G.R. No. L-19190 November 29, 1922 THE PEOPLE OF THE PHILIPPINE ISLANDS, Plaintiff-Appellee , vs.

VENANCIO CONCEPCION, Defendant-Appellant.

MALCOLM, J.:

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By telegrams and a letter of confirmation to the manager of the Aparri branch of the Philippine National Bank, Venancio Concepcion, President of the Philippine National Bank, between April 10, 1919, and May 7, 1919, authorized an extension of credit in favor of "Puno y Concepcion, S. en C." in the amount of P300,000. This special authorization was essential in view of the memorandum order of President Concepcion dated May 17, 1918, limiting the discretional power of the local manager at Aparri, Cagayan, to grant loans and discount negotiable documents to P5,000, which, in certain cases, could be increased to P10,000. Pursuant to this authorization, credit aggregating P300,000, was granted the firm of "Puno y Concepcion, S. en C.," the only security required consisting of six demand notes. The notes, together with the interest, were taken up and paid by July 17, 1919.
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"Puno y Concepcion, S. en C." was a copartnership capitalized at P100,000. Anacleto Concepcion contributed P5,000; Clara Vda. de Concepcion, P5,000; Miguel S. Concepcion, P20,000; Clemente Puno, P20,000; and Rosario San Agustin, "casada con Gral. Venancio Concepcion," P50,000. Member Miguel S. Concepcion was the administrator of the company.
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On the facts recounted, Venancio Concepcion, as President of the Philippine National Bank and as member of the board of directors of this bank, was charged in the Court of First Instance of Cagayan with a violation of section 35 of Act No. 2747. He was found guilty by the Honorable Enrique V. Filamor, Judge of First Instance, and was sentenced to imprisonment for one year and six months, to pay a fine of P3,000, with subsidiary imprisonment in case of insolvency, and the costs.
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Section 35 of Act No. 2747, effective on February 20, 1918, just mentioned, to which reference must hereafter repeatedly be made, reads as follows: "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." Section 49 of the same Act provides: "Any person who shall violate any of the provisions of this Act shall be punished by a fine not to exceed ten thousand pesos, or by imprisonment not to exceed five years, or by both such fine and imprisonment." These two sections were in effect in 1919 when the alleged unlawful acts took place, but were repealed by Act No. 2938, approved on January 30, 1921.
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Counsel for the defense assign ten errors as having been committed by the trial court. These errors they have argued adroitly and exhaustively in their printed brief, and again in oral argument. Attorney-General Villa-Real, in an exceptionally accurate and comprehensive brief, answers the proposition of appellant one by one.
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The question presented are reduced to their simplest elements in the opinion which follows:

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I. Was the granting of a credit of P300,000 to the copartnership "Puno y Concepcion, S. en C." by Venancio Concepcion, President of the Philippine National Bank, a "loan" within the meaning of section 35 of Act No. 2747?
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Counsel argue that the documents of record do not prove that authority to make a loan was given, but only show the concession of a credit. In this statement of fact, counsel is correct, for the exhibits in question speak of a "credito" (credit) and not of a " prestamo" (loan).
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The "credit" of an individual means his ability to borrow money by virtue of the confidence or trust reposed by a lender that he will pay what he may promise. (Donnell vs. Jones [1848], 13 Ala., 490; Bouvier's Law Dictionary.) A "loan" means the delivery by one party and the receipt by the other party of a given sum of money, upon an agreement, express or implied, to repay the sum loaned, with or without interest. (Payne vs. Gardiner [1864], 29 N. Y., 146, 167.) The concession of a "credit" necessarily involves the granting of "loans" up to the limit of the amount fixed in the "credit,"
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II. Was the granting of a credit of P300,000 to the copartnership "Puno y Concepcion, S. en C.," by Venancio Concepcion, President of the Philippine National Bank, a "loan" or a "discount"?
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Counsel argue that while section 35 of Act No. 2747 prohibits the granting of a "loan," it does not prohibit what is commonly known as a "discount."
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In a letter dated August 7, 1916, H. Parker Willis, then President of the National Bank, inquired of the Insular Auditor whether section 37 of Act No. 2612 was intended to apply to discounts as well as to loans. The ruling of the Acting Insular Auditor, dated August 11, 1916, was to the effect that said section referred to loans alone, and placed no restriction upon discount transactions. It becomes material, therefore, to discover the distinction between a "loan" and a "discount," and to ascertain if the instant transaction comes under the first or the latter denomination.
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Discounts are favored by bankers because of their liquid nature, growing, as they do, out of an actual, live, transaction. But in its last analysis, to discount a paper is only a mode of loaning money, with, however, these distinctions: (1) In a discount, interest is deducted in advance, while in a loan, interest is taken at the expiration of a credit; (2) a discount is always on double-name paper; a loan is generally on single-name paper.
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Conceding, without deciding, that, as ruled by the Insular Auditor, the law covers loans and not discounts, yet the conclusion is inevitable that the demand notes signed by the firm "Puno y Concepcion, S. en C." were not discount paper but were mere evidences of indebtedness, because (1) interest was not deducted from the face of the notes, but was paid when the notes fell due; and (2) they were single-name and not double-name paper.
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The facts of the instant case having relation to this phase of the argument are not essentially different from the facts in the Binalbagan Estate case. Just as there it was declared that the operations constituted a loan and not a discount, so should we here lay down the same ruling.
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III. Was the granting of a credit of P300,000 to the copartnership, "Puno y Concepcion, S. en C." by Venancio Concepcion, President of the Philippine National Bank, an "indirect loan" within the meaning of section 35 of Act No. 2747?
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Counsel argue that a loan to the partnership "Puno y Concepcion, S. en C." was not an "indirect loan." In this connection, it should be recalled that the wife of the defendant held one-half of the capital of this partnership.
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In the interpretation and construction of statutes, the primary rule is to ascertain and give effect to the intention of the Legislature. In this instance, the purpose of the Legislature is plainly to erect a wall of safety against temptation for a director of the bank. The prohibition against indirect loans is a recognition of the familiar maxim that no man may serve two masters - that where personal interest clashes with fidelity to duty the latter almost always suffers. If, therefore, it is shown that the husband is financially interested in the success or failure of his wife's business venture, a loan to partnership of which the wife of a director is a member, falls within the prohibition.
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Various provisions of the Civil serve to establish the familiar relationship called a conjugal partnership. (Articles 1315, 1393, 1401, 1407, 1408, and 1412 can be specially noted.) A loan, therefore, to a partnership of which the wife of a director of a bank is a member, is an indirect loan to such director.
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That it was the intention of the Legislature to prohibit exactly such an occurrence is shown by the acknowledged fact that in this instance the defendant was tempted to mingle his personal and family affairs with his official duties, and to permit the loan P300,000 to a partnership of no established reputation and without asking for collateral security.
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In the case of Lester and Wife vs. Howard Bank ([1870], 33 Md., 558; 3 Am. Rep., 211), the Supreme Court of Maryland said: What then was the purpose of the law when it declared that no director or officer should borrow of the bank, and "if any director," etc., "shall be convicted," etc., "of directly or indirectly violating this section he shall be punished by fine and imprisonment?" We say to protect the stockholders, depositors and creditors of the bank, against the temptation to which the directors and officers might be exposed, and the power which as such they must necessarily possess in the control and management of the bank, and the legislature unwilling to rely upon the implied understanding that in assuming this relation they would not acquire any interest hostile or adverse to the most exact and faithful discharge of duty, declared in express terms that they should not borrow, etc., of the bank. In the case of People vs. Knapp ([1912], 206 N. Y., 373), relied upon in the Binalbagan Estate decision, it was said: We are of opinion the statute forbade the loan to his copartnership firm as well as to himself directly. The loan was made indirectly to him through his firm. IV. Could Venancio Concepcion, President of the Philippine National Bank, be convicted of a violation of section 35 of Act No. 2747 in relation with section 49 of the same Act, when these portions of Act No. 2747 were repealed by Act No. 2938, prior to the finding of the information and the rendition of the judgment?
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As noted along toward the beginning of this opinion, section 49 of Act No. 2747, in relation to section 35 of the same Act, provides a punishment for any person who shall violate any of the provisions of the Act. It is contended, however, by the appellant, that the repeal of these sections of Act No. 2747 by Act No. 2938 has served to take away the basis for criminal prosecution.
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This same question has been previously submitted and has received an answer adverse to such contention in the cases ofUnited Stated vs. Cuna ([1908], 12 Phil., 241); People vs. Concepcion ([1922], 43 Phil., 653); and Ong Chang Wing and Kwong Fokvs. United States ([1910], 218 U. S., 272; 40 Phil., 1046). In other words, it has been the holding, and it must again be the holding, that where an Act of the Legislature which penalizes an offense, such 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 sentenced offenders charged with violations of the old law.
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V. Was the granting of a credit of P300,000 to the copartnership "Puno y Concepcion, S. en C." by Venancio Concepcion, President of the Philippine National Bank, in violation of section 35 of Act No. 2747, penalized by this law?
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Counsel argue that since the prohibition contained in section 35 of Act No. 2747 is on the bank, and since section 49 of said Act provides a punishment not on the bank when it violates any provisions of the law, but on a person violating any provisions of the same, and imposing imprisonment as a part of the penalty, the prohibition contained in said section 35 is without penal sanction.
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The answer is that when the corporation itself is forbidden to do an act, the prohibition extends to the board of directors, and to each director separately and individually. (People vs. Concepcion, supra.)
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VI. Does the alleged good faith of Venancio Concepcion, President of the Philippine National Bank, in extending the credit of P300,000 to the copartnership "Puno y Concepcion, S. en C." constitute a legal defense?
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Counsel argue that if defendant committed the acts of which he was convicted, it was because he was misled by rulings coming from the Insular Auditor. It is furthermore stated that since the loans made to the copartnership "Puno y Concepcion, S. en C." have been paid, no loss has been suffered by the Philippine National Bank.
c hanro blesvi rt ualaw libra ry chan robles v irt ual law l ibra ry

Neither argument, even if conceded to be true, is conclusive. Under the statute which the defendant has violated, criminal intent is not necessarily material. The doing of the inhibited act, inhibited on account of public policy and public interest, constitutes the crime. And, in this instance, as previously demonstrated, the acts of the President of the Philippine National Bank do not fall within the purview of the rulings of the Insular Auditor, even conceding that such rulings have controlling effect.
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Morse, in his work, Banks and Banking, section 125, says: It is fraud for directors to secure by means of their trust, and advantage not common to the other stockholders. The law will not allow private profit from a trust, and will not listen to any proof of honest intent. JUDGMENT
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On a review of the evidence of record, with reference to the decision of the trial court, and the errors assigned by the appellant, and with reference to previous decisions of this court on the same subject, we are irresistibly led to the conclusion that no reversible error was committed in the trial of this case, and that the defendant has been proved guilty beyond a reasonable doubt of the crime charged in the information. The penalty imposed by the trial judge falls within the limits of the punitive provisions of the law.
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Judgment is affirmed, with the costs of this instance against the appellant. So ordered.

