You are on page 1of 3

Saura Import &Export Co., Inc v.

DBP
G.R. No. L-24968 April 27, 1972
Facts: Saura Inc. applied to the Rehabilitation Finance Corp (before its conversion to DBP)
for a loan of 500k secured by a first mortgage of the factory building to finance for the
construction of a jute mill factory and purchase of factory implements. RFC accepted and
approved the loan application subject to some conditions which Saura admitted it could not
comply with. Without having received the amount being loaned, and sensing that it could
not at anyway obtain the full amount of loan, Saura Inc. then asked for cancellation of the
mortgage which RFC also approved. Nine years after the cancellation of the mortgage,
Saura sued RFC for damages for its non-fulfillment of obligations arguing that there was
indeed a perfected consensual contract between them.
Issue: Was there a perfected consensual contract? Was there a real contract of loan which
would warrant recovery of damages arising out of breach of such contract?
Held: On the first issue, yes, there was indeed a perfected consensual contract, as
recognized in Article 1934 of the Civil Code. There was undoubtedly offer and acceptance
in this case: the application of Saura, Inc. for a loan of P500,000.00 was approved by
resolution of the defendant, and the corresponding mortgage was executed and
registered. But this fact alone falls short of resolving the second issue and the basic claim
that the defendant failed to fulfill its obligation and the plaintiff is therefore entitled to
recover damages. The action thus taken by both partiesSaura's request for cancellation
and RFC's subsequent approval of such cancellationwas in the nature of mutual
desistance what Manresa terms "mutuo disenso" which is a mode of extinguishing
obligations. It is a concept derived from the principle that since mutual agreement can
create a contract, mutual disagreement by the parties can cause its extinguishment. In
view of such extinguishment, said perfected consensual contract to deliver did not
constitute a real contract of loan.
BPI INVESTMENT CORP. V CA
G.R. No. 133632. February 15, 2002
credit transactions: Loan (Mutuum): A loan contract is not a consensual contract but a real
contract. It is perfected upon delivery of the object of the contract.
obligations and contracts: Reciprocal Obligations: 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.
FACTS:
Frank Roa obtained a loan at 16 1/4% interest rate per annum from Ayala Investment and
Development Corporation. For security, Roa's house and lot were mortgaged. Later, Roa
sold the house and lot to ALS and Antonio Litonjua, who assumed Roa's debt to Ayala
Investment. Ayala Investment, however, granted a new loan to be applied to Roa's debt,
secured by the same property at a different interest rate of 20% per annum.
When ALS and Litonjua failed to pay, BPIIC, successor to Ayala Investment, filed for
foreclosure of mortgage.
ISSUE:
W/N a contract of loan is a consensual contract
HELD:
A loan contract is not a consensual contract but a real contract. It is perfected upon
delivery of the object of the contract. Although a perfected consensual contract can give
rise to an action for damages, it does not constitute a real contract which requires delivery
for perfection. A perfected real contract gives rise only to obligations on the part of the
borrower.
In the present case, the loan contract was only perfected on the date of the second release
of the loan.
A contract of loan involves a reciprocal obligation, wherein the obligation or promise of
each party is the consideration for that of the other. It is a basic principle in reciprocal
obligations that neither party incurs in delay, if the other does not comply or is not ready to
comply in a proper manner with what is incumbent upon him. Only 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.
DECISION:
The payment of amortization should accrue from the time BPIIC released the loan amount to
ALS and Litonjua because it was only at that time (the delivery of the amount -- the object
of the contract) that the loan contract was perfected.

Bonnevie v. CA
GR No. L-49101 October 24, 1983
Facts: Spouses Lozano mortgaged their property to secure the payment of a loan
amounting to 75K with private respondent Philippine Bank of Communication (PBCom). The
deed of mortgage was executed on 12-6-66, but the loan proceeeds were received only on
12-12-66. Two days after the execution of the deed of mortgage, the spouses sold the
property to the petitioner Bonnevie for and in consideration of 100k25K of which payable
to the spouses and 75K as payment to PBCom. Afterwhich, Bonnevie defaulted payments to
PBCom prompting the latter to auction the property after Bonnivie failed to settle despite
subsequent demands, in order to recover the amount loaned. The latter now assails the
validity of the mortgage between Lozano and Pbcom arguing that on the day the deed was
executed there was yet no principal obligation to secure as the loan of P75,000.00 was not
received by the Lozano spouses, so that in the absence of a principal obligation, there is
want of consideration in the accessory contract, which consequently impairs its validity and
fatally affects its very existence.
