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1. Saura Import and Export Co. vs. DBP, 27 April

1972
2. BPI Investment Corp vs. CA, 15 Feb 2002
3. Bonnevie vs CA, 24 Oct 1983
4. Central Bank of the Philippines vs. CA, 3 Oct 1985
5. Republic vs Bagtas
6. Catholic Vicar Apostolic Inc of the Mt. Province vs. CA, 21 September 1988
7. Quintos and Ansaldo vs. Beck, 69 Phil 108 (1939)
8. Consolidated Bank and Trust Corporation vs CA, 19 April 2001
9. Republic vs Grijaldo GR L-20240 (1965)
10. Casa Filipino Development Corporation vs. Deputy Executive Secretary, 209 SCRA 379
11. PNB vs CA, 30 April 1991
12. Relucio vs. Garfin, GR 76518 (1990)
13. Eastern Shipping Lines Inc. vs. CA, 12 July 1994
14. Phil. American Accident Inc. Co. vs. Flores, 97 SCRA 1980

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1. Saura Import and Export Co. vs. DBP, 27 April
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/s: 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 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.

2. BPI Investment Corp vs. CA, 15 Feb 2002

Doctrine: A loan contract is not a consensual contract but a real contract. It is perfected only
upon the delivery of the object of the contract.
Facts:
Frank Roa obtained a loan from Ayala Investment and Development Corporation (AIDC), the
predecessor of petitioner BPIIC, for the construction of a house on his lot in New Alabang Village,
Muntinlupa. Said house and lot were mortgaged to AIDC to secure the loan. Sometime in 1980,
Roa sold the house and lot to private respondents ALS and Antonio Litonjua for P850,000. They
paid P350,000 in cash and assumed the P500,000 balance of Roa's indebtedness with AIDC.
The latter, however, was not willing to extend the old interest rate to private respondents and
proposed to grant them a new loan of P500,000 to be applied to Roa's debt and secured by the
same property. On August 13, 1982, ALS and Litonjua updated Roa's arrearages by paying
BPIIC the sum of P190,601.35. This reduced Roa's principal balance to P457,204.90 which, in
turn, was liquidated when BPIIC applied thereto the proceeds of private respondents loan of
P500,000.
On September 13, 1982, BPIIC released to private respondents P7,146.87, purporting to be what
was left of their loan after full payment of Roa's loan.
In June 1984, BPIIC instituted foreclosure proceedings against private respondents on the
ground that they failed to pay the mortgage indebtedness.

Issue/s: WHETHER OR NOT A CONTRACT OF LOAN IS A CONSENSUAL CONTRACT

Held:
NO. A loan contract is not a consensual contract but a real contract. It is perfected only upon the

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delivery of the object of the contract. Petitioner misapplied Bonnevie. The contract in Bonnevie
declared by this Court as a perfected consensual contract falls under the first clause of Article
1934, Civil Code. It is an accepted promise to deliver something by way of simple loan. In the
present case, the loan contract between BPI, on the one hand, and ALS and Litonjua, on the
other, was perfected only on September 13, 1982, the date of the second release of the loan.
Following the intentions of the parties on the commencement of the monthly amortization, as
found by the Court of Appeals, private respondents obligation to pay commenced only on
October 13, 1982, a month after the perfection of the contract.

3. Bonnevie vs CA, 24 Oct 1983

Facts:
On December 6, 1966, Spouses Jose and Josefa Lozano (Lozanos) mortgaged their property to
the Philippine Bank of Commerce (PBC) to secure a loan amounting to P75,000. However, the
amount loaned from said bank was not yet received by the Lozanos.

On December 8, 1966, the Lozanos executed a Deed of Sale with an Assumption of Mortgage to
Honesto Bonnevie for P100,000. Payment of the amount was to be done by paying P25,000. to
the Lozanos and P75,000 to PBC.

On December 12, 1966, the Lozanos along with one Alfonso Lim, made a promissory note for
P75,000 since the loan was not yet received from the bank.

On May 4, 1968, Honesto Bonnevie assigned his rights under the Deed of Sale with Assumption
of Mortgage to his brother, Raoul Bonnevie. Then, PBC applied for the foreclosure of Mortgage
on June 10, 1968 and the notice of sale was published in the Luzon Weekly Courier on June 30,
July 7, and July 14, 1968. On Septtember 4, 1968, PBC bought the property from the public
auction for P84,387.

On October 9, 1969, Raoul and Honesto offered to repurchase the property but were denied.
Thereafter they caused an adverse claim to be annotated on the title of the property.

The Bonnevies contend, first, that the mortgage was invalid for lacking consideration as the
Lozanos have not received the amount. Second, that the renewals of the Lozanos of the loan
using the same property already sold rendered it null and void. Third, the foreclosure sale lacked
notice to them.

Issue/s:
1. Whether the real estate mortgage executed by the spouses Lozano in favor of respondent
bank was validly and legally executed.
2. Whether the extrajudicial foreclosure of the said mortgage was validly and legally
effected.
3. Whether petitioners had a right to redeem the foreclosed property.

