REPUBLIC OF THE PHILIPPINES (BUREAU OF LANDS), petitioner,

vs.
THE HON. COURT OF APPEALS, HEIRS OF DOMINGO P. BALOY,
represented by RICARDO BALOY, ET AL., respondents.
G.R. No. L-46145 November 26, 1986
FACTS:
The Respondents, heirs of Domingo Baloy, represented by Ricardo P.
Baloy, applied for registration of their land in Zambales. Their claim
was anchored on their possessory information title coupled with their
continuous, adverse and public possession over the land in question
The description and the area of the land stated therein substantially
coincides with the land applied for and that said possessory
information title had been regularly issued having been acquired by
applicants' predecessor, Domingo Baloy, under the provisions of the
Spanish Mortgage Law. Applicants presented their tax declaration on
said lands on April 8, 1965.
Director of Lands opposed the registration alleging that this land had
become public land thru the operation of Act 627 of the Philippine
Commission.
o On November 26, 1902 pursuant to the executive order of the
President of the U.S., the area was declared within the U.S. Naval
Reservation. Under Act 627 as amended by Act 1138, a period
was fixed within which persons affected thereby could file their
application, (that is within 6 months from July 8, 1905) otherwise
"the said lands or interest therein will be conclusively adjudged
to be public lands and all claims on the part of private individuals
for such lands or interests therein not to presented will be
forever barred."
o Petitioner argues that since Domingo Baloy failed to file his claim
within the prescribed period, the land had become irrevocably
public and could not be the subject of a valid registration for
private ownership.

RTCS DECISION
Court of First Instance of Zambales denied respondents' application for
registration, concurring with the argument of the Director of Lands.
CAS DECISION
CA reversed the decision appealed from and thus approving the
application for registration on the the following grounds:

o Reason for the failure of Baloy to file his application was that
warning was from the Clerk of the Court of Land Registration and
there has not been presented a formal order or decision of the
said Court of Land Registration so declaring the land public
because of that failure
o It would be most difficult to sustain position of Director of Lands
that it was land of no private owner; open to public disposition,
and over which he has control; and since immediately after U.S.
Navy had abandoned the area, applicant came in and asserted
title once again
ISSUE:
WON private respondents' rights by virtue of their possessory
information title was lost by prescription.
HELD:
No

Sec. 3, Act 627 reveals that private land could be deemed to have
become public land only by virtue of a judicial declaration after due
notice and hearing.
o Without a judgment or order declaring the land to be public, its
private character and the possessory information title over it
must be respected. Since no such order has been rendered by
the Land Registration Court it necessarily follows that it never
became public land thru the operation of Act 627.
o To assume otherwise is to deprive private respondents of their
property without due process of law.
The finding of CA that during the interim of 57 years from November
26, 1902 to December 17, 1959 (when the U.S. Navy possessed the
area) the possessory rights of Baloy or heirs were merely suspended
and not lost by prescription, is supported by Exhibit "U," a
communication or letter No. 1108-63, dated June 24, 1963, which
contains an official statement of the position of the Republic of the
Philippines with regard to the status of the land in question.
o Said letter recognizes the fact that Domingo Baloy and/or his
heirs have been in continuous possession of said land since 1894
as attested by an "Informacion Possessoria" Title, which was
granted by the Spanish Government.
o Hence, the disputed property is private land and this possession
was interrupted only by the occupation of the land by the U.S.
Navy in 1945 for recreational purposes.

o The U.S. Navy eventually abandoned the premises.

o The heirs of the late Domingo P. Baloy, are now in actual
possession, and this has been so since the abandonment by the
U.S. Navy.
o A new recreation area is now being used by the U.S. Navy
personnel and this place is remote from the land in question.

Clearly, the occupancy of the U.S. Navy was not in the concept of
owner.
o It partakes of the character of a commodatum.
o It cannot therefore militate against the title of Domingo Baloy
and his successors-in-interest.
o One's ownership of a thing may be lost by prescription by reason
of another's possession if such possession be under claim of
ownership, not where the possession is only intended to be
transient, as in the case of the U.S. Navy's occupation of the
land concerned, in which case the owner is not divested of his
title, although it cannot be exercised in the meantime.

WHEREFORE, premises considered, finding no merit in the petition the

appealed decision is hereby AFFIRMED.

MARGARITA QUINTOS and ANGEL A. ANSALDO, plaintiffs-appellants,

vs.
BECK, defendant-appellee.
Mauricio Carlos for appellants.
Felipe Buencamino, Jr. for appellee.
G.R. No. L-46240

November 3, 1939

FACTS:

Quintos and Beck entered into a contract of lease, whereby the latter
occupied the formers house.
On Jan 14, 1936, the contract of lease was novated, wherein the
Quintos gratuitously granted to Beck the use of the furniture, subject
to the condition that Beck should return the furnitures to Quintos upon
demand.
Quintos sold the property to Maria and Rosario Lopez.
Beck was notified of the conveyance and given him 60 days to vacate
the premises.
In addition, Quintos required Beck to return all the furniture. Beck
refused to return 3 gas heaters and 4 electric lamps since he would use
them until the lease was due to expire.
Quintos refused to get the furniture since Beck had declined to return
all of them.
Beck deposited all the furniture belonging to QUintos to the sheriff.

