correct in ruling that the presumption of
truthfulness of the recitals in a public document was defeated by the clear
and convincing evidence in this case that pointed to the absence of
consideration.18 This Court has held that the presumption of truthfulness
engendered by notarized documents is rebuttable, yielding as it does to clear
and convincing evidence to the contrary, as in this case. 19
On the other hand, absolutely no evidence was submitted by Naguiat that the
checks she issued or endorsed were actually encashed or deposited. The
mere issuance of the checks did not result in the perfection of the contract of
loan. For the Civil Code provides that the delivery of bills of exchange and
mercantile documents such as checks shall produce the effect of payment
only when they have been cashed. 20 It is only after the checks have
produced the effect of payment that the contract of loan may be deemed
perfected. Art. 1934 of the Civil Code provides:
"An accepted promise to deliver something by way of commodatum or simple
loan is binding upon the parties, but the commodatum or simple loan itself
shall not be perfected until the delivery of the object of the contract."
A loan contract is a real contract, not consensual, and, as such, is perfected
only upon the delivery of the object of the contract. 21 In this case, the objects
of the contract are the loan proceeds which Queao would enjoy only upon
the encashment of the checks signed or indorsed by Naguiat. If indeed the
checks were encashed or deposited, Naguiat would have certainly presented
the corresponding documentary evidence, such as the returned checks and
the pertinent bank records. Since Naguiat presented no such proof, it follows
that the checks were not encashed or credited to Queaos
account.1awphi1.nt
Naguiat questions the admissibility of the various written representations
made by Ruebenfeldt on the ground that they could not bind her following the
res inter alia acta alteri nocere non debet rule. The Court of Appeals rejected
the argument, holding that since Ruebenfeldt was an authorized
representative or agent of Naguiat the situation falls under a recognized

exception to the rule.22 Still, Naguiat insists that Ruebenfeldt was not her
agent.
Suffice to say, however, the existence of an agency relationship between
Naguiat and Ruebenfeldt is supported by ample evidence. As correctly
pointed out by the Court of Appeals, Ruebenfeldt was not a stranger or an
unauthorized person. Naguiat instructed Ruebenfeldt to withhold from
Queao the checks she issued or indorsed to Queao, pending delivery by
the latter of additional collateral. Ruebenfeldt served as agent of Naguiat on
the loan application of Queaos friend, Marilou Farralese, and it was in
connection with that transaction that Queao came to know Naguiat. 23 It was
also Ruebenfeldt who accompanied Queao in her meeting with Naguiat and
on that occasion, on her own and without Queao asking for it, Reubenfeldt
actually drew a check for the sum ofP220,000.00 payable to Naguiat, to
cover for Queaos alleged liability to Naguiat under the loan agreement. 24
The Court of Appeals recognized the existence of an "agency by
estoppel25 citing Article 1873 of the Civil Code.26 Apparently, it considered
that at the very least, as a consequence of the interaction between Naguiat
and Ruebenfeldt, Queao got the impression that Ruebenfeldt was the agent
of Naguiat, but Naguiat did nothing to correct Queaos impression. In that
situation, the rule is clear. One who clothes another with apparent authority
as his agent, and holds him out to the public as such, cannot be permitted to
deny the authority of such person to act as his agent, to the prejudice of
innocent third parties dealing with such person in good faith, and in the
honest belief that he is what he appears to be. 27 The Court of Appeals is
correct in invoking the said rule on agency by estoppel.1awphi1.nt
More fundamentally, whatever was the true relationship between Naguiat and
Ruebenfeldt is irrelevant in the face of the fact that the checks issued or
indorsed to Queao were never encashed or deposited to her account of
Naguiat.
All told, we find no compelling reason to disturb the finding of the courts a
quo that the lender did not remit and the borrower did not receive the
proceeds of the loan. That being the case, it follows that the mortgage which
is supposed to secure the loan is null and void. The consideration of the
mortgage contract is the same as that of the principal contract from which it
receives life, and without which it cannot exist as an independent
contract.28 A mortgage contract being a mere accessory contract, its validity
would depend on the validity of the loan secured by it. 29
WHEREFORE, the petition is denied and the assailed decision is affirmed.
Costs against petitioner. SO ORDERED.

G.R. No. 96770. March 30, 1993.

HERMENEGILDO AGDEPPA (substituted by his heirs MAGDALENA S.
AGDEPPA, EMMANUEL S. AGDEPPA, NELIA A. UNISA, MARILYN A.
LEONES, EVANGELINE A. PIMENTEL, EDWIN S. AGDEPPA EDNA A.
AGDEPPA EDNA A. ABELLA, JOCELYN A. VICUNA, MA. THERESA S.
AGDEPPA and VIVIANNE S. AGDEPPA, petitioners, vs. EMILIANO IBE
(substituted by her husband FRUCTUOSO IBE and children LOLITA and
CESAR IBE), BENJAMIN IBE and FERDINAND IBE, respondents.
Cabio and Rabanes Law Offices for petitioners.
Public Attorney's Office for private respondents.
SYLLABUS
1. REMEDIAL LAW; SPECIAL CIVIL ACTION; CERTIORARI; ISSUE
LIMITED TO REVIEW OF ERRORS OF LAW. In a petition for certiorari
under Rule 45 of the Rules of Court like the instant petition, the jurisdiction of
this Court is limited to the review of errors of law.
2. ID.; EVIDENCE; CREDIBILITY; FINDINGS OF FACT OF THE COURT OF
APPEALS, GENERALLY CONCLUSIVE; EXCEPTIONS. The findings of
fact of the Court of Appeals are conclusive upon this Court (Ronquillo vs.
Court of Appeals, 195 SCRA 433 [1991]). However, there are exceptions to
this rule such as when there is a conflict between the factual findings of the
Court of Appeals and the trial court. The resolution of such conflict requires
the review of the same factual findings by this Court (Co vs. Court of
Appeals, 193 SCRA 198 [1991] citing Raneses vs. IAC, 187 SCRA 397
[1990] and Remalante vs. Tibe, 158 SCRA 138 [1988]).
3. ID.; ID.; RESIDENCE CERTIFICATE; A PUBLIC DOCUMENT. A
residence certificate, being a receipt prescribed by the government to be
issued upon receipt of money for public purposes (Moran, Comments on the
Rules of Court, Vol. 6, 1980 ed., p. 101), is a public document.
4. ID.; ID.; PROOF OF DOCUMENTS; CONTENTS OF RESIDENCE
CERTIFICATE, HOW PROVED. As such, presentation of the same
document would suffice to prove its contents. As part of the public record, it
may also be proved by the presentation of a copy attested by the officer
having legal custody of the duplicates (Sec. 25, Rule 132, Rules of Court) if,
as in this case, a certified copy of the residence certificate itself cannot be
presented. Exhibit F, upon which the trial court relied in nullifying the
questioned documents, is, as correctly pointed out by the Court of Appeals,
merely a secondary evidence. It is even based on the lost pages of an

abstract of the residence certificates issued by the municipal treasurer of

Sinait. The evidentiary value of Exh. F is therefore suspect.
5. ID.; ID.; NOTARIZED DEEDS OF CONVEYANCES, PRESUMED VALID;
PREPONDERANT EVIDENCE, NOT SUFFICIENT TO OVERCOME
PRESUMPTION. The questioned deeds of conveyances, being public
documents as they are duly notarized (Moran, Comments on the Rules of
Court, supra), therefore retain the presumption of validity in the absence of a
full, clear and convincing evidence to overcome such presumption (Favor vs.
Court of Appeals, 194 SCRA 308 [1991] citing Antonio vs. Estrella, 156
SCRA 68 [1987]). Merely preponderant evidence may not destroy such
presumption because strong evidence is required to prove a defect of a
public instrument.
6. ID.; ID.; ID.; CASE AT BAR. In the case at bar, no clear and convincing
evidence had been adduced by petitioners to impugn the validity of the
documents executed by Rosario Igarta. Consequently, the validity of the said
documents must be, as they are hereby, upheld.
DECISION
BIDIN, J p:
This is a petition for review on certiorari of the December 17,1990 decision of
the Court of Appeals affirming with modification the May 12, 1989 decision of
the Regional Trial Court of Ilocos Sur, Branch 24 at Cabugao, on the
complaint for the partition of the properties of the late Rosario Igarta.
Rosario Igarta was one of the three daughters of the deceased Joaquin
Igarta and Angela Gascon. Her two sisters were Carmen and Emiliana,
Carmen married Maximo Agdeppa and they begot Hermenegildo and Jose.
The latter died in 1954 leaving three sons named Joseph, Jefferson and
Stevenson.
Rosario's other sister Emiliana married Fructuoso Ibe. The couple had three
children: Benjamin, Lolita and Cesar.
On October 19, 1986, Rosario, an octogenarian, died single and without
issue. At that time, her nearest relatives were her sister Emiliana Ibe and her
nephew Hermenegildo Agdeppa as Carmen, the latter's mother, had
predeceased Rosario. All the properties of Rosario were in the possession of
the family of her sister Emiliana Ibe to the exclusion of the heirs of her other
sister, Carmen. From time to time, however, Hermenegildo would got a share
from the produce of the properties.

Hermenegildo thus expressed his desire to partition Rosario's estate in

accordance with law but the Ibes adamantly objected. Hence, on January 27,
1987, Hermenegildo, together with the sons of his deceased brother Jose
named Joseph, Jefferson and Stevenson Agdeppa, filed in the Regional Trial
Court of Ilocos Sur, Branch 24 at Cabugan, a complaint against Emiliana Ibe,
assisted by her husband Fructuoso Ibe, Benjamin Ibe and Ferdinand Ibe
(Benjamin's son), for partition (Civil Case No. 300- KC) of Rosario's
properties.

Parcels I, II, IV, V, VII and VIII were all declared in the name of Rosario Igarta
for tax purposes. Parcel III was declared in the names of Rosario Igarta and
Emiliana Igarta, Parcel IX in the names of Rosario, Higino and Fernando
Igarta while Parcel X was in the name of Joaquin Igarta (Record, pp. 23-A
and 23-B).
Subsequently, the plaintiffs filed a supplemental pleading enumerating the
following properties which are also all located in Sinait, Ilocos Sur as
included in the estate of Rosario Igarta:

The complaint enumerated the following properties which are located in

different barangays of Sinait, Ilocos Sur as subjects of the complaint for
partition:

(a) Cornland in Cortin, with an area of 1168 square meters and assessed at
P230.00

(1) Parcel I, an unirrigated riceland and forest land in Balingasa with an area
of 7,750 square meters and assessed at P780.00;

(b) Riceland in Sitio, with an area of 3740 square meters and assessed at
Pl,050.00;

(2) Parcel II, an irrigated riceland in Cadanglaan, with an area of 1,305

square meters and assessed at P470.00;

(c) Cornland in Teppeng, with an area of 6023 square meters and assessed
at P1,200.00;

(3) Parcel III, an unirrigated riceland at Zapat with an area of 594 square
meters and assessed at P170.00;

(d) Riceland in Masadag, with an area of 578 square meters and assessed at
P160.00

(4) Parcel IV, an unirrigated riceland in Paratong with an area of 2,037

square meters and assessed at P570.00;

(e) Riceland in Masadag, with an area of 1011 square meters and assessed
at P280.00;

(5) Parcel V, a residential land in the poblacion (Namnama) with an area of

131 square meters and assessed at P1,180.00;

(f) Riceland in Masadag, with an area of 578 square meters and assessed at
P160.00;

(6) Parcel VI, an unirrigated riceland, tobacco land and forest land in Cotin,
with an area of 36,271 and assessed at P4,540.00;

(g) Riceland in Nagbalioartian, with an area of 4040 square meters and

assessed at P1,460.00; and

(7) Parcel VII, a residential land in the poblacion with an area of 275 square
meters and assessed at P1,350.00;

(h) Riceland in Nagbalioartian, with an area of 1330 square meters and

assessed at P480.00.

