Digest

People v. Concepcion
G.R. No. 19190 (November 29, 1922)
FACTS:
Defendant authorized an extension of credit in favor of Concepcion, a copartnership. Defendants wife was a director of this co-partnership. Defendant was found guilty of
violating Sec. 35 of Act No. 2747 which says that The National Bank shall not, directly or indirectly,
grant loans to any of the members of the Board of Directors of the bank nor to agents of the branch
banks. This Section was in effect in 1919 but was repealed in Act No. 2938 approved on January
30, 1921.
ISSUE:
W/N Defendant can be convicted of violating Sections of Act No. 2747, which were repealed
by Act No. 2938.
HELD:
In the interpretation and construction, the primary rule is to ascertain and give effect to the
intention of the Legislature. Section 49 in relation to Sec. 25 of Act No. 2747 provides a punishment
for any person who shall violate any provisions of the Act. Defendant contends that the repeal of
these Sections by Act No. 2938 has served to take away basis for criminal prosecution. The Court
holds that where an act of the Legislature which penalizes an offense repeals a former act which
penalized the same offense, such repeal does not have the effect of thereafter depriving
the Courts of jurisdiction to try, convict and sentence offenders charged with violations of the old law.
HERRERA vs PETROPHIL CORP.
[G.R. No. L-48349, December 29, 1986]
CRUZ, J.
FACTS:

On December 5, 1969, Herrera and ESSO Standard, (later substituted by Petrophil Corp.,) entered into a
lease agreement, whereby the former leased to the latter a portion of his property for a period of 20yrs.
subject to the condition that monthly rentals should be paid and there should be an advance payment of
rentals for the first eight years of the contract, to which ESSO paid on December 31, 1969. However,
ESSO deducted the amount of 101, 010.73 as interest or discount for the eight years advance rental.

On August 20, 1970, ESSO informed Herrera that there had been a mistake in the computation of the
interest and paid an additional sum of 2,182.70; thus, it was reduced to 98, 828.03.

As such, Herrera sued ESSO for the sum of 98, 828.03, with interest, claiming that this had been
illegally deducted to him in violation of the Usury Law.

ESSO argued that amount deducted was not usurious interest but rather a discount given to it for paying
the rentals in advance. Judgment on the pleadings was rendered in favor of ESSO. Thus, the matter was
elevated to the SC for only questions of law was involve.

ISSUE: W/N the contract between the parties is one of loan or lease.
RULING:

Contract between the parties is one of lease and not of loan. It is clearly denominated a "LEASE
AGREEMENT." Nowhere in the contract is there any showing that the parties intended a loan rather
than a lease. The provision for the payment of rentals in advance cannot be construed as a repayment of
a loan because there was no grant or forbearance of money as to constitute an indebtedness on the part
of the lessor. On the contrary, the defendant-appellee was discharging its obligation in advance by paying
the eight years rentals, and it was for this advance payment that it was getting a rebate or discount.

There is no usury in this case because no money was given by the defendant-appellee to the plaintiffappellant, nor did it allow him to use its money already in his possession. There was neither loan nor
forbearance but a mere discount which the plaintiff-appellant allowed the defendant-appellee to deduct
from the total payments because they were being made in advance for eight years. The discount was in
effect a reduction of the rentals which the lessor had the right to determine, and any reduction thereof,
by any amount, would not contravene the Usury Law.

The difference between a discount and a loan or forbearance is that the former does not have to be
repaid. The loan or forbearance is subject to repayment and is therefore governed by the laws on usury.

To constitute usury, "there must be loan or forbearance; the loan must be of money or something
circulating as money; it must be repayable absolutely and in all events; and something must be exacted
for the use of the money in excess of and in addition to interest allowed by law."

It has been held that the elements of usury are (1) a loan, express or implied; (2) an
understanding between the parties that the money lent shall or may be returned; that for
such loan a greater rate or interest that is allowed by law shall be paid, or agreed to be
paid, as the case may be; and (4) a corrupt intent to take more than the legal rate for the
use of money loaned. Unless these four things concur in every transaction, it is safe to affirm that no
case of usury can be declared.

