Final Exams Cases

8/19/2019 Final Exams Cases

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FINAL EXAMS CASES

INSOLVENCY

DE BARRETO, ET. AL. v. VILLANUEVA, ET. AL., (1961)Special Preferred Credits(Important: See full text of the Resolution)

Facts: Rosario Cruzado sold all her right, title, and interest and that of her childrenin the house and lot herein involved to Villanueva for !"#$ %he &urchaser &aid!,'(( in advance, and e)ecuted a &ro*issor+ note for the alance$ -o.ever, theu+er could onl+ &a+ ','(( /n account of the note, for .hich reason the vendorotained 0udg*ent for the un&aid alance$ In the *eanti*e, the u+er Villanueva.as ale to secure a clean certi1cate of title and *ortgaged the &ro&ert+ toa&&ellant 2arretto to secure a loan of 3(#, said *ortgage having een dul+recorded$

Villanueva defaulted on the *ortgage loan in favor of 2arretto$ %he latter foreclosedthe *ortgage in her favor, otained 0udg*ent, and u&on its eco*ing 1nal as4edfor e)ecution$ Cruzado 1led a *otion for recognition for her 5ve!"#$s %&e5invo4ing Articles 6676, 6673, and 667" of the ne. Civil Code$ After hearing, thecourt elo. ordered the 5lien5 annotated on the ac4 of the title, .ith the &rovisothat in case of sale under the foreclosure decree the vendor8s lien and the *ortgagecredit of a&&ellant 2arretto should e &aid pro rata fro* the &roceeds$

A&&ellants insist that9!$ %he vendor8s lien, under Articles 6676 and 6673 of the ne., Civil Code of the

hili&&ines, can onl+ eco*e e:ective in the event of insolvenc+ of the vendee,

.hich has not een &roved to e)ist in the instant case; and $6$ %hat the Cruzado is not a true vendor of the foreclosed &ro&ert+$

A#t&c%e ''' of the ne. Civil Code enu*erates the clai*s, *ortgage and liens thatconstitute an encu*rance on s&eci1c i**ovale &ro&ert+, and a*ong the* are9 $<6= For the un&aid &rice of real &ro&ert+ sold, u&on the i**ovale sold; and<'= Mortgage credits recorded in the Registr+ of ro&ert+$5

A#t&c%e ''9 of the sa*e Code &rovides that 5if there are t.o or *ore credits .ithres&ect to the sa*e s&eci1c real &ro&ert+ or real rights, the+ shall e satis1ed #"*#ata after the &a+*ent of the ta)es and assess*ent u&on the i**ovale &ro&ert+or real rights$

+e%!: A&&lication of the aove>?uoted &rovisions to the case at ar .ould *eanthat the herein a&&ellee Rosario Cruzado as an un&aid vendor of the &ro&ert+ in?uestion has the right to share &ro>rata .ith the a&&ellants the &roceeds of theforeclosure sale$

Isse: A&&ellant@s argu*ent9 inas*uch as the un&aid vendor8s lien in this case .asnot registered, it should not &re0udice the said a&&ellants8 registered rights over the&ro&ert+$



+e%!: %here is nothing to this argu*ent$ Note *ust e ta4en of the fact that article6676 of the ne. Civil Code enu*erating the &referred clai*s, *ortgages and lienson i**ovales, s&eci1call+ re?uires that$ nli4e the un&aid &rice of real &ro&ert+sold$ *ortgage credits, in order to e given &reference, should e recorded in theRegistr+ of ro&ert+$ If the legislative intent .as to i*&ose the sa*e re?uire*ent in

the case of the vendor8s lien, or the un&aid &rice of real &ro&ert+ sold, thela.*a4ers could have easil+ inserted the sa*e ?uali1cation .hich no. *odi1es the*ortgage credits$ %he la., ho.ever, does not *a4e an+ distinction et.eenregistered and unregistered vendor8s lien, .hich onl+ goes to sho. that an+ lien ofthat 4ind en0o+s the &referred credit status$

As to the &oint *ade that the articles of the Civil Code on concurrence and&reference of credits are a&&licale onl+ to the insolvent detor, suBce it to sa+that nothing in the la. sho.s an+ such li*itation$ If .e are to inter&ret this &ortionof the Code as intended onl+ for insolvenc+ cases, then other creditor>detorrelationshi&s .here there are concurrence of credits .ould e left .ithout an+ rulesto govern the*, and it .ould render &ur&oseless the s&ecial la.s on insolvenc+$

Res"%t&" " -"t&" t" C"s&!e# (196')A&&ellants, s&ouses 2arretto, have 1led a *otion vigorousl+ urging that our decisione reconsidered and set aside, and a ne. one entered declaring that their right as*ortgagees re*ain su&erior to the unrecorded clai* of herein a&&ellee for thealance of the &urchase &rice of her rights, title, and interests in the *ortgaged&ro&ert+$

e have reached the conclusion that our original decision *ust e reconsidered andset aside9

nder the s+ste* of the Civil Code of the hili&&ines, onl+ ta)es en0o+ a si*ilar

asolute &reference$ All the re*aining thirteen classes of &referred creditors underArticle 6676 en0o+ no &riorit+ a*ong the*selves, ut *ust e &aid pro-rata i$e$, in&ro&ortion to the a*ount of the res&ective credits$ %hus, A#t&c%e ''9 &rovides9If there are t.o or *ore credits .ith res&ect to the sa*e s&eci1c real &ro&ert+ orreal rights, the+, shall e satis1ed pro-rata after the &a+*ent of the ta)es andassess*ents u&on the i**ovale &ro&ert+ or real rights$5

