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88 SUPREME COURT REPORTS ANNOTATED

Ibaan Rural Bank, Inc. vs. Court of Appeals

*
G.R. No. 123817. December 17, 1999.

IBAAN RURAL BANK, INC., petitioner, vs. THE COURT

OF APPEALS and MR. and MRS. RAMON TARNATE,
respondents.

Remedial Law; Estoppel; When circumstances imply a duty to

speak on the part of the person for whom an obligation is proposed,
his silence can be construed as consent; When estoppel in pais
arises.—When petitioner received a copy of the Certificate of Sale
registered in the Office of the Register of Deeds of Lipa City, it
had actual and constructive knowledge of the certificate and its
contents. For two years, it did not object to the two-year
redemption period provided in the certificate. Thus, it could be
said that petitioner consented to the two-year redemption period
specially since it had time to object and did not. When
circumstances imply a duty to speak on the part of the person for
whom an obligation is proposed, his silence can be construed as
consent. By its silence and inaction,

________________

* SECOND DIVISION.

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Ibaan Rural Bank, Inc. vs. Court of Appeals

petitioner misled private respondents to believe that they had two

years within which to redeem the mortgage. After the lapse of two
years, petitioner is estopped from asserting that the period for
redemption was only one year and that the period had already
lapsed. Estoppel in pais arises when one, by his acts,
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representations or admissions, or by his own silence when he

ought to speak out, intentionally or through culpable negligence,
induces another to believe certain facts to exist and such other
rightfully relies and acts on such belief, so that he will be
prejudiced if the former is permitted to deny the existence of such
facts.
Same; Same; Banks, being greatly affected with public
interest, are expected to exercise a degree of diligence in the
handling of its affairs higher than that expected of an ordinary
business firm.—Petitioner is a banking institution on whom the
public expects diligence, meticulousness and mastery of its
transactions. Had petitioner diligently reviewed the Certificate of
Sale it could have easily discovered that the period was extended
one year beyond the usual period for redemption. Banks, being
greatly affected with public interest, are expected to exercise a
degree of diligence in the handling of its affairs higher than that
expected of an ordinary business firm.
Same; Attorney’s Fees; The general rule is that attorney’s fees
cannot be recovered as part of damages because of the public policy
that no premium should be placed on the right to litigate.—The
award of attorney’s fees must be disallowed for lack of legal basis.
The fact that private respondents were compelled to litigate and
incur expenses to protect and enforce their claim does not justify
the award of attorney’s fees. The general rule is that attorney’s
fees cannot be recovered as part of damages because of the public
policy that no premium should be placed on the right to litigate.
The award of attorney’s fees must be deleted where the award of
moral and exemplary damages are eliminated.

PETITION for review on certiorari of a decision of the

Court of Appeals.

The facts are stated in the opinion of the Court.

     Balgos & Perez for petitioner.
     Franco L. Loyola for private respondents.
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Ibaan Rural Bank, Inc. vs. Court of Appeals

QUISUMBING, J.:

This petition for review under Rule 45 of the Rules of Court

seeks to set aside the decision of the Court of Appeals in
CA-G.R. CV No. 32984 affirming with modification the
decision of the Regional Trial Court of Batangas, Branch 2,

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in Civil Case No. 534, as well as the resolution of the Court

of Appeals denying petitioner’s motion for reconsideration.
The facts are as follows:
Spouses Cesar and Leonila Reyes were the owners of
three (3) lots covered by Transfer Certificate of Title (TCT)
Nos. 33206, 33207 and 33208 of the Register of Deeds of
Lipa City. On March 21, 1976, the spouses mortgaged these
lots to Ibaan Rural Bank, Inc. [herein petitioner]. On June
11, 1976, with the knowledge and consent of the petitioner,
the spouses as sellers, and Mr. and Mrs. Ramon Tarnate
[herein private respondents] as buyers, entered into a Deed
of Absolute Sale with Assumption of Mortgage of the lots in
question. Private respondents failed to pay the loan and
the bank extrajudicially foreclosed on the mortgaged lots.
The Provincial Sheriff conducted a public auction of the lots
and awarded the lots to the bank, the sole bidder. On
December 13, 1978, the Provincial Sheriff issued a
Certificate of Sale which was registered on October 16,
1979. The certificate stated that the redemption period
expires two (2) years from the registration of the sale. No
notice of the extrajudicial foreclosure was given to the
private respondents. On September 23, 1981, private
respondents offered to redeem the foreclosed lots and
tendered the redemption amount of P77,737.45. However,
petitioner Bank refused the redemption on the ground that
it had consolidated its titles over the lots. The Provincial
Sheriff also denied the redemption on the ground that
private respondents did not appear on the title to be the
owners of the lots.
Private respondents filed a complaint to compel the
bank to allow their redemption of the foreclosed lots. They
alleged that the extrajudicial foreclosure was null and void
for lack of valid notice and demand upon them. They
further argued that
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Ibaan Rural Bank, Inc. vs. Court of Appeals

