"xxx, the Court Finds that a parcel of land of about 49,969 square meters, located in Residence Section J, Camp 7, Baguio City, covered by TCT T-29817 (land for short) is registered in the name of Manuel Behis, married to Cristina Behis (Exhibit "B"). Said land originally was part of a bigger tract of land owned by Behis (one name), father of Manuel Behis, covered by OCT-0-33 (Exhibit "26", Halsema, for history of the land). And upon the latter’s death on September 24, 1971, his children, namely: Saro Behis, Marcelo Behis, Manuel Behis, Lucia Behis, Clara Behis and Arana Behis, in an extrajudicial settlement with Simultaneous Sale of Inheritance dated September 28, 1978, agreed to sell the land to Manuel Behis, married to Cristina Behis (Exhibit `2’, Halsema) but which subsequently was explained as only an arrangement adopted by them to facilitate transactions over the land in a Confirmation of Rights of Co-Ownership over real Property dated September 26, 1983, showing that the Behis brothers and sisters, including Manuel Behis, are still co-owners thereof (Exhibit `30’, Halsema, Exhibit `AA’).

Unfortunately thereafter, Manuel Behis was delinquent in paying his debts.

Plaintiffs did not present to the Register of Deeds of Baguio said two contracts and ask that the title, TCT T-29817 in the name of Manuel Behis be cancelled and a new one issued in their name which normally a buyer does. Neither did plaintiffs annotate at the back of the title the aforesaid two contracts. Nor did they immediately go to the Bank and present said two contracts. Thus, the title to the land, TCT No. T-29817, remained in the name of Manuel Behis.

Pursuant to their two contracts with Manuel Behis, plaintiffs paid him during his lifetime the sum of P10,000.00 plus P50,000.00 plus P145,800.00 (Exhibit `U’ as stipulated in the hearing), and the sum of P21,353.75 for the hospitalization, medical and burial expenses of Manuel Behis when he died on June 21, 1985 (Exhibit `II’, `JJ’, `KK’, `LL’, `PP’, `OO’, and `RR’). Obviously, from the above payments, the plaintiffs were unable to complete their full payment to Manuel Behis of the sale of the land as it is nowhere near P2,400,000.00.

Meantime, the loan in the name of Manuel Behis with the Bank secured by the Real Estate Mortgage on the land continued to accumulate being delinquent. By May 30, 1985, in a Statement of Account (Exhibit `D’) sent to Manuel Behis by the Bank thru the Paredes Law Office for collection, the debt of P150,750.00 has ballooned into P316,368.13, with interest and other charges. In fact, the Bank, thru its President, Vicente Natividad, initiated foreclosure proceedings. But after the usual publication, the same was discontinued since many parties were interested to buy the land outside the said procedure but none materialized.

On June 19, 1985, Atty. William Arceño, in behalf of Manuel Behis, wrote a letter asking for a more detailed Statement of Account from the Bank broken down as to principal, interest and other charges (Exhibit `E’).

(1) P35,000.00 on August 1, 1985 as initial deposit when the Agreement was signed (Exhibits `G’ and `H’);

(2) P15,000.00 on September 16, 1985 (Exhibit `I’) and P21,000.00 on September 20, 1985 (Exhibit `J’) to cover the obligation of P36,000.00 on September 15, 1985;

(3) P20,000.00 on October 17, 1985 (Exhibit `K’) and P16,000.00 on October 25, 1985 (Exhibit `L’) to cover the obligation to pay P36,000.00 on October 15, 1985;

(4) P36,000.00 in the form of dollars remitted to Engr. Edilberto Natividad on December 18, 1985 (Exhibit `N’) to cover the obligation to pay P36,000.00 on November 15, 1985.

From the above payments made, the total amount of P143,000.00 as required by paragraphs 5 (a) and 5 (b) of the Memorandum of Agreement was fully paid by plaintiffs although they were not paid on time.

