Republic of the Philippines

REGIONAL TRIAL COURT

Second Judicial Region
OFFICE OF THE CLERK OF COURT
Aparri, Cagayan

JUNIOR DELA CRUZ

Plaintiff
-v e r s u s- Civ. Case No. ____________

THIM MCKEY BANK

Defendant
X - - - - - - - - - - - - X

COMPLAINT FOR DECLARATION OF NULLITY OF THE TRANSFER OF TITLE

WITH PRAYER FOR TEMPORARY RESTRAINING ORDER/INJUNCTION

I, JUNIOR DELA CRUZ, of legal age, a Filipino citizen, and a resident of Di

Masarsarakan, Cagayan, after having been sworn in accordance with law, hereby
depose and state that:

PARTIES
PLAINTIFF:

(1) Junior Dela Cruz is filing the instant case in his capacity as the sole legal
heir of SENIOR Dela Cruz. He may be served with processes by this Honorable
Office at Di Masarsarakan, Cagayan.

DEFENDANT:

(2) Thim McKey Rural Bank, Inc. [herein referred to as the “BANK”] is the
successor-in-interest of Pheening de Garcia of Caramagui. Its principal place of
business is at Blood, Caramagui, Cagayan.
PREFATORY STATEMENT
The Public Land Act was enacted to give the homestead or patentee every
chance to preserve for himself and his family the land that the State had
gratuitously given to him as a reward for his labor in cleaning and cultivating it—
its basic objective is to provide home and decent living for destitutes. It
bears stressing that the law was enacted to give the homesteader or patentee
every chance to preserve for himself and his family the land that the State had
gratuitously given to him as a reward for his labor in cleaning and cultivating it. Its
basic objective, as the Court had occasion to stress, is to promote public policy,
that is to provide home and decent living for destitutes, aimed at providing a class
of independent small landholders, which is the bulwark of peace and order. Hence,
any act which would have the effect of removing the property subject of the patent
from the hands of a grantee will be struck down for being violative of the law. 1
PRELIMINARY STATEMENT

(3) The plaintiff reserves all available remedies under our Banking Laws,
Manual Operations for Banks and other relevant laws to prosecute the defendant
and to bring the plaintiff towards proper retributive justice.

STATEMENT OF THE FACTS

(4) On 5 July 1973, SENIOR DELA CRUZ entered into a Real Estate
Mortgage of the SEVEN THOUSAND THREE HUNDRED square meters (7,300
Sq. meters) in favor of Pheening de Garcia Bank to secure the payment of loan
or advance in the principal amount of ONE THOUSAND PESOS ONLY (PhP
1000.00) with a dragnet clause and an interest rate of 12% per annum (a
1
Flores vs. Bagaoisan, G.R. NO. 173365 (618 SCRA 323), April 15, 2010
 2

machine copy of the Real Estate Mortgage is hereto attached as Annex “A” and
made integral part hereof);

(5) On 26 April 1982, without any explanation why the mortgage

defaulted, the bank instituted an extrajudicial foreclosure of the mortgage under
the auspices of Ex-Officio Provincial Sheriff Burias Burye; (a machine copy of the
Certificate of Sheriff’s Sale is hereby attached as Annex “B” and made integral
part hereof);

(6) On 12 July 1991, plaintiff was granted an Original Certificate of Title

No. P-67833 by virtue of a homestead grant by the Ministry of Natural Resources
Bureau of Lands denominated as Homestead Patent No. 69696969696-69696
(P) (a machine copy of the Original Certificate of Title P-67833 is hereby attached
as Annex “C” and made integral part hereof);

(7) On 31 December 1999, as by-products of forgery, Pacita Pacito,

executed a Falsified Deed of Sale purportedly making the plaintiff as the vendor
and Pacita Pacito as the vendee (a machine copy of the Deed of Absolute Sale is
hereby attached as Annex “D” and made integral part hereof);

