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CASE DIGEST
CASE No. 1 SORIANO V. BAUTISTA 6 SCRA 946 (1962)
Sheet Music FACTS: Spouses Bautista are the absolute and registered owners of a parcel of land. In May 30, 1956, the said
spouses entered into an agreement entitled Kasulatan ng Sanglaan (mortgage) in favor of spouses Soriano for
the amount of P1,800. Simultaneously with the signing of the deed, the spouses Bautista transferred the
possession of the subject property to spouses Soriano. The spouses Soriano have, since that date, been in
possession of the property and are still enjoying the produce thereof to the exclusion of all other persons
Sometime after May 1956, the spouses Bautista received from spouses Soriano the sum of P450 pursuant to the
conditions agreed upon in the document. However, no receipt was issued. The said amount was returned by the
spouses Bautista
In May 13, 1958, a certain Atty. Ver informed the spouses Bautista that the spouses Soriano have decided to
purchase the subject property pursuant to par. 5 of the document which states that “…the mortgagees may
purchase the said land absolutely within the 2- year term of the mortgage for P3,900.”
Despite the receipt of the letter, the spouses Bautista refused to comply with Soriano’s demand
As such, spouses Soriano filed a case, praying that they be allowed to consign or deposit with the Clerk of Court
the sum of P1,650 as the balance of the purchase price of the land in question
The trial court held in favor of Soriano and ordered Bautista to execute a deed of absolute sale over the said
property in favor of Soriano.
Subsequently spouses Bautista filed a case against Soriano, asking the court to order Soriano to accept the
payment of the principal obligation and release the mortgage and to make an accounting the harvest for the 2
harvest seasons (1956-1957).
CFI held in Soriano’s favor and ordered the execution of the deed of sale in their favor
Bautista argued that as mortgagors, they cannot be deprived of the right to redeem the mortgaged property, as
such right is inherent in and inseparable from a mortgage.

ISSUE: WON spouses Bautista are entitled to redemption of subject property

HELD: No. While the transaction is undoubtedly a mortgage and contains the customary stipulation concerning
redemption, it carries the added spe cial provision which renders the mortgagor’s right to redeem defeasible at
the election of the mortgagees. There is nothing illegal or immoral in this as this is allowed under Art 1479 NCC
which states: “A promise to buy and sell a determinate thing for a price certain is reciprocally demandable. An
accepted unilateral promise to buy or to sell a determinate thing for a price certain is binding upon the promissor
if the promise supported by a consideration apart from the price.”
Read books, audiobooks, and more
In the case at bar, the mortgagor’s promise is supported by the same consideration as that of the mortgage
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itself, which is distinct from the consideration in sale should the option be exercised. The mortgagor’s promise
was in the nature of a continuing offer, non-withdrawable during a period of 2 years, which upon acceptance by
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the mortgagees gave rise to a perfected contract of sale.

TENDER INEFFECTIVE AS PREEMPTIVE RIGHT TO PURCHASE BY OTHER PARTY HAS BEEN EXERCISED
The tender of P1,800 to redeem the mortgage by spouses Bautista was ineffective for the purpose intended.
Such tender must have been made after the option to purchase had been exercised by spouses Soriano.
Bautista’s offer to redeem could be defeated by Soriano’s preemptive right to purchase within the period of 2
years from May 30, 1956. Such right was availed of and spouses Bautista were accordingly notified by Soriano.
Offer and acceptance converged and gave rise to a perfected and binding contract of purchase and sale.

CASE No. 2 Santiago v Dionisio

FACTS:
In 1935, Roman San Diego sold a land to Apolonia Santiago, and the sale was recorded in the Register of
Deeds of Bulacan, in accordance with Revised Administrative Code. However, prior to the sale, Roman had already
mortgaged the land to Eulalia Resurreccion. Since the mortgage was also registered pursuant to the Administrative
Code, the mortgage to Eulalia had precedence over the sale. Roman defaulted in his debt, so Eulalia foreclosed the
mortgage and the land was sold at public auction to Angela Dionisio as the highest bidder.
Upon discovery of the sale of the same land to Dionisio, Santiago brought an action to annul the sale to
Dionisio, and Santiago also intervened for the confirmation of the sale and filed her opposition thereto. The lower
court confirmed the sale to Dionisio without prejudice to the rights of Santiago.
