Jurisprudence: G.R. No. 80294-95

FIRST DIVISION

G.R. No. 80294-95 September 21, 1988

CATHOLIC VICAR APOSTOLIC OF THE MOUNTAIN PROVINCE, petitioner,
vs.
COURT OF APPEALS, HEIRS OF EGMIDIO OCTAVIANO AND JUAN VALDEZ, respondents.

Valdez, Ereso, Polido & Associates for petitioner.

Claustro, Claustro, Claustro Law Office collaborating counsel for petitioner.

Jaime G. de Leon for the Heirs of Egmidio Octaviano.

Cotabato Law Office for the Heirs of Juan Valdez.



GANCAYCO, J.:

The principal issue in this case is whether or not a decision of the Court of Appeals promulgated a long time ago can properly be considered res judicata by respondent Court of Appeals in the present two cases between petitioner and two private respondents.

Petitioner questions as allegedly erroneous the Decision dated August 31, 1987 of the Ninth Division of Respondent Court of Appeals 1 in CA-G.R. No. 05148 [Civil Case No. 3607 (419)] and CA-G.R. No. 05149 [Civil Case No. 3655 (429)], both for Recovery of Possession, which affirmed the Decision of the Honorable Nicodemo T. Ferrer, Judge of the Regional Trial Court of Baguio and Benguet in Civil Case No. 3607 (419) and Civil Case No. 3655 (429), with the dispositive portion as follows:

WHEREFORE, Judgment is hereby rendered ordering the defendant, Catholic Vicar Apostolic of the Mountain Province to return and surrender Lot 2 of Plan Psu-194357 to the plaintiffs. Heirs of Juan Valdez, and Lot 3 of the same Plan to the other set of plaintiffs, the Heirs of Egmidio Octaviano (Leonardo Valdez, et al.). For lack or insufficiency of evidence, the plaintiffs' claim or damages is hereby denied. Said defendant is ordered to pay costs. (p. 36, Rollo)

Respondent Court of Appeals, in affirming the trial court's decision, sustained the trial court's conclusions that the Decision of the Court of Appeals, dated May 4,1977 in CA-G.R. No. 38830-R, in the two cases affirmed by the Supreme Court, touched on the ownership of lots 2 and 3 in question; that the two lots were possessed by the predecessors-in-interest of private respondents under claim of ownership in good faith from 1906 to 1951; that petitioner had been in possession of the same lots as bailee in commodatum up to 1951, when petitioner repudiated the trust and when it applied for registration in 1962; that petitioner had just been in possession as owner for eleven years, hence there is no possibility of acquisitive prescription which requires 10 years possession with just title and 30 years of possession without; that the principle of res judicata on these findings by the Court of Appeals will bar a reopening of these questions of facts; and that those facts may no longer be altered.

Petitioner's motion for reconsideation of the respondent appellate court's Decision in the two aforementioned cases (CA G.R. No. CV-05418 and 05419) was denied.

The facts and background of these cases as narrated by the trail court are as follows —

... The documents and records presented reveal that the whole controversy started when the defendant Catholic Vicar Apostolic of the Mountain Province (VICAR for brevity) filed with the Court of First Instance of Baguio Benguet on September 5, 1962 an application for registration of title over Lots 1, 2, 3, and 4 in Psu-194357, situated at Poblacion Central, La Trinidad, Benguet, docketed as LRC N-91, said Lots being the sites of the Catholic Church building, convents, high school building, school gymnasium, school dormitories, social hall, stonewalls, etc. On March 22, 1963 the Heirs of Juan Valdez and the Heirs of Egmidio Octaviano filed their Answer/Opposition on Lots Nos. 2 and 3, respectively, asserting ownership and title thereto. After trial on the merits, the land registration court promulgated its Decision, dated November 17, 1965, confirming the registrable title of VICAR to Lots 1, 2, 3, and 4.

The Heirs of Juan Valdez (plaintiffs in the herein Civil Case No. 3655) and the Heirs of Egmidio Octaviano (plaintiffs in the herein Civil Case No. 3607) appealed the decision of the land registration court to the then Court of Appeals, docketed as CA-G.R. No. 38830-R. The Court of Appeals rendered its decision, dated May 9, 1977, reversing the decision of the land registration court and dismissing the VICAR's application as to Lots 2 and 3, the lots claimed by the two sets of oppositors in the land registration case (and two sets of plaintiffs in the two cases now at bar), the first lot being presently occupied by the convent and the second by the women's dormitory and the sister's convent.

On May 9, 1977, the Heirs of Octaviano filed a motion for reconsideration praying the Court of Appeals to order the registration of Lot 3 in the names of the Heirs of Egmidio Octaviano, and on May 17, 1977, the Heirs of Juan Valdez and Pacita Valdez filed their motion for reconsideration praying that both Lots 2 and 3 be ordered registered in the names of the Heirs of Juan Valdez and Pacita Valdez. On August 12,1977, the Court of Appeals denied the motion for reconsideration filed by the Heirs of Juan Valdez on the ground that there was "no sufficient merit to justify reconsideration one way or the other ...," and likewise denied that of the Heirs of Egmidio Octaviano.

Thereupon, the VICAR filed with the Supreme Court a petition for review on certiorari of the decision of the Court of Appeals dismissing his (its) application for registration of Lots 2 and 3, docketed as G.R. No. L-46832, entitled 'Catholic Vicar Apostolic of the Mountain Province vs. Court of Appeals and Heirs of Egmidio Octaviano.'

From the denial by the Court of Appeals of their motion for reconsideration the Heirs of Juan Valdez and Pacita Valdez, on September 8, 1977, filed with the Supreme Court a petition for review, docketed as G.R. No. L-46872, entitled, Heirs of Juan Valdez and Pacita Valdez vs. Court of Appeals, Vicar, Heirs of Egmidio Octaviano and Annable O. Valdez.

On January 13, 1978, the Supreme Court denied in a minute resolution both petitions (of VICAR on the one hand and the Heirs of Juan Valdez and Pacita Valdez on the other) for lack of merit. Upon the finality of both Supreme Court resolutions in G.R. No. L-46832 and G.R. No. L- 46872, the Heirs of Octaviano filed with the then Court of First Instance of Baguio, Branch II, a Motion For Execution of Judgment praying that the Heirs of Octaviano be placed in possession of Lot 3. The Court, presided over by Hon. Salvador J. Valdez, on December 7, 1978, denied the motion on the ground that the Court of Appeals decision in CA-G.R. No. 38870 did not grant the Heirs of Octaviano any affirmative relief.

On February 7, 1979, the Heirs of Octaviano filed with the Court of Appeals a petitioner for certiorari and mandamus, docketed as CA-G.R. No. 08890-R, entitled Heirs of Egmidio Octaviano vs. Hon. Salvador J. Valdez, Jr. and Vicar. In its decision dated May 16, 1979, the Court of Appeals dismissed the petition.

It was at that stage that the instant cases were filed. The Heirs of Egmidio Octaviano filed Civil Case No. 3607 (419) on July 24, 1979, for recovery of possession of Lot 3; and the Heirs of Juan Valdez filed Civil Case No. 3655 (429) on September 24, 1979, likewise for recovery of possession of Lot 2 (Decision, pp. 199-201, Orig. Rec.).

In Civil Case No. 3607 (419) trial was held. The plaintiffs Heirs of Egmidio Octaviano presented one (1) witness, Fructuoso Valdez, who testified on the alleged ownership of the land in question (Lot 3) by their predecessor-in-interest, Egmidio Octaviano (Exh. C ); his written demand (Exh. B—B-4 ) to defendant Vicar for the return of the land to them; and the reasonable rentals for the use of the land at P10,000.00 per month. On the other hand, defendant Vicar presented the Register of Deeds for the Province of Benguet, Atty. Nicanor Sison, who testified that the land in question is not covered by any title in the name of Egmidio Octaviano or any of the plaintiffs (Exh. 8). The defendant dispensed with the testimony of Mons.William Brasseur when the plaintiffs admitted that the witness if called to the witness stand, would testify that defendant Vicar has been in possession of Lot 3, for seventy-five (75) years continuously and peacefully and has constructed permanent structures thereon.

In Civil Case No. 3655, the parties admitting that the material facts are not in dispute, submitted the case on the sole issue of whether or not the decisions of the Court of Appeals and the Supreme Court touching on the ownership of Lot 2, which in effect declared the plaintiffs the owners of the land constitute res judicata.

In these two cases , the plaintiffs arque that the defendant Vicar is barred from setting up the defense of ownership and/or long and continuous possession of the two lots in question since this is barred by prior judgment of the Court of Appeals in CA-G.R. No. 038830-R under the principle of res judicata. Plaintiffs contend that the question of possession and ownership have already been determined by the Court of Appeals (Exh. C, Decision, CA-G.R. No. 038830-R) and affirmed by the Supreme Court (Exh. 1, Minute Resolution of the Supreme Court). On his part, defendant Vicar maintains that the principle of res judicata would not prevent them from litigating the issues of long possession and ownership because the dispositive portion of the prior judgment in CA-G.R. No. 038830-R merely dismissed their application for registration and titling of lots 2 and 3. Defendant Vicar contends that only the dispositive portion of the decision, and not its body, is the controlling pronouncement of the Court of Appeals. 2

The alleged errors committed by respondent Court of Appeals according to petitioner are as follows:

1. ERROR IN APPLYING LAW OF THE CASE AND RES JUDICATA;

2. ERROR IN FINDING THAT THE TRIAL COURT RULED THAT LOTS 2 AND 3 WERE ACQUIRED BY PURCHASE BUT WITHOUT DOCUMENTARY EVIDENCE PRESENTED;

3. ERROR IN FINDING THAT PETITIONERS' CLAIM IT PURCHASED LOTS 2 AND 3 FROM VALDEZ AND OCTAVIANO WAS AN IMPLIED ADMISSION THAT THE FORMER OWNERS WERE VALDEZ AND OCTAVIANO;

4. ERROR IN FINDING THAT IT WAS PREDECESSORS OF PRIVATE RESPONDENTS WHO WERE IN POSSESSION OF LOTS 2 AND 3 AT LEAST FROM 1906, AND NOT PETITIONER;

5. ERROR IN FINDING THAT VALDEZ AND OCTAVIANO HAD FREE PATENT APPLICATIONS AND THE PREDECESSORS OF PRIVATE RESPONDENTS ALREADY HAD FREE PATENT APPLICATIONS SINCE 1906;

6. ERROR IN FINDING THAT PETITIONER DECLARED LOTS 2 AND 3 ONLY IN 1951 AND JUST TITLE IS A PRIME NECESSITY UNDER ARTICLE 1134 IN RELATION TO ART. 1129 OF THE CIVIL CODE FOR ORDINARY ACQUISITIVE PRESCRIPTION OF 10 YEARS;

7. ERROR IN FINDING THAT THE DECISION OF THE COURT OF APPEALS IN CA G.R. NO. 038830 WAS AFFIRMED BY THE SUPREME COURT;

8. ERROR IN FINDING THAT THE DECISION IN CA G.R. NO. 038830 TOUCHED ON OWNERSHIP OF LOTS 2 AND 3 AND THAT PRIVATE RESPONDENTS AND THEIR PREDECESSORS WERE IN POSSESSION OF LOTS 2 AND 3 UNDER A CLAIM OF OWNERSHIP IN GOOD FAITH FROM 1906 TO 1951;

9. ERROR IN FINDING THAT PETITIONER HAD BEEN IN POSSESSION OF LOTS 2 AND 3 MERELY AS BAILEE BOR ROWER) IN COMMODATUM, A GRATUITOUS LOAN FOR USE;

10. ERROR IN FINDING THAT PETITIONER IS A POSSESSOR AND BUILDER IN GOOD FAITH WITHOUT RIGHTS OF RETENTION AND REIMBURSEMENT AND IS BARRED BY THE FINALITY AND CONCLUSIVENESS OF THE DECISION IN CA G.R. NO. 038830. 3

The petition is bereft of merit.