Issue: Was there a perfected contract of loan?
Held: Yes. From the recitals of the mortgage deed itself, it is clearly seen that the mortgage
deed was executed for and on condition of the loan granted to the Lozano spouses. The
fact that the latter did not collect from the respondent Bank the consideration of the
mortgage on the date it was executed is immaterial. A contract of loan being a
consensual contract, the herein contract of loan was perfected at the same time the
contract of mortgage was executed. The promissory note executed on December 12,
1966 is only an evidence of indebtedness and does not indicate lack of consideration of
the mortgage at the time of its execution.
CENTRAL BANK OF THE PHILIPPINES V. CA
The banks asking for advance interest for the loan is improper considering that the total
loan hasnt been released. A person cant be charged interest for nonexisting debt. The
alleged discovery by the bank of overvaluation of the loan collateral is not an issue. Since
Island Savings Bank failed to furnish the P63,000.00 balance of the P80,000.00 loan, the
real estate mortgage of Sulpicio M. Tolentino became unenforceable to such extent.
Facts: Island Savings Bank, upon favorable recommendation of its legal department,
approved the loan application for P80,000.00 of Sulpicio M. Tolentino, who, as a security for
the loan, executed on the same day a real estate mortgage over his 100-hectare land
located in Cubo, Las Nieves, Agusan. The loan called for a lump sum of P80,000, repayable
in semi-annual installments for 3 yrs, with 12% annual interest. After the agreement, a
mere P17K partial release of the loan was made by the bank and Tolentino and his wife
signed a promissory note for the P17,000 at 12% annual interest payable w/in 3 yrs. An

advance interest was deducted fr the partial release but this prededucted interest was
refunded to Tolentino after being informed that there was no fund yet for the release of the
P63K balance.
Monetary Board of Central Bank, after finding that bank was suffering liquidity problems,
prohibited the bank fr making new loans and investments. And after the bank failed to
restore its solvency, the Central Bank prohibited Island Savings Bank from doing business
in the Philippines. Island Savings Bank in view of the non-payment of the P17K filed an
application for foreclosure of the real estate mortgage. Tolentino filed petition for specific
performance or rescission and damages with preliminary injunction, alleging that since the
bank failed to deliver P63K, he is entitled to specific performance and if not, to rescind the
real estate mortgage.
Issues: 1) Whether or not Tolentinos can collect from the bank for damages
2) Whether or not the mortgagor is liable to pay the amount covered by the
promissory note
3) Whether or not the real estate mortgage can be foreclosed
Held:
1) Whether or not Tolentinos can collect from the bank for damages
The loan agreement implied reciprocal obligations. When one party is willing and ready to
perform, the other party not ready nor willing incurs in delay. When Tolentino executed real
estate mortgage, he signified willingness to pay. That time, the banks obligation to furnish
the P80K loan accrued. Now, the Central Bank resolution made it impossible for the bank to
furnish the P63K balance. The prohibition on the bank to make new loans is irrelevant bec it
did not prohibit the bank fr releasing the balance of loans previously contracted. Insolvency
of debtor is not an excuse for non-fulfillment of obligation but is a breach of contract.
The banks asking for advance interest for the loan is improper considering that the total
loan hasnt been released. A person cant be charged interest for nonexisting debt. The
alleged discovery by the bank of overvaluation of the loan collateral is not an issue. The
bank officials should have been more responsible and the bank bears risk in case the
collateral turned out to be overvalued. Furthermore, this was not raised in the pleadings so
this issue cant be raised. The bank was in default and Tolentino may choose bet specific
performance or rescission w/ damages in either case. But considering that the bank is now
prohibited fr doing business, specific performance cannot be granted. Rescission is the only
remedy left, but the rescission shld only be for the P63K balance.