Judge Roldan, in Santiago’s action for annulment, ruled that the sale of the land in favor of Dionisio was null
and void, since Santiago was not included as a party to the foreclosure proceedings, but the ownership of Santiago
over the land is subject to the mortgage in favor of Eulalia.
In 1936, Santiago filed an application for registration of the land under her name, and among the oppositors
was Dionisio, who claimed title to the land as purchaser in a foreclosure. Judge PotencianoPecson ruled that the
foreclosure sale did not affect the rights of the applicant Santiago, who had not been made a party to the
proceedings, and decreed the registration of the land in her favor. So, Dionisio filed the present appeal.
ISSUES:
1. Whether or not the sale of land to Dionisio was valid, despite Santiago not being impleaded to the foreclosure
proceedings.

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2. Whether or not the land should be registered in the name of Santiago.

HELD: 1. YES, insofar as to the parties to the suit, but not to Santiago. Dionisio argued that Santiago intervened in
the foreclosure suit, thus she is bound by its results. But, the Court found that Santiago’s intervention consisted
merely in opposing the confirmation of the sale. This is not the same as being a party to the suit to the extent of
being bound by the judgment. That judgment had already been rendered and was already in the process of
execution when Santiago intervened. Though the sale was confirmed, the court said that the confirmation was to
be without prejudice to the rights of Santiago. Judge Roldan did not declare the foreclosure sale entirely void, but
only "with regards to the rights of Apolonia Santiago". This means that the foreclosure was ineffective as against
Santiago, although it may be valid as between the parties to the suit (Eulalia and Dionisio). Also, the sale is subject
to Santiago's unforeclosed equity of redemption.
While it is true that Santiago’s interest in the land was subordinate t o that of the mortgagee, Eulalia, the
rule of procedure in force at the time the foreclosure was section 255 of Act 190, which required that in an action for
foreclosure "all persons having or claiming an interest in the premises subordinate in right to that of the holder of
the mortgage . . .be made defendants in the action." This rule applied not only to a subordinate lienholder, but also
to a purchaser of real property already mortgaged to another. Failure to implead a subordinate lienholder or
subsequent purchaser renders the foreclosure ineffective as against them. Therefore, there remains in their favor
2.
theWhether or not equity
"unforeclosed the land ofshould be registered
redemption." But theinforeclosure
the name ofisSantiago.
valid as between the parties to the suit.
2. NO .Santiago’s application for registration of
HELD: 1. YES, insofar as to the parties to the suit, but not to Santiago. the land under her name argued
Dionisio should be thatdenied.
SantiagoTheintervened
unforeclosed in
equity
the foreclosure suit, thus she is bound by its results. But, the Court found that Santiago’s intervention land
of Santiago still exists and must be recognized in either of the following ways: 1) to register the in the
consisted
name
merelyofin Santiago
opposing but the subject
confirmationto theofmortgage in favor
the sale. This is notofthe Eulalia;
same as 2) being
to register
a party the
to land in the
the suit name
to the of the
extent of
oppositorDionisio subject to redemption by Apolonia Santiago.
being bound by the judgment. That judgment had already been rendered and was already in the process of
executionThewhen
Court’s preference
Santiago is the second
intervened. Thoughmethod,
the sale waswhich was already
confirmed, theruled
courtinsaidthethat
casetheof confirmation
De la Paz, et was al. vs.
to
McCondray&
be without prejudice to the rights of Santiago. Judge Roldan did not declare the foreclosure sale entirely void,prior
Co., Inc., supra, where the Court granted the registration applied for but subject to the but
purchasers' equitable
only "with regards to right of redemption.
the rights of Apolonia Santiago". This means that the foreclosure was ineffective as against
Santiago, although it may be valid as Santiago,
It is the previous purchaser, between the whoparties
has applied
to thefor suitthe registration
(Eulalia of the Also,
and Dionisio). land. the
However, both by
sale is subject
statute and by jurisprudence, registration
to Santiago's unforeclosed equity of redemption. may be decreed in favor of an oppositor (Dionisio in this case) whose
ownership has been established. More so, in the present case, the record shows
While it is true that Santiago’s interest in the land was subordinate t o that of the mortgagee, Eulalia, the that the opposition of Dionisio
prays
rule offor the registration
procedure
the application
foreclosure "allfor
in force at of the
registration.