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G.R. No. 154878 : March 16, 2007 CAROLYN M. GARCIA, Petitioner, v. RICA MARIE S. THIO, Respondent. DECISION CORONA, J.: Assailed in this petition for review on certiorari 1 are the June 19, 2002 decision2 and August 20, 2002 resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 56577 which set aside the February 28, 1997 decision of the Regional Trial Court (RTC) of Makati City, Branch 58. Sometime in February 1995, respondent Rica Marie S. Thio received from petitioner Carolyn M. Garcia a crossed check4dated February 24, 1995 in the amount of US$100,000 payable to the order of a certain Marilou Santiago.5 Thereafter, petitioner received from respondent every month (specifically, on March 24, April 26, June 26 and July 26, all in 1995) the amount of US$3,000 6 and P76,5007 on July 26,8 August 26, September 26 and October 26, 1995. In June 1995, respondent received from petitioner another crossed check9 dated June 29, 1995 in the amount ofP500,000, also payable to the order of Marilou Santiago.10 Consequently, petitioner received from respondent the amount of P20,000 every month on August 5, September 5, October 5 and November 5, 1995.11 According to petitioner, respondent failed to pay the principal amounts of the loans (US$100,000 and P500,000) when they fell due. Thus, on February 22, 1996, petitioner filed a complaint for sum of money and damages in the RTC of Makati City, Branch 58 against respondent, seeking to collect the sums of US$100,000, with interest thereon at 3% a month from October 26, 1995 and P500,000, with interest thereon at 4% a month from November 5, 1995, plus attorney's fees and actual damages.12 Petitioner alleged that on February 24, 1995, respondent borrowed from her the amount of US$100,000 with interest thereon at the rate of 3% per month, which loan would mature on October 26, 1995.13 The amount of this loan was covered by the first check. On June 29, 1995, respondent again borrowed the amount ofP500,000 at an agreed monthly interest of 4%, the maturity date of which was on November 5, 1995.14 The amount of this loan was covered by the second check. For both loans, no promissory note was executed since petitioner and respondent were close friends at the time.15 Respondent paid the stipulated monthly interest for both loans but on their maturity dates, she failed to pay the principal amounts despite repeated demands.16 Respondent denied that she contracted the two loans with petitioner and countered that it was Marilou Santiago to whom petitioner lent the money. She claimed she was merely asked by petitioner to give the crossed checks to Santiago.17 She issued the checks for P76,000 and P20,000 not as payment of interest but to accommodate petitioner's request that respondent use her own checks instead of Santiago's. 18 In a decision dated February 28, 1997, the RTC ruled in favor of petitioner.19 It found that respondent borrowed from petitioner the amounts of US$100,000 with monthly interest of 3% and P500,000 at a monthly interest of 4%:20 WHEREFORE, finding preponderance of evidence to sustain the instant complaint, judgment is hereby rendered in favor of [petitioner], sentencing [respondent] to pay the former the amount of:
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1. [US$100,000.00] or its peso equivalent with interest thereon at 3% per month from October 26, 1995 until fully paid; 2. P500,000.00 with interest thereon at 4% per month from November 5, 1995 until fully paid. 3. P100,000.00 as and for attorney's fees; and 4. P50,000.00 as and for actual damages. For lack of merit, [respondent's] counterclaim is perforce dismissed.

With costs against [respondent]. IT IS SO ORDERED.21 On appeal, the CA reversed the decision of the RTC and ruled that there was no contract of loan between the parties:
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A perusal of the record of the case shows that [petitioner] failed to substantiate her claim that [respondent] indeed borrowed money from her. There is nothing in the record that shows that [respondent] received money from [petitioner]. What is evident is the fact that [respondent] received a MetroBank [crossed] check dated February 24, 1995 in the sum of US$100,000.00, payable to the order of Marilou Santiago and a CityTrust [crossed] check dated June 29, 1995 in the amount of P500,000.00, again payable to the order of Marilou Santiago, both of which were issued by [petitioner]. The checks received by [respondent], being crossed, may not be encashed but only deposited in the bank by the payee thereof, that is, by Marilou Santiago herself. It must be noted that crossing a check has the following effects: (a) the check may not be encashed but only deposited in the bank; (b) the check may be negotiated only once-to one who has an account with the bank; (c) and the act of crossing the check serves as warning to the holder that the check has been issued for a definite purpose so that he must inquire if he has received the check pursuant to that purpose, otherwise, he is not a holder in due course. Consequently, the receipt of the [crossed] check by [respondent] is not the issuance and delivery to the payee in contemplation of law since the latter is not the person who could take the checks as a holder, i.e., as a payee or indorsee thereof, with intent to transfer title thereto. Neither could she be deemed as an agent of Marilou Santiago with respect to the checks because she was merely facilitating the transactions between the former and [petitioner]. With the foregoing circumstances, it may be fairly inferred that there were really no contracts of loan that existed between the parties. x x x (emphasis supplied)22 Hence this petition.23 As a rule, only questions of law may be raised in a petition for review on certiorari under Rule 45 of the Rules of Court. However, this case falls under one of the exceptions, i.e., when the factual findings of the CA (which held that there were no contracts of loan between petitioner and respondent) and the RTC (which held that there were contracts of loan) are contradictory.24 The petition is impressed with merit.
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A loan is a real contract, not consensual, and as such is perfected only upon the delivery of the object of the contract.25 This is evident in Art. 1934 of the Civil Code which provides:
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An accepted promise to deliver something by way of commodatum or simple loan is binding upon the parties, but the commodatum or simple loan itself shall not be perfected until the delivery of the object of the contract. (Emphasis supplied) Upon delivery of the object of the contract of loan (in this case the money received by the debtor when the checks were encashed) the debtor acquires ownership of such money or loan proceeds and is bound to pay the creditor an equal amount.26 It is undisputed that the checks were delivered to respondent. However, these checks were crossed and payable not to the order of respondent but to the order of a certain Marilou Santiago. Thus the main question to be answered is: who borrowed money from petitioner - respondent or Santiago?
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Petitioner insists that it was upon respondent's instruction that both checks were made payable to Santiago.27 She maintains that it was also upon respondent's instruction that both checks were delivered to her (respondent) so that she could, in turn, deliver the same to Santiago. 28 Furthermore, she argues that once respondent received the checks, the latter had possession and control of them such that she had the choice to either forward them to Santiago (who was already her debtor), to retain them or to return them to petitioner.29 We agree with petitioner. Delivery is the act by which the res or substance thereof is placed within the actual or constructive possession or control of another.30 Although respondent did not physically receive the proceeds of the checks, these
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instruments were placed in her control and possession under an arrangement whereby she actually relent the amounts to Santiago. Several factors support this conclusion. First, respondent admitted that petitioner did not personally know Santiago.31 It was highly improbable that petitioner would grant two loans to a complete stranger without requiring as much as promissory notes or any written acknowledgment of the debt considering that the amounts involved were quite big. Respondent, on the other hand, already had transactions with Santiago at that time.32 Second, Leticia Ruiz, a friend of both petitioner and respondent (and whose name appeared in both parties' list of witnesses) testified that respondent's plan was for petitioner to lend her money at a monthly interest rate of 3%, after which respondent would lend the same amount to Santiago at a higher rate of 5% and realize a profit of 2%.33 This explained why respondent instructed petitioner to make the checks payable to Santiago. Respondent has not shown any reason why Ruiz' testimony should not be believed.
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Third, for the US$100,000 loan, respondent admitted issuing her own checks in the amount of P76,000 each (peso equivalent of US$3,000) for eight months to cover the monthly interest. For the P500,000 loan, she also issued her own checks in the amount of P20,000 each for four months.34 According to respondent, she merely accommodated petitioner's request for her to issue her own checks to cover the interest payments since petitioner was not personally acquainted with Santiago.35 She claimed, however, that Santiago would replace the checks with cash.36 Her explanation is simply incredible. It is difficult to believe that respondent would put herself in a position where she would be compelled to pay interest, from her own funds, for loans she allegedly did not contract. We declared in one case that:
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In the assessment of the testimonies of witnesses, this Court is guided by the rule that for evidence to be believed, it must not only proceed from the mouth of a credible witness, but must be credible in itself such as the common experience of mankind can approve as probable under the circumstances. We have no test of the truth of human testimony except its conformity to our knowledge, observation, and experience. Whatever is repugnant to these belongs to the miraculous, and is outside of juridical cognizance.37 Fourth, in the petition for insolvency sworn to and filed by Santiago, it was respondent, not petitioner, who was listed as one of her (Santiago's) creditors.38 Last, respondent inexplicably never presented Santiago as a witness to corroborate her story.39 The presumption is that "evidence willfully suppressed would be adverse if produced."40 Respondent was not able to overturn this presumption.
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We hold that the CA committed reversible error when it ruled that respondent did not borrow the amounts of US$100,000 and P500,000 from petitioner. We instead agree with the ruling of the RTC making respondent liable for the principal amounts of the loans. We do not, however, agree that respondent is liable for the 3% and 4% monthly interest for the US$100,000 andP500,000 loans respectively. There was no written proof of the interest payable except for the verbal agreement that the loans would earn 3% and 4% interest per month. Article 1956 of the Civil Code provides that "[n]o interest shall be due unless it has been expressly stipulated in writing." Be that as it may, while there can be no stipulated interest, there can be legal interest pursuant to Article 2209 of the Civil Code. It is well-settled that:
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When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.41 Hence, respondent is liable for the payment of legal interest per annumto be computed from November 21, 1995, the date when she received petitioner's demand letter.42 From the finality of
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the decision until it is fully paid, the amount due shall earn interest at 12% per annum, the interim period being deemed equivalent to a forbearance of credit.43 The award of actual damages in the amount of P50,000 andP100,000 attorney's fees is deleted since the RTC decision did not explain the factual bases for these damages.
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WHEREFORE, the petition is hereby GRANTED and the June 19, 2002 decision and August 20, 2002 resolution of the Court of Appeals in CA-G.R. CV No. 56577 are REVERSED and SET ASIDE. The February 28, 1997 decision of the Regional Trial Court in Civil Case No. 96-266 is AFFIRMED with the MODIFICATION that respondent is directed to pay petitioner the amounts of US$100,000 and P500,000 at 12% per annum interest from November 21, 1995 until the finality of the decision. The total amount due as of the date of finality will earn interest of 12% per annum until fully paid. The award of actual damages and attorney's fees is deleted. SO ORDERED.