2) Whether or not the mortgagor is liable to pay the amount covered by the promissory
note
The promissory note gave rise to Sulpicio M. Tolentinos reciprocal obligation to pay the
P17,000.00 loan when it falls due. His failure to pay the overdue amortizations under the
promissory note made him a party in default, hence not entitled to rescission (Article 1191
of the Civil Code). If there is a right to rescind the promissory note, it shall belong to the
aggrieved party, that is, Island Savings Bank. If Tolentino had not signed a promissory note
setting the date for payment of P17,000.00 within 3 years, he would be entitled to ask for
rescission of the entire loan because he cannot possibly be in default as there was no date
for him to perform his reciprocal obligation to pay. Since both parties were in default in the
performance of their respective reciprocal obligations, that is, Island Savings Bank failed to
comply with its obligation to furnish the entire loan and Sulpicio M. Tolentino failed to
comply with his obligation to pay his P17,000.00 debt within 3 years as stipulated, they are
both liable for damages.
3) Whether or not the real estate mortgage can be foreclosed
Since Island Savings Bank failed to furnish the P63,000.00 balance of the P80,000.00 loan,
the real estate mortgage of Sulpicio M. Tolentino became unenforceable to such extent.
P63,000.00 is 78.75% of P80,000.00, hence the real estate mortgage covering 100
hectares is unenforceable to the extent of 78.75 hectares. The mortgage covering the
remainder of 21.25 hectares subsists as a security for the P17,000.00 debt. 21.25
hectares is more than sufficient to secure a P17,000.00 debt.
REPUBLIC V BAGTAS
FACTS:
May 8, 1948: Jose V. Bagtas borrowed from the Republic of the Philippines through
the Bureau of Animal Industry three bulls: a Red Sindhi with a book value of P1,176.46, a
Bhagnari, of P1,320.56 and a Sahiniwal, of P744.46, for a period of 1 year for breeding
purposes subject to a breeding fee of 10% of the book value of the bulls
May 7, 1949: Jose requested for a renewal for another year for the three bulls but
only one bull was approved while the others are to be returned
March 25, 1950: He wrote to the Director of Animal Industry that he would pay the
value of the 3 bulls
October 17, 1950: he reiterated his desire to buy them at a value with a deduction
of yearly depreciation to be approved by the Auditor General.
October 19, 1950: Director of Animal Industry advised him that either the 3 bulls
are to be returned or their book value without deductions should be paid not later than
October 31, 1950 which he was not able to do
December 20, 1950: An action at the CFI was commenced against Jose praying
that he be ordered to return the 3 bulls or to pay their book value of P3,241.45 and the
unpaid breeding fee of P199.62, both with interests, and costs
July 5, 1951: Jose V. Bagtas, through counsel Navarro, Rosete and Manalo,
answered that because of the bad peace and order situation in Cagayan Valley, particularly
in the barrio of Baggao, and of the pending appeal he had taken to the Secretary of
Agriculture and Natural Resources and the President of the Philippines, he could not return
the animals nor pay their value and prayed for the dismissal of the complaint.
RTC: granted the action
December 1958: granted an ex-parte motion for the appointment of a special
sheriff to serve the writ outside Manila
December 6, 1958: Felicidad M. Bagtas, the surviving spouse of Jose who died on
October 23, 1951 and administratrix of his estate, was notified
January 7, 1959: she file a motion that the 2 bulls where returned by his son on
June 26, 1952 evidenced by recipt and the 3rd bull died from gunshot wound inflicted
during a Huk raid and prayed that the writ of execution be quashed and that a writ of
preliminary injunction be issued.
ISSUE: W/N the contract is commodatum and NOT a lease and the estate should be liable
for the loss due to force majeure due to delay.
HELD: YES. writ of execution appealed from is set aside, without pronouncement as to costs
If contract was commodatum then Bureau of Animal Industry retained ownership
or title to the bull it should suffer its loss due to force majeure. A contract of commodatum
is essentially gratuitous. If the breeding fee be considered a compensation, then the
contract would be a lease of the bull. Under article 1671 of the Civil Code the lessee would
be subject to the responsibilities of a possessor in bad faith, because she had continued
possession of the bull after the expiry of the contract. And even if the contract be
commodatum, still the appellant is liable if he keeps it longer than the period stipulated
the estate of the late defendant is only liable for the sum of P859.63, the value of
the bull which has not been returned because it was killed while in the custody of the
administratrix of his estate
Special proceedings for the administration and settlement of the estate of the
deceased Jose V. Bagtas having been instituted in the CFI, the money judgment rendered
in favor of the appellee cannot be enforced by means of a writ of execution but must be
presented to the probate court for payment by the appellant, the administratrix
appointed by the court.