Meanwhile, on September 5, 1985, Cristina Behis, widow of Manuel Behis, wrote a letter to the Bank (Exhibit `3’, Halsema) claiming the Real Estate mortgage was without her signature. And in another letter dated October 28, 1985 to the Bank (Exhibit 4, Halsema), Cristina Behis stressed she did not authorize anybody to redeem the property in her behalf as one of the mortgagors of the land.

On January 7, 1986, plaintiffs demanded in a letter (Exhibit `O’) that the Bank comply with its obligation under the Memorandum of Agreement to (1) release the mortgage of Manuel Behis, (2) give its consent for the transfer of title in the name of the plaintiffs, and (3) execute a new mortgage with plaintiffs for the balance of P200,000.00 over the same land.

Meanwhile on January 18, 1986, Cristina Behis went to the Bank inquiring about her protest about her signature. The Bank told her it did not receive her two letters and instead advised her to write the Bank again as well as the plaintiffs about her objections.

In a reply letter dated February 11, 1986, (Exhibit `B’) to the demand of the plaintiffs, the Bank said it cannot comply because of supervening circumstances, enclosing the two letters of Cristina Behis dated September 5, 1985 and October 28, 1985 which they said were both self explanatory, and suggested that plaintiffs take up the matter with Mrs. Cristina Behis.

On February 15, 1986, as suggested by the Bank, Cristina Behis wrote another letter to the Bank claiming this time that she was not a party to the Deed of Absolute Sale with Assumption of Mortgage and her signature was forged (Exhibit 5’, Halsema) and requesting the Bank not to release the title with copy furnished to the plaintiffs (Exhibit `5-B’, Halsema).

Then, months passed, and nothing was heard from the plaintiffs by the Bank. On the first week of July, 1986, Teodoro Verzosa, President of Halsema, Inc., heard about the land and got interested and had preliminary talks with Vicente Natividad, President of the Bank, and with Edilberto Natividad, the principal stockholder of the bank.

xxx, upon suggestion of the lawyer of Halsema, an Assignment of Mortgage was entered into on July 28, 1986 between Halsema and the Bank for the consideration of P520,765.45 (Exhibit `1’, Bank) which amount was the total indebtedness of Manuel Behis with the Bank at the time (Exhibit `7-A’, Halsema). Note however, that what was assigned was the Mortgage made originally by Manuel Behis and not the Mortgage as assumed by plaintiffs under a restructured and liberalized terms.

In turn, the Bank explained it entered into the Assignment of Mortgage because at the time it considered the Memorandum of Agreement cancelled as first, plaintiffs failed to settle the objections of Cristina Behis aforesaid on her signature being forged in the Deed of Sale with Assumption of Mortgage despite the lapse of time from February, 1986 to July, 1986. Second, the terms of the Memorandum of Agreement have not been fully complied with as the payments were not made on time on the dates fixed therein; and third, their consent to the Memorandum of Agreement was secured by the plaintiffs thru fraud as the Bank was not shown the Agreement containing the real consideration of P2,400,000.00 of the sale of the land of Manuel Behis to plaintiffs.

On the same date of July 28, 1986, Vicente Natividad of the Bank sent notice of the Assignment of Mortgage to the debtor mortgagor, Manuel Behis (already dead at the time) and Cristina Behis. Notice of the Assignment of Mortgage was not sent to plaintiffs for as aforesaid what was assigned was the Mortgage originally made by Manuel Behis and not the Mortgage as assumed by plaintiffs under the restructured and liberalized terms in the Memorandum of Agreement which was considered by the Bank as cancelled.

After the assignment of mortgage, the Bank returned the P143,000.00 to plaintiffs (Exhibit `13’, Bank). But the latter rejected the same maintaining the Memorandum of Agreement is valid until annulled by Court Action. Subsequently, however, the Bank paid plaintiffs P143,000.00 and P90,000.00 interest in settlement of the criminal case of Estafa against Edilberto Natividad and Vicente Natividad (Exhibit `14’, Bank).

