Land Bank of the Philippines v. Barbara Sampaga Poblete;

G.R. No. 196577. February 25, 2013

On October 1997, respondent Poblete obtained a loan worth P300k from Kapantay Multi-Purpose. She mortgaged her Lot No.29 located in Buenavista, Sablayan, Occidental Mindoro, under OCT No. P-12026. Kapantay, in turn, used OCT No. P-12026 as collateral under its Loan Account No. 97-OC-013 with Land Bank-Sablayan Branch.

After a year, Poblete instructed her son-in-law Domingo Balen to look for a buyer for the Lot No. 29 in order to pay her loan and he referred Angelito Joseph Maniego. Both parties agreed that the lot shall amount to P 900k but in order to reduce taxes they will execute a P 300k agreed price appearing in the Deed of Absolute Sale dated November 9, 1998. In the Deed, Poblete specifically described herself as a widow. Balen, then, delivered the Deed to Maniego. Instead of paying the price, Maniego promised in an affidavit dated November 19, 1998 stating that the said amount will be deposited to her Land Bank Savings Account but he failed to do so.

On August 1999, Maniego paid Kapantay’s Loan Account for P448,202.08 and on subsequent year he applied for a loan worth P1M from Land Bank using OCT No. P-12026 as a collateral with a condition that the title must be first transferred on his name. On August 14, 2000, the Registry of Deeds issued TCT No. T-20151 in Maniego’s name pursuant to a Deed of Absolute Sale with the signatures of Mrs. Poblete and her husband dated August 11, 2000 and Maniego successfully availed the Credit Line Agreement for P1M and a Real Estate Mortgage over TCT No. T-20151 on August 15, 2000. On November 2002, Land Bank filed an Application for an Extra-judicial Foreclosure against the said Mortgage stating that Maniego failed to pay his loan.

Poblete filed a complaint for nullification of the Deed of Sale dated August 11, 2000 and TCT No. T-20151, Reconveyance of the Title and Damages with a Prayer for Temporary Restraining Order and/or Issuance of Writ of Preliminary Injunction against Maniego, Landbank and the Register of Deeds. The judgment of RTC, affirmed by the CA upon appeal, favors the plaintiff Poblete. Hence, this petition.

ISSUE:     WON the CA erred in upholding the finding of the trial court declaring the TCT No. T-20151 as null and void.

Held : 

The petition is meritorious.

It is well-entrenched rule, as applied, by the CA, that a forged or fraudulent deed is a nullity and conveys no title. Moreover, where the deed of sale states that the purchase price has been paid but in fact has never been, the deed is void ab initio for lack of consideration. Since the deed, is void, the title is also void. Since the land title has been declared void by final judgment, the Real Estate Mortgage over it is also void.

It is essential that the mortgagor be the absolute owner of the mortgage; otherwise, the mortgage is void. The doctrine ―the mortgagee in good faith as a rule does not apply to banks which are required to observe a higher standard of diligence. A bank cannot assume that, simply because the title offered as security is on its face, free of any encumbrances or lien, it is relieved of the responsibility of taking further steps to verify the title and inspect the properties to be mortgage.

The records do not even show that Land Bank investigated and inspected the actual occupants. Land Bank merely mentioned Maniego’s loan application upon his presentation of OCT No. P-12026, which was still under the name of Poblete. Land Bank even ignored the fact that Kapantay previously used Poblete’s title as collateral in its loan account with Land Bank.

Furthermore, only one day after Maniego obtained TCT No. P-20151 under his name, Land Bank and Maniego executed a Credit Line Agreement and Real Mortgage. It appears that Maniego’s loan was already completely processed while the collateral was still in the name of Poblete. Where said mortgagee acted with haste in granting the mortgage loan and did not ascertain the ownership of the land being mortgaged, it cannot be considered innocent mortgagee.

The pari delicto rule provides ―when two parties are equally at fault, the law leaves them as they are and denies recovery by either one of them. This court adopt the decisions of RTC and CA that only Maniego is at fault. Finally, on the issue of estoppels and laches, such question were not raised before the trial court. It is settled that an issue which are neither alleged in the complaint nor raised during the trial cannot be raised for the time on appeal.

The issue on the nullity of Maniego’s title had already been foreclosed when this Court denied Maniego’s petition for review in the Resolution dated 13 July 2011, which became final and executory on 19 January 2012. It is settled that a decision that has acquired finality becomes immutable and unalterable and may no longer be modified in any respect, even if the modification is meant to correct erroneous conclusions of fact or law and whether it will be made by the court that rendered it or by the highest court of the land. This is without prejudice, however, to the right of Maniego to recover from Poblete what he paid to Kapantay for the account of Poblete, otherwise there will be unjust enrichment by Poblete. 