%he full a&&lication of Articles 667" and 6676 de*ands that there *ust e 1rstso*e &roceedings .here the clai*s of all the &referred creditors *a+ e indingl+ad0udicated, such as9

!$ insolvenc+,6$ the settle*ent of decedents estate under Rule D of the Rules of Court, or3$ other li?uidation &roceedings of si*ilar i*&ort$

%his e)&lains the rule of A#t&c%e '' of the ne. Civil Code that %he clai*s or credits enu*erated in the t.o &receding articles5 shall e consideredas *ortgages or &ledges of real or &ersonal &ro&ert+, or liens .ithin the &urvie. oflegal &rovisions governing insolvenc+$

And the rule is further clari1ed in the Re&ort of the Code Co**ission, as follo.s9



%he ?uestion as to .hether the Civil Code and the insolvenc+ La. can ehar*onized is settled + Article 6673$ %he &references na*ed in Articles 66G! and66G6 <no. 667! and 6676= are to be enforced in accordance with the Insolvencyaw$5

R%e

%hus, it eco*es evident that one &referred creditor8s third>&art+ clai* to the&roceeds of a foreclosure sale <as in the case no. efore us= is not the &roceedingconte*&lated + la. for the enforce*ent of &references under Article 6676, unlessthe clai*ant .ere enforcing a credit for ta)es that en0o+ asolute &riorit+$ If none ofthe clai*s is for ta)es, a dis&ute et.een t.o creditors .ill not enale the Court toascertain the pro-rata dividend corres&onding to each, ecause the rights of theother creditors li4e.ise5 en0o+ing &reference under Article 6676 can not eascertained$

+e%!: %here eing no insolvenc+ or li?uidation, the clai* of the a&&ellee, as un&aidvendor, did not re?uire the character and ran4 of a statutor+ lien co>e?ual to the*ortgagee8s recorded encu*rance, and *ust re*ain suordinate to the latter$

S/S. FELINO S. SA-ATRA a! C+ARLITA ISIDRO, petitioners, vs. RITA S.VDA. DE /ARIAS, respondent .

D E C I S I O N

/UNO, J.:

%he case at ar originated fro* an agrarian case involving t.o <6= agriculturallotsi .ith an aggregate area of 6D,3' s?uare *eters and a ho*elot ii .ith an area of 76 s?uare *eters, all situated in Sto$ Ho*ingo, Nueva Eci0a$ %hese lots .ereoriginall+ o.ned + s&ouses Honato Sa*atra and Macaria Sana$ etitioner FELIN/

SAMA%RA and res&ondent RI%A S$ VHA$ HE ARIAS are their legiti*ate children$/n March 6(, !"6, the s&ouses *ortgaged one of the agricultural lots and the

ho*elot to the Rural 2an4 of Sto$ Ho*ingo <N$E$= Inc$ to secure their 6,'(($(( loanthat .ould *ature on August 6', !"'$ A +ear later, or on Se&te*er 6!, !"3, thes&ouses constituted another real estate *ortgage over the other lot in favor of thesa*e an4 to secure their second loan of !,3(($(($ %his loan .as to *ature onA&ril 3, !"'$

/n anuar+ 3, !"', .hile the *ortgages .ere still susisting, *ortgagorHonato Sa*atra e)ecuted a !asunduan" #uwisan sa Sa$ahaniii constituting hisdaughter, res&ondent Rita S$ Vda$ de arias, as agricultural lessee over the*ortgaged lots, .ithout the consent of the *ortgagee an4$

hen the *ortgagors>s&ouses failed to &a+ their loans u&on *aturit+, the*ortgagee an4 e)tra0udiciall+ foreclosed the *ortgages over the su0ect lots$ At a&ulic auction, the lots .ere sold to the *ortgagee an4 as the sole and highestidder$ %he corres&onding ce#t&0cates " sa%e 2e#e &sse! & &ts av"# a!#e3&ste#e! .ith the Register of Heeds of Nueva Eci0a on -a4 '5, 1956. As te7"#t3a3"#s*s"ses a&%e! t" #e!ee7 te %"ts 2&t& a 4ea# #"7 &ts#e3&st#at&", te 7"#t3a3ee 8a c"s"%&!ate! &ts "2e#s& "ve# tes8ect %"ts. Nonetheless, res&ondent continued in &ossession of the lands$



%hereafter, negotiations .ere conducted et.een the *anager of the*ortgagee an4 Ricardo E$ Jonzales and the heirs of the *ortgagor>s&ouses, .iththe an4 o:ering the heirs &riorit+ to re&urchase the lots$ Res&ondent Rita S$ Vda$de arias and her son erfecto sho.ed interest in the o:er$ %hus, it .as agreed thatres&ondent .ould u+ ac4 the lots + graduall+ de&ositing s*all a*ounts for there&urchase of the &ro&erties until the full &urchase &rice is &aid and, thereafter, the

*ortgagee an4 .ould e)ecute the corres&onding deed of sale in favor ofres&ondent$

Initiall+, the agree*ent .as carried out + the res&ondent$ Later, ho.ever,res&ondent and her son discontinued de&ositing *one+ in their account for there&urchase of the lots$ Instead, the+ egan to .ithdra. s*all a*ounts fro* theiraccount until it .as de&leted and their account closed in Nove*er !"D6$ Fro* thenon, nothing .as heard fro* res&ondent and her son aout their intention tore&urchase the lots$ %hus, the *ortgagee an4 construed their silence and inactionas a lac4 of further interest to continue .ith the agreed &lan of sale$