persons
the time
You're Reading a Preview
land the
in her favor by asking
foreclosure that she
was section 255be substituted
of Act 190, which in place
required
having or claiming an interest in the premises subordinate in right to that of the holder of
of Apolonia
that in anSantiago
action forin

Registration of the
the mortgage . . .be made defendants land in the name
in the of Dionisio,
action." This rulethe herein
applied notoppositor, is proper, subject
only to a subordinate to Apolonia
lienholder, but also
Santiago's equitable right of
to a purchaser of real property already Unlock
redemption. full access
mortgaged with aFailure
to another. free trial.
to implead a subordinate lienholder or
Registration
subsequent purchaser of renders
the land thein the name of Santiago,
foreclosure ineffective who does notthem.
as against become its owner
Therefore, untilremains
there she hasin exercised her
their favor
right to redeem, would be subject to the objection that it is premature, if not
the "unforeclosed equity of redemption." But the foreclosure is valid as between the parties to the suit. altogether anomalous. But, Santiago’s
equity of2.redemption
NO.Santiago’s is registerable,
application for butregistration
only as an encumbrance
of the land under on a registered
her name shouldtitle of beownership.
denied. The unforeclosed
The judgment appealed from Download With Free Trial
is revoked and another one
equity of Santiago still exists and must be recognized in either of the following ways: 1) toentered, decreeing the registration
register theof the
landland in
in the
the name of Angela Dionisio, but subject to Apolonia Santiago's equitable right
name of Santiago but subject to the mortgage in favor of Eulalia; 2) to register the land in the name of the of redemption, which right should
be exercised by hersubject
oppositorDionisio withinto three months from
redemption the dateSantiago.
by Apolonia this decision becomes final.
The Court’s preference is the second method, which was already ruled in the case of De la Paz, et al. vs.
McCondray& Co., Inc., supra, where the Court granted CASE No.the 3 RCBC v CA
registration applied for but subject to the prior
purchasers' equitable right of redemption.
FACTS It is the previous purchaser, Santiago, who has applied for the registration of the land. However, both by
statuteGOYU
and by wasjurisprudence,
granted creditregistration
facilities and mayaccommodations
be decreed in favor by theofRCBC initially in(Dionisio
an oppositor the amount of P
in this 30 million.
case) whose
Upon GOYU’s application, the cred it was increased to P50 Million, then P90 Million,
ownership has been established. More so, in the present case, the record shows that the opposition of Dionisio then P117 Million. As security,
GOYU executed
prays for 2 REM andof2the
the registration CMland
in favor
in herof RCBC,
favor by which
askingwere registered
that with the RD.
she be substituted in Under
place ofthe 4 contracts,
Apolonia GOYU
Santiago in
committed
the applicationitself
for to insure the mortgaged properties with an insurance company approved by RCBC, and
registration.
subsequently
Registration
endorse of and
the deliver
land in thetheinsurance
name of policies
Dionisio,tothe RCBC.
hereinGOYUoppositor,
then obtained
is proper, 10 subject
policies to
fromApolonia
MICO.
Santiago's
GOYU’s buildings
equitable were
right
gutted
of redemption.
by fire and it claimed indemnity from MICO but the latter denied the claim on the
ground Registration
that the insurance policies
of the land were
in the name either attachedwho
of Santiago, pursuant
does notto writs
becomeof attachments/garnishments
its owner until she has exercised issuedher
by
various
right to courts
redeem, orwould
that thebe proceeds
subject towere also claimed
the objection thatbyit isother creditors
premature, of GOYU.
if not altogether GOYU, alleging better
anomalous. rights to
But, Santiago’s
the proceeds,
equity filed forisspecific
of redemption performance
registerable, but onlyand as andamges before the
encumbrance on aRTC of Manila
registered Br of
title 3. The trial court ruled in favor
ownership.
of GOYUThe forjudgment
the fire loss claims but
appealed fromordered it toand
is revoked pay another
RCBC itsone loanentered,
obligations. On appeal
decreeing to the CA, itofaffirmed
the registration the landthein
ruling with regard to the liabilities of MICO and RCBC. The trial court and appellate
the name of Angela Dionisio, but subject to Apolonia Santiago's equitable right of redemption, which right should courts both held that, since the
endorsements
be exercised by do hernot bear
within themonths
three signature fromoftheanydate
officer of GOYU,
this decision they concluded
becomes final. that the endorsements are
defective. The CA then ordered GOYU to pay its obligation to RCBC without any inter est, surcharges and penalties.