RTCS DECISION
Court of First Instance of Manila which ordered that the defendant
return to her the three has heaters and the four electric lamps found in
the possession of the Sheriff of said city, that she call for the other
furniture from the said sheriff of Manila at her own expense, and that
the fees which the Sheriff may charge for the deposit of the furniture
be paid pro rata by both parties, without pronouncement as to the
costs.
ISSUE:
WON the defendant complied with his obligation to return the furniture upon
the plaintiff's demand
HELD:

The contract entered into between the parties is one of commadatum,

because under it the plaintiff gratuitously granted the use of the
furniture to the defendant, reserving for herself the ownership thereof;
by this contract the defendant bound himself to return the furniture to
the plaintiff, upon the latters demand.
The obligation voluntarily assumed by the defendant to return the
furniture upon the plaintiff's demand, means that he should return all
of them to the plaintiff at the latter's residence or house.
The defendant did not comply with this obligation when he merely
placed them at the disposal of the plaintiff, retaining for his benefit the
three gas heaters and the four electric lamps.
As the defendant had voluntarily undertaken to return all the furniture
to the plaintiff, upon the latter's demand, the Court could not legally
compel her to bear the expenses occasioned by the deposit of the
furniture at the defendant's behest.
The latter, as bailee, was not entitled to place the furniture on deposit;
nor was the plaintiff under a duty to accept the offer to return the
furniture, because the defendant wanted to retain the three gas
heaters and the four electric lamps.

The appealed judgment is modified and the defendant is ordered to return

and deliver to the plaintiff, in the residence to return and deliver to the
plaintiff, in the residence or house of the latter, all the furniture described in
paragraph 3 of the stipulation of facts Exhibit A. The expenses which may be
occasioned by the delivery to and deposit of the furniture with the Sheriff
shall be for the account of the defendant. the defendant shall pay the costs
in both instances. So ordered.

REPUBLIC OF THE PHILIPPINES, plaintiff-appellee,

vs.
JOSE GRIJALDO, defendant-appellant.
Office of the Solicitor General for plaintiff-appellee.
Isabelo P. Samson for defendant-appellant.
G.R. No. L-20240

December 31, 1965

FACTS:

In the year 1943, Jose Grijaldo obtained five loans from the Bank of
Taiwan, LTD., in Bacolod City, in the total sum of 1281.97, with interest
at 6% per annum, compounded quarterly.
The said loans were evidenced by promissory notes executed by
Grijaldo in favor of Bank of Taiwan. To secure payment of the loans,
Grijaldo executed a chattel mortgage on the standing crops on his
land, known as Haciend Campugas in Hinigiran, Negros Occidental.
By virtue of Vesting Order P-4, and under the authority providing for in
the Trading with the Enemy Act, the assets in the Phils., of Bank of
Taiwan were vested in the Government of the United States.
Pursuant to the Phil. Property Act of 1946 of the United States, these
assets, including the loans in question were subsequently transferred
to the Republic of the Phils.
The Republic of the Phils,filed a complaint in the Justice of the Peace to
collect the unpaid account in question.

The Justice of the Peace, after hearing, dismissed the case on the ground
that the action had prescribed.
On appeal, the Court of First Instance, ordered Grijaldo to pay the Republic
the total amount of the loans plus interests.
ISSUE: and RULING
1. WON appellee has no privity of contract with the appellant
NO.

It is true that the Bank of Taiwan, Ltd. was the original creditor and the
transaction between the appellant and the Bank of Taiwan was a
private contract of loan.

However, pursuant to the Trading with the Enemy Act, as amended,

and Executive Order No. 9095 of the United States; and under Vesting
Order No. P-4, dated January 21, 1946, the properties of the Bank of
Taiwan, Ltd., an entity which was declared to be under the jurisdiction
of the enemy country (Japan), were vested in the United States
Government and the Republic of the Philippines, the assets of the Bank
of Taiwan, Ltd. were transferred to and vested in the Republic of the
Philippines.
o The successive transfer of the rights over the loans in question
from the Bank of Taiwan, Ltd. to the United States Government,
and from the United States Government to the government of
the Republic of the Philippines, made the Republic of the
Philippines the successor of the rights, title and interest in said
loans, thereby creating a privity of contract between the appellee
and the appellant. In defining the word "privy" this Court, in a
case, said:

The word "privy" denotes the idea of succession ... hence

an assignee of a credit, and one subrogated to it, etc. will
be privies; in short, he who by succession is placed in the
position of one of those who contracted the judicial relation
and executed the private document and appears to be
substituting him in the personal rights and obligation is a
privy (Alpurto vs. Perez, 38 Phil. 785, 790).