In Hece*er !"D3, &etitioner Felino Sa*atra, one of the heirs of the *ortgagor>s&ouses and a rother of res&ondent, e)&ressed his intention to re&urchase the lotsfro* the an4$ Conse?uentl+, " ;%4 15, 19<, te 8a s"%! te %"ts t"et&t&"e#s FELINO SA-ATRA a! C+ARLITA ISIDRO.&v Te sa%e 2as !%4#e3&ste#e! a! t&t%e 2as &sse! & te a7e " et&t&"e#s.v

hen res&ondent learned aout the sale, she i**ediatel+ .ent to the an4 anddeclared that she .as read+ to u+ the* ac4$ %he *ortgagee an4 infor*ed herthat the+ .ere alread+ validl+ sold to &etitioners$ Res&ondent ada*antl+ held on tothe lots and continued her &ossession clai*ing right over the* as agriculturallessee$ She 1led a co*&laint .ith the aranga+s upon" %a"apayapa forreconve+ance of the lots as she has right of &re>e*&tion as agricultural lessee$ Asthe issue could not e settled at the aranga+ level, the Lu&on issued a certi1cationto enale the &arties to 1le the necessar+ action in court$

/n Hece*er 6G, !"D7, res&ondent 1led an agrarian casevi .ith the Regional %rial Court against the *ortgagee an4 and the &etitioners9 <!= to annul the sale +the *ortgagee an4 of said lots to &etitioners, clai*ing right of &re>e*&tion or legalrede*&tion as agricultural tenant and ho*elot &ossessor of the su0ect lots; <6= toorder the *ortgagee an4 to reconve+ the lands to her after e)ercising her right oflegal rede*&tion; and <3= for &a+*ent of da*ages$

In their Ans.er, &etitioners argued that res&ondent .as not an agriculturallessee over the su0ect lots as it .as their &arents, *ortgagor>s&ouses HonatoSa*atra and Macaria Sana, .ho &ersonall+ cultivated the lots as &revious o.ners$

After the issues .ere 0oined, trial ensued$ /n /ctoer !3, !""7, te t#&a% c"#t

#e!e#e! a !ec&s&"v&&

& av"# " te et&t&"e#s. It "! tat #es"!et2as "t a 8"a0!e %essee " te %a!s as se !&! "t #eset #"" tatse e#s"a%%4 c%t&vate! te7. Not eing a ona1de agricultural lessee, thetrial court ruled that res&ondent has no right of &re>e*&tion and legal rede*&tionover said lots$ s%he trial court dis&osed, thus9

-EREF/RE, 0udg*ent is here+ rendered9

!$ ordering the dis*issal of the co*&laint;



6$ declaring the docu*ent entitled #ASNHANJ 2ISAN SASA#A-AN as fraudulent, illegal and null and void;

3$ declaring the sale of the &ro&erties in ?uestion + the defendant Rural2an4 of Sto$ Ho*ingo <NE=, Inc$ in favor of the defendants>s&ouses FelinoSa*atra and Charlita Isidro as legal and valid;

7$ ordering the &lainti: to vacate the su0ect landholdings and deliverthe &ossession thereof to the s&ouses Felino Sa*atra and Charlita Isidro;

'$ ordering the &lainti: to &a+ the defendants>s&ouses Felino Sa*atraand Charlita Isidro the a*ount of '(,((($(( as unrealized inco*e fro* thedis&uted land fro* !"D7 u& to the &resent;viii

G$ ordering the &lainti: to &a+ to the defendants>s&ouses Felino Sa*atraand Charlita Isidro the a*ount of 3,((($(( as attorne+s fees and thea*ount of 6,((($(( as e)&enses of litigation and the defendant Rural 2an4of Sto$ Ho*ingo <N$E$=, Inc$ the a*ount of 3,((($(( as attorne+s fees andthe a*ount of 6,((($(( as litigation e)&enses; and

$ ordering the &lainti: to &a+ the costs of suit$

S/ /RHEREH$

/n a&&eal, the court of A&&eals held that although the a&&ellant did not&ersonall+ cultivate the su0ect lands, could still e considered an agriculturallessee as the la. allo.s the lessee to e assisted + far* laorers in .or4ing theland$ %he Court of A&&eals also relied on t.o <6= docu*ents attesting that theres&ondent is the registered legiti*ate agricultural lessee of the dis&uted lands,thus9 <!= the Certi1cation, dated Ma+ D, !"D', issued + the Ministr+ of AgrarianRefor* <MAR= Histrict /Bcer Eugenio 2$ 2ernardo, in co*&liance .ith the /rder ofthe trial court, dated A&ril 63, !"D'; <6= an ABdavit of one onciano Ale0o,i) resident of the &alaya Samahan" 'ayon dated /ctoer 7, !"D7$ Although the

Court of A&&eals ruled that res&ondent is a ona1de lessee, it denied her the rightof &re>e*&tion as she .as alread+ given + the an4 suBcient o&&ortunit+ toe)ercise it ut she failed to avail of it$ It also held that res&ondent did not &ossessthe right of rede*&tion as the sale + the *ortgagee an4 of the dis&uted lands to&etitioners .as not un4no.n to her$ -ence, the Court of A&&eals dis&osed9

