Credit Txn Compilation of Case Digests

8/16/2019 Credit Txn Compilation of Case Digests

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NAGUIAT VS CA AND QUEAÑO412 SCRA 591

03 October 2003

Doctrine: A loan contract is a real contract, not consensual, and, as such, is perfectedonly upon the deliery of the ob!ect of the contract

FACTS:

"uea#o applied $ith %a&uiat a loan for '200,000, $hich the latter &ranted( %a&uiatindorsed to "uea#o Associated ban) Chec) %o( 090990 for the a*ount of '95,000 andissued also her o$n +il*anban) Chec) to the order of "uea#o for the a*ount of '95,000( he proceeds of these chec)s $ere to constitute the loan &ranted by %a&uiatto "uea#o( o secure the loan, "uea#o e-ecuted a .eed of Real /state ort&a&e infaor of %a&uiat, and surrendered the o$ners duplicates of titles of the *ort&a&ed

properties( he deed $as notaried and "uea#o issued to %a&uiat a pro*issory notefor the a*ount of '200,000( "uea#o also issued a postdated chec) a*ountin& to'200,000 payable to the order of %a&uait( he chec) $as dishonoured for insufficiencyof funds( .e*and $as sent to "uea#o( Shortly, "uea#o, and one Ruby Reubenfeldt*et $ith %a&uiat( "uea#o told %a&uiat that she did not receie the loan proceeds,addin& that the chec)s $ere retained by Reubenfeldt, $ho purportedly $as %a&uiatsa&ent(

%a&uiat applied for e-tra!udicial foreclosure of the *ort&a&e( RC declared the .eed asnull and oid and ordered %a&uiat to return to "uea#o the o$ners duplicates of titles of the *ort&a&ed lots(

ISSUE:

hether or not the issuance of chec) resulted in the perfection of the loan contract(

HELD:

he Court held in the ne&atie( %o eidence $as sub*itted by %a&uiat that the chec)sshe issued or endorsed $ere actually encashed or deposited( he *ere issuance of thechec)s did not result in the perfection of the contract of loan( he Ciil Code proidesthat the deliery of bills of e-chan&e and *ercantile docu*ents such as chec)s shallproduce the effect of pay*ent only $hen they hae been cashed( t is only after thechec)s hae been produced the effect of pay*ent that the contract of loan *ay haebeen perfected(

Article 1934 of the Ciil Code proides6 An accepted pro*ise to delier so*ethin& by$ay of co**odatu* or si*ple loan is bindin& upon the parties, but the co**odatu* or si*ple loan itsel shall not be perfected until the deliery of the ob!ect of the contract( Aloan contract is a real contract, not consensual, and as such, is perfected only upon the

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deliery of the ob!ects of the contract(

BPI INVESTMENT CORP. VS. COURT OF APPEALS7R %o( 133832

15 +ebruary 2002

Doctrine: A loan contract is not a consensual contract but a real contract( t is perfected onlyupon the deliery of the ob!ect of the contract( t is an accepted pro*ise to delier so*ethin& by$ay of si*ple loan(FACTS:

+ran) Roa obtained a loan $ith interest rate of 18 14:annu* fro* Ayalanest*ent and .eelop*ent Corporation ;A.C


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HELD: I/S( A++R/. ? O.+CAO% as to the a$ard of da*a&es( heobli&ation to pay co**enced only on October 13, 19@2, a *onth after the perfection of the contract( Contract of loan inoles a reciprocal obli&ation, $herein the obli&ation or pro*ise of each party is the consideration for that of the other( t is a basic principle in

reciprocal obli&ations that neither party incurs in delay, if the other does not co*ply or isnot ready to co*ply in a proper *anner $ith $hat is incu*bent upon hi*( ConseDuently, petitioner could only de*and for the pay*ent of the *onthlya*ortiation after Septe*ber 13, 19@2 for it $as only then $hen it co*plied $ith itsobli&ation under the loan contract( ='C $as ne&li&ent in relyin& *erely on the entriesfound in the deed of *ort&a&e, $ithout chec)in& and correspondin&ly ad!ustin& itsrecords on the a*ount actually released and the date $hen it $as released( Suchne&li&ence resulted in da*a&e for $hich an a$ard of no*inal da*a&es should be&ien

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CENTRAL BAN VS CA

!"# SCRA $%FACTS:

sland sain&s ban) approed the loan for '@0,000 of Sulpicoolentino( As security for the loan, he e-ecuted a real estate *ort&a&e oer his 100 hectare land in Cubo, as%iees, A&usan repayable in se*iannual install*ents for a period of 3 years, $ith 12:annual interest( A partial release of 1E,000 $as *ade by the ban)( Sulpico and his $ifeedita si&ned a pro*issory note for 1E,000 at 12: annual interest, payable $ithin 3years( he onetary =oard, after findin& sland Sain&s =an) $as sufferin& liDuidityproble*s and failin& to put up the reDuired capital to restore its colency, issued aresolution prohibitin& sland Sain&s =an) fro* doin& business in the 'hilippines( nie$ of the nonpay*ent of the 1E,000 coered by the pro*issory note, sland Sain&s=an) filed an application for the e-tra!udicial foreclosure of the real estate *ort&a&eand the Sheriff scheduled for auction( Sulpico filed a petition for in!unction, specificperfor*ance or rescission and da*a&es for the =an)s failure to delier the 83,000 andif said balance is not deliered, to rescind the real estate *ort&a&e(

RC6 Ordered Sulpico to pay sland sain&s =an) the a*ount of 1E,000 plus le&alinterest and le&al char&es due(

CA6 Affir*ed the dis*issal for specific perfor*ance but it ruled that sland Sain&s =an)can neither foreclose the real estate *ort&a&e nor collect the 1E,000

ISSUE: hether or not Sulpicio olentino is liable to pay the 1E,000 debt coered by thepro*issory note(

HELD:

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Ies( As far as the partial release of '1E,000(00, $hich Sulpicio ( olentino accepted ande-ecuted a pro*issory note to coer it, the ban) $as dee*ed to hae co*plied $ith itsreciprocal obli&ation to furnish a '1E,000(00 loan( he pro*issory note &ae rise to Sulpicio (olentinoGs reciprocal obli&ation to pay the '1E,000(00 loan $hen it falls due( ?is failure to paythe oerdue a*ortiations under the pro*issory note *ade hi* a party in default, hence notentitled to rescission ;Article 1191 of the Ciil Code


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On Au&ust 20, 19E0, /SSO infor*ed ?errera that there had been a *ista)e in the co*putation of theinterest and paid an additional su* of 2,1@2(E0J thus, it $as reduced to 9@, @2@(03(

As such, ?errera sued /SSO for the su* of 9@, @2@(03, $ith interest, clai*in& that this had been

ille&ally deducted to hi* in iolation of the Ksury a$(

/SSO ar&ued that a*ount deducted $as not usurious interest but rather a discount &ien to it for payin& the rentals in adance( Fud&*ent on the pleadin&s $as rendered in faor of /SSO( hus, the *atter $as eleated to the SC for an only Duestion of la$ $asinoled(

ISSUE: % the contract bet$een the parties is one of loan or lease(

HELD: Contract bet$een the parties is one of lease and not of loan( t is clearly deno*inated aL/AS/A7R///%(L %o$here in the contract is there any sho$in& that the parties intended a loan

rather than a lease( he proision for the pay*ent of rentals in adance cannot beconstrued as are pay*ent of a loan because there $as no &rant or forbearance of *oney as to constitute indebtedness on the part of the lessor( On the contrary, thedefendantappellee $as dischar&in& its obli&ation in adance by payin& the ei&ht yearsrentals and it $as for this adance pay*ent that it $as &ettin& a rebate or discount(

here is no usury in this case because no *oney $as &ien by the defendantappelleeto the plaintiffappellant, nor did it allo$ hi* to use its *oney already in hispossession( here $as neither loan nor forbearance but a *ere discount $hich theplaintiffappellant allo$ed the defendantappellee to deduct fro* the total pay*ents becausethey $ere bein& *ade in adance for ei&ht years( he discount $as in effect a reduction of the rentals$hich the lessor had the ri&ht to deter*ine, and any reduction thereof, by any a*ount, $ould notcontraene the Ksury a$

Pro&'cer( B)n* o+ t,e P,i-iine( /(. CA7(R( %o( 11532419 +ebruary 2003

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Doctrine:

=y the contract of loan, one of the parties deliers to another, either so*ethin& notconsu*able so that the latter *ay use the sa*e for a certain ti*e and return it, in $hichcase the contract is called a co**odatu*J or *oney or other consu*able thin&, upon

the condition that the sa*e a*ount of the sa*e )ind and Duality shall be paid, in $hichcase the contract is si*ply called a loan or *utuu*( Co**odatu* is essentially&ratuitous( Si*ple loan *ay be &ratuitous or $ith a stipulation to pay interest( nco**odatu*, the bailor retains the o$nership of the thin& loaned, $hile in si*ple loan,o$nership passes to the borro$er( he fore&oin& proision see*s to i*ply that if thesub!ect of the contract is a consu*able thin&, such as *oney, the contract $ould be a*utuu*( ?o$eer, there are so*e instances $here a co**odatu* *ay hae for itsob!ect a consu*able thin&( Article 1938 of the Ciil Code proides6 Consu*able &oods*ay be the sub!ect of co**odatu* if the purpose of the contract is not theconsu*ption of the ob!ect, as $hen it is *erely for e-hibition( hus, if consu*able&oods are loaned only for purposes of e-hibition, or $hen the intention of the parties is

to lend consu*able &oods and to hae the ery sa*e &oods returned at the end of theperiod a&reed upon, the loan is a co**odatu* and not a *utuu*(

FACTS:

>ies ;$ill be the creditor in this case< $as as)ed by his friend Sanche to help thelatters friend, .oronilla ;$ill be the debtor in this case< in incorporatin& .oronillasbusiness MStrelaN( his MhelpN basically inoled >ies depositin& a certain a*ount of *oney in Strelas ban) account for purposes of incorporation ;rationale6 .oronilla had tosho$ that he had sufficient funds for incorporationies( Relyin& on the assurances and representations of Sanche and .oronilla,>ies issued a chec) of '200,00 in faor of Strela and deposited the sa*e into Strelasne$lyopened ban) account ;the passboo) $as &ien to the $ife of >ies and thepassboo) had an instruction that no $ithdra$alsdeposits $ill be allo$ed unless thepassboo) is presentedies learned that Strela $as no lon&er holdin& officein the address preiously &ien to hi*( ?e later found out that the funds had alreadybeen $ithdra$n leain& only a balance of '90,000( he >ies spouses tried to $ithdra$the a*ount, but it $as unable to since the balance had to ans$er for certain postdatedchec)s issued by .oronilla( he latter *ade arious tenders of chec) in faor of >ies inorder to pay his debt( All of $hich $ere dishonored( ?ence, >ies filed an action for recoery of su* a&ainst .oronilla, Sanche, .u*a&pi and 'roducers =an)( he RCand CA ruled in faor of >ies(