(8) Parcel VIII, a sugarland with an area of 3,380 square meters and
assessed at P680.00;

Properties (a) to (b)were declared for tax purposes in the name of Joaquin
Igarta while properties (c) to (h) were all declared in the names of Rosario
Igarta and Emiliana Ibe.

(9) Parcel IX, an unirrigated riceland, cornland, cogonland and "bushyland"

with an area of 34,601 square meters and assessed at P6,550.00; and
(10) Parcel X, a cornland and a residential land with respective areas of
1,454 square meters and 100 square meters assessed at P470.00 and
P600.00.

In their answer to the complaint, the defendants alleged that some of the
properties had been conveyed and transferred by Rosario to different
recipients, to wit: Parcels IV, VI and XI to Benjamin Ibe; Parcels V and X to
Ferdinand Ibe and Parcel VII to Corazon Ibe Lanario. Defendants did not
object to the partition of Parcels I, II, III and VIII although they averred that
Parcel III was co-owned by Emiliana Ibe and Rosario (Ibid., pp. 8-9). With

regard to the properties enumerated in the plaintiffs' supplemental pleading,

the defendants stated that property "c" had been sold by Rosario to a third
person and that properties "a", "d", "e", "f', "g" and "h" had been acquired by
them from Rosario by virtue of a deed of conveyance. They admitted,
however, that property "b" should be partitioned (Ibid., p. 42).
In support of their claim, the defendants presented the following documents:
"(1) A deed of quitclaim and transfer of ownership executed by Rosario Igarta
on April 28, 1985 showing that Rosario conveyed and relinquished her
interests over four (4) parcels of land in favor of Benjamin Ibe and another
parcel of land in favor of Ferdinand Ibe. This appears as Document No. 384,
Page No. 78, Book No. II, Series of 1985 of the Notarial Registry of Ernesto
S. Yalao (Exh. 1).
(2) A deed of quitclaim executed by Rosario Igarta ceding all her rights to
three parcels of land to Benjamin Ibe and his children Corazon I. Lanario and
Ferdinand Ibe. This appears as Document No. 157, Page 33, Book No. I,
Series of 1985 also in the Notarial Registry of Ernesto S. Yalao, Municipal
Trial Judge and Ex-Officio Notary Public (Exh. 2).
(3) A deed of absolute sale, appearing as Document No. 380, Page 78, Book
II, Series of 1985 also of the Notarial Registry of Ernesto S. Yalao, showing
that on April 28, 1985, Rosario Igarta sold to Benjamin Ibe the same parcel of
land denominated as Parcel VI in the complaint in consideration of the
amount of P50,000.00. (Exh. 3).
Another document, denominated as a deed of quitclaim was presented as
Exh. 11 to show that on January 16, 1984, Rosario Igarta renounced all her
rights and interests over properties "d", "e", "f", "g, and "h" of the
supplemental pleading, in favor of Emiliana Ibe.
During the pendency of the case or on June 10, 1987, Emiliana Ibe died
(Record, p.33). She was therefore substituted as party-defendant by her
husband Fructuoso Ibe and their children Lolita and Cesar.
After trial on the merits, the lower court rendered its decision 1 finding Exhs.
1,2 and 3 to be defective as the residence certificate numbers appearing
therein as that of Rosario Igarta actually belonged to three other persons
indicated in the certification issued by the municipal treasurer of Sinait (Exh.
F). The said certification states that Residence Certificate No. 10529408 in
the deed of absolute sale (Exh. 3) belonged to one David Arrocena;
Residence Certificate No. 10529708 used in the deed of quitclaim and
transfer of ownership Exh. 1) was issued to Simeon Bautista, and Residence
Certificate No. 10502786 in the deed of quitclaim (Exh. 2) was issued to

Florante Rosal who, as a witness during the trial, admitted having prepared
the questioned documents notarized by Atty. Ernesto Yalao.
The trial court also noted that Exhs. 1 and 3 conveying inter vivos certain
properties of Rosario Igarta to Benjamin Ibe and his children, were executed
"at different hours of the same day." In view thereof, the said court observed
that the "situation does not seem to jibe with the ordinary and natural course
of things because if it were true, as alleged, that the grantor freely, voluntarily
and intelligently disposed of her properties in favor of the Ibes in more than
one instance on the same day, the dispositions should have been embodied
in only one document" (Decision, p. 8; Rollo, p. 28).
Another "badge of anomaly" that the trial court noted is that Parcel IV is the
subject matter of both the deed of quitclaim and transfer of ownership of April
28, 1985 (Exh. 1) and the deed of quitclaim of December 20, 1985 (Exh. 2).
These documents both have Benjamin Ibe as recipient of the subject
properties. These findings led the trial court to conclude that there is a "clear,
strong and convincing evidence to prove that the documents notarized by
Atty. Yalao do not reflect the truth" (Ibid., p. 9).
The trial court, however, found as "lawful and regular" the deed of quitclaim
executed on January 16,1984 wherein Rosario renounced all her rights over
the properties described as parcels "d", "e", "f", "g", and "h" in favor of her
sister Emiliana Ibe because even the tax declarations indicate the coownership of Rosario and Emiliana over said properties. Thus, the trial court
concluded, said properties were not part of Rosario's hereditary estate.
However, Parcel No. III, which is also declared in the names of Rosario and
Emiliana, must be deemed the former's exclusive property as it was not
included in the deed of quitclaim. The trial court disposed of the case as
follows:
"WHEREFORE, in the light of all the foregoing, judgment is hereby rendered:
"(1) Declaring all the parcels of land subject-matter of this suit, except
Parcels 'c', 'd', 'e', 'f', 'g', and 'h' under the Supplemental Pleading, as
comprising the hereditary' estate of the deceased, Rosario Igarta;
"(2) Ordering the partition of the same, except those indicated above,
between plaintiff Hermenegildo Agdeppa and defendant Benjamin Ibe, in
representation of their parents, Carmen Igarta-Agdeppa and Emiliana IgartaIbe, respectively, in equal shares;
"(3) Declaring Parcels "d", "e", "f', "g", and "h'" under the Supplemental
Pleading, as the exclusive properties of the late Emiliana Igarta-Ibe, subject

to such dispositions as the deceased owner might have made during her
lifetime;
"(4) Ordering plaintiff Hermenegildo Agdeppa and defendant Benjamin Ibe to
agree on the division of the properties subject of partition and to submit their
written agreement to the Court, for confirmation, within thirty (30) days after
the finality of this decision; otherwise, the Court shall appoint commissioners
to make the partition pursuant to Section 3, Rule 69, of the Rules of Court;
"(5) Ordering the defendants, Benjamin Ibe and Ferdinand Ibe, to render an
accounting of the fruits and income of the portions of the partible properties
that may be allotted to plaintiff Hermenegildo Agdeppa, and to vacate the
same in order that the said plaintiff may have peaceful possession thereof.
"No pronouncement as to costs, in the same manner that no damages and
attorney's fees are awarded either under the complaint or under the
counterclaim which is hereby dismissed for lack of merit.
"Let a copy of this decision be furnished the Revenue District Officer, Bureau
of Internal Revenue, Vigan, Ilocos Sur, for a determination of the tax aspect
of the case.
"SO ORDERED."
Only Hermenegildo Agdeppa appealed to the Court of Appeals as the lower
court had ruled that his co-plaintiffs, Joseph, Jefferson and Stevenson, the
sons of his brother Jose, "cannot be considered as heirs of the late Rosario
Igarta because in the collateral line, representation takes place only in favor
of the children of brothers and sisters (in this case, children of Carmen and
Emiliana) whether they be of the full or half blood" (Ibid., p. 2, Citing Art. 972,
Civil Code). While the appeal was pending resolution before the Court of
Appeals, Hermenegildo died on October 23, 1989.
On December 17, 1999, the Court of Appeals rendered its decision 2 finding
merit in the appeal. Giving full faith and credit to the documents involved, the
Court of Appeals said:
"The proof adduced by plaintiff-appellees is not sufficient to overcome the
presumption of regularity in favor of the questioned documents. Their attempt
to show that the residence certificates appearing on said documents
belonged to persons other than the late Rosario Igarta through the testimony
of Mrs. Ester T. Remos, Municipal Treasurer of Sinait, Ilocos Sur, and her
Certification to that effect dated October 15, 1988 do not impress Us. The
court a quo erred in considering said testimony and certification since they
were merely secondary evidences, and plaintiff-appellees have not laid the

basis for their presentation. The best evidence of the residence certificates
are the residence certificates themselves. in lieu thereof, certified true copies
of the residence certificates should have been presented since these are part
of the public record.
"The presumption of validity of the questioned documents have not been
overcome by the circumstances surrounding its execution. There is no
showing that fraud, force or intimidation was perpetuated on Rosario Igarta in
the preparation of the documents. Neither have plaintiff-appellees shown that
the signature of Rosario Igarta appearing on said documents was forged.
Forgery cannot be presumed. It must be proved. Faced with the fact that the
signature of Rosario Igarta on said documents appears to be genuine, the
provisions of said documents must be upheld.
'Thus, the court a quo erred in disregarding the dispositions contained in the
questioned documents and tendering the partition of the properties covered
thereby. The decision appealed from is hereby modified declaring the
aforementioned properties, Parcels IV, V, VI, VII, IX, X and one-half of Parcel
III under paragraph 5 (a) of the Complaint and Parcel 'a' under the
Supplemental Pleading, the exclusive properties of the late Emiliana IgartaIbe and therefore, not subject to partition. We note that defendant appellants
admitted the partible nature of one-half of Parcel III, and thus partition should
take place only with regard to that half" (CA Decision, pp. 8-9, Rollo, pp. 5152).
The heirs of Hermenegildo Agdeppa filed the instant petition for review on
certiorari assailing the decision of the Court of Appeals for having set aside
the findings of the lower court that the three documents which conveyed to
the respondents parcels IV, V, VI, IX and X and property "a" were irregular
and not reflective of the truth, and for excluding from Rosario Igarta's estate
Parcels IV, V, VI, VII, IX and X.
From the foregoing, the resolution of this case revolves around the issue of
the validity of the documents executed by Rosario Igarta conveying certain
properties belonging to her to the herein respondents.
In a petition for certiorari under Rule 45 of the Rules of Court like the instant
petition, the jurisdiction of this Court is limited to the review of errors of law.
The findings of fact of the Court of Appeals are conclusive upon this Court
(Ronquillo vs. Court of Appeals, 195 SCRA 433 [1991]). However, there are
exceptions to this rule such as when there is a conflict between the factual
findings of the Court of Appeals and the trial court. The resolution of such
conflict requires the review of the same factual findings by this Court (Co vs.
Court of Appeals, 193 SCRA 198 [1991] citing Raneses vs. IAC, 187 SCRA
397(1990] and Remalante vs. Tibe, 158 SCRA 138[1988]). Thus, the