BPI INVESTMENT CORPORATION,, Petitioner, v. HON. COURT OF APPEALS and ALS MANAGEMENT & DEVELOPMENT CORPORATION, Respondents. DECISION QUISUMBING, J.: This petition for certiorari assails the decision dated February 28, 1997, of the Court of Appeals and its resolution dated April 21, 1998, in CA-G.R. CV No. 38887. The appellate court affirmed the judgment of the Regional Trial Court of Pasig City, Branch 151, in (a) Civil Case No. 11831, for foreclosure of mortgage by petitioner BPI Investment Corporation (BPIIC for brevity) against private respondents ALS Management and Development Corporation and Antonio K. Litonjua,[1 consolidated with (b) Civil Case No. 52093, for damages with prayer for the issuance of a writ of preliminary injunction by the private respondents against said petitioner. The trial court had held that private respondents were not in default in the payment of their monthly amortization, hence, the extrajudicial foreclosure conducted by BPIIC was premature and made in bad faith. It awarded private respondents the amount of P300,000 for moral damages, P50,000 for exemplary damages, and P50,000 for attorneys fees and expenses for litigation. It likewise dismissed the foreclosure suit for being premature. The facts are as follows: Frank Roa obtained a loan at an interest rate of 16 1/4% per annum from Ayala Investment and Development Corporation (AIDC), the predecessor of petitioner BPIIC, for the construction of a house on his lot in New Alabang Village, Muntinlupa. Said house and lot were mortgaged to AIDC to secure the loan. Sometime in 1980, Roa sold the house and lot to private respondents ALS and Antonio Litonjua for P850,000. They paid P350,000 in cash and assumed the P500,000 balance of Roas indebtedness with AIDC. The latter, however, was not willing to extend the old interest rate to private respondents and proposed to grant them a new loan of P500,000 to be applied to Roas debt and secured by the same property, at an interest rate of 20% per annum and service fee of 1% per annum on the outstanding principal balance payable within ten years in equal monthly amortization of P9,996.58 and penalty interest at the rate of 21% per annum per day from the date the amortization became due and payable. Consequently, in March 1981, private respondents executed a mortgage deed containing the above stipulations with the provision that payment of the monthly amortization shall commence on May 1, 1981. On August 13, 1982, ALS and Litonjua updated Roas arrearages by paying BPIIC the sum of P190,601.35. This reduced Roas principal balance to P457,204.90 which, in turn, was liquidated when BPIIC applied thereto the proceeds of private respondents loan of P500,000. On September 13, 1982, BPIIC released to private respondents P7,146.87, purporting to be what was left of their loan after full payment of Roas loan. In June 1984, BPIIC instituted foreclosure proceedings against private respondents on the ground that they failed to pay the mortgage indebtedness which from May 1, 1981 to June 30, 1984, amounted to Four Hundred Seventy Five Thousand Five Hundred Eighty Five and 31/100 Pesos (P475,585.31). A notice of sheriffs sale was published on August 13, 1984. On February 28, 1985, ALS and Litonjua filed Civil Case No. 52093 against BPIIC. They alleged, among others, that they were not in arrears in their payment, but in fact made an overpayment as of June 30, 1984. They maintained that they should not be made to pay amortization before the actual release of the P500,000 loan in August and September 1982. Further, out of theP500,000 loan, only the total amount of P464,351.77 was released to private respondents. Hence, applying the effects of

legal compensation, the balance of P35,648.23 should be applied to the initial monthly amortization for the loan. On August 31, 1988, the trial court rendered its judgment in Civil Case Nos. 11831 and 52093, thus: WHEREFORE, judgment is hereby rendered in favor of ALS Management and Development Corporation and Antonio K. Litonjua and against BPI Investment Corporation, holding that the amount of loan granted by BPI to ALS and Litonjua was only in the principal sum of P464,351.77, with interest at 20% plus service charge of 1% per annum, payable on equal monthly and successive amortizations at P9,283.83 for ten (10) years or one hundred twenty (120) months. The amortization schedule attached as Annex A to the Deed of Mortgage is correspondingly reformed as aforestated. The Court further finds that ALS and Litonjua suffered compensable damages when BPI caused their publication in a newspaper of general circulation as defaulting debtors, and therefore orders BPI to pay ALS and Litonjua the following sums: a) P300,000.00 for and as moral damages; b) P50,000.00 as and for exemplary damages; c) P50,000.00 as and for attorneys fees and expenses of litigation. The foreclosure suit (Civil Case No. 11831) is hereby DISMISSED for being premature. Costs against BPI. SO ORDERED.[2 Both parties appealed to the Court of Appeals. However, private respondents appeal was dismissed for non-payment of docket fees. On February 28, 1997, the Court of Appeals promulgated its decision, the dispositive portion reads: WHEREFORE, finding no error in the appealed decision the same is hereby AFFIRMED in toto. SO ORDERED.[3 In its decision, the Court of Appeals reasoned that a simple loan is perfected only upon the delivery of the object of the contract. The contract of loan between BPIIC and ALS & Litonjua was perfected only on September 13, 1982, the date when BPIIC released the purported balance of the P500,000 loan after deducting therefrom the value of Roas indebtedness. Thus, payment of the monthly amortization should commence only a month after the said date, as can be inferred from the stipulations in the contract. This, despite the express agreement of the parties that payment shall commence on May 1, 1981. From October 1982 to June 1984, the total amortization due was only P194,960.43. Evidence showed that private respondents had an overpayment, because as of June 1984, they already paid a total amount of P201,791.96. Therefore, there was no basis for BPIIC to extrajudicially foreclose the mortgage and cause the publication in newspapers concerning private respondents delinquency in the payment of their loan. This fact constituted sufficient ground for moral damages in favor of private respondents. The motion for reconsideration filed by petitioner BPIIC was likewise denied, hence this petition, where BPIIC submits for resolution the following issues:

I. WHETHER OR NOT A CONTRACT OF LOAN IS A CONSENSUAL CONTRACT IN THE LIGHT OF THE RULE LAID DOWN IN BONNEVIE VS. COURT OF APPEALS, 125 SCRA 122. II. WHETHER OR NOT BPI SHOULD BE HELD LIABLE FOR MORAL AND EXEMPLARY DAMAGES AND ATTORNEYS FEES IN THE FACE OF IRREGULAR PAYMENTS MADE BY ALS AND OPPOSED TO THE RULE LAID DOWN IN SOCIAL SECURITY SYSTEM VS. COURT OF APPEALS, 120 SCRA 707. On the first issue, petitioner contends that the Court of Appeals erred in ruling that because a simple loan is perfected upon the delivery of the object of the contract, the loan contract in this case was perfected only on September 13, 1982. Petitioner claims that a contract of loan is a consensual contract, and a loan contract is perfected at the time the contract of mortgage is executed conformably with our ruling in Bonnevie v. Court of Appeals, 125 SCRA 122. In the present case, the loan contract was perfected on March 31, 1981, the date when the mortgage deed was executed, hence, the amortization and interests on the loan should be computed from said date. Petitioner also argues that while the documents showed that the loan was released only on August 1982, the loan was actually released on March 31, 1981, when BPIIC issued a cancellation of mortgage of Frank Roas loan. This finds support in the registration on March 31, 1981 of the Deed of Absolute Sale executed by Roa in favor of ALS, transferring the title of the property to ALS, and ALS executing the Mortgage Deed in favor of BPIIC. Moreover, petitioner claims, the delay in the release of the loan should be attributed to private respondents. As BPIIC only agreed to extend a P500,000 loan, private respondents were required to reduce Frank Roas loan below said amount. According to petitioner, private respondents were only able to do so in August 1982. In their comment, private respondents assert that based on Article 1934 of the Civil Code, [4 a simple loan is perfected upon the delivery of the object of the contract, hence a real contract. In this case, even though the loan contract was signed on March 31, 1981, it was perfected only on September 13, 1982, when the full loan was released to private respondents. They submit that petitioner misread Bonnevie. To give meaning to Article 1934, according to private respondents, Bonnevie must be construed to mean that the contract to extend the loan was perfected on March 31, 1981 but the contract of loan itself was only perfected upon the delivery of the full loan to private respondents on September 13, 1982. Private respondents further maintain that even granting, arguendo, that the loan contract was perfected on March 31, 1981, and their payment did not start a month thereafter, still no default took place. According to private respondents, a perfected loan agreement imposes reciprocal obligations, where the obligation or promise of each party is the consideration of the other party. In this case, the consideration for BPIIC in entering into the loan contract is the promise of private respondents to pay the monthly amortization. For the latter, it is the promise of BPIIC to deliver the money. In reciprocal obligations, 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. Therefore, private respondents conclude, they did not incur in delay when they did not commence paying the monthly amortization on May 1, 1981, as it was only on September 13, 1982 when petitioner fully complied with its obligation under the loan contract. We agree with private respondents. A loan contract is not a consensual contract but a real contract. It is perfected only upon the delivery of the object of the contract.[5 Petitioner misapplied Bonnevie. The contract in Bonnevie declared by this Court as a perfected consensual contract falls under the first clause of Article 1934, Civil Code. It is an accepted promise to deliver something by way of simple loan. In Saura Import and Export Co. Inc. vs. Development Bank of the Philippines, 44 SCRA 445, petitioner applied for a loan of P500,000 with respondent bank. The latter approved the application through a board resolution. Thereafter, the corresponding mortgage was executed and registered. However, because of acts attributable to petitioner, the loan was not released. Later, petitioner instituted an action for damages. We recognized in this case, a perfected consensual contract which under normal