1. xxx xxx xxx;

2. Declaring the Deed of Sale with assumption of Mortgage (Exhibit "A") and the Agreement (Exhibit "15") taken together valid until annulled or cancelled;

3. Ordering the Bank to pay the plaintiffs the sum of P30,000.00 as Moral Damages, P10,000.00 as Exemplary Damages, P20,000.00 as Attorney’s fees and P5,000.00 as litigation expenses for their bad faith in violating the Memorandum of Agreement which took place while the Memorandum of Agreement was still valid there being no court action first filed to nullify it before entering into the Assignment of Mortgage;

4. Ordering the plaintiffs to pay the Bank the sum of P30,000.00 as Moral Damages, P10,000.00 as Exemplary Damages, P20,000.00 as Attorney’s fees and P5,000.00 as litigation expenses for plaintiffs’ bad faith in deceiving the Bank to enter into the Memorandum of Agreement;

5. Ordering the setting off in compensation the Damages awarded to plaintiffs and the Bank.

6. xxx xxx xxx;

7. Declaring the Memorandum of Agreement as annulled due to the fraud of plaintiffs;

8. xxx xxx xxx;

9. xxx xxx xxx;

10. xxx xxx xxx,

Without pronouncement as to costs.

1. xxx xxx xxx;

2. xxx xxx xxx;

3. xxx xxx xxx;

4. Declaring the Deed of Absolute Sale with Assumption of Mortgage, Exhibit A and the Memorandum of Agreement, Exhibit F, valid as between the parties thereto;

5. Ordering and sentencing defendant Rural Bank of Sta. Maria, Pangasinan to pay plaintiffs-appellant the sum of P229,135.00 as actual damages, the sum of P30,000.00 as moral damages, P10,000.00 as exemplary damages, P20,000.00 as attorney’s fees and P5,000.00 as litigation expenses;

6. Affirming the dismissal of all other counterclaims for damages;

7. Reversing and setting aside all other dispositions made by the trial court inconsistent with this decision;

8. There is no pronouncement as to costs.

THE MEMORANDUM OF AGREEMENT (EXH. "F") ENTERED INTO BETWEEN PRIVATE RESPONDENTS, AS ALLEGED ASSIGNEES OF MANUEL BEHIS, AND PETITIONER BANK IS VOIDABLE AND MUST BE ANNULLED.

"xxx. The real consideration for the sale with assumption of mortgage, or the non-disclosure thereof, was not the determining influence on the consent of the bank.

The bank received payments due under the Memorandum of Agreement, even if delayed. It initially claimed that the sale with assumption of mortgage was invalid not because of the concealment of the real consideration of P2,400,000.00 but because of the information given by Cristina Behis, the widow of the mortgagor Manuel Behis that her signature on the deed of absolute sale with assumption of mortgage was forged. Thus, the alleged nullity of the Memorandum of Agreement, Exhibit F, is a clear aftertought. It was raised by defendant bank, by way of counterclaim only after it was sued.

The deceit which avoids the contract exists where the party who obtains the consent does so by means of concealing or omitting to state material facts, with intent to deceive, by reason of which omission or concealment the other party was induced to give a consent which he would not otherwise have given (Tolentino, Commentaries and Jurisprudence on the Civil Code, Vol. IV, p. 480). In this case, the consideration for the sale with assumption of mortgage was not the inducement to defendant bank to give a consent which it would not otherwise have given.

Indeed, whether the consideration of the sale with assumption of mortgage was P250,000.00 as stated in Exhibit A, or P2,400,000.00 as stated in the Agreement, Exhibit 15, should not be of importance to the bank. Whether it was P250,000.00 or P2,400.000.00 the bank’s security remained unimpaired.

The stipulation in Exhibit 15, reading "in case of default in all of the above, Manuel Behis shall have legal recourse to the portion of the parcel of land under TCT No. T-29817 equivalent to the unpaid balance of the amount subject of this Agreement", obviously even if revealed would not have induced defendant bank to withhold its consent. The legal recourse to TCT No. T-29817 given to Manuel Behis, under the Agreement, is subordinate and inferior to the mortgage to the bank.