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ALEJANDRA MINA, ET AL., Plaintiffs-Appellants , vs. RUPERTA PASCUAL, ET AL., Defendants-Appellees.

Facts: Francisco Fontanilla and Andres Fontanilla were brothers. Francisco Fontanilla acquired during his lifetime, on March 12, 1874, a lot in the center of the town of Laoag, the capital of the Province of Ilocos Norte, the property having been awarded to him through its purchase at a public auction held by the alcalde mayor of that province. Andres Fontanilla, with the consent of his brother Francisco, erected a warehouse on a part of the said lot, embracing 14 meters of its frontage by 11 meters of its depth. Francisco Fontanilla, the former owner of the lot, being dead, the herein plaintiffs, Alejandro Mina, et al., were recognized without discussion as his heirs. Andres Fontanilla, the former owner of the warehouse, also having died, the children of Ruperta Pascual were recognized likes without discussion, though it is not said how, and consequently are entitled to the said building, or rather, as Ruperta Pascual herself stated, to only six-sevenths of onehalf of it, the other half belonging, as it appears, to the plaintiffs themselves, and the remaining one-seventh of the first one-half to the children of one of the plaintiffs, Elena de Villanueva. The fact is that the plaintiffs and the defendants are virtually, to all appearance, the owners of the warehouse; while the plaintiffs are undoubtedly, the owners of the part of the lot occupied by that building, as well as of the remainder thereof. This was the state of affairs, when, on May 6, 1909, Ruperta Pascual, as the guardian of her minor children, the herein defendants, petitioned the Curt of First Instance of Ilocos Norte for authorization to sell "the six-sevenths of the one-half of the warehouse, of 14 by 11 meters, together with its lot." The plaintiffs - that is Alejandra Mina, et al. - opposed the petition of Ruperta Pascual for the reason that the latter had included therein the lot occupied by the warehouse, which they claimed was their exclusive property. All this action was taken in a special proceeding in re guardianship.chanroblesvirtualawlibrary chanrobles virtual law library The plaintiffs did more than oppose Pascual's petition; they requested the court, through motion, to decide the question of the ownership of the lot before it pass upon the petition for the sale of the warehouse. But the court before determining the matter of the ownership of the lot occupied by the warehouse, ordered the sale of this building So, the warehouse, together with the lot on which it stands, was sold to Cu Joco, the other defendant in this case. Issue: Whether or not the sale was valid? Held: Hence, as the facts aforestated only show that a building was erected on another's ground, the question should be decided in accordance with the statutes that, thirty years ago, governed accessions to real estate, and which were Laws 41 and 42, title 28, of the third Partida, nearly identical with the provisions of articles 361 and 362 of the Civil Code. So, then, pursuant to article 361, the owner of the land on which a building is erected in good faith has a right to appropriate such edifice to himself, after payment of the indemnity prescribed in articles 453 and 454, or to oblige the builder to pay him the value of the land. Such, and no other, is the right to which the plaintiff are entitled. For the foregoing reasons, it is only necessary to annul the sale of the said lot which was made by Ruperta Pascual, in representation of her minor children, to Cu Joco, and to maintain the latter in the use of the lot until the plaintiffs shall choose one or the other of the two rights granted them by article 361 of the Civil Code. Art. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in Articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof. (361a) Art. 449. He who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity. (362) BANK OF THE PHILIPPINE ISLANDS, INC., Petitioner, vs. SPS. NORMAN AND ANGELINA YU and TUANSON BUILDERS CORPORATION represented by PRES. NORMAN YU, Respondents. Facts:

Sec ond. BPI also imposed a charge of P4,052,046.11 in attorneys fees, the equivalentof 10% of the principal, interest, and penalty charges. T hi rd . BPI did not provide documents to support its claim for foreclosure expenses of P446,726.74 and cost of publication of P518,059.21.As an alternative to their three causes of action, the Yus claimed that BPI was inestoppel to claim more than the amount stated in its published notices. Consequently, itmust turn over the excess bid of P6,035,311.46.After pre-trial, the Yus moved for summary judgment, pointing out that based on theanswer, the common exhibits of the parties, and the answer to the writteninterrogatories to the sheriff, no genuine issues of fact exist in the case. The Yuswaived their claim for moral damages so the RTC can dispose of the case through asummary judgment.Initially, the RTC granted only a partial summary judgment. It reduced the penaltycharge of 36% per annum to 12% per annum until the debt would have been fully paidbut

