Republic of the Philippines of First Instance of Isabela) where the petition was filed, a new owner's
SUPREME COURT duplicate was issued to Eusebia Tomas as the petitioner. Upon the
Manila
FIRST DIVISION
G.R. No. L-36897 June 26, 1980
SPOUSES FLORENTINO S. TOMAS and FRANCISCA CARIÑO,
plaintiffs-appellees,
vs.
EUSEBIA TOMAS, defendant, PHILIPPINE NATIONAL BANK,
SANTIAGO, ISABELA BRANCH, defendant-appellant.
DE CASTRO, J.:
Plaintiff spouses, Florentino S. Tomas and Francisca Cariño, are the
owners of a parcel of land located in Malasian, Santiago, Isabela (now
Saguday, Nueva Vizcaya) since 1929, which they obtained through a
homestead patent with Original Certificate of Title No. I-4620. Through
fraud and misrepresentation, one Eusebia Tomas succeeded in having
OCT No. I-4620 cancelled, and obtained in her name TCT No. 8779,
Isabela now TCT-350 Nueva Vizcaya, with which she obsessed a loan
from the Philippine National Bank branch in Santiago, Isabela, as a
security, mortgaging the land with the bank for the load of P2,500.00.
Florentino Tomas discovered the fraudulent acts of Eusebia Tomas when
he himself applied for a loan from the Philippine National Bank, and
offered as a collateral the same land already mortgaged by Eusebia
Tomas to the bank.
In the action plaintiffs filed on April 14, 1964 to declare TCT-350, Nueva
Vizcaya, null and void, against Eusebia Tomas, it was found by the court
(Court of First Instance of Nueva Vizcaya) that Eusebia Tomas
succeeded in having plaintiffs' OCT No. I-4620 (Isabela) 1 cancelled and
having TCT No. 8779 (Isabela) 2 issued in her name, by executing a deed
of extra-judicial settlement 3 in which she made it appear that she is the
lone heir of the registered owner, Florentino Tomas, to whom she was not
even known before, and who was at the time very much alive. She then
petitioned for the issuance of another owner's duplicate of OCT No. I-
4620, alleging loss of said owner's duplicate. On Order of the court (Court
registration of the deed of extra-judicial settlement (Exhibit "J" OCT No. I-
4620 was cancelled, and TCT No. 8779, now TCT-350 Nueva Vizcaya
was issued in the name of Eusebia Tomas on March 14,1957.
In the same action, the Philippine National Bank was made a co-
defendant as the mortgagee of the land, the plaintiffs alleging that the
mortgage is null and void, the mortgagor not being the owner of the
property mortgaged. After trial in which Eusebia Tomas never appeared
to present any evidence, the court a quo rendered judgment dated June
9, 1967, the dispositive portion 4 of which reads:
IN VIEW OF ALL THE FOREGOING
CONSIDERATIONS, decision is hereby rendered in favor
of the plaintiffs and against the defendants: (a) declaring
transfer Certificate of Title No. T-8779, now Transfer
Certificate of Title No. T-350 in the name of defendant
Eusebia Tomas null and void; (b) declaring the deed of
extra-judicial settlement executed by defendant Eusebia
Tomas null and void, (c) declaring Original Certificate of
Title No. I-4620 and its file and owner's copy revived (d)
condemning defendant Eusebia Tomas to pay the
plaintiffs in the amount of P950.00 as attorney's fee and
P 55.80 representing the actual expenses of the plaintiffs;
(e) declaring the mortgage in favor of the Philippine
National Bank without force and effect against the
plaintiffs, and ordering defendant Eusebia Tomas to pay
the costs of this proceedings.
From the portion of the foregoing judgment declaring the mortgage, in its
favor without force and effect, the Philippine National Bank appealed to
the Court of Appeals, 5 which, however, certified the appeal to this Court,
this issue presented being purely legal. 6
The only issue to be resolved is whether the mortgage of the land in favor
of the appellant bank is valid or not as against appellees.
There is no dispute that the mortgagor Eusebia Tomas is not the owner of
the land in question, the true owner being the appellees, who had always
been in possession of said land since they applied for it by way of
homestead patent. The owner's duplicate of OCT No. I-4620 covering the
land in favor of appellee Florentino Tomas had always been with the
latter, and was never lost as falsely and fraudulently misrepresented by
Eusebia Tomas in her petition for a new owner's duplicate of OCT No. I-
4620. Alleging however, good faith so as to invoke the protective
provision of the Land Registration Act (Section 39, Act 496), pointing to
the fact that the certificate of title, TCT-350 Nueva Vizcaya presented by
Eusebia Tomas as mortgagor was in her name, and showed no
encumbrance over the land, the appellant bank contends that its right as
mortgagee must be fully rated as a mortgagee in good faith.
Verily, the resolution of the issue raised in this appeal hinges on whether
the appellant is a mortgagee in good faith and for value, for if it is, and
without anything to excite suspension as it claims, it is protected in the
same way as a purchaser in good faith and for value is protected under
Section 39 of Act 496, otherwise known as the Land Registration Act.
In claiming good faith as a mortgagee, and for value, appellant bank
claims that no proof to the contrary was presented by appellees in the trial
court. 7 It is a fact, however, that incontrovertible proofs have seen
adduced showing that Eusebia Tomas, the mortgagor, was not the owner
of the property mortgaged. This is an that appellees had to prove that
would place appellant bank on obligation to show good faith, as in fact, it
was the bank that alleged good faith as its defense. 8 It would be more
legally correct, therefore, to say that it was incumbent on appellant to
prove its affirmative allegation of good faith rather than appellee to show
the contrary. In any case, to the statement in appellees' brief that
appellant bank "did not object when appellees presented evidence in the
lower court regarding negligence of appellant, like their failure to send
field inspector to the land to discover who is the real owner of the land
being offered as Atty. to the loan of impostor Eusebia Tomas," no denial
was made in a reply brief which appellant should have filed if it wanted to
deny this assertion of appellees. The allegation that appellate presented
no proof of lack of good faith on the part of appellant bank may, therefore,
not altogether be accurate.
The facts as properly taken note of by the lower court would seem to
bring the instant case within the ruling of the case of Pichay vs. Celestino,
9
the essence of which is as between two innocent persons, the
mortgagee and the owner of the mortgaged property, one of whom must
suffer the consequence of a breach of trust, the one who made it possible
by his act of confidence must bear the loss. This is a principle that
accords more with justice and equity, in the light of the common practice
of banking institution, which is a matter of public knowledge, as observed
by the trial court in the case aforecited, with which this Court agreed,
before approving a loan, to send representatives to the premises of the
land offered as collateral and investigate who are the true owners thereof.
Incidentally, the ruling cited herein was against the same appellant bank,
the Philippine National Bank, with reference to a mortgage entered into
under solar circumstances. Banks, indeed, should exercise more care
and prudence in dealing even with registered lands, than private
individuals, for their business is one affected with public interest, keeping
in trust money belonging to their depositors, which they should guard
against loss by not committing any act of negligence which amount to lack
of good faith by which they would be denied the protective mantle of the
land registration statute, Act 496, extended only to purchasers for value
and in good faith, as well as to mortgagees of the same character and
description. This is evidently the rationale of the doctrine laid down in the
case of Pichay vs. Celestino, supra, which as in the instant suit, involved
also a mortgage of a land covered by a certificate of title, mortgaged by
the defendant who was not the owner. The latter, however, succeeded in
cancelling the original certificate of title in the name of the real owner, by
forging a deed of sale, purportedly executed by the said registered owner
in his favor, upon the registration of which, he obtained a transfer
certificate of title in his name, presenting a new owner's duplicate
certificate he obtained by falsely alleging that the first owner's duplicate
was burned in an ex-parte petition with prayer for the issuance of another
owner's duplicate which the court granted.
Thus, the facts of the instant case so closely resemble, if they are not
exactly the same as, those in the Pichay vs. Celestino case, as to make
the application of the ruling in said case to the one at bar unavoidable and
compelling. There were only 12 days between the cancellation of OCT
No. I-4620 on March 14, 1957 and the constitution of the mortgage on
March 26, 1957, which shows that the application for the loan must have
been filed within days only from the receipt of the new TCT No. 8779 by
Eusebia Tomas. This fact should have aroused suspicion for appellant
bank to send representative to the premises to ascertain who the true
owner is, considering that homestead patents are generally applied for by
male appellant applicants, and are very infrequently sold or alienated, the
policy of the law being against sale or alienation.
The decision of this Court in the aforecited case promulgated on May 30,
1967 preceded the decision of the lower court in this case dated June 7,
1967, by only a few days. However, the court a quo went along the
doctrine as laid down in the Pichay vs. Celestino case even perhaps
without having actually read the decision, although a similar rule had
earlier been laid down in Blondeau, et al. vs. Nano, et al. 10 We, therefore,
find no error in the holding of the court a quo that the mortgage executed
by Eusebia Tomas, appellant's codefendant in favor of said appellant
bank over the land in question which the former never owned, is without
effect as against appellees herein.

We, indeed, find more weight and vigor in a doctrine which recognizes a
better right for the innocent original registered owner who obtained his
certificate of title through perfectly legal and regular proceedings, than
one who obtains his certificate from a totally void one, as to prevail over
judicial pronouncements to the effect that one dealing with a registered
land, such as a purchaser, is under no obligation to look beyond the
certificate of title of the vendor, for in the latter case, good faith has yet to
be established by the vendee or transferee, being the most essential
condition, coupled with valuable consideration, to entitle him to respect for
his newly acquired title even as against the holder of an earlier and
perfectly valid title. There might be circumstances apparent on the face of
the certificate of title which could excite suspicion as to prompt inquiry,
such as when the transfer is not by virtue of a voluntary act of the original
registered owner, as in the instant case, where it was by means of a self-
executed deed of extra-judicial settlement, a fact which should be noted
on the face of Eusebia Tomas' certificate of title. Failing to make such
inquiry would hardly be consistent with any pretense of good faith, which
the appellant bank invokes to claim the right to be protected as a
mortgagee, and for the reversal of the judgment rendered against it by the
lower court.

WHEREFORE, the judgement appealed from is hereby affirmed, without

pronouncement to cost.

SO ORDERED.

Teehankee (Chairman),Makasiar and Fernandez, JJ., concur.

Melencio-Herrera J., concurs in the result.

Guerrero, J., took no part.

