RURAL BANK OF CALOOCAN, INC. AND JOSE O. DESIDERIO, JR., PETITIONERS, VS. THE COURT OF APPEALS AND MAXIMA CASTRO, RESPONDENTS.

This is a petition for review by way of certiorari of the
decision^[1]
of the Court of Appeals in CA-G.R. No. 39760-R entitled “Maxima Castro,
plaintiff-appellee, versus Severino
Valencia, et al., defendants; Rural Bank of Caloocan,
Inc., Jose Desiderio, Jr. and Arsenio
Reyes, defendants-appellants,” which affirmed in toto the decision of the Court of First Instance of
Manila in favor of plaintiff-appellee, the herein
private respondent Maxima Castro.

On December 7, 1959,
respondent Maxima Castro, accompanied by Severino Valencia,
went to the Rural Bank of Caloocan
to apply for an industrial loan.  It was Severino Valencia
who arranged everything about the loan with the bank and who supplied to the
latter the personal data required for Castro’s loan application.  On December
11, 1959, after the bank approved the loan for the amount of P3,000.00, Castro, accompanied by the Valencia
spouses, signed a promissory note corresponding to her loan in favor of the
bank.

On the same day, December
11, 1959, the Valencia
spouses obtained from the bank an equal amount of loan for P3,000.00.  They signed a
promissory note (Exhibit “2”) corresponding to their loan in favor of
the bank and had Castro affixed thereon her signature as co-maker.

The two loans were secured by a real-estate mortgage (Exhibit
“6”) on Castro’s house and lot of 150 square meters, covered by
Transfer Certificate of Title No. 7419 of the Office of the Register of Deeds
of Manila.

On February 13, 1961,
the sheriff of Manila, thru Acting
Chief Deputy Sheriff Basilio Magsambol,
sent a notice of sheriff’s sale addressed to Castro, announcing that her
property covered by T.C.T. No. 7419 would be sold at public auction on March 10, 1961 to satisfy the
obligation covering the two promissory notes plus interest and attorney’s fees.

Upon request by Castro and the Valencias and with
conformity of the bank, the auction sale that was scheduled for March 10, 1961 was postponed for April 10, 1961.  But when April 10, 1961 was subsequently declared a special
holiday, the sheriff of Manila sold
the property covered by T.C.T. No. 7419 at a public auction sale that was held
on April 11, 1961, which
was the next succeeding business day following the special holiday.

Castro alleged that it was only when she received the letter from
the Acting Deputy Sheriff on February 13, 1961, when she learned for the first
time that the mortgage contract (Exhibit “6”) which was an
encumbrance on her property was for P6,000.00 and not
for P3,000.00 and that she was made to sign as co-maker of the promissory note
(Exhibit “2”) without her being informed of this.

On April 4, 1961, Castro filed a suit denominated “Re:  Sum of Money,” against petitioners Bank
and Desiderio, the Spouses Valencia, Basilio Magsambol and Arsenio Reyes as defendants in Civil Case No. 46698 before
the Court of First Instance of Manila upon the charge, amongst others, that
thru mistake on her part or fraud on the part of Valencias
she was induced to sign as co-maker of
a promissory note (Exhibit “2”) and to constitute a mortgage on her
house and lot to secure the questioned note. 
At the time of filing her complaint, respondent Castro deposited the
amount of P3,383.00 with the court a quo
in full payment of her personal loan plus interest.

In her amended complaint,
Castro prayed, amongst other, for the annulment as far as she is concerned of
the promissory note (Exhibit “2”) and mortgage contract (Exhibit
“6”) insofar as it exceeds P3,000.00; for the discharge of her
personal obligation with the bank by reason of a deposit of P3,383.00 with the
court a quo upon the filing of her complaint; for the annulment
of the foreclosure sale of her property covered by T.C.T. No. 7419 in favor of Arsenio Reyes; and for the award in her favor of attorney’s
fees, damages and cost.

