PHILIPPINE SAVINGS BANK, Petitioner,

vs.
SPOUSES ALFREDO M. CASTILLO AND ELIZABETH C. CASTILLO, and SPOUSES ROMEO
B. CAPATI and AQUILINA M. LOBO, Respondents.
G.R. No. 193178

May 30, 2011

Facts:
Respondent spouses Alfredo M. Castillo and Elizabeth Capati-Castillo were the registered
owners of a lot located in Tondo, Manila while respondent spouses Romeo B. Capati and Aquilina
M. Lobo were the registered owners of another lot, also located in Tondo, Manila. On May 7,
1997, respondents obtained a loan, with real estate mortgage over the said properties, from
petitioner as evidenced by a Promissory Note with a face value of P2,500,000.00. The rate of
interest and/or bank charges herein stipulated, during the terms of this promissory note, its
extensions, renewals or other modifications, may be increased, decreased or otherwise changed
from time to time within the rate of interest and charges allowed under present or future law(s)
and/or government regulation(s) as the PHILIPPINE SAVINGS BANK may prescribe for its debtors.
From the release of the loan in May 1997 until December 1999, petitioner had increased and
decreased the rate of interest, the highest of which was 29% and the lowest was 15.5% per
annum, per the Promissory Note. Respondents were notified in writing of these changes in the
interest rate. They neither gave their confirmation thereto nor did they formally question the
changes. However, respondent Alfredo Castillo sent several letters to petitioner requesting for
the reduction of the interest rates. Petitioner denied these requests.
Issue:
Whether or not the modifications in the interest rates are valid.
Held:
No, the modifications in the interest rates are not valid. Basic is the rule that there can be
no contract in its true sense without the mutual assent of the parties. If this consent is absent
on the part of one who contracts, the 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, the interest rate is undeniably always a vital component, for it can make or
break a capital venture. Thus, any change must be mutually agreed upon, otherwise, it
produces no binding effect. Respondents assent to the modifications in the interest rates
cannot be implied from their lack of response to the memos sent by petitioner, informing them
of the amendments. The said memos were in the nature of a proposal to change the contract
with respect to one of its significant components, i.e., the interest rates. As we have held, no
one receiving a proposal to change a contract is obliged to answer the proposal. Therefore,
respondents could neither be faulted, nor could they be deemed to have assented to the
modified interest rates, for not replying to the said memos from petitioner. We likewise disagree
with petitioners assertion that respondents recognized the legality of the imposed interest rates
through the letters requesting for the reduction of the rates. The request for reduction of the

interest does not translate to consent thereto. To be sure, a cursory reading of the said letters
would clearly show that Alfredo Castillo was, in fact, questioning the propriety of the interest
rates imposed on their loan.
SEBASTIAN SIGA-AN, Petitioner,
vs.
ALICIA VILLANUEVA, Respondent.
G.R. No. 173227

January 20, 2009

Facts:
On 30 March 1998, respondent filed a complaint for sum of money against petitioner.
Respondent claimed that sometime in 1992, petitioner approached her inside the PNO and
offered to loan her the amount of P540,000.00. Since she needed capital for her business
transactions with the PNO, she accepted petitioners proposal. The loan agreement was not
reduced in writing. Also, there was no stipulation as to the payment of interest for the loan. On
31 August 1993, respondent issued a check worth P500,000.00 to petitioner as partial payment
of the loan. On 31 October 1993, she issued another check in the amount of P200,000.00 to
petitioner as payment of the remaining balance of the loan. Petitioner told her that since she
paid a total amount of P700,000.00 for theP540,000.00 worth of loan, the excess amount
of P160,000.00 would be applied as interest for the loan. Not satisfied with the amount applied
as interest, petitioner pestered her to pay additional interest. Petitioner threatened to block or
disapprove her transactions with the PNO if she would not comply with his demand. As all her
transactions with the PNO were subject to the approval of petitioner as comptroller of the PNO,
and fearing that petitioner might block or unduly influence the payment of her vouchers in the
PNO, she conceded. Thus, she paid additional amounts in cash and checks as interests for the
loan. She asked petitioner for receipt for the payments but petitioner told her that it was not
necessary as there was mutual trust and confidence between them. Thereafter, respondent
consulted a lawyer regarding the propriety of paying interest on the loan despite absence of
agreement to that effect. Her lawyer told her that petitioner could not validly collect interest on
the loan because there was no agreement between her and petitioner regarding payment of
interest.
Issue:
Whether or not interest was due to the petitioner.
Held:
No. Article 1956 of the Civil Code, which refers to monetary interest, specifically
mandates that no interest shall be due unless it has been expressly stipulated in writing. As can
be gleaned from the foregoing provision, payment of monetary interest is allowed only if: (1)
there was an express stipulation for the payment of interest; and (2) the agreement for the
payment of interest was reduced in writing. The concurrence of the two conditions is required
for the payment of monetary interest. Thus, we have held that collection of interest without any