Petitioner questions the ruling of respondent Court of Appeals in CA-G.R. Nos. 05148 and 05149, when it clearly held that it was in agreement with the findings of the trial court that the Decision of the Court of Appeals dated May 4,1977 in CA-G.R. No. 38830-R, on the question of ownership of Lots 2 and 3, declared that the said Court of Appeals Decision CA-G.R. No. 38830-R) did not positively declare private respondents as owners of the land, neither was it declared that they were not owners of the land, but it held that the predecessors of private respondents were possessors of Lots 2 and 3, with claim of ownership in good faith from 1906 to 1951. Petitioner was in possession as borrower in commodatum up to 1951, when it repudiated the trust by declaring the properties in its name for taxation purposes. When petitioner applied for registration of Lots 2 and 3 in 1962, it had been in possession in concept of owner only for eleven years. Ordinary acquisitive prescription requires possession for ten years, but always with just title. Extraordinary acquisitive prescription requires 30 years. 4

On the above findings of facts supported by evidence and evaluated by the Court of Appeals in CA-G.R. No. 38830-R, affirmed by this Court, We see no error in respondent appellate court's ruling that said findings are res judicata between the parties. They can no longer be altered by presentation of evidence because those issues were resolved with finality a long time ago. To ignore the principle of res judicata would be to open the door to endless litigations by continuous determination of issues without end.

An examination of the Court of Appeals Decision dated May 4, 1977, First Division 5 in CA-G.R. No. 38830-R, shows that it reversed the trial court's Decision 6 finding petitioner to be entitled to register the lands in question under its ownership, on its evaluation of evidence and conclusion of facts.

The Court of Appeals found that petitioner did not meet the requirement of 30 years possession for acquisitive prescription over Lots 2 and 3. Neither did it satisfy the requirement of 10 years possession for ordinary acquisitive prescription because of the absence of just title. The appellate court did not believe the findings of the trial court that Lot 2 was acquired from Juan Valdez by purchase and Lot 3 was acquired also by purchase from Egmidio Octaviano by petitioner Vicar because there was absolutely no documentary evidence to support the same and the alleged purchases were never mentioned in the application for registration.

By the very admission of petitioner Vicar, Lots 2 and 3 were owned by Valdez and Octaviano. Both Valdez and Octaviano had Free Patent Application for those lots since 1906. The predecessors of private respondents, not petitioner Vicar, were in possession of the questioned lots since 1906.

There is evidence that petitioner Vicar occupied Lots 1 and 4, which are not in question, but not Lots 2 and 3, because the buildings standing thereon were only constructed after liberation in 1945. Petitioner Vicar only declared Lots 2 and 3 for taxation purposes in 1951. The improvements oil Lots 1, 2, 3, 4 were paid for by the Bishop but said Bishop was appointed only in 1947, the church was constructed only in 1951 and the new convent only 2 years before the trial in 1963.

When petitioner Vicar was notified of the oppositor's claims, the parish priest offered to buy the lot from Fructuoso Valdez. Lots 2 and 3 were surveyed by request of petitioner Vicar only in 1962.

Private respondents were able to prove that their predecessors' house was borrowed by petitioner Vicar after the church and the convent were destroyed. They never asked for the return of the house, but when they allowed its free use, they became bailors in commodatum and the petitioner the bailee. The bailees' failure to return the subject matter of commodatum to the bailor did not mean adverse possession on the part of the borrower. The bailee held in trust the property subject matter of commodatum. The adverse claim of petitioner came only in 1951 when it declared the lots for taxation purposes. The action of petitioner Vicar by such adverse claim could not ripen into title by way of ordinary acquisitive prescription because of the absence of just title.

The Court of Appeals found that the predecessors-in-interest and private respondents were possessors under claim of ownership in good faith from 1906; that petitioner Vicar was only a bailee in commodatum; and that the adverse claim and repudiation of trust came only in 1951.

We find no reason to disregard or reverse the ruling of the Court of Appeals in CA-G.R. No. 38830-R. Its findings of fact have become incontestible. This Court declined to review said decision, thereby in effect, affirming it. It has become final and executory a long time ago.

Respondent appellate court did not commit any reversible error, much less grave abuse of discretion, when it held that the Decision of the Court of Appeals in CA-G.R. No. 38830-R is governing, under the principle of res judicata, hence the rule, in the present cases CA-G.R. No. 05148 and CA-G.R. No. 05149. The facts as supported by evidence established in that decision may no longer be altered.

WHEREFORE AND BY REASON OF THE FOREGOING, this petition is DENIED for lack of merit, the Decision dated Aug. 31, 1987 in CA-G.R. Nos. 05148 and 05149, by respondent Court of Appeals is AFFIRMED, with costs against petitioner.

SO ORDERED.

Narvasa, Cruz, Griño-Aquino and Medialdea, JJ., concur.



Footnotes

1 Associate Justices Conrado T. Limcaoco, Jose C. Campos, Jr. and Gloria C. Paras.

2 Decision in CA-G.R. No. CV Nos. 05148 and 05149 dated August 31, 1987; pp. 11 2-117, Rollo.

3 Pp. 5-15, Petition; pp. 6-17, Rollo.

4 Arts. 1134 and 1129, Civil Code.

5 Presiding Justice Magno S. Gatmaitan, Associate Justices Pacifico P. de Castro and Samuel Reyes.

6 Land Reg. No. N-91, LRC Rec. No. N-22991 of the then C.F.I. of Baguio City.

Credit Transactions Case Digest: Republic v. Bagtas (1962)

G.R. No. L-17474 October 25, 1962

Laws Applicable: Commodatum

Lessons Applicable:

FACTS:

• May 8, 1948: Jose V. Bagtas borrowed from the Republic of the Philippines through the Bureau of Animal Industry three bulls: a Red Sindhi with a book value of P1,176.46, a Bhagnari, of P1,320.56 and a Sahiniwal, of P744.46, for a period of 1 year for breeding purposes subject to a breeding fee of 10% of the book value of the bulls
• May 7, 1949: Jose requested for a renewal for another year for the three bulls but only one bull was approved while the others are to be returned
• March 25, 1950: He wrote to the Director of Animal Industry that he would pay the value of the 3 bulls
• October 17, 1950: he reiterated his desire to buy them at a value with a deduction of yearly depreciation to be approved by the Auditor General.
• October 19, 1950: Director of Animal Industry advised him that either the 3 bulls are to be returned or their book value without deductions should be paid not later than October 31, 1950 which he was not able to do
• December 20, 1950: An action at the CFI was commenced against Jose praying that he be ordered to return the 3 bulls or to pay their book value of P3,241.45 and the unpaid breeding fee of P199.62, both with interests, and costs
• July 5, 1951: Jose V. Bagtas, through counsel Navarro, Rosete and Manalo, answered that because of the bad peace and order situation in Cagayan Valley, particularly in the barrio of Baggao, and of the pending appeal he had taken to the Secretary of Agriculture and Natural Resources and the President of the Philippines, he could not return the animals nor pay their value and prayed for the dismissal of the complaint.
• RTC: granted the action
• December 1958: granted an ex-parte motion for the appointment of a special sheriff to serve the writ outside Manila
• December 6, 1958: Felicidad M. Bagtas, the surviving spouse of Jose who died on October 23, 1951 and administratrix of his estate, was notified
• January 7, 1959: she file a motion that the 2 bulls where returned by his son on June 26, 1952 evidenced by recipt and the 3rd bull died from gunshot wound inflicted during a Huk raid and prayed that the writ of execution be quashed and that a writ of preliminary injunction be issued. 

ISSUE: W/N the contract is commodatum and NOT a lease and the estate should be liable for the loss due to force majeure due to delay.

HELD: YES. writ of execution appealed from is set aside, without pronouncement as to costs

• If contract was commodatum then Bureau of Animal Industry retained ownership or title to the bull it should suffer its loss due to force majeure. A contract of commodatum is essentially gratuitous.  If the breeding fee be considered a compensation, then the contract would be a lease of the bull. Under article 1671 of the Civil Code the lessee would be subject to the responsibilities of a possessor in bad faith, because she had continued possession of the bull after the expiry of the contract.  And even if the contract be commodatum, still the appellant is liable if he keeps it longer than the period stipulated
• the estate of the late defendant is only liable for the sum of P859.63, the value of the bull which has not been returned because it was killed while in the custody of the administratrix of his estate
• Special proceedings for the administration and settlement of the estate of the deceased Jose V. Bagtas having been instituted in the CFI, the money judgment rendered in favor of the appellee cannot be enforced by means of a writ of execution but must be presented to the probate court for payment by the appellant, the administratrix appointed by the court.

Jurisprudence: G.R. No. L-17474

EN BANC

G.R. No. L-17474            October 25, 1962

REPUBLIC OF THE PHILIPPINES, plaintiff-appellee,
vs.
JOSE V. BAGTAS, defendant,
FELICIDAD M. BAGTAS, Administratrix of the Intestate Estate left by the late Jose V. Bagtas, petitioner-appellant.

D. T. Reyes, Liaison and Associates for petitioner-appellant.
Office of the Solicitor General for plaintiff-appellee.

PADILLA, J.:

The Court of Appeals certified this case to this Court because only questions of law are raised.

On 8 May 1948 Jose V. Bagtas borrowed from the Republic of the Philippines through the Bureau of Animal Industry three bulls: a Red Sindhi with a book value of P1,176.46, a Bhagnari, of P1,320.56 and a Sahiniwal, of P744.46, for a period of one year from 8 May 1948 to 7 May 1949 for breeding purposes subject to a government charge of breeding fee of 10% of the book value of the bulls. Upon the expiration on 7 May 1949 of the contract, the borrower asked for a renewal for another period of one year. However, the Secretary of Agriculture and Natural Resources approved a renewal thereof of only one bull for another year from 8 May 1949 to 7 May 1950 and requested the return of the other two. On 25 March 1950 Jose V. Bagtas wrote to the Director of Animal Industry that he would pay the value of the three bulls. On 17 October 1950 he reiterated his desire to buy them at a value with a deduction of yearly depreciation to be approved by the Auditor General. On 19 October 1950 the Director of Animal Industry advised him that the book value of the three bulls could not be reduced and that they either be returned or their book value paid not later than 31 October 1950. Jose V. Bagtas failed to pay the book value of the three bulls or to return them. So, on 20 December 1950 in the Court of First Instance of Manila the Republic of the Philippines commenced an action against him praying that he be ordered to return the three bulls loaned to him or to pay their book value in the total sum of P3,241.45 and the unpaid breeding fee in the sum of P199.62, both with interests, and costs; and that other just and equitable relief be granted in (civil No. 12818).

On 5 July 1951 Jose V. Bagtas, through counsel Navarro, Rosete and Manalo, answered that because of the bad peace and order situation in Cagayan Valley, particularly in the barrio of Baggao, and of the pending appeal he had taken to the Secretary of Agriculture and Natural Resources and the President of the Philippines from the refusal by the Director of Animal Industry to deduct from the book value of the bulls corresponding yearly depreciation of 8% from the date of acquisition, to which depreciation the Auditor General did not object, he could not return the animals nor pay their value and prayed for the dismissal of the complaint.

After hearing, on 30 July 1956 the trial court render judgment —

. . . sentencing the latter (defendant) to pay the sum of P3,625.09 the total value of the three bulls plus the breeding fees in the amount of P626.17 with interest on both sums of (at) the legal rate from the filing of this complaint and costs.

