Rural Bank of Sta. Maria v. CA, 314 SCRA 255

5/5/2021 SUPREME COURT REPORTS ANNOTATED VOLUME 314
VOL. 314, SEPTEMBER 14, 1999 255

Rural Bank of Sta. Maria, Pangasinan vs. Court of Appeals
*
G.R. No. 110672. September 14, 1999.
RURAL BANK OF STA. MARIA, PANGASINAN,

petitioner, vs. THE HONORABLE COURT OF APPEALS,
ROSARIO R. RAYANDAYAN, CARMEN R. ARCEÑO,
respondents.
G.R. No. 111201. September 14, 1999.
ROSARIO R. RAYANDAYAN and CARMEN R. ARCEÑO,

petitioners, vs. COURT OF APPEALS, HALSEMA, INC.
and RURAL BANK OF STA. MARIA, PANGASlNAN,
INC., respondents.
Contracts; Fraud; The kind of fraud that will vitiate a

contract refers to those insidious words or machinations resorted
to by one of the contracting parties to induce the other to enter into
a contract which without them he would not have agreed to—the
fraud must be the determining cause of the contract, or must have
caused the consent to be given.—The kind of fraud that will vitiate
a contract refers to those insidious words or machinations
resorted to by one of the contracting parties to induce the other to
enter into a contract which without them he would not have
agreed to. Simply stated, the fraud must be the determining cause
of the contract, or must have caused the consent to be given. It is
believed that the non-disclosure to the bank of the purchase price
of the sale of the land between private respondents and Manuel
Behis cannot be the “fraud” contemplated by Article 1338 of the
Civil Code. From the sole reason submitted by the petitioner bank
that it was kept in the dark as to the financial capacity of private
respondents, we cannot see how the omission or concealment of
the real purchase price could have induced the bank into giving
its consent to the agreement; or that the bank would not have
otherwise given its consent had it known of the real purchase
price.
Same; Same; Pursuant to Article 1339 of the Civil Code,
silence or concealment, by itself, does not constitute fraud, unless
www.central.com.ph/sfsreader/session/0000017940d2e9de9339a062003600fb002c009e/t/?o=False 1/19
there is a special duty to disclose certain facts, or unless according

to good faith and the usages of commerce the communication
should be made.—
_______________
* THIRD DIVISION.
256
256 SUPREME COURT REPORTS ANNOTATED
Pursuant to Article 1339 of the Civil Code, silence or concealment,

by itself, does not constitute fraud, unless there is a special duty
to disclose certain facts, or unless according to good faith and the
usages of commerce the communication should be made. Verily,
private respondents Rayandayan and Arceño had no duty, and
therefore did not act in bad faith, in failing to disclose the real
consideration of the sale between them and Manuel Behis.
Same; Same; Elements; Presumptions; The general rule is that
whosoever alleges fraud or mistake in any transaction must
substantiate his allegation, since it is presumed that a person
takes ordinary care of his concerns and that private transactions
have been fair and regular.—Consequently, not all the elements of
fraud vitiating consent for purposes of annulling a contract
concur, to wit: (a) It was employed by a contracting party upon
the other; (b) It induced the other party to enter into the contract;
(c) It was serious; and, (d) It resulted in damages and injury to the
party seeking annulment. Petitioner bank has not sufficiently
shown that it was induced to enter into the agreement by the non-
disclosure of the purchase price, and that the same resulted in
damages to the bank. Indeed, the general rule is that whosoever
alleges fraud or mistake in any transaction must substantiate his
allegation, since it is presumed that a person takes ordinary care
of his concerns and that private transactions have been fair and
regular. Petitioner bank’s allegation of fraud and deceit have not
been established sufficiently and competently to rebut the
presumption of regularity and due execution of the agreement.
Actions; Appeals; Pleadings and Practice; It is well-settled
that a party who does not appeal from the decision may not obtain
any affirmative relief from the appellate court other than what he
has obtained from the lower court, if any, whose decision is
brought up on appeal.—Based on the foregoing, the second issue
raised by petitioner bank must likewise fail. Petitioner bank’s
imputation of bad faith to private respondents premised on the

same non-disclosure of the real purchase price of the sale so as to
preclude their entitlement to damages must necessarily be
resolved in the negative. Petitioner bank does not question the
actual damages awarded to private respondents in the amount of
P229,135.00, but only the moral damages of P30,000.00,
exemplary damages of P10,000.00, attorney’s fees of P20,000.00
and litigation expenses of P5,000.00. We may no longer examine
the amounts awarded by the trial court and affirmed
257
VOL. 314, SEPTEMBER 14, 1999 257
by the appellate court as petitioner bank did not appeal from the
decision of the trial court. It is well-settled that a party who does
not appeal from the decision may not obtain any affirmative relief
from the appellate court other than what he has obtained from
the lower court, if any, whose decision is brought up on appeal.
PETITIONS for review on certiorari of a decision and a

resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.

