CRUZ, JILLIAN MAE A.

JD4401

REPUBLIC OF THE PHILIPPINES

COURT OF APPEALS
Manila
Bataan Rural Bank
Plaintiffs -Appellee,

CA-G.R. No. 1916

RTC of Manila Br. 001
RTC Case No. 14344
-versus- For: Collection of
Sum of Money

Jake Zyrus and Arnold Clavio

Defendants -Appellants.
x ---------------------------------------- x

Pursuant to the Notice of this Honorable Court,

Defendants-Appellants, JAKE ZYRUS and ARNOLD CLAVIO,

through the undersigned counsel and unto this Honorable Court,

most respectfully submits their:

APPELLANTS’ BRIEF

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 I. SUBJECT INDEX

CONTENTS PAGE

1.1 Table of Arguments

1.1.1 The trial court erred in ruling that

the defendants-appellants are solidarily 5
liable under the deficiency judgment in
the amount of ₱9,000,000.00 plus the
legal interest from December 1, 2017
because no legal provision nor
jurisprudence in our jurisdiction which
makes a third person who secures the
fulfillment of another’s obligation by
mortgaging his own property, to be
solidarily bound with the principal
obligor.

1.1.2 Nonetheless, The trial court erred in

relying on the Special Power of 6
Attorney (SPA) which allegedly
authorized Burgos to constitute the
subject mortgage even without the
presentation of any evidence that the
notarization was regular. Hence, lacking
any evidence that defendant-appellants
have legally authorized Burgos to
mortgage the land as required under the
law to constitute a valid mortgage, the
mortgage is void ab initio.

1.2. Table of Statutes Cited

1.2.1 Section 1, Rule 37 of the Rules of 4
Court

1.2.2 Paragraph 3, Article 2085 of the New

6
Civil Code of the Philippines

1.2.3 Section 20, Rule 132 of the Rules of 6

Court

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1.3. Table of Cases Cited

1.3.1. Bank of America v. American Realty

5
Corporation, G.R. No. 133876,
December 29, 1999.
6
1.3.2 Tigno v. Sps. Aquino, 486 Phil. 254, 270
(2004).

1.3.3 Rural Bank of Cabadbaran v. Melecio- 6

Yap, G.R. No. 178451, July 30, 2014.

1.3.4 Lazaro v. Agustin, G.R. No. 152364, 6

April 15, 2010.

1.3.5 Meneses v. Venturozo, G.R. No. 6

172196, October 19, 2011.

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 II. ASSIGNMENT OF ERRORS

The trial court committed the following errors, as follows:

a. The trial court erred in ruling that the defendants-appellants are solidarily
liable with Burgos in the amount of ₱9,000,000.00 plus the legal interest from
December 1, 2017;

b. The trial court erred in relying on the Special Power of Attorney (SPA)
without the presentation of any evidence that the notarization is regular.

III. STATEMENT OF THE CASE

3.1. Nature of the Action:

This is an appeal from the decision of the trial court denying the Motion
for Reconsideration, dated December 5, 2017, filed by the
defendants-appellants on December 2, 2017. It ruled that
defendants-appellants are solidarily liable with Burgos in the amount of
relying on the Special Power of Attorney (SPA) allegedly authorizing
Burgos to mortgage the land.

3.2. Summary of the Proceedings:

The case arose when Burgos, one of the partners in Tres Amigos was not
able to settle his obligations to Bataan Rural Bank. Thereafter, Bataan
Rural Bank foreclosed the land mortgaged in its favor as a security
for the loan obtained by Burgos. However, the proceeds of the auction
were not enough to answer for the debt. The bank then filed a collection
case with the Regional Trial Court of Manila against the defendants-
appellants, for the balance of ₱9,000,000.00 plus the legal interest.

3.3. The Appealed Rulings and Orders of the Court:

In a December 1, 2017 Decision, the Regional Trial Court of Manila ruled

in favor of the bank and ordered the defendants-appellants, and Tres
Amigos solidarily liable with Burgos for ₱9,000,000.00 plus legal
interest from December 1, 2017.

