Metropolitan Fabrics, Inc VS Prosperity Credit Resources, Inc.

G.R.No. 154390, March 17, 2014

FACTS:
Metropolitan Fabrics, Incorporated (MFI), a family corporation, owned a 5.8hectare industrial compound at No. 685
Tandang Sora Avenue, Novaliches, Quezon City which was covered by TCT No. 241597.Pursuant to a P2 million, 10year
14% per annum loan agreement with Manphil Investment Corporation (Manphil) dated April 6, 1983, the said lot was
subdivided into 11 lots, with Manphil retaining four lots as mortgage security. The other seven lots, now covered by TCT
Nos. 317699 and 317702 to 317707, were released to MFI. In July 1984, MFI sought from PCRI a loan in the amount of
P3,443,330.52, the balance of the cost of its boiler machine, to prevent its repossession by the seller. PCRI, also a family
owned corporation licensed since 1980 to engage in money lending, was represented by Domingo Ang (Domingo) its
president, and his son Caleb, vice president. The parties knew each other because they belonged to the same family
association, the Lioc Kui Tong Fraternity. On the basis only of his interview with Enrique, feedback from the stockholders
and the Chinese community, as well as information given by his own father Domingo, and without further checking on
the background of Enrique and his business and requiring him to submit a company profile and a feasibility study of MFI,
Caleb recommended the approval of the P3.44 million with an interest ranging from 24% to 26% per annum and aterm
of between five and ten years (Decision, p. 5). According to the court, it sufficed for Caleb that Enrique was a well
respected Chinese businessman, that he was the presidentof their Chinese family association, and that he had other
personal businesses aside from MFI, such as the Africa Trading. However, in September 1984, the first amortization
check bounced for insufficient fund due to MFIs continuing business losses. It was then that the appellees allegedly
learned that PCRI had filled up the 24 blank checks with dates and amounts that reflected a 35%interest rate per annum,
instead of just 24%, and a two year repayment period, instead of 10 years. On September 4, 1986, Enrique received a
Notice of Sheriffs Sale dated August 29, 1986, announcing the auction of the seven lots on September 24, 1986 due to
unpaid indebtedness of P10.5 million. Vicky (daughter of owner of MFI, because their father went into a coma because
of intense pressure from the foreclosure) insisted that prior to the auction notice, they never received any statement or
demand letter from the defendants to pay P10.5 million, nor did the defendants inform them of the intended
foreclosure.
ISSUE:
Was the Mortgage Contract VOID?
HELD:
No. As the records show, petitioners really agreed to mortgage their properties as security for their loan, and signed the
deed of mortgage for the purpose. Thereafter, they delivered the TCTs of the properties subject of the mortgage to
respondents. Consequently, petitioners contention of absence of consent had no firm moorings. It remained unproved.
To begin with, they neither alleged nor established that they had been forced or coerced to enter into the mortgage.
Also, they had freely and voluntarily appled for the loan, executed the mortgage contract and turned over the TCTs of
their properties. And, lastly, contrary to their modified defense of absence of consent, Vicky Angs testimony tended at
best to prove the vitiation of their consent through insidious words, machinations or misrepresentations amounting to
fraud, which showed that thecontract was voidable. Where the consent was given through fraud, the contract was
voidable, not void ab initio.This is because a voidable or annullable contract is existent, valid and binding, although it can
be annulled due to want of capacity or because of the vitiated consent of one of the parties.Article 1390, in relation to
Article 1391 of the Civil Code, provides that if the consent of the contracting parties was obtained through fraud, the
contract is considered voidableand may be annulled within four years from the time of the discovery of the
fraud.According to Article 1338 of the Civil Code, there is fraud when one of the contracting parties, through insidious
words or machinations, induces the other to enter into thecontract that, without the inducement, he would not have
agreed to. Yet, fraud, to vitiateconsent, must be the causal (dolo causante), not merely the incidental (dolo
incidente),inducement to the making of the contract. In Samson v. Court of Appeals, causal fraud isdefined as a
deception employed by one party prior to or simultaneous to the contract inorder to secure the consent of the other.

TAN VS. LANDBANKOF THE PHILIPPINES

Gr No. 164968, July 3, 2009

Facts: In 1991, Ocampo and her daughter, Tan obtained from the Landbank a PhP10M quedan loan upon
issuance of promissory notes (PNs) which was released to them by: Amount ReleaseDate Maturity Date
RemarksPhP3.996M 01/31/1991 07/30/1991 2 PNsPhP6M 04/05/1991 10/02/1991 3 PNsQuedan Rural Credit
Guarantee Corporation (Quedancor) guaranteed to pay Landbank their loan but only up to 80% of the
outstanding loan plus interests at the time of maturity.Pursuant thereto, Ocampo and Tan delivered to
Landbankquedans and executed a Deed of Assignment covering 41,690cavans of palay (equivalent to
PhP9.996M,100% of the loan) in favor of Quedancor. Ocampo and Tan constituted a Real Estate Mortgage
(REM)over 2 parcels of unregistered land owned by Ocampo tosecure the remaining 20%. Such encumbrance
was annotated in the land title when Ocampo filed for the lands registration.
When Ocampo failed to pay the 3 remaining PNs on Oct. 2,1991, Lanbank filed the following:
1. Claim for guarantee payment with Quedancor;
2. Criminal case of estafa against Ocampo for disposingstocks of palay covered by the quedans;
3. Extrajudicial foreclosure of REM (re: 20% of loan)
The Ex-Officio Provincial Sheriff issued a notice of ExtrajudicialSale (Public Auction).RTC issued TRO on the
public auction and favored Ocampoand Tan when they filed a Complaint for Declaration of Nullityand
Damages with Application of a Writ of PreliminaryInjunction against Landbank and the Sheriff on the basis
onforgery regarding the REM on the 20% of the loan. Upon Landbanks appeal, the CA granted its petition and
reversed the RTCs decision.
ISSUE: WON the Deed of Real Estate Mortgage was void due to the alleged forgery
Held:
NO. The Deed of REM was valid.There is no forgery. Ocampo and Tan failed to presentany evidence to
disprove the genuineness or authenticityof their signatures. In fact, Ocampo admitted in her
directexamination that such signature was hers, although sheclaimed that she was made to sign a blank form
(printedform with blanks yet to be filled up). Moreover, the bankpersonnel who were also signatories to the
deedconfirmed their appearances despite her testimony thatshe cannot say for certain if she appeared before
thenotary public.It is well-settled that a document acknowledged before anotary public is a public document
that enjoys thepresumption of regularity. It is a prima facie evidence of the truth of the facts stated therein
and a conclusivepresumption of its existence and due execution.The real issue is fraud and not forgery.
Ocampo claimedthat she was led to believe by Landbank that the form shesigned was to process her PhP5M
loan application andnot to secure the subject 20% of the loan.However, Ocampo was unable to establish
clearly andprecisely how Landbank committed the alleged fraud. Shefailed to lay down the deception through
insidious words or machinations or misrepresentations made by Landbank sothat she signed the blank
form.Granting for the sake of argument that there was fraud,such contract was merely voidable where an

action shouldhave been instituted within 4 yours from discovery, i.e.when the REM was registered with the
Register of Deeds.