ISSUE0S:

hether or not the transaction is a co**odatu* or a *utuu*(

HELD:

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he transaction is a co**odatu*( Article 1933 of the Ciil Code ;the proisiondistin&uishin& bet$een the t$o )inds of loans< see* to i*ply that if the sub!ect of thecontract is a consu**able thin&, such as *oney, the contract $ould be a *utuu*(?o$eer, there are instances $hen a co**odatu* *ay hae for its ob!ect aconsu**able thin&( Such can be found in CC 1938 $hich states that Mconsu**able

&oods *ay be the sub!ect of co**odatu* if the purpose of the contract is not theconsu*ption of the ob!ect, as $hen it is *erely for e-hibitionN( n this case, the intentionof the parties $as *erely for e-hibition( >ies a&reed to deposit his *oney in Strelasaccount specifically for purpose of *a)in& it appear that Streal had sufficientcapitaliation for incorporation, $ith the pro*ise that the a*ount should be returned$ithin 30 days(

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REPUBLIC OF THE PHILIPPINES /(. 1OSE V. BAGTAS7(R( %o( 1E4E425 October 1982

FACTS:

On @ ay 194@ Fose >( =a&tas borro$ed fro* the Republic of the 'hilippines throu&hthe =ureau ofAni*al ndustry three bulls6 a Red Sindhi $ith a boo) alue of '1,1E8(48,a =ha&nari, of '1,320(58 anda Sahini$al, of 'E44(48, for a period of one year fro* @ay 194@ to E ay 1949 for breedin& purposessub!ect to a &oern*ent char&e of breedin& fee of 10: of the boo) alue of the bulls( On E ay 1949 of the contract, theborro$er as)ed for a rene$al for another period of one year( ?o$eer, the Secretary of

A&riculture and %atural Resources approed a rene$al thereof of onlyone bull for another year fro* @ ay 1949 to E ay 1950 and reDuested the return of the other t$o(On 25 arch 1950 Fose >( =a&tas $rote to the .irector of Ani*al ndustry that he $ouldpay the alue ofthe three bulls( On 1E October 1950 he reiterated his desire to buy the*at a alue $ith a deduction ofyearly depreciation to be approed by the Auditor 7eneral(On 19 October 1950 the .irector of Ani*alndustry adised hi* that the boo) alue of the three bulls could not be reduced and that they either bereturned or their boo) aluepaid not later than 31 October 1950( Fose >( =a&tas failed to pay the boo)alue of thethree bulls or to return the*( On 20 .ece*ber 1950 in the Court of +irst nstanceofanila the Republic of the 'hilippines co**enced an action a&ainst hi* prayin& thathe be ordered toreturn the three bulls loaned to hi* or to pay their boo) alue in thetotal su* of '3,241(45 and theunpaid breedin& fee in the su* of '499(82( On 28 Fune1959, son of the appellant by the late defendant, returnedthe Sindhi and =ha&nari bullsto Ro*an Re*orin, Superintendent of the %>= Station, =ureau of Ani*alndustry,=ayo*bon&, %uea >icaya, as eidenced by a *e*orandu* receipt si&ned by thelatter( he appellant contends that the Sahini$al bull $as accidentally )illed durin& araid by the ?u)s in%oe*ber 1953 upon the surroundin& barrios of ?acienda+elicidadntal, =a&&ao, Ca&ayan, $here theani*al $as )ept, and that as such death$as due to force *a!eure she is relieed fro* the duty of thereturnin& the bull or payin&its alue to the appellee(

ISSUE:hether the estate of estate of Fose >( =a&tas liable for the bull that $as unreturned

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ALE1ANDRA MINA2 ET AL. /(. RUPERTA PASCUAL2 ET AL.7(R( %o( @32114 October 1913

FACTS:

+rancisco +ontanilla and Andres +ontanilla $ere brothers( +rancisco+ontanillaacDuired durin& his lifeti*e, a lot in the center of the to$n of aoa&, thecapital of the 'roince of locos%orte( ?e allo$ed his brother, Andres, to erect a

$arehouse in that lot( =oth +rancisco and Andres died and their children beca*e their respectie heirs6 Ale!andra ina for +rancisco and Ruperta'ascual for Andres( 'ascualsold his share of the $arehouse and lot to Cu Foco, the other defendant in this case(ina opposed because the lot is hers because her predecessor ;+rancisco< neer parted $ith its o$nership $hen he let Andres construct a $arehouse statin& that it $as acontract of co**odatu*(ISSUE:

hether or not the contract bet$een +rancisco +ontanilla and Andres +ontanilla is aco**odatu*(HELD:

%o( he Supre*e Court held that it $as not a co**odatu*( t is an essentialfeature of co**odatu* that the use of the thin& belon&in& to another shall be for acertain period(=y the contract of loan, one of the parties deliers to the other, either anythin& not perishable, in order that the latter *ay use it durin& the certain period andreturn it to the for*er, in $hich case it is calledcommodatum ( ( ( ;art( 1E40, Ciil Code


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REPUBLIC VS. GRI1ALDO!3 SCRA 3"%

Doctrine:he obli&ation to delier a deter*inate thin& does not e-tin&uish the obli&ation to pay acertain su* of *oney(

FACTS:7ri!aldo obtained fie loans fro* =an) of ai$an in =acolod City in the total su*

of '12@1 $ith interest rate of 8: per annu*( he loans are eidenced by fiepro*issory notes, all notes $ithout due dates because the loans $ere due one year after they $ere incurred( o secure the pay*ent of loans, the appellant e-ecuted achattel *ort&a&e on the standin& crop( =y irtue of tradin& $ith the ene*y act, theassets of the ban) $ere ested in the &oern*ent of Knited States( 'ursuant to the

'hilippine 'roperty Act, these assets includin& the loans in dispute $ere transferred tothe Republic of the 'hilippines( he 'hilippines *ade a $ritten e-tra!udicial de*andupon the appellant for the pay*ent of loan( Record sho$s that the appellant receiedthe $ritten de*and but failed to pay the sa*e( Appellee filed a co*plaint in the Fusticeof 'eace, to collect fro* the appellant the a*ount of '23EE( he latter dis*issed thecase on the &round of that the action has prescribed( C+ ordered the appellant to paythe loan(

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ISSUE:hether or not the appellee has no cause of action a&ainst the appellant

HELD:he Supre*e Court ruled in the positie( he court held that obli&ation of the

appellant $as not to delier a deter*inate thin& ;i(e( the crops to be harested fro* hisland< but rather his obli&ation $as to pay a &eneric thin& ;i(e( the a*ount of *oneyrepresentin& the total su* of fie loans $ith interest(

TAN VS. CA19 OCO=/R 2001

FACTS:

his is a petition for reie$( an obtained 2 loans, each for '2,000,000 fro* CC'( ane-ecuted a pro*issory note in a*ount of '3,411,421(32 $hich is payable in 5 install*ents( anfailed to pay any install*ent on the said restructured loan( an $rote a letter, reDuested andproposed to respondent CC' a *ode of payin& the restructured loan $hich are6 1< 20: of theprincipal a*ount of the loan upon the respondent &iin& its confor*ity to his proposal and 2<balance on the principal obli&ation is payable in 38 *onthly install*ents until fully paid( anreDuested for a *oratoriu* on his loan obli&ation until the follo$in& year alle&edly due to asubstantial deduction in the olu*e of his business and on account of the peso dealuation( %ofaorable response $as *ade to said letters and CC' de*anded full pay*ent, $ithin ten ;10<days fro* receipt of said letter '8,0@@,E35(03( CC' filed co*plaint collection of a su* of *oneyand an interposed the defense that he acco**odated a friend $ho as)ed for help to obtain a

loan fro* CC'( an clai*ed that he cannot find his friend $ho he helped( an filed aanifestation $herein he proposed to settle his indebtedness to CC' by do$n pay*ent of '140,000(00 and to issue 12 chec)s eery be&innin& of the year to coer install*ent pay*entsfor one year, and eery year thereafter until the balance is fully paid( CC' did not a&ree to thepetitioners proposals and so the trial of the case ensued(

ISSUES:

1< hether or not there are contractual and le&al basis for the i*position of the penalty, intereston the penalty and attorneys fees(

2< hether or not interest *ay accrue on the penalty or co*pensatory interest $ithout iolatin&

AR 19596MWithout prejudice to the provisions of Article 2212, interest due and unpaid shall not earn interest. However, the contracting parties may by stipulation capitalize the interest due and unpaid, which as added principal, shall earn new interest.

HELD:

1< Ies and $ith le&al basis on AR( 1228 of the Ciil Code( n the case at bar, pro*issorynote e-pressed the i*position of both interest and penalties in case of default on the

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part of the petitioner in the pay*ent of the sub!ect restructured loan(

'enalty co*e in *any for*s6 1< f the parties stipulate penalty apart *onetary interest, t$o aredifferent and distinct fro* each other and *ay be de*anded separately 2< f stipulation aboutpay*ent of an additional interest rate parta)es of the nature of a penalty clause $hich issanctioned by la$6 A< AR( 22096 f the obli&ation consists in the pay*ent of a su* of *oney,

and the debtor incurs in delay, the inde*nity for da*a&es, there bein& no stipulation to thecontrary, shall be the pay*ent of the interest a&reed upon, and in the absence of stipulation, thele&al interest, $hich is si- per cent per annu*(

n the case at bar6 'enalty char&e of 2: per *onth be&an to accrue fro* the ti*e of default bythe petitioner( %o doubt petitioner is liable for both the stipulated *onetary interest and thestipulated penalty char&e( 'enalty char&e is eDual to penalty or co*pensatory interest(

2< 'enalty clauses can be in the for* of penalty or co*pensatory interest(

hus, the co*poundin& of the penalty or co*pensatory interest is sanctioned by and allo$edpursuant to the aboeDuoted proision of Article 1959 of the %e$ Ciil Code considerin& that6here is an e-press stipulation in the pro*issory note per*ittin& the co*poundin& of interest( 1<5th para&raph of the said pro*issory note proides that6 MAny interest $hich *ay be due if notpaid shall be added to the total a*ount $hen due and shall beco*e part thereof, the $holea*ount to bear interest at the *a-i*u* rate allo$ed by la$(N 2