On 9 October 1958 the plaintiff moved ex parte for a writ of execution which the court granted on 18 October and issued on 11 November 1958. On 2 December 1958 granted an ex-parte motion filed by the plaintiff on November 1958 for the appointment of a special sheriff to serve the writ outside Manila. Of this order appointing a special sheriff, on 6 December 1958, Felicidad M. Bagtas, the surviving spouse of the defendant Jose Bagtas who died on 23 October 1951 and as administratrix of his estate, was notified. On 7 January 1959 she file a motion alleging that on 26 June 1952 the two bull Sindhi and Bhagnari were returned to the Bureau Animal of Industry and that sometime in November 1958 the third bull, the Sahiniwal, died from gunshot wound inflicted during a Huk raid on Hacienda Felicidad Intal, and praying that the writ of execution be quashed and that a writ of preliminary injunction be issued. On 31 January 1959 the plaintiff objected to her motion. On 6 February 1959 she filed a reply thereto. On the same day, 6 February, the Court denied her motion. Hence, this appeal certified by the Court of Appeals to this Court as stated at the beginning of this opinion.

It is true that on 26 June 1952 Jose M. Bagtas, Jr., son of the appellant by the late defendant, returned the Sindhi and Bhagnari bulls to Roman Remorin, Superintendent of the NVB Station, Bureau of Animal Industry, Bayombong, Nueva Vizcaya, as evidenced by a memorandum receipt signed by the latter (Exhibit 2). That is why in its objection of 31 January 1959 to the appellant's motion to quash the writ of execution the appellee prays "that another writ of execution in the sum of P859.53 be issued against the estate of defendant deceased Jose V. Bagtas." She cannot be held liable for the two bulls which already had been returned to and received by the appellee.

The appellant contends that the Sahiniwal bull was accidentally killed during a raid by the Huk in November 1953 upon the surrounding barrios of Hacienda Felicidad Intal, Baggao, Cagayan, where the animal was kept, and that as such death was due to force majeure she is relieved from the duty of returning the bull or paying its value to the appellee. The contention is without merit. The loan by the appellee to the late defendant Jose V. Bagtas of the three bulls for breeding purposes for a period of one year from 8 May 1948 to 7 May 1949, later on renewed for another year as regards one bull, was subject to the payment by the borrower of breeding fee of 10% of the book value of the bulls. The appellant contends that the contract was commodatum and that, for that reason, as the appellee retained ownership or title to the bull it should suffer its loss due to force majeure. A contract of commodatum is essentially gratuitous.1 If the breeding fee be considered a compensation, then the contract would be a lease of the bull. Under article 1671 of the Civil Code the lessee would be subject to the responsibilities of a possessor in bad faith, because she had continued possession of the bull after the expiry of the contract. And even if the contract be commodatum, still the appellant is liable, because article 1942 of the Civil Code provides that a bailee in a contract of commodatum —

. . . is liable for loss of the things, even if it should be through a fortuitous event:

(2) If he keeps it longer than the period stipulated . . .

(3) If the thing loaned has been delivered with appraisal of its value, unless there is a stipulation exempting the bailee from responsibility in case of a fortuitous event;

The original period of the loan was from 8 May 1948 to 7 May 1949. The loan of one bull was renewed for another period of one year to end on 8 May 1950. But the appellant kept and used the bull until November 1953 when during a Huk raid it was killed by stray bullets. Furthermore, when lent and delivered to the deceased husband of the appellant the bulls had each an appraised book value, to with: the Sindhi, at P1,176.46, the Bhagnari at P1,320.56 and the Sahiniwal at P744.46. It was not stipulated that in case of loss of the bull due to fortuitous event the late husband of the appellant would be exempt from liability.

The appellant's contention that the demand or prayer by the appellee for the return of the bull or the payment of its value being a money claim should be presented or filed in the intestate proceedings of the defendant who died on 23 October 1951, is not altogether without merit. However, the claim that his civil personality having ceased to exist the trial court lost jurisdiction over the case against him, is untenable, because section 17 of Rule 3 of the Rules of Court provides that —

After a party dies and the claim is not thereby extinguished, the court shall order, upon proper notice, the legal representative of the deceased to appear and to be substituted for the deceased, within a period of thirty (30) days, or within such time as may be granted. . . .

and after the defendant's death on 23 October 1951 his counsel failed to comply with section 16 of Rule 3 which provides that —

Whenever a party to a pending case dies . . . it shall be the duty of his attorney to inform the court promptly of such death . . . and to give the name and residence of the executory administrator, guardian, or other legal representative of the deceased . . . .

The notice by the probate court and its publication in the Voz de Manila that Felicidad M. Bagtas had been issue letters of administration of the estate of the late Jose Bagtas and that "all persons having claims for monopoly against the deceased Jose V. Bagtas, arising from contract express or implied, whether the same be due, not due, or contingent, for funeral expenses and expenses of the last sickness of the said decedent, and judgment for monopoly against him, to file said claims with the Clerk of this Court at the City Hall Bldg., Highway 54, Quezon City, within six (6) months from the date of the first publication of this order, serving a copy thereof upon the aforementioned Felicidad M. Bagtas, the appointed administratrix of the estate of the said deceased," is not a notice to the court and the appellee who were to be notified of the defendant's death in accordance with the above-quoted rule, and there was no reason for such failure to notify, because the attorney who appeared for the defendant was the same who represented the administratrix in the special proceedings instituted for the administration and settlement of his estate. The appellee or its attorney or representative could not be expected to know of the death of the defendant or of the administration proceedings of his estate instituted in another court that if the attorney for the deceased defendant did not notify the plaintiff or its attorney of such death as required by the rule.

As the appellant already had returned the two bulls to the appellee, the estate of the late defendant is only liable for the sum of P859.63, the value of the bull which has not been returned to the appellee, because it was killed while in the custody of the administratrix of his estate. This is the amount prayed for by the appellee in its objection on 31 January 1959 to the motion filed on 7 January 1959 by the appellant for the quashing of the writ of execution.

Special proceedings for the administration and settlement of the estate of the deceased Jose V. Bagtas having been instituted in the Court of First Instance of Rizal (Q-200), the money judgment rendered in favor of the appellee cannot be enforced by means of a writ of execution but must be presented to the probate court for payment by the appellant, the administratrix appointed by the court.

ACCORDINGLY, the writ of execution appealed from is set aside, without pronouncement as to costs.

Bengzon, C.J., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Paredes, Dizon, Regala and Makalintal, JJ., concur.
Barrera, J., concurs in the result.


Footnotes

1 Article 1933 of the Civil Code.

Credit Transactions Case Digest: Bonnevie v. CA (1983)

G.R. No. L-49101 October 24, 1983

Lessons Applicable: Simple Loan

Laws Applicable:

Facts:

• December 6, 1966: Spouses Jose M. Lozano and Josefa P. Lozano secured their loan of P75K from Philippine Bank of Commerce (PBC) by mortgaging their property
• December 8, 1966: Executed Deed of Sale with Mortgage to Honesto Bonnevie where P75K is payable to PBC and P25K is payable to Spouses Lanzano.
• April 28, 1967 to July 12, 1968:   Honesto Bonnevie paid a total of P18,944.22 to PBC
• May 4, 1968:  Honesto Bonnevie assigned all his rights under the Deed of Sale with Assumption of Mortgage to his brother, intervenor Raoul Bonnevie
• June 10, 1968:  PBC applied for the foreclosure of the mortgage, and notice of sale was published 
• January 26, 1971: Honesto Bonnevie filed in the CFI of Rizal against Philippine Bank of Commerce for the annulment of the Deed of Mortgage dated December 6, 1966 as well as the extrajudicial foreclosure made on September 4, 1968.
• CFI: Dismissed the complaint with costs against the Bonnevies
• CA: Affirmed

ISSUE: W/N the forclosure on the mortgage is validly executed.

HELD: YES. CA affirmed

• A contract of loan being a consensual contract is perfected at the same time the contract of mortgage was executed. The promissory note executed on December 12, 1966 is only an evidence of indebtedness and does not indicate lack of consideration of the mortgage at the time of its execution.
• Respondent Bank had every right to rely on the certificate of title. It was not bound to go behind the same to look for flaws in the mortgagor's title, the doctrine of innocent purchaser for value being applicable to an innocent mortgagee for value. 
• Thru certificate of sale in favor of appellee was registered on September 2, 1968 and the one year redemption period expired on September 3, 1969. It was not until September 29, 1969 that Honesto Bonnevie first wrote respondent and offered to redeem the property. 
• loan matured on December 26, 1967 so when respondent Bank applied for foreclosure, the loan was already six months overdue. Payment of interest on July 12, 1968 does not make the earlier act of PBC inequitous nor does it ipso facto result in the renewal of the loan. In order that a renewal of a loan may be effected, not only the payment of the accrued interest is necessary but also the payment of interest for the proposed period of renewal as well. Besides, whether or not a loan may be renewed does not solely depend on the debtor but more so on the discretion of the bank. 

Jurisprudence: G.R. No. L-49101

SECOND DIVISION

G.R. No. L-49101 October 24, 1983

RAOUL S.V. BONNEVIE and HONESTO V. BONNEVIE, petitioners,
vs.
THE HONORABLE COURT OF APPEALS and THE PHILIPPINE BANK OF COMMERCE, respondents.

Edgardo I. De Leon for petitioners.

Siguion Reyna, Montecillo & Associates for private respondent.


GUERRERO, J:

Petition for review on certiorari seeking the reversal of the decision of the defunct Court of Appeals, now Intermediate Appellate Court, in CA-G.R. No. 61193-R, entitled "Honesto Bonnevie vs. Philippine Bank of Commerce, et al.," promulgated August 11, 1978 1 as well as the Resolution denying the motion for reconsideration.

The complaint filed on January 26, 1971 by petitioner Honesto Bonnevie with the Court of First Instance of Rizal against respondent Philippine Bank of Commerce sought the annulment of the Deed of Mortgage dated December 6, 1966 executed in favor of the Philippine Bank of Commerce by the spouses Jose M. Lozano and Josefa P. Lozano as well as the extrajudicial foreclosure made on September 4, 1968. It alleged among others that (a) the Deed of Mortgage lacks consideration and (b) the mortgage was executed by one who was not the owner of the mortgaged property. It further alleged that the property in question was foreclosed pursuant to Act No. 3135 as amended, without, however, complying with the condition imposed for a valid foreclosure. Granting the validity of the mortgage and the extrajudicial foreclosure, it finally alleged that respondent Bank should have accepted petitioner's offer to redeem the property under the principle of equity said justice.

On the other hand, the answer of defendant Bank, now private respondent herein, specifically denied most of the allegations in the complaint and raised the following affirmative defenses: (a) that the defendant has not given its consent, much less the requisite written consent, to the sale of the mortgaged property to plaintiff and the assumption by the latter of the loan secured thereby; (b) that the demand letters and notice of foreclosure were sent to Jose Lozano at his address; (c) that it was notified for the first time about the alleged sale after it had foreclosed the Lozano mortgage; (d) that the law on contracts requires defendant's consent before Jose Lozano can be released from his bilateral agreement with the former and doubly so, before plaintiff may be substituted for Jose Lozano and Alfonso Lim; (e) that the loan of P75,000.00 which was secured by mortgage, after two renewals remain unpaid despite countless reminders and demands; of that the property in question remained registered in the name of Jose M. Lozano in the land records of Rizal and there was no entry, notation or indication of the alleged sale to plaintiff; (g) that it is an established banking practice that payments against accounts need not be personally made by the debtor himself; and (h) that it is not true that the mortgage, at the time of its execution and registration, was without consideration as alleged because the execution and registration of the securing mortgage, the signing and delivery of the promissory note and the disbursement of the proceeds of the loan are mere implementation of the basic consensual contract of loan.