Gregorio T. Fabros for Rural Bank of Sta. Maria,
Pangasinan.
Stephen C. Arceño for Rosario Rayandayan and
Carmen R. Arceño.
Panganiban, Benitez, Parlade, Africa & Barinaga
Law Offices for Halsema, Inc.
GONZAGA-REYES, J.:
1
Before us are two consolidated petitions for review on
certiorari under Rule 45 of the Revised Rules of Court. In
G.R. No. 110672, petitioner Rural Bank of Sta. Maria,
Pangasinan, assails portions of the Decision dated March
17, 1993, and the2 Resolution dated January 25, 1993, of the
Court of Appeals in CA-G.R. CV No. 21918, which affirmed
with modification the Decision
3
of the Regional Trial Court
(Branch 6, Baguio City) in Civil Case No. 890-R entitled
“Rosario R. Rayandayan and Carmen R. Arceño versus
Rural Bank of Sta. Maria, Pangasi-nan and Halsema, Inc.”
In G.R. No. 111201, petitioners Rosario R. Rayandayan and
Carmen R. Arceño likewise assail portions of said Decision
adverse to it.
_______________
1 Per resolution dated October 18, 1993.

2 Penned by Associate Justice Eduardo G. Montenegro and concurred
by Associate Justices Arturo B. Buena and Regina G. Ordoñez-Benitez.
3 Presided by Judge Ruben C. Ayson.
258

The facts as found by the trial court and adopted by the

Court of Appeals insofar as pertinent to the instant
petitions are as follows:
“x x x, the Court Finds that a parcel of land of about 49,969

square meters, located in Residence Section J, Camp 7, Baguio
City, covered by TCT T-29817 (land for short) is registered in the
name of Manuel Behis, married to Cristina Behis (Exhibit “B”).
Said land originally was part of a bigger tract of land owned by
Behis (one name), father of Manuel Behis, covered by OCT-0-33
(Exhibit “26,” Halsema, for history of the land). And upon the
latter’s death on September 24, 1971, his children, namely: Saro
Behis, Marcelo Behis, Manuel Behis, Lucia Behis, Clara Behis
and Arana Behis, in an extrajudicial settlement with
Simultaneous Sale of Inheritance dated September 28, 1978,
agreed to sell the land to Manuel Behis, married to Cristina Behis
(Exhibit ‘2,’ Halsema) but which subsequently was explained as
only an arrangement adopted by them to facilitate transactions
over the land in a Confirmation of Rights of Co-Ownership over
real Property dated September 26, 1983, showing that the Behis
brothers and sisters, including Manuel Behis, are still co-owners
thereof (Exhibit ‘30,’ Halsema, Exhibit ‘AA’).
Manuel Behis mortgaged said land in favor of the Bank in a
Real Estate Mortgage dated October 23, 1978 (Exhibit ‘Q-1’) as
security for loans obtained, covered by six promissory notes and
trust receipts under the Supervised Credit Program in the total
sum of P156,750.00 (Exhibit ‘Q-2’ to ‘Q-7,’ Exhibits ‘4-A’ to ‘4-F,’
Halsema) and annotated at the back of the title on February 13,
1979 as Entry No. 85538-10-231 (Exhibit “1-A-1,” Halsema). The
mortgage, the promissory notes and trust receipts bear the
signatures of both Manuel Behis and Cristina Behis.
Unfortunately thereafter, Manuel Behis was delinquent in
paying his debts.
On January
4
9, 1985, Manuel Behis sold the land to the
plaintiffs in a Deed of Absolute Sale with Assumption of
Mortgage for the sum of P250,000.00 (Exhibit ‘A’) which bears the
signature of his wife Cristina Behis. Manuel Behis took it upon

himself to secure the signature of his wife and came back with it.
On the same date of January 9, 1985, plaintiffs and Manuel Behis
simultaneously exe-
_______________
4 Petitioners Rosario R. Rayandayan and Carmen R. Arceño in G.R. No. 111210.
259
VOL. 314, SEPTEMBER 14, 1999 259

cuted another Agreement (Exhibit ‘15’) whereby plaintiffs are

indebted to Manuel Behis for the sum of P2,400,000.00 payable in
installments with P10,000.00 paid upon signing and in case of
default in the installments, Manuel Behis shall have legal
recourse to the portions of the land equivalent to the unpaid
balance of the amounts in installments. Obviously, the real
consideration of the sale of the land of Manuel Behis to the
plaintiffs is contained in this Agreement (Exhibit ‘15’).
Plaintiffs did not present to the Register of Deeds of Baguio
said two contracts and ask that the title, TCT T-29817 in the
name of Manuel Behis be cancelled and a new one issued in their
name which normally a buyer does. Neither did plaintiffs
annotate at the back of the title the aforesaid two contracts. Nor
did they immediately go to the Bank and present said two
contracts. Thus, the title to the land, TCT No. T-29817, remained
in the name of Manuel Behis.
Pursuant to their two contracts with Manuel Behis, plaintiffs
paid him during his lifetime the sum of P10,000.00 plus
P50,000.00 plus P145,800.00 (Exhibit ‘U’ as stipulated in the
hearing), and the sum of P21,353.75 for the hospitalization,
medical and burial expenses of Manuel Behis when he died on
June 21, 1985 (Exhibit ‘II,’ ‘JJ,’ ‘KK,’ ‘LL,’ ‘PP,’ ‘OO,’ and ‘RR’).
Obviously, from the above payments, the plaintiffs were unable to
complete their full payment to Manuel Behis of the sale of the
land as it is nowhere near P2,400,000.00.
Meantime, the loan in the name of Manuel Behis with the
Bank secured by the Real Estate Mortgage on the land continued
to accumulate being delinquent. By May 30, 1985, in a Statement
of Account (Exhibit ‘D’) sent to Manuel Behis by the Bank thru
the Paredes Law Office for collection, the debt of P150,750.00 has
ballooned into P316,368.13, with interest and other charges. In
fact, the Bank, thru its President, Vicente Natividad, initiated
foreclosure proceedings. But after the usual publication, the same
was discontinued since many parties were interested to buy the