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TOLOMEO LIGUTAN )n& LEONIDAS DE LA LLANA /(. HON. COURT OF APPEALS 4SECURIT5 BAN 4 TRUST COMPAN5

7(R( %o( 13@8EE12 +ebruary 2002

DOCTRINE:

he Duestion of $hether a penalty is reasonable or iniDuitous can be partly sub!ectie andpartly ob!ectie( ts resolution $ould depend on such factors as, but not necessarily confined to,the type, e-tent and purpose of the penalty, the nature of the obli&ation, the *ode of breach andits conseDuences, the superenin& realities, the standin& and relationship of the parties, and theli)e, the application of $hich, by and lar&e, is addressed to the sound discretion of the court(

FACTS

'etitioners olo*eo i&utan and eonidas dela lana obtained on 11 ay 19@1 a loan inthe a*ount of '120,000(00 fro* respondent Security =an) and rust Co*pany( 'etitionerse-ecuted a pro*issory note bindin& the*seles, !ointly and seerally, to pay the su* borro$ed$ith an interest of 15(1@9: per annu* upon *aturity and to pay a penalty of 5: eery *onthon the outstandin& principal and interest in case of default( n addition, petitioners a&reed to pay10: of the total a*ount due by $ay of attorneys fees if the *atter $ere indorsed to a la$yer for collection or if a suit $ere instituted to enforce pay*ent( he obli&ation *aturedJ the ban)&ranted an e-tension but despite seeral de*ands fro* the ban), petitioners failed to settle thedebt( he ban) filed a co*plaint for recoery of the due a*ount(

'etitioners prayed for the reduction of the 5: stipulated penalty for bein&unconscionable( he ban), on the other hand, as)ed that the pay*ent of interest and penalty be

co**enced not fro* the date of filin& of co*plaint but fro* the ti*e of default as so stipulatedin the contract of the parties(

Considerin& that defendantsappellants partially co*plied $ith their obli&ation under thepro*issory note by the reduction of the ori&inal a*ount of '120,000(00 to '114,418(00 and inorder that they $ill finally settle their obli&ation, it is our ie$ and $e so hold that in the interestof !ustice and public policy, a penalty of 3: per *onth or 38: per annu* $ould suffice(

ISSUE

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hether or not the penalty of fie ;5:< percent per *onth is iniDuitous andunconscionable(

RULING

A penalty clause, e-pressly reco&nied by la$ is an accessory underta)in& to assu*e&reater liability on the part of an obli&or in case of breach of an obli&ation( t functions to

stren&then the coercie force of the obli&ation and to proide, in effect, for $hat could be theliDuidated da*a&es resultin& fro* such a breach( he obli&or $ould then be bound to pay thestipulated inde*nity $ithout the necessity of proof on the e-istence and on the *easure of da*a&es caused by the breach( Althou&h a court *ay not at liberty i&nore the freedo* of theparties to a&ree on such ter*s and conditions as they see fit that contraene neither la$ nor *orals, &ood custo*s, public order or public policy, a stipulated penalty, neertheless, *ay beeDuitably reduced by the courts if it is iniDuitous or unconscionable or if the principal obli&ationhas been partly or irre&ularly co*plied $ith(

n Rial Co**ercial =an)in& Corp( s( Court of Appeals, !ust an e-a*ple, the Court haste*pered the penalty char&es after ta)in& into account the debtors pitiful situation and its offer to settle the entire obli&ation $ith the creditor ban)( he stipulated penalty *i&ht li)e$ise be

reduced $hen a partial or irre&ular perfor*ance is *ade by the debtor( he stipulated penalty*i&ht een be deleted such as $hen there has been substantial perfor*ance in &ood faith bythe obli&or, $hen the penalty clause itself suffers fro* fatal infir*ity, or $hen e-ceptionalcircu*stances so e-ist as to $arrant it(

he Court of Appeals, e-ercisin& its &ood !ud&*ent in the instant case, has reduced thepenalty interest fro* 5: a *onth to 3: a *onth $hich petitioner still disputes( 7ien thecircu*stances, not to *ention the repeated acts of breach by petitioners of their contractualobli&ation, the Court sees no co&ent &round to *odify the rulin& of the appellate court(

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http://sc.judiciary.gov.ph/jurisprudence/1998/apr1998/128833.htmhttp://sc.judiciary.gov.ph/jurisprudence/1998/apr1998/128833.htmhttp://sc.judiciary.gov.ph/jurisprudence/1998/apr1998/128833.htm


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PACITA F. REFORMINA )n& HEIRS OF FRANCISCO REFORMINA/(.

THE HONORABLE VALERIANO P. TOMOL2 1R.2 )( 1'&7e o+ t,e Co'rt o+ Fir(tIn(t)nce2 Br)nc, 8I2 CEBU CIT52 SHELL REFINING COMPAN5 9PHILS.2 INC.2 )n&

MICHAEL2 INCORPORATED7(R( %o( 59098October 11, 19@5

FACTS:

'etitioners 'acita and +rancisoRefor*inafiled for anaction for Recoery of .a*a&es for in!ury to 'erson and oss of 'roperty a&ainst Shell and ichael, nc( to $hich a

!ud&*ent $as rendered in their faor( n the Resolution issued by respondent Fud&eo*ol, the le&al interest for the a$ard $as at the rate of si- percent ;8:< fro* the filin&of the co*plaint and this rate $as affir*ed on appeal to the Court of Appeals(

he decision beca*e final on October 24, 19@0 and the case $as re*anded to thelo$er court for e-ecution( n the co*putation of the Lle&al interestL decreed in the

!ud&*ent, petitioners clai* that the Lle&al interestL should be at the rate of t$ele ;12:<percent per annu*, ino)in& in support of their aforesaid sub*ission, Central =an) of the 'hilippines Circular %o( 418( Kpon the other hand, priate respondents insist thatsaid le&al interest should be at the rate of si- ;8:< percent per annu* only, pursuant to

Article 2209 of the %e$ Ciil Code in relation to Articles 2210 and 2211 under the sa*eCode(

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ISSUE:

hether the le&al interest allo$ed in !ud&e*ents referred to in Section 1 of Act %o(2855 or the Ksury a$ coers *onetary !ud&*ent arisin& fro* recoery of da*a&es for in!ury to person and loss of propertyJ hence, pursuant to Central =an) Circular %o( 418,

the le&al interest shall be 12:(

RULING:

!entral "an# !ircular $o. %1& prescribed that rate of interest for the loan or forbearance of any money, goods, or credits and the rate allowed in judgments, in theabsence of e'press contract as to such rate of interest, shall be twelve (12)* per cent

per annum. +he judgments spo#en of and referred to are udgments in litigationsinvolving loans or forbearance of any -money, goods or credits.

%o( Actin& pursuant to the authority &ranted under '. %o( 118, $hich a*ended Act %o

2855, the onetary =oard increased the rate of le&al interest fro* that of si- ;8:


20/82

BANCOFIIPINO VS. NAVARRO152 SCRA 348 ;19@E<

FACTS: +lorante del >alle obtained a loan secured by a real estate *ort&a&e fro* =anco+ilipino payable and to be a*ortied $ithin 15 years at 12: interest annually( On thepro*issory note, an escalation clause $as stipulated and states that .el >alleauthoried =anco +ilipino to increase the interest rate stipulated $ithout adance noticein the eent la$ should be enacted increasin& the la$ful rates of interest that *ay bechar&ed on this particular )ind of loan( Circular %o( 494$as issued and =anco +ilipinonotified del >alle that there $ould be an increase of interest rate on the loan fro* 12:

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to 1E: per annu*( =ecause of such increase, .el >alle filed a suit a&ainst =anco+ilipino prayin& that the escalation clause be declared null and oid and that =anco+ilipino be ordered to desist fro* enforcin& the increased rate of interest on the=orro$ers real estate loan( RC nullified the escalation clause and declared that itcannot le&ally i*pose a hi&her rate of interest before the e-piration of 15year period(

?ence this petition(

ISSUE: hether or not =anco +ilipino can increase interest rate on the loan fro* 12: to 1E:per annu* under the escalation clause(

HELD:

%o( it is clear fro* the stipulation bet$een the parties that interest rate *ay beincreased in the eent a la$ should be enacted increasin& the la$ful rate of interest that*ay be char&ed on this particular )ind of loan( he escalation clause $as dependent of

an increase of rate *ade by la$ alone( ?o$eer, Circular %o( 494, althou&h it has theeffect of la$ is not a la$ but an ad*inistratie re&ulation( /scalation clause to be alidshould proide6 1< that there can be an increase in interest if increased by la$ or byonetary =oardJ 2< it *ust include interest in the eent that the applicable *a-i*u*rate of interest is reduced by la$ or by *onetary =oard(

PNB VS. INTERMEDIATE APPELLATE COURT 4 SPOUSES FERMIN MAGSALANGAND ANTONIA SEDIGO

7R %o( E52231990

Doctrine: he /scalation Clause is a alid proision in the loan a&ree*ent proidedthat ;1< the increased rate i*posed or char&ed does not e-ceed the ceilin& fi-ed byla$ or the onetary =oardJ ;2< the increase is *ade effectie not earlier than theeffectiity of the la$ or re&ulation authoriin& such an increaseJ and ;3< the re*ainin&*aturities of the loans are *ore than E30 days as of the effectiity of the la$ or re&ulation authoriin& such an increase(

FACTS: 'etitioner, '%=, e-tended financial assistance to the priate respondents;a&salan& B Sedi&o< in the for* of loans, in total of '@2,8@2(39 as e*bodied in thepro*issory notes that the latter hae e-ecuted on arious dates fro* +ebruary 5, 19E8to ay 1@, 19E9, the pay*ent of $hich to co*e fro* the proceeds of su&ar sales of thepriate respondents( he pro*issory notes bore 12: interest per annu* plus 1:interest as penalty char&e in case of default in the pay*ents(

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Fanuary 18, 1989, the priate respondents *ort&a&ed seeral real estate properties infaor of the petitioner as security of their loans, $hich *ort&a&e $as a*ended on.ece*ber 1E, 1989, .ece*ber 22, 19E0 and +ebruary 12, 19E5, as to theconsideration thereof(.ece*ber 1, 19E9, the onetary =oard of the Central =an), by irtue of 'residential