=+EREFORE, .ith the *odi1cation declaring the legalit+ and validit+of the contract of lease or !S*'+*' #*,IS' S S!' 0!&3ae%%at R&ta S. V!a. !e /a#&as a 8"a0!e a3#&c%t#a%%essee>teat of the landholdings in dis&ute, vi./ Lots Nos$ 6D"!, 6"(Dand Lot 6737 and !e%et&3 te a2a#! "# !a7a3es a! att"#e4s eesa! a47et " %&t&3at&" e?eses a! c"st " s&t, the Hecision

a&&ealed fro* is AFFIR-ED in all other res&ects$

No Costs$

S/ /RHEREH$) <e*&hasis su&&lied=

etitioners *otion for reconsideration .as denied$

-ence this &etition, .here the follo.ing issues .ere raised9

7$!$ -E%-ER /R N/% %-E %ENANCK C/N%RAC% EN%EREH IN%/ 2E%EEN



%-E M/R%JAJ/RS>S/SES H/NA%/ SAMA%RA ANH MACARIA SANA I%-RES/NHEN% RI%A S$ ARIAS HRINJ %-E EFFEC%IVI%K /F %-E M/R%JAJEAS LEJAL ANH VALIH$

7$6$ -E%-ER /R N/% RES/NHEN% RI%A S$ ARIAS IS A 2/NAFIHEAJRICL%RAL LESSEE%ENAN% /F %-E LANH-/LHINJS IN HIS%E$

7$6$!$ hether or not the Court of A&&eals correctl+ revie.ed the1ndings of the trial court on the issue of .hether or not res&ondent Rita S$arias is dee*ed to have &ersonall+ cultivated the landholding, consideringthe rule that the onl+ dut+ of the Court of A&&eals in agrarian cases is todeter*ine .hether the 1ndings of the trial court are su&&orted +sustantial evidence$

7$6$6$ hether or not the Court of A&&eals correctl+ a&&reciateddocu*entar+ evidence in su&&ort of its ruling that res&ondent Rita S$ ariasis the one &ersonall+ cultivating the landholding$

7$6$3$ hether or not the resolution of <sic= this second *ain issue andits follo.ing t.o corollar+ issues are tanta*ount to <sic= ?uestions of la.that ought to e revie.ed + this -onorale Su&re*e Court$

7$3$ -E%-ER /R N/% E%I%I/NERS ARE EN%I%LEH %/ NREALIEHINC/ME FR/M %-E %IME %-EK RC-ASEH %-E R/ER%IES IN HIS%EFR/M %-E RRAL 2AN# /F S%/$ H/MINJ/ <N$E$= ANH %/ A%%/RNEKS FEESANH LI%IJA%I/N EXENSES$5

e shall discuss the issues in seriatim/

etitioners insist that the tenanc+ contract .as illegal as the *ortgagor>s&ousescannot validl+ enter into an agricultural lease agree*ent .ith res&ondent duringthe e:ectivit+ of the *ortgage contract$

e disagree$ %he Court of A&&eals correctl+ a&&lied Article 6!3( of the CivilCode .hich renders void an+ sti&ulation foridding the o.ner fro* alienating thei**ovale *ortgaged (pacto de non aliendo) &ro&ert+$ It is settled that a realestate *ortgage does not e)tinguish the title of the detor$ -e does not lose hisright to use or dis&ose of the *ortgaged &ro&ert+ (0us disponendi) .hich is one ofthe &rinci&al attriutes of o.nershi&$ %hus, in the case at ar, the *ortgagor>s&ouses .ere .ell .ithin their rights .hen the+ constituted res&ondent as anagricultural lessee and the legalit+ of the leasehold contract cannot e validl+assailed on this ground$

%he second issue deals .ith .hether or not res&ondent *a+ e considered a8"a0!e agricultural lessee of the su0ect lands as to give her the right tore&urchase the foreclosed lands$ %he 1ndings of the trial court and the Court ofA&&eals on this *atter are directl+ o&&osed to each other$ %hus, a scrutin+ of theevidence on record is in order to deter*ine if there is *erit in the &etition at ar$

%he essential ele*ents of agricultural leasehold relationshi&s are9 <!= the &artiesare the lando.ner and the agricultural lessee; <6= the su0ect *atter of therelationshi& is agricultural land; <3= there is consent et.een the &arties to therelationshi&; <7= the &ur&ose of the relationshi& is to ring aout agricultural&roduction; <'= te#e &s e#s"a% c%t&vat&" " te a#t " te a3#&c%t#a%%essee@ and <G= the harvest is shared et.een the lando.ner and the agricultural



lessee$)i

In the case at ar, the resolution of the second issue involves &roof of the 1fthele*ent, i/e/ &ersonal cultivation of the lands + res&ondent as to constitute her aona1de agricultural lessee thereof$ hile the trial court found that res&ondent .asnot a ona1de tenant, the Court of A&&eals declared that she is ut she failed to

e)ercise her right to redee* the lands .ithin the re?uired &eriod$ As a result, oththe trial court and the Court of A&&eals decreed that the sale of the lands to&etitioners is valid although the+ disagreed on the fact of &ersonal cultivation +res&ondent as to constitute her a ona1de lessee$ %hus, the &etitioners no. see4 adeclaration fro* this Court that the res&ondent has no right to further &ossess thedis&uted lands as she is not a ona1de agricultural lessee thereof$

/n this as&ect, .e 1nd for the &etitioners$

In su&&ort of her clai* of legiti*ate tenanc+, res&ondent &resented thefollo.ing docu*ents9 <!= the !asunduan" #uwisan sa Sa$ahan dated anuar+ 3,!"'; <6= the certi1cate of the Ministr+ of Agrarian Refor* <MAR= Histrict /BcerEugenio 2$ 2ernardo; and <3= the /ctoer 7, !"D7 aBdavit of onciano Ale0o,

resident of the Mala+ang Sa*ahang Na+on$ e 1nd, ho.ever, that thesedocu*ents are insuBcient to su&&ort res&ondents clai* of tenanc+$

