1

G.R. No. L-32116 April 2l, 1981 Rural Bank vs CA RURAL BANK OF CALOOCAN, INC. and JO ! O. "! I"!RIO, JR., petitioners, vs. #$! COUR# OF A%%!AL and &A'I&A CA #RO, respondents. This is a petition for review by way of certiorari of the decision 1 of the Court of Appeals in CA-G.R. No. !"#$-R entitled %Maxima Castro, plaintiff-appellee, versus Severino Valencia, et al., defendants; Rural Bank of Caloocan, Inc., Jose esiderio, Jr. and !rsenio Re"es, defendants-appellants,% which affir&ed in toto the decision of the Court of 'irst (nstance of )anila in favor of plaintiff- appellee, the herein private respondent )a*i&a Castro. +n ,ece&ber ", -!.!, respondent )a*i&a Castro, acco&panied by /everino 0alencia, went to the Rural Bank of Caloocan to apply for an industrial loan. (t was /everino 0alencia who arran1ed everythin1 about the loan with the bank and who supplied to the latter the personal data re2uired for Castro3s loan application. +n ,ece&ber --, -!.!, after the bank approved the loan for the a&ount of 4 ,$$$.$$, Castro, acco&panied by the 0alencia spouses, si1ned a pro&issory note correspondin1 to her loan in favor of the bank. +n the sa&e day, ,ece&ber --, -!.!, the 0alencia spouses obtained fro& the bank an e2ual a&ount of loan for 4 ,$$$.$$. They si1ned a pro&issory note 56*hibit %7%8 correspondin1 to their loan in favor of the bank and had Castro affi*ed thereon her si1nature as co-&aker. The two loans were secured by a real-estate &ort1a1e 56*hibit %#%8 on Castro3s house and lot of -.$ s2uare &eters, covered by Transfer Certificate of Title No. "9-! of the +ffice of the Re1ister of ,eeds of )anila. +n 'ebruary - , -!#-, the sheriff of )anila, thru Actin1 Chief ,eputy /heriff Basilio )a1sa&bol, sent a notice of sheriff3s sale addressed to Castro, announcin1 that her property covered by T.C.T. No. "9-! would be sold at public auction on )arch -$, -!#- to satisfy the obli1ation coverin1 the two pro&issory notes plus interest and attorney3s fees. :pon re2uest by Castro and the 0alencias and with confor&ity of the bank, the auction sale that was scheduled for )arch -$, -!#- was postponed for April -$, -!#-. But when April -$, -!#- was subse2uently declared a special holiday, the

sheriff of )anila sold the property covered by T.C.T. No. "9-! at a public auction sale that was held on April --, -!#-, which was the ne*t succeedin1 business day followin1 the special holiday. Castro alle1ed that it was only when she received the letter fro& the Actin1 ,eputy /heriff on 'ebruary - , -!#-, when she learned for the first ti&e that the &ort1a1e contract 56*hibit %#%8 which was an encu&brance on her property was for 4#.$$$.$$ and not for 4 ,$$$.$$ and that she was &ade to si1n as co-&aker of the pro&issory note 56*hibit %7%8 without her bein1 infor&ed of this. +n April 9, -!#-, Castro filed a suit deno&inated %Re; /u& of )oney,% a1ainst petitioners Bank and ,esiderio, the /pouses 0alencia, Basilio )a1sa&bol and Arsenio Reyes as defendants in Civil Case No. 9##!< before the Court of 'irst (nstance of )anila upon the char1e, a&on1st others, that thru &istake on her part or fraud on the part of 0alencias she was induced to si1n as co-&aker of a pro&issory note 56*hibit %7%8 and to constitute a &ort1a1e on her house and lot to secure the 2uestioned note. At the ti&e of filin1 her co&plaint, respondent Castro deposited the a&ount of 4 , < .$$ with the court a #uo in full pay&ent of her personal loan plus interest. (n her a&ended co&plaint, Castro prayed, a&on1st other, for the annul&ent as far as she is concerned of the pro&issory note 56*hibit %7%8 and &ort1a1e 56*hibit %#%8 insofar as it e*ceeds 4 ,$$$.$$= for the dischar1e of her personal obli1ation with the bank by reason of a deposit of 4 , < .$$ with the court a #uo upon the filin1 of her co&plaint= for the annul&ent of the foreclosure sale of her property covered by T.C.T. No. "9-! in favor of Arsenio Reyes= and for the award in her favor of attorney3s fees, da&a1es and cost. (n their answers, petitioners interposed counterclai&s and prayed for the dis&issal of said co&plaint, with da&a1es, attorney3s fees and costs. 2 The pertinent facts arrived fro& the stipulation of facts entered into by the parties as stated by respondent Court of Appeals are as follows; /pawnin1 the present liti1ation are the facts contained in the followin1 stipulation of facts sub&itted by the parties the&selves; -. That the capacity and addresses of all the parties in this case are ad&itted .