circumstances could have made the bank liable for not releasing the loan. However, since the fault was attributable to petitioner therein, the court did not award it damages. A perfected consensual contract, as shown above, can give rise to an action for damages. However, said contract does not constitute the real contract of loan which requires the delivery of the object of the contract for its perfection and which gives rise to obligations only on the part of the borrower.[6 In the present case, the loan contract between BPI, on the one hand, and ALS and Litonjua, on the other, was perfected only onSeptember 13, 1982, the date of the second release of the loan. Following the intentions of the parties on the commencement of the monthly amortization, as found by the Court of Appeals, private respondents obligation to pay commenced only on October 13, 1982, a month after the perfection of the contract.[7 We also agree with private respondents that a contract of loan involves a reciprocal obligation, wherein the obligation or promise of each party is the consideration for that of the other. [8 As averred by private respondents, the promise of BPIIC to extend and deliver the loan is upon the consideration that ALS and Litonjua shall pay the monthly amortization commencing onMay 1, 1981, one month after the supposed release of the loan. 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.[9Only when a party has performed his part of the contract can he demand that the other party also fulfills his own obligation and if the latter fails, default sets in. Consequently, petitioner could only demand for the payment of the monthly amortization afterSeptember 13, 1982 for it was only then when it complied with its obligation under the loan contract. Therefore, in computing the amount due as of the date when BPIIC extrajudicially caused the foreclosure of the mortgage, the starting date is October 13, 1982 and not May 1, 1981. Other points raised by petitioner in connection with the first issue, such as the date of actual release of the loan and whether private respondents were the cause of the delay in the release of the loan, are factual. Since petitioner has not shown that the instant case is one of the exceptions to the basic rule that only questions of law can be raised in a petition for review under Rule 45 of the Rules of Court,[10 factual matters need not tarry us now. On these points we are bound by the findings of the appellate and trial courts. On the second issue, petitioner claims that it should not be held liable for moral and exemplary damages for it did not act maliciously when it initiated the foreclosure proceedings. It merely exercised its right under the mortgage contract because private respondents were irregular in their monthly amortization. It invoked our ruling in Social Security System vs. Court of Appeals, 120 SCRA 707, where we said: Nor can the SSS be held liable for moral and temperate damages. As concluded by the Court of Appeals the negligence of the appellant is not so gross as to warrant moral and temperate damages, except that, said Court reduced those damages by only P5,000.00 instead of eliminating them. Neither can we agree with the findings of both the Trial Court and respondent Court that the SSS had acted maliciously or in bad faith. The SSS was of the belief that it was acting in the legitimate exercise of its right under the mortgage contract in the face of irregular payments made by private respondents and placed reliance on the automatic acceleration clause in the contract. The filing alone of the foreclosure application should not be a ground for an award of moral damages in the same way that a clearly unfounded civil action is not among the grounds for moral damages. Private respondents counter that BPIIC was guilty of bad faith and should be liable for said damages because it insisted on the payment of amortization on the loan even before it was released. Further, it did not make the corresponding deduction in the monthly amortization to conform to the actual amount of loan released, and it immediately initiated foreclosure proceedings when private respondents failed to make timely payment.

But as admitted by private respondents themselves, they were irregular in their payment of monthly amortization. Conformably with our ruling in SSS, we can not properly declare BPIIC in bad faith. Consequently, we should rule out the award of moral and exemplary damages.[11 However, in our view, 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 to private respondents and the date when it was released. Such negligence resulted in damage to private respondents, for which an award of nominal damages should be given in recognition of their rights which were violated by BPIIC.[12 For this purpose, the amount of P25,000 is sufficient. Lastly, as in 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. WHEREFORE, the decision dated February 28, 1997, of the Court of Appeals and its resolution dated April 21, 1998, are 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.

G.R. Nos. 173654-765 : August 28, 2008 PEOPLE OF THE PHILIPPINES, Petitioner, v. TERESITA PUIG and ROMEO PORRAS, Respondents. DEDECISION CHICO-NAZARIO, J.: This is a Petition for Review under Rule 45 of the Revised Rules of Court with petitioner People of the Philippines, represented by the Office of the Solicitor General, praying for the reversal of the Orders dated 30 January 2006 and 9 June 2006 of the Regional Trial Court (RTC) of the 6 th Judicial Region, Branch 68, Dumangas, Iloilo, dismissing the 112 cases of Qualified Theft filed against respondents Teresita Puig and Romeo Porras, and denying petitioner's Motion for Reconsideration, in Criminal Cases No. 05-3054 to 05-3165. The following are the factual antecedents:
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On 7 November 2005, the Iloilo Provincial Prosecutor's Office filed before Branch 68 of the RTC in Dumangas, Iloilo, 112 cases of Qualified Theft against respondents Teresita Puig (Puig) and Romeo Porras (Porras) who were the Cashier and Bookkeeper, respectively, of private complainant Rural Bank of Pototan, Inc. The cases were docketed as Criminal Cases No. 05-3054 to 05-3165. The allegations in the Informations1 filed before the RTC were uniform and pro-forma, except for the amounts, date and time of commission, to wit: INFORMATION That on or about the 1st day of August, 2002, in the Municipality of Pototan, Province of Iloilo, Philippines, and within the jurisdiction of this Honorable Court, above-named [respondents], conspiring, confederating, and helping one another, with grave abuse of confidence, being the Cashier andBookkeeper of the Rural Bank of Pototan, Inc., Pototan, Iloilo, without the knowledge and/or consent of the management of the Bank and with intent of gain, did then and there willfully, unlawfully and feloniously take, steal and carry away the sum of FIFTEEN THOUSAND PESOS (P15,000.00), Philippine Currency, to the damage and prejudice of the said bank in the aforesaid amount. After perusing the Informations in these cases, the trial court did not find the existence of probable cause that would have necessitated the issuance of a warrant of arrest based on the following grounds: (1) the element of 'taking without the consent of the owners' was missing on the ground that it is the depositors-clients, and not the Bank, which filed the complaint in these cases, who are the owners of the money allegedly taken by respondents and hence, are the real parties-in-interest; and (2) the Informations are bereft of the phrase alleging "dependence, guardianship or vigilance between the respondents and the offended party that would have created a high degree of confidence between them which the respondents could have abused." It added that allowing the 112 cases for Qualified Theft filed against the respondents to push through would be violative of the right of the respondents under Section 14(2), Article III of the 1987 Constitution which states that in all criminal prosecutions, the accused shall enjoy the right to be informed of the nature and cause of the accusation against him. Following Section 6, Rule 112 of the Revised Rules of Criminal Procedure, the RTC dismissed the cases on 30 January 2006 and refused to issue a warrant of arrest against Puig and Porras.

A Motion for Reconsideration2 was filed on 17 April 2006, by the petitioner. On 9 June 2006, an Order3 denying petitioner's Motion for Reconsideration was issued by the RTC, finding as follows: Accordingly, the prosecution's Motion for Reconsideration should be, as it hereby, DENIED. The Order dated January 30, 2006 STANDS in all respects. Petitioner went directly to this Court via Petition for Review on Certiorari under Rule 45, raising the sole legal issue of: WHETHER OR NOT THE 112 INFORMATIONS FOR QUALIFIED THEFT SUFFICIENTLY ALLEGE THE ELEMENT OF TAKING WITHOUT THE CONSENT OF THE OWNER, AND THE QUALIFYING CIRCUMSTANCE OF GRAVE ABUSE OF CONFIDENCE. Petitioner prays that judgment be rendered annulling and setting aside the Orders dated 30 January 2006 and 9 June 2006 issued by the trial court, and that it be directed to proceed with Criminal Cases No. 05-3054 to 05-3165. Petitioner explains that under Article 1980 of the New Civil Code, "fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loans." Corollary thereto, Article 1953 of the same Code provides that "a person who receives a loan of money or any other fungible thing acquires the ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and quality." Thus, it posits that the depositors who place their money with the bank are considered creditors of the bank. The bank acquires ownership of the money deposited by its clients, making the money taken by respondents as belonging to the bank. Petitioner also insists that the Informations sufficiently allege all the elements of the crime of qualified theft, citing that a perusal of the Informations will show that they specifically allege that the respondents were the Cashier and Bookkeeper of the Rural Bank of Pototan, Inc., respectively, and that they took various amounts of money with grave abuse of confidence, and without the knowledge and consent of the bank, to the damage and prejudice of the bank. Parenthetically, respondents raise procedural issues. They challenge the petition on the ground that a Petition for Review on Certiorari via Rule 45 is the wrong mode of appeal because a finding of probable cause for the issuance of a warrant of arrest presupposes evaluation of facts and circumstances, which is not proper under said Rule. Respondents further claim that the Department of Justice (DOJ), through the Secretary of Justice, is the principal party to file a Petition for Review on Certiorari , considering that the incident was indorsed by the DOJ. We find merit in the petition. The dismissal by the RTC of the criminal cases was allegedly due to insufficiency of the Informations and, therefore, because of this defect, there is no basis for the existence of probable cause which will justify the issuance of the warrant of arrest. Petitioner assails the dismissal contending that the Informations for Qualified Theft sufficiently state facts which constitute (a) the qualifying circumstance of grave abuse of confidence; and (b) the element of taking, with intent to gain and without the consent of the owner, which is the Bank. In determining the existence of probable cause to issue a warrant of arrest, the RTC judge found the allegations in the Information inadequate. He ruled that the Information failed to state facts constituting the qualifying circumstance ofgrave abuse of confidence and the element of taking

without the consent of the owner, since the owner of the money is not the Bank, but the depositors therein. He also cites People v. Koc Song,4 in which this Court held: There must be allegation in the information and proof of a relation, by reason of dependence, guardianship or vigilance, between the respondents and the offended party that has created a high degree of confidence between them, which the respondents abused. At this point, it needs stressing that the RTC Judge based his conclusion that there was no probable cause simply on the insufficiency of the allegations in the Informations concerning the facts constitutive of the elements of the offense charged. This, therefore, makes the issue of sufficiency of the allegations in the Informations the focal point of discussion. Qualified Theft, as defined and punished under Article 310 of the Revised Penal Code, is committed as follows, viz: ART. 310. Qualified Theft. - The crime of theft shall be punished by the penalties next higher by two degrees than those respectively specified in the next preceding article, if committed by a domestic servant, or with grave abuse of confidence, or if the property stolen is motor vehicle, mail matter or large cattle or consists of coconuts taken from the premises of a plantation, fish taken from a fishpond or fishery or if property is taken on the occasion of fire, earthquake, typhoon, volcanic eruption, or any other calamity, vehicular accident or civil disturbance. (Emphasis supplied.) Theft, as defined in Article 308 of the Revised Penal Code, requires the physical taking of another's property without violence or intimidation against persons or force upon things. The elements of the crime under this Article are: 1. Intent to gain; 2. Unlawful taking; 3. Personal property belonging to another; 4. Absence of violence or intimidation against persons or force upon things. To fall under the crime of Qualified Theft, the following elements must concur: 1. Taking of personal property; 2. That the said property belongs to another; 3. That the said taking be done with intent to gain; 4. That it be done without the owner's consent; 5. That it be accomplished without the use of violence or intimidation against persons, nor of force upon things; 6. That it be done with grave abuse of confidence. On the sufficiency of the Information, Section 6, Rule 110 of the Rules of Court requires, inter alia, that the information must state the acts or omissions complained of as constitutive of the offense. On the manner of how the Information should be worded, Section 9, Rule 110 of the Rules of Court, is enlightening:

Section 9. Cause of the accusation. The acts or omissions complained of as constituting the offense and the qualifying and aggravating circumstances must be stated in ordinary and concise language and not necessarily in the language used in the statute but in terms sufficient to enable a person of common understanding to know what offense is being charged as well as its qualifying and aggravating circumstances and for the court to pronounce judgment. It is evident that the Information need not use the exact language of the statute in alleging the acts or omissions complained of as constituting the offense. The test is whether it enables a person of common understanding to know the charge against him, and the court to render judgment properly. 5
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The portion of the Information relevant to this discussion reads:

A]bove-named [respondents], conspiring, confederating, and helping one another, with grave abuse of confidence, being the Cashier and Bookkeeper of the Rural Bank of Pototan, Inc., Pototan, Iloilo, without the knowledge and/or consent of the management of the Bank x x x.