 
 SECOND DIVISION
[G.R. No. 133638, April 15, 2005]
PERPETUA VDA. DE APE, PETITIONER, VS. THE HONORABLE
COURT OF APPEALS AND GENOROSA CAWIT VDA. DE LUMAYNO,
RESPONDENTS.
DECISION
CHICO-NAZARIO, J.:
Before Us is a petition for review on certiorari of the Decision[1] of the
Court of Appeals in CA-G.R. CV No. 45886 entitled, “Generosa Cawit de
Lumayno, accompanied by her husband Braulio Lumayno v. Fortunato
Ape, including his wife Perpetua de Ape.”
The pertinent facts are as follows:
Cleopas Ape was the registered owner of a parcel of land particularly
known as Lot No. 2319 of the Escalante Cadastre of Negros Occidental
and covered by Original Certificate of Title (OCT) No. RP 1379 (RP-154
[300]).[2] Upon Cleopas Ape’s death sometime in 1950, the property
passed on to his wife, Maria Ondoy, and their eleven (11) children,
namely:  Fortunato, Cornelio, Bernalda, Bienvenido, Encarnacion, Loreta,
Lourdes, Felicidad, Adela, Dominador, and Angelina, all surnamed Ape.
On 15 March 1973, Generosa Cawit de Lumayno (private respondent
herein), joined by her husband, Braulio,[3] instituted a case for “Specific
Performance of a Deed of Sale with Damages” against Fortunato and his
wife Perpetua (petitioner herein) before the then Court of First Instance of
Negros Occidental.  It was alleged in the complaint that on 11 April 1971,
private respondent and Fortunato entered into a contract of sale of land
under which for a consideration of P5,000.00, Fortunato agreed to sell his
share in Lot No. 2319 to private respondent.  The agreement was
contained in a receipt prepared by private respondent’s son-in-law,
Andres Flores, at her behest.  Said receipt was attached to the complaint
as Annex “A” thereof and later marked as Exhibit “G” for private
respondent. The receipt states:
April 11, 1971
TO WHOM IT MAY CONCERN:
This date received from Mrs. Generosa Cawit de Lumayno the sum of
THIRTY PESOS ONLY as Advance Payment of my share in Land
Purchased, for FIVE THOUSAND PESOS – LOT #2319.
                                                                                         (Signed)
FORTUNATO APE
P30.00            WITNESS:
                        (Illegible) [4]
As private respondent wanted to register the claimed sale transaction,
she supposedly demanded that Fortunato execute the corresponding
deed of sale and to receive the balance of the consideration.  However,
Fortunato unjustifiably refused to heed her demands.  Private respondent,
therefore, prayed that Fortunato be ordered to execute and deliver to her
“a sufficient and registrable deed of sale involving his one-eleventh (1/11)
share or participation in Lot No. 2319 of the Escalante Cadastre; to pay
P5,000.00 in damages; P500.00 reimbursement for litigation expenses as
well as additional P500.00 for every appeal made; P2,000.00 for
attorney’s fees; and to pay the costs.[5]
Fortunato and petitioner denied the material allegations of the complaint
and claimed that Fortunato never sold his share in Lot No. 2319 to private
respondent and that his signature appearing on the purported receipt was
forged.  By way of counterclaim, the defendants below maintained having
entered into a contract of lease with respondent involving Fortunato’s
portion of Lot No. 2319.  This purported lease contract commenced in
1960 and was supposed to last until 1965 with an option for another five
(5) years.  The annual lease rental was P100.00 which private respondent
and her husband allegedly paid on installment basis.  Fortunato and
petitioner also assailed private respondent and her husband’s continued
possession of the rest of Lot No. 2319 alleging that in the event they had
acquired the shares of Fortunato’s co-owners by way of sale, he was
invoking his right to redeem the same.  Finally, Fortunato and petitioner
prayed that the lease contract between them and respondent be ordered
annulled; and that respondent be ordered to pay them attorney’s fees;
moral damages; and exemplary damages.[6]
In their reply,[7] the private respondent and her husband alleged that they
had purchased from Fortunato’s co-owners, as evidenced by various
written instruments,[8] their respective portions of Lot No. 2319.  By virtue
of these sales, they insisted that Fortunato was no longer a co-owner of
Lot No. 2319 thus, his right of redemption no longer existed.
Prior to the resolution of this case at the trial court level, Fortunato died
and was substituted in this action by his children named Salodada,
Clarita, Narciso, Romeo, Rodrigo, Marieta, Fortunato, Jr., and Salvador,
all surnamed Ape.[9]
During the trial, private respondent testified that she and her husband
acquired the various portions of Lot No. 2319 belonging to Fortunato’s co-
owners.  Thereafter, her husband caused the annotation of an adverse
claim on the certificate of title of Lot No. 2319. [10] The annotation states:
Entry No. 123539 – Adverse claim filed by Braulio Lumayno. – Notice of
adverse claim filed by Braulio Lumayno affecting the lot described in this
title to the extent of 77511.93 square meters, more or less, the aggregate
area of shares sold to him on the basis of (alleged) sales in his
possession.  Doc. No. 157, Page No. 33, Book No. XI, Series of 1967 of
Alexander Cawit of Escalante, Neg. Occ. Date of instrument. – June 22,
1967 at 8:30 a.m. (SGD) FEDENCIORRAZ, Actg. Register of Deeds. [11]
In addition, private respondent claimed that after the acquisition of those
shares, she and her husband had the whole Lot No. 2319 surveyed by a
certain Oscar Mascada who came up with a technical description of said
piece of land.[12] Significantly, private respondent alleged that Fortunato
was present when the survey was conducted.[13]
Also presented as evidence for private respondent were pictures taken of
some parts of Lot No. 2319 purportedly showing the land belonging to
Fortunato being bounded by a row of banana plants thereby separating it
from the rest of Lot No. 2319.[14]
As regards the circumstances surrounding the sale of Fortunato’s portion
of the land, private respondent testified that Fortunato went to her store at
the time when their lease contract was about to expire.  He allegedly
demanded the rental payment for his land but as she was no longer
interested in renewing their lease agreement, they agreed instead to enter
into a contract of sale which Fortunato acceded to provided private
respondent bought his portion of Lot No. 2319 for P5,000.00.  Thereafter,
she asked her son-in-law Flores to prepare the aforementioned receipt.  when they formally offered their exhibits in the instant case; meaning,
Flores read the document to Fortunato and asked the latter whether he
had any objection thereto.  Fortunato then went on to affix his signature
on the receipt.
For her part, petitioner insisted that the entire Lot No. 2319 had not yet
been formally subdivided;[15] that on 11 April 1971 she and her husband
went to private respondent’s house to collect past rentals for their land
then leased by the former, however, they managed to collect only thirty
pesos;[16] that private respondent made her (petitioner’s) husband sign a
receipt acknowledging the receipt of said amount of money; [17] and that
the contents of said receipt were never explained to them. [18] She also
stated in her testimony that her husband was an illiterate and only learned
how to write his name in order to be employed in a sugar central. [19] As for
private respondent’s purchase of the shares owned by Fortunato’s co-
owners, petitioner maintained that neither she nor her husband received
any notice regarding those sales transactions.[20] The testimony of
petitioner was later on corroborated by her daughter-in-law, Marietta Ape
Dino.[21]
After due trial, the court a quo rendered a decision[22] dismissing both the
complaint and the counterclaim.  The trial court likewise ordered that
deeds or documents representing the sales of the shares previously
owned by Fortunato’s co-owners be registered and annotated on the
existing certificate of title of Lot No. 2319.  According to the trial court,
private respondent failed to prove that she had actually paid the purchase
price of P5,000.00 to Fortunato and petitioner.  Applying, therefore, the
provision of Article 1350 of the Civil Code,[23] the trial court concluded that
private respondent did not have the right to demand the delivery to her of
the registrable deed of sale over Fortunato’s portion of the Lot No. 2319.
The trial court also rejected Fortunato and petitioner’s claim that they had
the right of redemption over the shares previously sold to private
respondent and the latter’s husband, reasoning as follows:
Defendants in their counterclaim invoke their right of legal redemption
under Article 1623 of the New Civil Code in view of the alleged sale of the
undivided portions of the lot in question by their co-heirs and co-owners
as claimed by the plaintiffs in their complaint.  They have been informed
by the plaintiff about said sales upon the filing of the complaint in the
instant case as far back as March 14, 1973.  Defendant themselves
presented as their very own exhibits copies of the respective deeds of
sale or conveyance by their said co-heirs and co-owners in favor of the
plaintiffs or their predecessors-in-interest way back on January 2, 1992
they themselves acquired possession of said documentary exhibits even
before they formally offered them in evidence.  Under Art. 1623 of the
New Civil Code, defendants have only THIRTY (30) DAYS counted from
their actual knowledge of the exact terms and conditions of the deeds of
sale or conveyance of their co-heirs’ and co-owners’ share within which to
exercise their right of legal redemption.[24]
Within the reglementary period, both parties filed their respective notices
of appeal before the trial court with petitioner and her children taking
exception to the finding of the trial court that the period within which they
could invoke their right of redemption had already lapsed. [25] For her part,
private respondent raised as errors the trial court’s ruling that there was
no contract of sale between herself and Fortunato and the dismissal of
their complaint for specific performance.[26]
The Court of Appeals, in the decision now assailed before us, reversed
and set aside the trial court’s dismissal of the private respondent’s
complaint but upheld the portion of the court a quo’s decision ordering the
dismissal of petitioner and her children’s counterclaim.  The dispositive
portion of the appellate court’s decision reads:
WHEREFORE, the decision dated March 11, 1994, is hereby
REVERSED and SET ASIDE insofar as the dismissal of plaintiffs-
appellants’ complaint is concerned, and another one is entered ordering
the defendant-appellant Fortunato Ape and/or his wife Perpetua de Ape
and successors-in-interest to execute in favor of plaintiff-appellant
Generosa Cawit de Lumayno a Deed of Absolute Sale involving the one-
eleventh (1/11) share or participation of Fortunato Ape in Lot No. 2319,
Escalante Cadastre, containing an area of 12,527.19 square meters,
more or less, within (30) days from finality of this decision, and in case of
non-compliance with this Order, that the Clerk of Court of said court is
ordered to execute the deed on behalf of the vendor.  The decision is
AFFIRMED insofar as the dismissal of defendants-appellants’
counterclaim is concerned.
Without pronouncement as to costs.[27]
The Court of Appeals upheld private respondent’s position that Exhibit “G”
had all the earmarks of a valid contract of sale, thus:
Exhibit G is the best proof that the P5,000.00 representing the purchase
price of the 1/11th share of Fortunato Ape was not paid by the vendee on
April 11, 1971, and/or up to the present, but that does not affect the
binding force and effect of the document.  The vendee having paid the
vendor an advance payment of the agreed purchase price of the property,
what the vendor can exact from the vendee is full payment upon his
execution of the final deed of sale.  As is shown, the vendee precisely
instituted this action to compel the vendor Fortunato Ape to execute the
final document, after she was informed that he would execute the same
upon arrival of his daughter “Bala” from Mindanao, but afterwards failed to
live up to his contractual obligation (TSN, pp. 11-13, June 10, 1992).
It is not right for the trial court to expect plaintiff-appellant to pay the
balance of the purchase price before the final deed is executed, or for her
to deposit the equivalent amount in court in the form of consignation.  contract of sale of Fortunato’s share in Lot No. 2319 as said document
Consignation comes into fore in the case of a creditor to whom tender of
payment has been made and refuses without just cause to accept it (Arts.
1256 and 1252, N.C.C.; Querino vs. Pelarca, 29 SCRA 1).  As vendee,
plaintiff-appellant Generosa Cawit de Lumayno does not fall within the
purview of a debtor.
We, therefore, find and so hold that the trial court should have found that
exhibit G bears all the earmarks of a private deed of sale which is valid,
binding and enforceable between the parties, and that as a consequence
of the failure and refusal on the part of the vendor Fortunato Ape to live
up to his contractual obligation, he and/or his heirs and successors-in-
interest can be compelled to execute in favor of, and to deliver to the
vendee, plaintiff-appellant Generosa Cawit de Lumayno a registerable
deed of absolute sale involving his one-eleventh (1/11 th) share or
participation in Lot No. 2319, Escalante Cadastre, containing an area of
12,527.19 square meters, more or less, within 30 days from finality of this
decision, and, in case of non-compliance within said period, this Court
appoints the Clerk of Court of the trial court to execute on behalf of the
vendor the said document.[28]
The Court of Appeals, however, affirmed the trial court’s ruling on the
issue of petitioner and her children’s right of redemption.  It ruled that
Fortunato’s receipt of the Second Owner’s Duplicate of OCT (RP) 1379
(RP-154 ([300]), containing the adverse claim of private respondent and
her husband, constituted a sufficient compliance with the written notice
requirement of Article 1623 of the Civil Code and the period of redemption
under this provision had long lapsed.
Aggrieved by the decision of the appellate court, petitioner is now before
us raising, essentially, the following issues: whether Fortunato was
furnished with a written notice of sale of the shares of his co-owners as
required by Article 1623 of the Civil Code; and whether the receipt signed
by Fortunato proves the existence of a contract of sale between him and
private respondent.
In her memorandum, petitioner claimed that the Court of Appeals erred in
sustaining the court a quo’s pronouncement that she could no longer
redeem the portion of Lot No. 2319 already acquired by private
respondent for no written notice of said sales was furnished them. 
According to her, the Court of Appeals unduly expanded the scope of the
law by equating Fortunato’s receipt of Second Owner’s Duplicate of OCT
(RP) 1379 (RP-154 ([300]) with the written notice requirement of Article
1623.  In addition, she argued that Exhibit “G” could not possibly be a
does not contain “(a) definite agreement on the manner of payment of the
price.”[29] Even assuming that Exhibit “G” is, indeed, a contract of sale
between private respondent and Fortunato, the latter did not have the
obligation to deliver to private respondent a registrable deed of sale in
view of private respondent’s own failure to pay the full purchase price of
Fortunato’s portion of Lot No. 2319.  Petitioner is also of the view that, at
most, Exhibit “G” merely contained a unilateral promise to sell which
private respondent could not enforce in the absence of a consideration
distinct from the purchase price of the land.  Further, petitioner reiterated
her claim that due to the illiteracy of her husband, it was incumbent upon
private respondent to show that the contents of Exhibit “G” were fully
explained to him.  Finally, petitioner pointed out that the Court of Appeals
erred when it took into consideration the same exhibit despite the fact that
only its photocopy was presented before the court.
On the other hand, private respondent argued that the annotation on the
second owner’s certificate over Lot No. 2319 constituted constructive
notice to the whole world of private respondent’s claim over the majority