7. That the plaintiff was the re1istered owner of a residential house and lot located at Nos. -7#<--7"$ Carola /treet, /a&paloc, )anila, containin1 an area of one hundred fifty 5-.$8 s2uare &eters, &ore or less, covered by T.C.T. No. "9-! of the +ffice of the Re1ister of ,eeds of )anila= . That the si1natures of the plaintiff appearin1 on the followin1 docu&ents are 1enuine; a8 Application for (ndustrial >oan with the Rural Bank of Caloocan, dated ,ece&ber ", -!.! in the a&ount of 4 ,$$$.$$ attached as Anne* A of this partial stipulation of facts= b8 4ro&issory Note dated ,ece&ber --, -!.! si1ned by the plaintiff in favor of the Rural Bank of Caloocan for the a&ount of 4 ,$$$.$$ as per Anne* B of this partial stipulation of facts= c8 Application for (ndustrial >oan with the Rural Bank of Caloocan, dated ,ece&ber --, -!.!, si1ned only by the defendants, /everino 0alencia and Catalina 0alencia, attached as Anne* C, of this partial stipulation of facts= d8 4ro&issory note in favor of the Rural Bank of Caloocan, dated ,ece&ber --, -!.! for the a&ount of 4 $$$.$$, si1ned by the spouses /everino 0alencia and Catalina 0alencia as borrowers, and plaintiff )a*i&a Castro, as a co-&aker, attached as Anne* , of this partial stipulation of facts= e8 Real estate &ort1a1e dated ,ece&ber --, -!.! e*ecuted by plaintiff )a*i&a Castro, in favor of the Rural Bank of Caloocan, to secure the obli1ation of 4#,$$$.$$ attached herein as Anne* 6 of this partial stipulation of facts= All the parties herein e*pressly reserved their ri1ht to present any evidence they &ay desire on the circu&stances re1ardin1 the e*ecution of the above-&entioned docu&ents. 9. That the sheriff of )anila, thru Actin1 Chief ,eputy /heriff, Basilio )a1sa&bol, sent a notice of sheriff3s sale, address to the plaintiff, dated 'ebruary - , -!#-, announcin1 that plaintiff3s

property covered by TCT No. "9-! of the Re1ister of ,eeds of the City of )anila, would be sold at public auction on )arch -$, -!#to satisfy the total obli1ation of 4.,"7<..$, plus interest, attorney3s fees, etc., as evidenced by the Notice of /heriff3s /ale and Notice of 6*tra?udicial Auction /ale of the )ort1a1ed property, attached herewith as Anne*es ' and '--, respectively, of this stipulation of facts= .. That upon the re2uest of the plaintiff and defendants-spouses /everino 0alencia and Catalina 0alencia, and with the confor&ity of the Rural Bank of Caloocan, the /heriff of )anila postponed the auction sale scheduled for )arch -$, -!#- for thirty 5 $8 days and the sheriff re-set the auction sale for April -$, -!#-= #. That April -$, -!#- was declared a special public holiday= 5Note; No. " is o&itted upon a1ree&ent of the parties.8 <. That on April --, -!#-, the /heriff of )anila, sold at public auction plaintiff3s property covered by T.C.T. No. "9-! and defendant, Arsenio Reyes, was the hi1hest bidder and the correspondin1 certificate of sale was issued to hi& as per Anne* G of this partial stipulation of facts= !. That on April -#, -!#7, the defendant Arsenio Reyes, e*ecuted an Affidavit of Consolidation of +wnership, a copy of which is hereto attached as Anne* @ of this partial stipulation of facts= -$. That on )ay !, -!#7, the Rural Bank of Caloocan (ncorporated e*ecuted the final deed of sale in favor of the defendant, Arsenio Reyes, in the a&ount of 4",$$$.$$, a copy of which is attached as Anne* ( of this partial stipulation of facts= --. That the Re1ister of ,eeds of the City of )anila issued the Transfer Certificate of Title No. #"7!" in favor of the defendant, Arsenio Reyes, in lieu of Transfer Certificate of Title No. "9-! which was in the na&e of plaintiff, )a*i&a Castro, which was cancelled= -7. That after defendant, Arsenio Reyes, had consolidated his title to the property as per T.C.T. No. #"7!!, plaintiff filed a notice of