(8) By virtue of such deed, a Transfer Certificate of Title No. T-127066 was
issued in the name of Pacita Pacito on 15 July 1991 (a machine copy of the
Transfer Certificate of Title No. T-127066 is hereby attached as Annex “E” and
made integral part hereof);

(9) On 16 July 1999, Josefa Jaju, in her capacity as Managing Director

seeking for the surrender of plaintiff’s Original Certificate of Title (a machine copy
of the Letter is hereby attached as Annex “F” and made integral part hereof);

(10) The said letter asserted that the 7,708 sq. m. lot at Dimasarsarakan,
Cagayan that have been duly registered at the Register of Deeds on 4 October
1982; and, that upon expiration of one year from its registration, the BANK
asserted that the plaintiff was already divested of its ownership over the lot;

(11) On 23 April 2013, the Municipal Trial Court of Sta. Ana , Cagayan
declared in the case of Thim McKey Bank, Inc. v. Pacita Pacito et. al, that the Deed
of Sale executed in favor of the defendants by the late Spouses Senior Dela Cruz
was null and void, being products of forgery; (a certified true copy of the Decision
of the Regional Trial Court Branch 09, is hereby attached as Annex “G” and made
integral part hereof);

(12) A letter from Vice President/ Manager of the bank, effectively declared
that the Thim McKey Bank, now Thim McKey Bank is the rightful owner of the
property since 1983 when SENIOR M. Dela Cruz (a machine copy of the Letter is
hereby attached as Annex “H” and made integral part hereof);

CAUSE OF ACTION

Prior to its registration, the subject lot is part

of public domain; hence, beyond the commerce of
man.

(13) Since the subject lot is part of public domain prior to the Homestead
Patent grant, the encumbrance made through mortgage no less, is a patent nullity;

The circumvention of the free patent law

has been assented by the bank.

(14) The main purpose in the grant of free patent or homestead is to

preserve and keep the family of the homesteader that portion of the public land
which the State has given to him so he may have a place to live with his family and
become a happy citizen and useful member of the society. 2
2
Gregorio v. Crisologo Vda. De Culig, 781 SCRA 377 (2016)
 3

(15) Section 118 of the Commonwealth Act (C.A.) No. 141, otherwise
known as the Public Land Act (PLA), prohibits the alienation or encumbrance of
lands acquired under free patent or homestead within a period of five years from
the date of the issuance of the patent. 3 Under Section 124 of the Public Land Act
(PLA), any acquisition, conveyance, alienation, transfer, or other contract made or
executed in violation of Sections 118 to 123 of the PLA shall be unlawful and null
and void from its execution.4

(16) It is to be emphasized that the mortgage transaction between the

Bank and Senior Dela Cruz is indeed a nullity from the start. The proscription above
made it imperative not to encumber the land awarded via homestead patent.
Neither was there any indicia of the imprimatur of the Secretary of Department of
Environment and Natural Resources relative to the said transaction;

The bank is certainly not the proper party to

assail the title thereon due to Dela Cruz.

(17) Although Section 124 states that a violation of Section 118 causes the
reversion of the property to the State, the Supreme Court (SC) held that a private
individual may not bring an action for reversion or any action which would have the
effect of cancelling a free patent and the corresponding certificate of title issued on
the basis thereof, with the result that the land covered thereby again form part of
the public domain, since only the Solicitor General or the officer acting in his stead
may do so.5

(18) Certainly, the Bank is not the State. For want of standing, the plaintiff
humbly but strongly asserts that the transfer of title from Dela Cruz to the Bank
has no leg to stand on. The doctrine that “the spring cannot rise higher than its
source” may not even be applied because the spring did not even exist from the
start;

There is legal impossibility for the execution

to ensue in favor of the BANK.