.ecree %o( 118, issued C= Circular %o( E05 increasin& the ceilin& on the rate of intereston both secured and unsecured loans up to no *ore than 21: per annu*( n ie$ of this deelop*ent, the '%= =oard of .irectors reised its lendin& interest rates on the*ediu* and lon&ter* loans effectie Fune 1, 19@0, per '%= board resolution dateday 28, 19@0(he priate respondents defaulted in the pay*ents of their loans, the petitioner de*anded not only the settle*ent of their outstandin& obli&ation but also the pay*entof the ne$ interest rate of 21: per annu* be&innin& Fune 1, 19@0 per the '%= boardresolution(+or failure of the priate respondents to settle their obli&ation, then in the a*ount of '@4,E43(34, the petitioner foreclosed the *ort&a&e( Since the proceeds of the auction

sale, '83,000(00 $as not enou&h to satisfy priate respondentsG outstandin& obli&ation,the petitioner filed an action for deficiency !ud&*ent $ith the Court of +irst nstance of eyte a&ainst the priate respondents(rial Court ruled in faor of the '%=( Orderin& the defendants to pay the plaintiff thea*ount of '21,E43(34J said a*ount shall earn interest at 21 : per annu* and 3:penalty char&e startin& %oe*ber 2E, 19@1, until the $hole obli&ation is fully paidJ

Appellate Court affir*ed the decision of the trial court $ith *odification6 Orderin& thedefendants to pay the plaintiff the a*ount of '12,551(18 $hich shall earn interest at12: per annu* and 1: penalty char&e startin& %oe*ber 2E, 19@1 until fully paid('%= filed a petition at Supre*e Court $ith contention that pursuant to 'residential.ecree %o( 118, the onetary =oard issued Central =an) Circular %o( E05 on.ece*ber 1, 19E9, prescribin& the *a-i*u* rate of interest on loan transactions $ith*aturities of *ore than seen hundred thirty ;E30< days and shall not e-ceed t$entyone percent ;21:< per annu*( ?ence, the up$ard reision of interest rate as stipulatedin the 'ro*issory %otes and A*end*ent of Real /state ort&a&e dated +ebruary 12,19E5, is in accordance $ith 'residential .ecree %o( 118 pro*ul&ated on Fanuary 29,19E3 and Central =an) Circular %o( E05 issued on .ece*ber 1, 19E9, and thei*position of 21: rate of interest on the loan obli&ations of priate respondents is $ithinthe li*its prescribed by la$(

ISSUE: hether or not the reised rate of interest i*posed on the loans of the priaterespondents is le&al(

HELD: %o( here is no Duestion that '%= board resolution dated ay 28, 19@0contains such deescalation clause, under para&raph @ thereof, to $it6;@< o enable us to ad!ust interest rates in accordance $ith C= Circular letter of arch19, 19@0, the coerin& pro*issory note for all shortmediumlong terms loans shallinclude the follo$in& conditions6he =an) reseres the ri&ht to increase the interest rate $ithin the li*its allo$ed by la$or by the onetary =oard, provided , that the interest rate a&reed upon shall be reduced

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in the eent that the applicable *a-i*u* interest rate is reduced by la$ or by theonetary =oard6 rovided, further , that the ad!ust*ent in the interest rate shall ta)eeffect on or after the effectiity of the increase or increase in the *a-i*u* rate of interest(

Central =an) Circular %o( E05, authoriin& the increase fro* 12: to 21: $as issuedon .ece*ber 1, 19E9( he pro*issory notes e-ecuted by the priate respondents sho$that they are all payable on de*and but the records do not sho$ $hen pay*ent $asde*anded( /en &rantin& that it $as de*anded on the effectiity of la$, it is obiousthat the period of E30 days has not yet elapsed at the date the *ort&a&ed properties$ere sold at the public auction on %oe*ber 2E, 19@1 ;Certificate of SheriffGs Sale,Records of /-hibits, p( @45A6. ? $", over the objection of the private respondent, and without authority from the 4onetary "oard,within a period of only four (%* months, increased the 1@) interest rate on the privaterespondent-s loan obligation three (* timesB (a* to 2) in uly 10@%9 (b* to %1) in3ctober 10@%9 and (c* to %@) in $ovember 10@%. +hose increases were null and void.

Although


24/82

the contract Dto such increase within the rate allowed by law, as the "oard of irectorsof the 436+;A;55 may prescribeD (5'h. GFeF1* or Dwithin the limits allowed by lawD (romissory $otes, 5'hs. 2, , and %*, no laws was ever passed in uly to $ovember 10@% increasing the interest rates on loans or renewals thereof to 2), %1) and %@)(per annum*, and no documents were e'ecuted and delivered by the debtor to

effectuate the increases. +he $" relied on its own "oard 6esolution $o. &@1 (5'h.1/*, $" !ircular $o. %/FC0F@% (5'h. 1*, and $" !ircular $o. %/F120F@% (5'h. 1G*,but those resolution and circulars are neither laws nor resolutions of the 4onetary "oard.. 7.9 7.9 7.9 6543A8 3= E 8AW !5787$; 3$ 7$+565


25/82

on the priate respondentGs loan obli&ation three ;3< ti*es6 ;a< to 32: in Fuly 19@4J ;b<to 41: in October 19@4J and ;c< to 4@: in %oe*ber 19@4( hose increases $ere nulland oid( Althou&h Section 2, '(.( %o( 118 of Fanuary 29, 19E3, authories theonetary =oard to prescribe the *a-i*u* rate or rates of interest for loans or rene$althereof and to chan&e such rate or rates $heneer $arranted by preailin& econo*ic

and social conditions, it e-pressly proides that Lsuch chan&es shall not be *adeoftener than once eery t$ele *onths( Lf the onetary =oard itself $as not authoriedto *a)e such chan&es oftener than once a year, een less so *ay a ban) $hich issubordinate to the =oard(

PNB /. CA )n& FERNANDE;7R %o( 10E589

%oe*ber @, 1994

FACTS:

'riate respondents, $ho are o$ners of a %AC.Are&istered enterprise, obtained fro*petitioner '%= a loan initially pe&&ed at 12: per annu* interest( he contracta&ree*ent includes, a*on& others, a clause $hich allo$s '%= to raise the rate of interest dependin& on the ban)Gs future policies( .urin& the ter* of the a&ree*ent, '%=on seeral occasions i*posed subseDuent raises to the applicable rate ran&in& fro* theori&inal 12: up to 42:, i*posin& also a 8: penalty per annu*(

ISSUE:

Can a creditor raise the rate of interest based solely on a certain clause in the contractand $ithout consent fro* the debtor as to the a*ount and rate of increaseH

HELD:

%o( t is basic that there can be no contract in the true sense in the absence of theele*ent of a&ree*ent, or of *utual assent of the parties( f this assent is $antin& on the

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part of the one $ho contracts, his act has no *ore efficacy than if it had been doneunder duress or by a person of unsound *ind(

FLORENDO VS COURT OF APPEALS285 SCRA 8E@FACTS:

'etitioner 7ilda +lorendo $as an e*ployee of and =an) of the 'hilippines, herein respondent,for @ years( =efore her resi&nation, she applied on Fuly 20, 19@3for a housin& loan of '14@,000(00, payable $ithin 25 years fro* respondent ban)Gs'roident +und( On arch 19,19@5, the respondent increased the interest rate on petitionerGs loan fro* 9:per annu* to 1E:per annu* $hich too) effect on arch 19, 19@5( he details of the increase are stated in theban)s anCo* Resolution %o( @50@ dated arch 19, 19@5 and in 'roident +unde*orandu* Circular %o( @50@ Series of 19@5( he petitioners contested the increase but therespondent ban) )ept on de*andin& the petitionersto pay the increased interest or the ne$

*onthly install*ents based on the increased interest rate( .espite respondents de*and to paythe increased rate, the petitioners disre&arded it and re&ularly paid the ori&inal stipulatedinstall*ent of '1,24@(E2(he respondents de*and caused the petitioners to filea case for n!unction and .a*a&es(he rial Court ruled in faor of the respondent and held that the ban)$as ested $ith authority to increase the interest rate pursuant to the escalation proision of thehousin& loan and the *ort&a&e contract( 'etitioners appealed ar&uin& that the increased rate of interest is onerous and unilateral since it $as $ithout the consent of the petitioners( herespondent court affir*ed the decision of the trial court, statin& that a*on& the salientproisions of the *ort&a&e is para&raph ;f< $hich proides that the interest rate shall be sub!ect,durin& the ter* of the loan, to such increasesdecreases as *ay be allo$ed under the preailin&rules andor circulars of the Central =an) and as the 'roident +und of the =an) *ay prescribefor its borro$ers and that the spouses a&reed to the escalation of the interest rate on their

ori&inal loan( Such an a&ree*ent is a contractual one and the spouses are bound by it(

ISSUE:

hether the respondent ban) has a alid and le&al basis to i*pose an increased interest rateon the petitioners housin& loan(

HELD:

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%o( he court held that theretroactie enforce*ent of the anCo* Resolution as a&ainstpetitionere*ployee is inalid since in the case at bar, there is in fact no Central =an) rule,re&ulation or other issuance $hich $ould hae tri&&ered an application of the escalation clauseas to petitioners factual situation(he loan $as perfected on Fuly 20, 19@3( '. %o( 118 beca*eeffectie on Fanuary 29, 19E3( C= Circular %o( 418 $as issued on Fuly 29, 19E4( C= Circ( 504$as issued +ebruary 8, 19E8( C= Circ( E08 $as issued .ece*ber 1, 19E9( C= Circ( 905, liftin&

any interest rate ceilin& prescribed under or pursuant to the Ksury a$, as a*ended, $aspro*ul&ated in 19@2( hese and other releant C= issuances had already co*e into e-istenceprior to the perfection of the housin& loan a&ree*ent and *ort&a&e contract, and thus it *ay besaid that these re&ulations had been ta)en into consideration by the contractin& parties $henthey first entered into their loan contract( anCo* Resolution %o( @50@, $hich is neither a rulenor a resolution of the onetary =oard, cannot be used as basis for the escalation in lieu of C=issuances, since para&raph ;f< of the *ort&a&e contract ery cate&orically specifies that anyinterest rate increase be in accordance $ith Mpreailin& rules, re&ulations and circulars of theCentral =an) ( ( ( as the 'roident +und =oard ( ( ( *ay prescribe(N

AURELIO G. BRIONES V. PRIMITIVO CAMMA5O7R %o( 23559October 4, 19E1

DOCTRINE:he Ksury a$ penalies any person or corporation $ho, for any loan or

rene$al thereof or forbearance, shall collect or receie a hi&her rate or &reater su* or alue than is allo$ed by la$, and proides further that, in such case, the debtor *ay recoer the $hole interest, co**issions, pre*iu*s, penalties and surchar&es paidor deliered, $ith costs and attorneyGs fees, in an appropriate action a&ainst his creditor,$ithin t$o ;2< years after such pay*ent or deliery(