2. WON the obligation of Grijaldo to pay the loan was extinguished upon
the destruction of the mortgaged crops.

No.
The terms of the promissory notes and the chattel mortgage that the
appellant executed in favor of the Bank of Taiwan, Ltd. do not support
the claim of appellant.
o The obligation of the appellant under the five promissory notes
was not to deliver a determinate thing namely, the crops to be
harvested from his land, or the value of the crops that would be
harvested from his land.

o Rather, his obligation was to pay a generic thing the amount

of money representing the total sum of the five loans, with
interest.
o The transaction between the appellant and the Bank of Taiwan,
Ltd. was a series of five contracts of simple loan of sums of
money. "By a contract of (simple) loan, one of the parties delivers
to another ... money or other consumable thing upon the
condition that the same amount of the same kind and quality
shall be paid." (Article 1933, Civil Code)
o The obligation of the appellant under the five promissory notes
evidencing the loans in questions is to pay the value thereof;
that is, to deliver a sum of money a clear case of an obligation
to deliver, a generic thing. Article 1263 of the Civil Code
provides:

In an obligation to deliver a generic thing, the loss or

destruction of anything of the same kind does not
extinguish the obligation.

The chattel mortgage on the crops growing on appellant's land simply

stood as a security for the fulfillment of appellant's obligation covered
by the five promissory notes, and the loss of the crops did not
extinguish his obligation to pay, because the account could still be paid
from other sources aside from the mortgaged crops.

IN VIEW OF THE FOREGOING, the decision appealed from is affirmed, with

costs against the appellant. Inasmuch as the appellant Jose Grijaldo died
during the pendency of this appeal, his estate must answer in the execution
of the judgment in the present case.

FELIX DE LOS SANTOS, plaintiff-appelle,

vs.
AGUSTINA JARRA, administratrix of the estate of Magdaleno
Jimenea, deceased, defendant-appellant.
Matias Hilado, for appellant.
Jose Felix Martinez, for appellee.
G.R. No. L-4150

February 10, 1910

FACTS:

On the 1st of September, 1906, Felix de los Santos brought suit against
Agustina Jarra, the administratrix of the estate of Magdaleno Jimenea,
alleging that
o in the latter part of 1901 Jimenea borrowed and obtained from
the plaintiff ten first-class carabaos, to be used at the animalpower mill of his hacienda during the season of 1901-2, without
recompense or remuneration whatever for the use thereof, under
the sole condition that they should be returned to the owner as
soon as the work at the mill was terminated;
o that Magdaleno Jimenea, however, did not return the carabaos,
notwithstanding the fact that the plaintiff claimed their return
after the work at the mill was finished;
o that Magdaleno Jimenea died on the 28th of October, 1904, and
o the defendant herein was appointed by the Court of First
Instance of Occidental Negros administratrix of his estate and
she took over the administration of the same and is still
performing her duties as such administratrix;
o that the plaintiff presented his claim to the commissioners of the
estate of Jimenea, within the legal term, for the return of the said
ten carabaos,
but the said commissioners rejected his claim as appears
in their report;
o therefore, the plaintiff prayed that judgment be entered against
the defendant as administratrix of the estate of the deceased,
ordering her to return the ten first-class carabaos loaned to the
late Jimenea, or their present value, and to pay the costs.

RTCS DECISION
On the 10th of January, 1907, the court below entered judgment
sentencing Agustina Jarra, as administratrix of the estate of Magdaleno
Jimenea, to return to the plaintiff, Felix de los Santos, the remaining six
second and third class carabaos, or the value thereof at the rate of P120
each, or a total of P720 with the costs.

ISSUE:
WON the carabaos are merely loaned to the estate of Magdaleno
Jimenea
HELD:
Yes.

It may be logically inferred that

o the carabaos loaned or given on commodatum to the now
deceased Magdaleno Jimenea were ten in number;
o that they, or at any rate the six surviving ones, have not been
returned to the owner thereof, Felix de los Santos, and
o that it is not true that the latter sold to the former three carabaos
that the purchaser was already using;

therefore, as the said six carabaos were not the property of the
deceased nor of any of his descendants, it is the duty of the
administratrix of the estate to return them or indemnify the owner for
their value.

The Civil Code, in dealing with loans in general, from which generic
denomination the specific one of commodatum is derived, establishes
prescriptions in relation to the last-mentioned contract by the following
articles:
o ART. 1740. By the contract of loan, one of the parties delivers to
the other, either anything not perishable, in order that the latter
may use it during a certain period and return it to the former, in
which case it is called commodatum, or money or any other
perishable thing, under the condition to return an equal amount
of the same kind and quality, in which case it is merely called a
loan.

