Other Relevant Cases: 1. Surety PHILIPPINE NATIONAL BANK vs. PINEDA G.R. No.

L-46658 May 13, 1991 Facts: The Arroyo Spouses obtained a loan of P580K from PNB to purchase 60% of the subscribed capital stock, and thereby acquire the controlling interest of Tayabas Cement Company, Inc. (TCC). As security for said loan, the spouses executed a real estate mortgage over a parcel of land known as the La Vista property. TCC filed with petitioner bank an application and agreement for the establishment of an 8 year deferred letter of credit (L/C) for $7M in favor of Toyo Menka Kaisha to cover the importation of a cement plant machinery and equipment. Upon approval of the application and opening of an L/C by PNB in favor of Toyo Menka Kaisha for the account of TCC, the Arroyo spouses executed a surety agreement. The imported cement plant machinery and equipment arrived from Japan and were released to TCC under a trust receipt agreement. Subsequently, Toyo Menka Kaisha made the corresponding drawings against the L/C as scheduled. TCC, however, failed to remit and/or pay the corresponding amount covered by the drawings. Thus, pursuant to the trust receipt agreement, PNB notified TCC of its intention to repossess the imported machinery and equipment for failure of TCC to settle its obligations under the L/C. PNB foreclosed the real estate mortgages executed by the spouses Arroyo in TCCs favor. Contention of PNB PNB contends that the sale of La Vista was made to satisfy not only the amount owed by the spouses on their personal loan but also the amount of expenses owed by said spouses as sureties of TCC. Contention of Arroyo The Arroyos oppose the foreclosure, contending primarily that repossession of the imported machinery and equipment by PNB amounted to dacion en pago that extinguished their obligation as surety to TCC.

Ruling: There was no dacion en pago. Dation in payment takes place when property is alienated to the creditor in satisfaction of a debt in money and the same is governed by sales. Dation in payment is the delivery and transmission of ownership of a thing by the debtor to the creditor as an accepted equivalent of the performance of the obligation. The repossession of the machinery and equipment in question was merely to secure the payment of TCCs loan obligation and not for the purpose of transferring ownership thereof to PNB in satisfaction of said loan.

PNB has the right to foreclose the mortgages executed by the spouses Arroyo as sureties of TCC. A surety is considered in law as being the same party as the debtor in relation to whatever is adjudged touching the obligation of the latter, and their liabilities are interwoven as to be inseparable. As sureties, the Arroyo spouses are primarily liable as original promissors and are bound immediately to pay the creditor the amount outstanding. 2. Effects of Guaranty Aglibot v Santia GR No. 185945, December 5, 2012 Facts: Engr. Ingersol L. Santia (Santia) loaned the amount of P2,500,000.00 to Pacific Lending & Capital Corporation (PLCC), through its Manager, petitioner Fideliza J. Aglibot. The loan was evidenced by a Promissory Note dated July 1, 2003, issued by Aglibot in behalf of PLCC, payable in one year subject to interest at 24% per annum. Allegedly as a guaranty or security for the payment of the note, Aglibot also issued and delivered to Santia eleven (11) post-dated personal checks drawn from her own demand account maintained at Metrobank. Aglibot is a major stockholder of PLCC, with headquarters at 27 Casimiro Townhouse, Casimiro Avenue, Zapote, Las Pias, Metro Manila, where most of the stockholders also reside. Upon presentment of the aforesaid checks for payment, they were dishonored by the bank for having been drawn against insufficient funds or closed account. Santia thus demanded payment from PLCC and Aglibot of the face value of the checks, but neither of them heeded his demand. Consequently, eleven (11) Informations for violation of BP. 22, corresponding to the number of dishonored checks, were filed against Aglibot before the MTCC, Dagupan City. Contention of Aglibot: She did obtain a loan from Santia, but claimed that she did so in behalf of PLCC, hence she must be accorded the benefit of excussion. Ruling of the Court Aglibot cannot invoke the benefit of excussion. As provided under Article 2058 of the Civil Code, to wit: It is settled that the liability of the guarantor is only subsidiary, and all the properties of the principal debtor, the PLCC in this case, must first be exhausted before the guarantor may be held answerable for the debt. Thus, the creditor may hold the guarantor liable only after judgment has been obtained against the principal debtor and the latter is unable to pay, for obviously the exhaustion of the principals property the benefit of which the guarantor claims cannot even begin to take place before judgment has been obtained. This rule is contained in Article 2062 of the Civil Code, which provides that the action brought by the creditor must be filed against the principal debtor alone, except in some instances mentioned in Article 2059 when the action may be brought against both the guarantor and the principal debtor, but Aglibot is not a mere guarantor, hence she cannot invoke the benefit of excussion. On the other hand, Article 2055 of the Civil Code also provides that a

