Valenzuela Digest

7/22/2019 Valenzuela Digest

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Carlos Telosa obtained a loan from the Rural Bank of Lucena Inc. and as a security thereof,mortgaged a parcel of land located at Bo. Amugeria, Malunay, Quezon with an area of 50,000square meters. Several months thereafter, the Rural Bank of Lucena became a distressed bankand so the Monetary Board decided to liquidate said bank. The Monetary Board ordered theSuperintendent of Banks Carlota P. Valenzuela to convert the assets of the Lucena bank tomoney. Among the accounts of the Lucena bank inventoried was the account of Carlos Telosa

in the principal amount of P5,000.00, and so he was sent a demand letter. Because CarlosTelosa knew that his obligation to the rural bank was only P300.00 not P5,000.00, he executedan affidavit protesting the demand. Carlos Telosa paid the amount of P400.00. and claimed aremaining balance of P 11.25 which was paid by Dolores Telosa. Meanwhile,Carlos Telosa died

Claiming that the payments made did not fully satisfy the whole amount due, Napoleon R. Cruz,

then authorized deputy of the Central Bank assigned at the Lucena bank, petitioned the Deputy

Provincial Sheriff of Quezon to extra-judicially foreclose the mortgage and sell the collateral at

public auction. A complaint was then filedby the widow and children (now private respondents)of Carlos Telosa, against the Rural Bank of Lucena Inc. praying for a judgment declaring the

contract of mortgage executed by Carlos Telosa in favor of the Rural Bank of Lucena, Inc. null

and void with a prayer for the issuance of writ of preliminary injunction to stop the sheriff ofQuezon from proceeding with the extra-judicial foreclosure. The plaintiffs (now private

respondents) contended that the amount of the loan obtained by Carlos Telosa was only

P300.00 and that the same had already been fully paid.

Meanwhile, as there was no restraining order issued, the foreclosure sale took place with the

Rural Bank of Lucena, Inc., as the lone and highest bidder in the auction sale. The plaintiffs filed

their amended complaint, this time against Carlota P. Valenzuela in her capacity as

Superintendent of Banks and authorized representative of the Central Bank in the liquidation of

the Rural Bank of Lucena, The plaintiffs prayed in their amended complaint that the extra-

judicial foreclosure sale be annulled.Defendant (now petitioner) moved to dismiss the amended complaint on two (2) grounds: (1)that the trial court has no jurisdiction over the subject matter of the action as the Rural Bank ofLucena, Inc., is in the process of liquidation in the Court of First Instance of Manila and (2) thatthe plaintiffs have no cause of action against the defendant. The motion to dismiss was denied.Thereafter, defendant filed her answer After trial, the court a quorendered its decision in favorof the plaintiffs. The above decision was appealed to the Court of Appeals and said courtaffirmed the decision of the lower court in toto.

ISSUE: W/N the trial court has jurisdiction over the subject matter of the action as the RuralBank of Lucena, Inc., is in the process of liquidation in the Court of First Instance of Manila

HELD: YES.

This Court ruled in the case of Hernandez vs. Rural Bank of Lucena, Inc. that if there is a

judicial liquidation of an insolvent bank, all claims against the bank should be filed in the

liquidation proceeding. However, taking into consideration the circumstances of the case and in


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the interest of justice, we are constrained to deviate from this procedure. To order the private

respondents to refile and relitigate their case before the liquidation court would be an exercise in

futility. It would mean another several years of trial and additional expenses to private

respondents who are admittedly living in poverty. Incidentally, the property in question is the

only property of private respondents.We are convinced as were the trial court and the appellate

court that the amount of loan actually obtained by the deceased Telosa was only P300.00 andnot the P5,000.00Needless to state in this regard this particular transaction was one of the fraudulent andanomalous transactions involving the officers of the Rural Bank of Lucena, Inc. The latter tookadvantage of the very limited education of Carlos Telosa.

Finally, even Our ruling in the cited Hernandez versus Rural Bank case admits of exception. Itsays "as far as lawful andpracticableall claims against the insolvent bank should be filed in theliquidation proceeding." This case should be one of them.

St. Louis Realty caused to be published with the permission of Arcadio S. Arcadio (but withoutpermission of Doctor Aramil) in the issue of the Sunday Timesof December 15, 1968 anadvertisement with the heading "WHERE THE HEART IS". Below that heading was thephotograph of the residence of Doctor Aramil and theArcadio familyand below the photographwas a write-up. The same advertisement appeared in the Sunday Timesdated January 5, 1969.

Doctor Aramil a neuropsychiatrist and a member of the faculty of the U. E. Ramon MagsaysayMemorial Hospital, noticed the mistake. On that same date, he wrote St. Louis Realty a letter of

protest. The letter was received by Ernesto Magtoto, an officer of St. Louis Realty in charge ofadvertising. He stopped publication of the advertisement, offered his apologies to Doctor Aramil.However, no rectification or apology was published.

Thereafter, Aramil's counsel demanded from St. Louis Realty actual, moral and exemplary

damages of P110,000. In its answer, St. Louis Realty claimed that there was an honest mistake

and that if Aramil so desired, rectification would be published in the Manila Time. It published in

the issue of the Manila Timesof March 18, 1969 a new advertisement with the Arcadio family

and their real house but it did not publish any apology to Doctor Aramil and an explanation of

the error.On March 29, Aramil filed his complaint for damages. St. Louis Realty then published in theissue of the Manila Timesof April 15, 1969 the "NOTICE OF RECTIFICATION" in a space 4 by3 inches:

Judge Jose M. Leuterio observed that St. Louis Realty should have immediately published a

rectification and apology. He found that as a result of St. Louis Realty's mistake, Doctor Aramil

suffered mental anguish and his income was reduced by about P1,000 to P1,500 a month.

Moreover, there was violation of Aramil's right to privacy


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The trial court awarded Aramil P8,000 as actual damages, P20,000 as moral damages andP2,000 as attorney's fees. St. Louis Realty appealed to the Court of Appeals.

The Appellate Court affirmed that judgment reasoning that St. Louis Realty committed anactionable quasi-delict under articles 21 and 26 of the Civil Code because the questionedadvertisements pictured a beautiful house which did not belong to Arcadio but to Doctor Aramil

who, naturally, was annoyed by that contretemps.

ISSUE: W/N the case is covered by article 26 which provides that "every person shall respect

the dignity, personality, privacy and peace of mind of his neighbors and other persons HELD: YES. Article 2219 allows moral damages for acts and actions mentioned in Article 26. Aslengthily explained by Justice Gatmaitan, the acts and omissions of the firm fan under Article 26.

St. Louis Realty's employee was grossly negligent in mixing up the Aramil and Arcadioresidences in a widely circulated publication like the Sunday Times. To suit its purpose, it nevermade any written apology and explanation of the mix-up. It just contented itself with a cavalier

"rectification ".

Persons, who know the residence of Doctor Aramil, were confused by the distorted, lingeringimpression that he was renting his residence from Arcadio or that Arcadio had leased it fromhim. Either way, his private life was mistakenly and unnecessarily exposed. He suffereddiminution of income and mental anguish.

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Valenzuela Digest