14 trial on the merits proceeded thereafter the

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Bundalo, meanwhile, was not served summons because he could no longer be found at his given address. 14 Trial on the merits proceeded. Thereafter, the Regional Trial Court of Cebu City, Branch 24, rendered its decision finding that Ursal is more credible than the Monesets and that the Monesets are liable for damages for fraud and breach of the contract to sell: The evidence of [Ursal] show that she was the first to acquire a substantial interest over the lot and house by virtue of the execution of the Contract to Sell (Exh. "A"). After the execution of Exh. "A" plaintiff took possession of the questioned lot and house…after she made a downpayment of 50,000.00. … [S]he paid the installments for six (6) months without fail. [However] plaintiff (stopped) paying the installment because defendant spouses failed to give her the Transfer Certificate of Title over the lot and house despite repeated demands. It is evident then that the first to violate the conditions of Exh. "A" were the defendants Spouses Moneset. This is the reason why plaintiff was not able to annotate Exh. "A" on the TCT. The evidence of plaintiff show that there was no intention on her part to discontinue paying the installments. In a reciprocal obligation, one cannot be compelled to do if the other party fails to do his part (Art. 1169, New Civil Code).
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The acts of defendant Spouses Moneset in selling again the lot and house in question to Dr. Canora by executing a Deed of Absolute Sale; in selling the same on pacto de retro to defendant Bundalo; and in mortgaging the same to defendant Rural Bank of Larena are plainly and clearly fraudulent because they were done while Exh. "A" was still existing and the transaction was done without notice to the plaintiff. As provided in Art. 1170 of the New Civil Code, those who are guilty of fraud in the performance of their obligation --- and those who in any manner contravene the tenor thereof, are liable for damages. Another ground for liability under this article is when there is fraud/deceit. In the instant case, there was fraud/deceit on the part of the defendant spouses Moneset when they executed the Deed of Sale to Dr. Canora; the Deed of Sale with Pacto de Retro to Bundalo and the Special Power of Attorney for Bundalo to execute for and in their behalf the Real Estate Mortgage with the Rural Bank of Larena knowing fully well that the Contract to Sell house and lot, Exh. "A" was still existing notwithstanding their violation to the provisions thereto. It is therefore crystal clear that defendant spouses Moneset are liable for damages. 15 As to the real estate mortgage, the trial court held that the same was valid and the Bank was not under any obligation to look beyond the title, although the present controversy could have been avoided had the Bank been more astute in ascertaining the nature of petitioner’s possession of the property, thus: The Real Estate Mortgage and the Foreclosure Proceedings cannot be considered null and void in the sense that per se the formalities required by law were complied with except for the fact that behind their execution there was fraud, deceit and bad faith on the part of defendant spouses Moneset and Bundalo.
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