Held:
1. Yes. Under the law, a contract of loan being a consensual contract, it was perfected at the
same time the contract of mortgage was executed. The fact that the Lozanos did not
collect from the respondent Bank the consideration of the mortgage on the date it was
executed is immaterial. 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

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the time of its execution.
The argument that the renewals of the Lozanos of the loan using the property already
sold rendered it null and void, is untenable because of the assumption of mortgage. A
contract of mortgage which prohibits the sale, disposition of, mortgage and encumbrance
of the mortgaged properties, without the written consent of the mortgagee, and then
mortgaged property is sold, the vendee shall assume the mortgage in the terms and
conditions under which it is constituted.

In this case, the title of the property remained in the name of the Lozano spouses so they
could validly renew the loan and the bank could rely on the certificate of title because the
sale or assignment was not registered. The doctrine of innocent purchaser for value is
applicable to an innocent mortgagee for value. Furthermore, the petitioners voluntarily
assumed the mortgage when they entered into the Deed of Sale with Assumption of
Mortgage. As a result, they are estopped from impugning its validity whether on the
original loan or renewals thereof.

2. Yes. Under Act No. 3135,

Section 3. Notice shall be given by posting notices of the sale for not less than
twenty days in at least three public places of the municipality or city where the
property is situated, and if such property is worth more than four hundred pesos,
such notice shall also be published once a week for at least three consecutive
weeks in a newspaper of general circulation in the municipality or city.
The law does not require personal notice to the mortgagor. In Basa vs Mercado, it was
held that to be a newspaper of general circulation, it is enough that "it is published for the
dissemination of local news and general information; that it has a bona fide subscription
list of paying subscribers; that it is published at regular intervals." In this case, there was
sufficient publication.
3. No. The petitioners assumed the mortgage without the consent of PBC. As a result,
petitioners were not validly substituted as debtors. Furthermore, their rights were never
recorded and hence, respondent Bank is charged with the obligation to recognize the right
of redemption only of the Lozano spouses.

4. Central Bank of the Philippines vs. CA, 3 Oct 1985

Facts:
On April 28, 1965, 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, and covered by TCT No. T-305, and which mortgage was annotated
on the said title the next day. The approved loan application called for a lump sum P80,000.00
loan, repayable in semi-annual installments for a period of 3 years, with 12% annual interest. It
was required that Sulpicio M. Tolentino shall use the loan proceeds solely as an additional capital
to develop his other property into a subdivision.

On May 22, 1965, a mere P17,000.00 partial release of the P80,000.00 loan was made by the
Bank; and Sulpicio M. Tolentino and his wife Edita Tolentino signed a promissory note for
P17,000.00 at 12% annual interest, payable within 3 years from the date of execution of the

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contract at semi-annual installments of P3,459.00 (p. 64, rec.).

On August 13, 1965, the Monetary Board of the Central Bank, after finding Island Savings Bank
was suffering liquidity problems, issued Resolution No. 1049 which prohibited the bank from
making new loans and investments (except investments in government securities) excluding
extensions or renewals of already approved lloans provided that such extensions or renewals
shall be subject to review by the Superintendent of Banks.

On August 1, 1968, Island Savings Bank, in view of non-payment of the P17,000.00 covered by
the promissory note, filed an application for the extra-judicial foreclosure of the real estate
mortgage covering the 100-hectare land of Sulpicio M. Tolentino; and the sheriff scheduled the
auction for January 22, 1969. On January 20, 1969, Sulpicio M. Tolentino filed a petition with the
Court of First Instance of Agusan for injunction, specific performance or rescission and damages
with preliminary injunction, alleging that since Island Savings Bank failed to deliver the
P63,000.00 balance of the P80,000.00 loan, he is entitled to specific performance by ordering
Island Savings Bank to deliver the P63,000.00 with interest of 12% per annum from April 28,
1965, and if said balance cannot be delivered, to rescind the real estate mortgage

Issue/s:
1. WON Sulpicio can maintain an action for specific performance against Island Savings
Bank
2. Is Sulpicion liable to pay the 17,000
3. Failure to pay 17,000, can his real estate mortgage be foreclosed

Held:
1. NO. Since Island Savings Bank was in default in fulfilling its reciprocal obligation under
their loan agreement, Sulpicio M. Tolentino, under Article 1191 of the Civil Code, may
choose between specific performance or rescission with damages in either case. But
since Island Savings Bank is now prohibited from doing further business by Monetary
Board Resolution No. 967, WE cannot grant specific performance in favor of Sulpicio M,
Tolentino.

2. YES. Rescission is the only alternative remedy left. WE rule, however, that rescission is
only for the P63,000.00 balance of the P80,000.00 loan, because the bank is in default
only insofar as such amount is concerned, as there is no doubt that the bank failed to give
the P63,000.00. As far as the partial release of P17,000.00, which Sulpicio M. Tolentino
accepted and executed a promissory note to cover it, the bank was deemed to have
complied with its reciprocal obligation to furnish a P17,000.00 loan. 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.
Article 1192 of the Civil Code provides that in case both parties have committed a breach of their
reciprocal obligations, the liability of the first infractor shall be equitably tempered by the courts.

3. Not Entirely. The real estate mortgage of Sulpicio M. Tolentino cannot be entirely
foreclosed to satisfy his P 17,000.00 debt. When there is partial failure of consideration,
the mortgage becomes unenforceable to the extent of such failure (Dow. et al. vs. Poore,

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Vol. 172 N.E. p. 82, cited in Vol. 59, 1974 ed. CJS, p. 138). Where the indebtedness
actually owing to the holder of the mortgage is less than the sum named in the mortgage,
the mortgage cannot be enforced for more than the actual sum due.