lis pendens with the Re1ister of ,eeds of )anila and the sa&e was annotated in the back of T.C.T. No. #"7!! as per Anne* A of this partial stipulation of facts= and - . That the parties hereby reserved their ri1hts to present additional evidence on &atters not covered by this partial stipulation of facts. B@6R6'+R6, it is respectfully prayed that the fore1oin1 partial stipulation of facts be approved and ad&itted by this @onorable Court. As for the evidence presented durin1 the trial, Be 2uote fro& the decision of the Court of Appeals the state&ent thereof, as follows; (n addition to the fore1oin1 stipulation of facts, plaintiff clai&s she is a "$-year old widow who cannot read and write the 6n1lish lan1ua1e= that she can speak the 4a&pan1o dialect only= that she has only finished second 1rade 5t.s.n., p. 9, ,ece&ber --, -!#98= that in ,ece&ber -!.!, she needed &oney in the a&ount of 4 ,$$$.$$ to invest in the business of the defendant spouses 0alencia, who acco&panied her to the defendant bank for the purpose of securin1 a loan of 4 ,$$$.$$= that while at the defendant bank, an e&ployee handed to her several for&s already prepared which she was asked to si1n on the places indicated, with no one e*plainin1 to her the nature and contents of the docu&ents= that she did not even receive a copy thereof= that she was 1iven a check in the a&ount of 47,<<7.<. which she delivered to defendant spouses= that so&eti&e in 'ebruary -!#-, she received a letter fro& the Actin1 ,eputy /heriff of )anila, re1ardin1 the e*tra?udicial foreclosure sale of her property= that it was then when she learned for the first ti&e that the &ort1a1e indebtedness secured by the &ort1a1e on her property was 4#,$$$.$$ and not 4 ,$$$.$$= that upon investi1ation of her lawyer, it was found that the papers she was &ade to si1n were; 5a8 Application for a loan of 4 ,$$$.$$ dated ,ece&ber ", -!.! 56*h. B-- and 6*h. -8=

5b8 4ro&issory note dated ,ece&ber --, -!.! for the said loan of 4 ,$$$.$$ 56*h- B-78= 5c8 4ro&issory note dated ,ece&ber --, -!.! for 4 ,$$$.$$ with the defendants 0alencia spouses as borrowers and appellee as co&aker 56*h. B-9 or 6*h. 78. The auction sale set for )arch -$, -!#- was postponed co April -$, -!#- upon the re2uest of defendant spouses 0alencia who needed &ore ti&e within which to pay their loan of 4 ,$$$.$$ with the defendant bank= plaintiff clai&s that when she filed the co&plaint she deposited with the Clerk of Court the su& of 4 , < .$$ in full pay&ent of her loan of 4 ,$$$.$$ with the defendant bank, plus interest at the rate of -7C per annu& up to April , -!#- 56*h. ,8. As additional evidence for the defendant bank, its &ana1er declared that so&eti&e in ,ece&ber, -!.!, plaintiff was brou1ht to the +ffice of the Bank by an e&ployee- 5t.s.n., p 9, Aanuary 7", -!##8. /he wept, there to in2uire if she could 1et a loan fro& the bank. The clai&s he asked the a&ount and the purpose of the loan and the security to he 1iven and plaintiff said she would need 4 .$$$.$$ to be invested in a dru1store in which she was a partner 5t.s.n., p. <--. /he offered as security for the loan her lot and house at Carola /t., /a&paloc, )anila, which was pro&ptly investi1ated by the defendant bank3s inspector. Then a few days later, plaintiff ca&e back to the bank with the wife of defendant 0alencia A date was alle1edly set for plaintiff and the defendant spouses for the processin1 of their application, but on the day fi*ed, plaintiff ca&e without the defendant spouses. /he si1ned the application and the other papers pertinent to the loan after she was interviewed by the &ana1er of the defendant. After the application of plaintiff was &ade, defendant spouses had their application for a loan also prepared and si1ned 5see 6*h. - 8. (n his interview of plaintiff and defendant spouses, the &ana1er of the bank was able to 1ather that plaintiff was in ?oint venture with the defendant spouses wherein she a1reed to invest 4 ,$$$.$$ as additional capital in the laboratory owned by said spouses 5t.s.n., pp. -#--"8 3 The Court of Appeals, upon evaluation of the evidence, affir&ed in toto the decision of the Court of 'irst (nstance of )anila, the dispositive portion of which reads;