On December 2, 2017, the defendants-appellants filed a Motion for

Reconsideration which is within the period for taking an appeal, Section
1, Rule 37 of the Rules of Court partly provides that within the same
period, the aggrieved party may also move for reconsideration upon the
grounds that the damages awarded are excessive, that the evidence
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is insufficient to justify the decision or final order, or that the decision or
final order is contrary to law. However, the Regional Trial Court denied
the Motion for Reconsideration on December 5, 2017.

Hence, this appeal.

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 IV. STATEMENT OF THE FACTS

4.1. Arnold, Jake, and Burgos were partners in the restaurant Burger &
Brewskies. The three called their partnership ‘Tres Amigos’;

4.2. The land upon which the restaurant Burger & Brewskies was
located was owned by Tres Amigos;

4.3. Burgos, asked his two other partners if he could borrow money for the
purpose of buying a piece of land which he thinks is a good
investment. Arnold and Jake could not provide cash, so they told
Burgos that he could mortgage the land of Tres Amigos to raise money;

4.4. The partners allegedly signed a Special Power of Attorney (SPA) in

favor of Burgos, allegedly allowing the latter to mortgage the
said land;

4.5. With the alleged SPA, Burgos went to Bataan Rural Bank with the
principal place of business in Balanga, Bataan, obtained a loan in his
name with the Tres Amigos’ land being mortgaged;

4.6. A year later, Burgos failed to settle his obligation in favor of the bank.
Thereafter, the bank foreclosed the land and sold it to a public
auction;

4.7. The proceeds of the public auction were not enough to answer for the
debt, and it prompted the bank to file a collection case with the
Regional Trial Court of Manila against the plaintiffs-appellants, and
Tres Amigos for the balance of ₱9,000,000.00;

4.8. The Regional Trial Court on December 1, 2017 ruled in favor of the
bank and ordered the plaintiffs-appellants, and Tres Amigos to be
solidarily liable for ₱9,000,000.00 plus the legal interests basing its
decision on the alleged SPA signed by the partners;

4.9. The plaintiffs-appellants filed a Motion for Reconsideration on

December 2, 2017;

4.10. The Regional Trial Court in its December 5, 2017 Resolution denied
the Motion for Reconsideration.

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 V. STATEMENT OF THE ISSUES

The issues raised in this case are as follows:

5.1. Whether or not the trial court erred in ruling that the defendants-
appellants are solidarily liable with Burgos in the amount of
₱9,000,000.00 plus the legal interest from December 1, 2017

5.2. Whether or not the trial court erred in relying on the Special Power of
Attorney (SPA) without the presentation of any evidence that the
notarization is regular.

VI. ARGUMENTS

6.1. The trial court erred in ruling that the defendants-appellants

are solidarily liable with Burgos in the amount of ₱9,000,000.00
plus the legal interest from December 1, 2017;

6.1.1 In the case of Bank of America v. American Realty Corporation,1

there is no there is no legal provision nor jurisprudence in our
jurisdiction which makes a third person who secures the
fulfillment of another’s obligation by mortgaging his own
property, to be solidarily bound with the principal obligor. The
signatory to the principal contract of loan remains to be primarily
bound.

6.1.2 In the present case, it is undisputed that the Burgos is the sole
signatory as principal obligor under the contract of loan.

6.1.3 Therefore, the defendants-appellants cannot be deemed to be

solidarily bound with Burgos under the principal obligation.

1 G.R. No. 133876, December 29, 1999.

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 7.1 The trial court erred in relying on the Special Power of Attorney
(SPA) without the presentation of any evidence that the notarization
was regular;

7.1.1 A mortgage to be valid must conform with Article 2085 (3) of

the New Civil Code of the Philippines, which provides that the
persons constituting the mortgage have the free disposal of their
property, and in the absence thereof, that they be legally
authorized for the purpose.