land outside the said procedure but none materialized.
On June 19, 1985, Atty. William Arceño, in behalf of Manuel
Behis, wrote a letter asking for a more detailed Statement of
Account from the Bank broken down as to principal, interest and
other charges (Exhibit ‘E’).
Thereafter, plaintiffs finally presented the Deed of Absolute
Sale with Assumption of Mortgage (Exhibit ‘A’) to the Bank when
260

negotiating with its principal stockholder, Engr. Edilberto

Natividad, in Manila, but did not show to the latter the
Agreement (Exhibit ‘15’) with Manuel Behis providing for the real
consideration of P2,400,000.00. And thus, on August 1, 1985, a
Memorandum of Agreement (Exhibit ‘F’) was entered into between
plaintiffs, as assignees of Manuel Behis, and the Bank, the salient
features of which are:
‘x x x x x x x x x
‘3. That during the lifetime of Manuel Behis he had executed a Deed
of Absolute Sale with Assumption of Mortgage in favor of Carmen
Arceño and Rosario Rayandayan;
‘4. That the total obligation of the late Manuel Behis to the Bank
amounts to P343,782.22;
‘5. That the assignees hereby offer to redeem the aforesaid real
property and the Bank hereby agrees to release the mortgage
thereon under the following terms and conditions:
(a). That the amount of P35,000.00 shall be paid by the assignees to

the Bank upon execution of this Agreement;
(b). That the amount of P108,000.00 shall be paid by the assignees to
the Bank at the rate of P36,000.00 a month payable on September
15, 1985, October 15, 1985 and November 15, 1985;
(c). That the balance of P200,000.00 shall be renewed for one year
and shall be secured by another mortgage over the same property
which is renewable every year upon payment of interests and at
least 10 percent of the principal;
(d). That the bank shall release the mortgage of Manuel Behis and a
new mortgage shall be executed by the assignees and the bank
shall give its consent for the transfer of the title under the name
of the assignees.
“x x x.”
Plaintiffs did not annotate the Memorandum of Agreement in

the title, TCT T-29817.
Pursuant to the Memorandum of Agreement, plaintiffs paid
the Bank the following:
(1) P35,000.00 on August 1, 1985 as initial deposit when the

Agreement was signed (Exhibits ‘G’ and ‘H’);
261
VOL. 314, SEPTEMBER 14, 1999 261

(2) P15,000.00 on September 16, 1985 (Exhibit ‘1’) and

P21,000.00 on September 20, 1985 (Exhibit ‘J’) to cover
the obligation of P36,000.00 on September 15, 1985;
(3) P20,000.00 on October 17, 1985 (Exhibit ‘K’) and
P16,000.00 on October 25, 1985 (Exhibit ‘L’) to cover the
obligation to pay P36,000.00 on October 15, 1985;
(4) P36,000.00 in the form of dollars remitted to Engr.
Edilberto Natividad on December 18, 1985 (Exhibit ‘N’) to
cover the obligation to pay P36,000.00 on November 15,
1985.
After the last payment of P36,000.00 on December 18, 1985,

received in dollars (Exhibit ‘N’) which completed the P143,000.00
under paragraphs 5 (a) and 5 (b) of the Memorandum of
Agreement Engr. Edilberto Natividad, wrote a letter (Exhibit ‘M’)
to Vicente Natividad, with instructions that payment be duly
credited and Atty. Arceño will communicate about the transfer of
title to them and to consult the Bank’s counsel on the matter, and
with instructions also to Ana Acosta of the Rural Bank of Tuba to
debit said amount from the savings of Edilberto Natividad. x x x.
From the above payments made, the total amount of
P143,000.00 as required by paragraphs 5 (a) and 5 (b) of the
Memorandum of Agreement was fully paid by plaintiffs although
they were not paid on time.
Meanwhile, on September 5, 1985, Cristina Behis, widow of
Manuel Behis, wrote a letter to the Bank (Exhibit ‘3,’ Halsema)
claiming the Real Estate mortgage was without her signature.
And in another letter dated October 28, 1985 to the Bank (Exhibit
4, Halsema), Cristina Behis stressed she did not authorize
anybody to redeem the property in her behalf as one of the
mortgagors of the land.
On January 7, 1986, plaintiffs demanded in a letter (Exhibit
‘O’) that the Bank comply with its obligation under the
Memorandum of Agreement to (1) release the mortgage of Manuel
Behis, (2) give its consent for the transfer of title in the name of
the plaintiffs, and (3) execute a new mortgage with plaintiffs for
the balance of P200,000.00 over the same land.
Meanwhile on January 18, 1986, Cristina Behis went to the
Bank inquiring about her protest about her signature. The Bank
told her it did not receive her two letters and instead advised her
to write the Bank again as well as the plaintiffs about her
objections.
262

