12 Ponce de Leon v RFC

8/3/15 5:27 PMSUPREME COURT REPORTS ANNOTATED VOLUME 036

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VOL. 36, DECEMBER 18, 1970 289

Ponce de Leon vs. Rehabilitation Finance Corporation

No. L-24571. December 18, 1970.

JOSE L. PONCE DE LEON, plaintiff-appellant, vs.REHABILITATION FINANCE CORPORATION,defendant-appellant and third-party defendant-appellant,ROSALINA SORIANO,TEOFILA SORIANO andREV.FR.EUGENIO R. SORIANO, third-party plaintiffs-appellants.

Civil Law; Mortgage; Presumption of regularity of mortgagedeed.The mere oral unsupported testimony of an interested partyis not sufficient to overcome the legal presumption of the regularityof the mortgage deed, a contract celebrated with all the legalrequisites under the safeguard of a notarial certificate (Naval, et al.vs. Enriquez, 3 Phil. 670-672). Such unsupported testimony of theinterested party is not that clear, strong and convincing evidencebeyond mere preponderance of evidence, required to show thefalsity or nullity of a notarial document. (Sigue, et al. vs. Escaro,CA, 53 Q.C. 1161; Jocson vs. Ratacion, G.R. No. 41687; Palanca vs.Chillanchin vs. Coquinco, G.R. No. L-1355; Robinson vs. Villafuerte,18 Phil. 171).

Remedial Law; Legal Redemption; Sheriff's Sale; Price in asheriffs sale.Where there is the right to redeem, inadequacy ofprice should not be material, because the judgment debtor may re-acquire the property or else sell his right to redeem and thus recoverany loss he claims to have suffered by reason of the price obtainedat the execution sale. As the trial court had correctly observed: Mereinadequacy of the price obtained at the sheriff's sale unlessshocking to the conscience will not be sufficient to set aside the saleif there is no showing that, in the event of a regular sale, and, inforced sales, low prices are usually offered. (I Moran's Rules ofCourt, pp. 834-835).

Same; Same; Redemption price where mortgagee is a bankinginstitution.As set forth in its title, Act No. 3135 was promulgated



"to regulate the sale of property under special powers inserted in orannexed to real estate mortgages." Section 6 thereof provided thatin all cases of "extrajudicial sale x x x

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290 SUPREME COURT REPORTS ANNOTATED


made under the special power hereinbefore referred to, "theproperty sold may be redeemed within" one year from and after thedate of the sale x x x." Act No. 4118 amended Act No. 3135 bymerely adding thereto three (3) new sections. Upon the other hand,Rep. Act No. 337, otherwise known as "The General Banking Act," isentitled "An act Regulating Banks and Banking Institutions andfor other purposes." Section 78 thereof limits the amount of theloans that may be given by banks and banking or credit institutionson the basis of the appraised value of the property given as security,as well as provides that, in the event of foreclosure of a real estatemortgage to said banks or institutions, the property sold may beredeemed "by paying the amount fixed by the court in the order ofexecution," or the amount judicially adjudicated to the creditor bank.This provision had the effect of amending section 6 of Act No. 3135,insofar as the redemption price is concerned, when the mortgagee isa bank or a banking or credit institution, said section 6 of Act No.3135 being, in this respect, inconsistent with the above-quotedportion of section 78 of Rep. Act No. 337.

Statutory Construction; Special law prevails.The conflictbetween the two (2) laws (Act No. 3135 as amended and Rep. ActNo. 337) must be resolved in favor of Rep. Act No. 337, both as aspecial and as the subsequent legislation.

Negotiable Instruments Law; Promissory Notes; Time forpayment not indicated in promissory note.When a promissorynote expresses "no time for payment," it is deemed "payable ondemand."

Civil Law; Obligations and Contracts; Debtor cannot avail ofArt. 1174, Civil Code, in an obligation to pay.The debtor'sobligation was merely generic, namely, to pay certain sums ofmoney to the RFC. As the trial judge had aptly put it: In the instantcase, there was an obligation on the part of the debtor to pay hisloan, independently of the purpose for which the money loaned wasintended to be used and this obligation to pay continues to subsist



notwithstanding the fact that it may have become impossible for thedebtor to use the money loaned for the particular purpose that wasintended (Milan vs. Rio y Olabarrieta, 45 Phil. 718). There is henceno ground for declaring the amortizations due on the principal loansince October, 1952 as extinguished due to fortuitous event or togrant plaintiff a reasonable time to pay the due amortizations.

Land Registration Act; Original certificate of title does not

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establish time of acquisition.The title to said property was not atransfer certificate of title, but an original one, issued in accordancewith a decree which, pursuant to law, merely confirms a pre-existing title. Said original certificate of title does not establish,therefore, the time of acquisition of the property of the registeredowner thereof.

Civil Law; Conjugal Partnership; Proof of acquisition duringmarriage, a condition sine qua non.Article 160 of the Civil Codemust be construed in relation to Articles 153 to 159 of the sameCode, enumerating the properties "acquired x x x during themarriage" that constitute the conjugal partnership. Consequentlytherewith, the party who invokes this presumption must first provethat the property in controversy was acquired during the marriage.In other words, proof of acquisition during coverture is a conditionsine qua non for the operation of the presumption in favor ofconjugal partnership.

Same; Estoppel; Attempts to redeem constitute impliedadmission of validity.Defendants, by their repeated requests fortime to redeem had impliedly admittedwere estopped to questionthe validity and regularity of the sheriff's sale. (Tiaoqui vs.Chaves, L-10086, May 20, 1957, quoting from 59 C.J.S. p. 1372).

APPEAL from a decision of the Court of First Instance ofRizal.

The facts are stated in the opinion of the Court.

CONCEPCION, C.J.:

Appeal from a decision of the Court of First Instance of



Rizal, the dispositive part of which reads:

"IN VIEW OF THE FOREGOING, the Court hereby rendersjudgment dismissing plaintiff's complaint with costs againstplaintiff; ordering plaintiff Jose Ponce de Leon to pay the defendantRFC the amount of FIVE HUNDRED TWENTY-NINE THOUSANDTWO HUNDRED SIXTY FIVE PESOS AND FIFTY FOUR(P529,265.54) CENTAVOS, with interest at six percent per annumfrom November 24, 1954 until fully paid, the further sum of ONEHUNDRED EIGHTY (P180.00) PESOS per month from May 20,1955 until plaintiff vacates the house and lot at Taft Avenue, PasayCity, and FIVE THOUSAND (P5,000.00) PESOS as damages forthe injunction and costs.

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"The Court declares the mortgage of one-half of the lot covered byOriginal transfer certificate of title No. 8094 of the lands records ofRizal Province belonging to the third-party plaintiffs, namelyRosalina Soriano, Rev. Fr. Eugenio Soriano and Teofila Soriano delRosario null and void and the sheriff's sale in favor of the RFC ofsaid one-half share likewise null and void."

1

As correctly set forth in said decision, the main facts are:

"On August 14, 1945, herein plaintiff Jose L. Ponce de Leon andFrancisco Soriano, father of third-party plaintiffs Teofila Soriano delRosario, Rosalina Soriano and Rev. Fr. Eugenio Soriano, obtained aloan for P10,000.00 from the Philippine National Bank (PNB),Manila, mortgaging a parcel of land situated at Barrio Ibayo,Municipality of Paraaque, Rizal, covered by original certificate oftitle No. 8094 of the land records of Rizal Province in the name ofFrancisco Soriano, married to Tomasa Rodriguez, as security for theloan (Exhibit 15-Soriano). On August 16, 1945, Ponce de Leon gaveP2,000.00 to Soriano from the proceeds of the loan (Exhibit 'N'). Theloan was subsequently increased to P17,500.00 and an amendmentto the real estate mortgage, Exhibit '15-Soriano,' was executed byJose L. Ponce de Leon and Francisco Soriano on March 13, 1946(Exhibit '16-Soriano').

"On May 4, 1951, Jose L. Ponce de Leon filed with theRehabilitation Finance Corporation (RFC for short) Manila, his loanapplication, Exhibit '1-RFC,' for an industrial loan, for putting up asawmill, in the amount of P800,000.00 offering as security certain



parcels of land, among which, was the parcel which Ponce de Leonand Soriano mortgaged to the PNB. The application stated that theproperties offered for security for the RFC loan are encumbered tothe PNB, Bacolod, and to Cu Unjieng Bros. The properties offeredfor security to the RFC were inspected by the appraisers of thelatter, who submitted the following appraisals:

"1. Land ........................................................ P480,228.00

"2. Building ................................................... P 12,000.00

"3. Machinery & equipment .................... P 67,101.00

"4. Transportation equipment ................... P 14,000.00

Total ...................... P573,329.00

(Exh. '6-aRFC')

"The application was approved for P495,000.00 and the mortgagecontract (Exhibit 'A', also '16-RFC & '33-Soriano')

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1 Record on Appeal, p. 133.