Commodatum is essentially gratuitous. A simple loan may be

gratuitous, or made under a stipulation to pay interest.
ART. 1741. The bailee acquires retains the ownership of the thing
loaned. The bailee acquires the use thereof, but not its fruits; if any
compensation is involved, to be paid by the person requiring the use,
the agreement ceases to be a commodatum.

ART. 1742. The obligations and rights which arise from the
commodatum pass to the heirs of both contracting parties, unless the
loan has been in consideration for the person of the bailee, in which
case his heirs shall not have the right to continue using the thing
loaned.

The carabaos delivered to be used not being returned by the defendant

upon demand, there is no doubt that she is under obligation to
indemnify the owner thereof by paying him their value.
Article 1101 of said code reads:
Those who in fulfilling their obligations are guilty of fraud, negligence,
or delay, and those who in any manner whatsoever act in
contravention of the stipulations of the same, shall be subjected to
indemnify for the losses and damages caused thereby.

The obligation of the bailee or of his successors to return either the

thing loaned or its value, is sustained by the supreme tribunal of Sapin.
In its decision of March 21, 1895, it sets out with precision the legal
doctrine touching commodatum as follows:

Although it is true that in a contract of commodatum the bailor retains

the ownership of the thing loaned, and at the expiration of the period,
or after the use for which it was loaned has been accomplished, it is
the imperative duty of the bailee to return the thing itself to its owner,
or to pay him damages if through the fault of the bailee the thing
should have been lost or injured, it is clear that where public securities
are involved, the trial court, in deferring to the claim of the bailor that
the amount loaned be returned him by the bailee in bonds of the same
class as those which constituted the contract.

ALEJANDRA MINA, ET AL., plaintiffs-appellants,

vs.
RUPERTA PASCUAL, ET AL., defendants-appellees.
G.R. No. L-8321
October 14, 1913
Facts:
Francisco Fontanilla and Andres Fontanilla were brothers. Francisco
Fontanilla acquired during his lifetime, on March 12, 1874, a lot in the
center of the town of Laoag, the capital of the Province of Ilocos Norte,
the property having been awarded to him through its purchase at a
public auction held by the alcalde mayor of that province.
Andres Fontanilla, with the consent of his brother Francisco, erected a
warehouse on a part of the said lot, embracing 14 meters of its
frontage by 11 meters of its depth.
Francisco Fontanilla, the former owner of the lot, being dead, the
herein plaintiffs, Alejandro Mina, et al., were recognized without
discussion as his heirs.
Andres Fontanilla, the former owner of the warehouse, also having
died, the children of Ruperta Pascual were recognized the likes without
discussion, though it is not said how, and consequently are entitled to
the said building, or rather, as Ruperta Pascual herself stated, to only
six-sevenths of one-half of it, the other half belonging, as it appears, to
the plaintiffs themselves, and the remaining one-seventh of the first
one-half to the children of one of the plaintiffs, Elena de Villanueva.
o The fact is that the plaintiffs and the defendants are virtually, to
all appearance, the owners of the warehouse; while the plaintiffs
are undoubtedly, the owners of the part of the lot occupied by
that building, as well as of the remainder thereof.
This was the state of affairs, when, on May 6, 1909, Ruperta Pascual,
as the guardian of her minor children, the herein defendants,
petitioned the Court of First Instance of Ilocos Norte for authorization to
sell "the six-sevenths of the one-half of the warehouse, of 14 by 11
meters, together with its lot."
o The plaintiffs that is Alejandra Mina, et al. opposed the
petition of Ruperta Pascual for the reason that the latter had
included therein the lot occupied by the warehouse, which they
claimed was their exclusive property.
o All this action was taken in a special proceeding in re
guardianship.
the warehouse, together with the lot on which it stands, was sold to Cu
Joco, the other defendant in this case, for the price mentioned.
The plaintiffs insisted upon a decision of the question of the ownership
of the lot, and the court decided it by holding that this land belonged
to the owner of the warehouse which had been built thereon thirty
years before.

Issue:
WON the defendants hold a lawful possession of the lot in question
Held:
No.

Although both litigating parties may have agreed in their idea of the
commodatum, on account of its not being, as indeed it is not, a
question of fact but of law, yet that denomination given by them to
the use of the lot granted by Francisco Fontanilla to his brother,
Andres Fontanilla, is not acceptable.
o Contracts are not to be interpreted in conformity with the
name that the parties thereto agree to give them, but must be
construed, duly considering their constitutive elements, as
they are defined and denominated by law.
o By the contract of loan, one of the parties delivers to the
other, either anything not perishable, in order that the latter
may use it during the certain period and return it to the
former, in which case it is called commodatum . . . (art. 1740,
Civil Code).
It is, therefore, an essential feature of the commodatum that the
use of the thing belonging to another shall for a certain period.
Francisco Fontanilla did not fix any definite period or time during
which Andres Fontanilla could have the use of the lot whereon the
latter was to erect a stone warehouse of considerable value, and so
it is that for the past thirty years of the lot has been used by both
Andres and his successors in interest.
o The present contention of the plaintiffs that Cu Joco, now in
possession of the lot, should pay rent for it at the rate of P5 a
month, would destroy the theory of the commodatum
sustained by them, since, according to the second paragraph
of the aforecited article 1740, "commodatum is essentially
gratuitous," and, if what the plaintiffs themselves aver on
page 7 of their brief is to be believed, it never entered
Francisco's mind to limit the period during which his brother
Andres was to have the use of the lot, because he expected
that the warehouse would eventually fall into the hands of his
son, Fructuoso Fontanilla, called the adopted son of Andres,
which did not come to pass for the reason that Fructuoso died
before his uncle Andres.
With that expectation in view, it appears more likely
that Francisco intended to allow his brother Andres a
surface right; but this right supposes the payment of an