In their answers, petitioners interposed counterclaims and prayed
for the dismissal of said complaint, with damages, attorney’s fees and costs.^[2]

The pertinent facts
arrived from the stipulation of facts entered into by the parties as stated by
respondent Court of Appeals are as follows:

“Spawning the present litigation are the facts contained in
the following stipulation of facts submitted by the parties themselves:

“1.    That the capacity and addresses of all the
parties in this case are admitted;

“2.    That the plaintiff was the registered owner
of a residential house and lot located at Nos. 1268-1270 Carola
Street, Sampaloc, Manila, containing an area of one
hundred fifty (150) square meters, more or less, covered by T.C.T. No. 7419 of
the Office of the Register of Deeds of Manila;

“3.    That the signatures
of the plaintiff appearing on the following documents are genuine:

‘a)     Application for Industrial Loan with the
Rural Bank of Caloocan, dated December 7, 1959 in the
amount of P3,000.00 attached as Annex A of this partial stipulation of facts;

‘b)     Promissory Note dated December 11, 1959 signed by the plaintiff in
favor of the Rural Bank of Caloocan
for the amount of P3,000.00 as per Annex B of this
partial stipulation of facts;

‘c)     Application for Industrial Loan with the
Rural Bank of Caloocan, dated December 11, 1959,
signed only by the defendants, Severino Valencia and
Catalina Valencia, attached as Annex C, of this partial stipulation of facts;

‘d)     Promissory note in favor of the Rural Bank
of Caloocan, dated December 11, 1959 for the amount
of P3,000.00, signed by the spouses Severino Valencia
and Catalina Valencia as borrowers, and plaintiff Maxima Castro, as a co-maker,
attached as Annex D of this partial stipulation of facts;

‘e)     Real estate mortgage dated December 11,
1959 executed by plaintiff Maxima Castro, in favor of the Rural Bank of Caloocan, to secure the obligation of P6,000.00 attached
herein as Annex E of this partial stipulation of facts;

“All the parties herein expressly reserved their right to
present any evidence they may desire on the circumstances regarding the
execution of the above-mentioned documents.

“4.    That the sheriff of Manila, thru Acting
Chief Deputy Sheriff, Basilio Magsambol,
sent a notice of sheriff’s sale, addressed to the plaintiff, dated February 13,
1961, announcing that plaintiff’s property covered by T.C.T. No. 7419 of the
Register of Deeds of the City of Manila, would be sold at public auction on
March 10, 1961 to satisfy the total obligation of P5,728.50, plus interest,
attorney’s fees, etc., as evidenced by the Notice of Sheriff’s Sale and Notice
of Extrajudicial Auction Sale of the Mortgaged property, attached herewith as
Annexes F and F-1, respectively, of this stipulation of facts;

“5.    That upon the request of the plaintiff and
defendants-spouses Severino Valencia and Catalina
Valencia, and with the conformity of the Rural Bank of Caloocan,
the Sheriff of Manila postponed the auction sale scheduled for March 10, 1961
for thirty (30) days and the sheriff re-set the auction sale for April 10,
1961;

“6.    That April
10, 1961 was declared a special public holiday;

“(Note:  No. 7 is omitted upon agreement of the
parties.)

“8.    That on April 11, 1961, the Sheriff of
Manila, sold at public auction plaintiff’s property covered by T.C.T. No. 7419
and defendant, Arsenio Reyes, was the highest bidder
and the corresponding certificate of sale was issued to him as per Annex G of
this partial stipulation of facts;

“9.    That on April 16, 1962, the defendant Arsenio
Reyes, executed an Affidavit of Consolidation of Ownership, a copy of which is
hereto attached as Annex H of this
partial stipulation of facts;

“10.  That
on May 9, 1962, the Rural
Bank of Caloocan Incorporated executed the final deed
of sale in favor of the defendant, Arsenio Reyes, in
the amount of P7,000.00, a copy of which is attached
as Annex I of this partial stipulation of facts;

“11.  That the Register of Deeds of the City of
Manila issued the Transfer Certificate of Title No. 67297 in favor of the
defendant, Arsenio Reyes, in lieu of Transfer
Certificate of Title No. 7419 which was in the name of plaintiff, Maxima
Castro, which was cancelled;

“12.  That after defendant, Arsenio
Reyes, had consolidated his title to the property as per T.C.T. No. 67299,
plaintiff filed a notice of lis pendens
with the Register of Deeds of Manila and the same was annotated in the back of
T.C.T. No. 67299 as per Annex J of this partial stipulation of facts; and

“13.  That the parties hereby reserved their rights
to present additional evidence on matters not covered by this partial
stipulation of facts.

“WHEREFORE, it is respectfully prayed that the foregoing
partial stipulation of facts be approved and admitted by this Honorable
Court.”