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was executed on October 8, 1951 by Jose L. Ponce de Leon, his wifeCarmelina Russel, and Francisco Soriano. The same parties signed apromissory note (Exhibit 'A') for P495,000.00, with interest at 6%per annum payable on installments every month for P28,831.64 inconnection with the mortgage deed. Before the mortgage deed wassigned, the Notary Public, Fe-lipe Cuaderno, Jr. before whom it wasacknowledged, translated it in Tagalog to Francisco Soriano, whothereafter affixed his signature to the document. At the time thatFran-cisco Soriano signed the mortgage deed, Exhibit 'A', his spouseTomasa Rodriguez was already dead leaving as her heirs, herchildren namely, Rosalina, Teofila and Rev. Fr. Eugenio So-riano,none of whom signed the said mortgage deed or the promissorynote.

"The mortgage deed specifically stipulated that the proceedsthereof shall be used exclusively for the purchase of machinery andequipment, construction of buildings and the payment of obligationsand that the release of the amounts loaned shall be at the discretionof the RFC. In view of these conditions, the RFC paid Ponce de



Leon's obligations of P100,000.00 to the PNB; P30,000.00 to CuUnjieng Bros.; and P5,000.00 to Arturo Colmenares. From thebalance of P360,000.00, the sum of P352,000.00 was released toJose L. Ponce de Leon at various amounts during the period fromDecember, 1951 to July 1952. The checks covering these releaseswere issued to Jose L. Ponce de Leon in view of the authority givento him in writing by Francisco Soriano and Carmelina Russel(Exhibit '33-A-Soria-no,' Exhibit 'A' and Exhibit '16-RFC').

"On March 12, 1952, Jose L. Ponce de Leon and his wifeCarmelina Russel executed an addendum to the chattel mortgagefor machineries and equipments (Exhibit 'F').

"None of the amortization and interests which had become duewas paid and for this reason, the RFC took steps for the extra-judicial foreclosure of the mortgaged properties consisting of realestates and the sawmill and its equipments of Ponce de Leonsituated in two places in Samar. The RFC was the purchaser of allthe mortgaged properties in the ensuing sheriff's sales, with theexception of two parcels of land situated in Ba-colod City whichwere purchased by private individuals. Many items of themortgaged machineries and equipments could not be found. Theparcels of land mortgaged were sold as follows:

" 1 ) Nineparcels at Bacolod City .......... P78,800.00

"2) Two parcels acquired by privateindividuals................................................ P 5,790.00

"3) Two parcels at Pasay City with improvements . .............................. P15,000.00

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"4) The land of Soriano at Paraaque, Rizal......................................................... P10,000.00

"5) The Machineries & equipments that wereleft ................. ............................ P 6,000.00

"The Sheriff sold the land covered by original certificate of Title No.8094 in the name of Francisco Soriano, married to TomasaRodriguez, on June 15, 1954 and the deed of sale, dated April 19,1955 was executed by the sheriff in favor of the purchaser thereof,the RFC, including all the other properties sold (Exhibit '15-RFC,'also '54-Soriano').



"Previous to the expiration of the one-year period of redemption,Francisco Soriano, through Teofila Soriano del Rosario offered torepurchase the Soriano lot for P14,000.00 and on June 14, 1955,the last day for the redemption of the lot, Francisco Soriano, incompany with his daughter, Rosalina and Teofila, went to see Mr.Bernardo, Chief of the assets department of the RFC, and offered toredeem said lot for P14,000.00 but the offer was rejected and theywere told to participate in the public sale of the land to be conductedby the RFC. Jose L. Ponce de Leon did not offer to redeem themortgaged properties sold at anytime before the expiration of theperiod of redemption.

"The RFC scheduled a public sale of the lot registered in thename of Francisco Soriano and of the other lots which the RFCacquired in the Sheriff's sale for February 20, 1956 in view of theinability of Ponce de Leon or Soriano to legally redeem theproperties sold by the Sheriff within the one year period after thesale.

"On February 18, 1956, Jose L. Ponce de Leon instituted thepresent action alleging that there was delay in the releases of theamount of the loan; that the RFC withheld the amount ofP19,000.00 from the loan until it had verified whether Ponce deLeon had still an unpaid indebtedness to the defunct Agriculturaland Industrial Bank, the RFC's predecessor, and this was paid onlyafter one year had passed; that the typhoon in October andNovember, 1952 had caused destructions to his sawmills andhampered his operations for which reason, he asks, in his complaint,that the amortizations on his obligations which became due sinceOctober, 1952 be declared extinguished; that the sheriff's sales bedeclared null and void because the properties were sold at grosslyinadequate prices and that said sales were not conducted inaccordance with law; that the RFC be compelled to account for hismachineries and equipments at his lumber mill in Calbayog and toreimburse him for the value of the unaccounted machineries andequipments; that the RFC be ordered to pay him actual and moraldamages for P105,000.00

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and costs. De Leon asked for the issuance of a writ of preliminaryinjunction to restrain the RFC from carrying out its contemplatedpublic sale. The Court set the petition for injunction for hearing butno one appeared for the RFC at the hearing thereof so that the



Court had to issue the preliminary injunction prayed for. De Leoncaused notice of lis pendens to be recorded in relation with this case.

"The RFC filed its answer sustaining the legality of the mortgageand Sheriff's sales and counter-claimed that Ponce de Leon beordered to pay the deficiency claim representing the balance of thelatter's indebtedness, rental of the lot and house at Taft Avenue,Pasay City occupied by Ponce de Leon and damages.

"Subsequent to the filing of Ponce de Leon's complaint againstthe RFC, Francisco Soriano wrote a letter, dated February 20, 1956,to the President asking the latter's intervention so that the projectedsale on the same date to be conducted by the RFC may besuspended insofar as the lot in his name is concerned and that he beallowed to redeem it (Exhibit '27-Soriano'). This letter was referredby the Executive Office to the RFC, which sent a letter, Exhibit '29-Soriano', to Francisco Soriano informing the latter that he couldredeem his former property, for not less than its appraised value ofP59,647.05, payable 20% down and the balance in ten years, with6% interest. Soriano did not redeem the lot under the conditions ofthe RFC. He then filed a third-party complaint in this case with theRFC and Jose L. Ponce de Leon as the third-party defendants. Dueto the death of Francisco Soriano, he was substituted as third-partyplaintiff by his children, namely, Teofila Soriano del Rosario,Rosalina Soriano and Rev. Fr. Eugenio Soriano.

"The Sorianos contend that the mortgage in favor of the RFC andpromissory note signed by Francisco Soriano lacked the latter'sconsent and was without consideration insofar as Francisco Sorianois concerned and hence null and void as to him and his children;that the lot covered by original certificate of title No. 8094 in thename of Francisco Soriano belonged to the conjugal partnership ofthe latter and his wife, Tomasa Rodriguez, now deceased, and sincethe latter was already dead when the mortgage was executed andher children who have thus inherited her share have not signed themortgage contract and promissory note, at least, the one-half shareof the lot belonging now to the Soriano sisters and brothers, thethirdparty plaintiffs, have not been legally included in the mortgageto the RFC so that the latter had not acquired said one-half share inthe sheriff's sale. The Sorianos further ask that they be allowed toredeem the remaining one-half share, that which

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the amount for which the RFC acquired the whole lot in the sheriff's



sale. The third party-plaintiffs also ask that Ponce de Leon beordered to reimburse them for whatever amount they may use inredeeming the lot and expenses incident thereto and that Ponce deLeon and the RFC be made to pay them moral damages which theirfather suffered and attorney's fees.

"Answering the third-party complaint, the RFC and Ponce deLeon affirm the legality of the mortgage deed insofar as Soriano isconcerned. The RFC further contends that the mortgage wasbinding on the whole Soriano lot and that there was no validredemption of this lot.

"Ponce de Leon interposed a counterclaim for various sums ofmoney allegedly received from him by Francisco Soriano and thepresent third-party plaintiffs."

2

In due course, the lower court rendered judgment thedispositive part of which is quoted at the beginning of thisdecision. Said court held that the typhoons in October andNovember 1952 did not relieve the plaintiff from hisobligations under the promissory note and the deed ofmortgage in favor of the RFC; that the sheriff's sale of themortgaged properties is valid; that the RFC need notaccount for the machineries and equipment of the sawmillin Samar or reimburse the value of such machinery andequipment as may be unaccounted for, they having becomeproperty of the RFC, owing to plaintiff's failure to exercisethe right of redemption in accordance with law; that neithermay he recover damages from the RFC for the alleged delayin the releases made by the same, since their contractstipulates that the proceeds of the loan shall be released atthe discretion of the Mortgagee and plaintiff's offer ofredemption came long after the expiration of the periodtherefor, and was not for the full amount of plaintiff'sliability, which he, moreover, asked to be reduced andwanted to pay in installments; and that, accordingly,plaintiff has no right to recover any damages.