annual rent, and Andres had the gratuitous use of the

lot.
Hence, as the facts aforestated only show that a building was
erected on another's ground, the question should be decided in
accordance with the statutes that, thirty years ago, governed
accessions to real estate, and which were Laws 41 and 42, title 28,
of the third Partida, nearly identical with the provisions of articles
361 and 362 of the Civil Code.
o So, then, pursuant to article 361, the owner of the land on
which a building is erected in good faith has a right to
appropriate such edifice to himself, after payment of the
indemnity prescribed in articles 453 and 454, or to oblige the
builder to pay him the value of the land. Such, and no other, is
the right to which the plaintiff are entitled.
For the foregoing reasons, it is only necessary to annul the sale of
the said lot which was made by Ruperta Pascual, in representation
of her minor children, to Cu Joco, and to maintain the latter in the
use of the lot until the plaintiffs shall choose one or the other of the
two rights granted them by article 361 of the Civil Code.

The judgment appealed from is reversed and the sale of the lot in question is
held to be null and void and of no force or effect. No special finding is made
as to the costs of both instances.

AURELIO G. BRIONES, plaintiff-appellee,

vs.
PRIMITIVO P. CAMMAYO, ET AL., defendants-appellants.
Carlos J. Antiporda for plaintiff-appellee.
Manuel A. Cammayo for defendants-appellants.
G.R. No. L-23559 October 4, 1971

FACTS:

Aurelio G. Briones filed an action in the Municipal Court of Manila

against Primitivo, Nicasio, Pedro, Hilario and Artemio, all surnamed
Cammayo, to recover from them, jointly and severally, the amount of
P1,500.00, plus damages, attorney's fees and costs of suit.
Defendants executed the real estate mortgage as security for the loan
of P1,200.00 given to Primitivo P. Cammayo upon the usurious
agreement that defendant pays to the plaintiff, out of the alleged loan
of P1,500.00 (which includes as interest the sum of P300.00) for one
year.
Although the mortgage contract was executed for securing the
payment of P1,500.00 for a period of one year, without interest, the
truth and the real fact is that plaintiff delivered to the defendant
Primitivo P. Cammayo only the sum of P1,200.00 and withheld the sum
of P300.00 which was intended as advance interest for one year.
On account of said loan of P1,200.00, defendant Primitivo P. Cammayo
paid to the plaintiff during the period from October 1955 to July 1956
the total sum of P330.00 which plaintiff, illegally and unlawfully refused
to acknowledge as part payment of the account but as in interest of
the said loan for an extension of another term of one year.
ISSUE:
WON Briones can recover the amount of P1,500.00?
RULING:
Loan is valid but usurious interest is void.
o Creditor has the right to recover his capital by judicial action.
o To discourage stipulations on usurious interest, said stipulations
are treated as wholly void, so that the loan becomes one without
stipulation as to payment of interest.

o It should not, however, be interpreted to mean forfeiture even of

the principal, for this would unjustly enrich the borrower at the
expense of the lender.
o Furthermore, penal sanctions are available against a usurious
lender, as a further deterrence to usury.
In simple loan with stipulation of usurious interest, the prestation of the
debtor to pay the principal debt, which is the cause of the contract
(Article 1350, Civil Code), is not illegal.
o The illegality lies only as to the prestation to pay the stipulated
interest; hence, being separable, the latter only should be
deemed void, since it is the only one that is illegal.

Barrredo, J., concurring

The Usury law is clear that he may recover only all interests, including
of course, the legal part thereof, with legal interests from the date of judicial
demand, without maintaining that he can also recover the principal he has
already
paid
to
the
lender.
Castro Fernando, and Conception, JJ., dissenting
In a contract which is tainted with usury, that is, with a stipulation
(whether written or unwritten) to pay usurious interest, the prestation to pay
such interest is an integral part of the cause of the contract. It is also the
controlling cause, for a usurer lends his money not just to have it returned
but indeed, to acquire in coordinate gain. Article 1957, which declares the
contract itself not merely the stipulation to pay usurious interest -- void,
necessarily regards the prestation to pay usurious interest as an integral part
of the cause, making it illegal.