'+R A>> T@6 '+R6G+(NG C+N/(,6RAT(+N/, the Court renders ?ud1&ent and; 5-8 ,eclares that the pro&issory note, 6*hibit 373, is invalid as a1ainst plaintiff herein= 578 ,eclares that the contract of &ort1a1e, 6*hibit 3#3, is null and void, in so far as the a&ount thereof e*ceeds the su& of 4 ,$$$.$$ representin1 the principal obli1ation of plaintiff, plus the interest thereon at -7C per annu&= 5 8 Annuls the e*tra?udicial foreclosure sale at public auction of the &ort1a1ed property held on April --, -!#-, as well as all the process and actuations &ade in pursuance of or in i&ple&entation thereto= 598 @olds that the total unpaid obli1ation of plaintiff to defendant Rural Bank of Caloocan, (nc., is only the a&ount of 4 ,$$$.$$, plus the interest thereon at -7C per annu&, as of April , -!#-, and orders that plaintiff3s deposit of 4 , < .$$ in the +ffice of the Clerk of Court be applied to the pay&ent thereof= 5.8 +rders defendant Rural Bank of Caloocan, (nc. to return to defendant Arsenio Reyes the purchase price the latter paid for the &ort1a1ed property at the public auction, as well as rei&burse hi& of all the e*penses he has incurred relative to the sale thereof= 5#8 +rders defendants spouses /everino ,. 0alencia and Catalina 0alencia to pay defendant Rural Bank of Caloocan, (nc. the a&ount of 4 ,$$$.$$ plus the correspondin1 -7C interest thereon per annu& fro& ,ece&ber --, -!#$ until fully paid= and +rders defendants Rural Bank of Caloocan, (nc., Aose ,esiderio, Ar. and spouses /everino ,. 0alencia and Catalina 0alencia to pay plaintiff, ?ointly and severally, the su& of 4#$$.$$ by way of attorney3s fees, as well as costs. (n view of the conclusion that the court has thus reached, the counterclai&s of defendant Rural Bank of Caloocan, (nc., Aose