FACTS: Aurelio 7( =riones filed an action in the unicipal Court of anila a&ainst

'ri*itio, %icasio, 'edro, ?ilario and Arte*io, all surna*ed Ca**ayo, to recoer fro*the*, !ointly and seerally, the a*ount of ' 1,500(00, plus da*a&es, attorneyGs fees andcosts of suit( .efendants e-ecuted the real estate *ort&a&e as security for the loan of '1, 200(00 &ien to 'ri*itio '( Ca**ayo upon the usurious a&ree*ent that defendantpays to the plaintiff, out of the alle&ed loan of '1, 500(00 ;$hich includes the interest of the su* of ' 300


28/82

%o( oan is alid but usurious interest is oid( Creditor has the ri&ht to recoer hiscapital by !udicial action( o discoura&e stipulations on usurious interest, saidstipulations are treated as $holly oid, so that the loan beco*es one $ithout stipulationas to pay*ent of interest( t should not, ho$eer, be interpreted to *ean forfeiture eenof the principal, for this $ould un!ustly enrich the borro$er at the e-pense of the lender(

+urther*ore, penal sanctions are aailable a&ainst a usurious lender, as a further deterrence to usury(n si*ple loan $ith stipulation of usurious interest, the prestation of the

debtor to pay the principal debt, $hich is the cause of the contract ;Article 1350,Ciil Code


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Ghe Ksury a$, as construed by this court, per*its the creditor torecoer the principal but not the stipulated usurious interest( his could$ell be ta)en to *ean a forfeiture of the ri&ht to any interest so as not, toarrie at a contradiction in ter*s( %eertheless, the court has fallen intothe habit in cases of this character of allo$in& the creditor the le&al rate of

interest on the !ud&*ent fro* the date of the filin& of the co*plaint(G

he ob!ection of 'C= $hich $as &rounded on Article 1253 of the Ciil Code$hich proides that -7f the debt produces interest, payment of the principal shall not bedeemed to have been made until the interests have been covered $as ruled by theCourt to be un*eritorious(

LETICIA 5. MEDEL2 DR. RAFAEL MEDEL )n& SERVANDO FRANCO /(. CA7(R( %o( 131822

%oe*ber 2E, 199@

FACTS:

Serando +ranco and eticia edel ;hereafter Serando and eticia< obtained a loan fro*>eronica R( 7onales ;hereafter >eronicaeronica another loan in the a*ount of '90,000(00, payable in t$o*onths, at 8: interest per *onth( hey e-ecuted a pro*issory note to eidence the loan,*aturin& on Fanaury 19, 19@8( hey receied only '@4,000(00, out of the proceeds of theloan(On *aturity of the t$o pro*issory notes, the borro$ers failed to pay theindebtedness(Serando and eticia secured fro* >eronica still another loan in the a*out of '300,000(00, *aturin& in one *onth, secured by a real estate *ort&a&e oer a propertybelon&in& to eticia a)alintalIaptinchay, $ho issued a special po$er of attorney in faor of eticia edel, authoriin& her to e-ecute the *ort&a&e( Serando and eticia e-ecuted apro*issory note in faor of >eronica to pay the su* of '300,000(00, after a *onth, or on Fuly11, 19@8( ?o$eer, only the su* of '2E5(000(00, $as &ien to the* out of the proceeds of the

loan(Serando and edel failed to pay the third loan on *aturity( Serando and eticia $ith thelatterGs husband, .r( Rafael edel, consolidated all their preious unpaid loans totalin&'440,000(00, and sou&ht fro* >eronica another loan in the a*ount of '80,000(00, brin&in&their indebtedness to a total of '500,000(00$ith interest thereon at the rate of 5(5 '/R C/%per *onth plus 2: serice char&e per annu* fro* date hereof until fully paid accordin& to thea*ortiation schedule, payable on Au&ust 23, 19@8( hey e-ecuted a pro*issory note, statesthat pay*ent $ill be *ade in full at the *aturity date(Should they fail to pay any a*ortiation or portion hereof $hen due, a&ree to pay an additional a*ount eDuialent to one per cent ;1:< per *onth of the a*ount due and de*andable as penalty char&es in the for* of liDuidated

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da*a&es until fully paidJ and the furthersu* of /%I +>/ '/R C/% ;25:< thereof infull, $ithout deductions as Attorney-s =ee $hether actually incurred or not, of the total a*ountdue and de*andable, e-clusie of costs and !udicial or e-tra !udicial e-penses(

+urther a&ree that in the eent the present rate of interest on loan is increased by la$ or theCentral =an) of the 'hilippines, the holder shall hae the option to apply and collect theincreased interest char&es $ithout notice althou&h the ori&inal interest hae already beencollected $holly or partially unless the contrary is reDuired by la$ and a&ree that the a*ount of pesoobli&ation under a&ree*ent is based on the present alue of the peso, and if there be anychan&e in the alue thereof, due to e-traordinary inflation or deflation, or any other cause or reason, then the pesoobli&ation contracted shall be ad!usted in accordance $ith the alue of the peso then preailin& at the ti*e of the co*plete fulfill*ent of the obli&ation(

1( On *aturity of the loan, the borro$ers failed to pay the indebtedness of '500,000(00,plus interests and penalties(

2( >eronica R( 7onales, !oined by her husband .anilo 7( 7onales, filed $ith theRe&ional rial Court of =ulacana co*plaint for collection of the full a*ount of the loanincludin& interests and other char&es(

3( Serando alle&ed that he did not obtain any loan fro* the plaintiffsJ that it $as eticiaand .r( Rafael edel $ho borro$ed fro* the plaintiffs the su* of '500,000(00, andactually receied the a*ount and benefited therefro*J that the loan $as secured by a

real estate *ort&a&e e-ecuted in faor of the plaintiffs, and that he si&ned thepro*issory note only as a $itness(

4( eticia and Rafael edel alle&ed that the loan $as the transaction of eticia Iaptinchay,$ho e-ecuted a *ort&a&e in faor of the plaintiffs oer a parcel of real estate J that theinterest rate is e-cessie at 5(5: per *onth $ith additional serice char&e of 2: per annu*, and penalty char&e of 1: per *onthJ that the stipulation for attorneyGs fees of 25: of the a*ount due is unconscionable, ille&al and e-cessie, and that substantialpay*ents *ade $ere applied to interest, penalties and other char&es(

5( o$er court declared that the due e-ecution and &enuineness of the four pro*issorynotes had been duly proed, and ruled that althou&h the Ksury a$ had been repealed,the interest char&ed by the plaintiffs on the loans $as unconscionable and Lreoltin& tothe conscienceL( ?ence, the trial court applied Lthe proision of the %e$ PCiilQ CodeLthat the Lle&al rate of interest for loan or forbearance of *oney, &oods or credit is 12:per annu*(L

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8( Court of Appeals ruled that Lthe Ksury a$ hain& beco*e Gle&ally ine-istentG $ith thepro*ul&ation by the Central =an) in 19@2 of Circular %o( 905, the lender and borro$er could a&ree on any interest that *ay be char&ed on the loanL(+urther held that Lthei*position of Gan additional a*ount eDuialent to 1: per *onth of the a*ount due andde*andable as penalty char&es in the for* of liDuidated da*a&es until fully paidG $asallo$ed by la$L( 10

ISSUE:

hether or not the stipulated rate of interest at 5(5: per *onth on the loan in the su* of '500,000(00, that plaintiffs e-tended to the defendants is usurious(

RULING61( SC a&ree $ith petitioners that the stipulated rate of interest at 5(5: per *onth on the

'500,000(00 loan is e-cessie, iniDuitous, unconscionable and e-orbitant( 13 ?o$eer,$e can not consider the rate LusuriousL because this Court has consistently held that

Circular %o( 905 of the Central =an), adopted on .ece*ber 22, 19@2, has e-presslyre*oed the interest ceilin&s prescribed by the Ksury a$ 14 and that the Ksury a$ isno$ Lle&ally ine-istentL( 15

2( %eertheless, SC find the interest at 5(5: per *onth, or 88: per annu*, stipulatedupon by the parties in the pro*issory note iniDuitous or unconscionable, and, hence,contrary to *orals ;Lcontra bonos *oresL


32/82

On Au&ust 25, 19E8, Ale!o Sanche sued eodoro Sanche and eonor Santilles in theunicipal Court of =ato, Ca*arines Sur, for the recoery of '2,000(00 $hich the latter had pro*ised to pay in t$o notes( Said notes also contained stipulations for interest atthe rate of 10: per *onth he unicipal Court rendered !ud&*ent orderin& eodoro

Sanche only to pay to Ale!o Sanche '2,000(00 plus interest thereon at the le&al ratefro* the filin& of the co*plaint(

ISSUE:

hether in loan contracts $here it is found that the interest is usurious renders theentire contract oid, i(e(, both the principal and the interest(

HELD:

%o, only $ith respect to interest, in that case, le&al interest rate shall apply(

t is no$ $ellsettled that6 Lthe Ksury a$ ;Act %o( 2855


33/82

FACTS:On Fanuary 31, 19E@, petitioner +C &ranted respondent /ste del Sol a loan of

'E,3@5,500(00 to finance the construction and deelop*ent of the /ste del Sol

ountain Resere, a sportsresort co*ple- pro!ect located at =arrio 'uray, ontalban,Rial(Knder the ter*s of the oan A&ree*ent, the proceeds of the loan $ere to bereleased on sta&&ered basis( nterest on the loan $as pe&&ed at si-teen ;18:< percentper annu* based on the di*inishin& balance( he loan $as payable in thirtysi- ;38<eDual and consecutie *onthly a*ortiations to co**ence at the be&innin& of thethirteenth *onth fro* the date of the first release in accordance $ith the Schedule of

A*ortiation( And in case of default, an acceleration clause shall be applied and thea*ount due shall be sub!ect to a t$enty ;20:< percent oneti*e penalty( Such a*ountshall also bear interest at the hi&hest rate per*itted by la$ fro* the date of default untilfull pay*ent thereof plus liDuidated da*a&es at the rate of t$o ;2:< percent per *onthco*pounded Duarterly on the unpaid balance and accrued interests to&ether $ith all the

penalties, fees, e-penses or char&es thereon until the unpaid balance is fully paid, plusattorneyGs fees eDuialent to t$entyfie ;25:< percent of the su* sou&ht to berecoered, $hich shall not be less than '20,000(00 if the serices of a la$yer $erehired( n accordance $ith the ter*s of the oan A&ree*ent, respondent /ste del Sole-ecuted seeral docu*ents as security for pay*ent such as ;a< Real /state ort&a&einclusie of all i*proe*ents, as $ell as all the *achineries, eDuip*ent, furnishin&s andfurnitures e-istin& thereonJ and ;b< indiidual Continuin& Suretyship a&ree*ents byherein corespondents to &uarantee the pay*ent of all the obli&ations of respondent/ste del Sol up to the a&&re&ate su* of 'E,500,000(00 each(