of said parcel of land.  Relying on our decision in the case of Cabrera v.
Villanueva,[30] private respondent insisted that when Fortunato received a
copy of the second owner’s certificate, he became fully aware of the
contracts of sale entered into between his co-owners on one hand and
private respondent and her deceased husband on the other.
Private respondent also averred that “although (Lot No. 2319) was not
actually partitioned in a survey after the death of Cleopas Ape, the land
was partitioned in a ‘hantal-hantal’ manner by the heirs.  Each took and
possessed specific portion or premises as his/her share in land, farmed
their respective portion or premises, and improved them, each heir
limiting his/her improvement within the portion or premises which were
his/her respective share.”[31] Thus, when private respondent and her
husband purchased the other parts of Lot No. 2319, it was no longer
undivided as petitioner claims.
The petition is partly meritorious.
Article 1623 of the Civil Code provides:
The right of legal pre-emption or redemption shall not be exercised except
within thirty days from the notice in writing by the prospective vendor, or
by the vendor, as the case may be.  The deed of sale shall not be
recorded in the Registry of Property, unless accompanied by an affidavit
of the vendor that he has given written notice thereof to all possible
redemptioners.
Despite the plain language of the law, this Court has, over the years,
been tasked to interpret the “written notice requirement” of the above-
quoted provision.  In the case Butte v. Manuel Uy & Sons, Inc.,[32] we
declared that –
In considering whether or not the offer to redeem was timely, we think that
the notice given by the vendee (buyer) should not be taken into account. 
The text of Article 1623 clearly and expressly prescribes that the thirty
days for making the redemption are to be counted from notice in writing
by the vendor.  Under the old law (Civ. Code of 1889, Art. 1524), it was
immaterial who gave the notice; so long as the redeeming co-owner
learned of the alienation in favor of the stranger, the redemption period
began to run.  It is thus apparent that the Philippine legislature in Article
1623 deliberately selected a particular method of giving notice, and that
method must be deemed exclusive. (39 Am. Jur., 237; Payne vs. State,
12 S.W. 2(d) 528).  As ruled in Wampler vs. Lecompte, 150 Atl. 458 (affd.
in 75 Law Ed. [U.S.] 275) –
why these provisions were inserted in the statute we are not informed, but
we may assume until the contrary is shown, that a state of facts in respect
thereto existed, which warranted the legislature in so legislating.
The reasons for requiring that the notice should be given by the seller,
and not by the buyer, are easily divined.  The seller of an undivided
interest is in the best position to know who are his co-owners that under
the law must be notified of the sale.  Also, the notice by the seller
removes all doubts as to fact of the sale, its perfection; and its validity, the
notice being a reaffirmation thereof, so that the party notified need not
entertain doubt that the seller may still contest the alienation.  This
assurance would not exist if the notice should be given by the buyer. [33]
The interpretation was somehow modified in the case of De Conejero, et
al. v. Court of Appeals, et al.[34] wherein it was pointed out that Article
1623 “does not prescribe a particular form of notice, nor any distinctive
method for notifying the redemptioner” thus, as long as the redemptioner
was notified in writing of the sale and the particulars thereof, the
redemption period starts to run.  This view was reiterated in Etcuban v.
The Honorable Court of Appeals, et al.,[35] Cabrera v. Villanueva,[36]
Garcia, et al. v. Calaliman, et al.,[37] Distrito, et al. v. The Honorable Court
of Appeals, et al.,[38] and Mariano, et al. v. Hon. Court of Appeals, et al.[39]
However, in the case of Salatandol v. Retes,[40] wherein the plaintiffs were
not furnished any written notice of sale or a copy thereof by the vendor,
this Court again referred to the principle enunciated in the case of Butte. 
As observed by Justice Vicente Mendoza, such reversion is only sound,
thus:
… Art. 1623 of the Civil Code is clear in requiring that the written husband’s assumed partition?
notification should come from the vendor or prospective vendor, not from A  I do not know what [does] this “north” [mean].
any other person.  There is, therefore, no room for construction.  Indeed,
the principal difference between Art. 1524 of the former Civil Code and COURT
Art. 1623 of the present one is that the former did not specify who must (To Witness)
give the notice, whereas the present one expressly says the notice must
be given by the vendor.  Effect must be given to this change in statutory Q  To the place from where the sun rises, whose share was that?
language. [41] A  The shares of Cornelia, Loreta, Encarnacion and Adela.
In this case, the records are bereft of any indication that Fortunato was
given any written notice of prospective or consummated sale of the Q  How could you determine their own shares?
portions of Lot No. 2319 by the vendors or would-be vendors.  The thirty A  They were residing in their respective assumed portions.
(30)-day redemption period under the law, therefore, has not commenced
to run. Q  How about determining their respective boundaries?
A  It could be determined by stakes and partly a row of banana
Despite this, however, we still rule that petitioner could no longer invoke plantations planted by my son-in-law.
her right to redeem from private respondent for the exercise of this right
“presupposes the existence of a co-ownership at the time the conveyance Q  Who is this son-in-law you mentioned?
is made by a co-owner and when it is demanded by the other co-owner or A  Narciso Ape.
co-owners.”[42] The regime of co-ownership exists when ownership of an
undivided thing or right belongs to different persons. [43] By the nature of a ATTY. CAWIT
co-ownership, a co-owner cannot point to specific portion of the property (Continuing)
owned in common as his own because his share therein remains
intangible.[44] As legal redemption is intended to minimize co-ownership,[45] Q  You said that there were stakes to determine the hantal-hantal of your
once the property is subdivided and distributed among the co-owners, the husband and the hantal-hantal of the other heirs, did I get you right?
community ceases to exist and there is no more reason to sustain any
right of legal redemption.[46] ATTY. TAN
      Admitted, Your Honor.
In this case, records reveal that although Lot No. 2319 has not yet been
formally subdivided, still, the particular portions belonging to the heirs of …
Cleopas Ape had already been ascertained and they in fact took
possession of their respective parts.  This can be deduced from the ATTY. CAWIT
testimony of petitioner herself, thus:
Q  When the plaintiffs leased the share of your husband, were there any Q  Mrs. Ape, in 1960, Cleopas Ape was already dead, is that correct?
metes and bounds? A  Certainly, since he died in 1950.
A  It was not formally subdivided.  We have only a definite portion. 
(hantal-hantal) Q  By the manifestation of your counsel that the entire land (13 hectares)
of your father-in-law, Cleopas Ape, was leased to Generosa Lumayno, is
Q  This hantal-hantal of your husband, was it also separate and distinct this correct?
from the hantal-hantal or the share of the brothers and sisters of your A  No, it is only the assumed portion of my husband [which] was leased to
husband? Generosa Lumayno.
A  Well, this property in question is a common property.
Q  For clarification, it was only the share of your husband [which] was
Q  To the north, whose share was that which is adjacent to your leased to Generosa Cawit Lumayno?
A  Yes.[47]
ATTY. CAWIT
Q  My question: is that portion which you said was leased by your
husband to the Lumayno[s] and which was included to the lease by your
mother-in-law to the Lumayno[s], when the Lumayno[s] returned your
husband[’s] share, was that the same premises that your husband leased
to the Lumayno[s]?
A  The same.
Q  In re-possessing this portion of the land corresponding to the share of
your husband, did your husband demand that they should re-possess the
land from the Lumayno[s] or did the Lumayno[s] return them to your
husband voluntarily?
A  They just returned to us without paying the rentals.
COURT
Q  Was the return the result of your husband’s request or just voluntarily
they returned it to your husband?
A  No, sir, it was just returned voluntarily, and they abandoned the area
but my husband continued farming.[48]
Similarly telling of the partition is the stipulation of the parties during the
pre-trial wherein it was admitted that Lot No. 2319 had not been
subdivided nevertheless, “Fortunato Ape had possessed a specific portion
of the land ostensibly corresponding to his share.”[49]
From the foregoing, it is evident that the partition of Lot No. 2319 had
already been effected by the heirs of Cleopas Ape.  Although the partition
might have been informal is of no moment for even an oral agreement of
partition is valid and binding upon the parties. [50] Likewise, the fact that the
respective shares of Cleopas Ape’s heirs are still embraced in one and
the same certificate of title and have not been technically apportioned
does not make said portions less determinable and identifiable from one
another nor does it, in any way, diminish the dominion of their respective
owners.[51]
Turning now to the second issue of the existence of a contract of sale, we
rule that the records of this case betray the stance of private respondent
that Fortunato Ape entered into such an agreement with her.
A contract of sale is a consensual contract, thus, it is perfected by mere
consent of the parties.  It is born from the moment there is a meeting of
minds upon the thing which is the object of the sale and upon the price. [52]
Upon its perfection, the parties may reciprocally demand performance,
that is, the vendee may compel the transfer of the ownership and to
deliver the object of the sale while the vendor may demand the vendee to
pay the thing sold.[53] For there to be a perfected contract of sale,
however, the following elements must be present: consent, object, and
price in money or its equivalent.  In the case of Leonardo v. Court of
Appeals, et al.,[54] we explained the element of consent, to wit:
The essence of consent is the agreement of the parties on the terms of
the contract, the acceptance by one of the offer made by the other.  It is
the concurrence of the minds of the parties on the object and the cause
which constitutes the contract.  The area of agreement must extend to all
points that the parties deem material or there is no consent at all.
To be valid, consent must meet the following requisites: (a) it should be
intelligent, or with an exact notion of the matter to which it refers; (b) it
should be free and (c) it should be spontaneous.  Intelligence in consent
is vitiated by error; freedom by violence, intimidation or undue influence;
spontaneity by fraud.[55]
In this jurisdiction, the general rule is that he who alleges fraud or mistake
in a transaction must substantiate his allegation as the presumption is that
a person takes ordinary care for his concerns and that private dealings
have been entered into fairly and regularly.[56] The exception to this rule is
provided for under Article 1332 of the Civil Code which provides that
“[w]hen one of the parties is unable to read, or if the contract is in a
language not understood by him, and mistake or fraud is alleged, the
person enforcing the contract must show that the terms thereof have been
fully explained to the former.”
In this case, as private respondent is the one seeking to enforce the
claimed contract of sale, she bears the burden of proving that the terms of
the agreement were fully explained to Fortunato Ape who was an
illiterate.  This she failed to do.  While she claimed in her testimony that
the contents of the receipt were made clear to Fortunato, such allegation
was debunked by Andres Flores himself when the latter took the witness
stand.  According to Flores:
ATTY. TAN
Q  Mr. Witness, that receipt is in English, is it not?
A  Yes, sir.
Q  When you prepared that receipt, were you aware that Fortunato Ape
doesn’t know how to read and write English?
A  Yes, sir, I know.
Q  Mr. Witness, you said you were present at the time of the signing of
that alleged receipt of P30.00, correct?
A  Yes, sir.
Q  Where, in what place was this receipt signed?
A  At the store.
Q  At the time of the signing of this receipt, were there other person[s]
present aside from you, your mother-in-law and Fortunato Ape?
A  In the store, yes, sir.
Q  When you signed that document of course you acted as witness upon
request of your mother-in-law?
A  No, this portion, I was the one who prepared that document.
Q  Without asking of (sic) your mother-in-law, you prepared that
document or it was your mother-in-law who requested you to prepare that
document and acted as witness?
A  She requested me to prepare but does not instructed (sic) me to act as
witness.  It was our opinion that whenever I prepared the document, I
signed it as a witness.
Q  Did it not occur to you to ask other witness to act on the side of
Fortunato Ape who did not know how to read and write English?
A  It occurred to me.
Q  But you did not bother to request a person who is not related to your
mother-in-law, considering that Fortunato Ape did not know how to read
and write English?
A  The one who represented Fortunato Ape doesn’t know also how to
read and write English.  One a maid.
Q  You mentioned that there [was another] person inside the store, under
your previous statement, when the document was signed, there [was
another] person in the store aside from you, your mother-in-law and
Fortunato Ape, is not true?
A  That is true, there is one person, but that person doesn’t know how to
read also.
…
Q  Of course, Mr. Witness, since it occurred to you that there was need
for other witness to sign that document for Fortunato Ape, is it not a fact
that the Municipal Building is very near your house?
A  Quite (near).
Q  But you could readily proceed to the Municipal Building and request
one who is knowledgeable in English to act as witness?
A  I think there is no need for that small receipt.  So I don’t bother myself
to go.
Q  You did not consider that receipt very important because you said that
small receipt?
A  Yes, I know.[57]
As can be gleaned from Flores’s testimony, while he was very much
aware of Fortunato’s inability to read and write in the English language,
he did not bother to fully explain to the latter the substance of the receipt
(Exhibit “G”).  He even dismissed the idea of asking somebody else to
assist Fortunato considering that a measly sum of thirty pesos was
involved.  Evidently, it did not occur to Flores that the document he
himself prepared pertains to the transfer altogether of Fortunato’s
property to his mother-in-law.  It is precisely in situations such as this
when the wisdom of Article 1332 of the Civil Code readily becomes
apparent which is “to protect a party to a contract disadvantaged by
illiteracy, ignorance, mental weakness or some other handicap.” [58]
In sum, we hold that petitioner is no longer entitled to the right of
redemption under Article 1632 of the Civil Code as Lot No. 2319 had long
been partitioned among its co-owners. This Court likewise annuls the
contract of sale between Fortunato and private respondent on the ground
of vitiated consent.
WHEREFORE, premises considered, the decision dated 25 March 1998
of the Court of Appeals is hereby REVERSED and SET ASIDE and the
decision dated 11 March 1994 of the Regional Trial Court, Branch 58,
San Carlos City, Negros Occidental, dismissing both the complaint and
the counterclaim, is hereby REINSTATED.  No costs.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.
 Perpetua Vda. De Ape v. Court of Appeals
April 15, 2005, 456 SCRA 193
Elements of a Contract of Sale – Consent Vitiated
For consent to be valid, it must meet the following requisites: (a) it should
be intelligent, or with an exact notion of the matter to which it refers; (b) it
should be free and (c) it should be spontaneous.  Intelligence in consent
is vitiated by error; freedom by violence, intimidation or undue influence;
spontaneity by fraud.