After petitioner Honesto V. Bonnevie had rested his case, petitioner Raoul SV Bonnevie filed a motion for intervention. The intervention was premised on the Deed of Assignment executed by petitioner Honesto Bonnevie in favor of petitioner Raoul SV Bonnevie covering the rights and interests of petitioner Honesto Bonnevie over the subject property. The intervention was ultimately granted in order that all issues be resolved in one proceeding to avoid multiplicity of suits.

On March 29, 1976, the lower court rendered its decision, the dispositive portion of which reads as follows:

WHEREFORE, all the foregoing premises considered, judgment is hereby rendered dismissing the complaint with costs against the plaintiff and the intervenor.

After the motion for reconsideration of the lower court's decision was denied, petitioners appealed to respondent Court of Appeals assigning the following errors:

1. The lower court erred in not finding that the real estate mortgage executed by Jose Lozano was null and void;

2. The lower court erred in not finding that the auction sale decide on August 19, 1968 was null and void;

3. The lower court erred in not allowing the plaintiff and the intervenor to redeem the property;

4. The lower court erred in not finding that the defendant acted in bad faith; and

5. The lower court erred in dismissing the complaint.

On August 11, 1978, the respondent court promulgated its decision affirming the decision of the lower court, and on October 3. 1978 denied the motion for reconsideration. Hence, the present petition for review.

The factual findings of respondent Court of Appeals being conclusive upon this Court, We hereby adopt the facts found the trial court and found by the Court of Appeals to be consistent with the evidence adduced during trial, to wit:

It is not disputed that spouses Jose M. Lozano and Josefa P. Lozano were the owners of the property which they mortgaged on December 6, 1966, to secure the payment of the loan in the principal amount of P75,000.00 they were about to obtain from defendant-appellee Philippine Bank of Commerce; that on December 8, 1966, executed in favor of plaintiff-appellant the Deed of Sale with Mortgage ,, for and in consideration of the sum of P100,000.00, P25,000.00 of which amount being payable to the Lozano spouses upon the execution of the document, and the balance of P75,000.00 being payable to defendant- appellee; that on December 6, 1966, when the mortgage was executed by the Lozano spouses in favor of defendant-appellee, the loan of P75,000.00 was not yet received them, as it was on December 12, 1966 when they and their co-maker Alfonso Lim signed the promissory note for that amount; that from April 28, 1967 to July 12, 1968, plaintiff-appellant made payments to defendant-appellee on the mortgage in the total amount of P18,944.22; that on May 4, 1968, plaintiff-appellant assigned all his rights under the Deed of Sale with Assumption of Mortgage to his brother, intervenor Raoul Bonnevie; that on June 10, 1968, defendant-appellee applied for the foreclosure of the mortgage, and notice of sale was published in the Luzon Weekly Courier on June 30, July 7, and July 14, 1968; that auction sale was conducted on August 19, 1968, and the property was sold to defendant-appellee for P84,387.00; and that offers from plaintiff-appellant to repurchase the property failed, and on October 9, 1969, he caused an adverse claim to be annotated on the title of the property. (Decision of the Court of Appeals, p. 5).

Presented for resolution in this review are the following issues:

I

Whether the real estate mortgage executed by the spouses Lozano in favor of respondent bank was validly and legally executed.

II

Whether the extrajudicial foreclosure of the said mortgage was validly and legally effected.

III

Whether petitioners had a right to redeem the foreclosed property.

IV

Granting that petitioners had such a right, whether respondent was justified in refusing their offers to repurchase the property.

As clearly seen from the foregoing issues raised, petitioners' course of action is three-fold. They primarily attack the validity of the mortgage executed by the Lozano spouses in favor of respondent Bank. Next, they attack the validity of the extrajudicial foreclosure and finally, appeal to justice and equity. In attacking the validity of the deed of mortgage, they contended that when it was executed on December 6, 1966, there was yet no principal obligation to secure as the loan of P75,000.00 was not received by the Lozano spouses "So much so that in the absence of a principal obligation, there is want of consideration in the accessory contract, which consequently impairs its validity and fatally affects its very existence." (Petitioners' Brief, par. 1, p. 7).

This contention is patently devoid of merit. From the recitals of the mortgage deed itself, it is clearly seen that the mortgage deed was executed for and on condition of the loan granted to the Lozano spouses. The fact that the latter did not collect from the respondent Bank the consideration of the mortgage on the date it was executed is immaterial. A contract of loan being a consensual contract, the herein contract of loan was perfected at the same time the contract of mortgage was executed. The promissory note executed on December 12, 1966 is only an evidence of indebtedness and does not indicate lack of consideration of the mortgage at the time of its execution.

Petitioners also argued that granting the validity of the mortgage, the subsequent renewals of the original loan, using as security the same property which the Lozano spouses had already sold to petitioners, rendered the mortgage null and void,

This argument failed to consider the provision 2 of the contract of mortgage which prohibits the sale, disposition of, mortgage and encumbrance of the mortgaged properties, without the written consent of the mortgagee, as well as the additional proviso that if in spite of said stipulation, the mortgaged property is sold, the vendee shall assume the mortgage in the terms and conditions under which it is constituted. These provisions are expressly made part and parcel of the Deed of Sale with Assumption of Mortgage.

Petitioners admit that they did not secure the consent of respondent Bank to the sale with assumption of mortgage. Coupled with the fact that the sale/assignment was not registered so that the title remained in the name of the Lozano spouses, insofar as respondent Bank was concerned, the Lozano spouses could rightfully and validly mortgage the property. Respondent Bank had every right to rely on the certificate of title. It was not bound to go behind the same to look for flaws in the mortgagor's title, the doctrine of innocent purchaser for value being applicable to an innocent mortgagee for value. (Roxas vs. Dinglasan, 28 SCRA 430; Mallorca vs. De Ocampo, 32 SCRA 48). Another argument for the respondent Bank is that a mortgage follows the property whoever the possessor may be and subjects the fulfillment of the obligation for whose security it was constituted. Finally, it can also be said that petitioners voluntarily assumed the mortgage when they entered into the Deed of Sale with Assumption of Mortgage. They are, therefore, estopped from impugning its validity whether on the original loan or renewals thereof.

Petitioners next assail the validity and legality of the extrajudicial foreclosure on the following grounds:

a) petitioners were never notified of the foreclosure sale.

b) The notice of auction sale was not posted for the period required by law.

c) publication of the notice of auction sale in the Luzon Weekly Courier was not in accordance with law.

The lack of notice of the foreclosure sale on petitioners is a flimsy ground. Respondent Bank not being a party to the Deed of Sale with Assumption of Mortgage, it can validly claim that it was not aware of the same and hence, it may not be obliged to notify petitioners. Secondly, petitioner Honesto Bonnevie was not entitled to any notice because as of May 14, 1968, he had transferred and assigned all his rights and interests over the property in favor of intervenor Raoul Bonnevie and respondent Bank not likewise informed of the same. For the same reason, Raoul Bonnevie is not entitled to notice. Most importantly, Act No. 3135 does not require personal notice on the mortgagor. The requirement on notice is that:

Section 3. Notice shall be given by posting notices of the sale for not less than twenty days in at least three public places of the municipality or city where the property is situated, and if such property is worth more than four hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city

In the case at bar, the notice of sale was published in the Luzon Courier on June 30, July 7 and July 14, 1968 and notices of the sale were posted for not less than twenty days in at least three (3) public places in the Municipality where the property is located. Petitioners were thus placed on constructive notice.

The case of Santiago vs. Dionisio, 92 Phil. 495, cited by petitioners is inapplicable because said case involved a judicial foreclosure and the sale to the vendee of the mortgaged property was duly registered making the mortgaged privy to the sale.

As regards the claim that the period of publication of the notice of auction sale was not in accordance with law, namely: once a week for at least three consecutive weeks, the Court of Appeals ruled that the publication of notice on June 30, July 7 and July 14, 1968 satisfies the publication requirement under Act No. 3135 notwithstanding the fact that June 30 to July 14 is only 14 days. We agree. Act No. 3135 merely requires that such notice shall be published once a week for at least three consecutive weeks." Such phrase, as interpreted by this Court in Basa vs. Mercado, 61 Phil. 632, does not mean that notice should be published for three full weeks.

The argument that the publication of the notice in the "Luzon Weekly Courier" was not in accordance with law as said newspaper is not of general circulation must likewise be disregarded. The affidavit of publication, executed by the Publisher, business/advertising manager of the Luzon Weekly Courier, stares that it is "a newspaper of general circulation in ... Rizal, and that the Notice of Sheriff's sale was published in said paper on June 30, July 7 and July 14, 1968. This constitutes prima facie evidence of compliance with the requisite publication. Sadang vs. GSIS, 18 SCRA 491).

To be a newspaper of general circulation, it is enough that "it is published for the dissemination of local news and general information; that it has a bona fide subscription list of paying subscribers; that it is published at regular intervals." (Basa vs. Mercado, 61 Phil. 632). The newspaper need not have the largest circulation so long as it is of general circulation. Banta vs. Pacheco, 74 Phil. 67). The testimony of three witnesses that they do read the Luzon Weekly Courier is no proof that said newspaper is not a newspaper of general circulation in the province of Rizal.

Whether or not the notice of auction sale was posted for the period required by law is a question of fact. It can no longer be entertained by this Court. (see Reyes, et al. vs. CA, et al., 107 SCRA 126). Nevertheless, the records show that copies of said notice were posted in three conspicuous places in the municipality of Pasig, Rizal namely: the Hall of Justice, the Pasig Municipal Market and Pasig Municipal Hall. In the same manner, copies of said notice were also posted in the place where the property was located, namely: the Municipal Building of San Juan, Rizal; the Municipal Market and on Benitez Street. The following statement of Atty. Santiago Pastor, head of the legal department of respondent bank, namely:

Q How many days were the notices posted in these two places, if you know?

A We posted them only once in one day. (TSN, p. 45, July 25, 1973)

is not a sufficient countervailing evidence to prove that there was no compliance with the posting requirement in the absence of proof or even of allegation that the notices were removed before the expiration of the twenty- day period. A single act of posting (which may even extend beyond the period required by law) satisfies the requirement of law. The burden of proving that the posting requirement was not complied with is now shifted to the one who alleges non-compliance.

On the question of whether or not the petitioners had a right to redeem the property, We hold that the Court of Appeals did not err in ruling that they had no right to redeem. No consent having been secured from respondent Bank to the sale with assumption of mortgage by petitioners, the latter were not validly substituted as debtors. In fact, their rights were never recorded and hence, respondent Bank is charged with the obligation to recognize the right of redemption only of the Lozano spouses. But even granting that as purchaser or assignee of the property, as the case may be, the petitioners had acquired a right to redeem the property, petitioners failed to exercise said right within the period granted by law. Thru certificate of sale in favor of appellee was registered on September 2, 1968 and the one year redemption period expired on September 3, 1969. It was not until September 29, 1969 that petitioner Honesto Bonnevie first wrote respondent and offered to redeem the property. Moreover, on September 29, 1969, Honesto had at that time already transferred his rights to intervenor Raoul Bonnevie.

On the question of whether or not respondent Court of Appeals erred in holding that respondent Bank did not act in bad faith, petitioners rely on Exhibit "B" which is the letter of lose Lozano to respondent Bank dated December 8, 1966 advising the latter that Honesto Bonnevie was authorized to make payments for the amount secured by the mortgage on the subject property, to receive acknowledgment of payments, obtain the Release of the Mortgage after full payment of the obligation and to take delivery of the title of said property. On the assumption that the letter was received by respondent Bank, a careful reading of the same shows that the plaintiff was merely authorized to do acts mentioned therein and does not mention that petitioner is the new owner of the property nor request that all correspondence and notice should be sent to him.