Upon the other hand, the court found that plaintiffshould pay: (1) rentals for the use of the mortgaged property(house and lot) at Pasay City, after the title thereto had

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2 Record on Appeal, pp. 103-112

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senting the balance of plaintiff's obligation in favor of theRFCwhich, as of November 24, 1954, amounted toP583,-270.49, plus 10% thereof, as stipulated penalty, or theaggregate sum of P641,597.54after deducting therefromthe sum of P112,332.00 for which the mortgaged propertieshad been sold, (3) apart from the sum of P5,000.00, asdamages for the injunction issued, at his behest, and thecosts.

As regards the third party complaint of the Sorianos, thelower court: (1) overruled their claim to the effect thatFrancisco Soriano had signed the promissory note and thedeed of mortgage in favor of the RFC without knowledge ofthe contents thereof and without any consideration therefor;but (b) held that, being registered in the name of "FranciscoSoriano, married to Tomasa Rodriguez," the propertycovered by original certificate of title No. 8094hereinafterreferred to as the Paraaque propertyis presumed tobelong to the conjugal partnership of said spouses, and that,the RFC having failed to offset this presumption, themortgage on and the sale of the property by the sheriff arenull and void as to one-half (1/2) thereof.

Moreover, the court declared: (a) that the RFC wasjustified in rejecting the offer, made by the Sorianos, toredeem said property for, pursuant to section 78 of RepublicAct No. 337, redemption could be effected "only by payingthe amount fixed in the order of execution"; (b) thatplaintiff's counterclaim against the Sorianos is barred bythe statute of limitations; (c) that neither may he recoverdamages from the Sorianos, their alleged bad faith notbound to pay damages to the RFC, the action of the formeragainst the latter not being altogether unjustified.

All of the partiesnamely, plaintiff, Jose Ponce de Leon,defendant, Rehabilitation Finance Corporation, hereinafterreferred to as RFC (now Development Bank of thePhilippines), and Rosalina Soriano, Fr. Eugenio Sorianoand Teofila Soriano del Rosario, hereinafter referred to asthe Sorianoshave appealed from said decision. 297

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Appeal of the Sorianos

The Sorianos maintain that the lower court erred: (1) inholding that the promissory note and the deed of mortgageexecuted by Francisco Soriano in favor of the RFC are validas regards one-half of the Paraaque property; (2) in rulingthat the extrajudicial sale thereof to the RFC is valid as tothe aforementioned one-half of said property; (3) in notsentencing the RFC to allow the redemption of such half ofsaid property by the Sorianos, as heirs of the deceasedFrancisco Soriano, for one-half of the sum of P10,000 forwhich the whole lot was sold to the RFC, or, at least, for thewhole sum of P10,000; (4) in not declaring that section 78 ofRep. Act No. 337 is unconstitutional and in holding that thesame, instead of Act No. 3135, as amended by Act No. 4118,is the law applicable to the case; (5) in considering that thecase of Villar v. de Paderanga

3 is authoritative or

controlling in the case at bar; (6) in not sentencing theplaintiff and the RFC to pay damages to the Sorianos; (7) innot ordering the RFC to return OCT No. 8094, covering theParaaque property, to the Sorianos, free from any lien orencumbrance: and (8) in denying the motion forreconsideration of the Sorianos.

The latter's first assignment of error is predicated uponthe theory that, when the promissory note and the deed ofmortgage in question were executed by Francisco Soriano,he was somewhat absent-minded, owing to senility, he beingthen a septuagenarian, apart from illiterate, for he couldwrite only his name; that he was persuaded to sign saidpromissory note and deed of mortgage thru fraud, deceit andundue influence, and did not know the true nature of theseinstruments when he affixed his signatures thereon; andthat said instruments are also null and void for lack of causeand consideration. In this connection, the appealed decisionhas the following to say:

"The third-party plaintiffs ask that the mortgage deed andpromissory note be declared null and void with respect to FranciscoSoriano for lack of consent and consideration. It is

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3 97 Phil. 604, 609.

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claimed that Francisco Soriano was made to believe by Ponce deLeon when he signed the mortgage deed and the promissory notethat these were documents releasing his land from the previousmortgage in favor of the PNB and that Francisco Soriano did notreceive a single centavo out of the RFC loan.

"The principal witness on the above allegation of the thirdpartyplaintiffs is Rosalina Soriano, who testified that her father,Francisco was an old man who was absent-minded; that in 1945,Ponce de Leon merely borrowed her father's certificate of title on thepretext that he would see if it were valid; that she gave it to Poncede Leon who never returned the certificate and it turned out thatthe latter mortgaged it to the PNB by deceiving her father insigning the mortgage contract; that in 1951, her father received asheriff's notice that the land would be foreclosed; that her fatherwent to see Ponce de Leon in Negros but the latter assured him thatnothing would happen to his land; that in October, 1951, she andher father went to see Ponce de Leon; that when the latter told herfather that the property was mortgaged to the RFC, her father gotangry at Ponce de Leon saying that the latter fooled him but Poncede Leon assured him that he would redeem the land but he failed todo so.

"Ponce de Leon denied having deceived Francisco Soriano intosigning the mortgage deed covering his land, saying that thetransaction was with the full and complete knowledge andunderstanding of Francisco Soriano. He was supported by FelipeCuaderno, Jr., the Notary Public, who notarized the mortgage deed,who said that he explained and translated into Tagalog, a languageknown and spoken by Francisco Soriano, the mortgage deed.

"The fact that Francisco Soriano may have been absentmindedcould not be said to have the effect of vitiating his consent to themortgage deed because the execution and signing of a contract isnot a matter that concerns past events in which absent-mindednessmay be taken into account. Besides, the testimony of RosalinaSoriano to the effect that her father told Ponce de Leon that thelatter fooled him shows that the old man Soriano could rememberpast events, for if truly absentminded, Francisco would not recollectwhat he claims to be what really took place at the RFC office astestified to by Rosalina.

"Neither could Francisco Soriano be considered feebleminded ifwe believe the testimony of Rosalina which shows Soriano'sdetermination to see to it that the wrong done him was righted andthat his property may not be taken away from him, for according to



Rosalina, he even went to Negros alone to see Ponce de Leon hereceived the Sheriff's notice of fore-

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closure and as shown by his alleged going to see Ponce de Leon anumber of times about his land and of his enlisting the aid ofRamon Lacson

"The Sorianos stress that, according to Felipe Cuaderno, Jr., theNotary Public, when the latter asked Francisco Soriano, after hehad translated the mortgage deed into Tagalog if he (Francisco)understood it, it was Ponce de Leon who said that the old manalready (k)new it. But, granting that this was what happened, yet,Francisco Soriano would certainly have protested against thestatement of Ponce de Leon if Francisco did not really know whatthe transaction was about or he would have told Cuaderno that thedocument was not in accordance with the agreement between himand Ponce de Leon considering that the document was alreadytranslated to the old man by Cuaderno in the Tagalog languagewhich Soriano understood.

"Besides, if Ponce de Leon really deceived Francisco Soriano intosigning the mortgage deed and promissory note so much so that inOctober, 1951, the old man Soriano was so angry at Ponce de Leonthat he told the latter that he fooled him as testified to by RosalinaSoriano, then why was it that Ponce de Leon was wade one of thesponsors of the thanksgiving mass of the Neo-Prysbeter Rev. Fr.Eugenio Soriano, the old man's son and one of the present third-party plaintiffs? The conduct of the Sorianos in making Ponce deLeon one of the sponsors in the thanksgiving mass of Rev. Fr.Eugenio Soriano in which Ponce de Leon spent a considerableamount for the big feast that followed the mass is inconsistent withthe Sorianos' claim that Ponce de Leon had hoodwinked FranciscoSoriano into signing the mortgage instrument and the promissorynote.

"Moreover, the mere oral unsupported testimony of RosalinaSoriano, an interested party and one of the plaintiffs herein, is notsufficient to overcome the legal presumption of the regularity of themortgage deed, a contract celebrated with all the legal requisitesunder the safeguard of a notarial certificate (Naval, et al. v.Enriquez, 3 Phil. 670-72). Such unsupported testimony of theinterested party Rosalina Soriano is not that clear, strong andconvincing evidence beyond mere preponderance of evidence,



required to show the falsity or nullity of a notarial document (Sigue,et al. v. Escaro, CA, 53 Q.C. 1161; Jocson v. Ratacion, G.R. No.41687, Palanca v. Chillanchin v. Coquinco, G.R. No. L-1355;Robinson v. Villafuerte, 18 Phil. 171).