Lumayno claimed that she explained fully the receipt to Fortunato, but
Cleopas Ape died in 1950 and left a parcel of land (Lot 2319) to his 11
Flores’ testimony belies it. Flores said there was another witness but the
children. The children never formally divided the property amongst
other was a maid who was also lacked education. Further, Flores himself
themselves except through hantal-hantal whereby each just occupied a
was not aware that the receipt was “to transfer the ownership of
certain portion and developed each.
Fortunato’s land to her mom-in-law”. It only occurred to him to explain the
details of the receipt but he never did.
On the other hand, the spouses Lumayno were interested in the land so
they started buying the portion of land that each of the heirs occupied. On
11 Apr 1973, one of the children, Fortunato, entered into a contract of
sale with Lumayno. In exchange of his lot, Lumayno agreed to pay
P5,000.00. She paid in advance P30.00. Fortunato was given a receipt
prepared by Lumayno’s son in law (Andres Flores).  Flores also acted as
witness. Lumayno also executed sales transactions with Fortunato’s
siblings separately.

In 1973, Lumayno compelled Fortunato to make the the delivery to her of

the registrable deed of sale over Fortunato’s portion of the Lot No. 2319.
Fortunato assailed the validity of the contract of sale. He also invoked his
right to redeem (as a co-owner) the portions of land sold by his siblings to
Lumayno. Fortunato died during the pendency of the case.

ISSUE: Whether or not there was a valid contract of sale?

HELD: No. Fortunato was a “no read no write” person. It was incumbent
for the the other party to prove that details of the contract was fully
explained to Fortunato before Fortunato signed the receipt.