F&#st, the !asunduan" #uwisan sa Sa$ahan entered into + the original o.nersand the res&ondent does not &er se &rove that res&ondent is a ona1de lessee$ %he1ve <'= ele*ents of agricultural leasehold relationshi& are still re?uired to eestalished$ In the case at ar, the ele*ent of &ersonal cultivation + theres&ondent .as not ade?uatel+ &roved$ %his is fatal to res&ondents cause as2&t"t te e%e7et " e#s"a% c%t&vat&", a e#s" ca"t 8ec"s&!e#e! a teat eve & e &s s" !es&3ate! & te 2#&tte a3#ee7et" te a#t&es.?&&

Sec"!, the Certi1cation issued + MAR Histrict /Bcer 2ernardo is li4e.ise

insuBcient to &rove that res&ondent is a ona1de lessee as it did not *a4e a1nding that res&ondent &ersonall+ cultivated the land either + herself or throughfar* laorers$ %he Certi1cation si*&l+ *ade a 3ee#a% c"c%s&" tat#es"!et &s a #e3&ste#e! a3#&c%t#a% %essee " te %a!s e# #ec"#!s "te&# "ce, as the !asunduan" #uwisan sa Sa$ahan .as registered there$

T&#!, the !"D7 ABdavit of Ale0o,)iii the resident of the &alayan" Samahan"'ayon li4e.ise deserves scant consideration$ Its contents leave *uch to e desiredinsofar as &roof that res&ondent is a ona1de lessee of the su0ect lots$ Itsa78&3"s a! s2ee&3 state7ets ca"t s"#t #es"!ets c%a&7 " %e3&t&7ate teac4. Consider these state*ents9

'. Tat " ;%4 ', 19<, I &sse! a ce#t&0cat&" tat "e -R.DONATO SA-ATRA, " Ba#a3a4 -a%a4a, St". D"7&3", Neva Ec&a&s te "2e#, a! at te sa7e t&7e te acta% t&%%e# " t2" (')a#ce%s " a3#&c%t#a% %a! s&tate! te#eat, 2&t a c"78&e! a#ea" '6,56 sa#e 7ete#s, 7"#e "# %ess &c%!&3 a #es&!et&a%"#t&", 2&t"t ca#e%%4 ve#&4&3 te acts.

. Tat &t "2 aea#s tat I 2as 7&s%e! &t" 8e%&ev&3, a! tsce#t&4&3, tat sa&! %a!"%!&3 2as "t teate! 8t &s acta%%48e&3 t&%%e! 84 te #e3&ste#e! "2e# DONATO SA-ATRA@



. Tat & t#t a! & act, sa&! %a!"%!&3 &s teate! 84 v&#te" a as!a3 B2&sa sa Saaa, !ate! ;aa#4 , 195, 84a! 8et2ee &ts #e3&ste#e! "2e# DONATO SA-ATRA a! RITA S.VDA. DE /ARIAS, .ith Ru1no $ Ro?ue and Ernesto C$ Castelo asinstru*ental .itnesses, and .hich docu*ent is 4no.n as Ho4$ 2lg$ !7';ahina 2lg$ '(; A4lat 2lg$ VII, dul+ notarized + -on$ udge Manuel Hela

Cruz, Notar+ ulic E)>/1cio and registered .ith the /Bce of the Munici&al %reasurer of Sto$ Ho*ingo, Nueva Eci0a, on the sa*e date;

'$ %hat I a* e)ecuting this aBdavit in order to set the record straight and tocorrect an error that *a+ &re0udice, or *a+ have &re0udiced, the la.fultenant, &ossessor and cultivator, MRS$ RI%A S$ VHA$ HE ARIAS$ <e*&hasissu&&lied=

%hus, it a&&ears that Ale0o ased the foregoing aBdavit certif+ing thatres&ondent is the actual cultivator and la.ful lessee of the land s"%e%4 on thee)istence of the registered contract of agricultural lease$ -is certi1cation on the factof &ersonal cultivation + the res&ondent as to constitute her a 8"a0!e "#%e3&t&7ate lessee .as not ased on &ersonal 4no.ledge or factual infor*ation$

%here is no *ention in his ABdavit that he investigated res&ondents status and sa.for hi*self or 4ne. for a fact that res&ondent &ersonall+ cultivated the lots$ +&sA!av&t &s 2at&3 & a#t&c%a#s a! &ts a78&3"s c"tets 2e#e eve#e?%a&e! & c"#t. e li4e.ise 1nd it curious that A%e" a! ea#%&e# &sse! ac"&ct&3 A!av&t,?&v dated ul+ 6, !"D7, ce#t&4&3 tat te s8ect %a!s2e#e teate! a! te acta% t&%%e# 2as te 7"#t3a3"# D"at" Sa7at#a.

%hree *onths later, he issued the afore?uoted ABdavit stating in &aragra&h 3 thatit .as res&ondent .ho &ersonall+ cultivated the lands$ Curiousl+, Ale0o did notelaorate in the sa*e ABdavit or during the trial of the case the circu*stances andreasons that allegedl+ *isled hi* to issue the 1rst certi1cate$

In the light of these t.o <6= conOicting aBdavits issued + Ale0o, the issue on

&ersonal cultivation + the res&ondent as to constitute her a ona1de lessee .asnot ade?uatel+ &roved$ e reiterate our ruling & Be#as vs. C"#t " Aea%s?v tat te %e3a% est&" " a3#&c%t#a% %ease"%! #e%at&"s& ca"t 8e7a!e t" !ee! " 7e#e ce#t&0cat&"s &sse! 84 te #es&!et "# "ce#s" ass"c&at&"s a! "#3a&at&"s. %his ruling a&&lies .ith greater force in thecase at ar as te !"c7ets a! ce#t&0cat&"s &sse! 84 te sa7e e#s"c"t#a!&ct eac "te#.