The claim of appellants that the collection of interests on the loan up to July 12, 1968 extends the maturity of said loan up to said date and accordingly on June 10, 1968 when defendant applied for the foreclosure of the mortgage, the loan was not yet due and demandable, is totally incorrect and misleading. The undeniable fact is that the loan matured on December 26, 1967. On June 10, 1968, when respondent Bank applied for foreclosure, the loan was already six months overdue. Petitioners' payment of interest on July 12, 1968 does not thereby make the earlier act of respondent Bank inequitous nor does it ipso facto result in the renewal of the loan. In order that a renewal of a loan may be effected, not only the payment of the accrued interest is necessary but also the payment of interest for the proposed period of renewal as well. Besides, whether or not a loan may be renewed does not solely depend on the debtor but more so on the discretion of the bank. Respondent Bank may not be, therefore, charged of bad faith.

WHEREFORE, the appeal being devoid of merit, the decision of the Court of Appeals is hereby AFFIRMED. Costs against petitioners.

SO ORDERED.

Aquino, J., concur.

Makasiar (Chairman), Abad Santos and Escolin, JJ., concurs in the result.

Concepcion J J., took no part.

De Castro, J., is on leave.

Footnotes

1 Third Division, Reyes, L.B., J., ponente; Busran and Nocon, JJ., concurring.

2 4. The MORTGAGOR shall not sell, dispose of, mortgage, nor in any manner encumber the mortgaged properties without the written consent of MORTGAGEE. If in spite of this stipulation, a mortgaged property is sold, the Vendee shall assume the mortgaged in the terms and conditions under which it is constituted, it being understood that the assumption of the Vendee (does) not release the Vendor of his obligation to the MORTGAGEE; on the contrary, both the Vendor and the Vendee shall be jointly and severally liable for said mortgage obligation. ...

Credit Transactions Case Digest: BPI Investment Corp v. CA (2002)

G.R. No. 133632  February 15, 2002

Lessons Applicable: Simple Loan

Laws Applicable:

Facts:

• Frank Roa obtained a loan with interest rate of 16 1/4%/annum from Ayala Investment and Development Corporation (AIDC), the predecessor of BPI Investment Corp. (BPIIC), for the construction of a house on his lot in New Alabang Village, Muntinlupa.
• He mortgaged the house and lot to AIDC as security for the loan.
• 1980: Roa sold the house and lot to ALS Management & Development Corp. and Antonio Litonjua for P850K who paid P350K in cash and assumed the P500K indebtness of ROA with AIDC.
• AIDC proposed to grant ALS and Litonjua a new loan for P500K with interested rate of 20%/annum and service fee of 1%/annum on the outstanding balance payable within 10 years through equal monthly amortization of P9,996.58 and penalty interest of 21%/annum/day from the date the amortization becomes due and payable.
• March 1981: ALS and Litonjua executed a mortgage deed containing the new stipulation with the provision that the monthly amortization will commence on May 1, 1981
• August 13, 1982: ALS and Litonjua paid BPIIC P190,601.35 reducing the P500K principal loan to P457,204.90.
• September 13, 1982: BPIIC released to ALS and Litonjua P7,146.87, purporting to be what was left of their loan after full payment of Roa’s loan
• June 1984: BPIIC instituted foreclosure proceedings against  ALS and Litonjua on the ground that they failed to pay the mortgage indebtedness which from May 1, 1981 to June 30, 1984 amounting to P475,585.31
• August 13, 1984: Notice of sheriff's sale was published
• February 28, 1985: ALS and Litonjua filed Civil Case No. 52093 against BPIIC alleging that they are not in arrears and instead they made an overpayment as of June 30, 1984 since the P500K loan was only released September 13, 1982 which marked the start of the amortization and since only P464,351.77 was released applying legal compensation the balance of P35,648.23 should be applied to the monthly amortizations
• RTC: in favor of ALS and Litonjua and against BPIIC that the loan granted by BPI to ALS and Litonjua was only in the principal sum of P464,351.77 and awarding moral damages, exemplary damages and attorneys fees for the publication
• CA: Affirmed reasoning that a simple loan is perfected upon delivery of the object of the contract which is on September 13, 1982

ISSUE: W/N the contract of loan was perfected only on September 13, 1982 or the second release of the loan?

HELD: YES. AFFIRMED WITH MODIFICATION as to the award of damages.  The award of moral and exemplary damages in favor of private respondents is DELETED, but the award to them of attorney’s fees in the amount of P50,000 is UPHELD. Additionally, petitioner is ORDERED to pay private respondents P25,000 as nominal damages. Costs against petitioner.

• obligation to pay commenced only on October 13, 1982, a month after the perfection of the contract
• contract of loan involves a reciprocal obligation, wherein the obligation or promise of each party is the consideration for that of the other.  It is a basic principle in reciprocal obligations that neither party incurs in delay, if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him.  Consequently, petitioner could only demand for the payment of the monthly amortization after September 13, 1982 for it was only then when it complied with its obligation under the loan contract.  
• BPIIC was negligent in relying merely on the entries found in the deed of mortgage, without checking and correspondingly adjusting its records on the amount actually released and the date when it was released.  Such negligence resulted in damage for which an award of nominal damages should be given 
• SSS where we awarded attorney’s fees because private respondents were compelled to litigate, we sustain the award of P50,000 in favor of private respondents as attorney’s fees

Jurisprudence: G.R. No. 133632

SECOND DIVISION

G.R. No. 133632  February 15, 2002

BPI INVESTMENT CORPORATION, petitioner, vs. HON. COURT OF APPEALS and ALS MANAGEMENT & DEVELOPMENT CORPORATION, respondents.
D E C I S I O N
QUISUMBING, J.:

This petition for certiorari assails the decision dated February 28, 1997, of the Court of Appeals and its resolution dated April 21, 1998, in CA-G.R. CV No. 38887.  The appellate court affirmed the judgment of the Regional Trial Court of Pasig City, Branch 151, in (a) Civil Case No. 11831, for foreclosure of mortgage by petitioner BPI Investment Corporation (BPIIC for brevity) against private respondents ALS Management and Development Corporation and Antonio K. Litonjua,[1] consolidated with (b) Civil Case No. 52093, for damages with prayer for the issuance of a writ of preliminary injunction by the private respondents against said petitioner.

The trial court had held that private respondents were not in default in the payment of their monthly amortization, hence, the extrajudicial foreclosure conducted by BPIIC was premature and made in bad faith.  It awarded private respondents the amount of P300,000 for moral damages, P50,000 for exemplary damages, and P50,000 for attorney’s fees and expenses for litigation. It likewise dismissed the foreclosure suit for being premature.

The facts are as follows:

Frank Roa obtained a loan at an interest rate of 16 1/4% per annum from Ayala Investment and Development Corporation (AIDC), the predecessor of petitioner BPIIC, for the construction of a house on his lot in New Alabang Village, Muntinlupa.  Said house and lot were mortgaged to AIDC to secure the loan.  Sometime in 1980, Roa sold the house and lot to private respondents ALS and Antonio Litonjua for P850,000. They paid P350,000 in cash and assumed the P500,000 balance of Roa’s indebtedness with AIDC. The latter, however, was not willing to extend the old interest rate to private respondents and proposed to grant them a new loan of P500,000 to be applied to Roa’s debt and secured by the same property, at an interest rate of 20% per annum and service fee of 1% per annum on the outstanding principal balance payable within ten years in equal monthly amortization of P9,996.58 and penalty interest at the rate of 21% per annum per day from the date the amortization became due and payable.

Consequently, in March 1981, private respondents executed a mortgage deed containing the above stipulations with the provision that payment of the monthly amortization shall commence on May 1, 1981.

On August 13, 1982, ALS and Litonjua updated Roa’s arrearages by paying BPIIC the sum of P190,601.35. This reduced Roa’s principal balance to P457,204.90 which, in turn, was liquidated when BPIIC applied thereto the proceeds of   private respondents’ loan of P500,000.

On September 13, 1982, BPIIC released to private respondents P7,146.87, purporting to be what was left of their loan after full payment of Roa’s loan.

In June 1984, BPIIC instituted foreclosure proceedings against private respondents on the ground that they failed to pay the mortgage indebtedness which from May 1, 1981 to June 30, 1984, amounted to Four Hundred Seventy Five Thousand Five Hundred Eighty Five and 31/100 Pesos (P475,585.31). A notice of sheriff’s sale was published on August 13, 1984.

On February 28, 1985, ALS and Litonjua filed Civil Case No. 52093 against BPIIC. They alleged, among others, that they were not in arrears in their payment, but in fact made an overpayment as of June 30, 1984.  They maintained that they should not be made to pay amortization before the actual release of the P500,000 loan in August and September 1982. Further, out of the P500,000 loan, only the total amount of P464,351.77 was released to private respondents. Hence, applying the effects of legal compensation, the balance of P35,648.23 should be applied to the initial monthly amortization for the loan.

On August 31, 1988, the trial court rendered its judgment in Civil Case Nos. 11831 and 52093, thus:

WHEREFORE, judgment is hereby rendered in favor of ALS Management and Development Corporation and Antonio K. Litonjua and against BPI Investment Corporation, holding that the amount of loan granted by BPI to ALS and Litonjua was only in the principal sum of P464,351.77, with interest at 20% plus service charge of 1% per annum, payable on equal monthly and successive amortizations at P9,283.83 for ten (10) years or one hundred twenty (120) months. The amortization schedule attached as Annex “A” to the “Deed of Mortgage” is correspondingly reformed as aforestated.

The Court further finds that ALS and Litonjua suffered compensable damages when BPI caused their publication in a newspaper of general circulation as defaulting debtors, and therefore orders BPI to pay ALS and Litonjua the following sums:

a) P300,000.00 for and as moral damages;

b) P50,000.00 as and for exemplary damages;

c) P50,000.00 as and for attorney’s fees and expenses of litigation.

The foreclosure suit (Civil Case No. 11831) is hereby DISMISSED for being premature.

Costs against BPI.

SO ORDERED.[2]

Both parties appealed to the Court of Appeals.  However, private respondents’ appeal was dismissed for non-payment of docket fees.

On February 28, 1997, the Court of Appeals promulgated its decision, the dispositive portion reads:

WHEREFORE, finding no error in the appealed decision the same is hereby AFFIRMED in toto.

SO ORDERED.[3]

In its decision, the Court of Appeals reasoned that a simple loan is perfected only upon the delivery of the object of the contract.  The contract of loan between BPIIC and ALS & Litonjua was perfected only on September 13, 1982, the date when BPIIC released the purported balance of the P500,000 loan after deducting therefrom the value of Roa’s indebtedness. Thus, payment of the monthly amortization should commence only a month after the said date, as can be inferred from the stipulations in the contract. This, despite the express agreement of the parties that payment shall commence on May 1, 1981.  From October 1982 to June 1984, the total amortization due was only P194,960.43. Evidence showed that private respondents had an overpayment, because as of June 1984, they already paid a total amount of P201,791.96.  Therefore, there was no basis for BPIIC to extrajudicially foreclose the mortgage and cause the publication in newspapers concerning private respondents’ delinquency in the payment of their loan.  This fact constituted sufficient ground for moral damages in favor of private respondents.