stipulation therefor in writing is prohibited by law. It appears that petitioner and respondent did
not agree on the payment of interest for the loan. Neither was there convincing proof of written
agreement between the two regarding the payment of interest. Respondent testified that
although she accepted petitioners offer of loan amounting to P540,000.00, there was,
nonetheless, no verbal or written agreement for her to pay interest on the loan.

ANITA A. LEDDA, Petitioner,

vs.
BANK OF THE PHILIPPINE ISLANDS, Respondent.
G.R. No. 200868

November 12, 2012

Facts:
This case arose from a collection suit filed by respondent Bank of the Philippine Islands
(BPI) against Ledda for the latters unpaid credit card obligation. As one of BPIs valued clients,
Ledda was issued a pre-approved BPI credit card. Thereafter, Ledda used the credit card for
various purchases of goods and services and cash advances. Ledda defaulted in the payment of
her credit card obligation, which BPI claimed in their complaint amounted to P548,143.73 per
Statement of Account dated 9 September 2007. Consequently, BPI sent letters to Ledda
demanding the payment of such amount. Despite BPIs repeated demands, Ledda failed to pay
her credit card obligation constraining BPI to file an action for collection of sum of money. The
RTC gave due course to BPIs complaint and ordered Ledda to pay her obligation. Ledda averred
that since there was no written agreement to pay a higher interest, the interest rate to be
imposed is only 6% pursuant to Article 2209 of the Civil Code. The CA rejected Leddas
arguments.

Issue:
Whether or not the imposable interest rate is 6% per annum.
Held:
No, the imposable interest rate should be 12% per annum. Since there is no dispute that
Ledda received, accepted and used the BPI credit card issued to her and that she defaulted in
the payment of the total amount arising from the use of such credit card, Ledda is liable to pay
BPI P322,138.58 representing the principal amount of her unpaid credit card obligation. Ledda
must also pay interest on the total unpaid credit card amount at the rate of 12% per annum
since her credit card obligation consists of a loan or forbearance of money. We reject Leddas
contention that, since there was no written agreement to pay a higher interest rate, the interest
rate should only be 6%. Ledda erroneously invokes Article 2209 of the Civil Code. Article 2209
refers to indemnity for damages and not interest on loan or forbearance of money, which is the

case here. In accordance with Eastern Shipping Lines, Inc., the 12% legal interest shall be
reckoned from the date BPI extrajudicially demands from Ledda the payment of her overdue
credit card obligation.

SPOUSES FLORENTINO T. MALLARI and AUREA V. MALLARI, Petitioners,

vs.
PRUDENTIAL BANK (now BANK OF THE PHILIPPINE ISLANDS), Respondent.
G.R. No. 197861

June 5, 2013

Facts:

In 1984, Petitioner Florentino Mallari obtained a loan from respondent Prudential Bank in
the amount of P300,000.00. It was subject to an interest rate of 21% per annum and, in case of
default, a penalty of 12% per annum of the total amount due and attorneys fees equivalent of
15% of the total amount due. This was secured by a Deed of Assignment (DOA) over petitioner's
time deposit account. In 1989, Spouses Florentino and Aurea Mallari obtained another loan from
respondent for P1.7 million, stipulating interest of 23% per annum with the same penalties in
case of default. This was secured by Real Estate Mortgage (REM). Petitioners defaulted. When
computed in 1992, the total debt was P571,218.54 and P2,991,294.82 for the first and second
loans respectively.
Respondent tried to extrajudicially foreclose the mortgage. Petitioners on the other hand
tried to nullify the mortgage claiming that the Bank imposed onerous terms and conditions and
that the bank was unilaterally increasing its charges and interest over and above those
stipulated. The Bank claimed that the basis for its computation was all written in the Promissory
Notes.
The RTC ruled in favor of respondent bank. CA affirmed.
ISSUE:
Whether or not an interest rate of 23% per annum and 12% per annum penalty is
unconscionable.
HELD:

No. The Court has also ruled affirmed in a plethora of cases that stipulated interest rates
of 3% per month and higher are excessive, unconscionable and exorbitant. thus, the 23% per
annum interest rate imposed on petitioners loan in this case can by no means be considered
excessive or unconscionable. And neither is the 12% per annum penalty charge unconscionable
as the counrt found in DBP vs. Family Foods (2009) and Ruiz vs. Court of Appeals (2003).