Since Island Savings Bank failed to furnish the P63,000.00 balance of the P8O,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.

5. Republic vs Bagtas
Facts:
Jose Bagtas borrowed from the Bureau of Animal Industry three bulls for a period of one year for
breeding purposes subject to a government charge of breeding fee of 10% of the book value of
the books. Upon the expiration of the contract, Bagtas asked for a renewal for another one year,
however, the Secretary of Agriculture and Natural Resources approved only the renewal for one
bull and other two bulls be returned. Bagtas then wrote a letter to the Director of Animal Industry
that he would pay the value of the three bulls with a deduction of yearly depreciation. The
Director advised him that the value cannot be depreciated and asked Bagtas to either return the
bulls or pay their book value. Bagtas neither paid nor returned the bulls. The Republic then
commenced an action against Bagtas ordering him to return the bulls or pay their book value.

DECISION OF LOWER COURTS:

Trial court: After hearing, the trial Court ruled in favor of the Republic, as such, the Republic
moved ex parte for a writ of execution which the court granted.

INTERVENING FACT: Felicidad Bagtas, the surviving spouse and administrator of Bagtas'
estate, returned the two bulls and filed a motion to quash the writ of execution since one bull
cannot be returned for it was killed by gunshot during a Huk raid. The Court denied her motion
hence, this appeal certified by the Court of Appeals because only questions of law are raised.
Issue/s: Whether or not the contract was commodatum; Whether or not Bagtas should be held
liable for its loss due to force majeure.
Held:
NO, the contract is not commodatum. YES, he is liable for the loss.

A contract of commodatum is essentially gratuitous. Supreme Court held that Bagtas was liable
for the loss of the bull even though it was caused by a fortuitous event. If the contract was one of
lease, then the 10% breeding charge is compensation (rent) for the use of the bull and Bagtas, as
lessee, is subject to the responsibilities of a possessor. He is also in bad faith because he
continued to possess the bull even though the term of the contract has already expired.

If the contract was one of commodatum, he is still liable because: (1) he kept the bull longer than
the period stipulated; and (2) the thing loaned has been delivered with appraisal of its value
(10%). No stipulation that in case of loss of the bull due to fortuitous event the late husband of the
appellant would be exempt from liability.

The original period of the loan was from 8 May 1948 to 7 May 1949. The loan of one bull was

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renewed for another period of one year to end on 8 May 1950. But the appellant kept and used
the bull until November 1953 when during a Huk raid it was killed by stray bullets. Furthermore,
when lent and delivered to the deceased husband of the appellant the bulls had each an
appraised book value, to with: the Sindhi, at P1,176.46, the Bhagnari at P1,320.56 and the
Sahiniwal at P744.46. It was not stipulated that in case of loss of the bull due to fortuitous event
the late husband of the appellant would be exempt from liability.

6. Catholic Vicar Apostolic Inc of the Mt. Province vs. CA, 21 September 1988
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

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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.
7. Quintos and Ansaldo vs. Beck, 69 Phil 108 (1939)
Facts:
Quintos and Beck entered into a contract of lease, whereby the latter occupied the formers
house. On Jan 14, 1936, the contract of lease was novated, wherein Quintos gratuitously granted
to Beck the use of the furniture, subject to the condition that Beck should return the furniture 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
Issue: WON Beck complied with his obligation of returning the furniture to Quintos when it
deposited the furniture to the sheriff.
Held:
The contract entered into between the parties is one of commadatum, because under it the
plaintiff gratuitously granted the use of the furniture to the defendant, reserving for herself the
ownership thereof; by this contract the defendant bound himself to return the furniture to the
plaintiff, upon the latters demand (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 plaintiffs demand, means that he should return all of them to the plaintiff at the
latter's residence.

The defendant did not comply with this obligation when he merely placed them at the disposal of
the plaintiff, retaining for his benefit the three gas heaters and the four electric lamps. As the
defendant had voluntarily undertaken to return all the furniture to the plaintiff, upon the latter's
demand, the Court could not legally compel her to bear the expenses occasioned by the deposit
of the furniture at the defendant's behest. The later, as bailee, was not entitled to place the
furniture on deposit; nor was the plaintiff under a duty to accept the offer to return the furniture,
because the defendant wanted to retain the three gas heaters and the four electric lamps.
8. Consolidated Bank and Trust Corporation vs CA, 19 April 2001
Facts:
On July 13, 1982, respondents Continental Cement Corporation and Gregory T. Lim obtained
from petitioner Consolidated Bank and Trust Corporation Letter of Credit No. DOM-23277 in the
amount of P1,068,150.00 On the same date, respondent Corporation paid a marginal deposit of
P320,445.00 to petitioner. The letter of credit was used to purchase around 500,000 liters of
bunker fuel oil from Petrophil Corporation, which the latter delivered directly to respondent
Corporation in its Bulacan plant. In relation to the same transaction, a trust receipt for the amount
of P1,001,520.93 was executed by respondent Corporation, with respondent Lim as signatory.

Claiming that respondents failed to turn over the goods covered by the trust receipt or the
proceeds thereof, petitioner filed a complaint for sum of money with application for preliminary
attachment before the Regional Trial Court of Manila.

On September 17, 1990, the trial court rendered its Decision, dismissing the Complaint
and ordering petitioner to pay respondents the following amounts under their counterclaim:
P490,228.90 representing overpayment of respondent Corporation, with interest thereon at the

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legal rate from July 26, 1988 until fully paid; P10,000.00 as attorneys fees; and costs.