It is beyond doubt that tellers, Cashiers, Bookkeepers and other employees of a Bank who come into possession of the monies deposited therein enjoy the confidence reposed in them by their employer. Banks, on the other hand, where monies are deposited, are considered the owners thereof. This is very clear not only from the express provisions of the law, but from established jurisprudence. The relationship between banks and depositors has been held to be that of creditor and debtor. Articles 1953 and 1980 of the New Civil Code, as appropriately pointed out by petitioner, provide as follows: Article 1953. A person who receives a loan of money or any other fungible thing acquires the ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and quality. Article 1980. Fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions concerning loan. In a long line of cases involving Qualified Theft, this Court has firmly established the nature of possession by the Bank of the money deposits therein, and the duties being performed by its employees who have custody of the money or have come into possession of it. The Court has consistently considered the allegations in the Information that such employees acted with grave abuse of confidence, to the damage and prejudice of the Bank, without particularly referring to it as owner of the money deposits, as sufficient to make out a case of Qualified Theft. For a graphic illustration, we cite Roque v. People,6 where the accused teller was convicted for Qualified Theft based on this Information: That on or about the 16th day of November, 1989, in the municipality of Floridablanca, province of Pampanga, Philippines and within the jurisdiction of his Honorable Court, the above-named accused ASUNCION GALANG ROQUE, being then employed as teller of the Basa Air Base Savings and Loan Association Inc. (BABSLA) with office address at Basa Air Base, Floridablanca, Pampanga, and as such was authorized and reposed with the responsibility to receive and collect capital contributions from its member/contributors of said corporation, and having collected and received in her capacity as teller of the BABSLA the sum of TEN THOUSAND PESOS (P10,000.00), said accused, with intent of gain, with grave abuse of confidence and without the knowledge and consent of said corporation, did then and there willfully, unlawfully and feloniously take, steal and carry away the amount of P10,000.00, Philippine currency, by making it appear that a certain depositor by the name of Antonio Salazar withdrew from his Savings Account No. 1359, when in truth and in fact said Antonio Salazar did not withdr[a]w the said amount of P10,000.00 to the damage and prejudice of BABSLA in the total amount of P10,000.00, Philippine currency. In convicting the therein appellant, the Court held that: [S]ince the teller occupies a position of confidence, and the bank places money in the teller's possession due to the confidence reposed on the teller, the felony of qualified theft would be committed.7

Also in People v. Sison,8 the Branch Operations Officer was convicted of the crime of Qualified Theft based on the Information as herein cited: That in or about and during the period compressed between January 24, 1992 and February 13, 1992, both dates inclusive, in the City of Manila, Philippines, the said accused did then and there wilfully, unlawfully and feloniously, with intent of gain and without the knowledge and consent of the owner thereof, take, steal and carry away the following, to wit:
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Cash money amounting to P6,000,000.00 in different denominations belonging to the PHILIPPINE COMMERCIAL INTERNATIONAL BANK (PCIBank for brevity), Luneta Branch, Manila represented by its Branch Manager, HELEN U. FARGAS, to the damage and prejudice of the said owner in the aforesaid amount of P6,000,000.00, Philippine Currency. That in the commission of the said offense, herein accused acted with grave abuse of confidence and unfaithfulness, he being the Branch Operation Officer of the said complainant and as such he had free access to the place where the said amount of money was kept. The judgment of conviction elaborated thus: The crime perpetuated by appellant against his employer, the Philippine Commercial and Industrial Bank (PCIB), is Qualified Theft. Appellant could not have committed the crime had he not been holding the position of Luneta Branch Operation Officer which gave him not only sole access to the bank vault xxx. The management of the PCIB reposed its trust and confidence in the appellant as its Luneta Branch Operation Officer, and it was this trust and confidence which he exploited to enrich himself to the damage and prejudice of PCIB x x x.9 From another end, People v. Locson,10 in addition to People v. Sison, described the nature of possession by the Bank. The money in this case was in the possession of the defendant as receiving teller of the bank, and the possession of the defendant was the possession of the Bank. The Court held therein that when the defendant, with grave abuse of confidence, removed the money and appropriated it to his own use without the consent of the Bank, there was taking as contemplated in the crime of Qualified Theft.11
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Conspicuously, in all of the foregoing cases, where the Informations merely alleged the positions of the respondents; that the crime was committed with grave abuse of confidence, with intent to gain and without the knowledge and consent of the Bank, without necessarily stating the phrase being assiduously insisted upon by respondents, "of a relation by reason of dependence, guardianship or vigilance, between the respondents and the offended party that has created a high degree of confidence between them, which respondents abused,"12 and without employing the word "owner" in lieu of the "Bank" were considered to have satisfied the test of sufficiency of allegations. As regards the respondents who were employed as Cashier and Bookkeeper of the Bank in this case, there is even no reason to quibble on the allegation in the Informations that they acted with grave abuse of confidence. In fact, the Information which alleged grave abuse of confidence by accused herein is even more precise, as this is exactly the requirement of the law in qualifying the crime of Theft. In summary, the Bank acquires ownership of the money deposited by its clients; and the employees of the Bank, who are entrusted with the possession of money of the Bank due to the confidence reposed in them, occupy positions of confidence. The Informations, therefore, sufficiently allege all the essential elements constituting the crime of Qualified Theft. On the theory of the defense that the DOJ is the principal party who may file the instant petition, the ruling in Mobilia Products, Inc. v. Hajime Umezawa13 is instructive. The Court thus enunciated:

In a criminal case in which the offended party is the State, the interest of the private complainant or the offended party is limited to the civil liability arising therefrom. Hence, if a criminal case is dismissed by the trial court or if there is an acquittal, a reconsideration of the order of dismissal or acquittal may be undertaken, whenever legally feasible, insofar as the criminal aspect thereof is concerned and may be made only by the public prosecutor; or in the case of an appeal, by the State only, through the OSG. x x x. On the alleged wrong mode of appeal by petitioner, suffice it to state that the rule is well-settled that in appeals bycertiorari under Rule 45 of the Rules of Court, only errors of law may be raised,14 and herein petitioner certainly raised a question of law. As an aside, even if we go beyond the allegations of the Informations in these cases, a closer look at the records of the preliminary investigation conducted will show that, indeed, probable cause exists for the indictment of hereinRespondents. Pursuant to Section 6, Rule 112 of the Rules of Court, the judge shall issue a warrant of arrest only upon a finding of probable cause after personally evaluating the resolution of the prosecutor and its supporting evidence.Soliven v. Makasiar,15 as reiterated in Allado v. Driokno,16 explained that probable cause for the issuance of a warrant of arrest is the existence of such facts and circumstances that would lead a reasonably discreet and prudent person to believe that an offense has been committed by the person sought to be arrested.17 The records reasonably indicate that the respondents may have, indeed, committed the offense charged. Before closing, let it be stated that while it is truly imperative upon the fiscal or the judge, as the case may be, to relieve the respondents from the pain of going through a trial once it is ascertained that no probable cause exists to form a sufficient belief as to the guilt of the respondents, conversely, it is also equally imperative upon the judge to proceed with the case upon a showing that there is a prima facie case against the Respondents. WHEREFORE, premises considered, the Petition for Review on Certiorari is hereby GRANTED. The Orders dated 30 January 2006 and 9 June 2006 of the RTC dismissing Criminal Cases No. 05-3054 to 05-3165 are REVERSED and SET ASIDE. Let the corresponding Warrants of Arrest issue against herein respondents TERESITA PUIG and ROMEO PORRAS. The RTC Judge of Branch 68, in Dumangas, Iloilo, is directed to proceed with the trial of Criminal Cases No. 05-3054 to 05-3165, inclusive, with reasonable dispatch. No pronouncement as to costs. SO ORDERED

BPI vs Court of Appeals, 538 SCRA 184, GR No. 123498, November 23, 2007
Posted by Pius Morados on January 12, 2012

(Negotiable Instruments Money as a medium of exchange) Facts: Franco opened 3 accounts with BPI with the total amount of P2,000,000.00. The said amount used to open these accounts is traceable to a check issued by Tevesteco. The funding for the P2,000,000.00 check was part of the P80,000,000.00 debited by BPI from FMICs account (with a deposit of P100,000,000.00) and credited to Tevestecos account pursuant to an Authority to Debit which was allegedly forged as claimed by FMIC. Tevesteco effected several withdrawals already from its account amounting to P37,455,410.54 including the P2,000,000.00 paid to Franco. Franco issued two checks which were dishonoured upon presentment for payment due to garnishment of his account filed by BPI. BPI claimed that it had a better right to the amounts which consisted of part of the money allegedly fraudulently withdrawn from it by Tevesteco and ending up in Francos account. BPI urges us that the legal consequence of FMICs forgery claim is that the money transferred by BPI to Tevesteco is its own, and considering that it was able to recover possession of the same when the money was redeposited by Franco, it had the right to set up its ownership thereon and freeze Francos accounts. Issue: WON the bank has a better right to the deposits in Francos account. Held: No. Significantly, while Article 559 permits an owner who has lost or has been unlawfully deprived of a movable to recover the exact same thing from the current possessor, BPI simply claims ownership of the equivalent amount of money, i.e., the value thereof, which it had mistakenly debited from FMICs account and credited to Tevestecos, and subsequently traced to Francos account. Money bears no earmarks of peculiar ownership, and this characteristic is all the more manifest in the instant case which involves money in a banking transaction gone awry. Its primary function is to pass from hand to hand as a medium of exchange, without other evidence of its title. Money, which had been passed through various transactions in the general course of banking business, even if of traceable origin, is no exception.

