ACME SHOE, RUBBER & PLASTIC CORPORATION and CHUA PAC vs.HON.

COURT OF APPEALS, BANK OF THE PHILIPPINES and REGIONAL SHERIFF OF

CALOOCAN CITY

G.R. No. 103576 August 22, 1996

FACTS:
Petitioner Chua Pac, the president and general manager of co-petitioner Acme
executed a chattel mortgage in favor of private respondent Producers Bank as a
security for a loan of P3,000,000. A provision in the chattel mortgage agreement
was to this effect:

"In case the MORTGAGOR executes subsequent promissory note or notes either as a
renewal of the former note, as an extension thereof, or as a new loan, or is given
any other kind of accommodations such as overdrafts, letters of credit, acceptances
and bills of exchange, releases of import shipments on Trust Receipts, etc., this
mortgage shall also stand as security for the payment of the said promissory note
or notes and/or accommodations without the necessity of executing a new contract
and this mortgage shall have the same force and effect as if the said promissory
note or notes and/or accommodations were existing on the date thereof. This
mortgage shall also stand as security for said obligations and any and all other
obligations of the MORTGAGOR to the MORTGAGEE of whatever kind and nature,
whether such obligations have been contracted before, during or after the
constitution of this mortgage."

In due time, the loan of P3,000,000.00 was paid. Subsequently it obtained additional
loan totalling P2,700,000.00 which was also duly paid.

Another loan was again extended (P1,000,000.00) covered by four promissory notes
for P250,000.00 each, but went unsettled prompting the bank to apply for an
extrajudicial foreclosure with the Sheriff.

ISSUE:
Would it be valid and effective to have a clause in a chattel mortgage that purports
to likewise extend its coverage to obligations yet to be contracted or incurred?

HELD:
No. While a pledge, real estate mortgage, or antichresis may exceptionally secure
after-incurred obligations so long as these future debts are accurately described, a
chattel mortgage, however, can only cover obligations existing at the time the
mortgage is constituted. Although a promise expressed in a chattel mortgage to
include debts that are yet to be contracted can be a binding commitment that can
be compelled upon, the security itself, however, does not come into existence or
arise until after a chattel mortgage agreement covering the newly contracted debt
is executed either by concluding a fresh chattel mortgage or by amending the old
contract conformably with the form prescribed by the Chattel Mortgage Law. Refusal
on the part of the borrower to execute the agreement so as to cover the after-
incurred obligation can constitute an act of default on the part of the borrower of
the financing agreement whereon the promise is written but, of course, the remedy
of foreclosure can only cover the debts extant at the time of constitution and during
the life of the chattel mortgage sought to be foreclosed.

Olivia Navoa and Ernesto Navoa vs. C.A., Teresita Domdoma and Eduardo
Domdoma GR No 59255 20December1995

Facts: On December 1977 Teresita Domdoma and Eduardo Domdoma filed a case
with the RTC for collection of various sums of money based on loans given by them
to Olivia Navoa. They cased was dismissed on the ground that there was no cause
of action and that the Domdomas do not have capacity to sue. They appealed to
the C.A. and was granted a favourable decision. There were 6 instances in which the
Domdomas gave Olivia Navoa a loan. The first instance is when Teresita gave Olivia
a diamond ring valued at 15,000.00 which was secured by a PCIB check under the
condition that if the ring was not returned within 15 days from August 15, 1977 the
ring is considered sold. Teresita attempted to deposit the check on November 1977
but the check was not honoured for lack of funds. After this instance, there were
other loans of various amounts that were extended by Teresita to Olivia, loans which
were secured by PCIB checks, which were all dated to 1 month after the loan. All
these checks were not honoured under the same reason as the first loan.

Issue: W/n the decision of the RTC to dismiss the case due to having no cause of
action valid?