divergent findings of the trial court and the Court of Appeals on the validity of
the three documents executed by Rosario Igarta in favor of Benjamin Ibe and
his children Ferdinand and Corazon, necessitate this Court's scrutiny.
The trial court's objections to the documents are based on its finding that
residence certificates of other persons were used therein by Rosario Igarta.
The plaintiffs (now appellants) tried to prove this through the rebuttal
testimony of Mrs. Ester Y. Ramos, the Municipal Treasurer of Sinait. Mrs.
Ramos admitted having signed the certification marked as Exh. F and which
shows the names of the persons to whom the residence certificates
appearing in the questioned documents were issued. According to Mrs.
Ramos, the certification was based on the abstract of residence certificates
because one of their office clerks, a certain Florida Ines, could not find the
triplicates of the residence certificates subject of her certification (TSN, April
10,1989, pp. 5-6). Mrs. Ramos had with her "the abstract where Mrs. Ines
quoted the certification, but unluckily, the data are no longer available"
meaning the pages of the abstract where the three (3) residence certificate
numbers are found had been "lost" (Ibid., pp. 8-9). Mrs. Ramos could not
explain why and how they were lost (Ibid., p. 9).
A residence certificate, being a receipt prescribed by the government to be
issued upon receipt of money for public purposes (Moran, Comments on the
Rules of Court, Vol. 6, 1980 ed., p.101), is a public document. As such,
presentation of the same document would suffice to prove its contents. As
part of the public record, it may also be proved by the presentation of a copy
attested by the officer having legal custody of the duplicates (Sec. 25, Rule
132 Rules of Court)if, as in this case, a certified copy of the residence
certificate itself cannot be presented. Exhibit F, upon which the trial court
relied in nullifying the questioned documents, is, as correctly pointed out by
the Court of Appeals, merely a secondary evidence. It is even based on the
lost pages of an abstract of the residence certificates issued by the municipal
treasurer of Sinait. The evidentiary value of Exh. F. is therefore suspect.
The questioned deeds, being public documents as they are duly notarized
(Moran, Comments on the Rules of Court, supra), therefore retain the
presumption of validity in the absence of a full, clear and convincing evidence
to overcome such presumption (Favor vs. Court of Appeals, 194 SCRA 308
[1991] citing Antonio vs. Estrella, 156 SCRA 68 [1987]). Merely preponderant
evidence may not destroy such presumption because strong evidence is
required to prove a defect of a public instrument.
The petitioners never questioned the authenticity of the signature of Rosario
Igarta on the documents. Their due execution has been amply proved below.
The testimony of Florante Rosal who prepared them, was corroborated by
Atty. Ernesto Yalao who notarized all three documents. Yalao, who was a
citizens' attorney and who had become a municipal trial court judge by the

time he notarized the December 20,1985 document, testified that while he

noticed that Rosario Igurta was a "little bit sickly" and thin when she signed
the documents in his presence, she was mentally okay (TSN, September 13,
1988, p.5).
Even the nagging doubts nurtured by the trial court appear more apparent
than real upon a close examination of the testimonial evidence presented
before it. Thus, the execution of two documents on the same day was
explained by defense witness Florante Rosal. According to Rosal, who was
an employee of the Citizens Legal Assistance Office, in April, 1985, Rosario
Igarta requested him to accompany her to a lawyer "for purpose of drawing
up a document." He accompanied her to the house of Atty. Ernesto Yalao
who was then a citizens' attorney. Atty. Yalao, after having been informed of
the purpose of Rosario Igarta's visit, told Rosal to prepare the documents
promising that he would go over them later. Thus, Rosal who appears to
have previous experience in drafting documents, prepared the document in
his house (TSN, July 19, 1988, pp. 1315).
Rosario Igarta then went to Rosal's house and, after the document was
prepared, they went back together to the house of Atty. Yalao. The latter
examined the document and asked Rosario if its contents were alright.
Rosario, a former school teacher, said that the document was indeed alright
and signed it. Rosal and a visitor of Atty. Yalao signed as witnesses in the
document which, although written in English was understood by Rosario as
she was a former teacher (Ibid, pp. 15-19).
According to Rosal, after Atty. Yalao had delivered Exh. 1 to Rosario, the
latter remarked that another document had to be prepared otherwise
Benjamin Ibe could not give her any cash. So, in the afternoon, Rosal
prepared Exh. 3 (Ibid., pp. 23-24) and it was notarized on the same day by
Atty. Yalao. While on that day Rosario did not receive the consideration of the
sale in Exh. 3 from Benjamin Ibe, the latter actually paid Rosario the
P50,000.00 consideration of the sale at a much later date as the money had
to come from Benjamin's younger brother in America (TSN, November 17,
1988, pp. 7-9).
With regard to the discrepancy in the residence certificate numbers, Rosal
testified that Rosario did not show him her residence certificate but she only
gave him a piece of paper containing its number (Ibid, p. 11). On why the two
documents executed on April 28, 1985 bear two different residence certificate
numbers both purportedly belonging to Rosario Igarta, Rosal admitted that
he "might have committed a mistake" (Ibid., p. 26). This narration of facts had
not been rebutted by the plaintiffs (now appellants) by evidence aside from
Exh. F.

In the same manner, the deed of quitclaim and transfer of ownership of April
28,1985 and the deed of quitclaim of December 20, 1985 may not be nullified
just because they refer to the same Parcel IV with Benjamin Ibe as the
recipient in both instances. That Rosario Igarta conveyed the same property
to Benjamin Ibe in two different documents only shows that she favored
Benjamin over Hermenegildo. There is unrebutted evidence that it was
Benjamin who took care of Rosario. While Rosario Igarta had a house of her
own, Benjamin would fetch her in the afternoon and accompany her back to
the house in the morning from his own residence (TSN, November 17, 1988,
pp. 1-2). Further, according to the deputy public land inspector who testified,
Rosario Igarta even tried to delete the name of Hermenegildo from the space
indicating her nearest relatives in her application for free patent over Lot
9796 (Exh. 8-a) because Rosario believed that Hermenegildo had "another
woman in his life" (TSN, October 13, 1988, p. 9).
In Gevero vs. Intermediate Appellate Court (189 SCRA 201 [1990]), this court
held:
". . . it has long been settled that a public document executed and attested
through the intervention of the notary public is evidence of the facts in clear,
unequivocal manner therein expressed. It has the presumption of regularity
and to contradict all these, evidence must be clear, convincing and more than
merely preponderant (Rebuldela v. I.A.C. 155 SCRA 520-521 [1987]).
Forgery cannot be presumed, it must be proven (Siasat v. IAC No. 67889,
October 10, 1985). Likewise, petitioners' allegation of absence of
consideration of the deed was not substantiated. Under Art. 1354 of the Civil
Code, consideration is presumed unless the contrary is proven."
Similarly, in the case at bar, no clear and convincing evidence had been
adduced by petitioners to impugn the validity of the documents executed by
Rosario Igarta. Consequently, the validity of the said documents must be, as
they are hereby, upheld.
WHEREFORE, the decision of the Court of Appeals dated December 17,
1990 is Affirmed in toto.
SO ORDERED.
Feliciano, Davide

G.R. No. 85909 February 9, 1993

TERESITA C. GERALES, CESAR DELA FUENTE, MARCELA GOLDING,
MARIA
VERGARA
and
PERLITO
TRIGERO, petitioners,
vs.
HON. COURT OF APPEALS, ENRIQUE E. PIMENTEL and LETICIA
FIDELDIA, respondents.

On April 23, 1985, or after the filing of Civil Case No. 5210 but before the
service of summons upon the defendants (herein private respondents), the
claims of the offended parties (plaintiffs in Civil Case No. 5210) were
amicably settled, to wit:
Cesar Dela Fuente received 15,016.79
Marcela Golding received 10,171.75
Maria Vergara received 7,674.96

BIDIN, J.:
Teresita Gerales received 15,000.00
This is a petition for review on certiorari which seeks to reverse and set
aside: (1) the decision of the Court of Appeals promulgated on September
26, 1988 in C.A.-G.R. S.P. No. 11811 entitled "Enrique E. Pimentel and
Leticia T. Fideldia v. Hon. Ruben T. Reyes, as Regional Trial Court Judge,
Branch 1, Balanga, Bataan and Teresita C. Gerales, Cesar Dela Fuente,
Marcela Gelding, Maria Vergara, and Perlito Trigero" dismissing Civil Case.
No. 5210 and reversing the decision of the trial court and (2) the resolution of
the Court of Appeals promulgated on November 15, 1988 denying the Motion
for Reconsideration.
The undisputed facts of the case are as follows:
On July 9, 1984, a car owned by Leticia Fideldia, then driven by Enrique E.
Pimentel, hit another car, owned by Teresita Gerales then driven by Cesar
Dela Fuente, with Marcela Golding, Maria Vergara and Perlito Trigero as
passengers at San Jose, San Fernando, Pampanga.
On August 17, 1984, private respondent Enrique E. Pimentel was charged
before the Municipal Trial Court of San Fernando, Pampanga with the crime
of Damage to Property with Multiple Physical Injuries thru Reckless
Imprudence, docketed as Criminal Case No. 84-9302 (Rollo, p. 18, Annex
"A", p. 1).
During the pendency of the criminal case, particularly on January 11, 1985,
private offended parties (now petitioners) Maria Vergara, Perlito Trigero,
Marcela del Rosario Golding, Cesar Dela Fuente, and Teresita Gerales filed
a civil case for Damages in the total amount of P400,000.00 docketed as
Civil Case No. 5210, in the Regional Trial Court of Bataan against Enrique E.
Pimentel and Leticia Fideldia. This civil case is based on the same incident
for which private respondent, Enrique E. Pimentel was charged in Criminal
Case No. 84-9302 (Rollo, p. 19, Annex "A", p. 2).

Perlito Trigero received 2,136.50

as full and final settlement of all their claims, both civil and criminal,
in connection with the vehicular accident that occurred on July 9,
1984.
These offended parties (now petitioners), whose claims were amicably
settled, individually executed and signed a "Release Of Claim," the contents
of which substantially reads as follows:
For the sole consideration of . . ., the receipt whereof is
hereby acknowledged, (I), (We) . . . for myself, my heirs,
representatives, successors and assigns do hereby forever
release, discharge and absolve Atty. Enrique E. Pimentel,
Leticia Fideldia & F.E. Zuellig (M), Inc. of and from all
actions, claims and demands whatsoever that now exist or
may hereafter develop and particularly on account of all
known, unknown and unanticipated injuries and damages
arising out of and in consequence of the accident/illness
occurring on or about July 9, 1984 at about 6:00 P.M. along
the North Expressway, San Fernando, Pampanga when I
sustained serious physical injuries while riding as a
passenger of a Toyota Corona Sedan with Plate No. CFR447 was hit and bumped by a Mit. Lancer Sedan with Plate
No. NLL-979 driven by Atty. Enrique E. Pimentel and owned
by Leticia Fideldia.
The undersigned furthermore agrees that the foregoing sum
is voluntarily accepted as full and final compromise,
adjustment and settlement of all claims with respect to both
civil and/or criminal actions that may have been filed in
connection with the above accident; that the payment of said

amount shall never be construed as an admission of liability

by the party/parties hereby released. (Rollo, Annexes "I" to
"I-C", pp. 79-82; emphasis supplied).
A Motion to Dismiss the criminal case was filed by Atty. Jaime C. Bueza,
counsel of the offended parties, with the conformity of the Prosecuting Fiscal,
based on the Affidavits of Desistance executed by the offended parties.
On April 23, 1985, the Municipal Trial Court of San Fernando, Pampanga,
Branch IV, acting on the Motion to Dismiss, accordingly dismissed Criminal
Case No. 84-9302.
After the dismissal of the criminal charge against private respondent Enrique
E. Pimentel, the latter and respondent Leticia Fideldia were served on July
30, 1985 with summons and a copy of the complaint in Civil Case No. 5210
(Rollo, p. 19, Annex "A", p. 3).
On August 14, 1985, respondent Enrique E. Pimentel wrote a letter
addressed to the Clerk of Court of the Regional Trial Court of Bataan, which
reads:
Please (sic) refer to summons Civil Case No. 5210 Balanga,
Bataan dated July 1, 1985 which was received on July 30,
1985.
In relation thereto, is Criminal Case No. 84-9302 wherein a
Motion to Dismiss was submitted on April 23, 1985, 9:30
a.m. thus the affected parties mutually settled the case
before the Municipal Trial Court of Pampanga, Branch IV.
In view thereof, may we request that said settlement be
considered. (Annex "G")