,esiderio, Ar. and Arsenio Reyes are hereby dis&issed, as a corollary The Court further denies the &otion of defendant Arsenio Reyes for an +rder re2uirin1 )a*i&a Castro to deposit rentals filed on Nove&ber -#, -!# , resolution of which was held in abeyance pendin1 final deter&ination of the case on the &erits, also as a conse2uence of the conclusion aforesaid. ( 4etitioners Bank and Aose ,esiderio &oved for the reconsideration ) of respondent court3s decision. The &otion havin1 been denied, 6 they now co&e before this Court in the instant petition, with the followin1 Assi1n&ent of 6rrors, to wit; ( T@6 C+:RT +' A446A>/ 6RR6, (N :4@+>,(NG T@6 4ART(A> ANN:>)6NT +' T@6 4R+)(//+RD N+T6, 6E@(B(T 7, AN, T@6 )+RTGAG6, 6E@(B(T #, (N/+'AR A/ T@6D A''6CT R6/4+N,6NT )AE()A CA/TR+ 0(/-A0(/ 46T(T(+N6R BANF ,6/4(T6 T@6 T+TA> AB/6NC6 +' 6(T@6R A>>6GAT(+N (N T@6 C+)4>A(NT +R C+)46T6NT 4R++' (N T@6 60(,6NC6 +' AND 'RA:, +R +T@6R :N>AB':> C+N,:CT C+))(TT6, +R 4ART(C(4AT6, (N BD 46T(T(+N6R/ (N 4R+C:R(NG T@6 6E6C:T(+N +' /A(, C+NTRACT/ 'R+) R6/4+N,6NT CA/TR+. (( T@6 C+:RT +' A446A>/ 6RR6, (N ()4:T(NG :4+N AN, C+N/(,6R(NG 4R6A:,(C(A>>D AGA(N/T 46T(T(+N6R/, A/ BA/(/ '+R T@6 4ART(A> ANN:>)6NT +' T@6 C+NTRACT/ A'+R6/A(, (T/ '(N,(NG +' 'RA:, 46R46TRAT6, BD T@6 0A>6NC(A /4+:/6/ :4+N R6/4+N,6NT CA/TR+ (N :TT6R 0(+>AT(+N +' T@6 R6/ (NT6R A>(+/ ACTA R:>6. (((

T@6 C+:RT +' A446A> 6RR6, (N N+T @+>,(NG T@AT, :N,6R T@6 'ACT/ '+:N, BD (T, R6/4+N,6NT CA/TR+ (/ :N,6R 6/T+446> T+ ()4:GN T@6 R6G:>AR(TD AN, 0A>(,(TD +' @6R G:6/T(+N6, TRAN/ACT(+N B(T@ 46T(T(+N6R BANF. (0 T@6 C+:RT +' A446A>/ 6RR6, (N N+T '(N,(NG T@AT, B6TB66N 46T(T(+N6R/ AN, R6/4+N,6NT CA/TR+, T@6 >ATT6R /@+:>, /:''6R T@6 C+N/6G:6NC6/ +' T@6 'RA:, 46R46TRAT6, BD T@6 0A>6NC(A /4+:/6/, (N A/ ):C@ A/ (T BA/ T@R: R6/4+N,6NT CA/TR+3/ N6G>(G6NC6 +R ACG:(6/C6N/6 (' N+T ACT:A> C+NN(0ANC6 T@AT T@6 46R46TRAT(+N +' /A(, 'RA:, BA/ )A,6 4+//(B>6. 0 T@6 C+:RT +' A446A>/ 6RR6, (N :4@+>,(NG T@6 0A>(,(TD +' T@6 ,64+/(T BD R6/4+N,6NT CA/TR+ +' 4 , < .$$ B(T@ T@6 C+:RT B6>+B A/ A T6N,6R AN, C+N/(GNAT(+N +' 4AD)6NT /:''(C(6NT T+ ,(/C@ARG6 /A(, R6/4+N,6NT 'R+) @6R +B>(GAT(+N B(T@ 46T(T(+N6R BANF. 0( T@6 C+:RT +' A446A>/ 6RR6, (N N+T ,6C>AR(NG A/ 0A>(, AN, B(N,(NG :4+N R6/4+N,6NT CA/TR+ T@6 @+>,(NG +' T@6 /A>6 +N '+R6C>+/:R6 +N T@6 B:/(N6// ,AD N6ET '+>>+B(NG T@6 +R(G(NA>>D /C@6,:>6, ,AT6 T@6R6'+R B@(C@ BA/ ,6C>AR6, A @+>(,AD B(T@+:T N6C6//(TD +' ':RT@6R N+T(C6 T@6R6+'. The issue raised in the first three 5 8 assi1n&ent of errors is whether or not respondent court correctly affir&ed the lower court in declarin1 the pro&issory note 56*hibit 78 invalid insofar as they affect respondent Castro vis-a-vis petitioner bank, and the &ort1a1e contract 56*hibit #8 valid up to the a&ount of 4 ,$$$.$$ only.