ROLANDO C. DE LA PAZ,* Petitioner,

vs.
L & J DEVELOPMENT COMPANY, Respondent.
G.R. No. 183360

September 8, 2014

Facts:
On December 27, 2000, Rolando lent P350,000.00 without any security to L&J, a property
developer. The loan, with no specified maturity date, carried a 6% monthly interest,
i.e., P21,000.00. From December 2000 to August 2003, L&J paid Rolando a total of
P576,000.00 representing interest charges. As L&J failed to pay despite repeated demands,
Rolando filed a Complaint for Collection of Sum of Money with Damages against L&J and Atty.
Salonga in his personal capacity before the MeTC. Rolando alleged, among others, that L&Js
debts of January 2005, inclusive of the monthly interest, stood at P772,000.00; that the 6%
monthly interest was upon Atty. Salongas suggestion; and, that the latter tricked him into
parting with his money without the loan transaction being reduced into writing. In their
Answer, L&J and Atty. Salonga denied Rolandos allegations. While they acknowledged the loan
as a corporate debt, they claimed that the failure to pay the same was due to a fortuitous event,
that is, the financial difficulties brought about by the economic crisis. They further argued that
Rolando cannot enforce the 6% monthly interest for being unconscionable and shocking to the
morals. Hence, the payments already made should be applied to the P350,000.00 principal loan.
Issue:
Whether or not the monthly interest rate imposed was unconscionable.
Held:
Yes, the monthly interest rate is unconscionable. The lack of a written stipulation to pay
interest on the loaned amount disallows a creditor from charging monetary interest. Under
Article 1956 of the Civil Code, no interest shall be due unless it has been expressly stipulated in
writing. Jurisprudence on the matter also holds that for interest to be due and payable, two
conditions must concur: a) express stipulation for the payment of interest; and b) the
agreement to pay interest is reduced in writing. Here, it is undisputed that the parties did not
put down in writing their agreement. Thus, no interest is due. The collection of interest without
any stipulation in writing is prohibited by law. It may be raised that L&J is estopped from
questioning the interest rate considering that it has been paying Rolando interest at such rate
for more than two and a half years. However, in Ching v. Nicdao, the Court categorically stated
therein that estoppel cannot give validity to an act that is prohibited by law or one that is
against public policy. Even if the payment of interest has been reduced in writing, a 6% monthly
interest rate on a loan is unconscionable, regardless of who between the parties proposed the
rate.

ELEANOR DE LEON LLENADO, Petitioner,

vs.
PEOPLE OF THE PHILIPPINES and EDITHA VILLAFLORES, Respondents.
G.R. No. 193279

March 14, 2012

Facts:
Petitioner was convicted by the Metropolitan Trial Court (MeTC) of Valenzuela City, Branch
82 in Criminal Case No. 54905 for violating Batasang Pambansa Blg. 22 (B.P. 22) or the
Bouncing Checks Law. It appears that petitioner issued checks to secure the loans obtained from
private respondent. Upon presentment, the checks were dishonored, leading to the filing with
the MeTC of criminal cases docketed as Criminal Case Nos. 54905, 54906, 54907, and 54908 for
four (4) counts of violation of B.P. 22. Subsequently, petitioner settled the loans subject of
Criminal Case Nos. 54906, 54907 and 54908 using the funds of the Children of Mary Immaculate
College, of which she was president. Private respondent executed an Affidavit of Desistance for
the three cases; thus, only Criminal Case No. 54905 covering a check worth, P1,500,000,
proceeded to trial. The MeTC found that all the following elements of a violation of B.P. 22 were
present in the last check subject of the criminal proceedings. Thus, petitioner was sentenced to
pay P1,500,000, the amount of the dishonored check, and a fine of P200,000 with subsidiary
imprisonment in case of insolvency. Applying Lunaria v. People,the CA modified the appealed
judgment by imposing legal interest of 12% on the amount of the dishonored check.
Issue:
Whether or not the imposition of legal interest of 12% on the amount of the dishonored
check is legal.
Held:
Yes. It has been established that in the absence of stipulation, the rate of interest shall be
12% per annum to be computed from default, that is, from judicial or extrajudicial demand
under and subject to the provisions of Article 1169 of the Civil Code. In Ongson v. People, we
held that interest began to run from the time of the extrajudicial demand, as duly proved by the
creditor. Thus, petitioner should also be held liable for the amount of the dishonored check,
which is P1,500,000, plus 12% legal interest covering the period from the date of the receipt of
the demand letter on 14 May 1999 to the finality of this Decision. The total amount due in the
dispositive portion of the CAs Decision, inclusive of interest, shall further earn 12% interest per
annum from the finality of this Decision until fully paid.