Both parties appealed to the CA, which partially modified the Decision by deleting the
award of attorneys fees in favor of respondents and, instead, ordering respondent Corporation to
pay petitioner P37,469.22 as and for attorneys fees and litigation expenses.
Issue/s:
(1) Whether or not the appellate court acted incorrectly or committed reversible error in holding
that there was overpayment by private respondents to the petitioner in the amount og
P490,228.90

(2) Whether or not the manner of computation of the marginal deposit by the respondent
appellate court is in accordance with banking practice

(3) Whether or not the agreement among the parties as to the floating of interest rate is valid
under applicable jurisprudence and the rules and regulations of the Central Bank

(4) Whether or not the respondent appellate court grievously erred in not considering the
transaction at bar as a trust receipt transaction on the basis of the judicial admissions of the
private respondents and for which respondents are liable therefor

(5) Whether or not the respondent appellate court grievously erred in not holding private
respondent spouses label under the trust receipt transaction

Held:
(1) We note that the trial courts finding of overpayment is supported by evidence presented
before it. At any rate, we painstakingly reviewed and computed the payments together with
the interest and penalty charges due thereon and found that the amount of overpayment
made by respondent Bank to petitioner was more than what was ordered reimbursed by the
lower court. However, since respondents did not file an appeal in this case, the amount
ordered reimbursed by the lower court should stand.

(2) The interests and other charges on the subject letter of credit should be computed only on the
balance of P681,075.93, which was the portion actually loaned by the bank to respondent
Corporation.

Petitioners contention that the marginal deposit made by respondent Corporation should not
be deducted outright from the amount of the letter of credit is untenable. Petitioner argues that
the marginal deposit should be considered only after computing the principal plus accrued
interests and other charges. However, to sustain petitioner on this score would be to
countenance a clear case of unjust enrichment, for while a marginal deposit earns no interest
in favor of the debtor-depositor, the bank is not only able to use the same for its own
purposes, interest-free, but is also able to earn interest on the money loaned to respondent
Corporation. Indeed, it would be onerous to compute interest and other charges on the face
value of the letter of credit which the petitioner issued, without first crediting or setting off the
marginal deposit which the respondent Corporation paid to it. Compensation is proper and
should take effect by operation of law because the requisites in Article 1279 of the Civil Code
are present and should extinguish both debts to the concurrent amount.

(3) Neither do we find error when the lower court and the Court of Appeals set aside as invalid

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the floating rate of interest exhorted by petitioner to be applicable.

We agree with respondent CA that the foregoing stipulation is invalid, there being no
reference rate set either by it or by the Central Bank, leaving the determination thereof at the
sole will and control of petitioner.

While it may be acceptable, for practical reasons given the fluctuating economic conditions,
for banks to stipulate that interest rates on a loan not be fixed and instead be made
dependent upon prevailing market conditions, there should always be a reference rate upon
which to peg such variable interest rates. A stipulation ostensibly signifying an agreement to
any increase or decrease in the interest rate, without more, cannot be accepted by this Court
as valid for it leaves solely to the creditor the determination of what interest rate to charge
against an outstanding loan.

(4) Petitioner has also failed to convince us that its transaction with respondent Corporation is
really a trust receipt transaction instead of merely a simple loan, as found by the lower court
and the Court of Appeals.

In the case at bar, the delivery to respondent Corporation of the goods subject of the trust
receipt occurred long before the trust receipt itself was executed. More specifically, delivery of
the bunker fuel oil to respondent Corporations Bulacan plant commenced on July 7, 1982 and
was completed by July 19, 1982. Further, the oil was used up by respondent Corporation in its
normal operations by August, 1982. On the other hand, the subject trust receipt was only
executed nearly two months after full delivery of the oil was made to respondent Corporation,
or on September 2, 1982.

Similarly, respondent Corporation cannot be said to have been dishonest in its dealings with
petitioner. Neither has it been shown that it has evaded payment of its obligations. Indeed, it
continually endeavored to meet the same, as shown by the various receipts issued by
petitioner acknowledging payment on the loan. Certainly, the payment of the sum of
P1,832,158.38 on a loan with a principal amount of only P681,075.93 negates any badge of
dishonesty, abuse of confidence or mishandling of funds on the part of respondent
Corporation, which are the gravamen of a trust receipt violation. Furthermore, respondent
Corporation is not an importer which acquired the bunker fuel oil for re-sale; it needed the oil
for its own operations. More importantly, at no time did title over the oil pass to petitioner, but
directly to respondent Corporation to which the oil was directly delivered long before the trust
receipt was executed. The fact that ownership of the oil belonged to respondent Corporation,
through its President, Gregory Lim, was acknowledged by petitioners own account officer on
the witness stand. respondent Corporation was required to sign the trust receipt simply to
facilitate collection by petitioner of the loan it had extended to the former.

(5) We are not convinced that respondent Gregory T. Lim and his spouse should be personally
liable under the subject trust receipt. Petitioners argument that respondent Corporation and
respondent Lim and his spouse are one and the same cannot be sustained. The transactions
sued upon were clearly entered into by respondent Lim in his capacity as Executive Vice
President of respondent Corporation. We stress the hornbook law that corporate personality
is a shield against personal liability of its officers. Thus, we agree that respondents Gregory T.
Lim and his spouse cannot be made personally liable since respondent Lim entered into and
signed the contract clearly in his official capacity as Executive Vice President. The personality

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of the corporation is separate and distinct from the persons composing it.