"With reference to the contention that there was no considerationreceived by Francisco Soriano out of the mortgage contract and thepromissory note executed in connection there-

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with, this is a matter which concerned merely Francisco Soriano andJose L. Ponce de Leon for Francisco Soriano had expressly inwriting (Exhibit '33-a-Soriano') authorized Jose L. Ponce de Leon tohave the check or checks covering the amount of the mortgageissued in the name of said Jose L. Ponce de Leon. Whateverarrangements the latter and Francisco Soriano may have had withrespect to the amounts thus given by the RFC on account of themortgage is not the concern of the RFC if Ponce de Leon did not infact give any portion of the amount to Francisco Soriano. At anyrate, there is ample evidence to show that Francisco Soriano receivedpart of the consideration of the loan from the RFC. It will be recalledthat part of this loan was paid for the obligation of FranciscoSoriano and Ponce de Leon to the Philippine National Banksecured by a mortgage of the lot in the name of Francisco Soriano.That Francisco Soriano received portions of this PNB loan fromPonce de Leon is shown by the fact that on August 16, 1945,Francisco Soriano received the amount of P2,000.00 from Ponce deLeon, evidenced by the receipt exhibit 'N', and this amount musthave been part of the P10,000.00 consideration of the PNBmortgage because this mortgage was executed on August 11, 1945or two days before Soriano received from Ponce de Leon the amountof P2,000.00 on August 16, 1945. And two days thereafter, onAugust 18, 1945, Francisco Soriano again received from Ponce deLeon the amount of P350.00 as shown by the receipt exhibit '0-3'and, on April 27, 1945, the amount of P1,000.00 was received byFrancisco Soriano from Ponce de Leon as shown by his receiptexhibit '0-1' to pay the mortgage on his lot to Apolonio Pascual. OnMarch 12, 1952, Francisco Soriano received the amount ofP3,000.00 from de Leon as shown by the check exhibit 'X-2' and onJune 3, 1952 the amount of P50.00 as shown by the check exhibit'X-6' and P200.00 on October 22, 1952 as shown by the checkexhibit 'X-7'. Rosalina Soriano herself received P50.00 on March 30,



1952 from Ponce de Leon as shown by the check marked Exhibit 'X-3' and third-party plaintiff Rev. Eugenio Soriano received P100.00on March 3, 1952 as shown by the check exhibit 'X-1' and P50.00 onMarch 13, 1952 as shown by exhibit 'X-4'. There is therefore noground for declaring the mortgage contract and promissory noteinvalid for lack of consideration insofar as Francisco Soriano and hischildren are concerned."

4

The facts thus relied upon by His Honor, the Trial Judge,are borne out by the record, and We are fully in accord withthe conclusions drawn therefrom.

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4 Record on Appeal pp. 120-127. Italics ours.

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In support of their second assignment of error, the Sorianosmaintain that the sum of P10,000, for which the Paraaqueproperty was sold to the RFC, is ridiculously inadequate,considering that said property had been assessed atP59,647.05. This pretense is devoid of merit, for saidproperty was subject to redemption and:

"x x x where there is the right to redeem x x xinadequacy of priceshould not be material, because the judgment debtor may re-acquirethe property or else sell his right to redeem and thus recover any losshe claims to have suffered by reason of the price obtained at theexecution sale."

5

Then, again, as the trial court had correctly of served:

"But, mere inadequacy of the price obtained at the sheriff's saleunless shocking to the conscience will not be sufficient to set asidethe sale if there is no showing that, in the event of a regular sale, abetter price can be obtained. The reason is that, generally, and, inforced sales, low prices are usually offered (1 Moran's Rules ofCourt, pp. 834-835). Considering that in Gov't. of P.I. v. Sorna, G.R.No. 32196, wherein property worth P120,000.00 was sold for onlyP15,000.00, in Philippine National Bank v. Gonzales, 45 Phil. 693,wherein property valued at P45,000.00 was sold for P15,000.00 andin Cu Unjieng & Sons v. Mabalacat Sugar Co., 58 Phil. 439,



property worth P300,000.00 to P400,000.00 was sold forP177,000.-00, the Court cannot consider the sale of the Bacolodproperties, the Taft Avenue house and lot and the Paraaqueproperty of the Sorianos null and void for having been sold atinadequate prices shocking to the conscience and there being noshowing that in the event of a resale, better prices can be obtained."

6

The third, fourth and fifth assignments of error of theSorianos refer to the amount for which they feel entitled toredeem the aforementioned property.

It will be recalled that, before the expiration of theredemption period, Teofila Soriano del Rosario offered torepurchase said property for P14,000; that she and hersister Rosalina reiterated the offer on the last day of saidperiod; and that the offer was rejected by the RFC, whoseaction was upheld by the lower court, inasmuch as sec. 78 ofRep. Act 337 provides that, "(i)n the event of foreclosure x xx

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5 Barrozo v. Macaraeg, 83 Phil. 378, 381. Italics ours.6 Record on Appeal, pp. 115-116. Italics ours.

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VOL. 36, DECEMBER 18, 1970 303


the mortgagor or debtor whose real property has been soldat public auction x x x for the x x x payment of an obligationto any bank, banking, or credit institution, x x x shall havethe right x x x to redeem the property by paying the amountfixed by the court in the order of execution, x x x," not theamount for which it had been purchased by the buyer atpublic auction. We have already declared that" xxx (o)nlyforeclosure of mortgages to banking institutions (includingthe Rehabilitation Finance Corporation) and those madeextrajudicially are subject to legal redemption, by expressprovision of statute, x x x"

7 and, although neither an

ordinary bank nor the RFC was involved in the case inwhich this pronouncement had been made, the same wasrelevant to the subject-matter of said case and to the issueraised therein. At any rate, We reiterate the aforementionedpronouncement, it being in accordance with law, for,



pursuant to Rep. Act No. 337:

"x x x The terms 'banking institution' and 'bank', as used in thisAct, are synonymous and interchangeable and specifically includebanks, banking institutions, commercial banks, savings banks,mortgage banks, trust companies, building and loan associations,branches and agencies in the Philippines of foreign banks,hereinafter called Philippine branches, and all other corporations,companies, partnerships, and associations performing bankingfunctions in the Philippines."

8

The Sorianos insist that the present case is governed, not byRep. Act No. 337, but by Act No. 3135, as amended by ActNo. 4118pursuant to which, in relation to section 465 ofAct No. 190, the redemption may be made by "pairing thepurchaser the amount of his purchase," with interest andtaxesthe deed of real estate mortgage in favor of the RFChaving allegedly been executed and the aforementionedproperty having been sold pursuant to said Acts Nos. 3135and 4118.

The conclusion drawn by the Sorianos from these facts isuntenable. As set forth in its title, Act No. 3135 waspromulgated "to regulate the sale of property under specialpowers inserted in or annexed to real estate mortgages,"

_______________

7 Villar v. de Paderanga, 97 Phil. 64, 609.8 Rep. Act No. 337, Sec. 2. Italics ours.

304



Section 6 thereof provides that in all cases of "extrajudicialsale xxx made under the special power hereinbefore referredto," the property sold may be redeemed within "one yearfrom and after the date of the sale x x x." Act No. 4118amended Act No. 3185 by merely adding thereto three (3)new sections. Upon the other hand, Rep. Act No. 337,otherwise known as "The General Banking Act," is entitled"An Act Regulating Banks and Banking Institutions and forother purposes." Section 78 thereof limits the amount of theloans that may be given by banks and banking or creditinstitutions on the basis of the appraised value of the



property given as security, as well as provides that, in theevent of foreclosure of a real estate mortgage to said banksor institutions, the property sold may be redeemed "bypaying the amount fixed by the court in the order ofexecution," or the amount judicially adjudicated to thecreditor bank. This provision had the effect of amendingsection 6 of Act No. 3135, insofar as the redemption price isconcerned, when the mortgagee is a bank or a banking orcredit institution, said section 6 of Act No. 3135 being, inthis respect, inconsistent with the above-quoted portion ofsection 78 of Rep. Act No. 337. In short, the Paraaqueproperty was sold pursuant to said Act No. 3135, but thesum for which it is redeemable shall be governed by Rep.Act No. 337, which partakes of the nature of an amendmentto Act No. 3135, insofar as mortgages to banks or banking orcredit institutions are concerned, to which class the RFCbelongs. At any rate, the conflict between the two (2) lawsmust be resolved in favor of Rep. Act No. 337, both as aspecial and as the subsequent legislation.