CATHOLIC VICAR APOSTOLIC INC. OF MT. PROVINCE V. CA
Facts:
- 1962: Catholic Vicar Apostolic of the Mountain Province (Vicar), petitioner, filed with the
court an application for the registration of title over lots 1, 2, 3 and 4 situated in Poblacion
Central, Benguet, said lots being used as sites of the Catholic Church, building, convents,
high school building, school gymnasium, dormitories, social hall and stonewalls.
- 1963: Heirs of Juan Valdez and Heirs of Egmidio Octaviano claimed that they have
ownership over lots 1, 2 and 3. (2 separate civil cases)
- 1965: The land registration court confirmed the registrable title of Vicar to lots 1 , 2, 3 and
4. Upon appeal by the private respondents (heirs), the decision of the lower court was
reversed. Title for lots 2 and 3 were cancelled.
- VICAR filed with the Supreme Court a petition for review on certiorari of the decision of
the Court of Appeals dismissing his application for registration of Lots 2 and 3.
- During trial, the Heirs of Octaviano presented one (1) witness, who testified on the alleged

ownership of the land in question (Lot 3) by their predecessor-in-interest, Egmidio


Octaviano; his written demand to Vicar for the return of the land to them; and the
reasonable rentals for the use of the land at P10,000 per month. On the other hand, Vicar
presented the Register of Deeds for the Province of Benguet, Atty. Sison, who testified that
the land in question is not covered by any title in the name of Egmidio Octaviano or any of
the heirs. Vicar dispensed with the testimony of Mons. Brasseur when the heirs admitted
that the witness if called to the witness stand, would testify that Vicar has been in
possession of Lot 3, for 75 years continuously and peacefully and has constructed
permanent structures thereon.
Issue: WON Vicar had been in possession of lots 2 and 3 merely as bailee borrower in
commodatum, a gratuitous loan for use.
Held: YES.
Private respondents were able to prove that their predecessors' house was borrowed by
petitioner Vicar after the church and the convent were destroyed. They never asked for the
return of the house, but when they allowed its free use, they became bailors in
commodatum and the petitioner the bailee.
The bailees' failure to return the subject matter of commodatum to the bailor did not mean
adverse possession on the part of the borrower. The bailee held in trust the property
subject matter of commodatum. The adverse claim of petitioner came only in 1951 when it
declared the lots for taxation purposes. The action of petitioner Vicar by such adverse claim
could not ripen into title by way of ordinary acquisitive prescription because of the absence
of just title.
The Court of Appeals found that petitioner Vicar did not meet the requirement of 30 years
possession for acquisitive prescription over Lots 2 and 3. Neither did it satisfy the
requirement of 10 years possession for ordinary acquisitive prescription because of the
absence of just title. The appellate court did not believe the findings of the trial court that
Lot 2 was acquired from Juan Valdez by purchase and Lot 3 was acquired also by
purchase from Egmidio Octaviano by petitioner Vicar because there was absolutely no
documentary evidence to support the same and the alleged purchases were never
mentioned in the application for registration.
Quintos vs Beck
Facts: Beck the appellee was a tenant for the appellant Quintos and Ansaldo. The
appellants gratuitously allowed appellee the use of their furniture with the clause that they
be returned upon demand. When plaintiffs-appellant sold the property in which defendantappellee was currently residing, the plaintiffs ordered the return of the furniture. Defendant
only returned some of the Furniture, and later on deposited the furniture to the sheriff.
The court of first instance ruled that the expenses be shared by the parties pro-rata, and
that they parties are to pay their respective legal fees
Issues: Did the trial court err in their conclusion that the plaintiff failed to comply with
her obligation to get the furniture when offered to her? YES. 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, to be delivered at her residence or house.
Is the plaintiff legally bound to bear the expenses occasion by the deposit of the furniture?
NO. As the defendant had voluntarily undertaken to return all the furniture to the plaintiff,
upon the latter's demand. The defendant was not entitled to place the furniture on deposit
nor was the plaintiff under a duty to accept the offer to return the furniture.
Is the plaintiff entitled to the value of the furniture? NO. The defendant has neither agreed
to nor admitted the correctness of the said value. Should the defendant fail to deliver some
of the furniture, the value thereof should be latter determined by the trial Court through
evidence which the parties may desire to present.