9. Republic vs Grijaldo GR L-20240 (1965)

Facts:
Jose Grijaldo obtained five loans from the branch of the Bank of Taiwan. The loans were
evidenced by five promissory notes executed by the appellant in favor of the Bank of Taiwan. To
secure the payment of the loans, Grijaldo executed a chattel mortgage on the standing crops on
his land. The assets in the Philippines of the Bank of Taiwan, Ltd. were vested in the Government
of the United States. Pursuant to the Philippine Property Act of 1946 of the United States, these
assets including the loans in question, were subsequently transferred to the Republic of the
Philippines by the Government of the United States under Transfer Agreement of 20 July 1954.
Republic of the Philippines, represented by the Chairman of the Board of Liquidators, made a
written extrajudicial demand upon the appellant for the payment of account in question. Republic
filed a complaint in the Justice of the Peace of Court of Hinigaran, Negros Occidental, to collect
from the appellant the unpaid account in question. The court a quo rendered a decision ordering
the Grijaldo to pay the Republic of the Philippines the sum of P2,377.23 as of 31 December 1959
plus interest at the rate of 6% per annum compounded quarterly. Grijaldo contends that Republic
of the Philippines has no cause of action against him since the contract of loan was institutes with
the Bank of Taiwan.

Issue: Whether or not the Republic of the Philippines has no cause of action against Grijaldo.
Held: Yes. While the bank of Taiwan, Ltd. was the original creditor and the transaction between
Grijaldo and the Bank of Taiwan was a private contract of loan. The successive transfer of the
rights over the loans in question from the Bank of Taiwan, Ltd. to the United States Government,
and from the United States Government to the government of the Republic of the Philippines,
made the Republic of the Philippines the successor of the rights, title and interest in said loans,
thereby creating a privity of contract between the Republic of the Philippines and Grijaldo. The
word privy denotes the idea of succession. Hence, an assignee of a credit and the one
subrogated to it will be privies. The United States of America acting as a belligerent sovereign
power seized the assets of the Bank of Taiwan, Ltd., which belonged to an enemy country. The
republic of the Philippines had become a privy to the original contract of loan between Bank of
Taiwan Ltd. and Grijaldo.

10. Casa Filipino Development Corporation vs. Deputy Executive Secretary, 209 SCRA 379
Doctrine: It is, thus, evident that if a particular rate of interest has been expressly stipulated by
the parties, that interest, not the legal rate of interest, shall be applied.
Facts:
On June 30, 1986, private respondent Jose Valenzuela, Jr. filed a complaint against petitioner
Casa Filipina Development Corporation before the Office of Appeals, Adjudication and Legal
Affairs (OAALA) of the then Human Settlements Regulatory Commission (now Housing and
Land Use Regulatory Board) for its failure to execute and deliver the deed of sale and transfer
certificate of title.

On January 21, 1987, the OAALA rendered judgment in favor of private respondent, relying on
Section 25 of Presidential Decree No. 957 (Regulating the Sale of Subdivision Lots and
Condominiums, Providing Penalties for Violations thereof), which provides:

Sec. 25. Issuance of Title The owner or developer shall deliver the title of the lot or
unit to the buyer upon full payment of the lot or unit. No fee except those required for

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the registration of the deed of sale in the Registry of deeds shall be collected for the
issuance of such title. In the event a mortgage over the lot or unit is outstanding at the
time of the issuance of the title to the buyer, the owner of or developer shall redeem
the mortgage or the corresponding portion thereof within six months from such
issuance in order that the title over any fully paid lot or unit may be secured and
delivered to the buyer in accordance herewith.

The dispositive portion of its decision reads (p. 19, Rollo): (THIS IS THE CAUSE OF
THE ISSUE)

WHEREFORE, PREMISES CONSIDERED, judgment is rendered ordering

respondent, within 15 days from finality of this decision, to execute the deed of
absolute sale for Lot 8, Block 9, Phase II, Casa Filipina, Sucat II, Bo. San Dionisio,
Paraaque, Metro Manila in favor of the complainant and thereafter to bill
complainant the total amount due for the registration and transfer expenses of the
title. Respondent is further ordered, within 15 days from receipt of complainant's
payment for registration and transfer expenses, to deliver to the latter the transfer
certificate of title of subject lot free from all liens and encumbrances. In the event
respondent is unable to deliver the title to the said lot, respondent is hereby ordered
to refund (to) complainant his total payments amounting to SEVENTY SIX
THOUSAND ONE HUNDRED EIGHTY PESOS and 82/100 (P76,180.82) plus 24%
interest per annum from June 30, 1986, the date of the filing of the complaint, until
fully paid. Respondent is likewise ordered to pay complainant TWO THOUSAND
PESOS (P2,000.00) by way of attorney's fees, for compelling the latter to litigate and
incur expenses in the protection of his rights.