HERMOJINA ESTORES, Petitioner,

vs.
SPOUSES ARTURO and LAURA SUPANGAN, Respondents.
G.R. No. 175139

April 18, 2012

Facts:
Petitioner and respondent-spouses entered into a Conditional Deed of Sale whereby
petitioner offered to sell, and respondent-spouses offered to buy, a parcel of land located at
Naic, Cavite for the sum of P4.7 million. After almost seven years from the time of the execution
of the contract and notwithstanding payment of P3.5 million on the part of respondent-spouses,
petitioner still failed to comply with her obligation as expressly provided in paragraphs 4, 6, 7, 9
and 10 of the contract. Hence, in a letter dated September 27, 2000, respondent-spouses
demanded the return of the amount of P3.5 million within 15 days from receipt of the letter. In
reply, petitioner acknowledged receipt of the P3.5 million and promised to return the same
within 120 days. Respondent-spouses were amenable to the proposal provided an interest of
12% compounded annually shall be imposed on the P3.5 million. When petitioner still failed to
return the amount despite demand, respondent-spouses were constrained to file a Complaint for
sum of money before the RTC of Malabon against herein petitioner as well as Roberto U. Arias
who allegedly acted as petitioners agent. In their Answer with Counterclaim, petitioner and
Arias averred that they are willing to return the principal amount of P3.5 million but without any
interest as the same was not agreed upon. In their Pre-Trial Brief, they reiterated that the only
remaining issue between the parties is the imposition of interest. They argued that since the
Conditional Deed of Sale provided only for the return of the downpayment in case of breach,
they cannot be held liable to pay legal interest as well.
Issue:
Whether or not it is proper to impose interest for an obligation that does not involve a
loan or forbearance of money in the absence of stipulation of the parties.
Held:
Yes, interest may be imposed even in the absence of stipulation in the contract. Article
2210 of the Civil Code expressly provides that "interest may, in the discretion of the court, be
allowed upon damages awarded for breach of contract." In this case, there is no question that
petitioner is legally obligated to return the P3.5 million because of her failure to fulfill the
obligation under the Conditional Deed of Sale, despite demand. The interest at the rate of 12%
is applicable in the instant case. Anent the interest rate, the general rule is that the applicable
rate of interest "shall be computed in accordance with the stipulation of the parties." Absent any
stipulation, the applicable rate of interest shall be 12% per annum "when the obligation arises
out of a loan or a forbearance of money, goods or credits. In other cases, it shall be six percent
(6%)." In this case, the parties did not stipulate as to the applicable rate of interest. Petitioners
unwarranted withholding of the money which rightfully pertains to respondent-spouses amounts

to forbearance of money which can be considered as an involuntary loan. Thus, the applicable
rate of interest is 12% per annum.