FROILAN LOPEZ, plaintiff-appellant,

vs.
SALVADOR V. DEL ROSARIO and BENITA QUIOGUE DE V. DEL
ROSARIO, defendants-appellants.
Araneta and Zaragoza for plaintiff-appellant.
Jose Espiritu and Gibbs, McDonough and Johnson for defendants-appellants.
G.R. No. L-19189

November 27, 1922

FACTS:

Benita Quiogue de V. del Rosario (Mrs. del Rosario), owner of a bonded

warehouse where Froilan Lopez, holder or 14 warehouse receipts and
Elias Zamora had their copra deposited

The warehouse receipts states an insurance of 1% their declared value

which can be increase or decrease by giving 1 month notice in writing

Lopez paid the insurance to May 18, 1920, but not to subsequent
payments

On June 6, 1920, the warehouse was destroyed by fire.

o Only copra worth P49,985 was salvaged.
o At that time Lopez was still liable for the storage and insurance
of P315.90

Mrs. Del Rosario submitted the insurance with the arbitrators and
seems to have satisfied all of the persons who had copra stored in her
warehouse, including the stockholders in the Compaia Coprera de
Tayabas (whose stock she took over), with the exception of Froilan
Lopez

Ineffectual attempts by Mrs. Del Rosario to effect a compromise with

Lopez first for P71,994, later raised to P72,724, and finally reduced to
P17,000, were made. But Lopez stubbornly contended, or, at least, his
attorney contended for him, that he should receive not a centavo less
than P88,595.43 (from originally P107,990.40)

ISSUE:
WON the plaintiff should recover interest at the rate of 12 per cent per
annum.

HELD:
Yes.

The defendant has not sought to elude her moral and legal obligations.
o The controversy is merely one which unfortunately all too often
arises between litigious persons.
o Plaintiff has exactly the rights of any litigant, equally situated,
and no more.
It has been the constant practice of the court to make article 1108 of
the Civil Code the basis for the calculation of interest.
o Damages in the form of interest at the rate of 12 per cent, as
claimed by the plaintiff, are too remote and speculative to be
allowed.
o The deprivation of an opportunity for making money which might
have proved beneficial or might have been ruinous is of too
uncertain character to be weighed in the even balances of the
law. (Civil Code, art. 1108)

JACOBO ZOBEL, ET AL., plaintiffs-appellants,

vs.
THE CITY OF MANILA, defendant-appellant.
Fisher, DeWitt, Perkins and Brady for plaintiffs-appellants.
City Fiscal Guevara and Araneta and Zaragoza for defendant-appellant.
G.R. No. L-22201

January 12, 1925

FACTS:
Minors Jacobo Zobel, Alfonso Zobel, and Mercedes Zobel, under the
guardianship of Fernando Zobel, to recover of the City of Manila the
amount of the first two installments of the purchase price of a tract of
land located in the Province of Rizal near the corporate limits of the
City of Manila, which has been conveyed by the guardian of the minorplaintiffs by deed dated 21st of February, 1922, said installments
amounting respectively to P41,666.66 and with interest upon the first
installment from May 21, 1922, and upon the second from the date of
the making of the contract.
The City of Manila have appreciated the necessity for the
establishment of a cemetery near the city and on the south side of the
Pasig River. Admittedly the only tract of land available for this purpose
consists of a part of the Hacienda San Pedro Macati, belonging to the
plaintiffs, who are minors.
o This estate lies in the Province of Rizal, beyond the corporate
limits of the city, but one of its corners juts into the southern, or
southeastern suburbs of the city, in such manner as to bring the
desired tract close to populous centres.
o The hacienda, it may be stated, has never been built upon
improved for city purposes and forms a solid block, practically
untraversed by public streets or roads.
o Owing to the character of the subsoil the land has little value for
agricultural purposes, which is the only use to which it has
heretofore been put; and it is taxed in the Province of Rizal on
the low basis of agricultural land.
In February, 1920, the Municipal Board of the City of Manila passed an
ordinance (No. 726) appropriating the sum of P703,750 to be used for
"the establishment of a cemetery in the south district of Manila and the
acquisition of the land necessary therefor."
Honorable Ramon J. Fernandez, at that time the Mayor of the City,
entered into negotiations with the guardian of the appellees, the result
of which was a letter, written July 1, 1920, in which the appellees
offered to sell to the city upon the terms therein set forth twenty-five
hectares of the San Pedro Macati Estate for cemetery purposes (Exhibit
A)

By the final deed of sale, dated February 21, 1922, the city undertook
to pay the total purchase price of P250,000 in six installments. The first
was in the amount of P41,666.70 payable on May 21, 1922. The other
five were in the amount of P41,666.66 each, successively falling due
on May 21, 1923, and on the same date in each succeeding year until
all should be paid.

The following stipulation with respect to interest is found in clause III of

this contract:
o Of the installments above stipulated, the first (which will fall due
three months after the execution of this writing) shall draw no
interest; but the five later installments shall draw interest at the
rate of five per centum (5%) per annum, payable to the creditors
upon the date when they shall respectively fall due.