In a reply letter dated February 11, 1986, (Exhibit ‘B’) to the

demand of the plaintiffs, the Bank said it cannot comply because
of supervening circumstances, enclosing the two letters of
Cristina Behis dated September 5, 1985 and October 28, 1985
which they said were both self explanatory, and suggested that
plaintiffs take up the matter with Mrs. Cristina Behis.
On February 15, 1986, as suggested by the Bank, Cristina
Behis wrote another letter to the Bank claiming this time that she
was not a party to the Deed of Absolute Sale with Assumption of
Mortgage and her signature was forged (Exhibit ‘5,’ Halsema) and
requesting the Bank not to release the title with copy furnished to
the plaintiffs (Exhibit ‘5-B,’ Halsema).
Then, months passed, and nothing was heard from the
plaintiffs by the Bank. On the first week of July, 1986, Teodoro
Verzosa, President of Halsema, Inc., heard about the land and got
interested and had preliminary talks with Vicente Natividad,
President of the Bank, and with Edilberto Natividad, the
principal stockholder of the bank.
x x x.
x x x, upon suggestion of the lawyer of Halsema, an Assignment
of Mortgage was entered into on July 28, 1986 between Halsema
and the Bank for the consideration of P520,765.45 (Exhibit ‘1,’
Bank) which amount was the total indebtedness of Manuel Behis
with the Bank at the time (Exhibit ‘7-A,’ Halsema). Note however,
that what was assigned was the Mortgage made originally by
Manuel Behis and not the Mortgage as assumed by plaintiffs
under a restructured and liberalized terms.
As explained by Halsema lawyer, she suggested the
Assignment of Mortgage as the cheapest and fastest way for
Halsema to acquire the property of Manuel Behis as (1) they
assume the role of the Bank as Mortgagee with the assignment of
mortgage credit, (2) they acquire the property for the amount only
of the mortgage debt at the time, (3) after execution thereof, the
Bank is out of the picture, and (4) in case of foreclosure, Halsema
controls the foreclosure proceedings and is assured of its legality.
In turn, the Bank explained it entered into the Assignment of

Mortgage because at the time it considered the Memorandum of
Agreement cancelled as first, plaintiffs failed to settle the
objections of Cristina Behis aforesaid on her signature being
forged in the Deed of Sale with Assumption of Mortgage despite
the lapse of time from
263
VOL. 314, SEPTEMBER 14, 1999 263

February, 1986 to July, 1986. Second, the terms of the

Memorandum of Agreement have not been fully complied with as
the payments were not made on time on the dates fixed therein;
and third, their consent to the Memorandum of Agreement was
secured by the plaintiffs thru fraud as the Bank was not shown
the Agreement containing the real consideration of P2,400,000.00
of the sale of the land of Manuel Behis to plaintiffs.
On the same date of July 28, 1986, Vicente Natividad of the
Bank sent notice of the Assignment of Mortgage to the debtor
mortgagor, Manuel Behis (already dead at the time) and Cristina
Behis. Notice of the Assignment of Mortgage was not sent to
plaintiffs for as aforesaid what was assigned was the Mortgage
originally made by Manuel Behis and not the Mortgage as
assumed by plaintiffs under the restructured and liberalized
terms in the Memorandum of Agreement which was considered by
the Bank as cancelled.
x x x x x x x x x.
After the assignment of mortgage, the Bank returned the
P143,000.00 to plaintiffs (Exhibit ‘13,’ Bank). But the latter
rejected the same maintaining the Memorandum of Agreement is
valid until annulled by Court Action. Subsequently, however, the
Bank paid plaintiffs P143,000.00 and P90,000.00 interest in
settlement of the criminal case of Estafa against Edilberto
Natividad and Vicente Natividad (Exhibit ‘14,’ Bank).
In the meantime, since the account of the late Manuel Behis
has been delinquent and his widow, Cristina Behis, and his
brothers and sisters could not pay as in fact they have already
assigned their rights to redeem, Halsema as Mortgage Creditor in
place of the Bank instituted foreclosure proceedings by filing an
Application for Foreclosure of Real Estate Mortgage in the Office
of the Sheriff on July 31, 1986 (Exhibit ‘37,’ Halsema) setting the
public auction sale on September 2, 1986 and was published and
posted as required by law. A Notice of Foreclosure was sent
directly to the mortgagor (Exhibit ‘38,’ Halsema) and the public
auction sale was held on September 2, 1986 at 10:00 a.m. at the
City Hall, Baguio City, with Halsema as the only bidder to whom
accordingly the Sheriff’s Certificate of Sale was issued (Exhibit ‘8,’