RODRIGO RIVERA, Petitioner,

vs.
SPOUSES SALVADOR CHUA AND VIOLETA S. CHUA, Respondents.
G.R. No. 184458

January 14, 2015

Facts:
On 24 February 1995, Rivera obtained a loan from the Spouses Chua. Almost three years
from the date of payment stipulated in the promissory note, Rivera, as partial payment for the
loan, issued and delivered to the Spouses Chua, as payee, a check in the amount of P25,000.00.
On 21 December 1998, the Spouses Chua received another check presumably issued by Rivera,
likewise drawn against Riveras PCIB current account, numbered 013224, duly signed and
dated, but blank as to payee and amount. Ostensibly, as per understanding by the parties, PCIB
Check No. 013224 was issued in the amount of P133,454.00 with "cash" as payee. Purportedly,
both checks were simply partial payment for Riveras loan in the principal amount
of P120,000.00. Upon presentment for payment, the two checks were dishonored for the reason
"account closed." As of 31 May 1999, the amount due the Spouses Chua was pegged
at P366,000.00 covering the principal ofP120,000.00 plus five percent (5%) interest per month
from 1 January 1996 to 31 May 1999. The Spouses Chua alleged that they have repeatedly
demanded payment from Rivera to no avail. Because of Riveras unjustified refusal to pay, the
Spouses Chua were constrained to file a suit on 11 June 1999.
Issue:
Whether or not the stipulated interest is illegal.
Held:
Yes. As observed by [Rivera], the stipulated interest of 5% per month or 60% per annum
in addition to legal interests and attorneys fees is, indeed, highly iniquitous and unreasonable.
Stipulated interest rates are illegal if they are unconscionable and the Court is allowed to
temper interest rates when necessary. Since the interest rate agreed upon is void, the parties
are considered to have no stipulation regarding the interest rate, thus, the rate of interest
should be 12% per annum computed from the date of judicial or extrajudicial demand. The
appellate court found the 5% a month or 60% per annum interest rate, on top of the legal
interest and attorneys fees, steep, tantamount to it being illegal, iniquitous and
unconscionable. Significantly, the issue on payment of interest has been squarely disposed of in
G.R. No. 184472 denying the petition of the Spouses Chua for failure to sufficiently show any
reversible error in the ruling of the appellate court, specifically the reduction of the interest rate
imposed on Riveras indebtedness under the Promissory Note. Ultimately, the denial of the
petition in G.R. No. 184472 is res judicata in its concept of "bar by prior judgment" on whether
the Court of Appeals correctly reduced the interest rate stipulated in the Promissory Note.

SPOUSES SALVADOR ABELLA AND ALMA ABELLA, Petitioners,

vs.
SPOUSES ROMEO ABELLA AND ANNIE ABELLA, Respondents.
G.R. No. 195166
Facts:
On July 31, 2002, petitioners Spouses Salvador and Alma Abella filed a Complaint for sum
of money and damages with prayer for preliminary attachment against respondents Spouses
Romeo and Annie Abella before the Regional Trial Court, Branch 8, Kalibo, Aklan. In their
Complaint, petitioners alleged that respondents obtained a loan from them in the amount of
P500,000.00. The loan was evidenced by an acknowledgment receipt dated March 22, 1999 and
was payable within one (1) year. Petitioners added that respondents were able to pay a total of
P200,000.00 P100,000.00 paid on two separate occasionsleaving an unpaid balance of
P300,000.00. In their Answer (with counterclaim and motion to dismiss), respondents alleged
that the amount involved did not pertain to a loan they obtained from petitioners but was part
of the capital for a joint venture involving the lending of money. In the Decision dated December
28, 2005, the Regional Trial Court ruled in favor of petitioners. It noted that the terms of the
acknowledgment receipt executed by respondents clearly showed that: (a) respondents were
indebted to the extent of P500,000.00; (b) this indebtedness was to be paid within one (1) year;
and (c) the indebtedness was subject to interest. Thus, the trial court concluded that
respondents obtained a simple loan, although they later invested its proceeds in a lending
enterprise. The Regional Trial Court adjudged respondents solidarily liable to petitioners. The
Court of Appeals noted that while the acknowledgement receipt showed that interest was to be
charged, no particular interest rate was specified. Thus, at the time respondents were making
interest payments of 2.5% per month, these interest payments were invalid for not being
properly stipulated by the parties.
Issue:
Whether or not interest accrued on respondents loan from petitioners. If so, at what
rate?
Held:
Yes, interest accrued on respondents loan. Article 1956 of the Civil Code spells out the
basic rule that "no interest shall be due unless it has been expressly stipulated in writing." The
controversy, however, stems from the acknowledgment receipts failure to state the exact rate
of interest. Jurisprudence is clear about the applicable interest rate if a written instrument fails
to specify a rate. In Spouses Toring v. Spouses Olan, this court clarified the effect of Article 1956
of the Civil Code and noted that the legal rate of interest (then at 12%) is to apply: "In a loan or
forbearance of money, according to the Civil Code, the interest due should be that stipulated in
writing, and in the absence thereof, the rate shall be 12% per annum." The Monetary Board, in
its Resolution No. 796 dated 16 May 2013, approved the following revisions governing the rate
of interest in the absence of stipulation in loan contracts, thereby amending Section 2 of
Circular No. 905, Series of 1982. Thus, from the foregoing, in the absence of an express
stipulation as to the rate of interest that would govern the parties, the rate of legal interest for