ISSUE CASE No. 3 RCBC v CA
Whether or not the ruling of the appellate court is correct.
HELD
FACTS
The Court
GOYU heldwasin the negative.
granted creditThe essence
facilities andor accommodations
rationale for the payment
by the RCBC of interest
initiallyorincost
theof moneyof
amount is separate and
P 30 million.
distinct from that of surcharges and penalties. The charging of interest for loans
Upon GOYU’s application, the cred it was increased to P50 Million, then P90 Million, then P117 Million. As security, forms a very essential and
fundamental element of the banking business.
GOYU executed 2 REM and 2 CM in favor of RCBC, which were registered with the RD. Under the 4 contracts, GOYU
committed itself to insure the mortgaged properties with an insurance company approved by RCBC, and
subsequently endorse and deliver the insurance policies to RCBC. GOYU then obtained 10 policies from MICO.
GOYU’s buildings were gutted by fire and it claimed indemnity from MICO but the latter denied the claim on the
ground that the insurance policies were either attached pursuant to writs of attachments/garnishments issued by
various courts or that the proceeds were also claimed by other creditors of GOYU. GOYU, alleging better rights to
the proceeds, filed for specific performance and damges before the RTC of Manila Br 3. The trial court ruled in favor
of GOYU for the fire loss claims but ordered it to pay RCBC its loan obligations. On appeal to the CA, it affirmed the
ruling with regard to the liabilities of MICO and RCBC. The trial court and appellate courts both held that, since the
endorsements do not bear the signature of any officer of GOYU, they concluded that the endorsements are
defective. The CA then ordered GOYU to pay its obligation to RCBC without any inter est, surcharges and penalties.
ISSUE
Whether or not the ruling of the appellate court is correct.
HELD CASE No. 4 VEGA v SSS
The Court held in the negative. The essence or rationale for the payment of interest or cost of money is separate and
Topic:
distinct Article
from that 1237 –and
of surcharges Whoever pays
penalties. The on behalf
charging offorthe
of interest debtor
loans forms a without
very essentialtheandknow
cannotelement
fundamental compel the creditor
of the banking business. to subrogate him in his rights, such as those ar

penalty.
Facts:
Magdalena Reyes owned a piece of titled land in Pilar Village, Las Piñ
housing loan from SSS for which she mortgaged her land. Late 1979, Reyes as
and buy her house and lot s ince she was to emigrate.
An employee at SSS said, however, that SSS did not approve of me
homes. But the Sps Vega (Vegas) could make a private arrangement with Reye
amortizations on time. Vegas agreed for Reyes to execute in their favor a deed
assumption of mortgage and paid Reyes P20,000 after she undertook to upd
the country. The Vegas took possession of the house in January 1981.
Reyes did not execute the deed of assignment. She left the country
special power of attorney to convey ownership of property. Sometime betwee
deed of assignment in favor of the Vegas, kept the original and gave the Vega
Home Development Mortgage Fund and kept the other.
CASE No.A4 storm
VEGA vinSSS 1984 re
personal You're Reading
copy.1237 – Whoever
Topic: Article pays on abehalf
Preview of the debtor without the know
cannot compel the creditor to subrogate himdid
In 1992, the Vegas learned that Reyes notrights,
in his updatesuchthe asamortizatio
those ar
Reyes from the SSS.Unlock
They full access
told the with
SSSa free
that trial.
they already gave the payme
penalty.
indifferent,
Facts: on January 6, 1992, the Vegas updated the amortization and
negotiated seven additional
Magdalena Download
Reyes remittances
owned With and
Free
a piece the SSS
of Trial
titled accepted
land in PilarP8,681
Village,more fro
Las Piñ
housing OnloanApril
from16,SSS
1993,
for PDC
which filed
shean action forher
mortgaged sumland.of money against
Late 1979, Reyes Reye
as
that Reyes
and buy herborrowed
house andfrom Apex
lot s ince Mortgage
she and Loans Corporation (Apex) P4
was to emigrate.