As for the evidence
presented during the trial, We quote from the decision of the Court of
Appeals the statement thereof, as follows:

“In addition to the foregoing stipulation of facts, plaintiff
claims she is a 70-year old widow who cannot read and write the English
language; that she can speak the Pampango dialect
only; that she has only finished second grade (t.s.n.,
p. 4, December 11, 1964); that in December 1959, she needed money in the amount
of P3,000.00 to invest in the business of the defendant spouses Valencia, who
accompanied her to the defendant bank for the purpose of securing a loan of P3,000.00;
that while at the defendant bank, an employee handed to her several forms
already prepared which she was asked to sign on the places indicated, with no
one explaining to her the nature and contents of the documents; that she did
not even receive a copy thereof; that
she was given a check in the amount of P2,882.85 which she delivered to
defendant spouses; that sometime in February 1961, she received a letter from
the Acting Deputy Sheriff of Manila, regarding the extrajudicial foreclosure
sale of her property; that it was then when she learned for the first time that
the mortgage indebtedness secured by the mortgage on her property was P6,000.00
and not P3,000.00; that upon investigation of her lawyer, it was found that the
papers she was made to sign were:

‘(a)     Application for a loan of P3,000.00 dated December 7, 1959 (Exh.
B-1 and Exh. I);

‘(b)     Promissory note dated December 11, 1959 for the said loan of P3,000.00 (Exh. B-2);

‘(c)     Promissory note dated December 11, 1959 for P3,000.00
with the defendants Valencia
spouses as borrowers and appellee as co-maker (Exh. B-4 or Exh.
2).

“The auction sale set for March 10, 1961 was postponed to
April 10, 1961 upon the request of defendant spouses Valencia who needed more
time within which to pay their loan of P3,000.00 to the defendant bank;
plaintiff claims that when she filed the complaint she deposited with the Clerk
of Court the sum of P3,383.00 in full payment of her loan of P3,000.00 with the
defendant bank, plus interest at the rate of 12% per annum up to April 3, 1961
(Exh. D).

“As additional
evidence for the defendant bank, its manager declared that sometime in
December, 1959, plaintiff was brought to the Office of the Bank by an employee
(t.s.n., p. 4, January 27, 1966).  She
went there to inquire if she could get a loan from the bank.  He claims he asked the amount and the purpose
of the loan and the security to be given and plaintiff said she would need P3,000.00 to be invested in a drugstore in which she was a
partner (t.s.n., p. 8).  She offered as security for the loan her lot
and house at Carola St., Sampaloc, Manila, which was promptly investigated by the
defendant bank’s inspector.  Then a few
days later, plaintiff came back to the bank with the wife of defendant Valencia.  A date
was allegedly set for plaintiff and the defendant spouses for the processing of
their application, but on the day fixed, plaintiff came without the defendant
spouses.  She signed the application and
the other papers pertinent to the loan after she was interviewed by the manager
of the defendant.  After the application
of plaintiff was made, defendant spouses had their application for a loan also
prepared and signed (see Exh. 13).  In his interview of plaintiff and defendant
spouses, the manager of the bank was able to gather that plaintiff was in joint
venture with the defendant spouses wherein she agreed to invest P3,000.00 as additional capital in the laboratory owned by
said spouses (t.s.n., pp. 16-17).”^[3]

The Court of Appeals,
upon evaluation of the evidence, affirmed in toto
the decision of the Court of First Instance of Manila, the dispositive
portion of which reads:

“FOR ALL THE FOREGOING CONSIDERATIONS, the Court renders
judgment and:

“(1)     Declares that the
promissory note, Exhibit ‘2’, is invalid as against plaintiff herein;

“(2)     Declares that the contract of mortgage,
Exhibit ‘6’, is null and void, in so far as the amount thereof exceeds the sum
of P3,000.00 representing the principal obligation of plaintiff, plus the
interest thereon at 12% per annum;

“(3)     Annuls the extrajudicial foreclosure sale
at public auction of the mortgaged property held on April 11, 1961, as well as all the process and
actuations made in pursuance of or in implementation thereto;

“(4)     Holds that the total unpaid obligation of
plaintiff to defendant Rural Bank of Caloocan, Inc.,
is only the amount of P3,000.00, plus the interest thereon at 12% per annum, as
of April 3, 1961, and orders that plaintiff’s deposit of P3,383.00 in the Office
of the Clerk of Court be applied to the payment thereof;