loans or forbearance of any money, goods or credits and the rate allowed in judgments shall no
longer be twelve percent (12%) per but will now be six percent (6%) per annum effective July 1,
2013.
PHILIPPINE AIRLINES, INC. Petitioner,
vs
PAL EMPLOYEES SAVINGS & LOAN ASSOCIATION, INC., Respondent.
G.R. No. 201073, February 10, 2016
Facts:
With the enactment of Republic Act No. 3779 (Savings and Loan Association Law),
PESALA submitted the necessary requirements to the BSP so that PESALA will be authorized to
operate as a savings and loan association. Among the documents required by and submitted to
the BSP was a Certification dated June 20, 1969 issued by Mr. Claro C. Gloria, then Vice
President for Industrial Relations of PAL, to the effect that PAL sanctions and supports the
systems and operations of the PESALA; and that it allows and implements an arrangement
whereby the PESALA collects-loan repayments, capital contributions, and deposits from its
members by payroll deduction through the facilities of PAL. The controversy began on July 11,
1997, when PESALA received from Atty. Jose C. Blanco, then PAL Labor Affairs Officer-in-Charge,
a Letter informing it that PAL shall implement a maximum 40% salary deduction on all its
Philippine-based employees effective August 1, 1997. The Letter stated that, as all present
Philippine-based collective bargaining agreement contain this maximum 40% salary deduction
provision and to prevent "zero net pay" situations, PAL was going to strictly enforce said
provision. In the Decision dated November 6, 2002, the RTC made the writ of preliminary
injunction earlier issued as permanent, thus ordering PAL and its officials to strictly comply with
and implement the arrangement between the parties whereby PAL deducts from the salaries of
PESALA members through payroll deductions the loan repayments, capital contributions and
deposits of said members, and to remit the same to PESALA.
Issue:
Whether or not there is a contract of guaranty between PAL and the members-debtors of
PESALA.
Held:
No. In directing PAL to remit to PESALA the amount of P44,488,716.41, PAL additionally
argues that the Court of Appeals unilaterally appointed PAL as a guarantor of the debts of
PESALA's members because the amount of P44,488,716.41 had not yet been deducted from the
salaries of the PESALA members. Contrary to PAL's erroneous argument, however, it is liable,
not because it is being made a guarantor of the debts of PESALA's members, but because of its
failure to comply with the RTC's directives. Indeed the amount of P44,488,716.41 has not yet
been deducted from the salaries of the PESALA members and, precisely, the reason why such
amount has not been deducted is because PAL contravened the RTC's TRO and WPI. PAL is
therefore liable, not because it is being made a guarantor of the debts of PESALA's members,
but because its own actions brought forth the loss in the case at bar. On a last note, we herein

clarify that the Court's directive for PAL to remit to PESALA the amount of P44,488,716.41 does
not preclude PAL from seeking due reimbursement from the members of PESALA whose
accounts were not accordingly deducted. As explained earlier, the Court is not holding PAL as a
guarantor of the debts of these PESALA members; thus, PAL can rightfully claim the principal
amount of P44,488,716.41 from these concerned PESALA members.