Saura vs DBP
Facts: Saura Inc. applied to the Rehabilitation Finance Corp (before its conversion to
DBP) for a loan of 500k secured by a first mortgage of the factory building to finance
for the construction of a jute mill factory and purchase of factory implements. RFC

accepted and approved the loan application subject to some conditions which Saura
admitted it could not comply with. Without having received the amount being loaned,
and sensing that it could not at anyway obtain the full amount of loan, Saura Inc. then
asked for cancellation of the mortgage which RFC also approved. Nine years after the
cancellation of the mortgage, Saura sued RFC for damages for its non-fulfillment of
obligations arguing that there was indeed a perfected consensual contract between
them.
Issue: Was there a perfected consensual contract?
Was there a real contract of loan which would warrant recovery of damages arising out
of breach of such contract?
Held: On the first issue, yes, there was indeed a perfected consensual contract, as
recognized in Article 1934 of the Civil Code. There was undoubtedly offer and
acceptance in this case: the application of Saura, Inc. for a loan of P500,000.00 was
approved by resolution of the defendant, and the corresponding mortgage was
executed and registered. But this fact alone falls short of resolving the second issue and
the basic claim that the defendant failed to fulfill its obligation and the plaintiff is
therefore entitled to recover damages. The action thus taken by both partiesSaura's
request for cancellation and RFC's subsequent approval of such cancellationwas in the
nature of mutual desistance what Manresa terms "mutuo disenso" which is a mode
of extinguishing obligations. It is a concept derived from the principle that since mutual
agreement can create a contract, mutual disagreement by the parties can cause its
extinguishment. In view of such extinguishment, said perfected consensual contract to
deliver did not constitute a real contract of loan.

Credit Transactions Case Digest: BPI

Investment Corp V. CA (2002)
G.R. No. 133632 February 15, 2002
Lessons Applicable: Simple Loan
Laws Applicable:
Facts:

Frank Roa obtained a loan with interest rate of 16 1/4%/annum from Ayala Investment and
Development Corporation (AIDC), the predecessor of BPI Investment Corp. (BPIIC), for the

construction of a house on his lot in New Alabang Village, Muntinlupa.

He mortgaged the house and lot to AIDC as security for the loan.

1980: Roa sold the house and lot to ALS Management & Development Corp. and Antonio
Litonjua for P850K who paid P350K in cash and assumed the P500K indebtness of ROA with
AIDC.

AIDC proposed to grant ALS and Litonjua a new loan for P500K with interested rate
of 20%/annum and service fee of 1%/annum on the outstanding balance payable within 10 years
through equal monthly amortization of P9,996.58 and penalty interest of 21%/annum/day from

the date the amortization becomes due and payable.

March 1981: ALS and Litonjua executed a mortgage deed containing the new stipulation with

the provision that the monthly amortization will commence on May 1, 1981
August 13, 1982: ALS and Litonjua paid BPIIC P190,601.35 reducing the P500K principal

loan to P457,204.90.
September 13, 1982: BPIIC released to ALS and Litonjua P7,146.87, purporting to be what

was left of their loan after full payment of Roas loan

June 1984: BPIIC instituted foreclosure proceedings against ALS and Litonjua on the
ground that they failed to pay the mortgage indebtedness which from May 1, 1981 to June 30,

1984 amounting to P475,585.31

August 13, 1984: Notice of sheriff's sale was published
February 28, 1985: ALS and Litonjua filed Civil Case No. 52093 against BPIIC alleging that
they are not in arrears and instead they made an overpayment as of June 30, 1984 since the
P500K loan was only released September 13, 1982 which marked the start of the amortization
and since only P464,351.77 was released applying legal compensation the balance

of P35,648.23 should be applied to the monthly amortizations

RTC: in favor of ALS and Litonjua and against BPIIC that the loan granted by BPI to ALS and
Litonjua was only in the principal sum of P464,351.77 and awarding moral damages, exemplary

damages and attorneys fees for the publication

CA: Affirmed reasoning that a simple loan is perfected upon delivery of the object of the
contract which is on September 13, 1982

ISSUE: W/N the contract of loan was perfected only on September 13, 1982 or the
second release of the loan?
HELD: YES. AFFIRMED WITH MODIFICATION as to the award of damages. The award of
moral and exemplary damages in favor of private respondents is DELETED, but the
award to them of attorneys fees in the amount of P50,000 is UPHELD. Additionally,
petitioner is ORDERED to pay private respondents P25,000 as nominal damages. Costs
against petitioner.

obligation to pay commenced only on October 13, 1982, a month after the

perfection of the contract

contract of loan involves a reciprocal obligation, wherein the obligation or
promise of each party is the consideration for that of the other. It is a basic principle

in reciprocal obligations that neither party incurs in delay, if the other does not
comply or is not ready to comply in a proper manner with what is incumbent upon
him. Consequently, petitioner could only demand for the payment of the monthly
amortization after September 13, 1982 for it was only then when it complied with its

obligation under the loan contract.

