Saura Import & Export Co., Inc.

-vs- DBP
GR No. L-24968, 27 April 972
44 SCRA 445

FACTS
Saura applied to the Rehabilitation Finance Corporation (RFC), before its conversion
into DBP, for an industrial loan to be used for construction of factory building, for
payment of the balance of the purchase price of the jute machinery and equipment
and as additional working capital. In Resolution No.145, the loan application was
approved to be secured first by mortgage on the factory buildings, the land site, and
machinery and equipment to be installed.

The mortgage was registered and documents for the promissory note were executed.
The cancellation of the mortgage was requested to make way for the registration of a
mortgage contract over the same property in favor of Prudential Bank and Trust Co.,
the latter having issued Saura letter of credit for the release of the jute machinery.
As security, Saura execute a trust receipt in favor of the Prudential. For failure of
Saura to pay said obligation, Prudential sued Saura.

After 9 years after the mortgage was cancelled, Saura sued RFC alleging failure to
comply with tits obligations to release the loan proceeds, thereby prevented it from
paying the obligation to Prudential Bank.

The trial court ruled in favor of Saura, ruling that there was a perfected contract
between the parties ad that the RFC was guilty of breach thereof.

ISSUE
Whether or not there was a perfected contract between the parties.

HELD
Article 1934 provides: An accepted promise to deliver something by way of commodatum or
simple loan is binding upon the parties, but the commodatum or simple loan itself shall not be
perfected until delivery of the object of the contract.
There was undoubtedly offer and acceptance in the 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. The defendant failed to fulfill its obligation and the plaintiff
is therefore entitled to recover damages.
When an application for a loan of money was approved by resolution of the respondent
corporation and the responding mortgage was executed and registered, there arises a perfected
consensual contract.
However, it should be noted that RFC imposed two conditions (availability of raw materials and
increased production) when it restored the loan to the original amount of P500,000.00.
 Saura, Inc. obviously was in no position to comply with RFCs conditions. So instead of doing so
and insisting that the loan be released as agreed upon, Saura, Inc. asked that the mortgage be
cancelled.The action thus taken by both parties was in the nature of mutual desistance
which is a mode of extinguishing obligations. It is a concept that derives from the principle
that since mutual agreement can create a contract, mutual disagreement by the parties
can cause its extinguishment.

BPI Investment Corporation -vs- CA

GR No. 133632, 15 February 2002
377 SCRA 117

FACTS
Frank Roa obtained a loan from Ayala Investment and Development Corporation (AIDC), for the
construction of his house. Said house and lot were mortgaged to AIDC to secure the loan. Roa
sold the properties to ALS and Litonjua, the latter paid in cash and assumed the balance of Roas
indebtedness wit AIDC. AIDC was not willing to extend the old interest to private respondents and
proposed a grant of new loan of P500,000 with higher interest to be applied to Roas debt,
secured by the same property. Private respondents executed a mortgage deed containing the
stipulation. The loan contract was signed on 31 March 1981 and was perfected on 13 September
1982, when the full loan was released to private respondents.

BPIIC, AIDCs predecessor, released to private respondents P7,146.87, purporting to be what

was left of their loan after full payment of Roas loan. BPIIC filed for foreclosure proceedings on
the ground that private respondents failed to pay the mortgage indebtedness. Private
respondents maintained that they should not be made to pay amortization before the actual
release of the P500,000 loan. The suit was dismissed and affirmed by the CA.

ISSUE
Whether or not a contract of loan is a consensual contract.