“(5)     Orders defendant Rural Bank of Caloocan, Inc. to return to defendant Arsenio
Reyes the purchase price the latter paid for the mortgaged property at the
public auction, as well as reimburse him of all the expenses he has incurred
relative to the sale thereof;

“(6)     Orders defendants spouses Severino D. Valencia and Catalina Valencia to pay defendant
Rural Bank of Caloocan, Inc. the amount of P3,000.00
plus the corresponding 12% interest thereon per annum from December 11, 1960
until fully paid; and

“Orders defendants Rural Bank of Caloocan, Inc., Jose Desiderio,
Jr. and spouses Severino D. Valencia and Catalina Valencia to pay plaintiff, jointly and severally, the
sum of P600.00 by way of attorney’s fees, as well as costs.

“In view of the conclusion that the court has thus reached,
the counterclaims of defendant Rural Bank of Caloocan,
Inc., Jose Desiderio, Jr. and Arsenio
Reyes are hereby dismissed, as a corollary.

“The Court further denies the motion of defendant Arsenio Reyes for an Order requiring Maxima Castro to
deposit rentals filed on November 16,
1963, resolution of which
was held in abeyance pending final determination of the case on the merits,
also as a consequence of the conclusion aforesaid.”^[4]

Petitioners Bank and Jose Desiderio
moved for the reconsideration^[5]
of respondent court’s decision.  The
motion having been denied,^[6]
they now come before this Court in the instant petition, with the following
Assignment of Errors, to wit:

I

“THE COURT OF APPEALS ERRED IN UPHOLDING THE PARTIAL ANNULMENT
OF THE PROMISSORY NOTE, EXHIBIT 2, AND THE MORTGAGE, EXHIBIT 6, INSOFAR AS THEY
AFFECT RESPONDENT MAXIMA CASTRO VIS-A-VIS PETITIONER BANK DESPITE THE TOTAL
ABSENCE OF EITHER ALLEGATION IN THE COMPLAINT OR COMPETENT PROOF IN THE EVIDENCE OF ANY FRAUD OR OTHER UNLAWFUL CONDUCT
COMMITTED OR PARTICIPATED IN BY PETITIONERS IN PROCURING THE EXECUTION OF SAID
CONTRACTS FROM RESPONDENT CASTRO.

II

“THE COURT OF APPEALS ERRED IN IMPUTING UPON AND CONSIDERING
PREJUDICIALLY AGAINST PETITIONERS, AS BASIS FOR THE PARTIAL ANNULMENT OF THE
CONTRACTS AFORESAID ITS FINDING OF FRAUD PERPETRATED BY THE VALENCIA
SPOUSES UPON RESPONDENT CASTRO IN UTTER VIOLATION OF THE RES INTER
ALIOS ACTA RULE.

III

“THE COURT OF APPEALS ERRED IN NOT HOLDING THAT, UNDER THE
FACTS FOUND BY IT, RESPONDENT CASTRO IS UNDER ESTOPPEL TO IMPUGN THE REGULARITY
AND VALIDITY OF HER QUESTIONED TRANSACTION WITH PETITIONER BANK.

IV

“THE COURT OF APPEALS ERRED IN NOT FINDING THAT, BETWEEN
PETITIONERS AND RESPONDENT CASTRO, THE LATTER SHOULD SUFFER THE CONSEQUENCES OF
THE FRAUD PERPETRATED BY THE VALENCIA SPOUSES, INASMUCH AS IT WAS THRU
RESPONDENT CASTRO’S NEGLIGENCE OR
ACQUIESCENSE, IF NOT ACTUAL CONNIVANCE, THAT THE PERPETRATION OF SAID FRAUD WAS
MADE POSSIBLE.

V

“THE COURT OF APPEALS ERRED IN UPHOLDING THE VALIDITY OF THE
DEPOSIT BY RESPONDENT CASTRO OF P3,383.00 WITH THE
COURT BELOW AS A TENDER AND CONSIGNATION OF PAYMENT SUFFICIENT TO DISCHARGE
SAID RESPONDENT FROM HER OBLIGATION WITH PETITIONER BANK.

VI

“THE COURT OF APPEALS ERRED IN NOT DECLARING AS VALID AND
BINDING UPON RESPONDENT CASTRO THE HOLDING OF THE SALE ON FORECLOSURE ON THE
BUSINESS DAY NEXT FOLLOWING THE ORIGINALLY SCHEDULED DATE THEREFOR WHICH WAS DECLARED A HOLIDAY WITHOUT
NECESSITY OF FURTHER NOTICE THEREOF.”