As proided for by the loan a&ree*ent, Respondent /ste del Sol also e-ecuted,an Knder$ritin& A&ree*ent in faor of petitioner +C for the public offerin& of respondent /ste del SolGs capital stoc) for a cost of ' 200,000( n addition, it also statedthat respondent /ste del Sol shall pay petitioner +C an annual superision fee of '200,000(00 per annu* for a period of four ;4< consecutie years( A consultancya&ree*ent fee a*ountin& to '332,500(00 per annu* $as also e-ecuted( ater on,respondent /ste del Sol failed to *eet the schedule of repay*ent, thus he incurred atotal obli&ation of'12,8E9,830(9@( .espite de*ands *ade by the petitioner, therespondent failed to co*ply( ConseDuently, petitioner +C caused the e-tra!udicialforeclosure of the real estate *ort&a&e( At the public auction, petitioner +C $as thehi&hest bidder of the *ort&a&ed properties for '9,000,000(00( he proceeds of the sale$ere applied to the principal obli&ation, interest and penalties incurred by the petitioner(=ut the sa*e $as not enou&h, thereby leain& a balance of '8,@83,29E(E3( +ailin& tosecure fro* the sureties of the loan of respondent , petitioner instituted the instantcollection suit a&ainst the respondents to collect the alle&ed deficiency balance of '8,@83,29E(E3 plus interest thereon at t$entyone ;21:< percent per annu* fro* Fune24, 19@0 until fully paid, and t$entyfie ;25:< percent thereof as and for attorneyGs feesand costs(

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ISSUES:

1( hether the under$ritin& and consultancy a&ree*ents are *ere subterfu&es toca*oufla&e the usurious interest char&edL by the petitioner(

2( hether the loan a&ree*ent referrin& to stipulated penalties, liDuidated da*a&esand attorneyGs fees is Le-cessie, iniDuitous and unconscionable(

RULING:

1( he court held that an apparently la$ful loan is usurious $hen it is intended thatadditional co*pensation for the loan be dis&uised by an ostensibly unrelatedcontract proidin& for pay*ent by the borro$er for the lenderGs serices $hich are of little alue or $hich are not in fact to be rendered, such as in the instant case(

Accordin&ly, the facts sho$s that the Knder$ritin& and Consultancy A&ree*ents$hich $ere e-ecuted and deliered conte*poraneously $ith the oan A&ree*ent$ere e-acted by petitioner +C as essential conditions for the &rant of the loan( nusurious loans, the entire obli&ation does not beco*e oid because of ana&ree*ent for usurious interestJ the unpaid principal debt still stands and re*ainsalid but the stipulation as to the usurious interest is oid, conseDuently, the debt isto be considered $ithout stipulation as to the interest( hus, the nullity of thestipulation on the usurious interest does not affect the lenderGs ri&ht to receie bac)the principal a*ount of the loan( ith respect to the debtor, the a*ount paid asinterest under a usurious a&ree*ent is recoerable by hi*, since the pay*ent isdee*ed to hae been *ade under restraint, rather than oluntarily(

2( he court held that the stipulated penalties, liDuidated da*a&es and attorneyGs fees,e-cessie, iniDuitous and unconscionable and reoltin& to the conscience as theyhardly allo$ the borro$er any chance of surial in case of default( Attorneys feesas proided in penal clauses are in the nature of liDuidated da*a&es( So lon& assuch stipulation does not contraene any la$, *orals, or public order, it is bindin&upon the parties( %onetheless, courts are e*po$ered to reduce the a*ount of attorneys fees if the sa*e is iniDuitous or unconscionable( n the case at bar, thea*ount of 3,1@@,830(E5 for the stipulated attorneyGs fees eDuialent to t$entyfie;25:< percent of the alle&ed a*ount due is *anifestly e-orbitant andunconscionable( hus the appellate court that a reduction of the attorneyGs fees to

ten ;10:< percent is appropriate and reasonable under the facts and circu*stancesof this case(

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SOLANGON VS. SALA;AR7(R( %o( 125944

Fune 29, 2001

DOCTRINE:hile the Ksury a$ ceilin& on interest rates $as lifted by Central =an) ;C(=(< Circular %o( 905, nothin& in the said circular &rants lenders carte blanche authority to raiseinterest rates to leels $hich $ill either enslae their borro$ers or lead to ahe*orrha&in& of their assets(

A stipulated interest rate of 8: per *onth or E2: per annu* is definitely outra&eousand inordinatean interest of 12: per annu* is dee*ed fair and reasonable(FACTS:On Au&ust 22, 19@8, the plaintiffs spouses .anilo and Krsula Solan&on e-ecuted adeed or real estate *ort&a&e in $hich they *ort&a&ed a parcel of land situated in Sta(aria, =ulacan, in faor of the defendantappellee, to secure pay*ent of a loan of '80,000(00 payable $ithin a period of four ;4< *onths, $ith interest thereon at the rateof 8: per *onth( hereafter, the plaintiffs e-ecuted t$o deeds of real estate *ort&a&efor the sa*e parcel of land to the defendantappellee( One to secure pay*ent of a loanof '138,512(00, payable $ithin a period of one ;1< year $ith interest at the le&al rate(

And the other $as to secure pay*ent of a loan in the a*ount of '230,000(00 payable$ithin a period of four ;4< *onths, $ith interest thereon at the le&al rate (+or their alle&ed failure to pay the loan '230,000(00 plus interest, defendant Salaar initiated foreclosure proceedin&s(ConseDuently, plaintiffs initiated an action to preent the foreclosure of the *ort&a&edproperty( hey alle&ed that they obtained only one loan fro* the defendant and that $asfor the a*ount of '80,000(00, the pay*ent of $hich $as secured by the first of theaboe*entioned *ort&a&es( he subseDuent *ort&a&es $ere *erely continuations of the first one, $hich is null and oid because it proided for unconscionable rate of interest( oreoer, the defendant assured the* that he $ill not foreclose the *ort&a&eas lon& as they pay the stipulated interest upon *aturity or $ithin a reasonable ti*ethereafter( hey clai*ed to hae already paid the defendant 'E@,000(00 and tendered'4E,000(00 *ore, but the latter has initiated foreclosure proceedin&s for their alle&edfailure to pay the loan '230,000(00 plus interest(

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On the other hand, the defendant Fose Aelino Salaar clai*ed that the aboedescribed *ort&a&es $ere e-ecuted to secure three separate loans of '80,000(00,'138,512(00 and '230,000(00, and that the first t$o loans $ere paid, but the last one,$as not( ?e denied hain& represented that he $ill not foreclose the *ort&a&e as lon&as the plaintiffsappellants pay interest(

he trial courtdid not &ie credence to petitioners corroborated testi*ony and ruled thatthe testi*ony is i*probable as the real estate *ort&a&e $as si&ned not only by KrsulaSolan&on but also by her husband includin& the 'ro*issory %ote appended to it(Si&nin& a docu*ent $ithout )no$in& its contents is contrary to co**on e-perienceJhence, the uncorroborated testi*ony of Krsula Solan&on cannot be &ien $ei&ht(he Court of Appeals affir*ed the trial courts rulin& andsustained the stipulatedinterest rate of E2: per annu* or 8: per *onth for the unpaid a*ount ;'138,512(00<ratiocinatin& that since the Ksury a$ had been repealed by Central =an) Circular %o(905 there is no *ore *a-i*u* rate of interest and the rate $ill !ust depend on the*utual a&ree*ent(ISSUE:

hether or not stipulated interest rate of E2: per annu* or 8: per *onth is iniDuitous,e-orbitant and unconscionable(RULING:Ies( hile the Ksury a$ ceilin& on interest rates $as lifted by C(=( Circular %o( 905,nothin& in the said circular &rants lenders carte blanche authority to raise interest ratesto leels $hich $ill either enslae their borro$ers or lead to a he*orrha&in& of their assets( n edel ( Court of Appeals, this Court had the occasion to rule on this Duestion$hether or not the stipulated rate of interest at 5(5: per *onth on a loan a*ountin&to '500,000(00 is usurious( hile decreein& that the afore*entioned interest $as notusurious, this Court held that the sa*e *ust be eDuitably reduced for bein& iniDuitous,unconscionable and e-orbitant(n the case at bench, petitioners stand on a $orse situation( hey are reDuired to paythe stipulated interest rate of 8: per *onth or E2: per annu* $hich is definitelyoutra&eous and inordinate( Surely, it is *ore consonant $ith !ustice that the said interestrate be reduced eDuitably( An interest of 12: per annu* is dee*ed fair and reasonable(

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CA AGRO


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PEOPLE VS. ONG=>$ SCRA #$=

FACTS: Accused .ic) On& $as one of the depositors of the ?o*e Sain&s =an) and rust Co*pany inits Aurea Anne- =ranch at Rial Aenue, Sta( Cru, anila, hereafter, to be referred to as the=an)(

ithout his chec) under&oin& the usual and re&la*entary ;sic< clearance, $hich nor*ally ta)esabout fie $or)in& days, .ic) On& $as allo$ed to $ithdra$ fro* his sain&s account $ith the

=an) the su* of '5,000(00( he correspondin& $ithdra$al slip $as si&ned and approed byino orfe, then the =ranch ana&er, and accused ucilaalabis, the =ranch Cashier(

hat initial transaction $as follo$ed by other si*ilar transactions $here .ic) On&, upondepositin& chec)s in his sain&s account $ith the =an), $as allo$ed to $ithdra$ a&ainst thoseuncleared chec)s and uncollected deposits(

On the other hand, accused ucilaalabis ad*itted that she approed the $ithdra$als of theaccusedappellant a&ainst uncleared chec)s( ?o$eer, she e-plained that her approal thereof $as in accordance $ith the instruction of then ban) *ana&er ino orfeJ that thisacco**odation &ien or e-tended to the accusedappellant had been &oin& on een before shestarted &iin& the sa*e acco**odationJ that this $as co**on practice in the ban)J that sheapproed those $ithdra$als to&ether $ith one other ban) official, na*ely, either the ban)*ana&er, the ban) accountant, the other ban) cashier, or the ban) assistant cashierJ and thatthey reported those $ithdra$als a&ainst, and the dishonor of, the sub!ect chec)s al$ayssendin& copies of their reports to the head office(

Accused Ricardo >illaran testified on his behalf that the accusedappellant $as able to $ithdra$a&ainst his uncleared chec)s because of the acco**odations e-tended to hi* by ban) officialsino orfe, coaccused ucilaalabis, 7race Silao, 'recySala*at, and Cora 7asconJ that thispractice of dra$in& a&ainst uncollected deposits $as a co**on practice in branches of the=an)(

ISSUE:hether the ban) deposit is in the nature of re&ular deposit(HELD:%O(Re&ardin& the second part of the first ele*ent of Article 315, para&raph 2;d< of theReised 'enal Code, the accusedappellant alle&es that $hen he deposited the sub!ectchec)s in his sain&s account, it $as clearly not in pay*ent of an obli&ation to the =an)(he Office of the Solicitor 7eneral *isses this point of the accusedappellant(

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=an) deposits are in the nature of irre&ular deposits( hey are really loans because theyearn interest( All )inds of ban) deposits, $hether fi-ed, sain&s, or current are to betreated loans and are to be coered by the la$ on loans(

TEOFISTO GUINGONA, JR., ET AL. VS. THE CITY FISCAL OF MANILA, ET AL.