9

The sixth, seventh and eighth assignments of error madeby the Sorianos are mere consequences of those alreadydisposed of. Hence, no further discussion thereof isnecessary.

Plaintiff's Appeal

Plaintiff Ponce de Leon alleges that the lower court has

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9 Nepomuceno v. RFC (DBP), L-14897, November 23, 1960.

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VOL. 36, DECEMBER 18, 1970 305


erred: (1) "in not setting aside the foreclosure sales on themortgage contract dated October 8, 1951"; (2) "in statingthat the proceeds of the foreclosure sales were conscionable";(3) in not granting Ponce de Leon's claim for adjustmentand not "giving him a reasonable time to pay whateverobligations he may have"; (4) in not granting him damagesnor directing the return of his properties; (5) "in notordering a new trial for the purpose of adjusting" his



"obligations and determining the terms and conditions of hisobligation"; and (6) in not granting his claim against theSorianos.

With respect to his first assignment of error, plaintiffmaintains that his promissory note Exhibit A was not yetoverdue when the mortgage was foreclosed, because theinstallments stipulated in said promissory note have "nofixed or determined dates of payment," so that the note isunenforceable and "the RFC should have first asked thecourt to determine the terms, conditions and period ofmaturity thereof."

In this connection, it should be noted that, pursuant toExhibit A, the total sum of P495,000 involved therein shallbe satisfied in quarterly installments of P28,831.64 eachrepresenting interest and amortizationand that, althoughthe date of maturity of the first installment was left blank,the promissory note states that the "date of maturity (was)to be fixed as of the date of the last release," completing thedelivery to the plaintiff of the sum of P495,000 lent to himby the RFC. He now says that this sum of P495,000 has not,as yet, been fully released by the RFC. But this is contraryto the facts of record, for, during the trial, his counsel, Atty.Jose Orozco, made the following admission:

"Out of the loan of P495,000.00, the following were paid to thecreditors of Jose Ponce de Leon: P100,000.00 to the PNB,P30,000.00 to Cu Unijeng Bros., P5,000.00 to Arturo Colmenares,P1,000.00 to Lorenzo Balagtas. The total amount paid to thecreditors is P136,000.00 which were taken out of the proceeds ofP495,000,00. The rest were all paid in the name of Jose Ponce deLeon."

10

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10 T.s.n., p. 45, hearing of Jan. 3, 1957. Italics ours.

306



In short, part of the sum of P495,000 had been delivered bythe RFC to the creditors of the plaintiff and FranciscoSoriano, as agreed upon by them, in payment of theiroutstanding obligations, and the balance of said sum of



P495,-000 was turned over to the plaintiff, with the writtenauthorization and conformity of Francisco Soriano. This isborne out by the fact that, prior to the institution of thiscase, plaintiff had not complained of failure of the RFC tofully release the aforementioned sum of P495,000. Indeed,in his own complaint herein, he merely alleged a "delay inthe release." Even so, he impliedly admitted that the firstinstallment was due in October 1952or, more specifically,on October 24, 1952, this being the date given therefor inthe letter-demands of the RFC, the accuracy of which werenot questioned by the plaintiffso that the last releasemade by the RFC to complete the sum of P495,000 musthave taken place on July 24, 1952, although, in answer to aquestion propounded to him, by his own counsel, as regardsthe date he "received the total amount granted by the RFC,"plaintiff saidon the witness standhe "believed that itwas in the last part or quarter of 1953." At this juncture, itis noteworthy that plaintiff claims the right to a suspensionof payment or an extension of the period to pay the RFCowing to the typhoons that had lashed his sawmill inOctober and November 1952, thus indicating clearly thatthe amount of the loan extended to him and FranciscoSoriano had then been fully released by the RFC three (3)months before October 1952 and that the first installmentunder the promissory note Exhibit A was due that month,as claimed by the RFC.

At any rate, Annex A, in effect, authorized the RFC to fixthe date of maturity of the installments therein stipulated,which is allowed by the Negotiable Instruments Law

11 and

when a promissory note expresses "no time for

_______________

11 SEC. 13. When date may be inserted.Where an instrument

expressed to be payable at a fixed period after date is issued undated, or

where the acceptance of an instrument payable at fixed period after

sight is undated, any holder may insert therein the true date of issue or

acceptance, and the instrument shall be payable accordingly. The

insertion of a wrong date does not avoid the instrument in the hands of

a subsequent holder

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VOL. 36, DECEMBER 18, 1970 307




(a)

(b)

payment," it is deemed "payable ondemand."12

Under his second assignment of error, plaintiff maintainsthat the aggregate price of P112,332.00, for which themortgaged properties had been sold at public auction, isunconscionable, said properties being allegedly worthP1,-202,976. This premise is inaccurate.

It should be noted that plaintiff and Francisco Sorianowere granted a P495,000 loan on the security, not only, ofthe existing properties offered as guarantee, but, also, onthat of assetsappraised at P570,000yet to be acquired byplaintiff, partly with money thus received from the RFC andpartly with his own funds. After obtaining said loan andreceiving the amount thereof, less the sum of P 136,000applied to the payment of outstanding obligations, plaintifffailed to purchase the machinery and equipment he hadpromised to get, or to set up the constructions he hadundertaken to make. Moreover, the RFC found that

_______________

in due course; but as to him the date so inserted is to be regarded as

the true date.

SEC. 14. Blanks, when may be filled.Where the instrument is

wanting in any material particular, the person in possession thereof has

a prima facie authority to complete it by filling up the blanks therein.

And a signature on a blank paper delivered by the person making the

signature in order that the paper may be converted into a negotiable

instrument operates as a prima facie authority to fill it up as such for

any amount. In order, however, that any such instrument, when

completed, may be enforced against any person who became a party

thereto prior to its completion, it must be filled up strictly in accordance

with the authority given and within a reasonable time. But if any such

instrument after completion, is negotiated to a holder in due course, it

is valid and effectual for all purposes in his hands, and he may enforce it

as if it had been filled up strictly in accordance with the authority given

and within a reasonable time.12 SEC.7. When payable on demand.An instrument is payable on

demand

Where it is expressed to be payable on demand, or at sight or on

presentation; or

In which no time for payment is expressed.

Where an instrument is issued, accepted, or indorsed when overdue,

it is, as regards the person so issuing, accepting, or indorsing it, payable

on demand.



308



were originally appraised at P492,288.00, were actuallyworth P172,530.00 only. Again, a good part of themachinery and equipment existing in one of the mortgagedlands, when it was inspected before the granting of the loan,were subsequently lost or missing, and those that remainedwere, at the time of the sale to the RFC, in bad shape, sothat the appraised value thereof was then estimated atP10,000 only. Under these circumstances, it is clear that thelower court did not err in approving the sale of themortgaged properties for the aggregate sum of P112,332.

As regards his third assignment of error, it is urged bythe plaintiff that he is entitled to a "suspension of payment,"or a postponement of the date of maturity of his obligation topay, in view of the typhoons that had "practically wiped out"his sawmill in Samar during the months of October andNovember 1952. This claim is predicated upon Article 1174of our Civil Code, reading:

"x x x Except in cases expressly specified by the law, or when it isotherwise declared by stipulation, or when the nature of theobligation requires the assumption of risk, no person shall beresponsible for those events which could not be foreseen, or which,though foreseen, were inevitable.

Plaintiff cannot avail of the benefits of this provision sincehe was not bound to deliver the aforementioned sawmill, orany other specific thing damaged or destroyed by thetyphoons, to the RFC. His obligation was merely generic,namely, to pay certain sums of money to the RFC, at statedintervals. As His Honor, the Trial Judge, had aptly put it:

"x x x in the instant case, there was an obligation on the part of thedebtor to pay his loan, independently of the purpose for which themoney loaned was intended to be used and this obligation to paycontinues to subsist notwithstanding the fact that it may havebecome impossible for the debtor to use the money loaned for theparticular purpose that was intended (Milan v. Rio y Glabarrieta,45 Phil. 718). There is hence no ground for declaring theamortizations due on the principal loan since October, 1952 asextinguished due to fortuitous event or



309

VOL. 36, DECEMBER 18, 1970 309


to grant plaintiff a reasonable time to pay the due amortizations asasked for by Ponce de Leon in his complaint."

13

Being mere corollaries to his first three assignments oferror, which cannot be sustained, plaintiff's fourth, fifth andsixth assignments of error must have the same fate.