Should the cost be borne by the defendant? YES (section 487 of the Code of Civil
Procedure). The defendant was the one who breached the contract ofcommodatum
CONSOLIDATED BANK & TRUST CORP. V CA
Solidbanks tellers must exercise a high degree of diligence in insuring that they return the
passbook only to the depositor or his authorized representative. The tellers know, or should
know, that the rules on savings account provide that any person in possession of the
passbook is presumptively its owner.
Facts: Solidbank is a domestic banking corporation while private respondent L.C. Diaz and
Company, CPAs (L.C. Diaz), is a professional partnership engaged in the practice of
accounting and which opened a savings account with Solidbank. Diaz through its cashier,
Mercedes Macaraya , filled up a savings cash deposit slip and a savings checks deposit
slip. Macaraya instructed the messenger of L.C. Diaz, Ismael Calapre, to deposit the money
with Solidbank and give him the Solidbank passbook. Calapre went to Solidbank and
presented to Teller No. 6 the two deposit slips and the passbook. The teller acknowledged
receipt of the deposit by returning to Calapre the duplicate copies of the two deposit slips.
Since the transaction took time and Calapre had to make another deposit for L.C. Diaz with
Allied Bank, he left the passbook with Solidbank. When Calapre returned to Solidbank to
retrieve the passbook, Teller No. 6 informed him that somebody got the passbook. Calapre
went back to L.C. Diaz and reported the incident to Macaraya. The following day,, L.C. Diaz
through its Chief Executive Officer, Luis C. Diaz, called up Solidbank to stop any transaction
using the same passbook until L.C. Diaz could open a new account followed by a formal
written request later that day. It was also on the same day that L.C. Diaz learned of the
unauthorized withdrawal the day before of P300,000 from its savings account. The
withdrawal slip bore the signatures of the authorized signatories of L.C. Diaz, namely Diaz
and Rustico L. Murillo. The signatories, however, denied signing the withdrawal slip. A
certain Noel Tamayo received the P300,000.
L.C. Diaz demanded from Solidbank the return of its money but to no avail. Hence, L.C.
Diaz filed a Complaint for Recovery of a Sum of Money against Solidbank with the Regional
Trial Court. After trial, the trial court rendered a decision absolving Solidbank and
dismissing the complaint. Court of Appeals reversed the decision of the trial court.
Issue: Whether or not Solidbank must be held liable for the fraudulent withdrawal on
private respondents account.
Held: Solidbanks tellers must exercise a high degree of diligence in insuring that they
return the passbook only to the depositor or his authorized representative. The tellers
know, or should know, that the rules on savings account provide that any person in
possession of the passbook is presumptively its owner. If the tellers give the passbook to
the wrong person, they would be clothing that person presumptive ownership of the
passbook, facilitating unauthorized withdrawals by that person. For failing to return the
passbook to Calapre, the authorized representative of L.C. Diaz, Solidbank and Teller No. 6
presumptively failed to observe such high degree of diligence in safeguarding the
passbook, and in insuring its return to the party authorized to receive the same. However,
L.C. Diaz was guilty of contributory negligence in allowing a withdrawal slip signed by its
authorized signatories to fall into the hands of an impostor. Thus, the liability of Solidbank
should be reduced. Hence, the liability of Solidbank for actual damages was reduced to
only 60%, the remaining 40% was borne by private respondent.
The contract between the bank and its depositor is governed by the provisions of the Civil
Code on simple loan. There is a debtor-creditor relationship between the bank and its
depositor. The bank is the debtor and the depositor is the creditor. The law imposes on
banks high standards in view of the fiduciary nature of banking. RA 8791 declares that
the State recognizes the fiduciary nature of banking that requires high standards of
integrity and performance. This new provision in the general banking law, introduced in
2000, is a statutory affirmation of Supreme Court decisions holding that the bank is
under obligation to treat the accounts of its depositors with meticulous care, always
having in mind the fiduciary nature of their relationship.