Should plaintiffs fail to comply herewith, the Court shall

consider that they have no more interest in the prosecution
of this action, especially considering that according to a letter
of defendant Enrique E. Pimentel dated August 14, 1985, a
motion to dismiss was filed by plaintiffs' counsel in the
related criminal case (C.C. Case No. 9302) before the
Municipal Trial Court of San Fernando, Pampanga, Branch
IV. (Annex "H")
On motion of petitioners, the trial court issued an order declaring
respondents Enrique E. Pimentel and Leticia Fideldia in default and forthwith
set the case for presentation of petitioners' evidence ex-parte on October 8,
1985. A copy of said order was received by private respondents on
September 18, 1985.
Judgment was rendered in favor of the petitioners, ordering respondents
Enrique E. Pimentel and Leticia T. Fideldia, to pay jointly and severally the
following:
(1) To Cesar Dela Fuente, actual damages in the amount of
P55,771.05;
(2) To Marcela Golding, actual damages in the amount of
P30,101.55;
(3) To Maria Vergara, actual damages in the amount of
P21,142.00;
(4) To Teresita Gerales, compensatory damages in the
amount of P50,000.00;
(5) No further award is due Perlito Trigero as he had been
fully compensated;

On August 21, 1985, or after receipt of respondent Pimentel's letter, the

Presiding Judge of Branch 1 of the Regional Trial Court of Balanga, Bataan
issued an order in Civil Case No. 5210, to wit:

(6) To all plaintiffs, attorney's fees in the total amount of

P50,000.00 plus costs of suit.

It appearing that defendants Enrique E. Pimentel and Leticia

T. Fideldia were served with summons and copies of the
complaint on July 30, 1985 at their Quezon City residence
and they have not filed their answer up to now, plaintiffs are
hereby ordered to file the necessary motion within (5) days
from receipt of this order.

Copy of the said judgment was received by private respondents on February

12, 1986. On March 10, 1986, private respondents filed a Petition for Relief
from Judgment. On February 20, 1987, the trial judge denied the Petition for
Relief from Judgment. A writ of execution was issued on March 6, 1987
(Rollo, p. 20, Annex "A", p. 3). Private respondents received a copy of the
order of denial on March 26, 1987 (Rollo, p. 20, Annex "A", p. 3).

Private respondents filed a Petition for Certiorari, Mandamus and Prohibition

with Prayer for Writ of Preliminary Injunction and Restraining Order with the
Court of Appeals to set aside the aforementioned judgment and orders of the
Regional Trial Court in Civil Case No. 5210, alleging among others that the
trial court acted without or in excess of its jurisdiction and with grave abuse of
discretion amounting to lack of jurisdiction in rendering a judgment by default
against private respondents, in denying the petition for relief from judgment
and in issuing a writ of execution.
The Court of Appeals, citing the case of Ledesma v. Avelino (82 SCRA 396
[1978]), reversed the decision of the trial court, the dispositive portion of
which reads as follows:
Following the action of the Supreme Court in said case and
considering that the only defense of the petitioners is the
release of claims signed by all the respondents which
released all the petitioners from all actions, claims and
demands whatsoever that now may exist or may hereafter
develop and particularly on all known and unknown and
unanticipated injuries and damages arising out of and in
consequence of the accident, a new decision is entered
dismissing the complaint against petitioners (Rollo, p. 18,
Annex "A", p. 6).
The Motion for Reconsideration filed by petitioners was denied in a resolution
promulgated on November 15, 1988. (Rollo, p. 25, Annex "B", p. 2)
Hence, this petition.
In a resolution dated March 1, 1989, this Court gave due course to the
petition and required both parties to file their respective memoranda.
Petitioners raise the issue of whether or not the respondent Court of Appeals
committed reversible error in deciding private respondents' petition on the
merits, thereby reversing the decision of the trial court and disregarding
petitioners' evidence.
Petitioners claim that the respondent Court of Appeals should have denied
and dismissed private respondents' petition for certiorari as there was no
error of jurisdiction correctible by certiorari under Rule 65 of the Rules of
Court. They insist that the court a quo had jurisdiction over the subject matter
of the case and over the persons of the private respondents when the latter
were duly served with summons on July 30, 1985. Hence, whatever error
may have been committed in the case was not an error of jurisdiction
correctible by certiorari. They claim that the respondent court, in dismissing

the civil case for damages on the sole basis of the "releases of claims," had
denied them procedural due process as they were not afforded the
opportunity to refute, assail, and overcome their/probative value (Rollo, pp.
10-12).
On the other hand, private respondents maintain that the trial court
committed grave abuse of discretion in not considering their letter dated
August 14, 1985 as their responsive pleading and in consequently declaring
them in default; in denying in its order dated February 20, 1987 their petition
for relief from judgment; and in issuing a writ of execution on March 6, 1987,
even before they received a copy of the order denying their petition for relief
from judgment.
An examination of the records of the case shows that the trial court, after
taking judicial notice of the letter of private respondents informing the court
that the parties have mutually settled the case, and that a Motion to Dismiss
was even filed by petitioners' counsel in the related criminal case, altogether
did not consider nor treat it as private respondents' responsive pleading to
the complaint for damages. In fact, on motion of petitioners, the private
respondents were declared in default and accordingly, a judgment by default
was rendered against them (private respondents).
Under the factual setting of the case, the trial court ought to have considered
the letter of respondent Enrique E. Pimentel as a responsive pleading even if
it lacks the formalities required by law. Undoubtedly, the letter made mention
of the fact that the parties mutually settled the case, which allegation may be
deemed as an averment of an affirmative defense and if proven
in a preliminary hearing pursuant to Section 5, Rule l6, would constitute a
meritorious defense of private respondents which would bar petitioners from
recovering damages from the former as the claim or demand set forth in
plaintiffs' (petitioners') pleading had been paid or extinguished.
Pleadings as well as remedial laws should be liberally construed in order that
the litigant may have ample opportunity to prove their respective claims, and
possible denial of substantial justice, due to technicalities, may be avoided
(Cabutin, et al. v. Amacio, 170 SCRA 750 [1989], citing Quibuyen v. CA, 9
SCRA 741 [1963]). Litigations should as much as possible be decided on the
merits and not on technicality (Fonseca v. Court of Appeals, 165 SCRA 40
[1988], citing A-One Feeds, Inc. v. Court of Appeals, 100 SCRA 590, 594
[1980]). Technicality, when it deserts its proper office as an aid to justice and
becomes its great hindrance and chief enemy, deserves scant consideration
from courts (American Express International, Inc. v. Intermediate Appellate
Court, 167 SCRA 209 [1988] citing Alonso v. Villamor, 16 Phil. 315 (1910]),
and because there is no vested right in technicalities, in meritorious crises, a
liberal, not literal interpretation of the rules becomes imperative and
technicalities should not be resorted to in derogation of the intent and

purpose of the rules, which is the proper and just determination of a litigation
(Fonseca v. C.A., supra.).
In addition thereto, the trial court's denial of private respondents' petition for
relief from judgment, inspite of the fact that they raise the meritorious
defense of full settlement and/or payment of the claim is improper. The trial
judge should have granted the aforesaid petition as it would ultimately afford
both parties the opportunity to prove their respective claims by fully and fairly
laying before the Court, the facts in issue and seek justice upon the merits
thereof and that possible denial of justice due to legal technicalities may be
avoided.
The courts should be liberal in setting aside orders of default for default
judgment is frowned upon, and unless it clearly appears that the reopening of
the case is intended for delay, it is best that the trial courts give both parties
every chance to fight their case fairly and in the open, without resort to
technicality (Zenith Insurance Corporation v. Hon. Fidel Purisima, 114 SCRA
62 [1982], citing Pineda v. Court of Appeals, 67 SCRA 229 [1975]).
In the light of the foregoing, it is evident that indeed the trial court committed
grave abuse of discretion in declaring private respondents in default, and in
denying their petition for relief from judgment. Consequently, the validity of
the order of default and all the proceedings that transpired subsequent
thereto cannot be sustained.
A petition for Certiorari lies when any tribunal, board or officer exercising
judicial functions, has acted without or in excess of its or his jurisdiction, or
with grave abuse of discretion and there is no appeal, nor any plain, speedy,
and adequate remedy in the ordinary course of law (Section I of Rule 65 of
the Rules of Court). It is the inadequacy not the mere absence of all other
legal remedies and the danger of failure of justice without/such writ that
usually determines the propriety of certiorari(Philippine National Bank v.
Puno, 170 SCRA 229 [1989] citing Jaca v. Davao Lumber Co., 113 SCRA
107 (1982]).
Undoubtedly, Certiorari is a more speedy and efficacious remedy to have the
judgment by default be set aside as a nullity where a party has been illegally
declared in default. It will be noted that the trial court had already issued a
writ of execution even before respondents received a copy of the order
denying their petition for relief from judgment (Rollo, p. 20). Clearly therefore
even if appeal was available to private respondents, it was no longer speedy
and adequate.
Petitioners contend that respondent Court of Appeals, in dismissing the
complaint (Civil Case No. 5210) against private respondents on the basis

solely of the releases of claims, had denied them their right to procedural due
process. They claim that the settlements contained in the releases of claims
were not true; that patent irregularities attended their execution as petitioners
executed them because private respondents led them to believe that what
they were receiving were partial settlements only; and that the said
documents were more of a receipt rather than any document (Rollo, p. 12).
Conversely, private respondents contend that the releases of claims
executed and signed by petitioners show that full settlements were received
by the latter from private respondents and their insurer, F.E. Zuellig, Inc.; that
when petitioners executed these documents, they were assisted by their very
own counsel, Atty. Jaime C. Bueza; that the same was duly notarized and
that petitioners cannot now impugn the veracity of the documents upon the
self-serving argument that they were misled by their own counsel into
believing that the settlements were but partial.
It should be borne in mind that the petitioners do not deny at all their having
executed the releases of claims which are in the nature of quitclaims. Their
allegation that the execution thereof was attended by false pretenses is selfserving. Contrary thereto, petitioners, in executing these releases of claims,
were in fact assisted by their counsel, Atty. Bueza, and the document was
even notarized.
A notarized instrument is admissible in evidence without further proof of its
due execution and is conclusive as to the truthfulness of its contents,
although not absolute but rebuttable by clear and convincing evidence to the
contrary (Baranda v. Baranda, 150 SCRA 59 [1987], citing Antillon v.
Barcelon, 37 Phil. 148 [1917] and Mendezona v. Phil Sugar Estate
Development Corporation. 41 Phil. 475 [1921]). A public document executed
and attested through the intervention of the notary public is evidence of the
facts in clear, unequivocal manner therein expressed. It has in its favor the
presumption of regularity. To contradict all these, there must be evidence that
is clear and convincing more than merely preponderant (Collantes v.
Capuno, 123 SCRA 652 [1983]).
Petitioners can not now question the validity and/or veracity of the releases
of claims on the allegation that the same were executed on their belief that
what they received were only partial settlements and that they could not have
released them "forever from all actions arising from such vehicular accident."
If they did not release their claims against, respondents forever, why did they
cause the dismissal of the criminal case against Enrique Pimentel?
In essence, petitioners are varying the terms embodied in the releases of
claims, which is proscribed by Section 7 of Rule 130 of the Rules of Court. It
is a well-settled principle of law that proof of verbal agreements offered to