From this it will be seen that the agreement as to interest differs in

case of the two installments here sued on; and the situation with
respect to each will therefore be dealt with separately.

RTC Ruling
Upon hearing the cause the trial judge gave judgment in favor of the
plaintiffs to recover both the principal sums claimed, amounting to
P83,333.32, with interest upon only one installment at the rate of five
per centum per annum.
ISSUE:
WON the rules on the computation of interest is proper
HELD:
No.

As to the first installment, which was to fall due at three months, it was
stipulated that it should bear no interest.
o The trial judge appears to have considered that this stipulation
deprived the plaintiffs of the right to interest after default, and no
interest whatever was allowed by him upon this installment. This
was error.

o The stipulation that this installment should draw no interest was

made in the expectation that the obligation would be paid upon
the date stipulated.
o After default occurred the defendant became liable for interest as
damages regardless of the absence of any express stipulation for
interest and regardless of the statement that this installment
should draw no interest.
o This statement in the contract was evidently intended merely to
govern the rights of the parties with respect to interest for the
three-month period between the making of the contract and the
date when the installment was to become due. With respect to
the plaintiffs' right to interest after default the situation is to be
treated precisely as if nothing had been said about interest at all.

As already stated, the first installment fell due on May 21, 1922, and
extrajudicial demand for payment appears to have been made in a
letter dated June 7, 1922, from the guardian of the plaintiffs addressed
to the Mayor.
o Under the first paragraph of article 1100 of the Civil Code and
under article 1108 of the same Code, interest should be allowed
upon this installment at the rate of six per centum per annum.
o Under section 510 of the Code of Civil Procedure, the interest
thus accruing must be consolidated with the principal as of the
date of the judgment of the lower court; after which interest
upon the whole shall be computed at the same rate.

With respect to the second installment interest must be allowed at the

contract rate of five per centum per annum from the date of the
execution of the final deed of sale, or February 21, 1922;
o and under article 1109 of the Civil Code the interest that had
accrued up to the date of the filing of the complaint (May 24,
1923) must be consolidated as of that date with the capital, after
which the whole shall bear interest at the contract rate of five
per centum per annum until paid.
o Where interest is contracted for at a given rate the contract
obligation to pay interest is not merged in the judgment but
remains in full force until the debt is paid.

o The circumstance that the rate here stipulated was less than the
lawful rate does not alter the case.

In connection with liability for interest it may be well to point out that
section 510 of the Code of Civil Procedure is applicable only to debts
and claims with respect to which no stipulation for interest has been
made, and article 1109 of the Civil Code, providing for interest upon
interest, is applicable only to obligations containing a stipulation for
interest.
o Furthermore, it will be noted that, though section 510 of the
Code of Civil Procedure provides that interest shall be added
"until the date of the final judgment," this is not to be understood
as inhibiting the collection of interest thereafter accruing until
the judgment is paid.
o A demand established by judgment must be understood as
bearing interest whether expressly so stated or not.
o Finally, it hardly needs be said, a municipal corporation does not
enjoy immunity from liability for interest, when assessed as
damages for the nonpayment of a debt, to the same extent as
the general government.

The plaintiffs shall recover of the defendant, upon the first cause of action,
the sum of P45,652.84, as of the date of January 11, 1924, with interest
thereafter at the rate of six per centum per annum until the judgment shall
be paid; and upon the second cause of action the sum of P44,283.04, as of
the date of May 24, 1923, with interest thereafter at the rate of five per
centum per annum until the judgment shall be paid. The plaintiffs will also
recover costs of both instances. As thus modified, the judgment is affirmed.
So ordered.

PACITA F. REFORMINA and HEIRS OF FRANCISCO

REFORMINA, petitioners,
vs.
THE HONORABLE VALERIANO P. TOMOL, JR., as Judge of the Court of
First Instance, Branch XI, CEBU CITY, SHELL REFINING COMPANY
(PHILS.), INC., and MICHAEL, INCORPORATED, respondents.
Mateo Canonoy for petitioners.
Reynaldo A. Pineda, Reyes, Santayana, Tayao and Picaso Law Office for
respondent Shell.
Marcelo Fernan & Associates for respondent Michael, Inc.
G.R. No. L-59096 October 11, 1985
FACTS:

A fire occurred burning the boat FB Pacita III and fishing gear of the
Reforminas. Consequently, they filed an action for recovery of
damages for injury to persons and loss of property.
Judge Tomol, Jr awarded the Reforminas damages with legal interest
from the filing of the complaint until paid.
He further rendered that by legal interest meant 6% as provided for by
Art 2209 CC. Reforminas contend that it should be 12% by virtue of
Central Bank Circular No. 416

ISSUE:
WON the appropriate legal interest is 6%
HELD:

C.B. Circular 416 which took effect July 29, 1974 pursuant to PD 116
which amended Act 2655 (Usury Law) which raised the legal interest
from 6% to 12% applies only to forbearances of money, goods or credit
and court judgments.
Such court judgment refers only to judgments in litigations involving
loans or forbearance of any money, goods or credit.
Any other kind of monetary judgment does not fall under the coverage
of said law for it is not within the ambit of authority granted to the
central Bank.
Only the legislature can change the laws.