The issue raised in the
first three (3) assignment of errors is whether or not respondent court
correctly affirmed the lower court in declaring the promissory note (Exhibit 2)
invalid insofar as they affect respondent Castro vis-a-vis
petitioner bank, and the mortgage contract (Exhibit 6) valid up to the amount
of P3,000.00 only.

Respondent court declared
that the consent of Castro to the promissory note (Exhibit 2) where she signed
as co-maker with the Valencias as principal borrowers
and her acquiescence to the mortgage contract (Exhibit 6) where she encumbered
her property to secure the amount of P6,000.00 was
obtained by fraud perpetrated on her by the Valencias
who had abused her confidence, taking advantage of her old age and ignorance of
her financial need.  Respondent court
added that “the mandate of fair play decrees that she should be relieved
of her obligation under the contract” pursuant to Articles 24^[7] and 1332^[8] of the Civil Code.

The decision in effect relieved Castro of any liability to the
promissory note (Exhibit 2) and the mortgage contract (Exhibit 6) was deemed
valid up to the amount of P3,000.00 only which was
equivalent to her personal loan to the bank.

Petitioners argued that since the Valencias were solely
declared in the decision to be responsible for the fraud against Castro, in the
light of the res inter alios acta rule, a
finding of fraud perpetrated by the spouses against Castro cannot be taken to
operate prejudicially against the bank. 
Petitioners concluded that respondent court erred in not giving effect
to the promissory note (Exhibit 2) insofar as they affect Castro and the bank
and in declaring that the mortgage contract (Exhibit 6) was valid only to the
extent of Castro’s personal loan of P3,000.00.

The records of the case reveal that respondent court’s findings of fraud against the Valencias is well supported by evidence.  Moreover, the findings of
fact by respondent court in the matter is deemed final.^[9]
The decision declared the Valencias
solely responsible for the defraudation of
Castro.  Petitioners’ contention that the
decision was silent regarding the participation of the bank in the fraud is,
therefore, correct.

We cannot agree with the contention of petitioners that the bank
was defrauded by the Valencias.  For one, no claim was made on this in the
lower court.  For another, petitioners
did not submit proof to support its contention.

At any rate, We observe that while the Valencias defrauded
Castro by making her sign the promissory note (Exhibit 2) and the mortgage
contract (Exhibit 6), they also misrepresented to the bank Castro’s personal
qualifications in order to secure its consent to the loan.  This must be the reason which prompted the
bank to contend that it was defrauded by the Valencias.  But to reiterate, We
cannot agree with the contention for reasons above-mentioned.  However, if the contention deserves any
consideration at all, it is in indicating the admission of petitioners that the
bank committed mistake in giving its consent to the contracts.

Thus, as a result of the fraud upon Castro and the misrepresentation
to the bank inflicted by the Valencias,
both Castro and the bank committed mistake in giving their consents to the
contracts.  In other words, substantial
mistake vitiated their consents given. 
For if Castro had been aware of what she signed and the bank of the true
qualifications of the loan applicants, it is evident that they would not have
given their consents to the contracts.

Pursuant to Article 1342
of the Civil Code which provides:

“Art. 1342. 
Misrepresentation by a third person does not vitiate consent,
unless such misrepresentation has created substantial mistake and the same is
mutual.”

We cannot declare the promissory note
(Exhibit 2) valid between the bank and Castro and the mortgage contract
(Exhibit 6) binding on Castro beyond the amount of P3,000.00, for while the
contracts may not be invalidated insofar as they affect the bank and Castro on
the ground of fraud because the bank was not a participant thereto, such may
however be invalidated on the ground of substantial mistake mutually committed
by them as a consequence of the fraud and misrepresentation inflicted by the Valencias.  Thus, in
the case of Hill vs. Veloso,^[10]
this Court declared that a contract may be annulled on the ground of vitiated
consent if deceit by a third person, even without connivance or complicity with
one of the contracting parties, resulted in mutual error on the part of the
parties to the contract.

