Rural bank of sta maria vs ca

RURAL BANK OF STA. MARIA, PANGASINAN vs. THE HONORABLE COURT OF APPEALS, ROSARIO R. RAYANDAYAN, CARMEN R. ARCEÑO

G.R. No. 110672 September 14, 1999

Facts:

          A parcel of land is registered in the name of Manuel Behis, married to Cristina Behis. Said land originally was part of a bigger tract of land owned by Behis, father of Manuel Behis. And upon the latter's death, his children, namely: Saro Behis, Marcelo Behis, Manuel Behis, Lucia Behis, Clara Behis and Arana Behis, in an extrajudicial settlement with Simultaneous Sale of Inheritance, agreed to sell the land to Manuel Behis, married to Cristina Behis but which subsequently was explained as only an arrangement adopted by them to facilitate transactions over the land in a Confirmation of Rights of Co-Ownership over real Property, showing that the Behis brothers and sisters, including Manuel Behis, are still co-owners thereof.

Manuel Behis mortgaged said land in favor of the Bank in a Real Estate Mortgage as security for loans obtained, covered by six promissory notes and trust receipts under the Supervised Credit Program and annotated at the back of the title. The mortgage, the promissory notes and trust receipts bear the signatures of both Manuel Behis and Cristina Behis. Unfortunately thereafter, Manuel Behis was delinquent in paying his debts.

Manuel Behis sold the land to the plaintiffs in a Deed of Absolute Sale with Assumption of Mortgage which bears the signature of his wife Cristina Behis. Manuel Behis took it upon himself to secure the signature of his wife and came back with it. On the same date, plaintiffs and Manuel Behis simultaneously executed another Agreement whereby plaintiffs are indebted to Manuel Behis for the sum of P2,400,000.00 payable in installments with P10,000.00 paid upon signing and in case of default in the installments, Manuel Behis shall have legal recourse to the portions of the land equivalent to the unpaid balance of the amounts in installments.  Plaintiffs did not present to the Register of Deeds said two contracts and ask that the title in the name of Manuel Behis be cancelled and a new one issued in their name which normally a buyer does. Neither did plaintiffs annotate at the back of the title the aforesaid two contracts. Nor did they immediately go to the Bank and present said two contracts. Thus, the title to the land remained in the name of Manuel Behis.

The plaintiffs were unable to complete their full payment to Manuel Behis of the sale of the land as it is nowhere near P2,400,000.00. Meantime, the loan in the name of Manuel Behis with the Bank secured by the Real Estate Mortgage on the land continued to accumulate being delinquent.

Issue:

          Whether or not the Memorandum is voidable on the ground of fraud

Ruling:

          The Supreme Court held that the kind of fraud that will vitiate a contract refers to those insidious words or machinations resorted to by one of the contracting parties to induce the other to enter into a contract which without them he would not have agreed to.  Simply stated, the fraud must be the determining cause of the contract, or must have caused the consent to be given. It is believed that the non-disclosure to the bank of the purchase price of the sale of the land between private respondents and Manuel Behis cannot be the "fraud" contemplated by Article 1338 of the Civil Code.  From the sole reason submitted by the petitioner bank that it was kept in the dark as to the financial capacity of private respondents, we cannot see how the omission or concealment of the real purchase price could have induced the bank into giving its consent to the agreement; or that the bank would not have otherwise given its consent had it known of the real purchase price.

Secondly, pursuant to Article 1339 of the Civil Code, silence or concealment, by itself, does not constitute fraud, unless there is a special duty to disclose certain facts, or unless according to good faith and the usages of commerce the communication should be made. Verily, private respondents Rayandayan and Arceño had no duty, and therefore did not act in bad faith, in failing to disclose the real consideration of the sale between them and Manuel Behis.