vary the terms of written agreements is inadmissible under the Parol

Evidence Rule (Continental Airlines Inc. v. Santiago, 172 SCRA 490 [1989]),
and while Parol Evidence is admissible in a variety of ways to explain the
meaning of written contracts, it cannot serve the purpose of incorporating into
the contract additional contemporaneous conditions which are not mentioned
at all in the writing, unless there has been fraud or mistake (Tupue v. Urgel,
161 SCRA 417 [1988] citing Yu Tek & Co. v. Gonzalez, 29 Phil. 384 [1915]).
It is edgy to see that the exceptions to the rule do not apply in the instant
case. The wordings of the "releases of claims" are clear, simple and
unambiguous and there is no showing of any fraud, mistake or failure to
express the true agreement of the parties. The second paragraph of the
releases of claims executed by petitioners provides:
the undersigned agrees that the foregoing sum is voluntarily
accepted as full and final compromise, adjustments and
settlement of claims with respect to both civil and/or criminal
actions that may have been filed in connection with the
above accident; . . . . (Rollo, Annexes "I" to "I-C", pp. 79-82,
emphasis supplied).
When petitioners executed the releases of claims on April 23, 1986, Civil
Case No. 5210 for damages had already been filed on January 11, 1985 by
petitioners as plaintiffs against private respondents as defendants. With the
subsequent execution of the releases of claims by petitioners, all claims and
demands of petitioners as plaintiffs in Civil Case No. 5210 which "had been
filed in connection with the above (vehicular) accident," were fully and finally
compromised, settled and forever released as stipulated in the releases of
claims and agreed upon by petitioners.
There could have been no fraud or mistake in the execution of the "releases
of claims" because the petitioners were assisted by their counsel in the
execution thereof, who affixed his signature on each and every document as
witness thereto, which documents ("releases of claims") were acknowledged
before a notary public.
While strictly speaking, a remand of the case to the trial court to enable
petitioners to present their evidence would be the normal course to follow
before a decision is rendered, it has been held that such time-consuming
procedure may be properly dispensed with for being unnecessary where the
Supreme Court could resolve the dispute on the basis of the records before it
(Quisumbing v. CA, SCRA 703 [1983]; Board of Liquidators v. Zulueta, 115
SCRA 549 [1982]). The only defense of the private respondents is the
"releases of claims" executed by the petitioners, the existence of which is
beyond dispute and is sufficient basis for rendering a decision on the

merits, i.e., the dismissal of petitioners' complaint on the ground that the
claim or demand of petitioners as plaintiffs had been paid or released.
WHEREFORE, the petition is hereby DISMISSED and the decision of the
Court of Appeals dismissing the complaint for damages against private
respondents is hereby AFFIRMED.
SO ORDERED.

G.R. No. L-49101 October 24, 1983

RAOUL S.V. BONNEVIE and HONESTO V. BONNEVIE, petitioners,
vs.
THE HONORABLE COURT OF APPEALS and THE PHILIPPINE BANK OF
COMMERCE, respondents.
GUERRERO, J:
Petition for review on certiorari seeking the reversal of the decision of the
defunct Court of Appeals, now Intermediate Appellate Court, in CA-G.R. No.
61193-R, entitled "Honesto Bonnevie vs. Philippine Bank of Commerce, et
al.," promulgated August 11, 1978 1 as well as the Resolution denying the
motion for reconsideration.

property in question remained registered in the name of Jose M. Lozano in

the land records of Rizal and there was no entry, notation or indication of the
alleged sale to plaintiff; (g) that it is an established banking practice that
payments against accounts need not be personally made by the debtor
himself; and (h) that it is not true that the mortgage, at the time of its
execution and registration, was without consideration as alleged because the
execution and registration of the securing mortgage, the signing and delivery
of the promissory note and the disbursement of the proceeds of the loan are
mere implementation of the basic consensual contract of loan.
After petitioner Honesto V. Bonnevie had rested his case, petitioner Raoul SV
Bonnevie filed a motion for intervention. The intervention was premised on
the Deed of Assignment executed by petitioner Honesto Bonnevie in favor of
petitioner Raoul SV Bonnevie covering the rights and interests of petitioner
Honesto Bonnevie over the subject property. The intervention was ultimately
granted in order that all issues be resolved in one proceeding to avoid
multiplicity of suits.

The complaint filed on January 26, 1971 by petitioner Honesto Bonnevie with
the Court of First Instance of Rizal against respondent Philippine Bank of
Commerce sought the annulment of the Deed of Mortgage dated December
6, 1966 executed in favor of the Philippine Bank of Commerce by the
spouses Jose M. Lozano and Josefa P. Lozano as well as the extrajudicial
foreclosure made on September 4, 1968. It alleged among others that (a) the
Deed of Mortgage lacks consideration and (b) the mortgage was executed by
one who was not the owner of the mortgaged property. It further alleged that
the property in question was foreclosed pursuant to Act No. 3135 as
amended, without, however, complying with the condition imposed for a valid
foreclosure. Granting the validity of the mortgage and the extrajudicial
foreclosure, it finally alleged that respondent Bank should have accepted
petitioner's offer to redeem the property under the principle of equity said
justice.

On March 29, 1976, the lower court rendered its decision, the dispositive
portion of which reads as follows:

On the other hand, the answer of defendant Bank, now private respondent
herein, specifically denied most of the allegations in the complaint and raised
the following affirmative defenses: (a) that the defendant has not given its
consent, much less the requisite written consent, to the sale of the
mortgaged property to plaintiff and the assumption by the latter of the loan
secured thereby; (b) that the demand letters and notice of foreclosure were
sent to Jose Lozano at his address; (c) that it was notified for the first time
about the alleged sale after it had foreclosed the Lozano mortgage; (d) that
the law on contracts requires defendant's consent before Jose Lozano can
be released from his bilateral agreement with the former and doubly so,
before plaintiff may be substituted for Jose Lozano and Alfonso Lim; (e) that
the loan of P75,000.00 which was secured by mortgage, after two renewals
remain unpaid despite countless reminders and demands; of that the

2. The lower court erred in not finding that the auction sale
decide on August 19, 1968 was null and void;

WHEREFORE, all the foregoing premises considered,

judgment is hereby rendered dismissing the complaint with
costs against the plaintiff and the intervenor.
After the motion for reconsideration of the lower court's decision was denied,
petitioners appealed to respondent Court of Appeals assigning the following
errors:
1. The lower court erred in not finding that the real estate
mortgage executed by Jose Lozano was null and void;

3. The lower court erred in not allowing the plaintiff and the
intervenor to redeem the property;
4. The lower court erred in not finding that the defendant
acted in bad faith; and
5. The lower court erred in dismissing the complaint.

On August 11, 1978, the respondent court promulgated its decision affirming
the decision of the lower court, and on October 3. 1978 denied the motion for
reconsideration. Hence, the present petition for review.

Whether the real estate mortgage executed by the spouses

Lozano in favor of respondent bank was validly and legally
executed.

The factual findings of respondent Court of Appeals being conclusive upon

this Court, We hereby adopt the facts found the trial court and found by the
Court of Appeals to be consistent with the evidence adduced during trial, to
wit:

II

It is not disputed that spouses Jose M. Lozano and Josefa P.

Lozano were the owners of the property which they
mortgaged on December 6, 1966, to secure the payment of
the loan in the principal amount of P75,000.00 they were
about to obtain from defendant-appellee Philippine Bank of
Commerce; that on December 8, 1966, executed in favor of
plaintiff-appellant the Deed of Sale with Mortgage ,, for and
in consideration of the sum of P100,000.00, P25,000.00 of
which amount being payable to the Lozano spouses upon
the execution of the document, and the balance of
P75,000.00 being payable to defendant- appellee; that on
December 6, 1966, when the mortgage was executed by the
Lozano spouses in favor of defendant-appellee, the loan of
P75,000.00 was not yet received them, as it was on
December 12, 1966 when they and their co-maker Alfonso
Lim signed the promissory note for that amount; that from
April 28, 1967 to July 12, 1968, plaintiff-appellant made
payments to defendant-appellee on the mortgage in the total
amount of P18,944.22; that on May 4, 1968, plaintiffappellant assigned all his rights under the Deed of Sale with
Assumption of Mortgage to his brother, intervenor Raoul
Bonnevie; that on June 10, 1968, defendant-appellee
applied for the foreclosure of the mortgage, and notice of
sale was published in the Luzon Weekly Courier on June 30,
July 7, and July 14, 1968; that auction sale was conducted
on August 19, 1968, and the property was sold to defendantappellee for P84,387.00; and that offers from plaintiffappellant to repurchase the property failed, and on October
9, 1969, he caused an adverse claim to be annotated on the
title of the property. (Decision of the Court of Appeals, p. 5).

III

Presented for resolution in this review are the following issues:

I

Whether the extrajudicial foreclosure of the said mortgage

was validly and legally effected.

Whether petitioners had a right to redeem the foreclosed

property.
IV
Granting that petitioners had such a right, whether
respondent was justified in refusing their offers to repurchase
the property.
As clearly seen from the foregoing issues raised, petitioners' course of action
is three-fold. They primarily attack the validity of the mortgage executed by
the Lozano spouses in favor of respondent Bank. Next, they attack the
validity of the extrajudicial foreclosure and finally, appeal to justice and equity.
In attacking the validity of the deed of mortgage, they contended that when it
was executed on December 6, 1966, there was yet no principal obligation to
secure as the loan of P75,000.00 was not received by the Lozano spouses
"So much so that in the absence of a principal obligation, there is want of
consideration in the accessory contract, which consequently impairs its
validity and fatally affects its very existence." (Petitioners' Brief, par. 1, p. 7).
This contention is patently devoid of merit. From the recitals of the mortgage
deed itself, it is clearly seen that the mortgage deed was executed for and on
condition of the loan granted to the Lozano spouses. The fact that the latter
did not collect from the respondent Bank the consideration of the mortgage
on the date it was executed is immaterial. A contract of loan being a
consensual contract, the herein contract of loan was perfected at the same
time the contract of mortgage was executed. The promissory note executed
on December 12, 1966 is only an evidence of indebtedness and does not
indicate lack of consideration of the mortgage at the time of its execution.
Petitioners also argued that granting the validity of the mortgage, the
subsequent renewals of the original loan, using as security the same
property which the Lozano spouses had already sold to petitioners, rendered
the mortgage null and void,

This argument failed to consider the provision 2 of the contract of mortgage

which prohibits the sale, disposition of, mortgage and encumbrance of the
mortgaged properties, without the written consent of the mortgagee, as well
as the additional proviso that if in spite of said stipulation, the mortgaged
property is sold, the vendee shall assume the mortgage in the terms and
conditions under which it is constituted. These provisions are expressly made
part and parcel of the Deed of Sale with Assumption of Mortgage.