Republic vs Grijaldo
Facts: Grijaldo obtained five loans from the Bank of Taiwan in the total sum of P1,281.97
with interest at the rats of 6% per annum compounded quarterly. These were evidenced by
five promissory notes. These loans were crop loans and were considered to be due one

year after they were incurred. As a security for the payment of the loans, a chattel
mortgage was executed on the standing crops of his land. The assets in the Bank of Taiwan
were vested in the US Govt which were subsequently transferred to the Republic of the
Philippines RP is now demanding the payment of the account. Justice of Peace dismisses
the case on the ground of prescription. CA rendered a decision ordering the appellant to
pay the appellee Defendants contentions:
1) The appellee has no cause of action against appellant since the transaction was with
Taiwan Bank.
2) That if the appellee has a cause of action at all, it had prescribed
3) The lower court erred in ordering the appellant to pay P2,377.23
Issue: Can RP still collect from Grijaldo?
Held: Yes
Ratio: The obligation of the contract was not to deliver a determinate thing, it was a
generic thing the amount of money representing the total sum of his loans. The
destruction of anything of the same kind does not extinguish the obligation. 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. Also, prescription does not run against the
State

PNB vs. CA et al
G.R. No. 121597
June 29, 2001
FACTS: The spouses Chua were the owners of a parcel of land covered by a TCT and
registered in their names. Upon the husbands death, the probate court appointed his son,
private respondent Allan as special administrator of the deceaseds intestate estate. The
court also authorized Allan to obtain a loan accommodation from PNB to be secured by a
real estate mortgage over the above-mentioned parcel of land, which Allan did for
P450,000.00 with interest.
For failure to pay the loan in full, the bank extrajudicially foreclosed the real estate
mortgage. During the auction, PNB was the highest bidder. However, the loan having a
payable balance, to claim this deficiency, PNB instituted an action with the RTC, Balayan,
Batangas, against both Mrs. Chua and Allan.
The RTC rendered its decision, ordering the dismissal of PNBs complaint. On appeal, the CA
affirmed the RTC decision by dismissing PNBs appeal for lack of merit.
Hence, the present petition for review on certiorari under Rule 45 of the Rules of Court.
ISSUE: The WON it was error for the CA to rule that petitioner may no longer pursue by civil
action the recovery of the balance of indebtedness after having foreclosed the property
securing the same.
HELD: petition is DENIED. The assailed decision of the CA is AFFIRMED.
No
Petitioner relies on Prudential Bank v. Martinez, 189 SCRA 612, 615 (1990), holding that in
extrajudicial foreclosure of mortgage, when the proceeds of the sale are insufficient to pay
the debt, the mortgagee has the right to recover the deficiency from the mortgagor.
However, it must be pointed out that petitioners cited cases involve ordinary debts
secured by a mortgage. The case at bar, we must stress, involves a foreclosure of
mortgage arising out of a settlement of estate, wherein the administrator mortgaged a
property belonging to the estate of the decedent, pursuant to an authority given by the
probate court. As the CA correctly stated, the Rules of Court on Special Proceedings comes
into play decisively. The applicable rule is Section 7 of Rule 86 of the Revised Rules of Court
( which PNB contends is not.)
In the present case it is undisputed that the conditions under the aforecited rule have been
complied with [see notes]. It follows that we must consider Sec. 7 of Rule 86, appropriately
applicable to the controversy at hand, which in summary [and case law as well] grants to
the mortgagee three distinct, independent and mutually exclusive remedies that can be
alternatively pursued by the mortgage creditor for the satisfaction of his credit in case the
mortgagor dies, among them:
(1) to waive the mortgage and claim the entire debt from the estate of the mortgagor as an
ordinary claim;
(2) to foreclose the mortgage judicially and prove any deficiency as an ordinary claim; and
(3) to rely on the mortgage exclusively, foreclosing the same at any time before it is barred
by prescription without right to file a claim for any deficiency.
Clearly petitioner herein has chosen the mortgage-creditors option of extrajudicially
foreclosing the mortgaged property of the Chuas. This choice now bars any subsequent
deficiency claim against the estate of the deceased. Petitioner may no longer avail of the
complaint for the recovery of the balance of indebtedness against said estate, after
petitioner foreclosed the property securing the mortgage in its favor. It follows that in this
case no further liability remains on the part of respondents and the deceaseds estate.