Petitioner then filed an appeal before the Housing and Land Use Regulatory Board. In
petitioner's memorandum, it narrated the events that transpired which led to its failure to deliver
the title, namely: its original mortgagee bank was Royal Savings Bank which was absorbed by
Comsavings Bank apparently due to bankrunptcy; Comsavings Bank is not amenable to
petitioner's earlier arrangement with Royal Savings Bank on individual redemption of title, thus,
it demanded that petitioner's obligations should be paid prior to the release of any individual
title. petitioner cannot seasonably meet such demand due to the inability of the past
administration to put up a viable and progressive economic program that brought it into a fix
situation wherein it has no participation either intentionally or by negligence.

On October 6, 1987, the HLURB dismissed petitioner's appeal for lack of merit and affirmed in
toto the questioned decision of the OAALA

Petitioner asseverates that in granting both remedies of specific performance and rescission,
public respondent ignored a well-pronounced rule that these remedies cannot be availed of at
the same time. Furthermore the amount of 24% interest imposed by the OAALA in case of
refund is high and without basis. Finally, inasmuch as issuance of the title has not yet been
effected because of the take over by Comsavings Bank of Royal Savings Bank, the period
specified under Section 25 of P.D. No. 957 has not begun to run for the purpose of redemption.

Issue/s:
1. WON both remedies of specific performance and rescission were availed of at the same time
2. WON the amount of 24% interest imposed by the OAALA in case of refund is high and

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without basis
3. WON the period specified under Section 25 of P.D. No. 957 has not begun to run for the
purpose of redemption
Held:
1. No. It is plain enough in the OAALA decision that rescission is being ordered only in the event
specific performance is not feasible. Moreover, petitioner is already estopped from raising this
issue because in its appeal memorandum submitted before the HLURB, it leaded that (p. 28,
Rollo):

5.Appellant prays that it be given a period/time to redeem the title or the demand for
issuance of title be suspended from the Comsavings Bank before any deed of absolute sale be
executed so that the Transfer Certificate of Title be issued and/or refund be ordered.

2. The 24% interest was valid. The ruling in Reformina v. Tomol, it must be underscored, deals
exclusively with cases where damages in the form of interest is due but no specific rate has been
previously set by the parties. In such cases, the legal interest of 12% per annum must be applied.
In the present case, however, the interest rate of 24% per annum was mutually agreed upon by
petitioner and private respondent in their contract to sell this was the interest rate imposed on
private respondent for the payment of the installments on the contract price and there is no
reason why this same interest rate should not be equally applied to petitioner which is guilty of
violating the reciprocal obligation.

3. The argument of petitioner that the issuance of the title is a prerequisite to the running of the
six month period of redemption, fails to convince Us. Otherwise, the owner or developer can
readily concoct a thousand and one reasons as justifications for its failure to issue the title and in
the process, prolong the period within which to deliver the title to the buyer free from any liens or
encumbrances. Additionally, by not issuing/delivering the title of the lot to private respondent
upon full payment thereof, petitioner has already violated the explicit mandate of the first
sentence of Section 25 of P.D. No. 957. If We were to count the six month period of redemption
from the belated issuance of the title, petitioner will have a lot to gain from its own non-
observance of said provision.

(Section 25 of P.D. No. 957 imposes an obligation on the part of the owner or developer, in the
event the mortgage over the lot or unit is outstanding at the time of the issuance of the title to the
buyer, to redeem the mortgage or the corresponding portion thereof within six months from such
issuance.)

11. PNB vs CA, 30 April 1991

Facts:
Private respondent, Ambrosio Padilla, applied for and was granted a credit line of 321.8million, by
petitioner PNB. This was for a term of 2 years at 18% interest per annum and was secured by
real estate mortgage and 2 promissory notes executed in favor of petitioner by PR. The credit
agreement and the promissory notes, in effect, provide that private respondent agrees to be
bound by increases to the interest rate stipulated, provided it is within the limits provided for by
law.

Conflict in this case arose when Petitioner unilaterally increased the interest rate from 18% to:
(1) 32% [July 1984];
(2) 41% [October 1984]; and

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(3) 48% [November 1984], or 3 times within the span of a single year.
This was done despite the numerous letters of request made by PR that the interest rate be
increased only to 21% or 24%.

Respondent filed a complaint against Petitioner with the RTC. The latter dismissed the case for
lack of merit. Appeal by respondent to CA resulted in his favor.
Hence the petition for certiorari under Rule 45 of ROC filed byPNB with SC.

Issue: Whether or not the bank may validly increase the stipulated interest rate on loans as often
as it deemed necessary, despite the removal of Usury Law ceiling on interests.
Held:
NO

Although under Sec. 2 of PD 116, the Monetary Board is authorized to prescribe the maximum
rate of interest for loans and to change such rates whenever warranted by prevailing
economic and socialconditions, by express provision, it may not do so oftener than once
every 12 months. If the Monetary Board cannot, much less can PNB, effect increases on the
interest rates more than once a year.
In this case, basing on the credit agreement and promissory notes executed between the parties,
although respondent agreed to increase on the interest rates allowed by law, there was no law
that was passed warranting petitioner to effect increase on the interest rates on the existing loan
of respondent for the months of July to November of 1984. Neither there being any document
executed and delivered by respondent to effect such increase.

For escalation clauses to be valid and warrant the increase of the interest rates on loans, there
must be:
(1) increase was made by law or by the Monetary Board;
(2) stipulation must include a clause for the reduction of the stipulated interest rate in the event
that the maximum interest is lowered by law or by the Monetary board.