maintained the attorneys fees as reasonable considering that BPI already waivedthe P1,761,511.36 that formed part of the attorneys fees and reduced the rate of attorneys fees it collected from 25% to 10% of the amount due. The RTC ruled thatfacts necessary to resolve the issues on penalties and fees had been admitted by theparties thus dispensing with the need to receive evidence.Still, the RTC held that it needed to receive evidence for the resolution of the issues of (1) whether or not the foreclosure and publication expenses were justified; (2) whether or not the foreclosure of the lot in Pili, Camarines Sur, was valid given that the proceedsof the foreclosure of the properties in Legazpi City sufficiently covered the debt; and (3)whether or not BPI was entitled to its counterclaim for attorneys fees, moral damages,and exemplary damages. The Yus moved for partial reconsideration. On January 3, 2006 the RTC reconsideredits earlier decision.BPI appealed the decision to the Court of Appeals (CA) in CA-G.R. CV 86577. But theCA rendered judgment on January 23, 2008, affirming the RTC decision in all respects.And when BPI asked for reconsideration, the CA denied it on July 14, 2008, hence, thebanks recourse to this Court. ISSUE: WHETHER OR NOT THE LOAN AGREEMENTS BETWEEN THEM WERE VALID ANDENFORCEABLE. RULING: BPI contends that a summary judgment was not proper given the following issues thatthe parties raised: 1) whether or not the loan agreements between them were valid andenforceable; 2) whether or not the Yus have a cause of action against BPI; 3) whether or not the Yus are proper parties in interest; 4) whether or not the Yus are stopped from questioning the foreclosure proceeding after entering into a compromiseagreement with Magnacraft; 5) whether or not the penalty charges and fees and expenses of litigation and publication are excessive; and 6) whether or not BPI violatedthe Truth in Lending Act.But these are issues that could be readily resolved based on the facts established bythe pleadings and the admissions of the parties. Indeed, BPI has failed to name any Bank ruling declared valid the penalty charges that were stipulated in the promissory notes. What the Court disallowed in that case was the collection of a handling chargethat the promissory notes did not contain. The Court has affirmed that financial charges are amply disclosed if stated in the promissory note in the case of Development Bank of the Philippines v. Arcilla,Jr.

The Court there said, Under Circular 158 of the Central Bank, the lender is required to include the information required by R.A. 3765 in the contract covering the credit transaction or any other document to be acknowledged and signed by the borrower. In addition, the contract or document shall specify additional charges, if any, which will becollected in case certain stipulations in the contract are not met by the debtor. In this case, the promissory notes signed by the Yus contained data, including penaltycharges, required by the Truth in Lending Act. They cannot avoid liability based on arigid interpretation of the Truth in Lending Act that contravenes its goal. Nonetheless,the courts have authority to reduce penalty charges when these are unreasonable andiniquitous. Considering that BPI had already received over P2.7 million in interest andthat it seeks to impose the penalty charge of 3% per month or 36% per annum on thetotal amount dueprincipal plus interest, with interest not paid when due added to andbecoming part of the principal and also bearing interest at the same ratethe Courtfinds the ruling of the RTC in its original decision reasonable and fair. Thus, the penaltycharge of 12% per annum or 1% per month is imposed. Three.As for the award of attorneys fee, it bei In Bank of Philippine Islands vs. Spouses Norman and Angelina Yu, the Supreme Court explained that to resolve the issue of the excessive charges allegedly incorporated into the auction bid price, the RTC simply had to look at a) the pleadings of the parties; b) the loan agreements, the promissory note, and the real estate mortgages between them; c) the foreclosure and bidding documents; and d) the admissions and other disclosures between the parties during pre-trial. Since the parties admitted not only the existence, authenticity, and genuine execution of these documents but also what they stated, the trial court did not need to hold a trial for the reception of the evidence of the parties. Be that as it may, BPI contends that a summary judgment was not proper given the following issues that the parties raised: 1) whether or not the loan agreements between them were valid and enforceable; 2) whether or not the Yus have a cause of action against BPI; 3) whether or not the Yus are proper parties in interest; 4) whether or not the Yus are estopped from questioning the foreclosure proceeding after entering into a compromise agreement with Magnacraft; 5) whether or not the penalty charges and fees and expenses of litigation and publication are excessive; and 6) whether or not BPI violated the Truth in Lending Act.(RULES OF COURT, Rule 35, Section 5). But, the Supreme Court held that these are issues that could be readily resolved based on the facts established by the pleadings and the admissions of the parties.(A.M. No. 03-1-09-SC, Guidelines to be Observed by Trial Court Judges and Clerks of Court in Conduct of Pre-trial and Use of Deposition-Discovery Measures, August 16, 2004). Indeed, BPI has failed to name any document or item of fact that it would have wanted to adduce at the trial of the case. A trial would have been such a great waste of time and resources. Otherwise stated, a summary judgment is apt when the essential facts of the case are uncontested or the parties do not raise any genuine issue of fact.(BANK OF THE PHILIPPINE ISLANDS, INC., vs. SPS. NORMAN AND ANGELINA YU, G.R. No. 184122, January 20, 2010, ABAD, J.). Metrobank vs Rural Bank of Gerona Legal subrogation. The present case exemplifies the circumstance contemplated under paragraph 2, of Article 1302 of the Civil Code which provides: It is presumed that there is legal subrogation: (1) When a creditor pays another creditor who is preferred, even without the debtors knowledge; (2) When a third person, not interested in the obligation, pays with the express or tacit approval of the debtor;