7.1.2 The settled rule is that persons constituting a mortgage must be

legally authorized for the purpose.2 Correspondingly, the burden
falls upon the bank to prove the authenticity and due execution
of the subject SPA.3

7.1.3 Generally, a notarized document carries the evidentiary weight

conferred upon it with respect to its due execution, and
documents acknowledged before a notary public have in their
favor the presumption of regularity which may only be rebutted
by clear and convincing evidence. However, the presumptions
that attach to notarized documents can be affirmed only so long
as it is beyond dispute that the notarization was regular.4

7.1.4 A defective notarization will strip the document of its public

character and reduce it to a private document. Hence, when there
is a defect in the notarization of a document, the clear and
convincing evidentiary standard normally attached to a duly-
notarized document is dispensed with, and the measure to test the
validity of such document is preponderance of evidence.5

7.1.5 In the present case, the plaintiff-appellee failed to show that the
subject SPA which it relied upon as proof of Burgos’ ostensible
authority to mortgage the entirety of the subject properties was
regularly notarized. Likewise, the trial court erred in relying on
the SPA without presentation of any evidence that the
notarization is regular.

7.1.6 Thus, having failed to sufficiently establish the regularity in the

execution of the SPA, the presumption of regularity accorded by
law to notarized documents can no longer apply and the

2 Rural Bank of Cabadbaran v. Melecio-Yap, G.R. No. 178451, July 30, 2014.
3 Tigno v. Sps. Aquino, 486 Phil. 254, 270 (2004).
4 Lazaro v. Agustin, G.R. No. 152364, April 15, 2010.
5 Meneses v. Venturozo, G.R. No. 172196, October 19, 2011.

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 questioned SPA is to be examined under the parameters of
Section 20, Rule 132 of the Rules of Court which provides that
"[b]efore any private document offered as authentic is received
in evidence, its due execution and authenticity must be proved
either (a) [b]y anyone who saw the document executed or
written, or (b) [b]y evidence of the genuineness of the signature
or handwriting of the maker."6

7.1.7 In the case at bar, plaintiff-appellee merely relied on the

presumption of authenticity and due execution accorded to a
notarized document, without presenting any other evidence to
bolster their case.

7.1.8 Finally, lacking any evidence that defendant-appellants have

legally authorized Burgos to mortgage the land as required by
Article 2085 of the said Code to constitute a valid mortgage, the
mortgage is void ab initio.

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Id.

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 RELIEF

WHEREFORE, defendants-appellants respectfully pray that the Decision

dated December 5, 2017, Annex “A,” of the trial court be set aside and
nullified, and judgment be rendered in favor of defendants-appellants as
prayed for in this petition, to wit:

1. Plaintiffs-Appellants are absolved from any liability under the

contract of loan obtained by Burgos from the Bataan Rural Bank;
2. Burgos is solely liable to pay Bataan Rural Bank the deficiency in
the amount of ₱9,000,000.00 plus legal interest from December 1,
2017;
3. The mortgage constituted by Burgos over the land is void ab initio.

Defendants-Appellants further pray for such other relief as may be just

and equitable in the premises.

City of Manila, Philippines, this 10th day of December 2017

JM Cruz
ATTY. JILLIAN MAE A. CRUZ
Counsel for Defendants-Appellants
Unit 2428 Amaia Residences, Sta. Mesa, Manila
IBP No. 101694; 01/10/10-Manila PTR No. 092294;
01/10/10-Manila Roll No. 080808; 5/05/05
MCLE No. I-001234; 9/09/18
MCLE No. II-005678; 12/09/18

APPENDIX “A”
(Certified True Copy of Judgment Appealed From)

THIS IS TO CERTIFY
THAT TWO (2) REGLEMENTARY
COPIES HAD BEEN SERVED PERSONALLY ON:

Ed C. Muros II
ATTY. ED C. MUROS II
Counsel for the Plaintiff-Appellee
Balanga, Bataan.