In this case, PNB merely relied on its own Board Resolutions, which are not laws nor resolutions
of the Monetary Board. Despite the suspension of the Usury Law, imposing a ceiling on interest
rates, this does not authorize banks to unilaterally and successively increase interest rates in
violation of Sec. 2 PD 116.
Increases unilaterally effected by PNB was in violation of the Mutuality of Contracts under Art.
1308. This provides that the validity and compliance of the parties to the contract cannot be left to
the will of one of the contracting parties. Increases made are therefore void.

Increase on the stipulated interest rates made by PNB also contravenes Art. 1956. It provides
that, no interest shall be due unless it has been expressly stipulated in writing. Respondent
never agreed in writing to pay interest imposed by PNB in excess of 24% per annum. Interest
rate imposed by PNB, as correctly found by CA, is indubitably excessive.

12. Relucio vs. Garfin, GR 76518 (1990)

Doctrine: Vendor and vendee are legally free to stipulate for the payment of either the cash
price of a subdivision lot or its installment price. Should the vendee opt to purchase a subdivision
lot via the installment payment system, he is in effect paying interest on the cash price, whether
the fact and rate of such interest payment is disclosed in the contract or not.
Facts:

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IRENE P. RELUCIO, petitioner, vs. ZEIDA B. BRILLANTE-GARFIN and COURT OF APPEALS,
respondents.
On 22 October 1979, private respondent filed a complaint in the lower court for specific
performance with damages against petitioner, to compel the latter to: (a) execute, in compliance
with the Contract to Buy and Sell in question, a final deed of sale in favor of the former over two
(2) residential subdivision lots in the Mariano Village Subdivision, Naga City; and (b) construct
paved roads on the northern and southern sides of the lots, as "necessary facilities,
improvements, infrastructures and other forms of development of the subdivision area."
Private respondent alleges P10,800.00, have already been paid for, as she had already paid
P200.00 as down payment, and had subsequently completed payment of 128 equal monthly
installments of P89.45 each amounting to P11,450.00that as the law allows the charging of
interest only as monetary interest or as compensatory interest, none of which have obtained in
her case, as she had never incurred in delay in the payment of installments due, the stipulated
interest of six percent (6%) per annum on the outstanding balance is null and void; and c. that the
amount of 650.00 representing overpayment be returned to her.
Petitioner maintained that private respondent, is obliged to pay interest on the installment
payments of the unpaid outstanding balance even if paid on their "due dates" per schedule of
payments; that private respondent had actually been in arrears in the amount of P4,269.40,
representing such interest as of June 1979, which therefore entitled petitioner to cancel the
contract in question. Petitioner then prayed for judicial affirmance of her Notarial Notice of
Cancellation over the said contract in question.

DECISION OF LOWER COURTS: * ordered petitioner: To execute a deed of absolute sale. *

court of appeal: affirmed lower court.

Issue/s:
(1) WON private respondent has fully paid the stipulated price in the contract so as to be
entitled lawfully to demand the execution of a deed of absolute sale in her favor.
(2) WON respondent is correct in saying that as the law allows the charging of interest only
as monetary interest or as compensatory interest, none of which have obtained in her
case, as she had never incurred in delay in the payment of installments due, the
stipulated interest of six percent (6%) per annum on the outstanding balance is null and
void
(3) WON private respondent can rescind the contract of sale

Held:
(1) NO, it has not yet been fully paid. The respondent should pay a total of 16,101 and not
10,600 or 10,800 only.
(2) NO, Examination of the record shows that the questioned Contract to Buy and Sell the
subdivision lots provided for payment by private respondent of the sum of P200.00 as
downpayment, and that "the balance [of P10,600.00] shall be paid in 180 monthly
installments at P89.45 per month, including interest rate at six percent (6%) per annum,
until the purchase price is fully paid." This stipulation clearly specified that an interest
charge of six percent (6%) per annum was included in the monthly installment price:
private respondent could not have helped noticing that P89.45 multiplied by 180 monthly
installments equals P16,101.00, and not P10,600.00. The contract price of P10,800.00

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may thus be seen to be the cash price of the subdivision lots. An installment sale has
implied interest. The installment price is almost always higher than the cash price and this
is a valid stipulation for the parties. For the vendor, upon receiving the full cash price,
could have deposited that amount in a bank, for instance, and earned interest income
which at six percent (6%) per year and for fifteen (15) years, would precisely total
P5,501.00 (the difference between the installment price of P16,101.00 and the cash
price of P10,600.00) To suppose, as private respondent argues, that mere prompt
payment of the monthly installments as they fell due would obviate application of the
interest charge of six percent (6%) per annum, is to ignore that simple economic fact. That
economic fact is, of course, recognized by law, which authorizes the payment of interest
when contractually stipulated for by the parties 4 or when implied in recognized
commercial custom or usage.
(3) NO. Despite private respondent's failure to fully pay the stipulated price of the two lots in
question, petitioner, however, could not validly rescind the contract not being lawfully
entitled to do so. Petitioner failed to rebut private respondents' allegations that the former
had failed to introduce required improvements in the subdivision; the former's bare
allegation that the improvements have already been donated to the city government was
not accepted by the trial court. Section 23 of Presidential Decree No. 957, otherwise
known as The Subdivision and Condominium Buyers' Protective Decree, vests upon the
buyer the option to demand reimbursement of the total amount paid, or to wait for further
development of the subdivision, private respondent who opted for the latter alternative by
waiting for the proper development of the site, may not be ousted from the subdivision.