Bentir v Leanda

GR 128991 April 12, 2000

Facts:

On May 15, 1992, respondent Leyte Gulf Traders, Inc. (herein referred to as respondent corporation) filed a complaint for reformation of instrument, specific performance, annulment of conditional sale and damages with prayer for writ of injunction against petitioners Yolanda Rosello-Bentir and the spouses Samuel and Charito Pormida. Respondent corporation alleged that it entered into a contract of lease of a parcel of land with petitioner Bentir for a period of twenty (20) years starting May 5, 1968. According to respondent corporation, the lease was extended for another four (4) years or until May 31, 1992. On May 5, 1989, petitioner Bentir sold the leased premises to petitioner spouses Samuel Pormada and Charito Pormada. 

Respondent corporation questioned the sale alleging that it had a right of first refusal. Rebuffed, it filed Civil Case No. 92-05-88 seeking the reformation of the expired contract of lease on the ground that its lawyer inadvertently omitted to incorporate in the contract of lease executed in 1968, the verbal agreement or understanding between the parties that in the event petitioner Bentir leases or sells the lot after the expiration of the lease, respondent corporation has the right to equal the highest offer.

Issue:

Whether the complaint for reformation filed by respondent Leyte Gulf Traders, Inc. has prescribed

Whether it is entitled to the remedy of reformation sought

Held:

The remedy of reformation of an instrument is grounded on the principle of equity where, in order to express the true intention of the contracting parties, an instrument already executed is allowed by law to be reformed. The right of reformation is necessarily an invasion or limitation of the parol evidence rule since, when a writing is reformed, the result is that an oral agreement is by court decree made legally effective. The remedy, being an extraordinary one, must be subject to limitations as may be provided by law. Our law and jurisprudence set such limitations, among which is laches. 

A suit for reformation of an instrument may be barred by lapse of time. The prescriptive period for actions based upon a written contract and for reformation of an instrument is ten (10) years under Article 1144 of the Civil Code. Prescription is intended to suppress stale and fraudulent claims arising from transactions like the one at bar which facts had become so obscure from the lapse of time or defective memory^. In the case at bar, respondent corporation had ten (10) years from 1968, the time when the contract of lease was executed, to file an action for reformation. Sadly, it did so only on May 15, 1992 or twenty-four (24) years after the cause of action accrued, hence, its cause of action has become stale, hence, time-barred. 

The prescriptive period of ten (10) years provided for in Art. 1144 applies by operation of law, not by the will of the parties. Therefore, the right of action for reformation accrued from the date of execution of the contract of lease in 1968.

Prescription; Reformation of an instrument is that remedy in equity by means of which a written instrument is made or construed so as to express or conform to the real intention of the parties when some error or mistake has been committed. It is predicated on the equitable maxim that equity treats as done that which ought to be done. The rationale of the doctrine is that it would be unjust and unequitable to allow the enforcement of a written instrument which does not reflect or disclose the real meeting of the minds of the parties. However, an action for reformation must be brought within the period prescribed by law, otherwise, it will be barred by the mere lapse of time.

Metropolitan Fabrics, Inc., et al. v. Prosperity Credit Resources, Inc. et al.,

FACTS:

Metropolitan Fabrics, Incorporated (MFI), a family corporation, owned a 5.8hectare industrial compound at No. 685 Tandang Sora Avenue, Novaliches, Quezon City which was covered by TCT No. 241597.Pursuant to a P2 million, 10-year 14% per annum loan agreement with Manphil Investment Corporation (Manphil) dated April 6, 1983, the said lot was subdivided into11 lots, with Manphil retaining four lots as mortgage security.

The other seven lots, now covered by TCT Nos. 317699 and 317702 to 317707, were released to MFI. In July 1984, MFI sought from PCRI a loan in the amount of P3,443,330.52, the balance of the cost of its boiler machine, to prevent its repossession by the seller. PCRI, also family-owned corporation licensed since 1980 to engage in money lending, was represented by Domingo Ang (“Domingo”) its president, and his son Caleb, vice-president. The parties knew each other because they belonged to the same familyassociation, the Lioc Kui Tong Fraternity.

On the basis only of his interview with Enrique, feedback from the stockholders and the Chinese community, as well as information given by his own father Domingo, and without further checking on the background of Enrique and his business and requiring him to submit a company profile and a feasibility study of MFI, Caleb recommended the approval of the P3.44 million with an interest ranging from 24% to 26% per annum and a term of between five and ten years (Decision, p. 5).

According to the court, it sufficed for Caleb that Enrique was a well-respected Chinese businessman, that he was the presidentof their Chinese family association, and that he had other personal businesses aside fromMFI, such as the Africa Trading.However, in September 1984, the first amortization check bounced for insufficient fund due to MFI’s continuing business losses. It was then that the appellees allegedly learnedthat PCRI had filled up the 24 blank checks with dates and amounts that reflected a 35%interest rate per annum, instead of just 24%, and a two year repayment period, instead of10 years.