Held: NO, A cause of action is the fact or combination of facts which affords a
party a right to judicial interference in his behalf. For the first loan it is a fact, that
the ring was considered sold to Olivia Navoa 15 days after August 15, 1977, and
even then, Olivia Navoa failed to pay the price for the ring when the payment was
due (check issued was not honoured. Thus it is confirmed that Teresitas right under
the agreement was violated. As for the other loans extended by Teresita to Olivia,
they were all secured by PCIB checks. It can be inferred that since the checks were
all dated to 1 month after the loan, it follows that the loans are then payable 1
month after they were contracted, and also these checks
were dishonoured by the bank for lack of funds. Olivia and Ernesto Navoa failed to
make good the checks that were issued as payment for their obligations. Art 1169
of the Civil Code is explicit: those obliged to deliver or to do something incur in
delay from the time the obligee judicially or extrajudicially demands from them the
fulfilment of the obligations, the continuing refusal of Olivia and Ernesto Navoa to
comply with the demand of payment shows the existence of a cause of action.

*Obligations and Contracts terms: Security A means of ensuring the enforcement of

an obligation or of protecting some interest in property. It may be personal or
property security. Cause of Action is the fact or combination of facts which affords a
party a right to judicial interference in his behalf. The requisites for a cause of action
are: (a) a right in favour of the plaintiff by whatever means and under whatever law
it arises or created, (b) an obligation on the part of the defendant to respect and not
to violate such right; and, (c) an act or omission on the part of the defendant
constituting a violation of the plaintiffs right or breach of the obligation of the
defendant to the plaintiff.
People v. Concepcion
G.R. No. 19190 (November 29, 1922)

FACTS:
Defendant authorized an extension of credit in favor of Concepcion, a co-
partnership. Defendants wife was a director of this co-partnership. Defendant
was found guilty of violating Sec. 35 of Act No. 2747 which says that The National
Bank shall not, directly or indirectly, grant loans to any of the members of the Board
of Directors of the bank nor to agents of the branch banks. This Section was in
effect in 1919 but was repealed in Act No. 2938 approved on January 30, 1921.

ISSUE:
W/N Defendant can be convicted of violating Sections of Act No. 2747, which
were repealed by Act No. 2938.

HELD:
In the interpretation and construction, the primary rule is to ascertain and give
effect to the intention of the Legislature. Section 49 in relation to Sec. 25 of Act No.
2747 provides a punishment for any person who shall violate any provisions of the
Act. Defendant contends that the repeal of these Sections by Act No. 2938 has
served to take away basis for criminal prosecution. The Court holds that where an
act of the Legislature which penalizes an offense repeals a former act which
penalized the same offense, such repeal does not have the effect of thereafter
depriving the Courts of jurisdiction to try, convict and sentence offenders charged
with violations of the old law.

Herrera vs Petrophil
Facts: On December 5, 1969, Herrera and Petrophil Corp. entered into a "Lease
Agreement" where Herrera leased to Petrophil a portion of his property, subject inter
alia to the following conditions:
3. The LESSEE shall pay the LESSOR a rental of a total of P2,930.20 per month on
2,093 sqm more or less, and that the Lessor should be paid 8 years advance rental
based on P2,930.70 per month discounted at 12% interest per annum before
registration of lease.
On Dec. 31, 1969, Petrophil paid the advance rentals for the first 8 years,
subtracting the amount of P101,010.73, the amount it computed as constituting the
interest or discount for the first 8 years, in the total sum P180,288.47.
On Aug. 20, 1970, Petrophil explained that there had been a mistake in
computation, and thereby reducing the amount to only P98,828.03.
On Oct. 14, 1974, Herrera sued Petrophil for the sum of P98,828.03, claiming this
had been illegally deducted from him in violation of the Usury Law. Petrophil argued
that the amount deducted was not usurious interest but was given for paying the
rentals in advance for 8 years. Judgment favoured Petrophil.
Herrera appealed to the SC, insisting that such interest is violative of the Usury Law;
and that he had neither agreed to nor accepted Petrophils computation of the total
amount to be deducted for the eight years advance rentals.
ISSUE: Whether or not the contract is a loan or lease.
RULING: Lease. As its title plainly indicates, the contract between the parties is one
of lease and not of loan. It is clearly denominated a "LEASE AGREEMENT.
The provision for the payment of rentals in advance cannot be taken as a
repayment of a loan because there was no grant of money as to constitute an
indebtedness on the part of the lessor. On the contrary, Petrophil was clearing its
obligation by paying the 8 years rentals, and it was for this advance payment that it
was getting a discount.
There is no usury in this case because no money was given by Petrophil to Herrera.
There was neither loan but a mere discount which Herrera allowed Petrophil to
deduct. The discount was in effect a reduction of the rentals which the lessor had
the right to determine, and any reduction thereof, by any amount, would not
contravene the Usury Law.
The difference between a discount and a loan or forbearance is that the former does
not have to be repaid. The loan or forbearance is subject to repayment and is
therefore governed by the laws on usury.
To constitute usury, "there must be loan or forbearance; the loan must be of money
or something circulating as money; it must be repayable absolutely and in all
events; and something must be exacted for the use of the money in excess of and
in addition to interest allowed by law."
The elements of usury are (1) a loan, express or implied; (2) an understanding
between the parties that the money lent shall or may be returned; that for such loan
a greater rate or interest that is allowed by law shall be paid, or agreed to be paid,
as the case may be; and (4) a corrupt intent to take more than the legal rate for the
use of money loaned. Unless these four things concur in every transaction, it is safe
to affirm that no case of usury can be declared.