Section 3. Notice shall be given by posting notices of the

sale for not less than twenty days in at least three public
places of the municipality or city where the property is
situated, and if such property is worth more than four
hundred pesos, such notice shall also be published once a
week for at least three consecutive weeks in a newspaper of
general circulation in the municipality or city

Petitioners admit that they did not secure the consent of respondent Bank to
the sale with assumption of mortgage. Coupled with the fact that the
sale/assignment was not registered so that the title remained in the name of
the Lozano spouses, insofar as respondent Bank was concerned, the Lozano
spouses could rightfully and validly mortgage the property. Respondent Bank
had every right to rely on the certificate of title. It was not bound to go behind
the same to look for flaws in the mortgagor's title, the doctrine of innocent
purchaser for value being applicable to an innocent mortgagee for value.
(Roxas vs. Dinglasan, 28 SCRA 430; Mallorca vs. De Ocampo, 32 SCRA
48). Another argument for the respondent Bank is that a mortgage follows the
property whoever the possessor may be and subjects the fulfillment of the
obligation for whose security it was constituted. Finally, it can also be said
that petitioners voluntarily assumed the mortgage when they entered into the
Deed of Sale with Assumption of Mortgage. They are, therefore, estopped
from impugning its validity whether on the original loan or renewals thereof.

In the case at bar, the notice of sale was published in the Luzon Courier on
June 30, July 7 and July 14, 1968 and notices of the sale were posted for not
less than twenty days in at least three (3) public places in the Municipality
where the property is located. Petitioners were thus placed on constructive
notice.

Petitioners next assail the validity and legality of the extrajudicial foreclosure
on the following grounds:
a) petitioners were never notified of the foreclosure sale.
b) The notice of auction sale was not posted for the period
required by law.
c) publication of the notice of auction sale in the Luzon
Weekly Courier was not in accordance with law.
The lack of notice of the foreclosure sale on petitioners is a flimsy ground.
Respondent Bank not being a party to the Deed of Sale with Assumption of
Mortgage, it can validly claim that it was not aware of the same and hence, it
may not be obliged to notify petitioners. Secondly, petitioner Honesto
Bonnevie was not entitled to any notice because as of May 14, 1968, he had
transferred and assigned all his rights and interests over the property in favor
of intervenor Raoul Bonnevie and respondent Bank not likewise informed of
the same. For the same reason, Raoul Bonnevie is not entitled to notice.
Most importantly, Act No. 3135 does not require personal notice on the
mortgagor. The requirement on notice is that:

The case of Santiago vs. Dionisio, 92 Phil. 495, cited by petitioners is

inapplicable because said case involved a judicial foreclosure and the sale to
the vendee of the mortgaged property was duly registered making the
mortgaged privy to the sale.
As regards the claim that the period of publication of the notice of auction
sale was not in accordance with law, namely: once a week for at least three
consecutive weeks, the Court of Appeals ruled that the publication of notice
on June 30, July 7 and July 14, 1968 satisfies the publication requirement
under Act No. 3135 notwithstanding the fact that June 30 to July 14 is only 14
days. We agree. Act No. 3135 merely requires that such notice shall be
published once a week for at least three consecutive weeks." Such phrase,
as interpreted by this Court in Basa vs. Mercado, 61 Phil. 632, does not
mean that notice should be published for three full weeks.
The argument that the publication of the notice in the "Luzon Weekly Courier"
was not in accordance with law as said newspaper is not of general
circulation must likewise be disregarded. The affidavit of publication,
executed by the Publisher, business/advertising manager of the Luzon
Weekly Courier, stares that it is "a newspaper of general circulation in ...
Rizal, and that the Notice of Sheriff's sale was published in said paper on
June 30, July 7 and July 14, 1968. This constitutes prima facie evidence of
compliance with the requisite publication. Sadang vs. GSIS, 18 SCRA 491).
To be a newspaper of general circulation, it is enough that "it is published for
the dissemination of local news and general information; that it has a bona
fide subscription list of paying subscribers; that it is published at regular
intervals." (Basa vs. Mercado, 61 Phil. 632). The newspaper need not have
the largest circulation so long as it is of general circulation. Banta vs.
Pacheco, 74 Phil. 67). The testimony of three witnesses that they do read the

Luzon Weekly Courier is no proof that said newspaper is not a newspaper of

general circulation in the province of Rizal.
Whether or not the notice of auction sale was posted for the period required
by law is a question of fact. It can no longer be entertained by this Court.
(see Reyes, et al. vs. CA, et al., 107 SCRA 126). Nevertheless, the records
show that copies of said notice were posted in three conspicuous places in
the municipality of Pasig, Rizal namely: the Hall of Justice, the Pasig
Municipal Market and Pasig Municipal Hall. In the same manner, copies of
said notice were also posted in the place where the property was located,
namely: the Municipal Building of San Juan, Rizal; the Municipal Market and
on Benitez Street. The following statement of Atty. Santiago Pastor, head of
the legal department of respondent bank, namely:
Q How many days were the notices posted
in these two places, if you know?
A We posted them only once in one day.
(TSN, p. 45, July 25, 1973)
is not a sufficient countervailing evidence to prove that there was no
compliance with the posting requirement in the absence of proof or even of
allegation that the notices were removed before the expiration of the twentyday period. A single act of posting (which may even extend beyond the
period required by law) satisfies the requirement of law. The burden of
proving that the posting requirement was not complied with is now shifted to
the one who alleges non-compliance.
On the question of whether or not the petitioners had a right to redeem the
property, We hold that the Court of Appeals did not err in ruling that they had
no right to redeem. No consent having been secured from respondent Bank
to the sale with assumption of mortgage by petitioners, the latter were not
validly substituted as debtors. In fact, their rights were never recorded and
hence, respondent Bank is charged with the obligation to recognize the right
of redemption only of the Lozano spouses. But even granting that as
purchaser or assignee of the property, as the case may be, the petitioners
had acquired a right to redeem the property, petitioners failed to exercise
said right within the period granted by law. Thru certificate of sale in favor of
appellee was registered on September 2, 1968 and the one year redemption
period expired on September 3, 1969. It was not until September 29, 1969
that petitioner Honesto Bonnevie first wrote respondent and offered to
redeem the property. Moreover, on September 29, 1969, Honesto had at that
time already transferred his rights to intervenor Raoul Bonnevie.

On the question of whether or not respondent Court of Appeals erred in

holding that respondent Bank did not act in bad faith, petitioners rely on
Exhibit "B" which is the letter of lose Lozano to respondent Bank dated
December 8, 1966 advising the latter that Honesto Bonnevie was authorized
to make payments for the amount secured by the mortgage on the subject
property, to receive acknowledgment of payments, obtain the Release of the
Mortgage after full payment of the obligation and to take delivery of the title of
said property. On the assumption that the letter was received by respondent
Bank, a careful reading of the same shows that the plaintiff was merely
authorized to do acts mentioned therein and does not mention that petitioner
is the new owner of the property nor request that all correspondence and
notice should be sent to him.
The claim of appellants that the collection of interests on the loan up to July
12, 1968 extends the maturity of said loan up to said date and accordingly on
June 10, 1968 when defendant applied for the foreclosure of the mortgage,
the loan was not yet due and demandable, is totally incorrect and misleading.
The undeniable fact is that the loan matured on December 26, 1967. On
June 10, 1968, when respondent Bank applied for foreclosure, the loan was
already six months overdue. Petitioners' payment of interest on July 12, 1968
does not thereby make the earlier act of respondent Bank inequitous nor
does it ipso facto result in the renewal of the loan. In order that a renewal of a
loan may be effected, not only the payment of the accrued interest is
necessary but also the payment of interest for the proposed period of
renewal as well. Besides, whether or not a loan may be renewed does not
solely depend on the debtor but more so on the discretion of the bank.
Respondent Bank may not be, therefore, charged of bad faith.
WHEREFORE, the appeal being devoid of merit, the decision of the Court of
Appeals is hereby AFFIRMED. Costs against petitioners.
SO ORDERED.

G.R. No. L-45710 October 3, 1985

CENTRAL BANK OF THE PHILIPPINES and ACTING DIRECTOR
ANTONIO T. CASTRO, JR. OF THE DEPARTMENT OF COMMERCIAL
AND SAVINGS BANK, in his capacity as statutory receiver of Island
Savings
Bank, petitioners,
vs.
THE HONORABLE COURT OF APPEALS and SULPICIO M.
TOLENTINO, respondents.
MAKASIAR, CJ.:
This is a petition for review on certiorari to set aside as null and void the
decision of the Court of Appeals, in C.A.-G.R. No. 52253-R dated February
11, 1977, modifying the decision dated February 15, 1972 of the Court of
First Instance of Agusan, which dismissed the petition of respondent Sulpicio
M. Tolentino for injunction, specific performance or rescission, and damages
with preliminary injunction.
On April 28, 1965, Island Savings Bank, upon favorable recommendation of
its legal department, approved the loan application for P80,000.00 of Sulpicio
M. Tolentino, who, as a security for the loan, executed on the same day a
real estate mortgage over his 100-hectare land located in Cubo, Las Nieves,
Agusan, and covered by TCT No. T-305, and which mortgage was annotated
on the said title the next day. The approved loan application called for a lump
sum P80,000.00 loan, repayable in semi-annual installments for a period of 3
years, with 12% annual interest. It was required that Sulpicio M. Tolentino
shall use the loan proceeds solely as an additional capital to develop his
other property into a subdivision.
On May 22, 1965, a mere P17,000.00 partial release of the P80,000.00 loan
was made by the Bank; and Sulpicio M. Tolentino and his wife Edita Tolentino
signed a promissory note for P17,000.00 at 12% annual interest, payable
within 3 years from the date of execution of the contract at semi-annual
installments of P3,459.00 (p. 64, rec.). An advance interest for the
P80,000.00 loan covering a 6-month period amounting to P4,800.00 was
deducted from the partial release of P17,000.00. But this pre-deducted
interest was refunded to Sulpicio M. Tolentino on July 23, 1965, after being
informed by the Bank that there was no fund yet available for the release of
the P63,000.00 balance (p. 47, rec.). The Bank, thru its vice-president and
treasurer, promised repeatedly the release of the P63,000.00 balance (p.
113, rec.).

On August 13, 1965, the Monetary Board of the Central Bank, after finding
Island Savings Bank was suffering liquidity problems, issued Resolution No.
1049, which provides:
In view of the chronic reserve deficiencies of the Island
Savings Bank against its deposit liabilities, the Board, by
unanimous vote, decided as follows:
1) To prohibit the bank from making new loans and
investments [except investments in government securities]
excluding extensions or renewals of already approved loans,
provided that such extensions or renewals shall be subject to
review by the Superintendent of Banks, who may impose
such limitations as may be necessary to insure correction of
the bank's deficiency as soon as possible;
xxx xxx xxx
(p. 46, rec.).
On June 14, 1968, the Monetary Board, after finding thatIsland Savings Bank
failed to put up the required capital to restore its solvency, issued Resolution
No. 967 which prohibited Island Savings Bank from doing business in the
Philippines and instructed the Acting Superintendent of Banks to take charge
of the assets of Island Savings Bank (pp. 48-49, rec).
On August 1, 1968, Island Savings Bank, in view of non-payment of the
P17,000.00 covered by the promissory note, filed an application for the extrajudicial foreclosure of the real estate mortgage covering the 100-hectare land
of Sulpicio M. Tolentino; and the sheriff scheduled the auction for January 22,
1969.
On January 20, 1969, Sulpicio M. Tolentino filed a petition with the Court of
First Instance of Agusan for injunction, specific performance or rescission
and damages with preliminary injunction, alleging that since Island Savings
Bank failed to deliver the P63,000.00 balance of the P80,000.00 loan, he is
entitled to specific performance by ordering Island Savings Bank to deliver
the P63,000.00 with interest of 12% per annum from April 28, 1965, and if
said balance cannot be delivered, to rescind the real estate mortgage (pp.
32-43, rec.).
On January 21, 1969, the trial court, upon the filing of a P5,000.00 surety
bond, issued a temporary restraining order enjoining the Island Savings Bank
from continuing with the foreclosure of the mortgage (pp. 86-87, rec.).