Petitioners argued that the amended complaint fails to contain
even a general averment of fraud or mistake,
and its mention in the prayer is definitely not a substantial compliance with the
requirement of Section 5, Rule 8 of the Rules of Court.  The records of the case, however, will show
that the amended complaint contained a particular averment of fraud against the
Valencias
in full compliance with the provision of the Rules of Court.  Although, the amended complaint made no
mention of mistake being incurred in by the bank and Castro, such mention is
not essential in order that the promissory note (Exhibit 2) may be declared of
no binding effect between them and the mortgage (Exhibit 6) valid up to the
amount of P3,000.00 only.  The reason is that the mistake they mutually
suffered was a mere consequence of the fraud perpetrated by the Valencias against
them.  Thus, the fraud particularly
averred in the complaint, having been proven, is deemed sufficient basis for
the declaration of the promissory note (Exhibit 2) invalid insofar as it
affects Castro vis-a-vis the bank, and the mortgage
contract (Exhibit 6) valid only up to the amount of P3,000.00.

The second issue raised in the fourth assignment of errors is who
between Castro and the bank should suffer the consequences of the fraud
perpetrated by the Valencias.

In attributing to Castro all consequences of the loss, petitioners
argue that it was her negligence or acquiescence if not her actual connivance
that made the fraud possible.

Petitioners’ argument utterly disregards the findings of respondent
Court of Appeals wherein petitioners’ negligence in the contracts has been
aptly demonstrated, to wit:

“A witness for the defendant bank, Rodolfo Desiderio
claims he had subjected the plaintiff-appellee to
several interviews.  If this were true why is it that her age was placed at 61
instead of 70; why was she described in the application (Exh. B-1-9) as drug
manufacturer when in fact she was not; why was it placed in the application
that she has an income of P20,000.00 when according to
plaintiff-appellee, she has not even given such kind
of information – the true fact being that she was being paid P1.20 per picul of the sugarcane production in her hacienda and 500 cavans on the palay
production.”^[11]

From the foregoing, it is
evident that the bank was as much guilty, as Castro
was, of negligence in giving its consent to the contracts.  It apparently relied on representations made
by the Valencia
spouses when it should have directly obtained the needed data from Castro who
was the acknowledged owner of the property
offered as collateral.  Moreover,
considering Castro’s personal circumstances – her lack of education,
ignorance and old age – she cannot be considered utterly neglectful for having
been defrauded.  On the contrary, it is demanded
of petitioners to exercise the highest order of care and prudence in its
business dealings with the Valencias
considering that it is engaged in a banking business – a business affected with public interest.  It should have ascertained Castro’s awareness
of what she was signing or made her understand what obligations she was
assuming, considering that she was giving accommodation to, without any
consideration from, the Valencia spouses.

Petitioners further argue that Castro’s act of holding the Valencias as her agent
led the bank to believe that they were authorized to speak and bind her.  She cannot now be permitted to deny the
authority of the Valencias
to act as her agent for one who clothes another with apparent authority as her
agent is not permitted to deny such authority.

The authority of the Valencias was only to
follow-up Castro’s loan application with the bank.  They were not authorized to borrow for her.  This is apparent from the fact that Castro
went to the Bank to sign the promissory note for her loan of P3,000.00.  If her act
had been understood by the Bank to be a grant of an authority to the Valencias to borrow in
her behalf, it should have required a special power of attorney executed by
Castro in their favor.  Since the bank
did not, We can rightly assume that it did not
entertain the notion, that the Valencia
spouses were in any manner acting as an agent of Castro.

When the Valencias
borrowed from the Bank a personal loan of P3,000.00
evidenced by a promissory note (Exhibit 2) and mortgaged (Exhibit 6) Castro’s
property to secure said loan, the Valencias acted for
their own behalf.  Considering however
that for the loan in which the Valencias appeared as
principal borrowers, it was the property of Castro that was being mortgaged to
secure said loan, the Bank should have
exercised due care and prudence by making proper inquiry if Castro’s consent to
the mortgage was without any taint or defect. 
The possibility of her not knowing that she signed the promissory note
(Exhibit 2) as co-maker with the Valencias, and that
her property was mortgaged to secure the two loans instead of her own personal
loan only, in view of her personal circumstances – ignorance, lack of education
and old age – should have placed the Bank on prudent inquiry to protect its
interest and that of the public it serves. 
With the recent occurrence of events that have supposedly affected adversely
our banking system, attributable to laxity in the conduct of bank business by
its officials, the need of extreme caution and prudence by said officials and
employees in the discharge of their functions cannot be over-emphasized.