12@

DOCTRINE:

"an# deposits are in the nature of irregular deposits, they are really loansbecause they earn interest. All #inds of ban# deposits, whether fi'ed,savings, or current are to be treated as loans and are to be covered by thelaw on loan. !urrent and saving deposits, are loans to a ban# because it can use the same. While the "an# has the obligation to return the amount deposited, it has, however, no obligation to return or deliver the same

money that was deposited. And, the failure of the "an# to return theamount deposited will not constitute estafa through misappropriation but it will only give rise to civil liability over which the public respondents havenoF jurisdiction.

FACTS:

=rom 4arch 2/, 10C0 to 4arch, 10@1, private respondent avid, together with hissister, enise :uhne, invested with the $ation


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invested his money on time and savings deposits with the $


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FACTS:

Rialdy ( shornac) and his $ife *aintained in CORKS a dollar sain&s accountand a peso current account( An application for a dollar drat $as acco*plished by >ir&illo7arcia branch *ana&er of CORKS payable to a certain eoi&ilda .ion( n the

''Ction, 7arcia indicated that the a*ount $as to be char&ed to the dolar sain&saccount of the shornac)s( here $asa no indication of the na*e of the purchaser of the dollar draft( Co*trust issued a chec) payable to the order of .ion( henshornac) noticed the $ithdra$al fro* his account, he de*anded an e-plainaiton fro*the ban)( n its ans$er, Co*trust clai*ed that the peso alue of the $ithdra$al $as&ien to Atty( /rnesto shornac), brother of Rialdy( hen he encashed $ithCORKS a cashiers chec) for '@450 issued by the *anila ban)in& corporationpayable to /rnesto(

ISSUE:

hether the contract bet$een petitioner and respondent ban) is a depositH

HELD:

he docu*ent $hich e*bodies the contract states that the KS3,000(00 $as receiedby the ban) for safe)eepin&( he subseDuent acts of the parties also sho$ that theintent of the parties $as really for the ban) to safely )eep the dollars and to return it toshornac) at a later ti*e( hus, shornac) de*anded the return of the *oney on ay10, 19E8, or oer fie *onths later(

he aboe arran&e*ent is that contract defined under Article 1982, %e$ Ciil Code,

$hich reads6 Art( 1982( A deposit is constituted fro* the *o*ent a person receies a thin& belon&in&to another, $ith the obli&ation of safely )eepin& it and of returnin& the sa*e( f thesafe)eepin& of the thin& deliered is not the principal purpose of the contract, there isno deposit but so*e other contract(

BAN OF THE PHILIPPINE ISLANDS VS. COURT OF APPEALS232 SCRA 302AI 10, 1994

DOCTRINE: Article 19@0 of the Ciil Code e-pressly proides that LPfQi-ed, sain&s, and currentdeposits of *oney in ban)s and si*ilar institutions shall be &oerned by the proisionsconcernin& si*ple loan(L n


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FACTS:

'riate respondents /astern 'ly$ood Corporation and =eni&no i* as officer of thecorporation, had an MA%.ORN !oint account $ith Co**ercial =an) and rust Co;C=Celasco and i*(

ean$hile, a !udicial settle*ent of the estate of >elasco ordered the $ithdra$al of thebalance of the account of >elasco and i*(

Assertin& that the ?oldout A&ree*ent proides for the security of the loan obtained by/astern and that it is the duty of C=C to debit the account of respondents to set off thea*ount of 'E3,000 coered by the pro*issory note, =' filed the instant petition for recoery( 'riate respondents /astern and i*, ho$eer, assert that the a*ountdeposited in the !oint account of >elasco and i* ca*e fro* /astern and thereforeri&htfully belon& to /astern andor i*( Since the ?oldout A&ree*ent coers the loan of 'E3,000, then petitioner can only hold that a*ount a&ainst the !oint chec)in& accountand *ust return the rest(ISSUE: hether =' can de*and the pay*ent of the loan despite the e-istence of the?oldout A&ree*ent and $hether =' is still liable to the priate respondents on theaccount sub!ect of the $ithdra$al by the heirs of >elasco(RULING: Ies, for both issues( Re&ardin& the first, the ?oldout A&ree*ent conferred onC=C the po$er, not the duty, to set off the loan fro* the account sub!ect of the

A&ree*ent( hen =' de*anded pay*ent of the loan fro* /astern, it e-ercised itsri&ht to collect pay*ent based on the pro*issory note, and disre&arded its option under the ?oldout A&ree*ent( herefore, its de*and $as in the correct order(

Re&ardin& the second issue, =' $as the debtor and /astern $as the creditor $ithrespect to the !oint chec)in& account( herefore, =' $as obli&ed to return the a*ountof the said account only to the creditor( hen it allo$ed the $ithdra$al of the balance of the account by the heirs of >elasco, it *ade the pay*ent to the $ron& party( he la$proides that pay*ent *ade by the debtor to the $ron& party does not e-tin&uish itsobli&ation to the creditor $ho is $ithout fault or ne&li&ence( herefore, =' $as stillliable to the true creditor, /astern(

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MANUEL M. SERRANO /(. CENTRAL BAN OF THE PHILIPPINES

7(R( %o( 30511

+ebruary 14, 19@0

FACTS:Serrano *ade a ti*e deposit, for one year $ith 8: interest, of '150,000(00 $ith the Oerseas=an) of anila( Concepcion ane!a also *ade a ti*e deposit, for one year $ith 8(5: interestof '200,000(00 $ith the sa*e ban)( ane!a, *arried to +eli-berto ( Serrano, assi&ned andconeyed to anuel ( Serrano, her ti*e deposit( Serrano *ade a series of encash*ent but$as not successful( ?e filed a case a&ainst Oerseas =an) and included the Central =an) sothat the latter *ay also be !ointly and seerally liable( Serrano ar&ued that the C= failed to

superise the acts of Oerseas =an) and protect the interests of its depositors by irtue of constructie trust by irtue of the constructie trust created $hen respondent Central =an)reDuired the other respondent to increase its collaterals for its oerdrafts said e*er&ency loans,said collaterals alle&edly acDuired throu&h the use of depositors *oney(

ISSUE: hether or not the Central =an) is !ointly and seerally liable( T %O(

RULING:

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=an) deposits are in the nature of irre&ular deposits( hey are really loans because they earninterest( All )inds of ban) deposits, $hether fi-ed, sain&s, or current are to be treated as loansand are to be coered by the la$ on loans( Current and sain&s deposit are loans to a ban)because it can use the sa*e( he petitioner here in *a)in& ti*e deposits that earn interests$ith respondent Oerseas =an) of anila $as in reality a creditor of the respondent =an) andnot a depositor( he respondent =an) $as in turn a debtor of petitioner( +ailure of he

respondent =an) to honor the ti*e deposit is failure to pay s obli&ation as a debtor and not abreach of trust arisin& fro* depositaryGs failure to return the sub!ect *atter of the deposithe petition is dis*issed for lac) of *erit, $ith costs a&ainst petitioner(

LUA IAN VS. MANILA RAILROAD COMPAN5 AND MANILA PORT SERVICES19 SCRA 5

198E

FACTS:

ua ian i*ported 2,000 cases of Carnation il) fro* San +rancisco, California( hesaid &oods $ere shipped and subseDuently dischar&ed to anila 'ort Serice(?o$eer, only 1@29 of the 2,000 cases $ere receied by anila 'ort Serice on behalf of ua ian( +ro* the sa*e essel, 3,1E1 cases of Carnation il) $ere dischar&ed toanila 'ort Serice for the account of Cebu Knited /nterprise despite the fact that thebill of ladin& proides for only 3,000 cases(

ua ian filed a suit a&ainst the anila 'ort Serice for the undeliered &oods( anila'ort Serices on the other hand contends that it actually deliered 1,913 cases to ua

ian $hen it $as bound to delier 1,@29( hus, it has een oerdeliered(

ISSUE:

hether anila 'ort Serice as an Arrastre Operator is liable to ua ian

HELD:

Althou&h it is true, that Arrastre Operators are e-e*pted fro* responsibility for *isdeliery or nondeliery due to i*proper or insufficient *ar)in&, anila 'ort Sericecannot ino)e such since it is clear fro* the =ill of adin& that 2,000 cases has to be

deliered to ua ian and 3,000 cases to Cebu Knited /nterprise( he fact that thee-cess of 1E1 cases $ere *ar)ed for Cebu Knited /nterprises and that theconsi&n*ent to ua ian $as 1E1 cases less than the 2,000 in the bill of ladin&, shouldhae been sufficient reason for the defendant anila 'ort Serice to $ithhold the &oodspendin& deter*ination of their ri&htful o$nership(

he le&al relationship bet$een an ArrastreOperator and the consi&nee is a)in to that of a depositor and $arehouse*an( As custodian of the &oods dischar&ed fro* the essel,

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it $as Arrastre OperatorGs duty, li)e that of any ordinary depositary, to ta)e &ood care of the &oods and to turn the* oer to the party entitled to their possession( Knder thisparticular set of circu*stances, said defendant should hae $ithheld deliery becauseof the discrepancy bet$een the bill of ladin& and the *ar)in&s and conducted its o$ninesti&ation, not unli)e that under Section 1@ of the arehouse Receipts a$, or called

upon the parties, to interplead, such as in a case under Section 1E of the sa*e la$, inorder to deter*ine the ri&htful o$ner of the &oods(