On September 4, 1986, Enrique received a Notice of Sheriff’s Sale dated August 29, 1986, announcing the auction of the seven lots on September 24, 1986 due to unpaid indebtedness of P10.5 million. Vicky (daughter of owner of MFI, because their father went into a coma because of intense pressure from the foreclosure) insisted that prior to the auction notice, they never received any statement or demand letter from the defendants to pay P10.5 million, nor did the defendants inform them of the intended foreclosure.

ISSUES:                   Was the Mortgage Contract VOID?

HELD:                    

No. As the records show, petitioners really agreed to mortgage their properties as security for their loan, and signed the deed of mortgage for the purpose. Thereafter, they delivered the TCTs of the properties subject of the mortgage to respondents. Consequently, petitioners’ contention of absence of consent had no firm moorings. It remained unproved. To begin with, they neither alleged nor established that they had been forced or coerced to enter into the mortgage. Also, they had freely and voluntarily applied for the loan, executed the mortgage contract and turned over the TCTs of their properties. And, lastly, contrary to their modified defense of absence of consent, Vicky Ang’s testimony tended at best to prove the vitiation of their consent through insidious words, machinations or misrepresentations amounting to fraud, which showed that the contract was voidable. 

Where the consent was given through fraud, the contract was voidable, not void ab initio. This is because a voidable or annullable contract is existent, valid and binding, although it can be annulled due to want of capacity or because of the vitiated consent of one of the parties. Article 1390, in relation to Article 1391 of the Civil Code, provides that if the consent of the contracting parties was obtained through fraud, the contract is considered voidable and may be annulled within four years from the time of the discovery of the fraud. 

According to Article 1338 of the Civil Code, there is fraud when one of the contracting parties, through insidious words or machinations, induces the other to enter into the contract that, without the inducement, he would not have agreed to. Yet, fraud, to vitiate consent, must be the causal (dolo causante), not merely the incidental (dolo incidente), inducement to the making of the contract. In Samson v. Court of Appeals, causal fraud is defined as “a deception employed by one party prior to or simultaneous to the contract in order to secure the consent of the other.”

Rosencor v Inquing

March 08, 2001

Paterno Inquing, Irene Guillermo, Frederico Bantugan, Fernando Magbanua, and Liza Tiangco, herein respondents, averred that they are the lessees, since 1971, of a two-story residential apartment located at Tomas Morato Ave., Quezon City owned bythe spouses Faustino and Cresencia Tiangco.

The lease was not covered by a contract and the lessees were assured by the Spouses Tiangco that they had the pre-emptive right to purchase the property if ever there was a decision to sell it..

The original lessors died and their heir also promised the lessees the same pre-emptive right to purchase. The new lessors represented by Eufrocina de Leon demanded the lessees to vacate the property because the building will allegedly be demolished but after the lessees declined, she sent them a letter offering to sell the property for 2M. Lessees made a counter offer of 1M but no reply was made by the lessors.

De leon subsequently informed the lessees that the property was already sold to Rosencor. Lessees claimed that they were deceived because the property was already sold to Rosencor before it was offered to them. They offered to reimburse the payment to the lessors but the offer was declined as hence, this petition.

ISSUE:

WON the contract of sale is rescissible

HELD:

The right of first refusal is not covered by the Statute of Frauds. The application of such statute presupposes the existence of a perfected contact which is not applicable in this case. As such, a right of first refusal need not be written to be enforceable and can be proved by oral evidence.

Lessees have proven that the lessors admit the right of first refusal given to them when the property was offered to them by 2M.

The prevailing doctrine is that a contract of sale entered in violation of right of first refusal is rescissible. However, that doctrine cannot be applied to the case at bar. Under Article 1381 of the Civil Code, paragraph 3, a contract validly agreed upon may be rescinded if it is “undertaken in fraud of creditors when the latter cannot in any manner collect the claim due them.”

Moreover, under Article 1385, rescission shall not take place “when the things which are the object of the contract are legally in the possession of third persons who did not act in bad faith.”

Good faith is always presumed unless contrary to the evidence is adduced. In the case at bar, there clear and convincing evidence should have been shown to prove that petitioners were aware of the right of first refusal accorded to the respondents.

Respondents point to the letter by Atty. Aguila as proof. However, no mention about the rights of first refusal was made in said letter. Neither was there any showing that respondents notified Rosencor of Atty. Aguila of their right of first refusal after they received the said letter.

Respondents also point to the letter by De Leon where she recognized the right of first refusal of the respondents. However, De Leon was writing on her behalf and not on behalf of petitioners and, as such, it only shows that De Leon was aware of the existence of the rights. It does not show that petitioners were aware of such rights. Clearly, De Leon is the only party in bad faith in this case.

Considering the there was no showing of bad faith on the part of the petitioners, the CA erred in ordering for the rescission of the Deed of Absolute Sale between Rosencor and De Leon.

Rosencor could not have acted in bad faith because they are not aware of the right of first refusal given verbally. Respondents remedy is not rescission but an action for damages against De Leon and the heirs of the Spouses Tiangco for the unjustified disregard of their right of first refusal.