house on Anit.employee
Apex assigned
at SSSReyes' credit to PDC
said, however, thaton SSSDecember 29, 1992.of
did not approve RTC:
me
P46,398
homes. But plusthe
interest
Sps Vegaand(Vegas)
penalties beginning
could make aApril private11, 1979 as well aswith
arrangement attorney
Reye
issued a writ ofon
amortizations execution
time. Vegasagainst Reyes
agreed forand
Reyesits Sheriff
to execute leviedinon thefavor
their property
a deedin
On Feb
assumption 16, 1994, the
of mortgage andVegas
paid requested
Reyes P20,000 the SSS afterto acknowledge
she undertooktheir sta
to upd
update of theThe
the country. account
Vegas so they
took could settle
possession it inhouse
of the full. SSS did not 1981.
in January reply. RTC she
sale of the property
Reyes did notonexecute
Feb 24, March
the deed3 and
of 10, 1994. He also
assignment. She gave notice
left the to th
country
an affidavit
special power ofofthird partytoclaimant
attorney convey and a motion
ownership to quashSometime
of property. the levy on the p
betwee
sheriff
deed oftoassignment
proceed with the execution.
in favor of the Vegas, kept the original and gave the Vega
The Vegas gotMortgage
Home Development a telegram informing
Fund and kept them the that the SSS
other. intended
A storm to for
in 1984 re
unpaid
personal debt
copy.of P38,789.58. The Vegas requested from the SSS in writing for th
and for In assurance
1992, thethatVegas they would
learned beReyes
that entitled did tonotthe discharge
update of the m
the amortizatio
subrogation
Reyes from documents
the SSS. They upontoldpayment.
the SSS Theythat also
theysentalready
a P37,521.95
gave manager's
the payme
The Vegas filed an action for consignation,
indifferent, on January 6, 1992, the Vegas updated the amortization damages, and injuncti
and
injunction and TRO against SSS, PDC, the RTC sheriff and
negotiated seven additional remittances and the SSS accepted P8,681 more fro the Register of Deed
the caseOn wasApril
pending, SSS released
16, 1993, PDC filedthe an mortgage
action for to sum PDC.of Amoney
writ ofagainst
possessionReye
RTC decided in favor of the Vegas. CA reversed.
that Reyes borrowed from Apex Mortgage and Loans Corporation (Apex) P4
house on it. Apex assigned Reyes' credit to PDC on December 29, 1992. RTC:
Issues:
P46,398 plus interest and penalties beginning April 11, 1979 as well as attorney
Whether
issued a writReyes validly soldagainst
of execution her SSS-mortgaged property
Reyes and its Sheriff to the
levied on Vegas given ainp
the property
that sheOn could
Febnot16, do so the
1994, without
Vegasthe written consent
requested the SSSof toSSS.
acknowledge their sta
update of the account so they could settle it in full. SSS did not reply. RTC she
Held:
sale of the property on Feb 24, March 3 and 10, 1994. He also gave notice to th
Yes. SC reversed
an affidavit CA decision.
of third party claimant and a motion to quash
CASE the V
No. 5 DBP levy on the p
MIRANG
-sheriff
The Vegas
to
The were
rulingable
proceed with to
in DBPthepresent adequate
execution.
vs. Mirang proof141
(66 SCRA of [1975]),
Reye's sale of thethe
wherein propert
mort
of the deed of assignment
The Vegasbefore
indebtedness in
got a telegram their favor
informing
the redemption and what
wasthem it contained,
thatisthe
allowed notSSS they
intended
controlling offered
to for
becaus
Reyes'
unpaid sale
debtof
charter ofthe
of property
P38,789.58.
the mortgagee to
Thethem.
VegasThey
(DBP) tookthe
requested
requires possession
from ofofthe
the SSS
payment house
in writing
such and
amount. loI
for th
for
andtheforamortizations
assurance
property, no charterto the
that theySSS. And
the when
would
requires SSSof
be entitled
payment wanted
to the
sums todischarge
of foreclose
money the prope
of than
other the m
th
for the balance
subrogation of the loan.