OSCAR S. VILLARTA, Petitioner,

vs
GAUDIOSO TALAVERA, JR., Respondent.
G.R. No. 208021, February 03, 2016
Facts:
Appellant Oscar Villarta filed the complaint a quo for reformation of contracts, moral
damages, and attorney's fees against appellee Gaudioso Talavera, Jr. He alleged: he owned four
parcels of land, all situated in Santiago City. Sometime in 1993, he ventured into treasure
hunting activites; in order to infuse his much needed capital, he obtained several loans from
appellee who was a distant relative; as of 1996, his loan already reached P800,000.00, inclusive
of 3% interest per month; he religiously paid the interest, but when the 1997 financial crisis
struck, appellee raised the interest to a rate between 7% and 10%; in 1995, appellee employed
insidious words and machinations in convincing him to execute a deed of absolute sale over TCT
No. T-130095; however, the real agreement was that the lot would only serve as security for the
several loans he obtained; in 1997, he was again convinced to execute two more deeds of
conveyance over the two lots under TCTs T-12142 and T-53252. when appellee realized that his
loan was going to be approved, the former demanded that he execute a deed of absolute sale
over the lot under TCT T-214950, yet, the real agreement was that the lot would only serve as
collateral. Appellee took advantage of the situation and caused the cancellation of TCT T214950, by utilizing the deed of absolute sale, contrary to their real agreement that the
property should only serve as collateral; the Deeds of Absolute Sale dated March 1995 and May
18, 2001 were in reality an equitable mortgage; the P500,000.00 consideration for the Deed of
Absolute Sale dated May 18, 2001 was grossly inadequate because the actual market value of
the subject land was P5,900,000.00; despite the execution of the two deeds of absolute sale, he
still had possession of the subject lots and even leased them to Wellmade Manufacturing Corp.;
because of appellee's fraudulent act of transferring titles of the two lots to his name, he suffered
sleepless nights and serious anxiety; and, he also prayed for attorney's fees and costs of suit.
Issue:
Whether or not the contract is an equitable mortgage.
Held:
No, the contract is not an equitable mortgage. Respondent was able to sufficiently
explain why the presumption of an equitable mortgage does not apply in the present case. The
inadequacy of the purchase price in the two deeds of sale dated 18 May 2001 was supported by
an Affidavit of True Consideration of the Absolute Sale of the Property. Respondent did not
tolerate petitioner's possession of the lots. Respondent caused the registration and subsequent
transfer of TCT No. T-214950 to TCT No. T-333921 under his name, and paid taxes thereon.
There were no extensions of time for the payment of petitioner's loans; rather, petitioner offered
different modes of payment for his loans. It was only after three instances of bounced checks

that petitioner offered TCT Nos. T-130095 and T-214950 as payment for his loans and executed
deeds of sale in respondent's favor. The transaction between petitioner and respondent is thus
not an equitable mortgage, but is instead a dacion en pago.

PHILIPINE NATIONAL BANK, Petitioner

vs
VENANCIO C. REYES, JR., Respondent
G.R. No. 212483

October 5, 2016

Facts:
Venancio is married to Lilia since 1973. During their union, they acquired three (3)
parcels of land in Malolos, Bulacan. The properties were mortgaged to Philippine National Bank
on August 25, 1994 to secure a loan worth Pl,100,000.00,7 which on October 6, 1994 was
increased to 3,000,000.00. According to Philippine National Bank, the Reyes Spouses contracted
and duly consented to the loan. When the Reyes Spouses failed to pay the loan obligations, PNB
foreclosed the mortgaged real properties. The auction sale was held on September 19, 1997.
PNB emerged as the highest bidder, and a certificate of sale was issued in its favor. On
September 22, 1998, Venancio filed before the Regional Trial Court a Complaint (or Annulment
of Certificate of Sale and Real Estate Mortgage against PNB. In assailing the validity of the real
estate mortgage, Venancio claimed that his wife undertook the loan and the mortgage without
his consent and his signature was falsified on the promissory notes and the mortgage. Since the
three (3) lots involved were conjugal properties, he argued that the mortgage constituted over
them was void.
Issue:

Whether or not the Court of Appeals erred in declaring the real estate mortgage void.

Held:
No, the CA committed no reversible error in affirming the ruling of the RTC. The real
estate mortgage over a conjugal property is void if the non-contracting spouse did not give
consent. The Family Code is clear: the written consent of the spouse who did not encumber the
property is necessary before any disposition or encumbrance of a conjugal property can be
valid. Petitioner points to respondent's signature on the Promissory Notes and Deed of Mortgage
to prove that he consented to the transactions. For his part, respondent alleges that his
signature was forged and offers testimony from a handwriting expert to prove that his signature
on the bank documents were falsified. The Regional Trial Court and the Court of Appeals both
agreed that respondent presented clear and convincing evidence that his signature, as it
appeared on the mortgage contract, was forged. We see no compelling reason to overturn the
lower courts' factual findings that the forgery was proven with clear and convincing evidence.
Having established that his signature was forged, respondent proved that he did not consent to
the real estate mortgage. The mortgage unilaterally made by his wife over their conjugal
property is void and legally inexistent.