In this case, the decision of the judge is one rendered in an action for
damages arising from injury to persons and loss of property and does
not involve a loan much less forbearance of any money, goods or
credit.
The law applicable is thus ART 2209 CC which states that:
o If the obligation consists in the payment of a sum of money and
the debtor incurs in delay, the indemnity for damages there
being no stipulation to the contrary shall be the payment of
interest agreed upon, and in the absence of stipulation, the legal
interest which is 6% per annum.
Plana Concurring and Dissenting: Under Sec 1a of Act 2655 as
amended by PD 116, the authority of CB is to fix a maximum rate of
interest on loans and not to prescribe a fixed interest rate. Such
authority given to CB is absolute and unqualified and therefore the
delegation of power to itis void.

N VIEW OF THE FOREGOING CONSIDERATIONS, and finding the instant

petition to be without merit, the same is hereby DISMISSED with costs
against petitioners.
SO ORDERED.

LIAM LAW, plaintiff-appellee,

vs.
OLYMPIC SAWMILL CO. and ELINO LEE CHI, defendants-appellants.
Felizardo S.M. de Guzman for plaintiff-appellee.
Mariano M. de Joya for defendants-appellants.
G.R. No. L-30771 May 28, 1984
FACTS:

on or about September 7, 1957, plaintiff loaned P10,000.00, without

interest, to defendant partnership and defendant Elino Lee Chi, as the
managing partner.
o The loan became ultimately due on January 31, 1960, but was
not paid on that date, with the debtors asking for an extension of
three months, or up to April 30, 1960.
Payment of the P10,000.00 was extended to April 30, 1960, but the
obligation was increased by P6,000.00 which formed part of the
principal obligation to answer for attorneys fees, legal interest, and
other cost incident thereto to be paid unto the creditor and his
successors in interest upon the termination of this agreement.
o The defendants again failed to pay their obligation.
On 23 September 1960, the plaintiff instituted the collection case
before the Court of First Instance of Bulacan.
o The defendants admitted the P10,000.00 principal obligation, but
claimed that the additional P6,000.00 constituted usurious
interest.
o Upon the plaintiffs application, the Trial Court issued a writ of
Attachment on real and personal properties of defendants.
o After the Writ of Attachment was implemented, proceedings
before the Trial Court versed principally in regards to the
attachment.
o On 18 January 1961, an Order was issued by the Trial Court
allowing both parties to simultaneously submit a Motion for
Summary Judgment.
o On 26 June 1961, the Trial Court rendered decision ordering
defendants to pay the plaintiff the amount of P10,000.00 plus the
further sum of P6,000.00.
o The defendants appealed before the then court of Appeals, which
endorsed it to the Supreme Court stating that the issue involved
was one of law.

RTC Ruling:

On June 26, 1961, the Trial Court rendered decision ordering defendants to
pay plaintiff "the amount of P10,000.00 plus the further sum of P6,000.00 by
way of liquidated damages . . . with legal rate of interest on both amounts
from April 30, 1960." It is from this judgment that defendants have appealed.
ISSUE:
WON the P6,000.00 constituted usurious interest
HELD:
No.

Section 9 of the Usury Law (Act 2655) provided:

o SEC. 9. The person or corporation sued shall file its answer in
writing under oath to any complaint brought or filed against said
person or corporation before a competent court to recover the
money or other personal or real property, seeds or agricultural
products, charged or received in violation of the provisions of this
Act. The lack of taking an oath to an answer to a complaint will
mean the admission of the facts contained in the latter.

The foregoing provision envisages a complaint filed against an entity

which has committed usury, for the recovery of the usurious interest
paid.
o In that case, if the entity sued shall not file its answer under oath
denying the allegation of usury, the defendant shall be deemed
to have admitted the usury.
o The provision does not apply to a case, as in the present, where
it is the defendant, not the plaintiff, who is alleging usury.

Moreover, for sometime now, usury has been legally non-existent.

o Interest can now be charged as lender and borrower may agree
upon.
o The Rules of Court in regards to allegations of usury, procedural
in nature, should be considered repealed with retroactive effect.

Statutes regulating the procedure of the courts will be construed as

applicable to actions pending and undetermined at the time of their
passage.

o Procedural laws are retrospective in that sense and to that

extent.

Section 24(d), Republic Act No. 876, known as the

Arbitration Law, which took effect on 19 December 1953,
and may be retroactively applied to the case at bar
because it is procedural in nature.

WHEREFORE, the appealed judgment is hereby affirmed, without

pronouncement as to costs.