Rule 39. documents upon payment. They also sent a P37,521.95 manager's
- ArticleRedemption
1237Vegas
The of thefiled
Civil
of Code
an cannot
action
properties for apply
mortgaged in this
consignation,
with thecase since the
damages,
Philippine and debtor
injuncti
National Ban(
ownership
injunction of the
and
Philippines TRO
andmortgaged
against SSS,
foreclosed property t o the
PDC,judicially
either the RTCVegas.
sheriffAlthough Paragraph
and the Register
or extrajudicially of4Deed
are governed of tb
that Reyes
the case wasmust
payment of secure
pending,
all theSSSthe consent
released
amounts theofmortgage
owed SSS
bybefore selling
PDC. A the
the todebtor. writproperty,
This of is val
possession
special prote
cannot be compelled
RTCinstitutions
decided in favor
is notoftothe
recognize
accordedVegas. thereversed.
CA
to judgment sale before
creditorstheinloan is completely
o rdinary paid,
civil actions.27
owner, from selling the property while the loan remained unpaid . Such stipul
undue
Issues:impediment or interference on the transmission CASE No. 6 Ruralof property.
Bank of Caloocan v
-Whether
Article 2129
Reyes validly sold her SSS-mortgaged property to the Vegas from
of the Civil Code gives SSS the option of collecting given theap
mortgaged
that No.
she couldproperty.
G.R. L-32116not do 2l,
April so 1981
without the written consent of SSS.

***There
Held: are other issues but I focused on that which involved Art. 1237
FACTS:
Yes. SC reversed CA decision. CASE No. 5 DBP V MIRANG
-Maxima
The Vegas were
Castro,
The ruling in You're
able DBP vs.Reading
accompaniedto present adequate
by Severino
Mirang a Preview
(66 proof
Valencia,
SCRA 141ofwent
Reye's
[1975]), tosale
the of thethe
Rural
wherein propert
Bank of
mort
of the
arranged deed of assignment
everything
indebtedness about
before in
thethe their favor
loan with was
redemption and what
the bank.
allowed it contained,
Heissupplied they offered
to the latter
not controlling becaus th
Reyes' sale of Unlock
thefull access with a free trial.
loancharter of the
application. property
theAfter
mortgagee to them.
bank
(DBP) They
approved took
requires the possession
the loan for the
payment ofofthe house
amount
such ofand
amount. P3,0loI
for the
Valencia amortizations
spouses,
property, to the
signed
no charter SSS. And
the when
a promissory
requires noteSSS
payment wanted
corresponding
of sums of tomoney
foreclose thethan
to herother
loan prope
in favo
th
for the balance of the loan.
ValenciaRule 39.spouses obtained Download from theWithbank FreeanTrial
equal amount of loan for P3,000
-note
Article 1237 "2")
(Exhibit of the
Redemption Civil
corresponding
of Code cannot
properties theirapply
tomortgaged in favor
loan with
in this
thecase
of thesince
bankthe
Philippine anddebtor
NationalhadBan Ca(
ownership
co-maker.
Philippinesof theand mortgaged
foreclosedproperty t o the Vegas.
either judicially Although Paragraph
or extrajudicially are governed 4 of tb
that Reyes
loans must
Bothpayment of secure
were the the
secured
all by consent of SSS
a real-estate
amounts owed before
mortgage
by selling
the debtor. the
Thisproperty,
on Castro's house and
special is val
prote lo
cannot
notice beCastro,
to compelled
institutions is saying to that
recognize
not accorded the salewould
hertoproperty
judgment before bethe
creditors inloan
sold oat is completely
public
rdinary auction
civil paid,
to sa
actions.27
owner,
promissory fromnotes
selling plusthe property
interest andwhile the loan
attorney's fees.remained
Upon requestunpaidby . Such
Castrostipul
and
undue
the bank, impediment
the auction orsale
interference on the transmission
was postponed, but was
CASE of property.
No.nevertheless
6 Rural Bankauctioned
of Caloocan at av
-Castro
Articleclaimed
2129 of thatthesheCivil
is aCode
70-yeargives
old SSS
widow thewhooptioncannot of collecting
read and writefrominthe En
mortgaged
finished property.
G.R. No. second grade.