On January 29, 1969, the trial court admitted the answer in intervention
praying for the dismissal of the petition of Sulpicio M. Tolentino and the
setting aside of the restraining order, filed by the Central Bank and by the
Acting Superintendent of Banks (pp. 65-76, rec.).
On February 15, 1972, the trial court, after trial on the merits rendered its
decision, finding unmeritorious the petition of Sulpicio M. Tolentino, ordering
him to pay Island Savings Bank the amount of PI 7 000.00 plus legal interest
and legal charges due thereon, and lifting the restraining order so that the
sheriff may proceed with the foreclosure (pp. 135-136. rec.
On February 11, 1977, the Court of Appeals, on appeal by Sulpicio M.
Tolentino, modified the Court of First Instance decision by affirming the
dismissal of Sulpicio M. Tolentino's petition for specific performance, but it
ruled that Island Savings Bank can neither foreclose the real estate mortgage
nor collect the P17,000.00 loan pp. 30-:31. rec.).
Hence, this instant petition by the central Bank.
The issues are:
1. Can the action of Sulpicio M. Tolentino for specific
performance prosper?
2. Is Sulpicio M. Tolentino liable to pay the P17,000.00 debt
covered by the promissory note?
3. If Sulpicio M. Tolentino's liability to pay the P17,000.00
subsists, can his real estate mortgage be foreclosed to
satisfy said amount?
When Island Savings Bank and Sulpicio M. Tolentino entered into an
P80,000.00 loan agreement on April 28, 1965, they undertook reciprocal
obligations. In reciprocal obligations, the obligation or promise of each party
is the consideration for that of the other (Penaco vs. Ruaya, 110 SCRA 46
[1981]; Vda. de Quirino vs, Pelarca 29 SCRA 1 [1969]); and when one party
has performed or is ready and willing to perform his part of the contract, the
other party who has not performed or is not ready and willing to perform
incurs in delay (Art. 1169 of the Civil Code). The promise of Sulpicio M.
Tolentino to pay was the consideration for the obligation of Island Savings
Bank to furnish the P80,000.00 loan. When Sulpicio M. Tolentino executed a
real estate mortgage on April 28, 1965, he signified his willingness to pay the
P80,000.00 loan. From such date, the obligation of Island Savings Bank to
furnish the P80,000.00 loan accrued. Thus, the Bank's delay in furnishing the
entire loan started on April 28, 1965, and lasted for a period of 3 years or

when the Monetary Board of the Central Bank issued Resolution No. 967 on
June 14, 1968, which prohibited Island Savings Bank from doing further
business. Such prohibition made it legally impossible for Island Savings Bank
to furnish the P63,000.00 balance of the P80,000.00 loan. The power of the
Monetary Board to take over insolvent banks for the protection of the public
is recognized by Section 29 of R.A. No. 265, which took effect on June 15,
1948, the validity of which is not in question.
The Board Resolution No. 1049 issued on August 13,1965 cannot interrupt
the default of Island Savings Bank in complying with its obligation of
releasing the P63,000.00 balance because said resolution merely prohibited
the Bank from making new loans and investments, and nowhere did it
prohibit island Savings Bank from releasing the balance of loan agreements
previously contracted. Besides, the mere pecuniary inability to fulfill an
engagement does not discharge the obligation of the contract, nor does it
constitute any defense to a decree of specific performance (Gutierrez Repide
vs. Afzelius and Afzelius, 39 Phil. 190 [1918]). And, the mere fact of
insolvency of a debtor is never an excuse for the non-fulfillment of an
obligation but 'instead it is taken as a breach of the contract by him (vol. 17A,
1974 ed., CJS p. 650)
The fact that Sulpicio M. Tolentino demanded and accepted the refund of the
pre-deducted interest amounting to P4,800.00 for the supposed P80,000.00
loan covering a 6-month period cannot be taken as a waiver of his right to
collect the P63,000.00 balance. The act of Island Savings Bank, in asking the
advance interest for 6 months on the supposed P80,000.00 loan, was
improper considering that only P17,000.00 out of the P80,000.00 loan was
released. A person cannot be legally charged interest for a non-existing debt.
Thus, the receipt by Sulpicio M. 'Tolentino of the pre-deducted interest was
an exercise of his right to it, which right exist independently of his right to
demand the completion of the P80,000.00 loan. The exercise of one right
does not affect, much less neutralize, the exercise of the other.
The alleged discovery by Island Savings Bank of the over-valuation of the
loan collateral cannot exempt it from complying with its reciprocal obligation
to furnish the entire P80,000.00 loan. 'This Court previously ruled that bank
officials and employees are expected to exercise caution and prudence in the
discharge of their functions (Rural Bank of Caloocan, Inc. vs. C.A., 104
SCRA 151 [1981]). It is the obligation of the bank's officials and employees
that before they approve the loan application of their customers, they must
investigate the existence and evaluation of the properties being offered as a
loan security. The recent rush of events where collaterals for bank loans turn
out to be non-existent or grossly over-valued underscore the importance of
this responsibility. The mere reliance by bank officials and employees on their
customer's representation regarding the loan collateral being offered as loan
security is a patent non-performance of this responsibility. If ever bank

officials and employees totally reIy on the representation of their customers

as to the valuation of the loan collateral, the bank shall bear the risk in case
the collateral turn out to be over-valued. The representation made by the
customer is immaterial to the bank's responsibility to conduct its own
investigation. Furthermore, the lower court, on objections of' Sulpicio M.
Tolentino, had enjoined petitioners from presenting proof on the alleged overvaluation because of their failure to raise the same in their pleadings (pp.
198-199, t.s.n. Sept. 15. 1971). The lower court's action is sanctioned by the
Rules of Court, Section 2, Rule 9, which states that "defenses and objections
not pleaded either in a motion to dismiss or in the answer are deemed
waived." Petitioners, thus, cannot raise the same issue before the Supreme
Court.
Since Island Savings Bank was in default in fulfilling its reciprocal obligation
under their loan agreement, Sulpicio M. Tolentino, under Article 1191 of the
Civil Code, may choose between specific performance or rescission with
damages in either case. But since Island Savings Bank is now prohibited
from doing further business by Monetary Board Resolution No. 967, WE
cannot grant specific performance in favor of Sulpicio M, Tolentino.
Rescission is the only alternative remedy left. WE rule, however, that
rescission is only for the P63,000.00 balance of the P80,000.00 loan,
because the bank is in default only insofar as such amount is concerned, as
there is no doubt that the bank failed to give the P63,000.00. As far as the
partial release of P17,000.00, which Sulpicio M. Tolentino accepted and
executed a promissory note to cover it, the bank was deemed to have
complied with its reciprocal obligation to furnish a P17,000.00 loan. The
promissory note gave rise to Sulpicio M. Tolentino's reciprocal obligation to
pay the P17,000.00 loan when it falls due. His failure to pay the overdue
amortizations under the promissory note made him a party in default, hence
not entitled to rescission (Article 1191 of the Civil Code). If there is a right to
rescind the promissory note, it shall belong to the aggrieved party, that is,
Island Savings Bank. If Tolentino had not signed a promissory note setting
the date for payment of P17,000.00 within 3 years, he would be entitled to
ask for rescission of the entire loan because he cannot possibly be in default
as there was no date for him to perform his reciprocal obligation to pay.
Since both parties were in default in the performance of their respective
reciprocal obligations, that is, Island Savings Bank failed to comply with its
obligation to furnish the entire loan and Sulpicio M. Tolentino failed to comply
with his obligation to pay his P17,000.00 debt within 3 years as stipulated,
they are both liable for damages.
Article 1192 of the Civil Code provides that in case both parties have
committed a breach of their reciprocal obligations, the liability of the first
infractor shall be equitably tempered by the courts. WE rule that the liability

of Island Savings Bank for damages in not furnishing the entire loan is offset
by the liability of Sulpicio M. Tolentino for damages, in the form of penalties
and surcharges, for not paying his overdue P17,000.00 debt. The liability of
Sulpicio M. Tolentino for interest on his PI 7,000.00 debt shall not be included
in offsetting the liabilities of both parties. Since Sulpicio M. Tolentino derived
some benefit for his use of the P17,000.00, it is just that he should account
for the interest thereon.
WE hold, however, that the real estate mortgage of Sulpicio M. Tolentino
cannot be entirely foreclosed to satisfy his P 17,000.00 debt.
The consideration of the accessory contract of real estate mortgage is the
same as that of the principal contract (Banco de Oro vs. Bayuga, 93 SCRA
443 [1979]). For the debtor, the consideration of his obligation to pay is the
existence of a debt. Thus, in the accessory contract of real estate mortgage,
the consideration of the debtor in furnishing the mortgage is the existence of
a valid, voidable, or unenforceable debt (Art. 2086, in relation to Art, 2052, of
the Civil Code).
The fact that when Sulpicio M. 'Tolentino executed his real estate mortgage,
no consideration was then in existence, as there was no debt yet because
Island Savings Bank had not made any release on the loan, does not make
the real estate mortgage void for lack of consideration. It is not necessary
that any consideration should pass at the time of the execution of the
contract of real mortgage (Bonnevie vs. C.A., 125 SCRA 122 [1983]). lt may
either be a prior or subsequent matter. But when the consideration is
subsequent to the mortgage, the mortgage can take effect only when the
debt secured by it is created as a binding contract to pay (Parks vs,
Sherman, Vol. 176 N.W. p. 583, cited in the 8th ed., Jones on Mortgage, Vol.
2, pp. 5-6). And, when there is partial failure of consideration, the mortgage
becomes unenforceable to the extent of such failure (Dow. et al. vs. Poore,
Vol. 172 N.E. p. 82, cited in Vol. 59, 1974 ed. CJS, p. 138). Where the
indebtedness actually owing to the holder of the mortgage is less than the
sum named in the mortgage, the mortgage cannot be enforced for more than
the actual sum due (Metropolitan Life Ins. Co. vs. Peterson, Vol. 19, F(2d) p.
88, cited in 5th ed., Wiltsie on Mortgage, Vol. 1, P. 180).
Since Island Savings Bank failed to furnish the P63,000.00 balance of the
P8O,000.00 loan, the real estate mortgage of Sulpicio M. Tolentino became
unenforceable to such extent. P63,000.00 is 78.75% of P80,000.00, hence
the real estate mortgage covering 100 hectares is unenforceable to the
extent of 78.75 hectares. The mortgage covering the remainder of 21.25
hectares subsists as a security for the P17,000.00 debt. 21.25 hectares is
more than sufficient to secure a P17,000.00 debt.