Defendant's Appeals

The RFC contends that the lower court erred: (1) in holdingthat the Paraaque property is presumed to belong to theconjugal partnership of Mr. and Mrs. Francisco Soriano; (2)in failing to give due weight to the testimony of GregorioSoriano, and in holding that the same is insufficient toovercome the presumption in favor of the conjugal nature ofsaid property; (3) in failing to consider that the Sorianos arenow estopped from questioning the validity of the mortgageon and the foreclosure sale of said property; (4) in annullingthe mortgage insofar as one-half of said property isconcerned, despite the finding that part of the proceeds ofthe RFC loan was paid to settle the PNB loan secured bythe same property; and (5) in holding that the mortgagethereon and the sheriff's sale thereof to the RFC are nulland void as regards onehalf of said property. Theseassignments of error may be reduced to one, namely, thatthe lower court erred in voiding the sale to the RFC of theParaaque property, upon the ground that the same formedpart of the conjugal partnership of Mr. and Mrs. FranciscoSoriano.

In this connection, it appears that the property wasregistered in the name of "Francisco Soriano, married toTomasa Rodriguez," and that based upon this fact alonewithout any proof establishing satisfactorily that theproperty had been acquired during coverturethe lowercourt presumed that it belongs to the conjugal partnershipof said spouses. We agree with the RFC that the lower courthas erred in applying said presumption.

We should not overlook the fact that the title to saidproperty was not a transfer certificate of title, but an



_______________

13 Record on Appeals, p. 114. Italics ours.

310



original one, issued in accordance with a decree which,pursuant to law, merely confirms a pre-existing title.

14 Said

original certificate of title does not establish, therefore, thetime of acquisition of the Paraaque property by theregistered owner thereof.

Then, again, the lower court applied said presumption,having in mind, presumably, Article 160 of our Civil Code,which reads:

"x x x All property of the marriage is presumed to belong to theconjugal partnership, unless it be proved that it pertains exclusivelyto the husband or to the wife."

This provision must be construed in relation to Articles 153to 159 of the same Code, enumerating the properties"acquired x x x during the marriage" that constitute theconjugal partnership. Consistently therewith, We have heldthat "the party who invokes this presumption must firstprove that the property in controversy was acquired duringthe marriage. In other words, proof of acquisition duringcoverture is a condition sine qua non for the operation of thepresumption in favor of conjugal partnership."

15 It had,

earlier, been declared,16

that "(t)he presumption underArticle 160 of the Civil Code refers to property acquiredduring the marriage x x x." We even added that, there being"no showing as to when the property in question wasacquired x x x the fact that the title is in the wife's namealone is determinative." This is borne out by the fact that, inthe previous cases applying said presumption,

17 it was duly

established that the property in question therein had beenacquired during coverture. Such

_______________

14 Section 38, Act 496; Maloles v. Director of Lands, 25 Phil. 548;

Verzosa v. Nicolas, 29 Phil. 425; Government v. Trio, 50 Phil 708;

Misamis Lumber Co. v. Director of Lands, 57 Phil. 881.



15 Cobb-Perez v. Lantin, L-22320, May 22, 1968.16 Maramba v. Lozano, L-21533, June 29, 1967.17 Flores v. Flores, 48 Phil. 288, 289-290; Pratts v. Menzi, 53 Phil. 51,

53; Espiritu v. Bernardino, 58 Phil. 902; Benavides v. Tordilla, 5,9 Phil.

918; Reyes v. llano, 63 Phil. 629, 639, Commonwealth v. Sandiko, 72

Phil. 258, 259; Guinoo v. Court of Appeals, 97 Phil. 235, 238.

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VOL. 36, DECEMBER 18, 1970 311


was, also, the situation obtaining in Servidad v.Alejandrino

18 cited in the decision appealed from.

The case at bar is differently situated. The Sorianos havenot succeeded in proving that the Paraaque propertywasacquired "during the marriage" of their parents. What ismore, there is substantial evidence to the contrary.

Gregorio Soriano testified that his first cousin, FranciscoSoriano, had acquired said property from his parents, longbefore he got married. In this connection, the lower court,however, said that:

"x x x the credibility of this witness is subject to doubt for it wasshown that he had an improper motive in testifying against thethird-party plaintiffs because he had a niece who was prosecuted bythe third-party plaintiffs for estafa, x x x."

19

This observation is, to our mind, hardly justifiable. To beginwith, when counsel for the Sorianos asked the witnesswhether or not his grandchild or grandniece FlordelizaClemente had been accused of "estafa" by the Sorianos,counsel for the RFC objected thereto, and the courtsustained the objection, upon the ground that the questionwas "irrelevant". As a consequence, there is no evidence ofthe prosecution of Flordeliza Clemente by the Sorianos.What is more, the ruling of the court declaring the matter"irrelevant" to the present case rendered it unnecessary forthe RFC to prove that said prosecutionif it were a facthad nothing to do with the testimony of Gregorio Soriano. Itwould, therefore, be less than fair to the RFC to draw aninference adverse thereto resulting from the absence ofevidence to this effect. At any rate, said prosecution does notnecessarily warrant the conclusion that Gregorio Sorianowas impelled by an "improper motive" in testifying as he



did. After all, the Sorianos are, likewise, nieces of GregorioSoriano and he was not the party allegedly accused bythem.

Again, this witness testified in a straightforward manner,and disclosed a good number of details bearing the ear-

_______________

18 52 O.G. 2031.19 Record on Appeal, pp. 128-129.

312



roborated, not only by Felipe Cuaderno, Jr. and OCT No.8094, but, also, by the testimony of third-party plaintiffRosalina Soriano. Indeed, Felipe Cuaderno, Jr.anassistant attorney and notary public of the RFC, beforewhom the deed of mortgage was acknowledgedtestifiedthat, in a conference he had before the execution of thepromissory note and the deed of mortgage in favor of saidinstitution, Francisco Soriano assured him that theParaaque property was "his own separate property, havingacquired it from his deceased father by inheritance and thathis children have nothing to do with the property." Thiswas, in effect, confirmed by no less than Rosalina Soriano,for she stated, on cross-examination, that her father,Francisco Soriano, "was born and x x x raised" in saidproperty, so thatcontrary to her testimony in chiefhecould not have told her that he and his wife had bought it,as the Sorianos would have Us believe.

Needless to say, had the property been acquired by themduring coverture, it would have been registered, in thename not of "Francisco Soriano, married to TomasaRodriguez," but of the spouses "Francisco Soriano andTomasa Rodriguez." In Litam v. Espiritu,

20 We quoted with

approval the following observation made in the decisionunder review therein:

"Further strong proofs that the properties in question are theparaphernal properties of Marcosa Rivera, are the very TorrensTitles covering said properties. All the said properties are registeredin the name of 'Marcosa Rivera, married to Rafael Litam.' This



circumstance indicates that the properties in question belong to theregistered owner, Marcosa Rivera, as her paraphernal properties,for if they were conjugal, the titles covering the same should havebeen issued in the names of Rafael Litam and Marcosa Rivera. Thewords 'married to Rafael Litam' written after the name of MarcosaRivera, in each of the above mentioned titles are merely descriptiveof the civil status of Marcosa Rivera, the registered owner of theproperties covered by said titles."

The records further show that on August 16, 1945or two(2) days after the execution of the deed of mort-

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20 100 Phil. 364, 376. Italics ours.

313

VOL. 36, DECEMBER 18, 1970 313


gage for P10,000 in favor of the PNBFrancisco Sorianoreceived P2,000 from plaintiff herein; that, early in 1951,Francisco Soriano received a letter informing him that thePNB mortgage on the Paraaque property would beforeclosed, unless the debt guaranteed therewith weresettled; that, accordingly, his children came to know of themortgage in favor of the PNB; that on October 8, 1951, saidmortgage was transferred to the RFC; that, thereafter, orfrom March to October 1952, Francisco Soriano and hischildren, Rosalina Soriano and Eugenio Soriano, receivedseveral sums of money, aggregating P3,450, from plaintiffherein; that the latter, moreover, spent over P6,000 on theoccasion of the ordination of third-party plaintiff, EugenioSoriano, as a priest, on April 20, 1952; that plaintiff, also,paid the bills of Francisco Soriano in the Singian Clinicwhen he fell sick in 1953; and that the former had, likewise,paid the real estate tax on the Paraaque property from1947 to 1952.

Under these circumstances, it is difficult to believe thatthe Sorianos did not know then of the mortgage constitutedby Francisco Soriano, on October 8, 1951, in favor of theRFC. In fact, Rosalina Soriano testified that when, thatmonth, Francisco Soriano and she conferred with theplaintiff, he stated that the Paraaque property was



mortgaged to the RFC, whereupon her father got angry atthe plaintiff and said that he had fooled him (FranciscoSoriano). Being thus aware of said mortgage since October1951, the Sorianos did not question its validityuntilJanuary 12, 1957, when they filed in this case their third-party complaint in interventionas regards, at least, one-half of the Paraaque property, which they now claim to betheir mother's share in the conjugal partnership. Worsestill, after the foreclosure sale in favor of the RFC, they triedto redeem the property for P14,000, and, when the RFC didnot agree thereto, they even sought the help of the Office ofthe President to effect said redemption.