L-32116 April 2l,She
1981needed money in the amount of P3,000.00 to inv
spouses Valencia, who accompanied her to the bank to secure a loan of P3,00
***There
handed are other issues but I focused on that which involved Art. 1237
FACTS: to her several forms already prepared which she was asked to sign, wit
and contents of the documents. She also alleged that it was only when she rec
she
Maximalearned thataccompanied
Castro, the mortgageby contract
Severino which was an
Valencia, wentencumbrance
to the Ruralon her of
Bank pr
P3,000.00 and that she
arranged everything was the
about made t owith
loan sign astheco-maker
bank. Heofsupplied
the promissory noteth
to the latter w
Castro filed a suit against
loan application. After the petitioners contending
bank approved the that
loan thru mistake
for the on her
amount of part
P3,0
was induced
Valencia to sign
spouses, as co-maker
signed of a promissory
a promissory note and totoconstitute
note corresponding her loan in a mor
favo
the questioned note. At the time of filing her complaint,
Valencia spouses obtained from the bank an equal amount of loan for P3,000 respondent Castro dep
the
notecourt a quo
(Exhibit in full
"2") payment of her
corresponding personal
to their loan loan plusof
in favor interest.
the bank and had Ca
Castro
co-maker. prayed for:
Both(1)loansthe were
annulmentsecured as byfar aasreal-estate
she is concerned
mortgage of the promissory
on Castro's housenote and(Exhlo
insofar as it exceeds P3,000.00; and
notice to Castro, saying that her property would be sold at public auction to sa
(2) for the
promissory notesdischarge of herand
plus interest personal
attorney'sobligation with the
fees. Upon bankby
request byCastro
reasonand of
the bank, a quo upon thesale
the auction filing
was ofpostponed,
her complaint. but was nevertheless auctioned at a
ISSUE:
Castro claimed that she is a 70-year old widow who cannot read and write in En
Whether
finished secondor not grade.
respondent court correctly
She needed money inaffirmed
the amount the lower court intodecla
of P3,000.00 inv
invalid
spousesinsofar as they
Valencia, whoaffect respondent
accompanied her Castro
to the vis-a-vis
bank to petitioner
secure a loan bank,of and
P3,00 th
up to thetoamount
handed her severalof P3,000.00
forms already only. prepared which she was asked to sign, wit
HELD:
and contents of the documents. She also alleged that it was only when she rec
Yes.
she learned that the mortgage contract which was an encumbrance on her pr
RATIO:
P3,000.00 and that she was made t o sign as co-maker of the promissory note w
While
Castrothe filedValencias defrauded
a suit against Castrocontending
petitioners by making her thatsignthruthe promissory
mistake on hernote part
misrepresented
was induced to sign to the bank Castro's
as co-maker personal qualifications
of a promissory note and to in order toasecur
constitute mor
result of the fraud
the questioned note. upon
At the Castro
timeand the misrepresentation
of filing her complaint, respondent to the bankCastroinflict
dep
the bank committed
the court a quo in full mistake
paymentinofgiving their consents
her personal loan plustointerest.
the contracts . In oth
their
Castro consents
prayed for:given. For if Castro had been aware of what she signed and the
loan(1)applicants, it is evident
the annulment as farthat theyiswould
as she not have
concerned given
of the their consents
promissory note to (Exhth
Article 1342 of the
insofar as itCivil Code which
exceeds provides:
P3,000.00; and
Art. 1342. Misrepresentation
(2) for the discharge of her personal obligation by witha third
the bank person
by reasondoesof
a quo upon misrepresentation
the filing of herhas created substantial mistake and the sam
complaint.
We
ISSUE:cannot declare the promissory note valid between the bank and Castro an
Castro
Whether beyond
or notthe amount ofcourt
respondent P3,000.00,
correctly foraffirmed
while thethe contracts may not
lower court be
in decla
bank
invalidand Castro
insofar on the
as they ground
affect of fraudCastro
respondent because the bank
vis-a-vis was not
petitioner bank,a partici
and th
up to the amount of P3,000.00 only.
HELD:
Yes.
RATIO:
While the Valencias defrauded Castro by making her sign the promissory note
misrepresented to the bank Castro's personal qualifications in order to secur
result of the fraud upon Castro and the misrepresentation to the bank inflict
the bank committed mistake in giving their consents to the contracts . In oth
their consents given. For if Castro had been aware of what she signed and the
loan applicants, it is evident that they would not have given their consents to t h
Article 1342 of the Civil Code which provides:
Art. 1342. Misrepresentation by a third person does
misrepresentation has created substantial mistake and the sam
We cannot declare the promissory note valid between the bank and Castro an
Castro beyond the amount of P3,000.00, for while the contracts may not be
bank and Castro on the ground of fraud because the bank was not a partici

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