G.R. No. 155223 : April 4, 2007 BOBIE ROSE V. FRIAS, represented by her Attorney-in-fact, MARIE F. FUJITA, Petitioner, v. FLORA SAN DIEGO-SISON, Respondent. DECISION AUSTRIA-MARTINEZ, J.: Before us is a Petition for Review on Certiorari filed by Bobie Rose V. Frias represented by her Attorney-in-fact, Marie Regine F. Fujita (petitioner) seeking to annul the Decision1 dated June 18, 2002 and the Resolution2 dated September 11, 2002 of the Court of Appeals (CA) in CA-G.R. CV No. 52839. Petitioner is the owner of a house and lot located at No. 589 Batangas East, Ayala Alabang, Muntinlupa, Metro Manila, which she acquired from Island Masters Realty and Development Corporation (IMRDC) by virtue of a Deed of Sale dated Nov. 16, 1990.3 The property is covered by TCT No. 168173 of the Register of Deeds of Makati in the name of IMRDC.4 On December 7, 1990, petitioner, as the FIRST PARTY, and Dra. Flora San Diego-Sison (respondent), as the SECOND PARTY, entered into a Memorandum of Agreement5 over the property with the following terms:
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NOW, THEREFORE, for and in consideration of the sum of THREE MILLION PESOS (P3,000,000.00) receipt of which is hereby acknowledged by the FIRST PARTY from the SECOND PARTY, the parties have agreed as follows: 1. That the SECOND PARTY has a period of Six (6) months from the date of the execution of this contract within which to notify the FIRST PARTY of her intention to purchase the aforementioned parcel of land together within (sic) the improvements thereon at the price of SIX MILLION FOUR HUNDRED THOUSAND PESOS (P6,400,000.00). Upon notice to the FIRST PARTY of the SECOND PARTY's intention to purchase the same, the latter has a period of another six months within which to pay the remaining balance of P3.4 million. 2. That prior to the six months period given to the SECOND PARTY within which to decide whether or not to purchase the above-mentioned property, the FIRST PARTY may still offer the said property to other persons who may be interested to buy the same provided that the amount of P3,000,000.00 given to the FIRST PARTY BY THE SECOND PARTY shall be paid to the latter including interest based on prevailing compounded bank interest plus the amount of the sale in excess of P7,000,000.00 should the property be sold at a price more than P7 million. 3. That in case the FIRST PARTY has no other buyer within the first six months from the execution of this contract, no interest shall be charged by the SECOND PARTY on the P3 million however, in the event that on the sixth month the SECOND PARTY would decide not to purchase the aforementioned property, the FIRST PARTY has a period of another six months within which to pay the sum of P3 million pesos provided that the said amount shall earn compounded bank interest for the last six months only. Under this circumstance, the amount of P3 million given by the SECOND PARTY shall be treated as [a] loan and the property shall be considered as the security for the mortgage which can be enforced in accordance with law. x x x x.6 Petitioner received from respondent two million pesos in cash and one million pesos in a post-dated check dated February 28, 1990, instead of 1991, which rendered said check stale.7 Petitioner then gave respondent TCT No. 168173 in the name of IMRDC and the Deed of Absolute Sale over the property between petitioner and IMRDC.

Respondent decided not to purchase the property and notified petitioner through a letter 8 dated March 20, 1991, which petitioner received only on June 11, 1991,9 reminding petitioner of their agreement that the amount of two million pesos which petitioner received from respondent should be considered as a loan payable within six months. Petitioner subsequently failed to pay respondent the amount of two million pesos. On April 1, 1993, respondent filed with the Regional Trial Court (RTC) of Manila, a complaint 10 for sum of money with preliminary attachment against petitioner. The case was docketed as Civil Case No. 9365367 and raffled to Branch 30. Respondent alleged the foregoing facts and in addition thereto averred that petitioner tried to deprive her of the security for the loan by making a false report 11 of the loss of her owner's copy of TCT No. 168173 to the Tagig Police Station on June 3, 1991, executing an affidavit of loss and by filing a petition12 for the issuance of a new owner's duplicate copy of said title with the RTC of Makati, Branch 142; that the petition was granted in an Order13 dated August 31, 1991; that said Order was subsequently set aside in an Order dated April 10, 1992 14 where the RTC Makati granted respondent's petition for relief from judgment due to the fact that respondent is in possession of the owner's duplicate copy of TCT No. 168173, and ordered the provincial public prosecutor to conduct an investigation of petitioner for perjury and false testimony. Respondent prayed for the ex-parte issuance of a writ of preliminary attachment and payment of two million pesos with interest at 36% per annum from December 7, 1991, P100,000.00 moral, corrective and exemplary damages and P200,000.00 for attorney's fees. In an Order dated April 6, 1993, the Executive Judge of the RTC of Manila issued a writ of preliminary attachment upon the filing of a bond in the amount of two million pesos.15
chanrob lesvi rtual lawliba ry

Petitioner filed an Amended Answer16 alleging that the Memorandum of Agreement was conceived and arranged by her lawyer, Atty. Carmelita Lozada, who is also respondent's lawyer; that she was asked to sign the agreement without being given the chance to read the same; that the title to the property and the Deed of Sale between her and the IMRDC were entrusted to Atty. Lozada for safekeeping and were never turned over to respondent as there was no consummated sale yet; that out of the two million pesos cash paid, Atty. Lozada took the one million pesos which has not been returned, thus petitioner had filed a civil case against her; that she was never informed of respondent's decision not to purchase the property within the six month period fixed in the agreement; that when she demanded the return of TCT No. 168173 and the Deed of Sale between her and the IMRDC from Atty. Lozada, the latter gave her these documents in a brown envelope on May 5, 1991 which her secretary placed in her attache case; that the envelope together with her other personal things were lost when her car was forcibly opened the following day; that she sought the help of Atty. Lozada who advised her to secure a police report, to execute an affidavit of loss and to get the services of another lawyer to file a petition for the issuance of an owner's duplicate copy; that the petition for the issuance of a new owner's duplicate copy was filed on her behalf without her knowledge and neither did she sign the petition nor testify in court as falsely claimed for she was abroad; that she was a victim of the manipulations of Atty. Lozada and respondent as shown by the filing of criminal charges for perjury and false testimony against her; that no interest could be due as there was no valid mortgage over the property as the principal obligation is vitiated with fraud and deception. She prayed for the dismissal of the complaint, counter-claim for damages and attorney's fees. Trial on the merits ensued. On January 31, 1996, the RTC issued a decision,17 the dispositive portion of which reads:
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WHEREFORE, judgment is hereby RENDERED: 1) Ordering defendant to pay plaintiff the sum of P2 Million plus interest thereon at the rate of thirty two (32%) per cent per annum beginning December 7, 1991 until fully paid. 2) Ordering defendant to pay plaintiff the sum of P70,000.00 representing premiums paid by plaintiff on the attachment bond with legal interest thereon counted from the date of this decision until fully paid.

3) Ordering defendant to pay plaintiff the sum of P100,000.00 by way of moral, corrective and exemplary damages. 4) Ordering defendant to pay plaintiff attorney's fees of P100,000.00 plus cost of litigation.18 The RTC found that petitioner was under obligation to pay respondent the amount of two million pesos with compounded interest pursuant to their Memorandum of Agreement; that the fraudulent scheme employed by petitioner to deprive respondent of her only security to her loaned money when petitioner executed an affidavit of loss and instituted a petition for the issuance of an owner's duplicate title knowing the same was in respondent's possession, entitled respondent to moral damages; and that petitioner's bare denial cannot be accorded credence because her testimony and that of her witness did not appear to be credible. The RTC further found that petitioner admitted that she received from respondent the two million pesos in cash but the fact that petitioner gave the one million pesos to Atty. Lozada was without respondent's knowledge thus it is not binding on respondent; that respondent had also proven that in 1993, she initially paid the sum of P30,000.00 as premium for the issuance of the attachment bond, P20,000.00 for its renewal in 1994, and P20,000.00 for the renewal in 1995, thus plaintiff should be reimbursed considering that she was compelled to go to court and ask for a writ of preliminary attachment to protect her rights under the agreement. Petitioner filed her appeal with the CA. In a Decision dated June 18, 2002, the CA affirmed the RTC decision with modification, the dispositive portion of which reads:
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WHEREFORE, premises considered, the decision appealed from is MODIFIED in the sense that the rate of interest is reduced from 32% to 25% per annum, effective June 7, 1991 until fully paid.19
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The CA found that: petitioner gave the one million pesos to Atty. Lozada partly as her commission and partly as a loan; respondent did not replace the mistakenly dated check of one million pesos because she had decided not to buy the property and petitioner knew of her decision as early as April 1991; the award of moral damages was warranted since even granting petitioner had no hand in the filing of the petition for the issuance of an owner's copy, she executed an affidavit of loss of TCT No. 168173 when she knew all along that said title was in respondent's possession; petitioner's claim that she thought the title was lost when the brown envelope given to her by Atty. Lozada was stolen from her car was hollow; that such deceitful conduct caused respondent serious anxiety and emotional distress. The CA concluded that there was no basis for petitioner to say that the interest should be charged for six months only and no more; that a loan always bears interest otherwise it is not a loan; that interest should commence on June 7, 199120 with compounded bank interest prevailing at the time the two million was considered as a loan which was in June 1991; that the bank interest rate for loans secured by a real estate mortgage in 1991 ranged from 25% to 32% per annum as certified to by Prudential Bank,21 that in fairness to petitioner, the rate to be charged should be 25% only. Petitioner's motion for reconsideration was denied by the CA in a Resolution dated September 11, 2002. Hence the instant Petition for Review on Certiorari filed by petitioner raising the following issues: (A) WHETHER OR NOT THE COMPOUNDED BANK INTEREST SHOULD BE LIMITED TO SIX (6) MONTHS AS CONTAINED IN THE MEMORANDUM OF AGREEMENT. (B) WHETHER OR NOT THE RESPONDENT IS ENTITLED TO MORAL DAMAGES. (C) WHETHER OR NOT THE GRANT OF CORRECTIVE AND EXEMPLARY DAMAGES AND ATTORNEY'S FEES IS PROPER EVEN IF NOT MENTIONED IN THE TEXT OF THE DECISION.22

Petitioner contends that the interest, whether at 32% per annum awarded by the trial court or at 25% per annum as modified by the CA which should run from June 7, 1991 until fully paid, is contrary to the parties' Memorandum of Agreement; that the agreement provides that if respondent would decide not to purchase the property, petitioner has the period of another six months to pay the loan with compounded bank interest for the last six months only; that the CA's ruling that a loan always bears interest otherwise it is not a loan is contrary to Art. 1956 of the New Civil Code which provides that no interest shall be due unless it has been expressly stipulated in writing. We are not persuaded. While the CA's conclusion, that a loan always bears interest otherwise it is not a loan, is flawed since a simple loan may be gratuitous or with a stipulation to pay interest,23 we find no error committed by the CA in awarding a 25% interest per annum on the two-million peso loan even beyond the second six months stipulated period. The Memorandum of Agreement executed between the petitioner and respondent on December 7, 1990 is the law between the parties. In resolving an issue based upon a contract, we must first examine the contract itself, especially the provisions thereof which are relevant to the controversy.24 The general rule is that if the terms of an agreement are clear and leave no doubt as to the intention of the contracting parties, the literal meaning of its stipulations shall prevail. 25 It is further required that the various stipulations of a contract shall be interpreted together, attributing to the doubtful ones that sense which may result from all of them taken jointly.26
chanroblesv irt uallawl ibary