Question is, likewise, raised as to the propriety of respondent
court’s decision which declared that Castro’s consignation in court of the
amount of P3,383.00 was validly made.  It is
contended that the consignation was made without prior offer or tender of
payment to the Bank, and is therefore, not valid.  In holding that there is a substantial
compliance with the provision of Article 1256 of the Civil Code, respondent
court considered the fact that the Bank was holding Castro liable for the sum
of P6,000.00 plus 12% interest per annum, while the amount consigned was only
P3,000.00 plus 12% interest; that at the time of consignation, the Bank had
long foreclosed the mortgage extrajudicially and the
sale of the mortgage property had already been scheduled for April 10, 1961 for
non-payment of the obligation, and that despite the fact that the Bank already
knew of the deposit made by Castro because the receipt of the deposit was
attached to the record of the case, said Bank had not made any claim of such deposit,
and that therefore, Castro was right in thinking that it was futile and useless
for her to make previous offer and tender of payment directly to the Bank only
in the aforesaid amount of P3,000.00 plus 12% interest.  Under the foregoing circumstances, the
consignation made by Castro was valid, if not under the strict provision of the
law, under the more liberal considerations of equity.

The final issue raised is the validity or invalidity of the
extrajudicial foreclosure sale at public auction of the mortgaged property that
was held on April 11, 1961.

Petitioners contended
that the public auction sale that was held on April 11, 1961 which was the next business day after the
scheduled date of the sale on April 10, 1961, a special public holiday, was permissible
and valid pursuant to the provisions of Section 31 of the Revised
Administrative Code which ordains:

“Pretermission of holiday. – Where
the day, or the last day, for doing any act required or permitted by law falls
on a holiday, the act may be done on the next succeeding business day.”

Respondent court ruled that the aforesaid sale is null and void,
it not having been carried out in accordance with Section 9 of Act No. 3135,
which provides:

“Section 9. – Notice shall be given
by posting notices of the sale for not less than twenty days in at least three
public places of the municipality or city where the property is situated, and
if such property is worth more than four hundred pesos, such notice shall also
be published once a week for at least three consecutive weeks in a newspaper of
general circulation in the municipality or city.”

We agree with respondent court. 
The pretermission of a holiday applies only “where the day, or the
last day for doing any act required or permitted by law falls on a
holiday,” or when the last day of a given period for doing an act
falls on a holiday.  It does not apply to
a day fixed by an office or officer of the government for an act to be done, as
distinguished from a period of time within which an act should be done,
which may be on any day within that
specified period.  For example, if a
party is required by law to file his answer to a complaint within
fifteen (15) days from receipt of the summons and the last day falls on a
holiday, the last day is deemed moved to the next succeeding business day.  But, if the court fixes the trial of a case
on a certain day but the said date is subsequently declared a public holiday, the trial thereof is not
automatically transferred to the next succeeding business day.  Since April 10, 1961 was not the day or the
last day set by law for the extrajudicial foreclosure sale, nor the last day of
a given period, but a date fixed by the deputy sheriff, the aforesaid
sale cannot legally be made on the next succeeding business day without the
notices of the sale on that day being posted as prescribed in Section 9, Act No. 3135.

WHEREFORE, finding no reversible error in the judgment
under review, We affirm the same in toto. 
No pronouncement as to cost.

SO ORDERED.

Teehankee, Acting C.J., Makasiar, Fernandez, Guerrero,
and Melencio-Herrera, JJ., concur.

* Mr. Justice de
Castro was designated to sit with the First Division under Special Order No.
225.

^[1] Rollo, pp. 112-133.

^[2] Record on Appeal, pp. 84-89.

^[3] Rollo, pp. 112-117.

^[4] Rollo, pp. 117-118.

^[5] Motion for Reconsideration, Rollo, pp. 134-167.

^[6] Resolution of the Court of Appeals,
dated May 25, 1970,
Rollo, p. 168.

^[7] Art. 24. 
In all contractual property or other relations, when one of the parties
is at a disadvantage on account of his moral dependence, ignorance, indigence,
mental weakness, tender age or other handicap, the courts must be vigilant for
his protection.

^[8] Art. 1332. 
When 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.

^[9] Guico vs.
Mayuga, 63 Phil. 328; Velasco vs. Court of
Appeals, 90 Phil. 688; Fonacier vs. Court of
Appeals, 96 Phil. 417.

^[10] 31 Phil. 160.

^[11] pp. 13-14, CA decision.