they were entitled to redeem the foreclosed lots because

they offered to redeem and tendered the redemption price
before October 16, 1981, the deadline of the 2-year
redemption period.
The bank opposed the redemption, contending that the
private respondents had no right to redeem the lots
because they were not the real parties in interest; that at
the time they offered to redeem on September 23, 1981, the
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right to redeem had prescribed, as more than one year had

elapsed from the registration of the Certificate of Sale on
October 16, 1979; that there was no need of personal notice
to them because under Section 3 of Act 3135, only the
posting of notice of sale at three public places of the
municipality
1
where the properties are located was
required.
After trial on the merits, the lower court ruled in favor
of herein private respondents and against the petitioner,
thus:

“WHEREFORE, in view of the foregoing, the Court renders

judgment in favor of the plaintiffs and against the defendants, to
wit:

(a) Ordering the defendant Ibaan Rural Bank Inc., and

Provincial Sheriff of Batangas for the redemption of the
foreclosed properties covered by Transfer Certificate of
Title Nos. T-33206, T-33207 and T-33208 of the Registry of
Deeds, Lipa City by the plaintiffs by paying the mortgaged
obligation.
(b) Ordering the Provincial Sheriff of Batangas to cancel the
Transfer Certificate of Titles issued to defendant Ibaan
Rural Bank, Inc. and its successors-in-interest and to
issue the corresponding Transfer of Certificate of Titles to
plaintiffs upon payment of the required legal fees.
(c) Ordering the defendant Ibaan Rural Bank, Inc., to pay
plaintiffs moral damages in the amount of P200,000.00,
and attorney’s fees in the sum of P20,000.00.

All other claims not having been duly proved are ordered
DISMISSED.
Without pronouncement as to costs.

________________

1 Rollo, p. 16.

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Ibaan Rural Bank, Inc. vs. Court of Appeals
2
SO ORDERED.”

On appeal, the Court of Appeals affirmed with modification

the decision of the lower court. The dispositive portion of
the CA decision reads:

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“WHEREFORE, the decision appealed from is hereby AFFIRMED

with the following modifications:

1. The register of Deeds of Lipa City is hereby ordered to

cancel the Certificate of Titles issued to defendant Ibaan
Rural Bank, Inc. and its successor-in-interest and to issue
the corresponding Transfer Certificate of Title to
plaintiffs-appellees upon proper redemption of the
properties and payment of the required legal fees.
2. Defendant Ibaan Rural bank, is hereby ordered to pay to
plaintiffs the amount of P15,000.00 as attorney’s fees.
3. The moral damages awarded in favor of plaintiffs is
hereby ordered deleted.
3
SO ORDERED.”

A timely Motion for Reconsideration was filed by the

petitioner but the same was denied in a Resolution dated
February 14, 1996. Hence, this petition.
Petitioner assigns the following errors:

1. THE RESPONDENT COURT ERRED AND,

ACCORDINGLY, THE PETITIONER IS
ENTITLED TO A REVIEW OF ITS DECISION,
WHEN IT SUSTAINED AVAILABILITY OF
REDEMPTION DESPITE THE LAPSE OF ONE
YEAR FROM DATE OF REGISTRATION OF THE
CERTIFICATE OF SALE.
2. THE RESPONDENT COURT ERRED AND,
ACCORDINGLY, THE PETITIONER IS
ENTITLED TO A REVIEW OF ITS DECISION,
WHEN THE RESPONDENT COURT ALLOWED
RECOVERY OF ATTORNEY’S FEES SIMPLY
BECAUSE THE PETITIONER DID NOT ALLOW
THE PRIVATE RESPONDENTS TO

________________

2 Id., at 14-15, 17.

3 Id., at 23.

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Ibaan Rural Bank, Inc. vs. Court of Appeals