Aside fro* res&ondents conOicting docu*entar+ evidence, the trial court rightl+oserved that #es"!et 2as " a!vace a3e .hich i**ediatel+ &uts in douther ailit+ to &ersonall+ cultivate the dis&uted lands$ It 2"%! ave 8eea#"#&ate "# #es"!et t" ave test&0e! " e# 8ea% "# #esete!

2&tesses t" attest tat se e#"#7e! a4 " te va#&"s acts " ca#&3"# te %ats, as t" a%% !e# te !e0&t&" " e#s"a% c%t&vat&".?v& hilethe evidence sho.s that res&ondent .as in &ossession of the lands, it is not enoughto &rove that she cultivated the*$ As correctl+ &ointed out + &etitioners,cultivation, although not li*ited to &lo.ing and harro.ing of the soil, re?uires so*egeneral industr+ on the &art of the tenant in caring for the &lants$ In the case at ar,.e 1nd asolutel+ no evidence on record to sho. that res&ondent &erfor*ed an+act that *a+ e considered as falling under the &hrase &ersonal cultivation$ Neithercan .e aBr* the Court of A&&eals conclusion that, although res&ondent *a+ not



have &ersonall+ cultivated the lands, she could have een hel&ed + far* laorersin the care of the &lants as this is allo.ed + la.$ %o e sure, there is a dearth ofevidence on record to sho. that res&ondent &ersonall+ cultivated the lands, *uchless that she .as assisted + hired &ersonnel in her far* .or4$

rescinding fro* these &re*ises, .e aBr* the conclusion of the trial court that

res&ondent is "t a 8"a0!e a3#&c%t#a% %essee of the su0ect lands for failureto &rove the i*&ortant ele*ent of &ersonal cultivation$

F&a%%4, 2e a#7 te a2a#! " acta% !a7a3es t" et&t&"e#s & te"#7 " #ea%&e! &c"7e #"7 te %a!s in vie. of res&ondents refusal tosurrender the dis&uted lands to the*$ %he actual a*ount thereof should ereco*&uted + the trial court ased on the total e)&ected harvest fro* the date thelots .ere sold to &etitioners in !"D7 until 1nalit+ of the decision$ -o.ever, 2ea#7 te !e%et&" " te a2a#! " att"#e4s ees a! %&t&3at&" e?esesas the trial court failed to discuss in its Hecision the reasons for their grant$ %hesettled rule is that the *atter of att"#e4s ees ca"t 8e 7et&"e! "%4 &te !&s"s&t&ve "#t&" of the decision$)vii %he sa*e goes for the a.ard oflitigation e)&enses$ %he+ *ust e clearl+ e)&lained and 0usti1ed + the trial court inthe od+ of its decision for the general rule is that attorne+s fees and e)&enses oflitigation cannot e recovered in the asence of sti&ulation$ )viii

IN VIE= =+EREOF, the i*&ugned Hecision of the Court of A&&eals in CA>J$R$CV No$ '!D3!, dated March !6, !""", is SE% ASIHE$ %he Hecision of the Regional

%rial Court, 2ranch 3, Sto$ Ho*ingo, Nueva Eci0a, dated /ctoer !, !""7, inAgrarian Case No$ !!3Civil Case No$ SH>!!"7, is REINS%A%EH, .ith the*odi1cations that the a.ards of attorne+s fees and litigation e)&enses to&etitioners are deleted$ %he records of the case are re*anded to the court a 1uo forreco*&utation of the &ro&er a*ount of actual da*ages to e &aid + res&ondentRita S$ Vda$ de arias to &etitioners Felino Sa*atra and Charlita Isidro$

SO ORDERED.+avide 2r/ C/2/ (Chairman) and ustria-&artine. 22/ concur$!apunan and 3nares-Santia"o on oBcial leave$



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viiiSPCL Chattel Mortgage2. Filipinas Marble Corporation v. Intermediate Appellate

Court, 12 SC!A 1"# $1%"&'FACTS:

>Fili&inas Marle Cor&oration a&&lied for a loan .ith Hevelo&*ent 2an4 of the hili&&ines <H2= in

its desire to develo& the fun &otentials of its *ining clai*s and de&osits and to 1nance ac?uisition

of *achiner+$ H2 granted the loan su0ect, ho.ever, to si)t+ onerous conditions, a*ong .hich

are9 Fili&inas Marle shall have to enter into a *anage*ent contract .ith res&ondent 2anco*



S+ste*s Control, Inc$ P2anco*Q and that the loan e secured + a *ortgage$

>%he *ortgage .as not registered$

>2anco* and its directors oBcers *is*anaged and *iss&ent the loan$

>2anco* resigned .ith the a&&roval of H2 even efore the e)&iration of the *anage*ent

contract, leaving Fili&inas Marle desolate and devastated$>Machineries arrived in the hili&&ines ut alleged not delivered to Fili&inas Marle$

>Also, instead of hel&ing Fili&inas Marle get ac4 on its feet, H2 co*&letel+ aandoned Fili&inas

Marle@s &ro0ect and &roceeded to foreclose the &ro&erties *ortgage .ithout &revious de*and or

notice$

>In essence, the Fili&inas Marle see4s the annul*ent of the deeds of *ortgage and deed of

assign*ent ecause there .as no loan at all to secure since .hat H2 5lent5 to Fili&inas Marle

.ith its right hand, it also got ac4 .ith its left hand; and that, there .as failure of consideration

.ith regard to the e)ecution of said deeds as the loan .as never delivered to the Fili&inas Marle$

>%he Fili&inas Marle further &ra+ed that &ending the trial on the *erits of the case, the trial court

i**ediatel+ issue a restraining order and then a .rit of &reli*inar+ in0unction against the sheri:s

to en0oin the latter fro* &roceeding .ith the foreclosure and sale of the Fili&inas Marle@s

&ro&erties in Metro Manila and in Ro*lo.