The motion for reconsideration filed by petitioner BPIIC was likewise denied, hence this petition, where BPIIC submits for resolution the following issues:

I.   WHETHER OR NOT A CONTRACT OF LOAN IS A CONSENSUAL CONTRACT IN THE LIGHT OF THE RULE LAID DOWN IN BONNEVIE VS. COURT OF APPEALS, 125 SCRA 122.

II. WHETHER OR NOT BPI SHOULD BE HELD LIABLE FOR MORAL AND EXEMPLARY DAMAGES AND ATTORNEY’S FEES IN THE FACE OF IRREGULAR PAYMENTS MADE BY ALS AND OPPOSED TO THE RULE LAID DOWN IN SOCIAL SECURITY SYSTEM VS. COURT OF APPEALS, 120 SCRA 707.

On the first issue, petitioner contends that the Court of Appeals erred in ruling that because a simple loan is perfected upon the delivery of the object of the contract, the loan contract in this case was perfected only on September 13, 1982.  Petitioner claims that a contract of loan is a consensual contract, and a loan contract is perfected at the time the contract of mortgage is executed conformably with our ruling in Bonnevie v. Court of Appeals, 125 SCRA 122. In the present case, the loan contract was perfected on March 31, 1981, the date when the mortgage deed was executed, hence, the amortization and interests on the loan should be computed from said date.

Petitioner also argues that while the documents showed that the loan was released only on August 1982, the loan was actually released on March 31, 1981, when BPIIC issued a cancellation of mortgage of Frank Roa’s loan.  This finds support in the registration on March 31, 1981 of the Deed of Absolute Sale executed by Roa in favor of ALS, transferring the title of the property to ALS, and ALS executing the Mortgage Deed in favor of BPIIC.  Moreover, petitioner claims, the delay in the release of the loan should be attributed to private respondents.  As BPIIC only agreed to extend a P500,000 loan, private respondents were required to reduce Frank Roa’s loan below said amount.  According to petitioner, private respondents were only able to do so in August 1982.

In their comment, private respondents assert that based on Article 1934 of the Civil Code,[4] a simple loan is perfected upon the delivery of the object of the contract, hence a real contract. In this case, even though the loan contract was signed on March 31, 1981, it was perfected only on September 13, 1982, when the full loan was released to private respondents.  They submit that petitioner misread Bonnevie.  To give meaning to Article 1934, according to private respondents, Bonnevie must be construed to mean that the contract to extend the loan was perfected on March 31, 1981 but the contract of loan itself was only perfected upon the delivery of the full loan to private respondents on September 13, 1982.

Private respondents further maintain that even granting, arguendo, that the loan contract was perfected on March 31, 1981, and their payment did not start a month thereafter, still no default took place.  According to private respondents, a perfected loan agreement imposes reciprocal obligations, where the obligation or promise of each party is the consideration of the other party.  In this case, the consideration for BPIIC in entering into the loan contract is the promise of private respondents to pay the monthly amortization. For the latter, it is the promise of BPIIC to deliver the money.  In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him.  Therefore, private respondents conclude, they did not incur in delay when they did not commence paying the monthly amortization on May 1, 1981, as it was only on September 13, 1982 when petitioner fully complied with its obligation under the loan contract.

We agree with private respondents. A loan contract is not a consensual contract but a real contract. It is perfected only upon the delivery of the object of the contract.[5] Petitioner misapplied Bonnevie.  The contract in Bonnevie declared by this Court as a perfected consensual contract falls under the first clause of Article 1934, Civil Code. It is an accepted promise to deliver something by way of simple loan.

In Saura Import and Export Co. Inc. vs. Development Bank of the Philippines, 44 SCRA 445, petitioner applied for a loan of P500,000 with respondent bank. The latter approved the application through a board resolution. Thereafter, the corresponding mortgage was executed and registered.  However, because of acts attributable to petitioner, the loan was not released. Later, petitioner instituted an action for damages. We recognized in this case, a perfected consensual contract which under normal circumstances could have made the bank liable for not releasing the loan.  However, since the fault was attributable to petitioner therein, the court did not award it damages.

A perfected consensual contract, as shown above, can give rise to an action for damages. However, said contract does not constitute the real contract of loan which requires the delivery of the object of the contract for its perfection and which gives rise to obligations only on the part of the borrower.[6]

In the present case, the loan contract between BPI, on the one hand, and ALS and Litonjua, on the other, was perfected only on September 13, 1982, the date of the second release of the loan.  Following the intentions of the parties on the commencement of the monthly amortization, as found by the Court of Appeals, private respondents’ obligation to pay commenced only on October 13, 1982, a month after the perfection of the contract.[7]

We also agree with private respondents that a contract of loan involves a reciprocal obligation, wherein the obligation or promise of each party is the consideration for that of the other.[8] As averred by private respondents, the promise of BPIIC to extend and deliver the loan is upon the consideration that ALS and Litonjua shall pay the monthly amortization commencing on May 1, 1981, one month after the supposed release of the loan.  It is a basic principle in reciprocal obligations that neither party incurs in delay, if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him.[9] Only when a party has performed his part of the contract can he demand that the other party also fulfills his own obligation and if the latter fails, default sets in. Consequently, petitioner could only demand for the payment of the monthly amortization after September 13, 1982 for it was only then when it complied with its obligation under the loan contract.  Therefore, in computing the amount due as of the date when BPIIC extrajudicially caused the foreclosure of the mortgage, the starting date is October 13, 1982 and not May 1, 1981.

Other points raised by petitioner in connection with the first issue, such as the date of actual release of the loan and whether private respondents were the cause of the delay in the release of the loan, are factual.  Since petitioner has not shown that the instant case is one of the exceptions to the basic rule that only questions of law can be raised in a petition for review under Rule 45 of the Rules of Court,[10] factual matters need not tarry us now.  On these points we are bound by the findings of the appellate and trial courts.

On the second issue, petitioner claims that it should not be held liable for moral and exemplary damages for it did not act maliciously when it initiated the foreclosure proceedings.  It merely exercised its right under the mortgage contract because private respondents were irregular in their monthly amortization.  It invoked our ruling in Social Security System vs. Court of Appeals, 120 SCRA 707, where we said:

Nor can the SSS be held liable for moral and temperate damages. As concluded by the Court of Appeals “the negligence of the appellant is not so gross as to warrant moral and temperate damages,” except that, said Court reduced those damages by only P5,000.00 instead of eliminating them. Neither can we agree with the findings of both the Trial Court and respondent Court that the SSS had acted maliciously or in bad faith. The SSS was of the belief that it was acting in the legitimate exercise of its right under the mortgage contract in the face of irregular payments made by private respondents and placed reliance on the automatic acceleration clause in the contract. The filing alone of the foreclosure application should not be a ground for an award of moral damages in the same way that a clearly unfounded civil action is not among the grounds for moral damages.

Private respondents counter that BPIIC was guilty of bad faith and should be liable for said damages because it insisted on the payment of amortization on the loan even before it was released.  Further, it did not make the corresponding deduction in the monthly amortization to conform to the actual amount of loan released, and it immediately initiated foreclosure proceedings when private respondents failed to make timely payment.

But as admitted by private respondents themselves, they were irregular in their payment of monthly amortization.  Conformably with our ruling in SSS, we can not properly declare BPIIC in bad faith. Consequently, we should rule out the award of moral and exemplary damages.[11]

However, in our view, BPIIC was negligent in relying merely on the entries found in the deed of mortgage, without checking and correspondingly adjusting its records on the amount actually released to private respondents and the date when it was released.  Such negligence resulted in damage to private respondents, for which an award of nominal damages should be given in recognition of their rights which were violated by BPIIC.[12] For this purpose, the amount of P25,000 is sufficient.

Lastly, as in SSS where we awarded attorney’s fees because private respondents were compelled to litigate, we sustain the award of P50,000 in favor of private respondents as attorney’s fees.

WHEREFORE, the decision dated February 28, 1997, of the Court of Appeals and its resolution dated April 21, 1998, are AFFIRMED WITH MODIFICATION as to the award of damages.  The award of moral and exemplary damages in favor of private respondents is DELETED, but the award to them of attorney’s fees in the amount of P50,000 is UPHELD. Additionally, petitioner is ORDERED to pay private respondents P25,000 as nominal damages. Costs against petitioner.

SO ORDERED.

Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.

Credit Transactions Notes

Case Digest List:
     

1. BPI Investment v. CA (2002)
2. Bonnevie v. CA (1983)
3. Republic v. Bagtas (1962)
4. Catholic Vicar Apostolic of the Mountain Province v. CA (1988)
5. Pajuyo v. CA 430 SCRA 492 2004
6. Cebu International Finance Corp. v. CA 316 SCRA 998 1999
7. Consolidated Bank and Trust Corp. v. CA G.R. 114286 April 26, 2001
8. Colinares v. CA 339 SCRA 609 2000
9. Republic v. Grijaldo 15 SCRA 689 1965
10. RadioWealth Finance Corp. v. Del Rosario 335 SCRA 288 2000
11. Casa Filipinas Development Corp. v. Deputy Exec. Sec. 209 SCRA 399 1992
12. Security Bank and Trust Co. v. RTC Makati 263 SCRA 483 1996
13. State Investment House v. CA 198 SCRA 390 1991
14. Castello v. CA 244 SCRA 180 1995
15. Lim  v. CA 273 SCRA 394 2002
16. Pilipinas Bank v. CA 225 SCRA V. 268
17. Terminal Facilities and Services Corp. v. Philippine Court Authority 378 SCRA 82 2002
18. Sentinel Insurance Corp. v. CA 182 SCRA 517 1992

Jurisprudence: G.R. No. 123486

FIRST DIVISION

G.R. No. 123486           August 12, 1999

EUGENIA RAMONAL CODOY, and MANUEL RAMONAL, petitioners,

vs.

EVANGELINE R. CALUGAY, JOSEPHINE SALCEDO, and UEFEMIA PATIGAS, respondents.

PARDO, J.:

Before us is a petition for review on certiorari of the decision of the Court of Appeals1 and its resolution denying reconsideration, ruling:

Upon the unrebutted testimony of appellant Evangeline Calugay and witness Matilde Ramonal Binanay, the authenticity of testators holographic will has been established and the handwriting and signature therein (exhibit S) are hers, enough to probate said will. Reversal of the judgment appealed from and the probate of the holographic will in question be called for. The rule is that after plaintiff has completed presentation of his evidence and the defendant files a motion for judgment on demurrer to evidence on the ground that upon the facts and the law plaintiff has shown no right to relief, if the motion is granted and the order to dismissal is reversed on appeal, the movant loses his right to present evidence in his behalf (Sec, 1 Rule 35 Revised Rules of Court). Judgment may, therefore, be rendered for appellant in the instant case.

Wherefore, the order appealed from is REVERSED and judgment rendered allowing the probate of the holographic will of the testator Matilde Seño Vda. de Ramonal.2

The facts are as follows:

On April 6, 1990, Evangeline Calugay, Josephine Salcedo and Eufemia Patigas, devisees and legatees of the holographic will of the deceased Matilde Seño Vda. de Ramonal, filed with the Regional Trial Court, Misamis Oriental, Branch 18, a petition3 for probate of the holographic will of the deceased, who died on January 16, 1990.

In the petition, respondents claimed that the deceased Matilde Seño Vda. de Ramonal, was of sound and disposing mind when she executed the will on August 30, 1978, that there was no fraud, undue influence, and duress employed in the person of the testator, and will was written voluntarily.

The assessed value of the decedent's property, including all real and personal property was about P400,000.00, at the time of her death.4

On June 28, 1990, Eugenia Ramonal Codoy and Manuel Ramonal filed an opposition5 to the petition for probate, alleging that the holographic will was a forgery and that the same is even illegible. This gives an impression that a "third hand" of an interested party other than the "true hand" of Matilde Seño Vda. de Ramonal executed the holographic will.