Respondent court declared that the consent of Castro to the pro&issory note 56*hibit 78 where she si1ned as co-&aker with the 0alencias as principal borrowers and her ac2uiescence to the &ort1a1e contract 56*hibit #8 where she encu&bered her property to secure the a&ount of 4#,$$$.$$ was obtained by fraud perpetrated on her by the 0alencias who had abused her confidence, takin1 advanta1e of her old a1e and i1norance of her financial need. Respondent court added that %the &andate of fair play decrees that she should be relieved of her obli1ation under the contract% pursuant to Articles 79 * and - 7 8 of the Civil Code. The decision in effect relieved Castro of any liability to the pro&issory note 56*hibit 78 and the &ort1a1e contract 56*hibit #8 was dee&ed valid up to the a&ount of 4 ,$$$.$$ only which was e2uivalent to her personal loan to the bank. 4etitioners ar1ued that since the 0alencias were solely declared in the decision to be responsible for the fraud a1ainst Castro, in the li1ht of the res inter alios acta rule, a findin1 of fraud perpetrated by the spouses a1ainst Castro cannot be taken to operate pre?udicially a1ainst the bank. 4etitioners concluded that respondent court erred in not 1ivin1 effect to the pro&issory note 56*hibit 78 insofar as they affect Castro and the bank and in declarin1 that the &ort1a1e contract 56*hibit #8 was valid only to the e*tent of Castro3s personal loan of 4 ,$$$.$$. The records of the case reveal that respondent court3s findin1s of fraud a1ainst the 0alencias is well supported by evidence. )oreover, the findin1s of fact by respondent court in the &atter is dee&ed final. 9 The decision declared the 0alencias solely responsible for the defraudation of Castro. 4etitioners3 contention that the decision was silent re1ardin1 the participation of the bank in the fraud is, therefore, correct. Be cannot a1ree with the contention of petitioners that the bank was defrauded by the 0alencias. 'or one, no clai& was &ade on this in the lower court. 'or another, petitioners did not sub&it proof to support its contention. At any rate, Be observe that while the 0alencias defrauded Castro by &akin1 her si1n the pro&issory note 56*hibit 78 and the &ort1a1e contract 56*hibit #8, they also &isrepresented to the bank Castro3s personal 2ualifications in order to secure its consent to the loan. This &ust be the reason which pro&pted the bank to contend that it was defrauded by the 0alencias. But to reiterate, Be cannot a1ree with the contention for reasons above-&entioned. @owever, if the contention deserves any consideration at all, it is in indicatin1 the ad&ission of petitioners that the bank co&&itted &istake in 1ivin1 its consent to the contracts.

Thus, as a result of the fraud upon Castro and the &isrepresentation to the bank inflicted by the 0alencias both Castro and the bank co&&itted &istake in 1ivin1 their consents to the contracts. (n other words, substantial &istake vitiated their consents 1iven. 'or if Castro had been aware of what she si1ned and the bank of the true 2ualifications of the loan applicants, it is evident that they would not have 1iven their consents to the contracts. 4ursuant to Article - 97 of the Civil Code which provides; Art. - 97. )isrepresentation by a third person does not vitiate consent, unless such &isrepresentation has created substantial &istake and the sa&e is &utual. Be cannot declare the pro&issory note 56*hibit 78 valid between the bank and Castro and the &ort1a1e contract 56*hibit #8 bindin1 on Castro beyond the a&ount of 4 ,$$$.$$, for while the contracts &ay not be invalidated insofar as they affect the bank and Castro on the 1round of fraud because the bank was not a participant thereto, such &ay however be invalidated on the 1round of substantial &istake &utually co&&itted by the& as a conse2uence of the fraud and &isrepresentation inflicted by the 0alencias. Thus, in the case of $ill vs. Veloso, 1+ this Court declared that a contract &ay be annulled on the 1round of vitiated consent if deceit by a third person, even without connivance or co&plicity with one of the contractin1 parties, resulted in &utual error on the part of the parties to the contract. 4etitioners ar1ued that the a&ended co&plaint fails to contain even a 1eneral aver&ent of fraud or &istake, and its &ention in the prayer is definitely not a substantial co&pliance with the re2uire&ent of /ection ., Rule < of the Rules of Court. The records of the case, however, will show that the a&ended co&plaint contained a particular aver&ent of fraud a1ainst the 0alencias in full co&pliance with the provision of the Rules of Court. Althou1h, the a&ended co&plaint &ade no &ention of &istake bein1 incurred in by the bank and Castro, such &ention is not essential in order that the pro&issory note 56*hibit 78 &ay be declared of no bindin1 effect between the& and the &ort1a1e 56*hibit #8 valid up to the a&ount of 4 ,$$$.$$ only. The reason is that the &istake they &utually suffered was a &ere conse2uence of the fraud perpetrated by the 0alencias a1ainst the&. Thus, the fraud particularly averred in the co&plaint, havin1 been proven, is dee&ed sufficient basis for the declaration of the pro&issory note 56*hibit 78 invalid insofar as it affects Castro vis-a-vis the bank, and the &ort1a1e contract 56*hibit #8 valid only up to the a&ount of 4 ,$$$.$$.