DB/Gs DEFENSE:

>o&&osed the issuance of a .rit of &reli*inar+ in0unction stating that under residential Hecree No$

3D', H28s right to foreclose is *andator+ as the arrearages of &etitioner had alread+ a*ounted to

!63,D(!,6G'$D6 as against its total oligation of !'!,"',G7!$6; that under the sa*e decree,

no court can issue an+ restraining order or in0unction against it to sto& the foreclosure since

Fili&inas Marle8s arrearages had alread+ reached at least t.ent+ &ercent of its total oligations;

that the alleged non>recei&t of the loan &roceeds + the &etitioner could, at est, e acce&ted onl+

in a technical sense ecause the *one+ .as received + the oBcers of the &etitioner acting in

such

ca&acit+ and, therefore, irres&ective of .hoever is res&onsile for &lacing the* in their &ositions$

TC AND CA:

>hile evidence of Fili&inas Marle Cor&oration a&&ears &ersuasive, still it cannot en0oin H2 fro*

co*&l+ing .ith the *andator+ &rovisions of H 3D'$

ISSUES:

age 7 of 33Co*ia, A$%$

SPCL Chattel Mortgage



If there .as no valid contract of loan for failure of consideration, .hether or not the *ortgage can

e)ist or stand + itself eing a *ere accessor+ contract$

hether or not the non>registration of the Chattel Mortgage a:ects its validit+$

+ELD:

> residential Hecree No$ 3D' .as issued &ri*aril+ to see to it that govern*ent 1nancial

institutions are not denied sustantial cash inOo.s, .hich are necessar+ to 1nance develo&*ent&ro0ects all over the countr+, + large orro.ers .ho, .hen the+ eco*e delin?uent, resort to

court actions in order to &revent or dela+ the govern*ent8s collection of their dets and loans$

>%he govern*ent, ho.ever, is ound + asic &rinci&les of fairness and decenc+ under the due

&rocess clause of the 2ill of Rights$ $H$ 3D' .as never *eant to &rotect oBcials of govern*ent

lending institutions .ho ta4e over the *anage*ent of a orro.er cor&oration, lead that

cor&oration to an4ru&tc+ through *is*anage*ent or *isa&&ro&riation of its funds, and .ho,

after ruining it, use the *andator+ &rovisions of the decree to avoid the conse?uences of their

*isdeeds$

>%he designated oBcers of the govern*ent 1nancing institution cannot si*&l+ .al4 a.a+ and then

state that since the loans .ere otained in the cor&oration8s na*e, then $H$ 3D' *ust e

&ere*&toril+ a&&lied and that there is no .a+ the orro.er cor&oration can &revent the auto*atic

foreclosure of the *ortgage on its &ro&erties once the arrearages reach t.ent+ &ercent <6(= of

the total oligation no *atter .ho .as res&onsile$

>In the case at ar, the res&ondents tr+ to i*&ress u&on this Court that the ',(((,((($(( loan

.as actuall+ granted and released to the &etitioner cor&oration and .hatever the co*&osition of

the *anage*ent .hich received the loan is of no *o*ent ecause this *anage*ent .as acting

in ehalf of the cor&oration$ %he res&ondents also argue that since the loan .as e)tended to the

cor&oration, the releases had to e *ade to the then oBcers of that orro.er cor&oration$

>recisel+, .hat the &etitioner is tr+ing to &oint out is that the H2 and 2anco* &eo&le .ho

*anaged Fili&inas Marle *iss&ent the &roceeds of the loan + ta4ing advantage of the &ositions

that the+ .ere occu&+ing in the cor&oration .hich resulted in the latter8s devastation instead of its

rehailitation$ %he &etitioner does not ?uestion the authorit+ under .hich the loan .as delivered

ut stresses that it is &recisel+ this authorit+ .hich enaled the H2 and 2anco* &eo&le to

*iss&end and *isa&&ro&riate the &roceeds of the loan there+ defeating its ver+ &ur&ose, that is,

to develo& the &ro0ects of the cor&oration$ %herefore, it is as if the loan .as never delivered to it

and thus, there .as failure on the &art of the res&ondent H2 to deliver the consideration for

.hich the *ortgage and the assign*ent of deed .ere e)ecuted$

> Article 6!6' of the Civil Code clearl+ &rovides that the non>registration of the *ortgage does not

a:ect the i**ediate &arties$ It states9

Art$ 6!6'$ In addition to the re?uisites stated in article 6(D', it is indis&ensale, in order that a

*ortgage *a+ e validl+ constituted that the docu*ent in .hich it a&&ears e recorded in the