Petitioners argued that the repeated dates incorporated or appearing on will after every disposition is out of the ordinary. If the deceased was the one who executed the will, and was not forced, the dates and the signature should appear at the bottom after the dispositions, as regularly done and not after every disposition. And assuming that the holographic will is in the handwriting of the deceased, it was procured by undue and improper pressure and influence on the part of the beneficiaries, or through fraud and trickery.1âwphi1.nêt

Respondents presented six (6) witnesses and various documentary evidence. Petitioners instead of presenting their evidence, filed a demurrer6 to evidence, claiming that respondents failed to establish sufficient factual and legal basis for the probate of the holographic will of the deceased Matilde Seño Vda. de Ramonal.

On November 26, 1990, the lower Court issued an order, the dispositive portion of which reads:

WHEREFORE, in view of the foregoing consideration, the Demurrer to Evidence having being well taken, same is granted, and the petition for probate of the document (Exhibit "S") on the purported Holographic Will of the late Matilde Seño Vda. de Ramonal, is denied for insufficiency of evidence and lack of merits.7

On December 12, 1990, respondents filed a notice of appeal,8 and in support of their appeal, the respondents once again reiterated the testimony of the following witnesses, namely: (1) Augusto Neri; (2) Generosa Senon; (3) Matilde Ramonal Binanay; (4) Teresita Vedad; (5) Fiscal Rodolfo Waga; and (6) Evangeline Calugay.

To have a clear understanding of the testimonies of the witnesses, we recite an account of their testimonies.

Augusto Neri, Clerk of Court, Court of First Instance of Misamis Oriental, where the special proceedings for the probate of the holographic will of the deceased was filed. He produced and identified the records of the case. The documents presented bear the signature of the deceased, Matilde Seño Vda. de Ramonal, for the purpose of laying the basis for comparison of the handwriting of the testatrix, with the writing treated or admitted as genuine by the party against whom the evidence is offered.

Generosa Senon, election registrar of Cagayan de Oro, was presented to produced and identify the voter's affidavit of the decedent. However, the voters' affidavit was not produced for the same was already destroyed and no longer available.

Matilde Ramonal Binanay, testified that the deceased Matilde Seño Vda. de Ramonal was her aunt, and that after the death of Matilde's husband, the latter lived with her in her parent's house for eleven (11) years from 1958 to 1969. During those eleven (11) years of close association the deceased, she acquired familiarity with her signature and handwriting as she used to accompany her (deceased Matilde Seño Vda. de Ramonal) in collecting rentals from her various tenants of commercial buildings, and deceased always issued receipts. In addition to this, she (witness Matilde Binanay) assisted the deceased in posting the records of the accounts, and carried personal letters of the deceased to her creditors.

Matilde Ramonal Binanay further testified that at the time of the death of Matilde Vda. de Ramonal, she left a holographic will dated August 30, 1978, which was personally and entirely written, dated and signed, by the deceased and that all the dispositions therein, the dates, and the signatures in said will, were that of the deceased.

Fiscal Rodolfo Waga testified that before he was appointed City Fiscal of Cagayan de Oro, he was a practicing lawyer, and handled all the pleadings and documents signed by the deceased in connection with the proceedings of her late husband, as a result of which he is familiar with the handwriting of the latter. He testified that the signature appearing in the holographic will was similar to that of the deceased, Matilde Seño Vda. de Ramonal, but he can not be sure.

The fifth witness presented was Mrs. Teresita Vedad, an employee of the Department of Environment and Natural Resources, Region 10. She testified that she processed the application of the deceased for pasture permit and was familiar with the signature of the deceased, since the signed documents in her presence, when the latter was applying for pasture permit.

Finally, Evangeline Calugay, one of the respondents, testified that she had lived with the deceased since birth, and was in fact adopted by the latter. That after a long period of time she became familiar with the signature of the deceased. She testified that the signature appearing in the holographic will is the true and genuine signature of Matilde Seño Vda. de Ramonal.

The holographic will which was written in Visayan, is translated in English as follows:

Instruction

August 30, 1978

1. My share at Cogon, Raminal Street, for Evangeline Calugay.

(Sgd) Matilde Vda de Ramonal

August 30, 1978

2. Josefina Salcedo must be given 1,500 square meters at Pinikan Street.

(Sgd) Matilde Vda de Ramonal

August 30, 1978

3. My jewelry's shall be divided among:

1. Eufemia Patigas

2. Josefina Salcedo

3. Evangeline Calugay

(Sgd) Matilde Vda de Ramonal

August 30, 1978

4. I bequeath my one (1) hectare land at Mandumol, Indahag to Evangeline R. Calugay

(Sgd) Matilde Vda de Ramonal

August 30, 1978

5. Give the 2,500 Square Meters at Sta. Cruz Ramonal Village in favor of Evangeline R. Calugay, Helen must continue with the Sta. Cruz, once I am no longer around.

(Sgd) Matilde Vda de Ramonal

August 30, 1978

6. Bury me where my husband Justo is ever buried.

(Sgd) Matilde Vda de Ramonal

August 30, 1978

Gene and Manuel:

Follow my instruction in order that I will rest peacefully.

Mama

Matilde Vda de Ramonal

On October 9, 1995, the Court of Appeals, rendered decision9 ruling that the appeal was meritorious. Citing the decision in the case of Azaola vs. Singson, 109 Phil. 102, penned by Mr. Justice J. B. L. Reyes, a recognized authority in civil law, the Court of Appeals held:

. . . even if the genuineness of the holographic will were contested, we are of the opinion that Article 811 of our present civil code can not be interpreted as to require the compulsory presentation of three witnesses to identify the handwriting of the testator, under penalty of having the probate denied. Since no witness may have been present at the execution of the holographic will, none being required by law (art. 810, new civil code), it becomes obvious that the existence of witnesses possessing the requisite qualifications is a matter beyond the control of the proponent. For it is not merely a question of finding and producing any three witnesses; they must be witnesses "who know the handwriting and signature of the testator" and who can declare (truthfully, of course, even if the law does not express) "that the will and the signature are in the handwriting of the testator." There may be no available witness acquainted with the testator's hand; or even if so familiarized, the witness maybe unwilling to give a positive opinion. Compliance with the rule of paragraph 1 of article 811 may thus become an impossibility. That is evidently the reason why the second paragraph of article 811 prescribes that —

in the absence of any competent witness referred to in the preceding paragraph, and if the court deems it necessary, expert testimony may be resorted to.

As can be see, the law foresees, the possibility that no qualified witness ma be found (or what amounts to the same thing, that no competent witness may be willing to testify to the authenticity of the will), and provides for resort to expert evidence to supply the deficiency.

It may be true that the rule of this article (requiring that three witnesses be presented if the will is contested and only one if no contest is had) was derived from the rule established for ordinary testaments (CF Cabang vs. Delfianado, 45 PHIL 291; Tolentino v. Francisco, 57 PHIL 742). But it can not be ignored that the requirement can be considered mandatory only in case of ordinary testaments, precisely because the presence of at least three witnesses at the execution of ordinary wills is made by law essential to their validity (Art. 805). Where the will is holographic, no witness need be present (art. 10), and the rule requiring production of three witnesses must be deemed merely permissive if absurd results are to be avoided.

Again, under Art. 811, the resort to expert evidence is conditioned by the words "if the court deem it necessary", which reveal that what the law deems essential is that the court should be convinced of the will's authenticity. Where the prescribed number of witnesses is produced and the court is convinced by their testimony that the will is genuine, it may consider it unnecessary to call for expert evidence. On the other hand, if no competent witness is available, or none of those produced is convincing, the court may still, and in fact it should resort to handwriting experts. The duty of the court, in fine, is to exhaust all available lines of inquiry, for the state is as much interested as the proponent that the true intention of the testator be carried into effect.

Paraphrasing Azaola vs. Singson, even if the genuineness of the holographic will were contested, Article 811 of the civil code cannot be interpreted as to require the compulsory presentation of three witnesses to identify the handwriting of the testator, under penalty of the having the probate denied. No witness need be present in the execution of the holographic will. And the rule requiring the production of three witnesses is merely permissive. What the law deems essential is that the court is convinced of the authenticity of the will. Its duty is to exhaust all available lines of inquiry, for the state is as much interested in the proponent that the true intention of the testator be carried into effect. And because the law leaves it to the trial court to decide if experts are still needed, no unfavorable inference can be drawn from a party's failure to offer expert evidence, until and unless the court expresses dissatisfaction with the testimony of the lay witnesses.10

According to the Court of Appeals, Evangeline Calugay, Matilde Ramonal Binanay and other witnesses definitely and in no uncertain terms testified that the handwriting and signature in the holographic will were those of the testator herself.

Thus, upon the unrebutted testimony of appellant Evangeline Calugay and witness Matilde Ramonal Binanay, the Court of Appeals sustained the authenticity of the holographic will and the handwriting and signature therein, and allowed the will to probate.

Hence, this petition.

The petitioners raise the following issues:

(1) Whether or not the ruling of the case of Azaola vs. Singson, 109 Phil. 102, relied upon by the respondent Court of Appeals, was applicable to the case.

(2) Whether or not the Court of Appeals erred in holding that private respondents had been able to present credible evidence to that the date, text, and signature on the holographic will written entirely in the hand of the testatrix.

(3) Whether or not the Court of Appeals erred in not analyzing the signatures in the holographic will of Matilde Seño Vda. de Ramonal.

In this petition, the petitioners ask whether the provisions of Article 811 of the Civil Code are permissive or mandatory. The article provides, as a requirement for the probate of a contested holographic will, that at least three witnesses explicitly declare that the signature in the will is the genuine signature of the testator.1âwphi1.nêt

We are convinced, based on the language used, that Article 811 of the Civil Code is mandatory. The word "shall" connotes a mandatory order. We have ruled that "shall" in a statute commonly denotes an imperative obligation and is inconsistent with the idea of discretion and that the presumption is that the word "shall," when used in a statute is mandatory.11

Laws are enacted to achieve a goal intended and to guide against an evil or mischief that aims to prevent. In the case at bar, the goal to achieve is to give effect to the wishes of the deceased and the evil to be prevented is the possibility that unscrupulous individuals who for their benefit will employ means to defeat the wishes of the testator.

So, we believe that the paramount consideration in the present petition is to determine the true intent of the deceased. An exhaustive and objective consideration of the evidence is imperative to establish the true intent of the testator.

It will be noted that not all the witnesses presented by the respondents testified explicitly that they were familiar with the handwriting of testator. In the case of Augusto Neri, clerk of court, Court of First Instance, Misamis Oriental, he merely identified the record of Special Proceedings No. 427 before said court. He was not presented to declare explicitly that the signature appearing in the holographic was that of the deceased.

Generosa E. Senon, the election registrar of Cagayan de Oro City, was presented to identify the signature of the deceased in the voter's affidavit, which was not even produced as it was no longer available.

Matilde Ramonal Binanay, on the other hand, testified that:

Q.   And you said for eleven (11) years Matilde Vda de Ramonal resided with your parents at Pinikitan, Cagayan de Oro City. Would you tell the court what was your occupation or how did Matilde Vda de Ramonal keep herself busy that time?

A.   Collecting rentals.

Q.   From where?

A.   From the land rentals and commercial buildings at Pabayo-Gomez streets.12

x x x           x x x           x x x

Q.   Who sometime accompany her?

A.   I sometimes accompany her.

Q.   In collecting rentals does she issue receipts?

A.   Yes, sir.13

x x x           x x x           x x x

Q.   Showing to you the receipt dated 23 October 1979, is this the one you are referring to as one of the receipts which she issued to them?