HELD
The Court held in the negative. A loan contract is not a consensual contract but a real contract. It
is perfected only upon delivery of the object of the contract. A contract o loan involves a reciprocal
obligation, wherein the obligation or promise of each party is the consideration for that of the
other; it is a basic principle in reciprocal obligations that neither party incurs in delay, if the other
does not comply or is not ready to comply is a proper manner with what is incumbent upon him

BonnevievsCA
Facts:

December 6, 1966: Spouses Jose M. Lozano and Josefa P. Lozano secured their
loan of P75K from Philippine Bank of Commerce (PBC) by mortgaging their property
 December 8, 1966: Executed Deed of Sale with Mortgage to Honesto
Bonnevie where P75K is payable to PBC and P25K is payable to Spouses Lanzano.
April 28, 1967 to July 12, 1968: Honesto Bonnevie paid a total of P18,944.22 to
PBC
May 4, 1968: Honesto Bonnevie assigned all his rights under the Deed of Sale with
Assumption of Mortgage to his brother, intervenor Raoul Bonnevie
June 10, 1968: PBC applied for the foreclosure of the mortgage, and notice of sale
was published
January 26, 1971: Honesto Bonnevie filed in the CFI of Rizal against Philippine Bank
of Commerce for the annulment of the Deed of Mortgage dated December 6, 1966 as
well as the extrajudicial foreclosure made on September 4, 1968.
CFI: Dismissed the complaint with costs against the Bonnevies
CA: Affirmed
ISSUE: W/N the forclosure on the mortgage is validly executed.

HELD: YES. CA affirmed

A contract of loan being a consensual contract is 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.
Respondent Bank had every right to rely on the certificate of title. It was not bound to
go behind the same to look for flaws in the mortgagor's title, the doctrine of innocent
purchaser for value being applicable to an innocent mortgagee for value.
Thru certificate of sale in favor of appellee was registered on September 2, 1968 and
the one year redemption period expired on September 3, 1969. It was not until
September 29, 1969 that Honesto Bonnevie first wrote respondent and offered to
redeem the property.
loan matured on December 26, 1967 so when respondent Bank applied for
foreclosure, the loan was already six months overdue. Payment of interest on July 12,
1968 does not make the earlier act of PBC inequitous nor does it ipso facto result in the
renewal of the loan. In order that a renewal of a loan may be effected, not only the
payment of the accrued interest is necessary but also the payment of interest for the
proposed period of renewal as well. Besides, whether or not a loan may be renewed
does not solely depend on the debtor but more so on the discretion of the bank.

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
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 loans 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:
WON Sulpicio can maintain an action for specific performance against Island Savings Bank
Is Sulpicion liable to pay the 17,000

Held:
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.
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.

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.
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
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.

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 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 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.
Consolidated Bank and Trust Corporation vs CA, 19 April
2001
Facts:OnJuly13,1982,respondentsContinentalCementCorporationandGregoryT.
LimobtainedfrompetitionerConsolidatedBankandTrustCorporationLetterofCredit
No.DOM23277intheamountofP1,068,150.00Onthesamedate,respondent
CorporationpaidamarginaldepositofP320,445.00topetitioner.Theletterofcreditwas
usedtopurchasearound500,000litersofbunkerfueloilfromPetrophilCorporation,
whichthelatterdelivereddirectlytorespondentCorporationinitsBulacanplant.In
relationtothesametransaction,atrustreceiptfortheamountofP1,001,520.93was
executedbyrespondentCorporation,withrespondentLimassignatory.Claimingthat
respondentsfailedtoturnoverthegoodscoveredbythetrustreceiptortheproceeds
thereof,petitionerfiledacomplaintforsumofmoneywithapplicationforpreliminary
attachmentbeforetheRegionalTrialCourtofManila.OnSeptember17,1990,thetrial
courtrendereditsDecision,dismissingtheComplaintandorderingpetitionertopay
respondentsthefollowingamountsundertheircounterclaim:P490,228.90representing
overpaymentofrespondentCorporation,withinterestthereonatthelegalratefromJuly
26,1988untilfullypaid;P10,000.00asattorneysfees;andcosts.

BothpartiesappealedtotheCA,whichpartiallymodifiedtheDecisionby
deletingtheawardofattorneysfeesinfavorofrespondentsand,instead,ordering
respondentCorporationtopaypetitionerP37,469.22asandforattorneysfeesand
litigationexpenses.

