Title
Allied Banking Corp. vs. Fukuoka
Case
G.R. No. 192443
Decision Date
Nov 23, 2015
Fukuoka secured a P1M loan with her property, unaware Crisostomo added P7M obligations. Court reformed REM, found fraud, and reinstated cross-claim against Crisostomo.
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Case Digest (G.R. No. 192443)

Facts:

  1. Background of the Parties:

    • Crisostomo Borillo (Crisostomo) was a long-time client of Allied Banking Corporation (Allied Bank).
    • Cristina B. Fukuoka (Fukuoka) engaged Crisostomo for the renovation of her house in Las Piñas City.
  2. Loan Agreement and Mortgage:

    • Fukuoka expressed interest in buying an adjacent lot but lacked funds. Crisostomo suggested obtaining a loan using Fukuoka’s property as collateral.
    • On December 15, 1995, Crisostomo applied for a loan from Allied Bank, which was approved. A Promissory Note (No. 0036-95-00767) was executed, and a Loan Release Manifold credited P984,937.50 to Crisostomo’s account.
    • Fukuoka signed a Real Estate Mortgage (REM) over her property, securing a P1 million loan. The REM included a note stating it was to secure Crisostomo’s loan.
  3. Monthly Amortizations:

    • Fukuoka requested automatic deductions for her monthly amortizations. From January 1996 to May 1999, Allied Bank deducted payments from Evelyn Pajarillaga’s savings account.
  4. Subsequent Loans by Crisostomo:

    • From December 1995 to July 1996, Crisostomo executed multiple promissory notes totaling P7 million, secured by Fukuoka’s property without her knowledge.
  5. Dispute and Legal Action:

    • In June 1999, Allied Bank stopped deducting payments. Fukuoka discovered irregularities and filed a complaint for reformation of contract, specific performance, consignation, and damages against Allied Bank, Ernesto Pascual (Allied Bank’s manager), and Crisostomo.
  6. RTC Decision:

    • The RTC ruled in favor of Fukuoka, ordering the deletion of Crisostomo’s name from the REM and holding the petitioners jointly and severally liable for damages.
  7. CA Decision:

    • The CA affirmed the RTC decision, dismissing the petitioners’ appeal and cross-claim against Crisostomo.

Issue:

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Ruling:

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Ratio:

  1. Reformation of Contract (Article 1359, Civil Code):

    • Reformation is proper when the true intention of the parties is not expressed in the instrument due to mistake, fraud, or inequitable conduct. The REM was intended to secure Fukuoka’s P1 million loan, not Crisostomo’s additional obligations.
  2. Fraud and Conspiracy:

    • Allied Bank’s actions, such as issuing a Credit Ticket in Fukuoka’s name and deducting monthly amortizations, demonstrated its intent to grant the loan to Fukuoka. The insertion of Crisostomo’s name in the REM without Fukuoka’s knowledge constituted fraud.
  3. Cross-Claim:

    • The CA erred in dismissing the cross-claim. The petitioners’ claim against Crisostomo for his outstanding obligations should be litigated in the same proceeding to avoid multiplicity of suits.
  4. Judicial Policy:

    • The Court emphasized that it is not a trier of facts and deferred to the factual findings of the lower courts, which were supported by substantial evidence.


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