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 m ortgage 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 parties
Saura's request for cancellation and RFC's subsequent approval of such cancellation
was 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.

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, 139 SCRA 46 (1985)

Tolentino made a loan from Island Savings Bank secured by a mortgage. The Bank
did not release the whole amount but only a portion thereof. Later, the Bank
experienced liquidity problems and the Monetary Board of Central Bank prohibited it
from making new loans and much later, from doing business in the Philippines.
Thereafter, the Acting Superintendent of Central Bank took charge of its assets.
Upon expiration of the loan term, the Bank filed extrajudicial foreclosure of the
mortgage. Was there a perfected contract of loan when only a portion of the amount
was delivered?

The Supreme Court held that there was only partial delivery. As such, the contract is
deemed perfect only in so far as what has been delivered. The mortgage cannot be
entirely foreclosed, except for up to the amount of the actual amount released, but
the Bank can recover the interest of the partial loan. Tolentino cannot anymore
demand the remaining amount of the loan from the Bank because he defaulted on
his payment. His liability offsets the liability of the Bank to him.

REPUBLIC v. BAGTAS
February 20, 2014 Leave a comment
Republic v. Bagtas

Facts: Bagtas borrowed three bulls from the Bureau of Animal Industry for one year
for breeding purposes subject to payment of breeding fee of 10% of book value of
the bull. Upon expiration, Bagtas asked for renewal. The renewal was granted only
to one bull. Bagtas offered to buy the bulls at its book value less depreciation but
the Bureau refused. The Bureau said that Bagtas should either return or buy it at
book value. Bagtas proved that he already returned two of the bulls, and the other
bull died during a Huk raid, hence, obligation already extinguished. He claims that
the contract is a commodatum hence, loss through fortuitous event should be borne
by the owner.

Issue: WON Bagtas is liable for the death of the bull.

Held: Yes. Commodatum is essentially gratuitous. However, in this case, there is a

10% charge. If this is considered compensation, then the case at bar is a lease.
Lessee is liable as possessor in bad faith because the period already lapsed.

Even if this is a commodatum, Bagtas is still liable because the fortuitous event
happened when he held the bull and the period stipulated already expired and he is
liable because the thing loaned was delivered with appraisal of value and there was
no contrary stipulation regarding his liability in case there is a fortuitous event.
Mina v. Pascual, 25 Phil 540

Francisco is the owner of land and he allowed his brother, Andres, to erect a
warehouse in that lot. Both Francisco and Andres died and their children became
their respective heirs: Mina for Francisco and Pascual for Andres. Pascual sold his
share of the warehouse and lot. Mina opposed because the lot is hers because her
predecessor (Francisco) never parted with its ownership when he let Andres
construct a warehouse, hence, it was a contract of commodatum. What is the
nature of the contract between Francisco and Andres?

The Supreme Court held that it was not a commodatum. It is an essential feature of
commodatum that the use of the thing belonging to another shall be for a certain
period. The parties never fixed a definite period during which Andres could use the
lot and afterwards return it.

Catholic Vicar Apostolic vs 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 69 PHIL 108

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.
Thereafter, 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.

ISSUE: WON Beck complied with his obligation of returning the furnitures to Quintos
when it deposited the furnitures to the sheriff.

RULING: 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 (clause 7 of the contract, Exhibit A; articles 1740, paragraph 1, and 1741 of
the Civil Code). 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 eletric 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 nt 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.