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RURAL BANK OF CALOOCAN VS CA, G.R NO. 32116 APRIL 21,1981

FACTS: On December 7,1959 respondent Maxima Castro together with Severino Valencia they went to the rural bank of Caloocan to apply for an industrial loan in the amount of P3,000.00 each of them and mortgaged the house and lot of Mrs Castro and also they executed a promissory note in favor of the bank. On February 13,1961 the subject property was a subject of sheriff sale but was postponed due to the request of Castro and Valencia with the consent of the bank and was scheduled on April 10,1961 which was a special holiday but the auction continued in the amount of P6,000.00 prompting Mrs Castro o filed a case against the bank for the recovery of her property . ISSUE: Whether or not the promissory note executed by Mrs Castro is valid or not? HELD: Supreme court declare the promissory note valid between the bank and Castro and the mortgage contract binding on Castro beyond the amount of P3,000.00 for while contracts may not be in may not be invalidated insofar as they affect the bank and Castro on the ground of fraud because the bank was not a participant thereto suc may however be invalidated on the ground of substantial mistake mutually committed bt them as a consequence of the fraud and misrepresentation inflicted by the Valencias. Wherefore finding no irreversible error in the judgment under review. We affirmed the same in toto.

DIGESTED BY : JIM LUTON