Halsema).
At the auction sale, the lawyer of Halsema was approached by
the plaintiff Rosario Rayandayan who told the former that the
land foreclosed was also sold to the plaintiffs. Since plaintiffs
could not do
264

anything anymore, they registered and annotated on 5the title,

TCT T-29817, their adverse claim on September 3, 1986.”
Since the Bank could not comply with the Memorandum of

Agreement, petitioners Rayandayan and Arceño instituted
Civil Case No. 890-R before the Regional Trial Court of
Baguio City (Branch 6) against the Rural Bank of Sta.
Maria, Pangasinan and Halsema, Inc. for “Specific
Performance, Declaration of Nullity and/or Annulment of
Assignment of Mortgage and Damages” on September 5,
1986, and caused a notice of lis pendens annotated at the
back of the title, TCT T-29817, on the same date. On March
6, 1989, judgment was rendered, the dispositive portion of
the decision pertinent to this case reads:
“WHEREFORE, in view of All the Foregoing, Judgment is hereby

rendered, as follows:
1. x x x x x x x x x;
2. Declaring the Deed of Sale with assumption of Mortgage
(Exhibit “A”) and the Agreement (Exhibit “15”) taken
together valid until annulled or cancelled;
3. Ordering the Bank to pay the plaintiffs the sum of
P30,000.00 as Moral Damages, P10,000.00 as Exemplary
Damages, P20,000.00 as Attorney’s fees and P5,000.00 as
litigation expenses for their bad faith in violating the
Memorandum of Agreement which took place while the
Memorandum of Agreement was still valid there being no
court action first filed to nullify it before entering into the
Assignment of Mortgage;
4. Ordering the plaintiffs to pay the Bank the sum of
P30,000.00 as Moral Damages, P10,000.00 as Exemplary
Damages, P20,000.00 as Attorney’s fees and P5,000.00 as
litigation expenses for plaintiffs’ bad faith in deceiving the
Bank to enter into the Memorandum of Agreement;
5. Ordering the setting off in compensation the Damages

awarded to plaintiffs and the Bank.
_______________
5 Rollo of G.R. No. 110672, pp. 74-82.
265
VOL. 314, SEPTEMBER 14, 1999 265

7. Declaring the Memorandum of Agreement as annulled due

to the fraud of plaintiffs;
10. x x x x x x x x x,
Without pronouncement
6
as to costs.
SO ORDERED.”
From the decision, plaintiffs Rayandayan and Arceño and

defendant Halsema, Inc. appealed. Defendant Rural Bank
of Sta. Maria, Pangasinan did not appeal.7 The Court of
Appeals rendered herein assailed decision, the dispositive
portion insofar as pertinent to this case reads:
“WHEREFORE, premises considered, decision is hereby rendered:
4. Declaring the Deed of Absolute Sale with Assumption of
Mortgage, Exhibit A and the Memorandum of Agreement,
Exhibit F, valid as between the parties thereto;
5. Ordering and sentencing defendant Rural Bank of Sta.
Maria, Pangasinan to pay plaintiffs-appellants the sum of
P229,135.00 as actual damages, the sum of P30,000.00 as
moral damages, P10,000.00 as exemplary damages,
P20,000.00 as attorney’s fees and P5,000.00 as litigation
expenses;
6. Affirming the dismissal of all other counterclaims for
damages;
7. Reversing and setting aside all other dispositions made by
the trial court inconsistent with this decision;
8. There is no pronouncement as to costs.
8
SO ORDERED.”
_______________
6 Ibid., pp. 100-101.

7 Ibid., p. 37.
8 Ibid., pp. 64-65.
266

In sum, the Court of Appeals in its assailed decision: (1)

affirmed the validity of the Memorandum of Agreement
between the parties thereto; (2) reversed and set aside the
finding of the trial court on the bad faith of Rayandayan
and Arceño in concealing the real purchase price of the
land sold to them by Manuel Behis during negotiations
with the bank on the assumption of the mortgage debt; (3)
modified the trial court’s finding as to the damages due
Rayandayan and Arceño from the bank by adding
P229,135.00 as actual damages; (4) dismissed the
counterclaim for damages by the bank and deleted the
portion on the set-off of damages due between the bank on
the one hand, and Rayandayan and Arceño on the other.
Motions for reconsideration were filed by plaintiffs-
appellants Rayandayan and Arceño and defendant Rural
Bank of Sta.
9
Maria, Pangasinan which were denied for lack
of merit.
Hence, the instant consolidated petitions.
In a Resolution dated August 25, 1993, this Court
denied the petition for review on certiorari (G.R. No.
111201) filed by Rayandayan and Arceño for having been 10
filed out of time and for late payment of docket fees.
Petitioners Rayandayan and Arceño moved to reconsider;
this Court in a Resolution dated November 22, 1993,
resolved to deny the same with finality considering
petitioners failed to show any compelling reason and to
raise any substantial argument 11 which would warrant a
modification of the said resolution.
What remains for resolution then is G.R. No. 110672,
wherein petitioner Rural Bank of Sta. Maria, Pangasinan,
contends that:
_______________
9 Ibid., p. 68.
10 Rollo of G.R. No. 111201, pp. 92-93.
11 Ibid., p. 98.
267
VOL. 314, SEPTEMBER 14, 1999 267