Their aforementioned failure to contest the legality of themortgage for over five (5) years and these attempts toredeem the property constitute further indicia that the samebelonged exclusively to Francisco Soriano, not to the

314



conjugal partnership with his deceased wife, TomasaRodriguez. Apart from the fact that said attempts to redeemthe property constitute an implied admission of the validityof its saleand, hence, of its mortgage to the RFCthereare authorities to the effect that they bar the Sorianos fromassailing the same.

"x x x defendants, by their repeated requests for time to redeem hadimpliedly admittedand were estopped to questionthe validityand regularity of the Sheriff's sale."

21

"The petitioner himself believed that the company had a right tocancel, because in March, 1932, i.e., after the cancellation, heproposed the repurchase of the property, and the company agreed toresell it to him x x x. Unluckily he could make no down paymentand the repurchase fell through. Wherefore, it is now too late forhim to question the cancellation, inasmuch as he practically ratifiedit, x x x."

22

"The fact that Mallorca failed to exercise her right of redemption,which she sought to enforce in a judicial court, ends her interest tothe land she claims, and, doubtless, estops her from denying PNB'smortgage lien thereon."

23

It is thus clear that the lower court erred in annulling the



RFC mortgage on the Paraaque property and its sale tothe RFC as regards one-half of said property, and that thedecision appealed from should, accordingly, be modified, byeliminating therefrom the second paragraph of itsdispositive part, quoted earlier in this decision.

With this modification and that of other pertinent partsof the decision appealed from, the same is hereby affirmed inall other respects, with the costs of this instance againstplaintiff, Jose L. Ponce de Leon and third-party plaintiffs,Rosalina Soriano, Teofila Soriano del Rosario and FatherEugenio Soriano. It is so ordered.

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21 Tiaoqui v. Chaves, L-10086, May 20, 1957, quoting from 59 C.J.S.

p. 1372: "By claiming a right to redeem, or availing himself of a

statutory stay, or by seeking to impress a trust on the property in the

hands of the purchaser, one affims the validity of the sale and may not

assail it; x x x." Italics ours.22 Tolentino v. Philippine Land Improvement Co., Inc., L-2469,

September 30, 1950 (Unreported) Italics ours.23 Philippine National Bank v. Mallorca, L-22538, October 31, 1967.

Italics ours.

315

VOL. 36, DECEMBER 18, 1970 315


Reyes, J.B.L., Makalintal, Zaldivar, Castro,Fernando, Teehankee, Barredo and Villamor, JJ., concur.

Dizon and Makasiar, JJ., are on leave.

Decision affirmed with modification.

A N N O T A T I O N CONTRACTS

1. Subject Matter

Court's jurisdiction cannot be the object of contracts.Aprobate court, or any other court of justice for that matter,cannot and never does, enter into any contract or agreementregarding its jurisdiction much less to barter it away wholly



or partially. Seifert vs. Bachrach, 79 Phil. 748.Contract over political rights is void.We agree with the

lower court in adjudging the contract or agreement inquestion a nullity. Among those that may not be the subjectmatter (object) of contracts are certain rights of individuals,which the law and public policy have deemed wise toexclude from the commerce of man. Among them are thepolitical rights conferred upon citizens, including, but notlimited to, one's right to vote, the right to present one'scandidacy to the people and to be voted to public office,provided, however, that all the qualifications prescribed bylaw obtain. Such rights may not, therefore, be bargainedaway or surrendered for consideration by the citizen norunduly curtailed with impunity, for they are conferred notfor individual or private benefit advantage but for thepublic good and interest. Saura vs. Sindico, 107 Phil. 336.

Qualifications for certain public offices may not beenlarged or reduced by agreement.Constitutional andstatutory provisions fix the qualifications of persons whomay be eligible for certain elective public offices. Saidrequirements may neither be enlarged nor reduced by mereagreements between private parties. A voter possessing allthe

316



qualifications required to fill an office may, by himself orthrough a political party or group, present his candidacywithout further limitations than those provided by law.

"Every voter has a right to be a candidate for public office if hepossesses the qualifications required to fill the office. It does notnecessarily follow that he can be the candidate of a particularpolitical party. The statute provides when and how one may be acandidate of a political party. If he cannot fill the requirement so asto be the candidate of the political party of his choice, he may stillbe a candidate at the general election by petition. The right of thevoter to vote at the general election for whom he pleases cannot belimited." (Roberts vs. Cleveland, Sec. of State of the State of NewMexico, 48 NM 226, 149 P [2d] 120, 153 ALR 635, 637-638) (Italicssupplied.)



In common law, certain agreements in consideration of thewithdrawal of candidates for office have invariably beencondemned by the courts as being against public policy, be ita withdrawal from the race for nomination, or, afternomination, from the race for election. (See notes in 37 LRA[N.S.] 289 and cases cited therein; 18 Am. Jur. Sec. 352, pp.399-400).

In the case at hand, plaintiff complains on account ofdefendant's alleged violation of the "pledge" in question byfiling her own certificate of candidacy for a seat in theCongress of the Philippines and in openly and activelycampaigning for her election. In the face of the precedingconsiderations, we certainly cannot entertain plaintiff'saction, which would result in limiting the choice of theelectors to only those persons selected by a small group or byparty bosses. Id.

When Pendleton and Monsale cases distinguished fromcase at bar.The case of Pendleton vs. Pace, 9 S.W. (2nd)437, cited by the appellant, is clearly inapplicable. The courtthere only sanctioned the validity of an agreement by theopposing candidates for nomination setting aside and re-submitting the nomination for another primary election onaccount of the protest or contest filed by the losing candidatein the first primary election. To abandon the contestproceedings, the candidates for nomination agreed to submitagain their nomination to the electors in a subsequentprimary.

317

VOL. 36, DECEMBER 18, 1970 317


Appellant likewise cites and quotes a portion of our ruling inMonsale vs. Nico, G.R. No. L-2539, May 28, 1949, to theeffect that it is not incompetent for a candidate to withdrawor annul his certificate of candidacy. This is not in point, forwhile we stated there that he may do so, there being nolegal prohibition against such a voluntary withdrawal, itdoes not follow, nor did we imply any where in the decision,that in case there is any agreement or consideration forsuch a withdrawal, said agreement or consideration shouldbe held valid or given effect. Id.

Market stall as subject matter of contract.The appellantfinally argues that since appellee was only a month-to-



month lessee of the market stall in question, and in view ofthe provisions of Ordinance No. 6 of the Municipality ofBatangas prohibiting a person from occupying and sellingin any stall of the public market without permission of thelocal market officers, the occupancy of the stall could not bethe subject-matter of a valid contract between parties,unless it was approved and ratified by the municipalauthorities. Held: This contention might be meritorious if itwere sought to enforce the contract in question against themunicipality, or over its objection. But such is not the case.In the absence of protest from the market officials, there isno reason why the contract between the parties should notbe carried out, as agreed between them. The fact remainsthat the market officials admitted the preferential right ofthe actual occupants to a renewal of their leases, and it wasthe waiver of this preference by the appellee that permittedappellant to obtain possession of the stall. The contract inquestion bound her to make a similar waiver upon demandby the appellee. With this arrangement the market officialshad nothing to do. Mercado vs. Aguilar, L-666, June 28,1947.

Stipulation as to venue is valid.Last contention of theplaintiff is that the clause regarding venue "is againstpublic policy and therefore illegal." This is plainlyunmeritorious. The Rules of Court expressly permit thisstipulation concerning venue (Sec. 4, Rule 5), which hadbeen approved in Central Azucarera vs. De Leon, 56 Phil.169 and Navarro vs. Aguila, 66 Phil. 604. Barreros vs. Phil-

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ippine Engineering Corporation, L-6500, Sept. 16, 1954, 95Phil. 960 (unrep.)

Prohibition against impairment of contracts is notabsolute.The prohibition contained in constitutionalprovisions against impairing obligation of contracts is notan absolute one and is not to be read with literal exactnesslike a mathematical formula. Such provisions are restrictedto contracts with respect to property, or some object of value,and confer rights which may be asserted in a court of justice,and have no application to statutes relating to publicsubjects within the domain of the general legislative powers



of the State, and involving the public rights and publicwelfare of the entire community affected by it. They do notprevent a proper exercise by the State of its police powers.By enacting regulations reasonably necessary to secure thehealth, safety, morals, comfort or general welfare of thecommunity, even the contracts may thereby be affected; forsuch matter cannot be placed by contract beyond the powerof the State to regulate and control them. (Ongsiako vs.Gamboa, 86 Phil. 50.) Ilusorio vs. Court of AgrarianRelations, 17 SCRA 25; Zaballero-Tady vs. Rural Bank ofLucena, Inc., 18 SCRA 1073.