Issue/s:

(1)Whetherornottheappellatecourtactedincorrectlyorcommittedreversibleerrorin
holdingthattherewasoverpaymentbyprivaterespondentstothepetitionerintheamount
ogP490,228.90

(2)Whetherornotthemannerofcomputationofthemarginaldepositbytherespondent
appellatecourtisinaccordancewithbankingpractice

(3)Whetherornottheagreementamongthepartiesastothefloatingofinterestrateis
validunderapplicablejurisprudenceandtherulesandregulationsoftheCentralBank

(4)Whetherornottherespondentappellatecourtgrievouslyerredinnotconsideringthe
transactionatbarasatrustreceipttransactiononthebasisofthejudicialadmissionsof
theprivaterespondentsandforwhichrespondentsareliabletherefor

(5)Whetherornottherespondentappellatecourtgrievouslyerredinnotholdingprivate
respondentspouseslabelunderthetrustreceipttransaction
Held:(1)Wenotethatthetrialcourtsfindingofoverpaymentissupportedbyevidence
presentedbeforeit.Atanyrate,wepainstakinglyreviewedandcomputedthepayments
togetherwiththeinterestandpenaltychargesduethereonandfoundthattheamountof
overpaymentmadebyrespondentBanktopetitionerwasmorethanwhatwasordered
reimbursedbythelowercourt.However,sincerespondentsdidnotfileanappealinthis
case,theamountorderedreimbursedbythelowercourtshouldstand.

(2)Theinterestsandotherchargesonthesubjectletterofcreditshouldbecomputedonly
onthebalanceofP681,075.93,whichwastheportionactuallyloanedbythebankto
respondentCorporation.

PetitionerscontentionthatthemarginaldepositmadebyrespondentCorporationshould
notbedeductedoutrightfromtheamountoftheletterofcreditisuntenable.Petitioner
arguesthatthemarginaldepositshouldbeconsideredonlyaftercomputingtheprincipal
plusaccruedinterestsandothercharges.However,tosustainpetitioneronthisscore
wouldbetocountenanceaclearcaseofunjustenrichment,forwhileamarginaldeposit
earnsnointerestinfavorofthedebtordepositor,thebankisnotonlyabletousethe
sameforitsownpurposes,interestfree,butisalsoabletoearninterestonthemoney
loanedtorespondentCorporation.Indeed,itwouldbeoneroustocomputeinterestand
otherchargesonthefacevalueoftheletterofcreditwhichthepetitionerissued,without
firstcreditingorsettingoffthemarginaldepositwhichtherespondentCorporationpaid
toit.Compensationisproperandshouldtakeeffectbyoperationoflawbecausethe
requisitesinArticle1279oftheCivilCodearepresentandshouldextinguishbothdebts
totheconcurrentamount.

(3)NeitherdowefinderrorwhenthelowercourtandtheCourtofAppealssetasideas
invalidthefloatingrateofinterestexhortedbypetitionertobeapplicable.

WeagreewithrespondentCAthattheforegoingstipulationisinvalid,therebeingno
referencerateseteitherbyitorbytheCentralBank,leavingthedeterminationthereofat
thesolewillandcontrolofpetitioner.

Whileitmaybeacceptable,forpracticalreasonsgiventhefluctuatingeconomic
conditions,forbankstostipulatethatinterestratesonaloannotbefixedandinsteadbe
madedependentuponprevailingmarketconditions,thereshouldalwaysbeareference
rateuponwhichtopegsuchvariableinterestrates.Astipulationostensiblysignifyingan
agreementtoanyincreaseordecreaseintheinterestrate,withoutmore,cannotbe
acceptedbythisCourtasvalidforitleavessolelytothecreditorthedeterminationof
whatinterestratetochargeagainstanoutstandingloan.