THE MEMORANDUM OF AGREEMENT (EXH. “F”) ENTERED

INTO BETWEEN PRIVATE RESPONDENTS, AS ALLEGED
ASSIGNEES OF MANUEL BEHIS, AND PETITIONER BANK IS
VOIDABLE AND MUST BE ANNULLED.
II
PRIVATE RESPONDENTS ARE IN BAD FAITH, HENCE,

THEY ARE NOT ENTITLED TO THE SUMS OF P30,000.00 AS
MORAL DAMAGES; P10,000.00 AS EXEMPLARY DAMAGES;
P20,000.00 AS ATTORNEY’S
12
FEES; AND P5,000.00 AS
LITIGATION EXPENSES.
The petition is devoid of merit.

Briefly, the antecedents material to this appeal are as
follows: A Deed of Absolute Sale with Assumption of
Mortgage was executed between Manuel Behis as
vendor/assignor and Rayandayan and Arceño as
vendees/assignees for the sum of P250,000.00. On the same
day, Rayandayan and Arceño together with Manuel Behis
executed another Agreement embodying the real
consideration of the sale of the land in the sum of
P2,400,000.00. Thereafter, Rayandayan and Arceño
negotiated with the principal stockholder of the bank,
Engr. Edilberto Natividad in Manila, for the assumption of
the indebtedness of Manuel Behis and the subsequent
release of the mortgage on the property by the bank.
Rayandayan and Arceño did not show to the bank the
Agreement with Manuel Behis providing for the real
consideration of P2,400,000.00 for the sale of the property
to the former. Subsequently, the bank consented to the
substitution of plaintiffs as mortgage debtors in place of
Manuel Behis in a Memorandum of Agreement between
private respondents and the bank with restructured and
liberalized terms for the payment of the mortgage debt.
Instead of the bank foreclosing immediately for non-
payment of the delinquent account, petitioner bank agreed
to receive only a partial payment of P143,000.00 by

installment on
_______________
12 Rollo of G.R. No. 110672, p. 17.
268

specified dates. After payment thereof, the bank agreed to

release the mortgage of Manuel Behis; to give its consent to
the transfer of title to the private respondents; and to the
payment of the balance of P200,000.00 under new terms
with a new mortgage to be executed by the private
respondents over the same land.
This brings us to the first issue raised by petitioner bank
that the Memorandum of Agreement is voidable on the
ground that its consent to enter said agreement was
vitiated by fraud because private respondents withheld
from petitioner bank the material information that the real
consideration for the sale with assumption of mortgage of
the property by Manuel Behis to Rayandayan and Arceño
is P2,400,000.00, and not P250,000.00 as represented to
petitioner bank. According to petitioner bank, had it known
of the real consideration for the sale, i.e. P2.4 million, it
would not have consented into entering the Memorandum
of Agreement with Rayandayan and Arceño as it was put in
the dark as to the real capacity and financial standing of
private respondents to assume the mortgage from Manuel
Behis. Petitioner bank pointed out that it would not have
assented to the agreement, as it could not expect the
private respondents to pay the bank the approximately
P343,000.00 mortgage debt when private respondents have
to pay at the same time P2,400,000.00 to Manuel Behis on
the sale of the land.
The kind of fraud that will vitiate a contract refers to
those insidious words or machinations resorted to by one of
the contracting parties to induce the other to enter into a 13
contract which without them he would not have agreed to.
Simply stated, the fraud must be the determining cause of
the contract, or must have caused the consent to be given.
It is believed that the non-disclosure to the bank of the
purchase price of the sale of the land between private
respondents and Manuel Behis cannot be the “fraud”
contemplated by Article
_______________
13 Reyes vs. Court of Appeals, 216 SCRA 152.
269
VOL. 314, SEPTEMBER 14, 1999 269

14
1338 of the Civil Code. From the sole reason submitted by
the petitioner bank that it was kept in the dark as to the
financial capacity of private respondents, we cannot see
how the omission or concealment of the real purchase price
could have induced the bank into giving its consent to the
agreement; or that the bank would not have otherwise
given its consent had it known of the real purchase price.
First of all, the consideration for the purchase of the
land between Manuel Behis and herein private
respondents Rayandayan and Arceño could not have been
the determining cause for the petitioner bank to enter into
the memorandum of agreement. To all intents and
purposes, the bank entered into said agreement in order to
effect payment on the indebtedness of Manuel Behis. As
correctly ruled by the Court of Appeals:
“x x x. The real consideration for the sale with assumption of