The inexistence of a contract is permanent and incurableand cannot be the subject of prescription.Mapalo vs.Mapalo, 17 SCRA 114.

Transaction is determined by its nature.A transactionis determined by the nature thereof. The nature of theagreement being inherent in the agreement itself, existsfrom the very moment the transaction was entered into.Thus, "except as to bona fide city purchasers without noticeand those standing in similar relations, on the reformationof an instrument, the general rule is that it relates back toand takes effect from the time of its original execution,especially as between the parties themselves." (76 C.J.S.par. 93) Cosio vs. Palileo, 17 SCRA 196; Air France vs.Carrascoso, 18 SCRA 155.

The test as to whether a given agreement constitutes anunlawful machination or a combination in restraint of tradeis whether, under the particular circumstances of the case

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and the nature of the particular contract involved in it, thecontract is, or is not, reasonable.Filipinas Cia. de Segurosvs. Mandanas, 17 SCRA 391.

Termination of stevedoring contract.Where a shippingcompany terminated its stevedoring contract with a unionbecause of the latter's inefficient service, it cannot be saidthat the termination was in bad faith or as a retaliation forthe union's demand for a collective bargaining contract. Norcan said termination be considered union interference.Allied Free Workers' Union (PLUM) vs. Compaia Maritima,19 SCRA 258.



Articles 20 and 21 of the New Civil Code which justify acreditor's claim for damages against the debtor and thirdpersons, who executed contracts intended to defraud thecreditors, have retroactive effect.People's Bank and TrustCo. vs. Dahican Lumber Company, 20 SCRA 84.

When court should not fix the period for performing anobligation.Where the issue raised in the pleadings waswhether the seller of the land was given in the contract ofsale a reasonable time within which to construct the streetsaround the perimeter of the land sold, the court, in an actionfor specific performance to compel the construction of saidstreets or for recovery of damages, cannot fix a period withinwhich the seller should construct the streets. The courtshould determine whether the parties had agreed that theseller should have reasonable time to perform its part of thebargain. If the contract so provided, then there was a periodfixed, a "reasonable time", and all that the court shouldhave done was to determine if that reasonable time hadalready elapsed when the suit was filed. If it had passed,then the court should declare that the petitioner hadbreached the contract, as averred in the complaint, and fixthe resulting damages. On the other hand, if the reasonabletime had not yet elapsed, the court perforce was bound todismiss the action for being premature. But in no case can itbe logically held that, under the pleadings, the interventionof the court to fix the period for performance was warranted,for Article 1197 of the New Civil Code is preciselypredicated on the absence of any period

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fixed by the parties. Gregorio Araneta, Inc, vs, Phil. SugarEstates Development Co., Ltd., 20 SCRA 330.

Power of court to fix period.Article 1197 of the NewCivil Code involves a two-step process. The court must firstdetermine that the obligation does not fix a period (or thatthe period depends upon the debtor's will) and that theintention of the parties, as may be inferred from the natureand circumstances of the obligation, is to have a period forits performance. The second step is to ascertain the periodprobably contemplated by the parties. The court cannotarbitrarily fix a period out of thin air. Id.; Air France vs.



Carrascoso, 18 SCRA 155.Alteration of the contract must be material in order that

surety may be released.For the purpose of releasing asurety's obligation, there must be a material alteration ofthe contract in connection with which the bond is given.There must be a change which imposes new obligation onthe party promising or which takes away some obligationalready imposed, changing the legal effect of the originalcontract and not merely the form thereof. A surety is notreleased by a change in the contract which does not havethe effect of making its obligation more onerous. NationalShipyards & Steel Corp. vs. Torrento, 20 SCRA 427.

Acts showing ratification of contract for services.Theratification of a contract may be express or implied. Impliedratification may take diverse forms, such as by silence oracquiescence; by acts showing approval or adoption of thecontract; or by acceptance and retention of benefits flowingtherefrom. Acua vs. Batac Producers CooperativeMarketing Association, Inc., 20 SCRA 526.

Where allegations of complaint show ratification ofcontract for services.A complaint should not be dismissedon the ground that the contract for services, on whichplaintiff's action was based, was allegedly not ratified by theBoard of Directors of defendant corporation, where thecomplaint contains sufficient allegations indicatingapproval or subsequent ratification of said contract by theBoard. Id.

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Charge of duress should be treated with caution.Thecharge of duress in the execution of a conveyance of landshould be treated with caution. Duress, like fraud, is not tobe lightly laid at the door of a man already dead. Vda. deRodriguez vs. Rodriguez, 20 SCRA 908.

Simulated contracts.The characteristic of simulation isthe fact that the apparent contract is not really desired orintended to produce legal effects or in any way alter thejuridical situation of the parties. Thus, where a person, inorder to place his property beyond the reach of his creditors,simulates a transfer of it to another, he does not reallyintend to divest himself of his title and control of the



property; hence, the deed of transfer is but a sham. Id.Simulated contracts distinguished from fraudulent

contracts.Simulated contracts are fictitious contracts.Fraudulent contracts are serious, real and intended for theattainment of a prohibited result. Simulation is intended tohide the violation of the law. Id.

Bad faith, defined.Bad faith does not simply connotebad judgment or negligence; it imports a dishonest purposeor some moral obliquity and conscious doing of wrong; itmeans breach of a known duty through some motive orinterest or ill-will; it partakes of the nature of fraud. Boardof Liquidators vs. Heirs of Maximo Kalaw, 20 SCRA 987.

Resolutory condition under Article 1308 of the New CivilCode.Article 1308 of the Civil Code creates noimpediment to the insertion in a contract for personalservices of a resolutory condition permitting thecancellation of the contract by one of the parties. Such astipulation does not make either the validity or thefulfillment of the contract dependent upon the will of theparty to whom is conceded the privilege of cancellation; forwhere the contracting parties have agreed that such optionshall exist, the exercise of the option is as much in thefulfillment of the contract as any other act which may havebeen the subject of the agreement. Indeed, the cancellationof a contract in accordance with conditions agreed uponbeforehand is fulfillment. Phil. Banking Corp. vs. Lui She,21 SCRA 52.

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A provision in a lease contract that the lessee, at any timebefore he created any building on the land may rescind thelease can hardly be regarded as a violation of Article 1308 ofthe Civil Code. Id.

When a lease contract to an alien is invalid.If an alienis given not only a lease of, but also an option to buy, a pieceof land, by virtue of which the Filipino owner cannot sell orotherwise dispose of his property, this to last for 50 years,then it becomes clear that the arrangement is a virtualtransfer of ownership whereby the owner divests himself instages not only of the right to enjoy the land (jus possidendi,jus utendi, jus fruendi, and jus abutendi), but also of the



right to dispose of it (jus disponendi)rights the sum totalof which make up ownership. It is just as if today thepossession is transferred, tomorrow the use, the next day thedisposition, and so on, until ultimately all the rights ofwhich ownership is made up are consolidated in an alien. Ifthis can be done, then the constitutional ban against alienlandholding in the Philippines, as announced in Krivenkovs. Register of Deeds (79 Phil. 461) is indeed in grave peril.Id.

Exception to pari delicto doctrine.It does not follow thatbecause the parties are in pari delicto they will be left wherethey are without relief. Article 1416 of the Civil Codeprovides as an exception to the rule of in pari delicto that"when the agreement is not illegal per se but is merelyprohibited, and the prohibition by law is designed for theprotection of the plaintiff, he may, if public policy is therebyenhanced, recover what he had paid or delivered." Id.

Courts are not bound by title or name given to contractsby parties.To determine the nature of the contract, courtsdo not have or are not bound to rely upon the name or titlegiven it by the contracting parties, should there be acontroversy as to what they really had intended to enterinto, but the way the contracting parties do or perform theirrespective obligations stipulated or agreed upon be shownand inquired into, and should such performance conflictwith the name or title given the contract by the

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parties the former must prevail over the latter. Balbas vs.Domingo, 21 SCRA 444.

2. Consideration

When P1 and other valuable consideration were heldsufficient.Where the two deeds of sale of mining claimseach mentions P1, and other valuable consideration, thereceipt whereof was acknowledged, to be the consideration.That consideration was held sufficient. Dumaguin vs.Reynolds, 92 Phil. 66.

Effect of false consideration.The expression of a falsecause or consideration in the contract does not make it



nonexistent, and it shall only be a ground for an action fornullity as provided by Article 1276 and confirmed by Article1301 of the Old Civil Code. The eff

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12 Ponce de Leon v RFC