13. Eastern Shipping Lines Inc. vs. CA, 12 July 1994

Doctrines:
An award of interest in the concept of actual and compensatory damages, the rate of interest, as
well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan
or forbearance of money, the interest due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest
on the amount of damages awarded may be imposed at the discretion of the court at the rate of
6% per annum. No interest, however, shall be adjudged on un-liquidated claims or damages
except when or until the demand can be established with reasonable certainty. Accordingly,
where the demand is established with reasonable certainty, the interest shall begin to run from
the time the claim is made judicially or extra-judicially but when such certainty cannot be so
reasonably established at the time the demand is made, the interest shall begin to run only from
the date the judgment of the court is made, at which time the quantification of damages may be
deemed to have been reasonably ascertained. The actual base for the computation of legal
interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the
rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be

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12% per annum from such finality until its satisfaction, this interim period being deemed to be by
then an equivalent to a forbearance of credit.
Xxxxxx

6% interest under the Civil Code governs when the transaction involves the payment of
indemnities in the concept of damage arising from the breach or a delay in the performance of
obligations in general and 12% interest per annum of the Central Bank Act applies only to loans
or forbearance 16 of money, goods or credits, as well as to judgments involving such loan or
forbearance of money, goods or credits.

Facts:
On December 4, 1981, two fiber drums of riboflavin were shipped from Yokohama, Japan for
delivery vessel "SS EASTERN COMET" owned by defendant Eastern Shipping Lines under Bill
of Lading. The shipment was insured under plaintiff's Marine Insurance Policy.

Upon arrival of the shipment in Manila on December 12, 1981, it was discharged unto the custody
of defendant Metro Port Service, Inc. The latter excepted to one drum, said to be in bad order,
which damage was unknown to plaintiff.

On January 7, 1982 defendant Allied Brokerage Corporation received the shipment from
defendant Metro Port Service, Inc., one drum opened and without seal.

On January 8 and 14, 1982, defendant Allied Brokerage Corporation made deliveries of the
shipment to the consignee's warehouse. The latter excepted to one drum which contained
spillages, while the rest of the contents was adulterated/fake

The consignee suffered losses totaling P19,032.95, due to the fault and negligence of
defendants. As a consequence of the losses sustained, plaintiff was compelled to pay the
consignee P19,032.95 under the aforestated marine insurance policy, so that it became
subrogated to all the rights of action of said consignee against defendants
There is no doubt ,as in this petition brought solely by Eastern Shipping Lines, which, being the
carrier and not having been able to rebut the presumption of fault, is, in any event, to be held
liable in this particular case. A factual finding of both the court a quo and the appellate court, we
take note, is that "there is sufficient evidence that the shipment sustained damage while in the
successive possession of appellants" (the herein petitioner among them)

Nonetheless, Eastern Shipping Lines, Inc., the common carrier, attributes error and grave abuse
of discretion on the part of the appellate court when it held that the grant of interest of claim of
private respondent should have commence from the date of filing of the complainant at the rate of
12% per annum instead of from the date of the decision of the trail court and only at the rate of
6% per annum. Private respondents claim being indisputably un-liquidated.

Issue/s:
1. Whether the payment of legal interest on an award for loss or damage is to be computed from
the time the complaint is filed or from the date the decision appealed from is rendered
2. Whether the applicable rate of interest, referred to above, is twelve percent 12% or six percent
6%

Held:

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The legal interest to be paid is 6% on the amount due computed from the decision. A 12%
interest, in lieu of 6% shall be imposed on such amount upon finality of the decision until
payment thereof.
According to the jurisprudence, an award of interest in the concept of actual and compensatory
damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan
or forbearance of money, the interest due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be
computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest
on the amount of damages awarded may be imposed at the discretion of the court at the rate of
6% per annum. No interest, however, shall be adjudged on un-liquidated claims or damages
except when or until the demand can be established with reasonable certainty. Accordingly,
where the demand is established with reasonable certainty, the interest shall begin to run from
the time the claim is made judicially or extra-judicially but when such certainty cannot be so
reasonably established at the time the demand is made, the interest shall begin to run only from
the date the judgment of the court is made, at which time the quantification of damages may be
deemed to have been reasonably ascertained. The actual base for the computation of legal
interest shall, in any case, be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the
rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be
12% per annum from such finality until its satisfaction, this interim period being deemed to be by
then an equivalent to a forbearance of credit.

In case at bar, the breach of obligation does not constitute a loan or forbearance of money but
transaction which involves the payment of indemnities in the concept of damage arising from the
breach or a delay in the performance of obligations in general. Hence, the 6% interest under the
Civil Code governs not the 12% per annum of the Central Bank Act which applies only to loans or
forbearance.

Furthermore, the interest shall begin to run only from the date of judgment of the court is made
because it was not reasonably established that judicially or extra-judicially was made.

14. Phil. American Accident Inc. Co. vs. Flores, 97 SCRA 1980
Facts:
Respondent Judge Flores rendered a judgment in favor of the Private Respondent Navalta
asking Petitioner Phil-Am Accident Insurance 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 October
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 October 1968, although the debt was judicially demanded only on
July 6 1970) and attorneys fees and the cost of the suit. Later on, Respondent advised the

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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.
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.

Private Respondent invokes Sec. 5 of the Usury Law which reads in part as follows: In
computing the interest 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. Decision set aside.

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