mortgage, or the non-disclosure thereof, was not the determining
influence on the consent of the bank.
The bank received payments due under the Memorandum of
Agreement, even if delayed. It initially claimed that the sale with
assumption of mortgage was invalid not because of the
concealment of the real consideration of P2,400,000.00 but
because of the information given by Cristina Behis, the widow of
the mortgagor Manuel Behis that her signature on the deed of
absolute sale with assumption of mortgage was forged. Thus, the
alleged nullity of the Memorandum of Agreement, Exhibit F, is a
clear afterthought. It was raised by defendant bank, by way of
counterclaim only after it was sued.
The deceit which avoids the contract exists where the party
who obtains the consent does so by means of concealing or
omitting to state material facts, with intent to deceive, by reason
of which omission or concealment the other party was induced to
give a consent which he would not otherwise have given
(Tolentino, Commentaries and Jurisprudence on the Civil Code,
Vol. IV, p. 480). In this
_______________
14 Art. 1338. There is fraud when through insidious words or machinations of

one of the contracting parties, the other is induced to enter into a contract which,
without them, he would not have agreed to.
270

case, the consideration for the sale with assumption of mortgage

was not the inducement to defendant bank to give a consent
which it would not otherwise have given.
Indeed, whether the consideration of the sale with assumption
of mortgage was P250,000.00 as stated in Exhibit A, or
P2,400,000.00 as stated in the Agreement, Exhibit 15, should not
be of importance to the bank. Whether it was P250,000.00 or
P2,400,000.00 the bank’s security remained unimpaired.
The stipulation in Exhibit 15, reading “in case of default in all
of the above, Manuel Behis shall have legal recourse to the
portion of the parcel of land under TCT No. T-29817 equivalent to
the unpaid balance of the amount subject of this Agreement,”
obviously even if revealed would not have induced defendant bank
to withhold its consent. The legal recourse to TCT No. T-29817
given to Manuel Behis, under the Agreement, is subordinate and
inferior to the mortgage to the bank.
We are, therefore, constrained to uphold the validity of the
Memorandum of Agreement, Exhibit F, and reverse and set aside
the ruling declaring the same annulled allegedly due to fraud of
plaintiffs-appellants (paragraph 7, dispositive portion).
With the above conclusion reached, the award of moral and
exemplary damages, attorney’s fees and expenses of litigation in
favor of defendant bank and against plaintiffs-appellants in
paragraph 4 of the dispositive portion of the decision of the trial
court must likewise be reversed and set aside; and similarly,
paragraph 5. The basis for the award, which we quote “for
plaintiffs’ bad faith in deceiving the Bank to enter into the 15
Memorandum of Agreement” is not correct as we have discussed.
16
Secondly, pursuant to Article 1339 of the Civil Code,
silence or concealment, by itself, does not constitute fraud,
unless there is a special duty to disclose certain facts, or
unless according to good faith and the usages of commerce
the communication should be made. Verily, private
respondents Rayandayan and Arceño had no duty, and
therefore did not
_______________
15 Ibid., pp. 53-54.

16 Art. 1339. Failure to disclose facts, when there is a duty to reveal
them, as when the parties are bound by confidential relations, constitutes
fraud.
271
VOL. 314, SEPTEMBER 14, 1999 271

act in bad faith, in failing to disclose the real consideration

of the sale between them and Manuel Behis.
Thirdly, the bank had other means and opportunity of
verifying the financial capacity of private respondents and
cannot avoid the contract on the ground that they were
kept in the dark as to the financial capacity by the non-
disclosure of the purchase price. As correctly pointed out by
respondent court, the bank security remained unimpaired
regardless of the consideration of the sale. Under the terms
of the Memorandum of Agreement, the property remains as
security for the payment of the indebtedness, in case of
default of payment. Thus, petitioner bank does not and can
not even allege that the agreement was operating to its
disadvantage. In fact, 17the bank admits that no damages
has been suffered by it.
Consequently, not all the elements of fraud vitiating
consent for purposes of annulling a contract concur, to wit:
(a) It was employed by a contracting party upon the other;
(b) It induced the other party to enter into the contract; (c)
It was serious; and, (d) It resulted
18
in damages and injury to
the party seeking annulment. Petitioner bank has not
sufficiently shown that it was induced to enter into the
agreement by the non-disclosure of the purchase price, and
that the same resulted in damages to the bank. Indeed, the
general rule is that whosoever alleges fraud or mistake in
any transaction must substantiate his allegation, since it is
presumed that a person takes ordinary care of his concerns
and that private transactions have been fair and regular.
Petitioner bank’s allegation of fraud and deceit have not
been established sufficiently and competently to rebut the
presumption of regularity and due execution of the
agreement.
Based on the foregoing, the second issue raised by
petitioner bank must likewise fail. Petitioner bank’s
imputation of bad faith to private respondents premised on
the same non-disclosure of the real purchase price of the
sale so as to preclude their entitlement to damages must
necessarily be re-
_______________
17 Ibid., p. 27.
18 Constantino vs. Court of Appeals, 264 SCRA 59.
272

solved in the negative. Petitioner bank does not question

the actual damages awarded to private respondents in the
amount of P229,135.00, but only the moral damages of
P30,000.00, exemplary damages of P10,000.00, attorney’s
fees of P20,000.00 and litigation expenses of P5,000.00. We
may no longer examine the amounts awarded by the trial
court and affirmed by the appellate court as petitioner
bank did not appeal from the decision of the trial court. It
is well-settled that a party who does not appeal from the
decision may not obtain any affirmative relief from the
appellate court other than what he has obtained from the
lower court,
19
if any, whose decision is brought up on
appeal.
WHEREFORE, the petition is hereby DENIED and the
decision of the Court of Appeals, dated March 17, 1993 is
AFFIRMED. No costs.
SO ORDERED.
Melo, Vitug and Purisima, JJ., concur.