(3) When, even without the knowledge of the debtor, a person interested in the fulfillment of the obligation pays, without prejudice to the effects of confusion as to the latters share. Metrobank was a third party to the Central Bank-RBG agreement, had no interest except as a conduit, and was not legally answerable for the IBRD loans. Despite this, it was Metrobanks demand deposit account, instead of RBGs, which the Central Bank proceeded against, on the assumption perhaps that this was the most convenient means of recovering the cancelled loans. That Metrobanks payment was involuntarily made does not change the reality that it was Metrobank which effectively answered for RBGs obligations. Was there express or tacit approval by RBG of the payment enforced against Metrobank? After Metrobank received the Central Banks debit advices in November 1978, it (Metrobank) accordingly debited the amounts it could from RBGs special savings account without any objection from RBG. RBGs President and Manager, Dr. Aquiles Abellar, even wrote Metrobank, on August 14, 1979, with proposals regarding possible means of settling the amounts debited by Central Bank from Metrobanks demand deposit account. These instances are all indicative of RBGs approval of Metrobanks payment of the IBRD loans. That RBGs tacit approval came after payment had been made does not completely negate the legal subrogation that had taken place. Article 1303 of the Civil Code states that subrogation transfers to the person subrogated the credit with all the rights thereto appertaining, either against the debtor or against third persons. As the entity against which the collection was enforced, Metrobank was subrogated to the rights of Central Bank and has a cause of action to recover from RBG the amounts it paid to the Central Bank, plus 14% per annum interest. Metropolitan Bank and Trust Company vs. Rural Bank of Gerona, Inc., G.R. No. 159097, July 5, 2010. Pentacapital investment Co. vs Mahinay Loan; promissory note: elements. To ascertain whether or not respondent is bound by the promissory notes, it must be established that all the elements of a contract of loan are present. Like any other contract, a contract of loan is subject to the rules governing the requisites and validity of contracts in general. It is elementary in this jurisdiction that what determines the validity of a contract, in general, is the presence of the following elements: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation which is established. Under Article 1354 of the Civil Code, it is presumed that consideration exists and is lawful unless the debtor proves the contrary. Moreover, under Section 3, Rule 131 of the Rules of Court, the following are disputable presumptions: (1) private transactions have been fair and regular; (2) the ordinary course of business has been followed; and (3) there was sufficient consideration for a contract. Pentacapital Investment Corporation vs. Makilito Mahinay/Pentacapital Investment Corporation Vs. Mikilito Mahinay, G.R. No. 171736, July 5, 2010 Asian Cathay Finance and Leasing Corporation, Petitioner vs. Spouses Cesario Gravador and Norma de Vera and Spouses Emma Concepcion G. Dumigpi and Federico L. Dumigpi, Respondents, G.R. No. 186550; 5 July 2010 Facts: Asian Cathay Finance and Leasing Corporation (ACFLC) extended a loan of P800,000.00 to respondent Cesario Gravador (Cesario), with respondents Norma de Vera and Emma Concepcion Dumigpi as his co-makers. The loan was payable in 60 monthly installments of P24,000.00 each and secured by a real estate mortgage executed by Cesario over his property. Respondents paid the first installment for November 1999 but failed to pay the subsequent installments. In February 2000, ACFLC demanded payment of P1,871,480.00 from respondents. Respondents asked for more time to pay but ACFLC denied their request. Respondents filed a case for annulment of the real estate mortgage and promissory note before the Regional Trial Court (RTC). Respondents averred that the mortgage did not make reference to the promissory note and contained a provision on the waiver of the mortgagors right of redemption, which is contrary to law and public policy. Respondents added that the promissory note did not specify the maturity date of the loan, the interest rate, and the mode of payment, and illegally imposed liquidated damages. ACFLC filed a petition for extrajudicial foreclosure of mortgage with the office of the Deputy Sheriff. The RTC dismissed respondents complaint for annulment of mortgage for lack of cause of action, holding that respondents were well-educated individuals who could not feign naivet in the execution of the loan documents. The RTC further held that the alleged defects in the promissory note and in the deed of real estate mortgage were too insubstantial to warrant the nullification of the mortgage. It added that a promissory note was not one of the essential elements of a mortgage, thus, reference to a promissory note was neither indispensable nor imperative for the validity of the mortgage. Respondents appealed to the Court of Appeals (CA) which reversed the RTC. The CA held that the amount of P1,871,480.00 demanded by ACFLC from respondents was unconscionable and excessive. The CA fixed the interest rate at 12% per annum and reduced the penalty charge to 1% per month. The CA also invalidated the waiver of respondents right of redemption for reasons of public policy. When the CA denied ACFLCs motion for reconsideration, ACFLC brought the case to the Supreme Court, insisting on the validity of the real estate mortgage and promissory note. ACFLC argued that right of redemption was a privilege which respondents could waive as they did in this case. It further argued that respondents action for annulment of mortgage was a collateral attack on its certificate of title. Issues: (1) Whether or not the interest imposed by ACFLC was unconscionable and excessive; (2)