guaranty is not presumed, but must be express, and cannot extend to more than what is stipulated therein. This is the obvious rationale why a contract of guarantee is unenforceable unless made in writing or evidenced by some writing. For as pointed out by Santia, Aglibot has not shown any proof, such as a contract, a secretarys certificate or a board resolution, nor even a note or memorandum thereof, whereby it was agreed that she would issue her personal checks in behalf of the company to guarantee the payment of its debt to Santia. Certainly, there is nothing shown in the Promissory Note signed by Aglibot herself remotely containing an agreement between her and PLCC resembling her guaranteeing its debt to Santia. And neither is there a showing that PLCC thereafter ratified her act of guaranteeing its indebtedness by issuing her own checks to Santia. Aglibot is an accommodation party and therefore liable to Santia The relation between an accommodation party and the party accommodated is, in effect, one of principal and surety the accommodation party being the surety. It is a settled rule that a surety is bound equally and absolutely with the principal and is deemed an original promisor and debtor from the beginning. The liability is immediate and direct. The mere fact, then, that Aglibot issued her own checks to Santia made her personally liable to the latter on her checks without the need for Santia to first go after PLCC for the payment of its loan.

3. Usurious Interest Advocates for Truth in lending, Inc. v Bangko Sentral ng Pilipinas GR No. 192986 Facts: Advocates for Truth in Lending, Inc. (AFTIL) is a nonprofit, non-stock corporation organized to engage in pro bono concerns and activities relating to money lending issues. It was incorporated on July 9, 2010, and a month later, it filed this petition, joined by its founder and president, Eduardo B. Olaguer, suing as a taxpayer and a citizen. R.A. No. 265, which created the Central Bank (CB) of the Philippines on June 15, 1948, empowered the CB-MB to, among others, set the maximum interest rates which banks may charge for all types of loans and other credit operations, within limits prescribed by the Usury Law. Section 109 of R.A. No. 265 reads: Sec. 109. Interest Rates, Commissions and Charges. The Monetary Board may fix the maximum rates of interest which banks may pay on deposits and on other obligations. On March 17, 1980, the Usury Law was amended by Presidential Decree (P.D.) No. 1684, giving the CBMB authority to prescribe different maximum rates of interest which may be imposed for a loan or renewal thereof or the forbearance of any money, goods or credits, provided that the changes are effected gradually and announced in advance. Provided, that changes in such rate or rates may be effected gradually on scheduled dates announced in advance. In its Resolution No. 2224 dated December 3, 1982, the CB-MB issued CB Circular No. 905, Series of 1982, effective on January 1, 1983. Section 1 of the Circular, under its General Provisions, removed the ceilings on interest rates on loans or forbearance of any money, goods or credits.

On June 14, 1993, President Fidel V. Ramos signed into law R.A. No. 7653 establishing the Bangko Sentral ng Pilipinas to replace the CB. Petitioners, claiming that they are raising issues of transcendental importance to the public, filed directly with SC this Petition for Certiorari, seeking to declare that the Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), replacing the Central Bank Monetary Board (CB-MB) by virtue of Republic Act (R.A.) No. 7653, has no authority to continue enforcing Central Bank Circular No. 905, issued by the CB-MB in 1982, which suspended Act No. 2655, or the Usury Law of 1916. Petitioners contend that under Section 109 of R.A. No. 265, the authority of the CB-MB was clearly only to fix the banks maximum rates of interest, but always within the limits prescribed by the Usury Law. Thus, according to petitioners, CB Circular No. 905, which was promulgated without the benefit of any prior public hearing, is void because it violated Article 5 of the New Civil Code, which provides that Acts executed against the provisions of mandatory or prohibitory laws shall be void, except when the law itself authorizes their validity. They further claim that just weeks after the issuance of CB Circular No. 905, Jobo treasury bills shot up to 40% per annum, as a result. Petitioners claim that the BSP-MB has been stripped of the power either to prescribe the maximum rates of interest which banks may charge for different kinds of loans and credit transactions, or to suspend Act No. 2655 and continue enforcing CB Circular No. 905. Ruling 1. The CB-MB merely suspended the effectivity of the Usury Law when it issued CB Circular No. 905. The power of the CB to effectively suspend the Usury Law pursuant to P.D. No. 1684 has long been recognized and upheld in many cases. As the Court explained in the landmark case of Medel v. CA, citing several cases, CB Circular No. 905 did not repeal nor in anyway amend the Usury Law but simply suspended the latters effectivity; that a *CB+ Circular cannot repeal a law, *for+ only a law can repeal another law; that by virtue of CB Circular No. 905, the Usury Law has been rendered ineffective; and Usury has been legally non-existent in our jurisdiction. 2. The lifting of the ceilings for interest rates does not authorize stipulations charging excessive, unconscionable, and iniquitous interest. Interest can now be charged as lender and borrower may agree upon. Stipulations authorizing iniquitous or unconscionable interests have been invariably struck down for being contrary to morals, if not against the law. Indeed, under Article 1409 of the Civil Code, these contracts are deemed inexistent and void ab initio, and therefore cannot be ratified, nor may the right to set up their illegality as a defense be waived. The nullity of the stipulation of usurious interest does not affect the lenders right to recover the principal of a loan, nor affect the other terms thereof. Thus, in a usurious loan with mortgage, the right to foreclose the mortgage subsists, and this right can be exercised by the creditor upon failure by the debtor to pay the debt due. The debt due is considered as without the stipulated excessive interest, and a legal interest of 12% per annum