The second issue raised in the fourth assi1n&ent of errors is who between Castro and the bank should suffer the conse2uences of the fraud perpetrated by the 0alencias. (n attributin1 to Castro an conse2uences of the loss, petitioners ar1ue that it was her ne1li1ence or ac2uiescence if not her actual connivance that &ade the fraud possible. 4etitioners3 ar1u&ent utterly disre1ards the findin1s of respondent Court of Appeals wherein petitioners3 ne1li1ence in the contracts has been aptly de&onstrated, to wit; A witness for the defendant bank, Rodolfo ,esiderio clai&s he had sub?ected the plaintiff-appellee to several interviews. (f this were true why is it that her a1e was placed at #- instead of "$= why was she described in the application 56*h. B---!8 as dru1 &anufacturer when in fact she was not= why was it placed in the application that she has inco&e of 47$,$$$.$$ when accordin1 to plaintiffappellee, she his not even 1iven such kind of infor&ation -the true fact bein1 that she was bein1 paid 4-.7$ per picul of the su1arcane production in her hacienda and .$$ cavans on the palay production. 11 'ro& the fore1oin1, it is evident that the bank was as &uch , 1uilty as Castro was, of ne1li1ence in 1ivin1 its consent to the contracts. (t apparently relied on representations &ade by the 0alencia spouses when it should have directly obtained the needed data fro& Castro who was the acknowled1ed owner of the property offered as collateral. )oreover, considerin1 Castro3s personal circu&stances H her lack of education, i1norance and old a1e H she cannot be considered utterly ne1lectful for havin1 been defrauded. +n the contrary, it is de&anded of petitioners to e*ercise the hi1hest order of care and prudence in its business dealin1s with the 0alencias considerin1 that it is en1a1ed in a bankin1 business Ha business affected with public interest. (t should have ascertained Castro3s awareness of what she was si1nin1 or &ade her understand what obli1ations she was assu&in1, considerin1 that she was 1ivin1 acco&&odation to, without any consideration fro& the 0alencia spouses. 4etitioners further ar1ue that Castro3s act of holdin1 the 0alencias as her a1ent led the bank to believe that they were authoriIed to speak and bind her. /he cannot now be per&itted to deny the authority of the 0alencias to act as her a1ent for one who