BPIIC was negligent in relying merely on the entries found in the deed of
mortgage, without checking and correspondingly adjusting its records on the
amount actually released and the date when it was released. Such negligence

resulted in damage for which an award of nominal damages should be given

SSS where we awarded attorneys fees because private respondents were
compelled to litigate, we sustain the award of P50,000 in favor of private

respondents as attorneys fees

Central Bank vs CA

The banks asking for advance interest for the loan is improper
considering that the total loan hasnt been released. A person cant be
charged interest for nonexisting debt. The alleged discovery by the
bank of overvaluation of the loan collateral is not an issue. Since Island
Savings

Bank

failed

to

furnish

the

P63,000.00

balance

of

the

P80,000.00 loan, the real estate mortgage of Sulpicio M. Tolentino

became unenforceable to such extent.
Facts: Island Savings Bank, upon favorable recommendation of its legal department,
approved the loan application for P80,000.00 of Sulpicio M. Tolentino, who, as a security for
the loan, executed on the same day a real estate mortgage over his 100-hectare land
located in Cubo, Las Nieves, Agusan. The loan called for a lump sum of P80,000, repayable
in semi-annual installments for 3 yrs, with 12% annual interest. After the agreement, a mere
P17K partial release of the loan was made by the bank and Tolentino and his wife signed a
promissory note for the P17,000 at 12% annual interest payable w/in 3 yrs. An advance
interest was deducted fr the partial release but this prededucted interest was refunded to
Tolentino after being informed that there was no fund yet for the release of the P63K
balance.
Monetary Board of Central Bank, after finding that bank was suffering liquidity problems,
prohibited the bank fr making new loans and investments. And after the bank failed to
restore its solvency, the Central Bank prohibited Island Savings Bank from doing business
in the Philippines. Island Savings Bank in view of the non-payment of the P17K filed an

application for foreclosure of the real estate mortgage. Tolentino filed petition for specific
performance or rescission and damages with preliminary injunction, alleging that since the
bank failed to deliver P63K, he is entitled to specific performance and if not, to rescind the
real estate mortgage.

Issues: 1) Whether or not Tolentinos can collect from the bank for damages
2) Whether or not the mortgagor is liable to pay the amount covered by the
promissory note
3) Whether or not the real estate mortgage can be foreclosed
Held:
1) Whether or not Tolentinos can collect from the bank for damages
The loan agreement implied reciprocal obligations. When one party is willing and ready to
perform, the other party not ready nor willing incurs in delay. When Tolentino executed real
estate mortgage, he signified willingness to pay. That time, the banks obligation to furnish
the P80K loan accrued. Now, the Central Bank resolution made it impossible for the bank to
furnish the P63K balance. The prohibition on the bank to make new loans is irrelevant bec it
did not prohibit the bank fr releasing the balance of loans previously contracted. Insolvency
of debtor is not an excuse for non-fulfillment of obligation but is a breach of contract.
The banks asking for advance interest for the loan is improper considering that the total
loan hasnt been released. A person cant be charged interest for nonexisting debt. The
alleged discovery by the bank of overvaluation of the loan collateral is not an issue. The
bank officials should have been more responsible and the bank bears risk in case the
collateral turned out to be overvalued. Furthermore, this was not raised in the pleadings so
this issue cant be raised. The bank was in default and Tolentino may choose bet specific
performance or rescission w/ damages in either case. But considering that the bank is now
prohibited fr doing business, specific performance cannot be granted. Rescission is the only
remedy left, but the rescission shld only be for the P63K balance.
2) Whether or not the mortgagor is liable to pay the amount covered by the promissory note

The promissory note gave rise to Sulpicio M. Tolentinos reciprocal obligation to pay the
P17,000.00 loan when it falls due. His failure to pay the overdue amortizations under the
promissory note made him a party in default, hence not entitled to rescission (Article 1191 of
the Civil Code). If there is a right to rescind the promissory note, it shall belong to the
aggrieved party, that is, Island Savings Bank. If Tolentino had not signed a promissory note
setting the date for payment of P17,000.00 within 3 years, he would be entitled to ask for
rescission of the entire loan because he cannot possibly be in default as there was no date
for him to perform his reciprocal obligation to pay. Since both parties were in default in the
performance of their respective reciprocal obligations, that is, Island Savings Bank failed to
comply with its obligation to furnish the entire loan and Sulpicio M. Tolentino failed to comply
with his obligation to pay his P17,000.00 debt within 3 years as stipulated, they are both
liable for damages.
3) Whether or not the real estate mortgage can be foreclosed
Since Island Savings Bank failed to furnish the P63,000.00 balance of the P80,000.00
loan, the real estate mortgage of Sulpicio M. Tolentino became unenforceable to such
extent. P63,000.00 is 78.75% of P80,000.00, hence the real estate mortgage covering 100
hectares is unenforceable to the extent of 78.75 hectares. The mortgage covering the
remainder of 21.25 hectares subsists as a security for the P17,000.00 debt. 21.25 hectares
is more than sufficient to secure a P17,000.00 debt.