(4)Petitionerhasalsofailedtoconvinceusthatitstransactionwithrespondent
Corporationisreallyatrustreceipttransactioninsteadofmerelyasimpleloan,asfound
bythelowercourtandtheCourtofAppeals.
Inthecaseatbar,thedeliverytorespondentCorporationofthegoodssubjectofthetrust
receiptoccurredlongbeforethetrustreceiptitselfwasexecuted.Morespecifically,
deliveryofthebunkerfueloiltorespondentCorporationsBulacanplantcommencedon
July7,1982andwascompletedbyJuly19,1982.Further,theoilwasusedupby
respondentCorporationinitsnormaloperationsbyAugust,1982.Ontheotherhand,the
subjecttrustreceiptwasonlyexecutednearlytwomonthsafterfulldeliveryoftheoil
wasmadetorespondentCorporation,oronSeptember2,1982.

Similarly,respondentCorporationcannotbesaidtohavebeendishonestinitsdealings
withpetitioner.Neitherhasitbeenshownthatithasevadedpaymentofitsobligations.
Indeed,itcontinuallyendeavoredtomeetthesame,asshownbythevariousreceipts
issuedbypetitioneracknowledgingpaymentontheloan.Certainly,thepaymentofthe
sumofP1,832,158.38onaloanwithaprincipalamountofonlyP681,075.93negatesany
badgeofdishonesty,abuseofconfidenceormishandlingoffundsonthepartof
respondentCorporation,whicharethegravamenofatrustreceiptviolation.Furthermore,
respondentCorporationisnotanimporterwhichacquiredthebunkerfueloilforresale;
itneededtheoilforitsownoperations.Moreimportantly,atnotimedidtitleovertheoil
passtopetitioner,butdirectlytorespondentCorporationtowhichtheoilwasdirectly
deliveredlongbeforethetrustreceiptwasexecuted.Thefactthatownershipoftheoil
belongedtorespondentCorporation,throughitsPresident,GregoryLim,was
acknowledgedbypetitionersownaccountofficeronthewitnessstand.respondent
Corporationwasrequiredtosignthetrustreceiptsimplytofacilitatecollectionby
petitioneroftheloanithadextendedtotheformer.

(5)WearenotconvincedthatrespondentGregoryT.Limandhisspouseshouldbe
personallyliableunderthesubjecttrustreceipt.Petitionersargumentthatrespondent
CorporationandrespondentLimandhisspouseareoneandthesamecannotbe
sustained.ThetransactionssueduponwereclearlyenteredintobyrespondentLiminhis
capacityasExecutiveVicePresidentofrespondentCorporation.Westressthehornbook
lawthatcorporatepersonalityisashieldagainstpersonalliabilityofitsofficers.Thus,we
agreethatrespondentsGregoryT.Limandhisspousecannotbemadepersonallyliable
sincerespondentLimenteredintoandsignedthecontractclearlyinhisofficialcapacity
asExecutiveVicePresident.Thepersonalityofthecorporationisseparateanddistinct
fromthepersonscomposingit.

Republic vs Grijaldo GR L-20240 (1965)

Facts:

JoseGrijaldoobtainedfiveloansfromthebranchoftheBankofTaiwan.Theloanswere
evidencedbyfivepromissorynotesexecutedbytheappellantinfavoroftheBankof
Taiwan.Tosecurethepaymentoftheloans,Grijaldoexecutedachattelmortgageonthe
standingcropsonhisland.TheassetsinthePhilippinesoftheBankofTaiwan,Ltd.were
vestedintheGovernmentoftheUnitedStates.PursuanttothePhilippinePropertyActof
1946oftheUnitedStates,theseassetsincludingtheloansinquestion,weresubsequently
transferredtotheRepublicofthePhilippinesbytheGovernmentoftheUnitedStates
underTransferAgreementof20July1954.RepublicofthePhilippines,representedby
theChairmanoftheBoardofLiquidators,madeawrittenextrajudicialdemanduponthe
appellantforthepaymentofaccountinquestion.RepublicfiledacomplaintintheJustice
ofthePeaceofCourtofHinigaran,NegrosOccidental,tocollectfromtheappellantthe
unpaidaccountinquestion.ThecourtaquorenderedadecisionorderingtheGrijaldoto
paytheRepublicofthePhilippinesthesumofP2,377.23asof31December1959plus
interestattherateof6%perannumcompoundedquarterly.Grijaldocontendsthat
RepublicofthePhilippineshasnocauseofactionagainsthimsincethecontractofloan
wasinstituteswiththeBankofTaiwan.