Registr+ of ro&ert+$ If the instru*ent is not recorded, the *ortgage is nevertheless inding



et.een the &arties$

Fili&inas *arle, ho.ever, cannot invo4e the aove &rovision to nullif+ the chattel *ortgage it

e)ecuted in favor of res&ondent H2

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)B"ev&e v. CA

HR N". L*911 Oct"8e# ', 19<

Facts9 S&ouses Lozano *ortgaged their &ro&ert+ to secure the &a+*ent of a loan

a*ounting to '# .ith &rivate res&ondent hili&&ine 2an4 of Co**unication

<2Co*=$ %he deed of *ortgage .as e)ecuted on !6>G>GG, ut the loan &roceeeds

.ere received onl+ on !6>!6>GG$ %.o da+s after the e)ecution of the deed of

*ortgage, the s&ouses sold the &ro&ert+ to the &etitioner 2onnevie for and in

consideration of !((46'# of .hich &a+ale to the s&ouses and '# as &a+*ent

to 2Co*$ After.hich, 2onnevie defaulted &a+*ents to 2Co* &ro*&ting the

latter to auction the &ro&ert+ after 2onnivie failed to settle des&ite suse?uent

de*ands, in order to recover the a*ount loaned$ %he latter no. assails the

validit+ of the *ortgage et.een Lozano and co* arguing that on the da+ the

deed .as e)ecuted there .as +et no &rinci&al oligation to secure as the loan of

',((($(( .as not received + the Lozano s&ouses, so that in the asence of a

&rinci&al oligation, there is .ant of consideration in the accessor+ contract,

.hich conse?uentl+ i*&airs its validit+ and fatall+ a:ects its ver+ e)istence$

Issue9 as there a &erfected contract of loanT

-eld9 Kes$ Fro* the recitals of the *ortgage deed itself, it is clearl+ seen that the

*ortgage deed .as e)ecuted for and on condition of the loan granted to the

Lozano s&ouses$ %he fact that the latter did not collect fro* the res&ondent 2an4

the consideration of the *ortgage on the date it .as e)ecuted is i**aterial$ A

contract of loan eing a consensual contract, the herein contract of loan .as

&erfected at the sa*e ti*e the contract of *ortgage .as e)ecuted$ %he

&ro*issor+ note e)ecuted on Hece*er !6, !"GG is onl+ an evidence of

indetedness and does not indicate lac4 of consideration of the *ortgage at the

ti*e of its e)ecution$Easte# S&&3 L&es v. CA

HR N". 951' ;%4 1', 199

Facts9 etitioner>defendant .as consigned to deliver a cargo$ &on e*ar4*ent,

the cargo .as found to e da*aged .hile on transit$ rivate res&ondent>&lainti:,

Mercantile Insurance, &aid the consignee the a*ount of da*age ased on a

*arine insurance &olic+$ Mercantile cons?uentl+ sued the &etitioner for recover+

of da*ages it &aid to the consignee$ %he court a ?uo decided in favor of the

&lainti: and further stressing the a*ount &aid + the insurance co*&an+ to the



consignee e &aid and .ith the &resent legal interest of !6 &er annu*

co**encing on the date of 1ling of the co*&laint, until full+ &aid$ %he &etitioner

no. constests the ruling &articularl+ on the issue of interest$

Issue9 hen should the rec4oning &eriod e for the co*&utation of the &a+*ent

of legal interest on an a.ard for loss or da*ageT hat is the a&&licale rate of

interestT

-eld9 %he Court laid do.n the follo.ing rules of thu* for guidance in cases li4e

that of the aove9

I$ hen an oligation, regardless of its source, i$e$, la., contracts, ?uasi>contracts,

delicts or ?uasi>delicts is reached, the contravenor can e held liale for

da*ages$ %he &rovisions under %itle XVIII on 5Ha*ages5 of the Civil Code govern

in deter*ining the *easure of recoverale da*ages$

II$ ith regard &articularl+ to an a.ard of interest in the conce&t of actual andco*&ensator+ da*ages, the rate of interest, as .ell as the accrual thereof, is

i*&osed, as follo.s9

!$ hen the oligation is reached, and it consists in the &a+*ent of a su* of

*one+, i$e$, a loan or forearance of *one+, the interest due should e that .hich

*a+ have een sti&ulated in .riting$ Further*ore, the interest due shall itself earn

legal interest fro* the ti*e it is 0udiciall+ de*anded$ In the asence of sti&ulation,

the rate of interest shall e !6 &er annu* to e co*&uted fro* default, i$e$,

fro* 0udicial or e)tra0udicial de*and under and su0ect to the &rovisions of Article

!!G" of the Civil Code$

6$ hen an oligation, not constituting a loan or forearance of *one+, is

reached, an interest on the a*ount of da*ages a.arded *a+ e i*&osed at the

discretion of the court at the rate of G &er annu*$ No interest, ho.ever, shall e

ad0udged on unli?uidated clai*s or da*ages e)ce&t .hen or until the de*and

can e estalished .ith reasonale certaint+$ Accordingl+, .here the de*and is

estalished .ith reasonale certaint+, the interest shall egin to run fro* the ti*e

the clai* is *ade 0udiciall+ or e)tra0udiciall+ <Art$ !!G", Civil Code= ut .hen such

certaint+ cannot e so reasonal+ estalished at the ti*e the de*and is *ade,

the interest shall egin to run onl+ fro* the date the 0udg*ent of the court is*ade <at .hich ti*e the ?uanti1cation of da*ages *a+ e dee*ed to have een

reasonal+ ascertained=$ %he actual ase for the co*&utation of legal interest

shall, in an+ case, e on the a*ount 1nall+ ad0udged$

3$ hen the 0udg*ent of the court a.arding a su* of *one+ eco*es 1nal and

e)ecutor+, the rate of legal interest, .hether the case falls under &aragra&h ! or

&aragra&h 6, aove, shall e !6 &er annu* fro* such 1nalit+ until its



satisfaction, this interi* &eriod eing dee*ed to e + then an e?uivalent to a

forearance of credit$

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