The rule of indivisibility of a real estate mortgage provided for by Article 2089
of the Civil Code is inapplicable to the facts of this case.
Article 2089 provides:
A pledge or mortgage is indivisible even though the debt
may be divided among the successors in interest of the
debtor or creditor.
Therefore, the debtor's heirs who has paid a part of the debt
can not ask for the proportionate extinguishment of the
pledge or mortgage as long as the debt is not completely
satisfied.
Neither can the creditor's heir who have received his share
of the debt return the pledge or cancel the mortgage, to the
prejudice of other heirs who have not been paid.
The rule of indivisibility of the mortgage as outlined by Article 2089 abovequoted presupposes several heirs of the debtor or creditor which does not
obtain in this case. Hence, the rule of indivisibility of a mortgage cannot apply
WHEREFORE, THE DECISION OF THE COURT OF APPEALS DATED
FEBRUARY 11, 1977 IS HEREBY MODIFIED, AND
1. SULPICIO M. TOLENTINO IS HEREBY ORDERED TO PAY IN FAVOR
OF HEREIN PETITIONERS THE SUM OF P17.000.00, PLUS P41,210.00
REPRESENTING 12% INTEREST PER ANNUM COVERING THE PERIOD
FROM MAY 22, 1965 TO AUGUST 22, 1985, AND 12% INTEREST ON THE
TOTAL AMOUNT COUNTED FROM AUGUST 22, 1985 UNTIL PAID;
2. IN CASE SULPICIO M. TOLENTINO FAILS TO PAY, HIS REAL ESTATE
MORTGAGE COVERING 21.25 HECTARES SHALL BE FORECLOSED TO
SATISFY HIS TOTAL INDEBTEDNESS; AND
3. THE REAL ESTATE MORTGAGE COVERING 78.75 HECTARES IS
HEREBY DECLARED UNEN FORCEABLE AND IS HEREBY ORDERED
RELEASED IN FAVOR OF SULPICIO M. TOLENTINO.
NO COSTS. SO ORDERED.

G.R. No. L-48349 December 29, 1986

FRANCISCO
HERRERA, plaintiff-appellant,
vs.
PETROPHIL CORPORATION, defendant-appellee.
CRUZ, J.:
This is an appeal by the plaintiff-appellant from a decision rendered by the
then Court of First Instance of Rizal on a pure question of law. 1
The judgment appealed from was rendered on the pleadings, the parties
having agreed during the pretrial conference on the factual antecedents.
The facts are as follows: On December 5, 1969, the plaintiff-appellant and
ESSO Standard Eastern. Inc., (later substituted by Petrophil Corporation)
entered into a "Lease Agreement" whereby the former leased to the latter a
portion of his property for a period of twenty (20) years from said date,
subject inter alia to the following conditions:
3. Rental: The LESSEE shall pay the LESSOR a rental of Pl.40 sqm.
per month on 400 sqm. and are to be expropriated later on (sic) or
P560 per month and Fl.40 per sqm. per month on 1,693 sqm. or
P2,370.21 per month or a total of P2,930.20 per month 2,093 sqm.
more or less, payable yearly in advance within the 1st twenty days of
each year; provided, a financial aid in the sum of P15,000 to clear
the leased premises of existing improvements thereon is paid in this
manner; P10,000 upon execution of this lease and P5,000 upon
delivery of leased premises free and clear of improvements thereon
within 30 days from the date of execution of this agreement. The
portion on the side of the leased premises with an area of 365 sqrm.
more or less, will be occupied by LESSEE without rental during the
lifetime of this lease. PROVIDED FINALLY, that the Lessor is paid 8
years advance rental based on P2,930.70 per month discounted at
12% interest per annum or a total net amount of P130,288.47 before
registration of lease. Leased premises shall be delivered within 30
days after 1st partial payment of financial aid. 2
On December 31, 1969, pursuant to the said contract, the defendantappellee paid to the plaintfff-appellant advance rentals for the first eight
years, subtracting therefrom the amount of P101,010.73, the amount it
computed as constituting the interest or discount for the first eight years, in
the total sum P180,288.47. On August 20, 1970, the defendant-appellee,

explaining that there had been a mistake in computation, paid to the

appellant the additional sum of P2,182.70, thereby reducing the deducted
amount to only P98,828.03. 3
On October 14, 1974, the plaintiff-appellant sued the defendant-appellee for
the sum of P98,828.03, with interest, claiming this had been illegally
deducted from him in violation of the Usury Law. 4 He also prayed for moral
damages and attorney's fees. In its answer, the defendant-appellee admitted
the factual allegations of the complaint but argued that the amount deducted
was not usurious interest but a given to it for paying the rentals in advance
for eight years. 5Judgment on the pleadings was rendered for the
defendant. 6
Plaintiff-appellant now prays for a reversal of that judgment, insisting that the
lower court erred in the computation of the interest collected out of the
rentals paid for the first eight years; that such interest was excessive and
violative of the Usury Law; and that he had neither agreed to nor accepted
the defendant-appellant's computation of the total amount to be deducted for
the eight years advance rentals. 7
The thrust of the plaintiff-appellant's position is set forth in paragraph 6 of his
complaint, which read:
6. The interest collected by defendant out of the rentals for the first
eight years was excessive and beyond that allowable by law,
because the total interest on the said amount is only P33,755.90 at
P4,219.4880 per yearly rental; and considering that the interest
should be computed excluding the first year rental because at the
time the amount of P281, 199.20 was paid it was already due under
the lease contract hence no interest should be collected from the
rental for the first year, the amount of P29,536.42 only as the total
interest should have been deducted by defendant from the sum of
P281,299.20.
The defendant maintains that the correct amount of the discount is
P98,828.03 and that the same is not excessive and above that allowed by
law.
As its title plainly indicates, the contract between the parties is one of lease
and not of loan. It is clearly denominated a "LEASE AGREEMENT." Nowhere
in the contract is there any showing that the parties intended a loan rather
than a lease. The provision for the payment of rentals in advance cannot be
construed as a repayment of a loan because there was no grant or
forbearance of money as to constitute an indebtedness on the part of the
lessor. On the contrary, the defendant-appellee was discharging its obligation

in advance by paying the eight years rentals, and it was for this advance
payment that it was getting a rebate or discount.

P33,755.90 (P4,129.4880 multiplied by eight (8) years and not

P98,828.03 as the defendant claimed it to be.

The provision for a discount is not unusual in lease contracts. As to its

validity, it is settled that the parties may establish such stipulations, clauses,
terms and condition as they may want to include; and as long as such
agreements are not contrary to law, morals, good customs, public policy or
public order, they shall have the force of law between them. 8

The afore-quoted manner of computation made by plaintiff is patently

erroneous. It is most seriously misleading. He just computed the
annual discount to be at P4,129.4880 and then simply multiplied it by
eight (8) years. He did not take into consideration the naked fact that
the rentals due on the eight year were paid in advance by seven (7)
years, the rentals due on the seventh year were paid in advance by
six (6) years, those due on the sixth year by five (5) years, those due
on the fifth year by four (4) years, those due on the fourth year by
three (3) years, those due on the third year by two (2) years, and
those due on the second year by one (1) year, so much so that the
total number of years by which the annual rental of P4,129.4880 was
paid in advance is twenty-eight (28), resulting in a total amount of
P118,145.44 (P4,129.48 multiplied by 28 years) as the discount.
However, defendant was most fair to plaintiff. It did not simply
multiply the annual rental discount by 28 years. It computed the total
discount with the principal diminishing month to month as shown by
Annex 'A' of its memorandum. This is why the total discount amount
to only P 8,828.03.

There is no usury in this case because no money was given by the

defendant-appellee to the plaintiff-appellant, nor did it allow him to use its
money already in his possession. 9 There was neither loan nor forbearance
but a mere discount which the plaintiff-appellant allowed the defendantappellee to deduct from the total payments because they were being made in
advance for eight years. The discount was in effect a reduction of the rentals
which the lessor had the right to determine, and any reduction thereof, by
any amount, would not contravene the Usury Law.
The difference between a discount and a loan or forbearance is that the
former does not have to be repaid. The loan or forbearance is subject to
repayment and is therefore governed by the laws on usury. 10
To constitute usury, "there must be loan or forbearance; the loan must be of
money or something circulating as money; it must be repayable absolutely
and in all events; and something must be exacted for the use of the money in
excess of and in addition to interest allowed by law." 11
It has been held that the elements of usury are (1) a loan, express or implied;
(2) an understanding between the parties that the money lent shall or may be
returned; that for such loan a greater rate or interest that is allowed by law
shall be paid, or agreed to be paid, as the case may be; and (4) a corrupt
intent to take more than the legal rate for the use of money loaned. Unless
these four things concur in every transaction, it is safe to affirm that no case
of usury can be declared. 12
Concerning the computation of the deductible discount, the trial court
declared:
As above-quoted, the 'Lease Agreement' expressly provides that the
lessee (defendant) shag pay the lessor (plaintiff) eight (8) years in
advance rentals based on P2,930.20 per month discounted at 12%
interest per annum. Thus, the total rental for one-year period is
P35,162.40 (P2,930.20 multiplied by 12 months) and that the interest
therefrom is P4,219.4880 (P35,162.40 multiplied by 12%). So,
therefore, the total interest for the first eight (8) years should be only

The allegation of plaintiff that defendant made the computation in a

compounded manner is erroneous. Also after making its own
computations and after examining closely defendant's Annex 'A' of its
memorandum, the court finds that defendant did not charge 12%
discount on the rentals due for the first year so much so that the
computation conforms with the provision of the Lease Agreement to
the effect that the rentals shall be 'payable yearly in advance within
the 1st 20 days of each year. '
We do not agree. The above computation appears to be too much technical
mumbo-jumbo and could not have been the intention of the parties to the
transaction. Had it been so, then it should have been clearly stipulated in the
contract. Contracts should be interpreted according to their literal meaning
and should not be interpreted beyond their obvious intendment. 13
The plaintfff-appellant simply understood that for every year of advance
payment there would be a deduction of 12% and this amount would be the
same for each of the eight years. There is no showing that the intricate
computation applied by the trial court was explained to him by the defendantappellee or that he knowingly accepted it.
The lower court, following the defendant-appellee's formula, declared that the
plaintiff-appellant had actually agreed to a 12% reduction for advance rentals

for all of twenty eight years. That is absurd. It is not normal for a person to
agree to a reduction corresponding to twenty eight years advance rentals
when all he is receiving in advance rentals is for only eight years.
The deduction shall be for only eight years because that was plainly what the
parties intended at the time they signed the lease agreement. "Simplistic" it
may be, as the Solicitor General describes it, but that is how the lessor
understood the arrangement. In fact, the Court will reject his subsequent
modification that the interest should be limited to only seven years because
the first year rental was not being paid in advance. The agreement was for
auniform deduction for the advance rentals for each of the eight years, and
neither of the parties can deviate from it now.
On the annual rental of P35,168.40, the deducted 12% discount was
P4,220.21; and for eight years, the total rental was P281,347.20 from which
was deducted the total discount of P33,761.68, leaving a difference of
P247,585.52. Subtracting from this amount, the sum of P182,471.17 already
paid will leave a balance of P65,114.35 still due the plaintiff-appellant.
The above computation is based on the more reasonable interpretation of the
contract as a whole rather on the single stipulation invoked by the
respondent for the flat reduction of P130,288.47.
WHEREFORE, the decision of the trial court is hereby modified, and the
defendant-appellee Petrophil Corporation is ordered to pay plaintiff-appellant
the amount of Sixty Five Thousand One Hundred Fourteen pesos and ThirtyFive Centavos (P65,114.35), with interest at the legal rate until fully paid, plus
Ten Thousand Pesos (P10,000.00) as attorney's fees. Costs against the
defendant-appellee.
SO ORDERED.