Case #3

TIO KHE CHIO vs. CA

Facts:
Tio Khe Chio imported one thousand (1,000) bags of fishmeal valued at
$36,000.30 from Agro Impex, U.S.A. Dallas, Texas, U.S.A. The goods were insured with
respondent EASCO and shipped on board the M/V Peskov, a vessel owned by Far
Eastern Shipping Company. When the goods reached Manila, they were found to have
been damaged by sea water which rendered the fishmeal useless. Petitioner filed a
claim with EASCO and Far Eastern Shipping. Both refused to pay. Whereupon,
petitioner sued them before the then Court of First Instance of Cebu for damages.
EASCO, as the insurer, filed a counterclaim against the petitioner for the recovery of
P18,387.86 representing the unpaid insurance premiums.
The trial court rendered judgment in favor of petitioner. The sheriff enforcing the
writ reportedly fixed the legal rate of interest at twelve (12%).

Issue:
What is the proper legal rate of interest to be imposed in actions for damages arising
from unpaid insurance claims?

Tio Khe Chios contention:

rate should be twelve (12%) per cent pursuant to Articles 243 and 244 of the Insurance
Code
EASCOs contention:
The legal interest to be computed should be six (6%) per cent per annum in accordance
with Article 2209 of the Civil Code.

Held:

SC ruled for respondent EASCO. The legal rate of interest in the case at bar is six (6%)
per annum as correctly held by the Appellate Court.
The cited sections of the Insurance Code are not pertinent to the instant case. They
apply only when the court finds an unreasonable delay or refusal in the payment of the
claims. The Court held in GSIS vs. Court of Appeals, that the rates under the Usury Law
(amended by P.D. 116) are applicable only to interest by way of compensation for the
use or forbearance of money, interest by way of damages is governed by Article 2209 of
the Civil Code.

Case #10
CASTELO vs. CA

Facts:
Petitioners entered into a contract denominated as a "Deed of Conditional Sale"
with private respondent Milagros Dela Rosa involving a parcel of land located in Manila.
The agreed price of the land was P269,408.00. Upon signing the contract, private
respondent paid petitioners P106,000.00 leaving a balance of P163,408.00. It was
stipulated that the balance should be paid without interest and penalty on or before
12/31/82 and should she fail to pay, she shall be given a grace period of 6mos to pay
the balance with an interest rate of 6% per annum and 1% penalty charge a month shall
be imposed on the remaining diminishing balance. Dela Rosa was unable to pay the
remaining balance even after the lapse of the grace period.
Petitioners filed an action for specific performance with damages. RTC rendered
the decision ordering the rescission of the Deed of Conditional Sale. Petitioners went on
Certiorari to CA. They claimed that rescission of the contract was only an alternative
relief available under the Civil Code, while they in their complaint before the RTC, had
asked for specific performance with damages.CA reversed the RTC decision. Writ of
execution was issued. Private respondent Dela Rosa was required to pay petitioners a
total of P197,723.68. Petitioners filed a motion for reconsideration and a separate
motion for alias writ of execution contending that the sum of P197,723.68 was
erroneous. They argued that the obligation of private respondent was to pay (a) interest
at the rate of twelve percent (12%) per annum plus (b) one percent (1%) penalty charge
per month, from default, i.e, from 1 January 1983; that the amount to be paid by the

Defendant should be P398,814.88 instead and not P197,723.68 or a difference of

P201,091.20.
PETITIONER CONTENDS that the phrase "to pay interest" found in the dispositive
portion of the CAs November 21, 1986 decision did not refer to the stipulation in the
"Deed of Conditional Sale" but rather to the legal rate of interest imposed by the CA
which started to run from 12 February 1987, the date of entry of judgment.
Petitioner filed on certiorari to CA. CA dismissed it. CA CONTENDS that the dispositive
portion, ordering the "defendant . . . to pay the balance of the conditional sale in the
amount of P163,408.00, to pay interest . . . ." Being a "new" judgment or decision, the
computation of the "interest" on the balance of the conditional sale should commence
from the date of its ENTRY on February 12, 1987, when the decision became FINAL
and EXECUTORY.

Issue:
What is the correct interpretation of the phrase "to pay interest" set out in the dispositive
portion of the 21 November 1986 decision of Castro-Bartolome, J.

Held:
SC believe and so hold that the phrase to pay interest, found in the dispositive portion
of the CA decision must, under applicable law, refer to the interest stipulated by the
parties in the Deed of Conditional Sale which they had entered into on 15 October 1982.
SC note, in the first place, that the phrase to pay interest comes close upon the heels
of the preceding phrase "to comply with her obligation under the conditional sale to pay
the balance of P163,408.00." A strong inference thus arises that the "interest"
required to be paid is the interest stipulated as part of the obligation [of private
respondent dela Rosa] under the conditional sale [agreement] to pay the balance of [the
purchase price of the land.

Case #17
NAGUIAT vs. CA

Facts:
Queao applied with Naguiat for a loan in the amount of P200,000.00, which Naguiat
granted. 2 checks were issued by Naguiat amounting to P190,000.00 to constitute the
loan granted. To secure the loan, Queao executed a Deed of Real Estate Mortgage
dated 11 August 1980 in favor of Naguiat, and surrendered to the latter the owners
duplicates of the titles covering the mortgaged properties. On the same day, the
mortgage deed was notarized, and Queao issued to Naguiat a promissory note for the
amount of P200,000.00, with interest at 12% per annum, payable on 11 September
1980. Queao also issued a check, postdated 11 September 1980, for the amount of
P200,000.00 and payable to the order of Naguiat.
Naguiat sought to encash the check issued by Queano on its maturity date but was
dishonored due to insufficient fund. A demand letter was sent to Queano to settle the
loan. The latter then met with Naguiat together with Ruebenfeldt, the latters agent, and
that she did not receive the proceeds of the loan, adding that the checks were retained
by Ruebenfeldt.
Naguiat applied for extrajudicial foreclosure of the mortgage. Before the date of the
foreclosure sale, Queano filed a case seeking the annulment of the mortgage deed.
RTC granted and ordered the return of the titles. The CA affirmed in toto this decision.
NAGUIATs CONTENTION is that being a notarial instrument or public document, the
mortgage deed enjoys the presumption of validity and truthfulness.

Issue:
Whether or not there is a perfected loan and the deed of mortgage valid.

Held:
No, there is no perfected loan contract. A loan contract is a real contract, not
consensual. The Civil Code provides that the delivery of bills of exchange and
mercantile documents such as checks shall produce the effect of payment only when

they have been cashed. It is only after the checks have produced the effect of payment
that the contract of loan may be deemed perfected. The lender did not remit and the
borrower did not receive the proceeds of the loan. That being the case, it follows that
the mortgage which is supposed to secure the loan is null and void. The consideration
of the mortgage contract is the same as that of the principal contract from which it
receives life, and without which it cannot exist as an independent contract. A mortgage
contract being a mere accessory contract, its validity would depend on the validity of the
loan secured by it.