Issue:WhetherornottheRepublicofthePhilippineshasnocauseofactionagainst
Grijaldo.

Held:Yes.WhilethebankofTaiwan,Ltd.wastheoriginalcreditorandthetransaction
betweenGrijaldoandtheBankofTaiwanwasaprivatecontractofloan.Thesuccessive
transferoftherightsovertheloansinquestionfromtheBankofTaiwan,Ltd.tothe
UnitedStatesGovernment,andfromtheUnitedStatesGovernmenttothegovernmentof
theRepublicofthePhilippines,madetheRepublicofthePhilippinesthesuccessorofthe
rights,titleandinterestinsaidloans,therebycreatingaprivityofcontractbetweenthe
RepublicofthePhilippinesandGrijaldo.Thewordprivydenotestheideaofsuccession.
Hence,anassigneeofacreditandtheonesubrogatedtoitwillbeprivies.TheUnited
StatesofAmericaactingasabelligerentsovereignpowerseizedtheassetsoftheBankof
Taiwan,Ltd.,whichbelongedtoanenemycountry.TherepublicofthePhilippineshad
becomeaprivytotheoriginalcontractofloanbetweenBankofTaiwanLtd.and
Grijaldo.

Casa Filipino Development Corporation vs. Deputy

Executive Secretary, 209 SCRA 379
Facts:OnJune30,1986,privaterespondentJoseValenzuela,Jr.filedacomplaint
againstpetitionerCasaFilipinaDevelopmentCorporationbeforetheOfficeofAppeals,
AdjudicationandLegalAffairs(OAALA)ofthethenHumanSettlementsRegulatory
Commission(nowHousingandLandUseRegulatoryBoard)foritsfailuretoexecute
anddeliverthedeedofsaleandtransfercertificateoftitle.

OnJanuary21,1987,theOAALArenderedjudgmentinfavorofprivaterespondent,
relyingonSection25ofPresidentialDecreeNo.957(RegulatingtheSaleofSubdivision
LotsandCondominiums,ProvidingPenaltiesforViolationsthereof),whichprovides:

Sec.25.IssuanceofTitleTheownerordevelopershalldeliverthetitleofthelotor
unittothebuyeruponfullpaymentofthelotorunit.Nofeeexceptthoserequiredforthe
registrationofthedeedofsaleintheRegistryofdeedsshallbecollectedfortheissuance
ofsuchtitle.Intheeventamortgageoverthelotorunitisoutstandingatthetimeofthe
issuanceofthetitletothebuyer,theownerofordevelopershallredeemthemortgageor
thecorrespondingportionthereofwithinsixmonthsfromsuchissuanceinorderthatthe
titleoveranyfullypaidlotorunitmaybesecuredanddeliveredtothebuyerin
accordanceherewith.

Thedispositiveportionofitsdecisionreads(p.19,Rollo):(THISISTHECAUSEOF
THEISSUE)

WHEREFORE,PREMISESCONSIDERED,judgmentisrenderedorderingrespondent,
within15daysfromfinalityofthisdecision,toexecutethedeedofabsolutesaleforLot
8,Block9,PhaseII,CasaFilipina,SucatII,Bo.SanDionisio,Paranaque,MetroManila
infavorofthecomplainantandthereaftertobillcomplainantthetotalamountdueforthe
registrationandtransferexpensesofthetitle.Respondentisfurtherordered,within15
daysfromreceiptofcomplainant'spaymentforregistrationandtransferexpenses,to
delivertothelatterthetransfercertificateoftitleofsubjectlotfreefromallliensand
encumbrances.Intheeventrespondentisunabletodeliverthetitletothesaidlot,
respondentisherebyorderedtorefund(to)complainanthistotalpaymentsamountingto
SEVENTYSIXTHOUSANDONEHUNDREDEIGHTYPESOSand82/100
(P76,180.82)plus24%interestperannumfromJune30,1986,thedateofthefilingof
thecomplaint,untilfullypaid.RespondentislikewiseorderedtopaycomplainantTWO
THOUSANDPESOS(P2,000.00)bywayofattorney'sfees,forcompellingthelatterto
litigateandincurexpensesintheprotectionofhisrights.