(19) The imperative language of the law states that:

“ Any bank may acquire real estate as shall be necessary for its own use in
the conduct of its business: Provided, however, That the total investment in such
real estate and improvements thereof including bank equipment, shall not
exceed fifty percent (50%) of combined capital accounts: Provided, further,
That the equity investment of a bank in another corporation engaged primarily in
real estate shall be considered as part of the bank's total investment in real estate,
unless otherwise provided by the Monetary Board.” 6

(20) It is further restricted and qualified by the following statutory

mechanism to wit:

“Any real property acquired or held under the circumstances enumerated in

the above paragraph shall be disposed of by the bank within a period of five (5)
years or as may be prescribed by the Monetary Board: Provided, however, That the
bank may, after said period, continue to hold the property for its own use, subject
to the limitations of the preceding Sec.” 7

No carved-out exception was made by the

Bangko Sentral Ng Pilipinas prescinding from the
reservation clause under the General Banking Law.

3
de Guzman, Jr. v. Court of Appeals, Mindanao Station, 785 SCRA 382 (2016)
4
Ibid
5
Ibid
6
Section 51 of RA 8791 “The General Banking Law of 2000”
7
Section 52.3 (2) of RA 8791 “The General Banking Law of 2000”
 4

(21) The Manual of Regulation for Banks set forth the following guidelines:

“RBs8 which are not qualified to acquire or hold land in the Philippines
pursuant to existing laws shall be allowed to bid and take part in foreclosure sales
of real property mortgaged to them, as well as to avail of enforcement and other
proceedings, and accordingly to take possession of the mortgaged property, for a
period not exceeding five (5) years from actual possession which excludes the
redemption period, as defined under Subsec. X311.5, unless actual possession was
acquired earlier: Provided, That in no event shall title to the property be
transferred to such RB In case the RB, which is not qualified to acquire or hold land
in the Philippines, is the winning bidder, it shall, during the said five (5) year
period, transfer its rights to a qualified Philippine national as defined under existing
laws without prejudice to a borrower’s right under applicable laws. Should said
unqualified RB fail to transfer such property within the five (5) year period, it shall
be penalized at one-half (1/2) of one percent (1%) per annum of the price at which
the property was foreclosed until the property is transferred to a qualified
Philippine national.9

(22) To enable the Bangko Sentral to determine compliance with the

foregoing, RBs not qualified to acquire or hold land in the Philippines shall
maintain, and make readily available for inspection, information pertaining to
individual mortgaged properties foreclosed.

(23) In this case, it is claimed by Thim McKey Bank via its demand letter 10
that the bank already owned the lot after the expiration of one year from the
registration of the sheriff’s sale on October 4, 1982. This eventually admits the
ownership over the said lot for almost nine (9) years. Evidently, the violation is
clear and unmistakable.

(24) It is glaringly a legal impossibility for Thim McKey Bank to own the
same disputed land due to the legal proscription under the General Banking Law.
Worthy to note that acts executed against the provisions of mandatory or
prohibitory laws shall be void, except when the law itself authorizes their validity. 11

(25) It is incumbent upon the bank to abide with the prevailing guidelines
set forth by the Bangko Sentral ng Pilipinas considering that the business of
banking is imbued with public interest; it is an industry where the general public’s
trust and confidence in the system is of paramount importance. 12

(26) The bank’s insistence militates against their plea as it is barred by an

equitable doctrine. Where a strict enforcement of the rules will not serve the ends
of justice and manifest wrong or injustice would result, the courts, under the
principle of equity, may liberally apply the rules. 13 It is respectfully submitted that
it is more in accord with justice and equity to bar the claim of Thim McKey Bank,
Inc. on the basis of the General Banking Law and equitable clean hands doctrine.

(27) The Highest Magistrates declare that he who comes to equity must
come to with clean hands.14 The posture of the bank renders its hands unclean as it
stands to be benefited from its dereliction to abide with the prevailing statutory
norms regarding ownership and disposal by banks of their real estate properties.

The issue on due and demandability of the

mortgage secured was not passed upon by the

8
RB stands for Rural Bank
9
Manual of Regulations for Banks, Part III 24 and 24-a
10
Annex “D”
11
Section 5 Republic Act 386 as amended “The New Civil Code of the Philippines”
12
Land bank of the Philippines v. Kho, 796 SCRA 21 (2016)
13
Quilo v. Bajao, 802 SCRA 299 (2016)
14
Seva v. Berwia, 48 Phil. 581, Bastida v. Dy Buncio and Co., 93 Phil. 195
 5

court which was a vital issue to resolve the validity

of the foreclosure.