In this case, the phrase "for the last six months only" should be taken in the context of the entire agreement. We agree with and adopt the CA's interpretation of the phrase in this wise:
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Their agreement speaks of two (2) periods of six months each. The first six-month period was given to plaintiff-appellee (respondent) to make up her mind whether or not to purchase defendant-appellant's (petitioner's) property. The second six-month period was given to defendant-appellant to pay the P2 million loan in the event that plaintiff-appellee decided not to buy the subject property in which case interest will be charged "for the last six months only", referring to the second six-month period. This means that no interest will be charged for the first six-month period while appellee was making up her mind whether to buy the property, but only for the second period of six months after appellee had decided not to buy the property. This is the meaning of the phrase "for the last six months only". Certainly, there is nothing in their agreement that suggests that interest will be charged for six months only even if it takes defendant-appellant an eternity to pay the loan.27
chanrob lesvi rt uallawliba ry

The agreement that the amount given shall bear compounded bank interest for the last six months only, i.e., referring to the second six-month period, does not mean that interest will no longer be charged after the second six-month period since such stipulation was made on the logical and reasonable expectation that such amount would be paid within the date stipulated. Considering that petitioner failed to pay the amount given which under the Memorandum of Agreement shall be considered as a loan, the monetary interest for the last six months continued to accrue until actual payment of the loaned amount. The payment of regular interest constitutes the price or cost of the use of money and thus, until the principal sum due is returned to the creditor, regular interest continues to accrue since the debtor continues to use such principal amount.28 It has been held that for a debtor to continue in possession of the principal of the loan and to continue to use the same after maturity of the loan without payment of the monetary interest, would constitute unjust enrichment on the part of the debtor at the expense of the creditor.29
chanrob lesvi rtua llawli bary

Petitioner and respondent stipulated that the loaned amount shall earn compounded bank interests, and per the certification issued by Prudential Bank, the interest rate for loans in 1991 ranged from 25% to 32% per annum. The CA reduced the interest rate to 25% instead of the 32% awarded by the trial court which petitioner no longer assailed.

In Bautista v. Pilar Development Corp.,30 we upheld the validity of a 21% per annum interest on a P142,326.43 loan. InGarcia v. Court of Appeals,31 we sustained the agreement of the parties to a 24% per annum interest on anP8,649,250.00 loan. Thus, the interest rate of 25% per annum awarded by the CA to a P2 million loan is fair and reasonable. Petitioner next claims that moral damages were awarded on the erroneous finding that she used a fraudulent scheme to deprive respondent of her security for the loan; that such finding is baseless since petitioner was acquitted in the case for perjury and false testimony filed by respondent against her. We are not persuaded. Article 31 of the Civil Code provides that when the civil action is based on an obligation not arising from the act or omission complained of as a felony, such civil action may proceed independently of the criminal proceedings and regardless of the result of the latter.32
chanroblesv irtuallaw liba ry

While petitioner was acquitted in the false testimony and perjury cases filed by respondent against her, those actions are entirely distinct from the collection of sum of money with damages filed by respondent against petitioner. We agree with the findings of the trial court and the CA that petitioner's act of trying to deprive respondent of the security of her loan by executing an affidavit of loss of the title and instituting a petition for the issuance of a new owner's duplicate copy of TCT No. 168173 entitles respondent to moral damages. Moral damages may be awarded inculpa contractual or breach of contract cases when the defendant acted fraudulently or in bad faith. Bad faith does not simply connote bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing of wrong. It partakes of the nature of fraud.33
chan roble svi rtual lawliba ry

The Memorandum of Agreement provides that in the event that respondent opts not to buy the property, the money given by respondent to petitioner shall be treated as a loan and the property shall be considered as the security for the mortgage. It was testified to by respondent that after they executed the agreement on December 7, 1990, petitioner gave her the owner's copy of the title to the property, the Deed of Sale between petitioner and IMRDC, the certificate of occupancy, and the certificate of the Secretary of the IMRDC who signed the Deed of Sale.34 However, notwithstanding that all those documents were in respondent's possession, petitioner executed an affidavit of loss that the owner's copy of the title and the Deed of Sale were lost. Although petitioner testified that her execution of the affidavit of loss was due to the fact that she was of the belief that since she had demanded from Atty. Lozada the return of the title, she thought that the brown envelope with markings which Atty. Lozada gave her on May 5, 1991 already contained the title and the Deed of Sale as those documents were in the same brown envelope which she gave to Atty. Lozada prior to the transaction with respondent.35 Such statement remained a bare statement. It was not proven at all since Atty. Lozada had not taken the stand to corroborate her claim. In fact, even petitioner's own witness, Benilda Ynfante (Ynfante), was not able to establish petitioner's claim that the title was returned by Atty. Lozada in view of Ynfante's testimony that after the brown envelope was given to petitioner, the latter passed it on to her and she placed it in petitioner's attach case36and did not bother to look at the envelope.37 It is clear therefrom that petitioner's execution of the affidavit of loss became the basis of the filing of the petition with the RTC for the issuance of new owner's duplicate copy of TCT No. 168173. Petitioner's actuation would have deprived respondent of the security for her loan were it not for respondent's timely filing of a petition for relief whereby the RTC set aside its previous order granting the issuance of new title. Thus, the award of moral damages is in order.
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The entitlement to moral damages having been established, the award of exemplary damages is proper.38 Exemplary damages may be imposed upon petitioner by way of example or correction for the public good.39 The RTC awarded the amount of P100,000.00 as moral and exemplary damages. While the award of moral and exemplary damages in an aggregate amount may not be the usual way

of awarding said damages,40 no error has been committed by CA. There is no question that respondent is entitled to moral and exemplary damages. Petitioner argues that the CA erred in awarding attorney's fees because the trial court's decision did not explain the findings of facts and law to justify the award of attorney's fees as the same was mentioned only in the dispositive portion of the RTC decision. We agree. Article 220841 of the New Civil Code enumerates the instances where such may be awarded and, in all cases, it must be reasonable, just and equitable if the same were to be granted.42 Attorney's fees as part of damages are not meant to enrich the winning party at the expense of the losing litigant. They are not awarded every time a party prevails in a suit because of the policy that no premium should be placed on the right to litigate.43 The award of attorney's fees is the exception rather than the general rule. As such, it is necessary for the trial court to make findings of facts and law that would bring the case within the exception and justify the grant of such award. The matter of attorney's fees cannot be mentioned only in the dispositive portion of the decision.44 They must be clearly explained and justified by the trial court in the body of its decision. On appeal, the CA is precluded from supplementing the bases for awarding attorney's fees when the trial court failed to discuss in its Decision the reasons for awarding the same. Consequently, the award of attorney's fees should be deleted. WHEREFORE, in view of all the foregoing, the Decision dated June 18, 2002 and the Resolution dated September 11, 2002 of the Court of Appeals in CA-G.R. CV No. 52839 are AFFIRMED with MODIFICATION that the award of attorney's fees is DELETED. No pronouncement as to costs.

[G.R. No. 122079. June 27, 1997] SPOUSES ANTONIO E.A. CONCEPCION and MANUELA S. CONCEPCION, Petitioners, vs. HON. COURT OF APPEALS, HOME SAVINGS BANK AND TRUST COMPANY, and as nominal partydefendants, THE SHERIFF ASSIGNED TO SAN JUAN, METRO MANILA, and who conducted the auction sale and the REGISTER OF DEEDS or his representative of San Juan, Metro Manila, and ASAJE REALTY CORPORATION, Respondents. DECISION VITUG, J.: The spouses Antonio E.A. Concepcion and Manuela S. Concepcion assail, via the instant petition for review on certiorari, the decision,1 dated 15 September 1995, of the Court of Appeals, affirming with modification the judgment of the Regional Trial Court ("RTC"),2 Branch 157, of Pasig City,3 that dismissed the complaint of herein petitioners against private respondents. The facts, hereunder narrated, are culled from the findings of the appellate court. On 17 January 1979, the Home Savings Bank and Trust Company (now Insular Life Savings and Trust Company) granted to the Concepcions a loan amounting to P1,400,000.00. The Concepcions, in turn, executed in favor of the bank a promissory note and a real estate mortgage over their property located at 11 Albany St., Greenhills, San Juan, Metro Manila. The loan was payable in equal quarterly amortizations for a period of fifteen (15) years and carried an interest rate of sixteen percent (16%) per annum. The promissory note provided that the Concepcions had authorized "x x x the Bank to correspondingly increase the interest rate presently stipulated in this transaction without advance notice to me/us in the event the Central Bank of the Philippines raises its rediscount rate to member banks, and/or the interest rate on savings and time deposit, and/or the interest rate on such loans and/or advances."4chanroblesvirtuallawlibrary In accordance with the above provision, the bank unilaterally increased the interest rate from 16% to 21% effective 17 February 1980; from 21% to 30% effective 17 October 1984; and from 30% to 38% effective 17 November 1984, increasing the quarterly amortizations from P67,830.00 to, respectively, P77,619.72, P104,661.10, and P123,797.05 for the periods aforestated. The Concepcions paid, under protest, the increased amortizations of P77,619.72 and P104,661.10 until January 1985 but thereafter failed to pay the quarterly amortization of P123,797.05 (starting due date of 17 April 1985). In a letter, dated 15 July 1985, the bank's President made a demand on the Concepcions for the payment of the arrearages. The Concepcions failed to pay, constraining the bank's counsel to send a final demand letter, dated 26 August 1985, for the payment of P393,878.81, covering the spouses' due account for three quarterly payments plus interest, penalty, and service charges. Still, no payment was received. On 14 April 1986, the bank finally filed with the Office of the Provincial Sheriff of Pasig City a petition for extrajudicial foreclosure of the real estate mortgage executed by the Concepcions. A notice of sale was issued on 15 May 1986, setting the public auction sale on 11 June 1986. The notice was published in the newspaper "Mabuhay." A copy of the notice was sent to the Concepcions at 59 Whitefield St., White Plains Subdivision, Quezon City and/or at 11 Albany St., Greenhills Subdivision, San Juan, Metro Manila. The public auction sale went on as scheduled with the bank emerging as the highest bidder. A Certificate of Sale was issued in favor of the bank. The Concepcions were unable to exercise their right of redemption within the one-year period provided under Act No. 3135. The bank thus consolidated its title over the property and, after the cancellation