ANGEL 1AVELLANA /(. 1OSE LIM2 ET AL7(R( %o( 4015

Au&ust 24, 190@

FACTS: A docu*ent $as e-ecuted in faor of plaintiffappellee An&el Faellana and defendantsFose and Ceferino .o*in&o i*( Such docu*ent states that they receied *oney fro*plaintiff, as a deposit, and a&reed that they $ill return it on the stipulated date $ithoutinterest( On the due date, the defendants as)ed for an e-tension to return the *oney$ith interest, $hich plaintiffappellee acceded( .efendants, upon de*and of plaintiffappellee, $ere still not able to furnish hi* the a*ount of their indebtedness(

ISSUE: hether the a&ree*ent entered by into by the parties is one of loan or deposit(

RULING: he transaction entered into by the parties is a contract of loan(he debtors $ere la$fully authoried to *a)e use of the a*ount deposited, $hich theyhae done, as subseDuently sho$n $hen as)in& for an e-tension of the ti*e for thereturn thereof, inas*uch as, ac)no$led&in& that they hae sub!ected the latter, their creditor, to losses and da*a&es for not co*plyin& $ith $hat had been stipulated, andbein& conscious that they had used, for their o$n profit and &ain, the *oney that theyreceied apparently as a deposit, they en&a&ed to pay interest to the creditor fro* thedate na*ed until the ti*e $hen the refund should be *ade( Such conduct on the part of the debtors is unDuestionable eidence that the transaction entered into bet$een the

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interested parties $as not a deposit, but a real contract of loan( Article 1C&C of the !ivil !ode provides that ?he depository can not *a)e use of the thin& deposited $ithout the e-press per*issionof the depositor(Other$ise he shall be liable for losses and da*a&es(

Article 1C&@ also provides that ?hen the depository has per*ission to *a)e use of the thin& deposited, the contractloses the character of a deposit and beco*es a loan or bail*ent(he per*ission shall not be presu*ed, and its e-istence *ust be proen(

SPOUSES TIRSO VINTOLA AND LORETA D5VS INSULAR BAN OF ASIA AND AMERICA9IBAA

150 SCRA 5E@

DOCTRINE: he entruster does not beco*e the real o$ner of the &oods but *erely the

holder of a security title for the adances *ade under the etter of Credit( t $as *erelythe holder of a security title for the adances it had *ade to the >%OAS( he &oodsthe >%OAS had purchased throu&h =AA financin& re*ain their o$n property andthey hold it at their o$n ris)(

FACTS:'etitioner spouses >intola o$ns and *ana&es *anufacturin& of ra$ seashells

into finished products, under their business na*e, .a- )in nternational( hey appliedfor do*estic letter of credit by respondent nsular =an) of Asia and A*erica $hich $as&ranted( hen, e-ecuted a rust Receipt A&ree*ent $ith nsular ban) stipulatin& thatthe >intolas shall hold the &oods in trust for =AA( ?ain& defaulted in its pay*ent, the>intolas offered to return the &oods to =AA, but the latter refused( .ue to their continued refusal, =AA char&ed the* $ith estafa( he Court acDuitted the >intolas(

ISSUE:hether or not =AA beca*e the real o$ners of the &oods held in trust by the

>intolas(

RULING:

%o( nsular ban) of Asia and A*erica did not beco*e the holder or realo$ner of the &oods( he >intolas retained o$nership of the &oods( heCourt held that the trustreceipt arran&e*ent did not conert the =AA intoan inestor, it re*ained a lender andcreditor( Knder the la$, a trust receipt is a docu*ent $herein the entrustee bindshi*self to hold thedesi&nated &oods, docu*ents or instru*ents in trust for the entruster to sell or other$ise dispose of the &oods, to the a*ount o$in& to the entruster(

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SAURA IMPORT 4 E8PORT CO.2 INC. VS. DBP44 SCRA 4452E April 9E2

FACTS:

Saura applied to the Rehabilitation +inance Corporation ;R+C


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here $as undoubtedly offer and acceptance in the case( hen an application for aloan of *oney $as approed by resolution of the respondent corporation and therespondin& *ort&a&e $as e-ecuted and re&istered, there arises a perfected consensualcontract(

BONNEVIE VS. CAOctober 24, 19@3

FACTS:

Spouses Fose ( oano and Fosefa '( oano secured their loan of 'E5 fro*'hilippine =an) of Co**erce ;'=C< by *ort&a&in& their property( hey e-ecuted .eedof Sale $ith *ort&a&e to ?onesto =onneie $here 'E5 is payable to '=C and '25 ispayable to Spouses anano( ?onesto =onneie paid a total of '1@,944(22 to '=Cand assi&ned all his ri&hts under the .eed of Sale $ith Assu*ption of ort&a&e to hisbrother, interenor Raoul =onneie( On Fune 10, 198@, '=C applied for the foreclosureof the *ort&a&e, and notice of sale $as published hence, he filed in the C+ of Riala&ainst 'hilippine =an) of Co**erce for the annul*ent of the .eed of ort&a&e dated.ece*ber 8, 1988 as $ell as the e-tra!udicial foreclosure *ade on Septe*ber 4, 198@(he C+ dis*issed the co*plaint $ith costs a&ainst the =onneies $hich the CAaffir*ed(

ISSUE: % the foreclosure on the *ort&a&e is alidly e-ecuted(

HELD:

I/S( A contract of loan bein& a consensual contract is perfected at the sa*e ti*e thecontract of *ort&a&e $as e-ecuted( he pro*issory note e-ecuted on .ece*ber 12,1988 is only an eidence of indebtedness and does not indicate lac) of consideration of the *ort&a&e at the ti*e of its e-ecution(

Respondent =an) had eery ri&ht to rely on the certificate of title( t $as not bound to &obehind the sa*e to loo) for fla$s in the *ort&a&orGs title, the doctrine of innocentpurchaser for alue bein& applicable to an innocent *ort&a&ee for alue(

hru certificate of sale in faor of appellee $as re&istered on Septe*ber 2, 198@ andthe one year rede*ption period e-pired on Septe*ber 3, 1989( t $as not untilSepte*ber 29, 1989 that ?onest =onneie first $rote respondent and offered to redee*the property(

oan *atured on .ece*ber 28, 198E so $hen respondent =an) applied for foreclosure,the loan $as already si- *onths oerdue( 'ay*ent of interest on Fuly 12, 198@ doesnot *a)e the earlier act of '=C ineDuitous nor does it ipso facto result in the rene$al of the loan( n order that a rene$al of a loan *ay be effected, not only the pay*ent of the

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accrued interest is necessary but also the pay*ent of interest for the proposed period of rene$al as $ell( =esides, $hether or not a loan *ay be rene$ed does not solelydepend on the debtor but *ore so on the discretion of the ban)(

CENTRAL BAN V COURT OF APPEALS7(R( %O( 45E1003 October 19@5

FACTS:

sland Sain&s =an), upon faorable reco**endation of its le&al depart*ent, approed the

loan application for '@0,000(00 of Sulpicio ( olentino, $ho, as a security for the loan,e-ecuted on the sa*e day a real estate *ort&a&e oer his 100hectare land located in Cubo,as %iees, A&usan( he loan called for a lu*p su* of '@0,000, repayable in se*iannualinstall*ents for 3 yrs, $ith 12: annual interest( After the a&ree*ent, a *ere '1E partialrelease of the loan $as *ade by the ban) and olentino and his $ife si&ned a pro*issory notefor the '1E,000 at 12: annual interest payable $in 3 yrs( An adance interest $as deducted fr the partial release but this prededucted interest $as refunded to olentino after bein& infor*edthat there $as no fund yet for the release of the '83 balance(

onetary =oard of Central =an), after findin& that ban) $as sufferin& liDuidity proble*s,prohibited the ban) fr *a)in& ne$ loans and inest*ents( And after the ban) failed to restore itssolency, the Central =an) prohibited sland Sain&s =an) fro* doin& business in the

'hilippines( sland Sain&s =an) in ie$ of the nonpay*ent of the '1E filed an application for foreclosure of the real estate *ort&a&e( olentino filed petition for specific perfor*ance or rescission and da*a&es $ith preli*inary in!unction, alle&in& that since the ban) failed to delier '83, he is entitled to specific perfor*ance and if not, to rescind the real estate *ort&a&e(

ISSUES: 1< hether or not olentinos can collect fro* the ban) for da*a&es

2< hether or not the *ort&a&or is liable to pay the a*ount coered by the

pro*issory note(

3< hether or not the real estate *ort&a&e can be foreclosed

HELD:

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1< hether or not olentinos can collect fro* the ban) for da*a&es

he loan a&ree*ent i*plied reciprocal obli&ations( hen one party is $illin& and ready toperfor*, the other party not ready nor $illin& incurs in delay( hen olentino e-ecuted realestate *ort&a&e, he si&nified $illin&ness to pay( hat ti*e, the ban)s obli&ation to furnish the'@0 loan accrued( %o$, the Central =an) resolution *ade it i*possible for the ban) to furnish

the '83 balance( he prohibition on the ban) to *a)e ne$ loans is irreleant bec it did notprohibit the ban) fr releasin& the balance of loans preiously contracted( nsolency of debtor isnot an e-cuse for nonfulfill*ent of obli&ation but is a breach of contract(

he ban)s as)in& for adance interest for the loan is i*proper considerin& that the total loanhasnt been released( A person cant be char&ed interest for none-istin& debt( he alle&eddiscoery by the ban) of oeraluation of the loan collateral is not an issue( he ban) officialsshould hae been *ore responsible and the ban) bears ris) in case the collateral turned out tobe oeralued( +urther*ore, this $as not raised in the pleadin&s so this issue cant be raised(he ban) $as in default and olentino *ay choose bet specific perfor*ance or rescission $da*a&es in either case( =ut considerin& that the ban) is no$ prohibited fr doin& business,specific perfor*ance cannot be &ranted( Rescission is the only re*edy left, but the rescission

shld only be for the '83 balance(

2< hether or not the *ort&a&or is liable to pay the a*ount coered by the pro*issory note

he pro*issory note &ae rise to Sulpicio ( olentinos reciprocal obli&ation to pay the'1E,000(00 loan $hen it falls due( ?is failure to pay the oerdue a*ortiations under thepro*issory note *ade hi* a party in default, hence not entitled to rescission ;Article 1191 of theCiil Code

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