Whether or not the provision in the real estate mortgage on the mortgagors waiver of right of redemption should be voided for being against public policy; and (3) Whether or not the action for annulment of mortgage was a collateral attack on ACFLCs certificate of title. Held: (1) It is true that parties to a loan agreement have a wide latitude to stipulate on any interest rate in view of Central Bank Circular No. 905, series of 1982, which suspended the Usury Law ceiling on interest rate effective 1 January 1983. However, interest rates, whenever unconscionable, may be equitably reduced or even invalidated. In a span of 3 months (from the payment of the initial installment for November 1999 up to ACFLCs demand on 1 February 2000), respondents principal obligation of P800,000.00 ballooned by more than P1,000,000.00. ACFLC failed to show any computation on how much interest was imposed and on the penalties charged. Thus, the amount claimed by ACFLC was unconscionable. Stipulations authorizing the imposition of iniquitous or unconscionable interest are contrary to morals, if not against the law. Under Article 1409 of the Civil Code, these contracts are inexistent and void from the beginning. They cannot be ratified nor the right to set up their illegality as a defense be waived. The nullity of the stipulation on the usurious interest does not, however, affect the lenders right to recover the principal of the loan. Nor would it affect the terms of the real estate mortgage. The right to foreclose the mortgage remains with the creditors, and said right can be exercised upon the failure of the debtors to pay the debt due. The debt due is to be considered without the stipulation of the excessive interest. A legal interest of 12% per annum will be added in place of the excessive interest formerly imposed. The nullification by the CA of the interest rate and the penalty charge and the consequent imposition of an interest rate of 12% and penalty charge of 1% per month cannot, therefore, be considered a reversible error. The Court cited Spouses Castro vs. Tan, et al. (G.R. No. 168940; 24 November 2009), where it held that: The imposition of an unconscionable rate of interest on a money debt, even if knowingly and voluntarily assumed, is immoral and unjust. It is tantamount to a repugnant spoliation and an iniquitous deprivation of property, repulsive to the common sense of man. It has no support in law, in principles of justice, or in the human conscience nor is there any reason whatsoever which may justify such imposition as righteous and as one that may be sustained within the sphere of public or private morals. (2) Settled is the rule that for a waiver to be valid and effective, it must, in the first place, be couched in clear and unequivocal terms which will leave no doubt as to the intention of a party to give up a right or benefit which legally pertains to him. The intention to waive a right or an advantage must be shown clearly and convincingly. ACFLC failed to convince the Court that respondents waived their right of redemption voluntarily. The Court agreed with the CAs explanation in invalidating the waiver: The supposed waiver was in fine print and in the form and language prepared by ACFLC, partaking of the nature of a contract of adhesion. Doubts in the interpretation of stipulations in contracts of adhesion should be resolved against the party that prepared them. This principle especially holds true with regard to waivers, which are not presumed, but which must be clearly and convincingly shown. ACFLC failed to show the efficacy of this waiver. Moreover, to say that the mortgagors right of redemption may be waived through a fine print in a mortgage contract is, in the last analysis, tantamount to placing at the mortgagees absolute disposal the property foreclosed. It would render practically nugatory this right that is provided by law for the mortgagor for reasons of public policy. A contract of adhesion may be struck down as void and unenforceable for being subversive to public policy, when the weaker party is completely deprived of the opportunity to bargain on equal footing. (3) The case for annulment of mortgage was filed long before the consolidation of ACFLCs title over the property. In fact, when respondents filed said case at the first instance, the title to the property was still in Cesarios name. It was pending with the RTC when ACFLC filed a petition for foreclosure of mortgage and even when a writ of possession was issued. Clearly, ACFLCs title was subject to the final outcome of the case for annulment of mortgage. Ponente: J. Antonio Eduardo B. Nachura

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