EXERCISE BELATEDLY 4 REDEMPTION OF THE

FORECLOSED PROPERTY.
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Essentially, two issues are raised for resolution. What

was the period of redemption: two years as unilaterally
fixed by the sheriff in the contract, or one year as fixed by
law? May respondent court properly award attorney’s fees
solely on the basis of the refusal of the bank to allow
redemption?
We now resolve these issues.
When petitioner received a copy of the Certificate of Sale
registered in the Office of the Register of Deeds of Lipa
City, it had actual and 5constructive knowledge of the
certificate and its contents. For two years, it did not object
to the two-year redemption period provided in the
certificate. Thus, it could be said that petitioner consented
to the two-year redemption period specially since it had
time to object and did not. When circumstances imply a
duty to speak on the part of the person for whom an
obligation
6
is proposed, his silence can be construed as
consent. By its silence and inaction, petitioner misled
private respondents to believe that they had two years
within which to redeem the mortgage. After the lapse of
two years, petitioner is estopped from asserting that the
period for redemption was only one year and that the
period had already lapsed. Estoppel in pais arises when
one, by his acts, representations or admissions, or by his
own silence when he ought to speak out, intentionally or
through culpable negligence, induces another to believe
certain facts to exist and such other rightfully relies and
acts on such belief, so that he will be prejudiced if7 the
former is permitted to deny the existence of such facts.

________________

4 Id., at 7.
5 Id., at 6.
6 Tolentino, Commentaries and Jurisprudence in the Civil Code of the
Philippines, Vol. IV, p. 455 citing 1 Ruggiero 255-256.
7 Roblett Industrial Construction Corporation vs. Court of Appeals, 266
SCRA 71, 76 (1997).

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Ibaan Rural Bank, Inc. vs. Court of Appeals

In affirming the decision of the trial court, the Court of

Appeals relied
8
on Lazo vs. Republic Surety and Insurance
Co., Inc., where the court held that the one year period of
redemption provided in Act No. 3135 is only directory and
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can be extended by agreement of the parties. True, but it

bears noting that in Lazo the parties voluntarily agreed to
extend the redemption period. Thus, the concept of legal
redemption was converted by the parties in Lazo into
conventional redemption. This is not so in the instant case.
There was no voluntary agreement. In fact, the sheriff
unilaterally and arbitrarily extended the period of
redemption to two (2) years in the Certificate of Sale. The
parties were not even privy to the extension made by the
sheriff. Nonetheless, as above discussed, the bank can not
after the lapse of two years insist that the redemption
period was one year only.
Additionally, the rule on redemption is liberally
interpreted in favor of the original owner of a property. The
fact alone that he is allowed the right to redeem clearly
demonstrates the solicitousness of the law in giving him
another opportunity,
9
should his fortune improve, to recover
his lost property.
Lastly, petitioner is a banking institution on whom the
public expects diligence, meticulousness and mastery of its
transactions. Had petitioner diligently reviewed the
Certificate of Sale it could have easily discovered that the
period was extended one year beyond the usual period for
redemption. Banks, being greatly affected with public
interest, are expected to exercise a degree of diligence in
the handling of its affairs
10
higher than that expected of an
ordinary business firm.
On the second issue, the award of attorney’s fees must
be disallowed for lack of legal basis. The fact that private
respondents were compelled to litigate and incur expenses
to protect and enforce their claim does not justify the
award of attorney’s fees. The general rule is that attorney’s
fees cannot

________________

8 31 SCRA 329, 340 (1970).

9 De los Reyes vs. IAC, 176 SCRA 394, 403 (1989).
10 Lim Sio Bio vs. Court of Appeals, 221 SCRA 307, 316 (1993).

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be recovered as part of damages because of the public

policy that
11
no premium should be placed on the right to
litigate. The award of attorney’s fees must be deleted
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where the 12award of moral and exemplary damages are

eliminated.
WHEREFORE, the decision of the Court of Appeals in
CA-G.R. CV No. 32984 is AFFIRMED, with the
MODIFICATION that the award of attorney’s fees is
deleted. No pronouncement as to costs.
SO ORDERED.

          Bellosillo (Chairman), Mendoza, Buena and De

Leon, Jr., JJ., concur.

Judgment affirmed with modification.

Note.—Under the doctrine of estoppel, an admission or

representation is rendered conclusive upon the person
relying thereon. (Mendoza vs. Court of Appeals, 274 SCRA
527 [1997])

——o0o——

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