A.   Yes, sir.

Q.   Now there is that signature of Matilde vda. De Ramonal, whose signature is that Mrs. Binanay?

A.   Matilde vda. De Ramonal.

Q.   Why do you say that is the signature of Matilde Vda. De Ramonal?

A.   I am familiar with her signature.

Q.   Now, you tell the court Mrs. Binanay, whether you know Matilde vda de Ramonal kept records of the accounts of her tenants?

A.   Yes, sir.

Q.   Why do you say so?

A.   Because we sometimes post a record of accounts in behalf of Matilde Vda. De Ramonal.

Q.   How is this record of accounts made? How is this reflected?

A.   In handwritten.14

x x x           x x x           x x x

Q.   In addition to collection of rentals, posting records of accounts of tenants and deed of sale which you said what else did you do to acquire familiarity of the signature of Matilde Vda De Ramonal?

A.   Posting records.

Q.   Aside from that?

A.   Carrying letters.

Q.   Letters of whom?

A.   Matilde.

Q.   To whom?

A.   To her creditors.15

x x x           x x x           x x x

Q.   You testified that at time of her death she left a will. I am showing to you a document with its title "tugon" is this the document you are referring to?

A.   Yes, sir.

Q.   Showing to you this exhibit "S", there is that handwritten "tugon", whose handwriting is this?

A.   My Aunt.

Q.   Why do you say this is the handwriting of your aunt?

A.   Because I am familiar with her signature.16

What Ms. Binanay saw were pre-prepared receipts and letters of the deceased, which she either mailed or gave to her tenants. She did not declare that she saw the deceased sign a document or write a note.

Further, during the cross-examination, the counsel for petitioners elicited the fact that the will was not found in the personal belongings of the deceased but was in the possession of Ms. Binanay. She testified that:

Q.   Mrs. Binanay, when you were asked by counsel for the petitioners if the late Matilde Seno vda de Ramonal left a will you said, yes?

A.   Yes, sir.

Q.   Who was in possession of that will?

A.   I.

Q.   Since when did you have the possession of the will?

A.   It was in my mother's possession.

Q.   So, it was not in your possession?

A.   Sorry, yes.

Q.   And when did you come into possession since as you said this was originally in the possession of your mother?

A.   1985.17

x x x           x x x           x x x

Q.   Now, Mrs. Binanay was there any particular reason why your mother left that will to you and therefore you have that in your possession?

A.   It was not given to me by my mother, I took that in the aparador when she died.

Q.   After taking that document you kept it with you?

A.   I presented it to the fiscal.

Q.   For what purpose?

A.   Just to seek advice.

Q.   Advice of what?

A.   About the will.18

In her testimony it was also evident that Ms. Binanay kept the fact about the will from petitioners, the legally adopted children of the deceased. Such actions put in issue her motive of keeping the will a secret to petitioners and revealing it only after the death of Matilde Seño Vda. de Ramonal.

In the testimony of Ms. Binanay, the following were established:

Q.   Now, in 1978 Matilde Seno Vda de Ramonal was not yet a sickly person is that correct?

A.   Yes, sir.

Q.   She was up and about and was still uprightly and she could walk agilely and she could go to her building to collect rentals, is that correct?

A.   Yes, sir.19

x x x           x x x           x x x

Q.   Now, let us go to the third signature of Matilde Ramonal. Do you know that there are retracings in the word Vda.?

A.   Yes, a little. The letter L is continuous.

Q.   And also in Matilde the letter L is continued to letter D?

A.   Yes, sir.

Q.   Again the third signature of Matilde Vda de Ramonal the letter L in Matilde is continued towards letter D.

A.   Yes, sir.

Q.   And there is a retracing in the word Vda.?

A.   Yes, sir.20

x x x           x x x           x x x

Q.   Now, that was 1979, remember one year after the alleged holographic will. Now, you identified a document marked as Exhibit R. This is dated January 8, 1978 which is only about eight months from August 30, 1978. Do you notice that the signature Matilde Vda de Ramonal is beautifully written and legible?

A.   Yes, sir the handwriting shows that she was very exhausted.

Q.   You just say that she was very exhausted while that in 1978 she was healthy was not sickly and she was agile. Now, you said she was exhausted?

A.   In writing.

Q.   How did you know that she was exhausted when you were not present and you just tried to explain yourself out because of the apparent inconsistencies?

A.   That was I think. (sic).

Q.   Now, you already observed this signature dated 1978, the same year as the alleged holographic will. In exhibit I, you will notice that there is no retracing; there is no hesitancy and the signature was written on a fluid movement. . . . And in fact, the name Eufemia R. Patigas here refers to one of the petitioners?

A.   Yes, sir.

Q.   You will also notice Mrs. Binanay that it is not only with the questioned signature appearing in the alleged holographic will marked as Exhibit X but in the handwriting themselves, here you will notice the hesitancy and tremors, do you notice that?

A.   Yes, sir.21

Evangeline Calugay declared that the holographic will was written, dated and signed in the handwriting of the testator. She testified that:

Q.   You testified that you stayed with the house of the spouses Matilde and Justo Ramonal for the period of 22 years. Could you tell the court the services if any which you rendered to Matilde Ramonal?

A.   During my stay I used to go with her to the church, to market and then to her transactions.

Q.   What else? What services that you rendered?

A.   After my college days I assisted her in going to the bank, paying taxes and to her lawyer.

Q.   What was your purpose of going to her lawyer?

A.   I used to be her personal driver.

Q.   In the course of your stay for 22 years did you acquire familiarity of the handwriting of Matilde Vda de Ramonal?

A.   Yes, sir.

Q.   How come that you acquired familiarity?

A.   Because I lived with her since birth.22

x x x           x x x           x x x

Q.   Now, I am showing to you Exhibit S which is captioned "tugon" dated Agosto 30, 1978 there is a signature here below item No. 1, will you tell this court whose signature is this?

A.   Yes, sir, that is her signature.

Q.   Why do you say that is her signature?

A.   I am familiar with her signature.23

So, the only reason that Evangeline can give as to why she was familiar with the handwriting of the deceased was because she lived with her since birth. She never declared that she saw the deceased write a note or sign a document.

The former lawyer of the deceased, Fiscal Waga, testified that:

Q.   Do you know Matilde Vda de Ramonal?

A.   Yes, sir I know her because she is my godmother the husband is my godfather. Actually I am related to the husband by consanguinity.

Q.   Can you tell the name of the husband?

A.   The late husband is Justo Ramonal.24

x x x           x x x           x x x

Q.   Can you tell this court whether the spouses Justo Ramonal and Matilde Ramonal have legitimate children?

A.   As far as I know they have no legitimate children.25

x x x           x x x           x x x

Q.   You said after becoming a lawyer you practice your profession? Where?

A.   Here in Cagayan de Oro City.

Q.   Do you have services rendered with the deceased Matilde vda de Ramonal?

A.   I assisted her in terminating the partition, of properties.

Q.   When you said assisted, you acted as her counsel? Any sort of counsel as in what case is that, Fiscal?

A.   It is about the project partition to terminate the property, which was under the court before.26

x x x           x x x           x x x

Q.   Appearing in special proceeding no. 427 is the amended inventory which is marked as exhibit N of the estate of Justo Ramonal and there appears a signature over the type written word Matilde vda de Ramonal, whose signature is this?

A.   That is the signature of Matilde Vda de Ramonal.

Q.   Also in exhibit n-3, whose signature is this?

A.   This one here that is the signature of Mrs. Matilde vda de Ramonal.27

x x x           x x x           x x x

Q.   Aside from attending as counsel in that Special Proceeding Case No. 427 what were the other assistance wherein you were rendering professional service to the deceased Matilde Vda de Ramonal?

A.   I can not remember if I have assisted her in other matters but if there are documents to show that I have assisted then I can recall.28

x x x           x x x           x x x

Q.   Now, I am showing to you exhibit S which is titled "tugon", kindly go over this document, Fiscal Waga and tell the court whether you are familiar with the handwriting contained in that document marked as exhibit "S"?

A.   I am not familiar with the handwriting.

Q.   This one, Matilde Vda de Ramonal, whose signature is this?

A.   I think this signature here it seems to be the signature of Mrs. Matilde vda de Ramonal.

Q.   Now, in item No. 2 there is that signature here of Matilde Vda de Ramonal, can you tell the court whose signature is this?

A.   Well, that is similar to that signature appearing in the project of partition.

Q.   Also in item no. 3 there is that signature Matilde Vda de Ramonal, can you tell the court whose signature is that?

A.   As I said, this signature also seems to be the signature of Matilde vda de Ramonal.

Q.   Why do you say that?

A.   Because there is a similarity in the way it is being written.

Q.   How about this signature in item no. 4, can you tell the court whose signature is this?

A.   The same is true with the signature in item no. 4. It seems that they are similar.29

x x x           x x x           x x x

Q.   Mr. Prosecutor, I heard you when you said that the signature of Matilde Vda de Ramonal Appearing in exhibit S seems to be the signature of Matilde vda de Ramonal?

A.   Yes, it is similar to the project of partition.

Q.   So you are not definite that this is the signature of Matilde vda de Ramonal. You are merely supposing that it seems to be her signature because it is similar to the signature of the project of partition which you have made?

A.   That is true.30

From the testimonies of these witnesses, the Court of Appeals allowed the will to probate and disregard the requirement of three witnesses in case of contested holographic will, citing the decision in Azaola vs. Singson,31 ruling that the requirement is merely directory and not mandatory.

In the case of Ajero vs. Court of Appeals,32 we said that "the object of the solemnities surrounding the execution of wills is to close the door against bad faith and fraud, to avoid substitution of wills and testaments and to guaranty their truth and authenticity. Therefore, the laws on this subject should be interpreted in such a way as to attain these primordial ends. But on the other hand, also one must not lose sight of the fact that it is not the object of the law to restrain and curtail the exercise of the right to make a will.

However, we cannot eliminate the possibility of a false document being adjudged as the will of the testator, which is why if the holographic will is contested, that law requires three witnesses to declare that the will was in the handwriting of the deceased.

The will was found not in the personal belongings of the deceased but with one of the respondents, who kept it even before the death of the deceased. In the testimony of Ms. Binanay, she revealed that the will was in her possession as early as 1985, or five years before the death of the deceased.

There was no opportunity for an expert to compare the signature and the handwriting of the deceased with other documents signed and executed by her during her lifetime. The only chance at comparison was during the cross-examination of Ms. Binanay when the lawyer of petitioners asked Ms. Binanay to compare the documents which contained the signature of the deceased with that of the holographic will and she is not a handwriting expert. Even the former lawyer of the deceased expressed doubts as to the authenticity of the signature in the holographic will.

A visual examination of the holographic will convince us that the strokes are different when compared with other documents written by the testator. The signature of the testator in some of the disposition is not readable. There were uneven strokes, retracing and erasures on the will.

Comparing the signature in the holographic will dated August 30, 1978,33 and the signatures in several documents such as the application letter for pasture permit dated December 30, 1980,34 and a letter dated June 16, 1978,35 the strokes are different. In the letters, there are continuous flows of the strokes, evidencing that there is no hesitation in writing unlike that of the holographic will. We, therefore, cannot be certain that ruling holographic will was in the handwriting by the deceased.

IN VIEW WHEREOF, the decision appealed from is SET ASIDE. The records are ordered remanded to the court of origin with instructions to allow petitioners to adduce evidence in support of their opposition to the probate of the holographic will of the deceased Matilde Seño vda. de Ramonal.1âwphi1.nêt

No costs.

SO ORDERED.

Davide, Jr., C.J., Puno, Kapunan and Ynares-Santiago, JJ., concur.