A contract of sale is a consensual contract, thus, it is perfected by mere

consent of the parties.  It is born from the moment there is a meeting of
minds upon the thing which is the object of the sale and upon the price.
Upon its perfection, the parties may reciprocally demand performance,
that is, the vendee may compel the transfer of the ownership and to
deliver the object of the sale while the vendor may demand the vendee to
pay the thing sold. For there to be a perfected contract of sale, however,
the following elements must be present: consent, object, and price in
money or its equivalent.
 Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-23196            October 31, 1967
LAUREANO OLIVA, plaintiff-appellant,
vs.
NICOLAS V. LAMADRID and ROSA L. VILLALUZ, defendants-appellees.
Crispo B. Borja for plaintiff-appellant.
Edmundo A. Narra for defendants-appellees.
CONCEPCION, C.J.:
Appeal by the plaintiff from a decision of the Court of First Instance of Camarines
Norte dismissing the complaint herein.
Plaintiff Laureano Oliva was the owner of a parcel of land of about 3,5258
hectares, located in the sitio of Pinagdamhan, barrio of Lalawigan, municipality of
Daet, province of Camarines Norte. The property was covered by Homestead
Patent No. 18863 and Original Certificate of Title No. 363 of the Office of the
Register of Deeds for said province, issued, in his name, on May 8, 1932. On
October 2, 1958, he mortgaged the property to the Rural Bank of Daet,
Camarines Norte, as security for the payment of a loan in the sum of P250.00. He
having subsequently defaulted in the payment of this obligation, the mortgage was
extrajudicially foreclosed and the property sold, by the provincial sheriff, at public
auction, to the Bank, as the sole bidder, on February 4, 1961, for the aggregate
sum of P188.00, representing P160.00, as unpaid balance of the loan, plus
P12.00 as interest, and P16.00 as attorney's fees. The certificate of sale, issued
by the sheriff, on February 6, 1961, stated that the property could be redeemed
"within . . . two (2) years from and after the date of the sale, or until February 4,
1963."
No redemption having been made within said period, the corresponding deed of
sale was executed in favor of the Bank, on February 27, 1963, on which date said
Original Certificate of Title No. 363 was cancelled and Transfer Certificate of Title
No. T-3968 issued in the name of the Bank. On March 2, 1963, the latter sold the
property to Nicolas V. Lamadrid for the sum of P350.00, and, accordingly,
Transfer Certificate of Title No. T-3968 was cancelled and Transfer Certificate of
Title No. 3978 issued to Lamadrid.
Prior to May 31, 1963, plaintiff offered to repurchase the property for said sum of
P350.00, but the offer was turned down. Hence, on said date, he instituted the
present action against Lamadrid and his wife, Rosa L. Villaluz, to compel them to
reconvey the property to him, for said sum of P350.00, which he deposited with
the Clerk of Court, and to recover damages, attorney's fees and costs. He claimed
that, as holder of a free patent and a torrens title, he is entitled to redeem the
property within five (5) years from February 4, 1961, the date of the auction sale,
pursuant to Section 119 of Commonwealth Act No. 141. Upon the other hand,
defendants alleged in their answer that the right of redemption expired on
February 4, 1963, under the provisions of Section 6 of Republic Act No. 720, as
amended by Republic Act No. 2670, which, they maintain, is controlling.
After appropriate proceedings, the lower court rendered judgment for the
defendants. Hence, this appeal, taken by the plaintiff, directly to the Supreme
Court, on questions purely of law. The main issue is whether the period of
redemption is governed by Section 119 of Commonwealth Act No. 141, as
asserted by the plaintiff, or by Section 5 of Republic Act No. 720, as amended, as
contended by the defendants and held in the decision appealed from, upon the
theory that Section 119 of Commonwealth Act No. 141 refers only to voluntary
conveyances and that the foreclosure sale had been made under Republic Act
No. 720.
As early as July 30, 19511 it has been settled, however, that Section 119 of
Commonwealth Act No. 141 is applicable to foreclosure sales of lands covered by
a homestead or free patent. Besides, on February 28, 1963,2 this Court explicitly
rejected the theory that said provision "refers exclusively to voluntary
conveyances and not to involuntary ones," upon the ground that "the law does not
distinguish between the two kinds of conveyances."
Upon the other hand, Section 5, of Republic Act No. 720, as amended provides:
Loans and advances extended by Rural Banks, organized and operated
under this Act, shall be primarily for the purpose of meeting the normal
credit needs of any small farmer or farm family owning or cultivating, in
the aggregate, not more than fifty hectares of land dedicated to
agricultural production, as well as the normal credit needs of
cooperatives and small merchants. For the purposes of this Act, a small
merchant shall be one whose capital investment does not exceed
twenty-five thousand pesos. In the granting of loans, the Rural Bank shall
give preference to the application of farmers whose cash requirements
are small.
Loans may be granted by rural banks on the security of lands without
torrens titles where the owner of private property can show five years or
more of peaceful, continuous and uninterrupted possession in the
concept of an owner or of homesteads or free patent lands pending the
 issuance of titles but already approved, the provisions of any law or
regulations to the contrary notwithstanding: Provided, That when the
corresponding titles are issued the same shall be delivered to the
register of deeds of the province where such lands are situated for the
annotation of the encumbrance: Provided, further, That in the case of
lands pending homestead or free patent titles, copies of notices for the
presentation of the final proof shall also be furnished the creditor rural
bank and, if the borrower applicants fail to present the final proof within
thirty (30) days from date of notice, the creditor rural bank may do so for
them at their expense: And provided, finally, That the applicant for
homestead or free patent has already made improvements on the land
and the loan applied for is to be used for further development of the
same for other productive economic activities.
The foreclosure of mortgages covering loans granted by rural banks shall
be exempt from the publication in newspapers now required by law
where the total amount of the loan, including interests due and unpaid,
does not exceed two thousand pesos (P2,000.00). It shall be sufficient
publication in such cases if the notices of foreclosure are posted in at
least three of the most conspicuous public places in the municipality
where the land mortgaged is situated during the period of sixty days
immediately preceding the public auction. Proof of publication as
required herein shall be accomplished by the foreclosure sale and shall
be attached with the records of the case: Provided, That when a land not
covered by a Torrens Title, a homestead or free patent land is
foreclosed, the homesteader or free patent holder, as well as their heirs,
shall have the right to redeem the same within two years from the date of
foreclosure: Provided, finally, That in case of borrowers who are mere
tenants the produce corresponding to their share could be accepted as
security.
It should be noted that the period of two (2) years granted for the redemption of
property foreclosed under Section 5 of Republic Act No. 720, as amended by
Republic Act No. 2670, refers to lands "not covered by a Torrens Title, a
homestead or free patent," or to owners of lands "without torrens titles," who can
"show five years or more of peaceful, continuous and uninterrupted possession
thereof in the concept of an owner, or of homesteads or free patent lands pending
the issuance of titles but already approved," or "of lands pending homestead or
free patent titles." Plaintiff, however, had, on the land in question, a free patent
and a Torrens title, which were issued over 26 years prior to the mortgage
constituted in favor of the Bank. Accordingly, there is no conflict between section
119 of Commonwealth Act No. 141 and section 5 of Republic Act No. 720, as
amended, and the period of two (2) years prescribed in the latter is not applicable
to him.
Moreover, the legislative history of the bills3 which later became said Republic Act
No. 2670, amending Republic, Act No. 720, shows that the original proposal was
to give homesteaders or free patent holders a period of ten (10) years within
which to redeem their property foreclosed by rural banks; that this proposal was
eventually found to be unwise, because its effect would have been to dissuade
rural banks from granting loans to homesteaders or free patent holders — which
were sought to be liberalized — said period of redemption being too long, from the
viewpoint of said banks; and that, consequently, the proposal was given up, with
the specific intent and understanding that homesteaders or holders of free patent
would retain the right to redeem within five (5) years from the conveyance of their
properties, as provided in the general law, that is to say the Public Land Act, or
Commonwealth Act No. 141.4
It is, therefore, our considered view that plaintiff herein has the right to repurchase
the property in question within five (5) years from the date of the conveyance or
foreclosure sale, or up to February 4, 1966, and that having exercised such right
and tendered payment long before the date last mentioned, defendants herein are
bound to reconvey said property to him.
Although plaintiff had offered to redeem it for the sum of P350.00 paid by
Lamadrid and the former has actually deposited this amount in the lower court, as
redemption price, plaintiff now alleges that he is bound to pay no more than
P188.00, this being the sum for which the property had been foreclosed by the
Bank. Independently of the amount due under section 119 of Commonwealth Act
No. 141, we cannot entertain this pretense entailing as it does a substantial
change of the theory under which plaintiff had litigated in the lower court, which is
not permissible on appeal.5
WHEREFORE, the decision appealed from is hereby reversed, and another one
shall be entered declaring that, upon the judicial consignation of the sum of
P350.00 by plaintiff herein, the property in litigation had been redeemed by him,
and, accordingly, directing the defendants to execute the corresponding deed of
reconveyance in his favor, and that, thereafter said sum of P350.00 be turned
over by the Clerk of Court to the defendants, with costs against the latter. Said
deed of reconveyance shall be executed by the Clerk of the lower court, in the
event of failure of the defendants to comply with this decision, within 30 days from
the date on which it shall have become final and executory. It is so ordered.
Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Castro,
Angeles and Fernando, JJ., concur.
 Oliva vs. Lamadrid, G.R. No. L-23196, October 31, 1967
Facts:
 Plaintiff Laureano Oliva owns a parcel of land in Camarines Norte. He mortgaged the
property to the Rural Bank of Daet as security for the payment of a loan. Having
defaulted in the payment of his obligation, the mortgage was extrajudicially foreclosed
and the property sold at public auction, to the Bank, as the sole bidder, on February 4,
1961. The certificate of sale, issued by the sheriff stated that the property could be
redeemed within two (2) years from and after the date of the sale, or until February
4,1963. No redemption having been made within said period, the corresponding deed of
sale was executed in favor of the Bank, on February 27, 1963.Prior to May 31, 1963,
plaintiff offered to repurchase the property but the offer was turned down. He claimed
that, as holder of a free patent and a torrens title, he is entitled to redeem the property
within five(5) years from the date of the auction sale , pursuant to Section 119 of
Commonwealth Act No. 141. Upon the other hand, defendants alleged in their answer
that the right of redemption expired on February 4,1963, under the provisions of Section
6 of Republic Act No. 720, as amended by Republic Act No. 2670,which, they maintain,
is controlling.
Issue:
 Whether the period of redemption is governed by Section 119 of Commonwealth Act
No. 141, as assertedby the plaintiff, or bySection 5 of Republic Act No. 720 , as
amended, as contended by the defendants
Held:
The plaintiff herein has the right to repurchase the property in question within five (5)
years from the date ofthe conveyance or foreclosure sale or up to February 4, 1966, and
that having exercised such right and tendered payment long before the date last
mentioned, defendants herein are bound to reconvey said property to him.
Ratio:
The legislative history of the bills which later became said Republic Act No. 2670,
amending Republic ActNo. 720, shows that the original proposal was to give
homesteaders or free patent holders a period of ten(10) years within which to redeem
their property foreclosed by rural banks; that this proposal was eventually found to be
unwise, because its effect would have been to dissuade rural banks from granting loans
to homesteaders or free patent holders ³ which were sought to be liberalized ³ said
period of redemption being too long, from the viewpoint of said banks; and that,
consequently, the proposal was given up, with the specific intent and understanding that
homesteaders or holders of free patent would retain the right to redeem within five (5)
years from the conveyance of their properties , as provided in the general law, that is to
say the Public Land Act, or Commonwealth Act No. 141. Where the general law is the
Commonwealth Act and the specific law is the Republic Act, they should be unified, and
should abide by the conditions of the times.

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 74917 January 20, 1988
BANCO DE ORO SAVINGS AND MORTGAGE BANK, petitioner,
vs.
EQUITABLE BANKING CORPORATION, PHILIPPINE CLEARING HOUSE
CORPORATION, AND REGIONAL TRIAL COURT OF QUEZON CITY,
BRANCH XCII (92), respondents.
 