of the title in the name of the Concepcions, a new transfer certificate of title (No. 090-R) was issued in the name of Home Savings Bank and Trust Company. On 31 July 1987, the bank executed a Deed of Absolute Sale in favor of Asaje Realty Corporation and a new certificate of title was issued in the latter's name. Meanwhile, on 29 July 1987, the Concepcions filed an action against Home Savings Bank and Trust Company, the Sheriff of San Juan, Metro Manila, and the Register of Deeds of San Juan, Metro Manila, for the cancellation of the foreclosure sale, the declaration of nullity of the consolidation of title in favor of the bank, and the declaration of nullity of the unilateral increases of the interest rates on their loan. The spouses likewise claimed damages against the defendants. The Concepcions, having learned of the sale of the property to Asaje Realty Corporation, filed an amended complaint impleading the realty corporation and so praying as well for the cancellation of the sale executed between said corporation and the bank and the cancellation of the certificate of title issued in the name of Asaje. On 31 August 1992, the trial court found for the defendants and ruled: "In view of all the foregoing premises, this Court finally concludes that the plaintiffs have no cause of action either against defendant Home Savings Bank & Trust Company or defendant Asaje Realty Corporation; and under the circumstances of this case, it deems it just and equitable that attorney's fees and expenses of litigation should be recovered by said defendants. "WHEREFORE, judgment is hereby rendered dismissing the amended complaint of plaintiffs Spouses Antonio E.A. Concepcion and Manuela S. Concepcion against the defendants for lack of merit, and ordering the said plaintiffs to pay attorney's fees and expenses of litigation in the sum of P30,000.00 to defendant Home Savings Bank & Trust Company and in the amount ofP25,000.00 to defendant Asaje Realty Corporation, in addition to their respective costs of suit. "SO ORDERED."5chanroblesvirtuallawlibrary The Concepcions went to the Court of Appeals. On 15 September 1995, the appellate court affirmed the trial court's decision, with modification, as follows: "Under the facts and circumstances of the case at bench, the award of attorney's fees, expenses of litigation and costs of suit in favor of defendant-appellee should be deleted. It is not a sound policy to place a penalty on the right to litigate, nor should counsel's fees be awarded everytime a party wins a suit (Arenas vs. Court of Appeals, 169 SCRA 558). "WHEREFORE, the appealed judgment is AFFIRMED with the modification that the award of attorneys fees, litigation expenses and costs of suit in favor of defendant-appellees are deleted from the dispositive portion. "SO ORDERED."6chanroblesvirtuallawlibrary The Concepcions forthwith filed with this Court a petition for review on certiorari, contending that they have been denied their contractually stipulated right to be personally notified of the foreclosure proceedings on the mortgaged property. There is some merit in the petition. The three common types of forced sales arising from a failure to pay a mortgage debt include (a) an extrajudicial foreclosure sale, governed by Act No. 3135; (b) a judicial foreclosure sale, regulated by

Rule 68 of the Rules of Court; and (c) an ordinary execution sale, covered by Rule 39 of the Rules of Court.7 Each mode, peculiarly, has its own requirements. In an extrajudicial foreclosure, such as here, Section 3 of Act No. 3135 8 is the law applicable;9 the provision reads: "Sec. 3. Notice shall be given by posting notices of the sale for not less than twenty days in at least three public places of the municipality or city where the property is situated, and if such property is worth more than four hundred pesos, such notice shall also be published once a week for at least three consecutive weeks in a newspaper of general circulation in the municipality or city." The Act only requires (1) the posting of notices of sale in three public places, and (2) the publication of the same in a newspaper of general circulation.10 Personal notice to the mortgagor is not necessary.11 Nevertheless, the parties to the mortgage contract are not precluded from exacting additional requirements. In the case at bar, the mortgage contract stipulated that "All correspondence relative to this Mortgage, including demand letters, summons, subpoenas, or notifications of any judicial or extrajudicial actions shall be sent to the Mortgagor at the address given above or at the address that may hereafter be given in writing by the Mortgagor to the Mortgagee, and the mere act of sending any correspondence by mail or by personal delivery to the said address shall be valid and effective notice to the Mortgagor for all legal purposes, and fact that any communication is not actually received by the Mortgagor, or that it has been returned unclaimed to the Mortgagee, or that no person was found at the address given, or that the address is fictitious or cannot be located, shall not excuse or relieve Mortgagor from the effects of such notice."12chanroblesvirtuallawlibrary The stipulation, not being contrary to law, morals, good customs, public order or public policy, is the law between the contracting parties and should be faithfully complied with.13chanroblesvirtuallawlibrary Private respondent bank maintains that the stipulation that "all correspondence relative to (the) Mortgage x x x shall be sent to the Mortgagor at the address given above or at the address that may hereafter be given in writing by the Mortgagor to the Mortgagee"14 gives the mortgagee an alternative to send its correspondence either at the old or the new address given.15 This stand is illogical. It could not have been the intendment of the parties to defeat the very purpose of the provision referred to which is obviously to apprise the mortgagors of the bank's action that might affect the property and to accord to them an opportunity to safeguard their rights. The Court finds the bank's failure to comply with its agreement with petitioners an inexcusable breach of the mortgagee's covenant. Neither petitioners' subsequent opportunity to redeem the property nor their failed negotiations with the bank for a new schedule of payments,16 can be a valid justification for the breach. The foregoing notwithstanding, petitioners may no longer seek the reconveyance of the property from private respondent Asaje Realty Corporation, the latter having been, evidently, an innocent purchaser in good faith.17 The realty corporation purchased the property when the title was already in the name of the bank. It was under no obligation to investigate the title of the bank or to look beyond what clearly appeared to be on the face of the certificate.18chanroblesvirtuallawlibrary Private respondent bank, however, can still be held to account for the bid price of Asaje Realty Corporation over and above, if any, the amount due the bank on the basis of the original interest rate, the unilateral increases made by the bank having been correctly invalidated by the Court of Appeals. The validity of "escalation" or "escalator" clauses in contracts, in general, was upheld by the Supreme Court in Banco Filipino Savings and Mortgage Bank vs. Hon. Navarro and Del Valle.19 Hence:

"Some contracts contain what is known as an `escalator clause,' which is defined as one in which the contract fixes a base price but contains a provision that in the event of specified cost increases, the seller or contractor may raise the price up to a fixed percentage of the base. Attacks on such a clause have usually been based on the claim that, because of the open price-provision, the contract was too indefinite to be enforceable and did not evidence an actual meeting of the minds of the parties, or that the arrangement left the price to be determined arbitrarily by one party so that the contract lacked mutuality. In most instances, however, these attacks have been unsuccessful. "The Court further finds as a matter of law that the cost of living index adjustment, or escalator clause, is not substantively unconscionable. "Cost of living index adjustment clauses are widely used in commercial contracts in an effort to maintain fiscal stability and to retain `real dollar' value to the price terms of long term contracts. The provision is a common one, and has been universally upheld and enforced. Indeed, the Federal government has recognized the efficacy of escalator clauses in tying Social Security benefits to the cost of living index, 42 U.S.C.s 415(i). Pension benefits and labor contracts negotiated by most of the major labor unions are other examples. That inflation, expected or otherwise, will cause a particular bargain to be more costly in terms of total dollars than originally contemplated can be of little solace to the plaintiffs."20chanroblesvirtuallawlibrary In Philippine National Bank vs. Court of Appeals,21 the Court further elucidated, as follows: "It is basic that there can be no contract in the true sense in the absence of the element of agreement, or of mutual assent of the parties. If this assent is wanting on the part of one who contracts, his act has no more efficacy than if it had been done under duress or by a person of unsound mind. "Similarly, contract changes must be made with the consent of the contracting parties. The minds of all the parties must meet as to the proposed modification, especially when it affects an important aspect of the agreement. In the case of loan contracts, it cannot be gainsaid that the rate of interest is always a vital component, for it can make or break a capital venture. Thus, any change must be mutually agreed upon, otherwise, it is bereft of any binding effect. "We cannot countenance petitioner bank's posturing that the escalation clause at bench gives it unbridled right to unilaterallyupwardly adjust the interest on private respondents' loan. That would completely take away from private respondents the right to assent to an important modification in their agreement, and would negate the element of mutuality in contracts. In Philippine National Bank v. Court of Appeals, et al., 196 SCRA 536, 544-545 (1991) we held "`x x x (T)he unilateral action of the PNB in increasing the interest rate on the private respondent's loan violated the mutuality of contracts ordained in Article 1308 of the Civil Code: "`ART. 1308. The contract must bind both contracting parties; its validity or compliance cannot be left to the will of one of them.' "In order that obligations arising from contracts may have the force or law between the parties, there must be mutualitybetween the parties based on their essential equality. A contract containing a condition which makes its fulfillment dependent exclusively upon the uncontrolled will of one of the contracting parties, is void x x x. Hence, even assuming that the x x x loan agreement between the PNB and the private respondent gave the PNB a license (although in fact there was none) to increase the interest rate at will during the term of the loan, that license would have been null and void for being violative of the principle of mutuality essential in contracts. It would have invested the loan agreement with the character of a contract of adhesion, where the parties do not bargain on equal footing, the weaker party's (the debtor) participation being reduced to the alternative `to take it or leave it' x x x. Such a contract is a veritable trap for the weaker party whom the courts of justice must protect against abuse and imposition. (Citations omitted.)"22chanroblesvirtuallawlibrary

Even if we were to consider that petitioners were bound by their agreement allowing an increase in the interest rate despite the lack of advance notice to them, the escalation should still be subject, as so contractually stipulated, to a corresponding increase by the Central Bank of its rediscount rate to member banks, or of the interest rate on savings and time deposit, or of the interest rate on such loans and advances. The notices sent to petitioners merely read: Letter of 19 July 1984: "Please be informed that the Bank has increased the interest rate of your existing loan from 21 to 30% per annum beginningOctober 17, 1984. This increase of interest rate is in accordance with the provision of Section 2 of Presidential Decree No. 1684 23 amending Act No. 2655. This provision of the decree is reiterated under paragraph 1 of your Promissory Note. Yourquarterly amortization has been increased to P104,661.10. "We trust that you will be guided accordingly."24chanroblesvirtuallawlibrary Letter of 14 November 1984: "On account of the prevailing business and economic condition, we are compelled to increase the interest rate of your existing loan from 30% to 38% per annum effective November 17, 1984. This increase is in accordance with your agreement (escalation clause) in your promissory note/s. "In view of this increase in the interest rate of your loan, your Quarterly amortization correspondingly increased to P123,797.05 commencing on April 17, 1985. "We trust that you will understand our position and please be guided accordingly."25chanroblesvirtuallawlibrary Given the circumstances, the Court sees no cogent reasons to fault the appellate court in its finding that there are no sufficient valid justifications aptly shown for the unilateral increases by private respondent bank of the interest rates on the loan. WHEREFORE, the decision of the appellate court is AFFIRMED subject to the MODIFICATION that private respondent Home Savings Bank and Trust Company shall pay to petitioners the excess, if any, of the bid price it received from Asaje Realty Corporation for the foreclosed property in question over and above the unpaid balance of the loan computed at the original interest rate. This case is REMANDED to the trial court for the above determination. No costs