(28) Since the former case between the Bank and Dela Cruz only settled
the issue of the nullity of the Deed of Sale in favor of PACITA PACITO, the issue
of demandability of the loan secured by SENIOR Dela Cruz. How can the
mortgage be rendered operative if there was no default to begin with?;

The Real Estate Mortgage includes a “pactum

commissorium clause; thus, void.”

(29) The Real Estate Mortgage includes a provision to wit:

“ That in case of non-payment or violation of the terms of this mortgage or

any of the provisions of Republic Act 720 as amended, this Mortgage shall be
immediately foreclosed judicially or extrajudicially as provided by law, and the
MORTGAGEEE is hereby appointed “Attorney-in-Fact” of the MORTGAGOR with full
powers and authority to take possession of the mortgaged properties,
without necessity of any judicial order or any other permission or power,
and to take any other legal action that may be necessary to satisfy the
mortgaged debt, but if the MORTGAGOR shall well and truly fulfill the obligation
above stated according to the terms thereof, then this Mortgage shall become null
and void.”

(30) In an attempt to circumvent Article 2088 the New Civil Code, the
playfulness of the words gave the creditor the power to automatically appropriate
the thing pledged. The evil of utilizing its moral ascendancy over the weakness of
the debtor surfaced but fortunately caught;

The remedy of injunction with annulment of

the foreclosure sale is justified.

(31) The remedy of a litigant who challenges the existence of the

mortgage or the validity- not the regularity- of the foreclosure is a separate action
to annul them.15 In cases of extrajudicial foreclosure sales of real estate, the
purchaser or the mortgagee who is also the purchaser in the foreclosure sale may
apply for a writ of possession either:

(a) Within 1 year redemption period upon filing of a bond; or,

(b) After the lapse of the redemption period without need of a bond. 16

The absence of notice requirement as

reflected in the certificate of sheriff’s sale caused
the nullity of the foreclosure sale.

(32) It is respectfully submitted that failure of the bank to give the

corresponding notice is a fatal jurisdictional defect, which renders the subsequent
foreclosure as void. Hence, no legal rights accrue from the said foreclosure.

(33) On this ground alone, the Court has this to say:

“If the sheriff acts without notice, or at a time and place other than that
designated in the notice, the sheriff acts without warrant of law.” 17

(34) Perforce, there is no right of redemption to speak of if the foreclosure

was void.18
(35) In the extrajudicial foreclosure of property subject of a real estate
mortgage, Act No. 3135 is quite explicit and definite about the special power to sell

15
Cabuhat v. Development Bank of the Philippine, 795 SCRA 163 (2016)
16
Hernandez v. Ocampo 800 SCRA 227 (2016)
17
Bank of the Philippine Islands (formerly Prudential Bank) v. Castro, 746 SCRA 129 (2015)
18
Baysa v. Plantilla, 762 SCRA 433 (2015)
 6

the property being required to be either inserted in or attached to the deed of

mortgage.19 This is evidently unattached in the records of the case.

(36) Section 8 of Act 3135 provides the plain, speedy and adequate
remedy in opposing the issuance of a writ of possession- a party may petition for
the setting aside of the foreclosure sale and for the cancellation of a writ of
possession in the same proceedings where the writ of possession was requested. 20
The law is clear, that the purchaser must first be placed in possession of the
mortgaged property pending proceedings assailing the issuance of the writ of
possession. 21

(37) There is no iota of evidence to support that notice of auction sale was
duly complied with. The failure to publish the notice of auction sale as required by
statute constitutes a jurisdictional defect, which invalidates the sale. 22 The object
of a notice of sale is to inform the public of the nature and condition of the
property to be sold, and inform of time, place and terms of the sale. Notices are
given for the purpose of securing bidders and to prevent a sacrifice of the
property.23 Publication, therefore, is required to give the foreclosure sale a
reasonably wide publicity such that those interested might attend the public sale. 24