GANCAYCO, J.:
This is a petition for review on certiorari of a decision of the Regional Trial Court of
Quezon City promulgated on March 24, 1986 in Civil Case No. Q-46517 entitled
Banco de Oro Savings and Mortgage Bank versus Equitable Banking Corporation
and the Philippine Clearing House Corporation after a review of the Decision of
the Board of Directors of the Philippine Clearing House Corporation (PCHC) in the
case of Equitable Banking Corporation (EBC) vs. Banco de Oro Savings and
Mortgage (BCO), ARBICOM Case No. 84033.
The undisputed facts are as follows:
It appears that some time in March, April, May and August
1983, plaintiff through its Visa Card Department, drew six
crossed Manager's check (Exhibits "A" to "F", and herein
referred to as Checks) having an aggregate amount of Forty
Five Thousand Nine Hundred and Eighty Two & 23/100
(P45,982.23) Pesos and payable to certain member
establishments of Visa Card. Subsequently, the Checks were
deposited with the defendant to the credit of its depositor, a
certain Aida Trencio.
Following normal procedures, and after stamping at the back of
the Checks the usual endorsements. All prior and/or lack of
endorsement guaranteed the defendant sent the checks for
clearing through the Philippine Clearing House Corporation
(PCHC). Accordingly, plaintiff paid the Checks; its clearing
account was debited for the value of the Checks and
defendant's clearing account was credited for the same amount,
Thereafter, plaintiff discovered that the endorsements
appearing at the back of the Checks and purporting to be that of
the payees were forged and/or unauthorized or otherwise
belong to persons other than the payees.
Pursuant to the PCHC Clearing Rules and Regulations, plaintiff
presented the Checks directly to the defendant for the purpose
of claiming reimbursement from the latter. However, defendant
refused to accept such direct presentation and to reimburse the
plaintiff for the value of the Checks; hence, this case.
In its Complaint, plaintiff prays for judgment to require the
defendant to pay the plaintiff the sum of P45,982.23 with
interest at the rate of 12% per annum from the date of the
complaint plus attorney's fees in the amount of P10,000.00 as
well as the cost of the suit.
In accordance with Section 38 of the Clearing House Rules and
Regulations, the dispute was presented for Arbitration; and Atty.
Ceasar Querubin was designated as the Arbitrator.
After an exhaustive investigation and hearing the Arbiter
rendered a decision in favor of the plaintiff and against the
defendant ordering the PCHC to debit the clearing account of
the defendant, and to credit the clearing account of the plaintiff
of the amount of P45,982.23 with interest at the rate of 12% per
annum from date of the complaint and Attorney's fee in the
amount of P5,000.00. No pronouncement as to cost was made.
1
In a motion for reconsideration filed by the petitioner, the Board of Directors of the
PCHC affirmed the decision of the said Arbiter in this wise:
In view of all the foregoing, the decision of the Arbiter is
confirmed; and the Philippine Clearing House Corporation is
hereby ordered to debit the clearing account of the defendant
and credit the clearing account of plaintiff the amount of Forty
Five Thousand Nine Hundred Eighty Two & 23/100
 (P45,982.23) Pesos with interest at the rate of 12% per annum
from date of the complaint, and the Attorney's fee in the amount
of Five Thousand (P5,000.00) Pesos.
Thus, a petition for review was filed with the Regional Trial Court of Quezon City,
Branch XCII, wherein in due course a decision was rendered affirming in toto the
decision of the PCHC.
Hence this petition.
The petition is focused on the following issues:
1. Did the PCHC have any jurisdiction to give due course to and adjudicate
Arbicom Case No. 84033?
2. Were the subject checks non-negotiable and if not, does it fall under the ambit
of the power of the PCHC?
3. Is the Negotiable Instrument Law, Act No. 2031 applicable in deciding
controversies of this nature by the PCHC?
4. What law should govern in resolving controversies of this nature?
5. Was the petitioner bank negligent and thus responsible for any undue
payment?
Petitioner maintains that the PCHC is not clothed with jurisdiction because the
Clearing House Rules and Regulations of PCHC cover and apply only to checks
that are genuinely negotiable. Emphasis is laid on the primary purpose of the
PCHC in the Articles of Incorporation, which states:
To provide, maintain and render an effective, convenient,
efficient, economical and relevant exchange and facilitate
service limited to check processing and sorting by way of
assisting member banks, entities in clearing checks and other
clearing items as defined in existing and in future Central Bank
of the Philippines circulars, memoranda, circular letters, rules
and regulations and policies in pursuance to the provisions of
Section 107 of R.A. 265. ...
and Section 107 of R.A. 265 which provides:
xxx xxx xxx
The deposit reserves maintained by the banks in the Central
Bank, in accordance with the provisions of Section 1000 shall
serve as a basis for the clearing of checks, and the settlement
of interbank balances ...
Petitioner argues that by law and common sense, the term check should be
interpreted as one that fits the articles of incorporation of the PCHC, the Central
Bank and the Clearing House Rules stating that it is a negotiable instrument citing
the definition of a "check" as basically a "bill of exchange" under Section 185 of
the NIL and that it should be payable to "order" or to "bearer" under Section 126 of
game law. Petitioner alleges that with the cancellation of the printed words "or
bearer from the face of the check, it becomes non-negotiable so the PCHC has no
jurisdiction over the case.
The Regional Trial Court took exception to this stand and conclusion put forth by
the herein petitioner as it held:
Petitioner's theory cannot be maintained. As will be noted, the
PCHC makes no distinction as to the character or nature of the
checks subject of its jurisdiction. The pertinent provisions
quoted in petitioners memorandum simply refer to check(s).
Where the law does not distinguish, we shall not distinguish.
In the case of Reyes vs. Chuanico (CA-G.R. No. 20813 R, Feb.
5, 1962) the Appellate Court categorically stated that there are
four kinds of checks in this jurisdiction; the regular check; the
cashier's check; the traveller's check; and the crossed check.
The Court, further elucidated, that while the Negotiable
Instruments Law does not contain any provision on crossed
checks, it is coon practice in commercial and banking
operations to issue checks of this character, obviously in
accordance with Article 541 of the Code of Commerce.
Attention is likewise called to Section 185 of the Negotiable
Instruments Law:
Sec. 185. Check defined. — A check is a bill
of exchange drawn on a bank payable on
demand. Except as herein otherwise
provided, the provisions of this act applicable
to a bill of exchange payable on demand
apply to a check
and the provisions of Section 61 (supra) that the drawer may
insert in the instrument an express stipulation negating or
limiting his own liability to the holder. Consequently, it appears
that the use of the term "check" in the Articles of Incorporation
 of PCHC is to be perceived as not limited to negotiable checks
only, but to checks as is generally known in use in commercial
or business transactions.
Anent Petitioner's liability on said instruments, this court is in full
accord with the ruling of the PCHC Board of Directors that:
In presenting the Checks for clearing and for
payment, the defendant made an express
guarantee on the validity of "all prior
endorsements." Thus, stamped at the back of
the checks are the defendant's clear
warranty; ALL PRIOR ENDORSEMENTS
AND/OR LACK OF ENDORSEMENTS
GUARANTEED. With. out such warranty,
plaintiff would not have paid on the checks.
No amount of legal jargon can reverse the
clear meaning of defendant's warranty. As the
warranty has proven to be false and
inaccurate, the defendant is liable for any
damage arising out of the falsity of its
representation.
The principle of estoppel, effectively prevents
the defendant from denying liability for any
damage sustained by the plaintiff which,
relying upon an action or declaration of the
defendant, paid on the Checks. The same
principle of estoppel effectively prevents the
defendant from denying the existence of the
Checks. (Pp. 1011 Decision; pp. 4344, Rollo)
We agree.
As provided in the aforecited articles of incorporation of PCHC its operation
extend to "clearing checks and other clearing items." No doubt transactions on
non-negotiable checks are within the ambit of its jurisdiction.
In a previous case, this Court had occasion to rule: "Ubi lex non distinguish nec
nos distinguere debemos." 2 It was enunciated in Loc Cham v. Ocampo, 77 Phil.
636 (1946):
The rule, founded on logic is a corollary of the principle that
general words and phrases in a statute should ordinarily be
accorded their natural and general significance. In other words,
there should be no distinction in the application of a statute
where none is indicated.
There should be no distinction in the application of a statute where none is
indicated for courts are not authorized to distinguish where the law makes no
distinction. They should instead administer the law not as they think it ought to be
but as they find it and without regard to consequences. 3
The term check as used in the said Articles of Incorporation of PCHC can only
connote checks in general use in commercial and business activities. It cannot be
conceived to be limited to negotiable checks only.
Checks are used between banks and bankers and their customers, and are
designed to facilitate banking operations. It is of the essence to be payable on
demand, because the contract between the banker and the customer is that the
money is needed on demand. 4
The participation of the two banks, petitioner and private respondent, in the
clearing operations of PCHC is a manifestation of their submission to its
jurisdiction. Sec. 3 and 36.6 of the PCHC-CHRR clearing rules and regulations
provide:
SEC. 3. AGREEMENT TO THESE RULES. — It is the general
agreement and understanding that any participant in the
Philippine Clearing House Corporation, MICR clearing
operations by the mere fact of their participation, thereby
manifests its agreement to these Rules and Regulations and its
subsequent amendments."
Sec 36.6. (ARBITRATION) — The fact that a bank participates
in the clearing operations of the PCHC shall be deemed its
written and subscribed consent to the binding effect of this
arbitration agreement as if it had done so in accordance with
section 4 of the Republic Act No. 876, otherwise known as the
Arbitration Law.
Further Section 2 of the Arbitration Law mandates:
Two or more persons or parties may submit to the arbitration of
one or more arbitrators any controversy existing between them
at the time of the submission and which may be the subject of
an action, or the parties of any contract may in such contract
agree to settle by arbitration a controversy thereafter arising
between them. Such submission or contract shall be valid and
 irrevocable, save upon grounds as exist at law for the
revocation of any contract.
Such submission or contract may include question arising out of
valuations, appraisals or other controversies which may be
collateral, incidental, precedent or subsequent to any issue
between the parties. ...
Sec. 21 of the same rules, says:
Items which have been the subject of material alteration or
items bearing forged endorsement when such endorsement is
necessary for negotiation shall be returned by direct
presentation or demand to the Presenting Bank and not through
the regular clearing house facilities within the period prescribed
by law for the filing of a legal action by the returning
bank/branch, institution or entity sending the same. (Emphasis
supplied)
Viewing these provisions the conclusion is clear that the PCHC Rules and
Regulations should not be interpreted to be applicable only to checks which are
negotiable instruments but also to non-negotiable instruments and that the PCHC
has jurisdiction over this case even as the checks subject of this litigation are
admittedly non-negotiable.
Moreover, petitioner is estopped from raising the defense of non-negotiability of
the checks in question. It stamped its guarantee on the back of the checks and
subsequently presented these checks for clearing and it was on the basis of these
endorsements by the petitioner that the proceeds were credited in its clearing
account.
The petitioner by its own acts and representation can not now deny liability
because it assumed the liabilities of an endorser by stamping its guarantee at the
back of the checks.
The petitioner having stamped its guarantee of "all prior endorsements and/or lack
of endorsements" (Exh. A-2 to F-2) is now estopped from claiming that the checks
under consideration are not negotiable instruments. The checks were accepted
for deposit by the petitioner stamping thereon its guarantee, in order that it can
clear the said checks with the respondent bank. By such deliberate and positive
attitude of the petitioner it has for all legal intents and purposes treated the said
cheeks as negotiable instruments and accordingly assumed the warranty of the
endorser when it stamped its guarantee of prior endorsements at the back of the
checks. It led the said respondent to believe that it was acting as endorser of the
checks and on the strength of this guarantee said respondent cleared the checks
in question and credited the account of the petitioner. Petitioner is now barred
from taking an opposite posture by claiming that the disputed checks are not
negotiable instrument.
This Court enunciated in Philippine National Bank vs. Court of Appeals 5 a point
relevant to the issue when it stated the doctrine of estoppel is based upon the
grounds of public policy, fair dealing, good faith and justice and its purpose is to
forbid one to speak against his own act, representations or commitments to the
injury of one to whom they were directed and who reasonably relied thereon.
A commercial bank cannot escape the liability of an endorser of a check and
which may turn out to be a forged endorsement. Whenever any bank treats the
signature at the back of the checks as endorsements and thus logically
guarantees the same as such there can be no doubt said bank has considered
the checks as negotiable.
Apropos the matter of forgery in endorsements, this Court has succinctly
emphasized that the collecting bank or last endorser generally suffers the loss
because it has the duty to ascertain the genuineness of all prior endorsements
considering that the act of presenting the check for payment to the drawee is an
assertion that the party making the presentment has done its duty to ascertain the
genuineness of the endorsements. This is laid down in the case of PNB vs.
National City Bank. 6 In another case, this court held that if the drawee-bank
discovers that the signature of the payee was forged after it has paid the amount
of the check to the holder thereof, it can recover the amount paid from the
collecting bank. 7
A truism stated by this Court is that — "The doctrine of estoppel precludes a party
from repudiating an obligation voluntarily assumed after having accepted benefits
therefrom. To countenance such repudiation would be contrary to equity and put
premium on fraud or misrepresentation". 8
We made clear in Our decision in Philippine National Bank vs. The National City
Bank of NY & Motor Service Co. that:
Where a check is accepted or certified by the bank on which it
is drawn, the bank is estopped to deny the genuineness of the
drawers signature and his capacity to issue the instrument.
If a drawee bank pays a forged check which was previously
accepted or certified by the said bank, it can not recover from a
holder who did not participate in the forgery and did not have
actual notice thereof.
 The payment of a check does not include or imply its
acceptance in the sense that this word is used in Section 62 of
the Negotiable Instruments Act. 9
The point that comes uppermost is whether the drawee bank was negligent in
failing to discover the alteration or the forgery. Very akin to the case at bar is one
which involves a suit filed by the drawer of checks against the collecting bank and
this came about in Farmers State Bank 10 where it was held:
A cause of action against the (collecting bank) in favor of the
appellee (the drawer) accrued as a result of the bank breaching
its implied warranty of the genuineness of the indorsements of
the name of the payee by bringing about the presentation of the
checks (to the drawee bank) and collecting the amounts
thereof, the right to enforce that cause of action was not
destroyed by the circumstance that another cause of action for
the recovery of the amounts paid on the checks would have
accrued in favor of the appellee against another or to others
than the bank if when the checks were paid they have been
indorsed by the payee. (United States vs. National Exchange
Bank, 214 US, 302, 29 S CT665, 53 L. Ed 1006, 16 Am. Cas.
11 84; Onondaga County Savings Bank vs. United States
(E.C.A.) 64 F 703)
Section 66 of the Negotiable Instruments ordains that:
Every indorser who indorsee without qualification, warrants to
all subsequent holders in due course' (a) that the instrument is
genuine and in all respects what it purports to be; (b) that he
has good title to it; (c) that all prior parties have capacity to
contract; and (d) that the instrument is at the time of his
indorsement valid and subsisting. 11
It has been enunciated in an American case particularly in American Exchange
National Bank vs. Yorkville Bank 12 that: "the drawer owes no duty of diligence to
the collecting bank (one who had accepted an altered check and had paid over
the proceeds to the depositor) except of seasonably discovering the alteration by
a comparison of its returned checks and check stubs or other equivalent record,
and to inform the drawee thereof." In this case it was further held that:
The real and underlying reasons why negligence of the drawer
constitutes no defense to the collecting bank are that there is no
privity between the drawer and the collecting bank (Corn
Exchange Bank vs. Nassau Bank, 204 N.Y.S. 80) and the
drawer owe to that bank no duty of vigilance (New York
Produce Exchange Bank vs. Twelfth Ward Bank, 204 N.Y.S.
54) and no act of the collecting bank is induced by any act or
representation or admission of the drawer (Seaboard National
Bank vs. Bank of America (supra) and it follows that negligence
on the part of the drawer cannot create any liability from it to the
collecting bank, and the drawer thus is neither a necessary nor
a proper party to an action by the drawee bank against such
bank. It is quite true that depositors in banks are under the
obligation of examining their passbooks and returned vouchers
as a protection against the payment by the depository bank
against forged checks, and negligence in the performance of
that obligation may relieve that bank of liability for the
repayment of amounts paid out on forged checks, which but for
such negligence it would be bound to repay. A leading case on
that subject is Morgan vs. United States Mortgage and Trust
Col. 208 N.Y. 218, 101 N.E. 871 Amn. Cas. 1914D, 462, L.R.A.
1915D, 74.
Thus We hold that while the drawer generally owes no duty of diligence to the
collecting bank, the law imposes a duty of diligence on the collecting bank to
scrutinize checks deposited with it for the purpose of determining their
genuineness and regularity. The collecting bank being primarily engaged in
banking holds itself out to the public as the expert and the law holds it to a high
standard of conduct.
And although the subject checks are non-negotiable the responsibility of petitioner
as indorser thereof remains.
To countenance a repudiation by the petitioner of its obligation would be contrary
to equity and would deal a negative blow to the whole banking system of this
country.
The court reproduces with approval the following disquisition of the PCHC in its
decision —
II. Payments To Persons Other
Than The Payees Are Not Valid
And Give Rise To An Obligation
To Return Amounts Received
Nothing is more clear than that neither the defendant's
depositor nor the defendant is entitled to receive payment
payable for the Checks. As the checks are not payable to
defendant's depositor, payments to persons other than payees
named therein, their successor-in-interest or any person
authorized to receive payment are not valid. Article 1240, New
Civil Code of the Philippines unequivocably provides that:
"Art. 1240. Payment shall be made to the
person in whose favor the obligation has
been constituted, or his successo-in-interest,
or any person authorized to receive it. "
Considering that neither the defendant's depositor nor the
defendant is entitled to receive payments for the Checks,
payments to any of them give rise to an obligation to return the
amounts received. Section 2154 of the New Civil Code
mandates that:
Article 2154. If something is received when
there is no right to demand it, and it was
unduly delivered through mistake, the
obligation to return it arises.
It is contended that plaintiff should be held responsible for
issuing the Checks notwithstanding that the underlying
transactions were fictitious This contention has no basis in our
jurisprudence.
The nullity of the underlying transactions does not diminish, but
in fact strengthens, plaintiffs right to recover from the defendant.
Such nullity clearly emphasizes the obligation of the payees to
return the proceeds of the Checks. If a failure of consideration is
sufficient to warrant a finding that a payee is not entitled to
payment or must return payment already made, with more
reason the defendant, who is neither the payee nor the person
authorized by the payee, should be compelled to surrender the
proceeds of the Checks received by it. Defendant does not
have any title to the Checks; neither can it claim any derivative
title to them.
III. Having Violated Its Warranty
On Validity Of All Endorsements,
Collecting Bank Cannot Deny
liability To Those Who Relied
On Its Warranty
In presenting the Checks for clearing and for payment, the
defendant made an express guarantee on the validity of "all
prior endorsements." Thus, stamped at the bank of the checks
are the defendant's clear warranty: ALL PRIOR
ENDORSEMENTS AND/OR LACK OF ENDORSEMENTS
GUARANTEED. Without such warranty, plaintiff would not have
paid on the checks.
No amount of legal jargon can reverse the clear meaning of
defendant's warranty. As the warranty has proven to be false
and inaccurate, the defendant is liable for any damage arising
out of the falsity of its representation.
The principle of estoppel effectively prevents the defendant
from denying liability for any damages sustained by the plaintiff
which, relying upon an action or declaration of the defendant,
paid on the Checks. The same principle of estoppel effectively
prevents the defendant from denying the existence of the
Checks.
Whether the Checks have been issued for valuable
considerations or not is of no serious moment to this case.
These Checks have been made the subject of contracts of
endorsement wherein the defendant made expressed
warranties to induce payment by the drawer of the Checks; and
the defendant cannot now refuse liability for breach of warranty
as a consequence of such forged endorsements. The defendant
has falsely warranted in favor of plaintiff the validity of all
endorsements and the genuineness of the cheeks in all
respects what they purport to be.
The damage that will result if judgment is not rendered for the
plaintiff is irreparable. The collecting bank has privity with the
depositor who is the principal culprit in this case. The defendant
knows the depositor; her address and her history, Depositor is
defendant's client. It has taken a risk on its depositor when it
allowed her to collect on the crossed-checks.
Having accepted the crossed checks from persons other than
the payees, the defendant is guilty of negligence; the risk of
wrongful payment has to be assumed by the defendant.
On the matter of the award of the interest and attorney's fees,
the Board of Directors finds no reason to reverse the decision of
 the Arbiter. The defendant's failure to reimburse the plaintiff has
constrained the plaintiff to regular the services of counsel in
order to protect its interest notwithstanding that plaintiffs claim is
plainly valid just and demandable. In addition, defendant's clear
obligation is to reimburse plaintiff upon direct presentation of the
checks; and it is undenied that up to this time the defendant has
failed to make such reimbursement.
WHEREFORE, the petition is DISMISSED for lack of merit without
pronouncement as to costs. The decision of the respondent court of 24 March
1986 and its order of 3 June 1986 are hereby declared to be immediately
executory. SO ORDERED. Teehankee, C.J., Narvasa, Cruz and Paras, JJ.,
concur.