Eastern Shipping vs CA
GR No. 97412, 12 July 1994
234 SCRA 78
FACTS
Two fiber drums were shipped owned by Eastern Shipping from Japan. The shipment
as insured with a marine policy. Upon arrival in Manila unto the custody of metro Port
Service, which excepted to one drum, said to be in bad order and which damage was
unknown the Mercantile Insurance Company. Allied Brokerage Corporation received the
shipment from Metro, one drum opened and without seal. Allied delivered the shipment to
the consignees warehouse. The latter excepted to one drum which contained spillages
while the rest of the contents was adulterated/fake. As consequence of the loss, the
insurance company paid the consignee, so that it became subrogated to all the rights of
action of consignee against the defendants Eastern Shipping, Metro Port and Allied
Brokerage. The insurance company filed before the trial court. The trial court ruled in favor
of plaintiff an ordered defendants to pay the former with present legal interest of 12% per
annum from the date of the filing of the complaint. On appeal by defendants, the appellate
court denied the same and affirmed in toto the decision of the trial court.
ISSUE
(1) Whether the applicable rate of legal interest is 12% or 6%.
(2) Whether the payment of legal interest on the award for loss or damage is to be
computed from the time the complaint is filed from the date the decision appealed from is
rendered.
HELD
(1)
The Court held that the legal interest is 6% computed from the decision of the
court a quo. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damaes awarded may be imposed at the discretion
of the court at the rate of 6% per annum. No interest shall be adjudged on unliquidated
claims or damages except when or until the demand can be established with reasonable
certainty.
When the judgment of the court awarding a sum of money becomes final and executor, the
rate of legal interest shall be 12% per annum from such finality until satisfaction, this
interim period being deemed to be by then an equivalent to a forbearance of money.
The interest due shall be 12% PA to be computed fro default, J or EJD.
(2)
From the date the judgment is made. Where the demand is established with
reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or EJ but when such certainty cannot be so reasonably established at the time the
demand is made, the interest shll begin to run only from the date of judgment of the court
is made.
(3) The Court held that it should be computed from the decision rendered by the court a
quo.

Philippine American Accident Insurance Company Inc. v. Hon. Jose Flores and
Concordia G. Navalta
GR No. L-47180 May 18 1980 97 SCRA 811
FACTS: Respondent Judge Flores rendered a judgment in favor of the Respondent Navalta
asking Petitioner Phil-Am Accident Incurance Company Inc. to pay the former the amount of
P75,000.00 with legal interest from Oct. 1968, as attorneys fees and the cost of the suit.
Petitioner paid respondent the principal amount with legal interest at 6% per annum from
Oct 1968 to Apr. 30 1978 (in accordance with Art. 2209 of the CC which provides: 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
the interest agreed upon, and in the absence of stipulation, the legal interest, which is six
per cent per annum." This appears to be the basis for the awarding interest at the legal
rate from Oct. 1968, although the debt wa s judicially demanded only on July 6 1970) and
attorneys fees and the cost of the suit. Later on, Respondent advised the petitioner that
payment was not in fun satisfaction of the judgment because he has to pay compound
interest or additional sum of P10, 375.77. The respondent secured a writ if execution upon
the refusal of the petitioner to pay the additional sum claimed; which was affirmed by the
Judge. Hence this review.

ISSUE: Whether or not the petitioner is obligated to pay compound interest under the
judgment.
HELD: The questioned Order cannot be sustained. The judgment which was sought to be
executed ordered the payment of simple "legal interest" only. It said nothing about the
payment of compound interest. Accordingly, when the respondent judge ordered the
payment of compound interest he went beyond the confines of his own judgment which
had been affirmed by the Court of Appeals and which had become final. Private Respondent
invokes Sec. 5 of the Usury Law which reads in part as follows: In computing theinterest
on any obligation, promissory note or other instrument or contract, compound interest
shall not be reckoned, except by agreement, or in default thereof, whenever the debt is
judicially claimed in which case it shall draw sic per centum per annum interest xxx as well
as Art. 2212 of the Civil Code which stipulates: Interest due shall earn legal interest from
the time it is judicially demanded, although the obligation may be silent upon this point.
Both legal provisions are inapplicable for they contemplate the presence of stipulated or
conventional interest which had accrued when demand was judicially made. In this case, no
interest had been stipulated by the parties. In other words, there was no accrued
conventional interest which could further earn interest upon judicial demand. Wherefore,
decision was set aside.
Doctrine: Both Art. 2212 of the Civil code and Section 5 of the Usury Law refer to stipulated
or conventional interest and does not apply where no interest was stipulated by the parties.