(38) To request the postponement of the sale is one thing; to request

without need of compliance with the statutory requirement is another. Therefore, a
party is not estopped from questioning the validity of the foreclosure sale for
noncompliance with Act 3135.25

(39) Publication, therefore, is required to give the foreclosure sale a

reasonably wide publicity such that those interested might attend the public sale.
To allow parties to waive this jurisdictional requirement would result in converting
a private sale what ought to be a public auction. 26

(40) The form of the notice of extrajudicial sale is now prescribed in

Circular 7-2002 issued by the Office of the Court Administrator on 22 January 2002.
Section 4 (a) of Circular No. 7-2002 provides that: xxxx

“The last paragraph of the prescribed notice of sale allows the holding of a
rescheduled auction sale without reposting and republication of the notice.
However, the rescheduled auction sale will only be valid if the rescheduled date of
auction is clearly specified in the prior notice of sale. The absence of information in
the prior notice of sale will render the rescheduled auction sale void for lack of
reposting and republication. If notice of auction sale contains this particular
information, whether or not the parties agreed to rescheduled date, there is no
more need for the reposting and republication of the notice of the rescheduled
sale.”27

(41) Hence the remedy of opposing the execution via injunction is in order
on the ground of nullity of the extrajudicial foreclosure sale.

(42) It is humbly submitted that, while it is true that redemption is an

implied admission of the regularity of the sale and should estop the petitioner from
impugning the validity its validity on that ground, such is in checkered difference in
our case. On the contrary, the petitioners plea of unavailing the redemption along
with continuous possession of the subject lot is a strong indication of protest and
vehement objection to the extrajudicial foreclosure done by Rural Bank.

19
Ibid
20
Samson v. Rivera, 428 SCRA 759 (2004)
21
Ong v. Court of Appeals, 333 SCRA 189
22
Development Bank of the Philippines v. Aguirre, G.R. No. 144877, September 7, 2001
23
Olizon v. Court of Appeals, 236 SCRA 148 (1994)
24
Ouano v. Court of Appeals, G.R. No. 129279, March 4,2003
25
PNB v. Nepomuceno Productions, Inc., G.R. No. 139479, December 27, 2002
26
Ouano v. Court of Appeals Supra 17
27
Development Bank of the Philippines v. Court of Appeals, G.R. No. 125838, June 10, 2003
 7

PRAYER

WHEREFORE, premises considered, it is respectfully prayed for that

this Honorable Court, after due notice and hearing, shall render a judgment in
favor of herein plaintiff and against defendant:

1. ISSUING an ex-parte Temporary Restraining Order effective for 72

against the bank from disposing the subject property and from taking
possession of the same;

2. ISSUING a Permanent Prohibitory Injunction against the bank to

permanently enjoin the bank from taking possession of the subject
property and from disposing the same;

3. DECLARING the NULLITY of the transfer of title from Senior Dela Cruz
to Thim Mckey Rural Bank the complaint;

4. DECLARING herein plaintiff as the lawful owner of the subject property;

5. ORDERING the defendant to pay to herein plaintiff the sum of;

a. Php 100, 000.00 as moral damages;
b. Php 50, 000.00 as exemplary damages;
c. Php 100,000, 000.00 as attorney’s fees;
d. Php 10,000 as appearance fee per scheduled hearing;
e. Litigation expenses to be proven during trial and costs of the suit;

6. Such other reliefs and that are just and equitable under the premises are
likewise prayed for.

Respectfully, submitted.

Tuguegarao City, 21 September 2018.

ATTY. MAKAULAW
Counsel For The Plaintiff
CSU Andrews Campus
Tuguegarao City,Cagayan
ROLL NO.:71789898
IBP NO.:900997968
PTR NO.:656584956586
MCLE COMPLIANCE: NEWLY ADMITTED TO THE BAR
Mobile No.:09171234679