BANCO DE ORO SAVING V. EQUITABLE checks  and subsequently  presented  it  for  clearing  and  it  was  in  the 
basis  of  these endorsements  by  the  petitioner  that  the  proceeds 
157 SCRA 188 were  credited  in  its
clearing account.  The petitioner cannot now deny its liability as it
assumed the  liability  of  an  indorser  by  stamping  its  guarantee  at 
 
the  back  of  the checks.   
 
FACTS: Furthermore, the bank cannot escape liability of an indorser of a check
and which may turn out to be a forged indorsement.  Whenever a bank
BDO drew  checks payable to member establishments.  Subsequently, treats the signature at the back of the checks as indorsements and thus
the checks  were  deposited  in  Trencio’s  account  with  Equitable.    logically guarantees  the  same  as  such  there  can  be  no  doubt  that 
The  checks were  sent  for  clearing  and  was  thereafter  cleared.    said  bank  had considered the checks as negotiable.
Afterwards,  BDO discovered that the indorsements in the back of the  
checks were forged.  It then  demanded  that  Equitable  credit  its  A   long   line   of   cases   also   held   that   in   the   matter   of   forgery  
account  but  the  latter  refused  to do so.  This prompted BDO to file a in endorsements,  it  is  the  collecting  bank  that  generally  suffers  the 
complaint against Equitable and PCHC.  The trial court and RTC held in loss because  it  had  the  dutyh  to  ascertain  the  genuineness  of  all 
favor of the Equitable and PCHC.    prior indorsements considering that the act of presenting the check for
  payment
to the drawee is an assertion that the party making the presentment has
ISSUE: done its duty to ascertain the genuineness of the indorsements. 

Whether or not Banco de Oro could collect reimbursement from Equitable

Bank.

HELD:

First,  PCHC  has  jurisdiction  over  the  case  in  question.    The 
articles  of incorporation of PHHC extended its operation to clearing
checks and other clearing items.  No doubt transactions on non-
negotiable checks are within the ambit of its jurisdiction.  Further, the
participation of the two banks in the clearing operations is submission to
the jurisdiction of the PCHC.
 
Petitioner  is  likewise  estopped  from  raising  the  non-negotiability  of 
the checks  in  issue.    It  stamped  its  guarantee  at  the  back  of the 
 pure question of law i.e., the coverage and application of Section 119 of
Commonwealth Act No. 141, as amended, known otherwise as the Public
Land Act.

The facts are undisputed.