clothes another with apparent authority as her a1ent is not per&itted to deny such authority. The authority of the 0alencias was only to follow-up Castro3s loan application with the bank. They were not authoriIed to borrow for her. This is apparent fro& the fact that Castro went to the Bank to si1n the pro&issory note for her loan of 4 ,$$$.$$. (f her act had been understood by the Bank to be a 1rant of an authority to the 0alencia to borrow in her behalf, it should have re2uired a special power of attorney e*ecuted by Castro in their favor. /ince the bank did not, Be can ri1htly assu&e that it did not entertain the notion, that the 0alencia spouses were in any &anner actin1 as an a1ent of Castro. Bhen the 0alencias borrowed fro& the Bank a personal loan of 4 ,$$$.$$ evidenced by a pro&issory note 56*hibit 78 and &ort1a1ed 56*hibit #8 Castro3s property to secure said loan, the 0alencias acted for their own behalf. Considerin1 however that for the loan in which the 0alencias appeared as principal borrowers, it was the property of Castro that was bein1 &ort1a1ed to secure said loan, the Bank should have e*ercised due care and prudence by &akin1 proper in2uiry if Castro3s consent to the &ort1a1e was without any taint or defect. The possibility of her not knowin1 that she si1ned the pro&issory note 56*hibit 78 as co-&aker with the 0alencias and that her property was &ort1a1ed to secure the two loans instead of her own personal loan only, in view of her personal circu&stances H i1norance, lack of education and old a1e H should have placed the Bank on prudent in2uiry to protect its interest and that of the public it serves. Bith the recent occurrence of events that have supposedly affected adversely our bankin1 syste&, attributable to la*ity in the conduct of bank business by its officials, the need of e*tre&e caution and prudence by said officials and e&ployees in the dischar1e of their functions cannot be over-e&phasiIed. Guestion is, likewise, raised as to the propriety of respondent court3s decision which declared that Castro3s consi1nation in court of the a&ount of 4 , < .$$ was validly &ade. (t is contended that the consi1nation was &ade without prior offer or tender of pay&ent to the Bank, and it therefore, not valid. (n holdin1 that there is a substantial co&pliance with the provision of Article -7.# of the Civil Code, respondent court considered the fact that the Bank was holdin1 Castro liable for the su& of 4#,$$$.$$ plus -7C interest per annu&, while the a&ount consi1ned was only 4 ,$$$.$$ plus -7C interest= that at the ti&e of consi1nation, the Bank had lon1 foreclosed the &ort1a1e e*tra?udicially and the sale of the &ort1a1e property had already been scheduled for April -$, -!#- for non-pay&ent of the obli1ation, and that despite the fact that the Bank already knew of the deposit &ade by Castro because the receipt of the deposit was attached to the record of the case, said Bank

had not &ade any clai& of such deposit, and that therefore, Castro was ri1ht in thinkin1 that it was futile and useless for her to &ake previous offer and tender of pay&ent directly to the Bank only in the aforesaid a&ount of 4 ,$$$.$$ plus -7C interest. :nder the fore1oin1 circu&stances, the consi1nation &ade by Castro was valid. if not under the strict provision of the law, under the &ore liberal considerations of e2uity. The final issue raised is the validity or invalidity of the e*tra?udicial foreclosure sale at public auction of the &ort1a1ed property that was held on April --, -!#-. 4etitioners contended that the public auction sale that was held on April --, -!#which was the ne*t business day after the scheduled date of the sale on April -$, -!#-, a special public holiday, was per&issible and valid pursuant to the provisions of /ection - of the Revised Ad&inistrative Code which ordains; 4reter&ission of holiday. H Bhere the day, or the last day, for doin1 any act re2uired or per&itted by law falls on a holiday, the act &ay be done on the ne*t succeedin1 business day. Respondent court ruled that the aforesaid sale is null and void, it not havin1 been carried out in accordance with /ection ! of Act No. - ., which provides; /ection !. H Notice shall be 1iven by postin1 notices of the sale for not less than twenty days in at least three public places of the &unicipality or city where the property is situated, and if such property is worth &ore than four hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a newspaper of 1eneral circulation in the &unicipality or city. Be a1ree with respondent court. The preter&ission of a holiday applies only %where the day, or the last day for doin1 any act re#uired or permitted %" la& falls on a holiday,% or when the last day of a 1iven period for doin1 an act falls on a holiday. (t does not apply to a day fi*ed by an office or officer of the 1overn&ent for an act to be done, as distin1uished fro& a period of ti&e within which an act should be done, which &ay be on any day within that specified period. 'or e*a&ple, if a party is re2uired by law to file his answer to a co&plaint within fifteen 5-.8 days fro& receipt of the su&&ons and the last day falls on a holiday, the last day is dee&ed &oved to the ne*t succeedin1 business day. But, if the court fi*es the trial of a case on a certain day but the said date is subse2uently declared a public holiday, the trial thereof is not auto&atically transferred to the ne*t succeedin1 business day. /ince

April -$, -!#- was not the day or the last day set by law for the e*tra?udicial foreclosure sale, nor the last day of a 1iven period but a date fi*ed by the deputy sheriff, the aforesaid sale cannot le1ally be &ade on the ne*t succeedin1 business day without the notices of the sale on that day bein1 posted as prescribed in /ection !, Act No. - .. B@6R6'+R6, findin1 no reversible error in the ?ud1&ent under review, Be affir& the sa&e in toto. No pronounce&ent as to cost.