Panganiban, J., No part. Former counsel of a party.
Petitions denied; Reviewed decision affirmed.
Notes.—A party who has not himself appealed cannot

obtain from the appellate court any affirmative relief other
than those granted in the decision of the lower court.
(Quintanilla vs. Court of Appeals, 279 SCRA 397 [1997])
Affirmative award cannot be given to parties who did
not appeal. The elementary norms of due process prevent
the grant of additional awards in favor of the employees
where the employer was not given notice that its filing of
its own Petition for Certiorari would put it in jeopardy of
such relief. (Philippine Tobacco Flue-Curing & Redrying
Corporation vs. National Labor Relations Commission, 300
SCRA 37 [1998])
——o0o——
_______________
19 Policarpio vs. Court of Appeals, 269 SCRA 344.
273
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5/5/2021 SUPREME COURT REPORTS ANNOTATED VOLUME 314

VOL. 314, SEPTEMBER 14, 1999 255

RURAL BANK OF STA. MARIA, PANGASINAN,

G.R. No. 111201. September 14, 1999.

ROSARIO R. RAYANDAYAN and CARMEN R. ARCEÑO,

Contracts; Fraud; The kind of fraud that will vitiate a

there is a special duty to disclose certain facts, or unless according

256 SUPREME COURT REPORTS ANNOTATED

Rural Bank of Sta. Maria, Pangasinan vs. Court of Appeals

Pursuant to Article 1339 of the Civil Code, silence or concealment,

imputation of bad faith to private respondents premised on the

VOL. 314, SEPTEMBER 14, 1999 257

Rural Bank of Sta. Maria, Pangasinan vs. Court of Appeals

PETITIONS for review on certiorari of a decision and a

The facts are stated in the opinion of the Court.

1 Per resolution dated October 18, 1993.

258 SUPREME COURT REPORTS ANNOTATED

The facts as found by the trial court and adopted by the

“x x x, the Court Finds that a parcel of land of about 49,969

signature of his wife Cristina Behis. Manuel Behis took it upon

4 Petitioners Rosario R. Rayandayan and Carmen R. Arceño in G.R. No. 111210.

VOL. 314, SEPTEMBER 14, 1999 259

cuted another Agreement (Exhibit ‘15’) whereby plaintiffs are

was discontinued since many parties were interested to buy the

260 SUPREME COURT REPORTS ANNOTATED

negotiating with its principal stockholder, Engr. Edilberto

(a). That the amount of P35,000.00 shall be paid by the assignees to

Plaintiffs did not annotate the Memorandum of Agreement in

(1) P35,000.00 on August 1, 1985 as initial deposit when the

VOL. 314, SEPTEMBER 14, 1999 261

(2) P15,000.00 on September 16, 1985 (Exhibit ‘1’) and

After the last payment of P36,000.00 on December 18, 1985,

262 SUPREME COURT REPORTS ANNOTATED

In a reply letter dated February 11, 1986, (Exhibit ‘B’) to the

In turn, the Bank explained it entered into the Assignment of

VOL. 314, SEPTEMBER 14, 1999 263

February, 1986 to July, 1986. Second, the terms of the

accordingly the Sheriff’s Certificate of Sale was issued (Exhibit ‘8,’

264 SUPREME COURT REPORTS ANNOTATED

anything anymore, they registered and annotated on 5the title,

Since the Bank could not comply with the Memorandum of

“WHEREFORE, in view of All the Foregoing, Judgment is hereby

5. Ordering the setting off in compensation the Damages

5 Rollo of G.R. No. 110672, pp. 74-82.

VOL. 314, SEPTEMBER 14, 1999 265

7. Declaring the Memorandum of Agreement as annulled due

From the decision, plaintiffs Rayandayan and Arceño and

“WHEREFORE, premises considered, decision is hereby rendered:

6 Ibid., pp. 100-101.

266 SUPREME COURT REPORTS ANNOTATED

In sum, the Court of Appeals in its assailed decision: (1)

VOL. 314, SEPTEMBER 14, 1999 267

THE MEMORANDUM OF AGREEMENT (EXH. “F”) ENTERED

PRIVATE RESPONDENTS ARE IN BAD FAITH, HENCE,

The petition is devoid of merit.

to receive only a partial payment of P143,000.00 by

12 Rollo of G.R. No. 110672, p. 17.

268 SUPREME COURT REPORTS ANNOTATED

specified dates. After payment thereof, the bank agreed to

13 Reyes vs. Court of Appeals, 216 SCRA 152.