The property subject matter of the case was formerly covered by Original
Certificate of Title No. P-1248, issued by virtue of Free Patent Application
No. 192765, in favor of the spouses, Florencia H. de Enciso and Miguel
Enciso. The said original certificate of title was inscribed in the
Registration Book for the Province of Camarines Norte on December 10,
1961. On February 28, 1970, the patentees, the Enciso spouses, by an
Absolute Deed of Sale, sold the property in favor of the petitioners, the
spouses Elena Salenillas and Bernardino Salenillas for a consideration of
P900.00. Petitioner Elena Salenillas is a daughter of the Encisos. As a
Republic of the Philippines result of the aforementioned sale, Transfer Certificate of Title No. T-8104
SUPREME COURT of the Register of Deeds of Camarines Norte was issued in the name of
Manila the Salenillas, cancelling Original Certificate of Title No. P-1248. On June
30, 1971, the petitioners mortgaged the property now covered by T.C.T.
No. T-8104 with the Rural Bank of Daet, Inc. The mortgage was
SECOND DIVISION subsequently released on November 22, 1973 after the petitioners paid
the amount of P1,000.00. Later, or on December 4, 1975, the petitioners
G.R. No. 78687 January 31, 1989 again mortgaged the property, this time in favor of the Philippine National
Bank Branch, Daet, Camarines Norte as security for a loan of P2,500.00.
ELENA SALENILLAS AND BERNARDINO SALENILLAS, petitioners,
vs. For failure of the petitioners to pay their loan, extrajudicial foreclosure
HONORABLE COURT OF APPEALS and HONORABLE RAYMUNDO proceeding, pursuant to Act No. 3135, was instituted by the Philippine
SEVA, JUDGE OF BRANCH 38 OF THE REGIONAL TRIAL COURT OF National Bank against the mortgage and the property was sold at a public
CAMARINES NORTE and WILLIAM GUERRA, respondents. auction held on February 27, 1981. The private respondent, William
Guerra, emerged as the highest bidder in the said public auction and as a
Jose L. Lapak for petitioners. result thereof a "Certificate of Sale" was issued to him by the Ex Officio
Provincial Sheriff of Camarines Norte. Ultimately, on July 12, 1983, a
Jose T. Atienza for private respondent. "Sheriff's Final Deed" was executed in favor of the private respondent.

 
SARMIENTO, J.:
This petition for review on certiorari which seeks the reversal and setting
aside of the decision 1 of the Court of Appeals 2 dismissing the petition for
certiorari against Judge Raymundo Seva of the Regional Trial Court of
Camarines Norte and the private respondent, William Guerra, involves a
On August 17,1983, the Philippine National Bank filed with the Regional
Trial Court of Camarines Norte at Daet, a motion for a writ of possession.
The public respondent, Judge Raymundo Seva of the trial court, acting on
the motion, issued on September 22, 1983 an order for the issuance of a
writ of possession in favor of the private respondent. When the deputy
sheriff of Camarines Norte however, attempted on November 17, 1983, to
place the property in the possession of the private respondent, the
petitioners refused to vacate and surrender the possession of the same
and instead offered to repurchase it under Section 119 of the Public Land
Act. On August 15, 1984, another motion, this time for the issuance of an
alias writ of possession was filed by the private respondent with the trial
court. The petitioners, on August 31, 1984, opposed the private
respondents' motion and instead made a formal offer to repurchase the
property. Notwithstanding the petitioners' opposition and formal offer, the
trial court judge on October 12, 1984 issued the alias writ of possession
prayed for the private respondent. The petitioners moved for a
reconsideration of the order but their motion was denied.
Undeterred by their initial setback, the petitioners elevated the case to the
respondent Court of Appeals by way of a petition for certiorari claiming
that the respondent trial court judge acted with grave abuse of discretion
in issuing the order dated October 12, 1984 granting the writ of
possession, and the order dated October 22, 1984, denying their motion
for reconsider consideration.
In a resolution dated January 23, 1985, the respondent appellate court
gave due course to the petition; required the parties to submit
simultaneous memoranda in support to their respective positions; and
restrained the trial court and the private respondent from executing,
implementing or otherwise giving effect to the assailed writ of possession
until further orders from the court. 3 However, in a decision promulgated
on September 17, 1986, the respondent Court of Appeals dismissed the
case for lack of merit. According to the appellate court:
It must be noted that when the original owner, Florencia
H. Enciso whose title, OCT No. P-1248, was issued on
August 9, 1961, executed a deed of absolute sale on
February 28, 1970 of the property covered by said title to
spouses Elena Salenillas and Bernardino Salenillas, the
five year period to repurchase the property provided for in
Section 119 of Commonwealth Act No. 141 as amended
could have already started. Prom this fact alone, the
petition should have been dismissed. However, granting
that the transfer from parent to child for a nominal sum
may not be the "conveyance" contemplated by the law.
We will rule on the issue raised by the petitioners. 4
xxx xxx xxx
Applying the case of Monge, et al. vs. Angeles, et al., 5 the appellate court
went on to hold that the five-year period of the petitioners to repurchase
under Section 119 of the Public Land Act had already prescribed. The
point of reckoning, ruled the respondent court in consonance with Monge
is from the date the petitioners mortgaged the property on December 4,
1973. Thus, when the petitioners made their formal offer to repurchase on
August 31, 1984, the period had clearly expired.
In an effort to still overturn the decision, the petitioners moved for
reconsideration. Their motion apparently went for naught because on May
7, 1987, the respondent appellate court resolved to deny the same.
Hence, this petition.
Before us, the petitioners maintain that contrary to the rulings of the
courts below, their right to repurchase within five years under Section 119
of the Public Land Act has not yet prescribed. To support their contention,
the petitioners cite the cases of Paras vs. Court of Appeals 6 and Manuel
vs. Philippine National Bank, et al. 7
On the other side, the private respondent, in support of the appellate
court's decision, states that the sale of the contested property by the
patentees to the petitioners disqualified the latter from being legal heirs
vis-a-vis the said property. As such, they (the petitioners) no longer enjoy
the right granted to heirs under the provisions of Section 119 of the Public
Land Act. 8
In fine, what need be determined and resolved here are: whether or not
the petitioners have the right to repurchase the contested property under
Section 119 of the Public Land Act; and assuming the answer to the
question is in the affirmative, whether or not their right to repurchase had
already prescribed.
We rule for the petitioners. They are granted by the law the right to
repurchase their property and their right to do so subsists.
Section 119 of the Public Land Act, as amended, provides in full:
Sec. 119. Every conveyance of land acquired under the
free patent or homestead provisions, when proper, shall
be subject to repurchase by the applicant, his widow, or
legal heirs within a period of five years from the date of
the conveyance.
From the foregoing legal provision, it is explicit that only three classes of
persons are bestowed the right to repurchase — the applicant-patentee,
his widow, or other legal heirs. Consequently, the contention of the private
respondent sustained by the respondent appellate court that the
petitioners do not belong to any of those classes of repurchasers because
they acquired the property not through inheritance but by sale, has no
legal basis. The petitioners-spouses are the daughter and son-in-law of
the Encisos, patentees of the contested property. At the very least,
petitioner Elena Salenillas, being a child of the Encisos, is a "legal heir" of
the latter. As such, and even on this score alone, she may therefore
validly repurchase. This must be so because Section 119 of the Public
Land Act, in speaking of "legal heirs," makes no distinction. Ubi lex non
distinguit nec nos distinguere debemos.
Moreover, to indorse the distinction made by the private respondent and
the appellate court would be to contravene the very purpose of Section
119 of the Public Land Act which is to give the homesteader or patentee
every chance to preserve for himself and his family the land that the State
had gratuitously given him as a reward for his labor in clearing and
cultivating it. 9 Considering that petitioner Salenillas is a daughter of the
spouses Florencia H. Enciso and Miguel Enciso, there is no gainsaying
that allowing her (Elena) and her husband to repurchase the property
would be more in keeping with the spirit of the law. We have time and
again said that between two statutory interpretations, that which better
serves the purpose of the law should prevail.
Guided by the same purpose of the law, and proceeding to the other
issue here raised, we rule that the five-year period for the petitioners to
repurchase their property had not yet prescribed.
The case of Monge et al. vs. Angeles, et al., 10 cited as authority by the
respondent Court of Appeals is inapplicable to the present controversy.
The facts obtaining there are substantially different from those in this
case. In Monge the conveyance involved was a pacto de retro sale and
not a foreclosure sale. More importantly, the question raised there was
whether the five-year period provided for in Section 119 "should be
counted from the date of the sale even if the same is with an option to
repurchase or from the date the ownership of the land has become
consolidated in favor of the purchaser because of the homesteader's
failure to redeem it. 11 It is therefore understandable why the Court ruled
there as it did. A sale on pacto de retro immediately vests title, ownership,
and, generally possession over the property on the vendee a retro,
subject only to the right of the vendor a retro to repurchase within the
stipulated period. It is an absolute sale with a resolutory condition.
The cases 12 pointed to by the petitioner in support of their position, on the
other hand, present facts that are quite identical to those in the case at
bar. Both cases involved properties the titles over which were obtained
either through homestead or free patent. These properties were
mortgaged to a bank as collateral for loans, and, upon failure of the
owners to pay their indebtedness, the mortgages were foreclosed. In both
instances, the Court ruled that the five-year period to. repurchase a
homestead sold at public auction or foreclosure sale under Act 3135
begins on the day after the expiration of the period of redemption when
the deed of absolute sale is executed thereby formally transferring the
property to the purchaser, and not otherwise. Taking into account that the
mortgage was foreclosed and the mortgaged property sold at a public
auction to the private respondent on February 27, 1981, with the "Sheriff's
Final Deed" issued on July 12, 1983, the two offers of the petitioners to
repurchase the first on November 17, 1983, and the second, formally, on
August 31, 1984 were both made within the prescribed five-year period.
Now, as regards the redemption price, applying Sec. 30 of Rule 39 of the
Revised Rules of Court, the petitioners should reimburse the private
respondent the amount of the purchase price at the public auction plus
interest at the rate of one per centum per month up to November 17,
1983, together with the amounts of assessments and taxes on the
property that the private respondent might have paid after purchase and
interest on the last named amount at the same rate as that on the
purchase price. 13
WHEREFORE, the petition is GRANTED. The Decision dated September
17, 1986, and the Resolution dated May 7, 1987 of the Court of Appeals,
and the Orders dated September 22, 1983, October 12, 1984, and
October 22, 1984 of the Regional Trial Court of Daet, Camarines Norte,
are hereby REVERSED and SET ASIDE, and another one ENTERED
directing the private respondent to reconvey the subject property and to
execute the corresponding deed of reconveyance therefor in favor of the
petitioners upon the return to him by the latter of the purchase price and
the amounts, if any, of assessments or taxes he paid plus interest of one
(1%) per centum per month on both amounts up to November 17, 1983.
No costs.
SO ORDERED.

Melencio-Herrera (Chairperson), Paras, Padilla and Regalado, JJ.,

concur.