PetitionerthenfiledanappealbeforetheHousingandLandUseRegulatoryBoard.In
petitioner'smemorandum,itnarratedtheeventsthattranspiredwhichledtoitsfailureto
deliverthetitle,namely:itsoriginalmortgageebankwasRoyalSavingsBankwhichwas
absorbedbyComsavingsBankapparentlyduetobankrunptcy;ComsavingsBankisnot
amenabletopetitioner'searlierarrangementwithRoyalSavingsBankonindividual
redemptionoftitle,thus,itdemandedthatpetitioner'sobligationsshouldbepaidpriorto
thereleaseofanyindividualtitle.petitionercannotseasonablymeetsuchdemanddueto
theinabilityofthepastadministrationtoputupaviableandprogressiveeconomic
programthatbroughtitintoafixsituationwhereinithasnoparticipationeither
intentionallyorbynegligence.

OnOctober6,1987,theHLURBdismissedpetitioner'sappealforlackofmeritand
affirmedintotothequestioneddecisionoftheOAALA

Petitionerasseveratesthatingrantingbothremediesofspecificperformanceand
rescission,publicrespondentignoredawellpronouncedrulethattheseremediescannot
beavailedofatthesametime.Furthermoretheamountof24%interestimposedbythe
OAALAincaseofrefundishighandwithoutbasis.Finally,inasmuchasissuanceofthe
titlehasnotyetbeeneffectedbecauseofthetakeoverbyComsavingsBankofRoyal
SavingsBank,theperiodspecifiedunderSection25ofP.D.No.957hasnotbeguntorun
forthepurposeofredemption.

Issue/s:
1.WONbothremediesofspecificperformanceandrescissionwereavailedofatthe
sametime

2.WONtheamountof24%interestimposedbytheOAALAincaseofrefundishigh
andwithoutbasis

3.WONtheperiodspecifiedunderSection25ofP.D.No.957hasnotbeguntorunfor
thepurposeofredemption

Held:1.No.ItisplainenoughintheOAALAdecisionthatrescissionisbeingordered
onlyintheeventspecificperformanceisnotfeasible.Moreover,petitionerisalready
estoppedfromraisingthisissuebecauseinitsappealmemorandumsubmittedbeforethe
HLURB,itleadedthat(p.28,Rollo):

5.Appellantpraysthatitbegivenaperiod/timetoredeemthetitleorthedemandfor
issuanceoftitlebesuspendedfromtheComsavingsBankbeforeanydeedofabsolute
salebeexecutedsothattheTransferCertificateofTitlebeissuedand/orrefundbe
ordered.

2.The24%interestwasvalid.TherulinginReforminav.Tomol,itmustbeunderscored,
dealsexclusivelywithcaseswheredamagesintheformofinterestisduebutnospecific
ratehasbeenpreviouslysetbytheparties.Insuchcases,thelegalinterestof12%per
annummustbeapplied.Inthepresentcase,however,theinterestrateof24%perannum
wasmutuallyagreeduponbypetitionerandprivaterespondentintheircontracttosell
thiswastheinterestrateimposedonprivaterespondentforthepaymentofthe
installmentsonthecontractpriceandthereisnoreasonwhythissameinterestrate
shouldnotbeequallyappliedtopetitionerwhichisguiltyofviolatingthereciprocal
obligation.

3.Theargumentofpetitionerthattheissuanceofthetitleisaprerequisitetotherunning
ofthesixmonthperiodofredemption,failstoconvinceUs.Otherwise,theowneror
developercanreadilyconcoctathousandandonereasonsasjustificationsforitsfailure
toissuethetitleandintheprocess,prolongtheperiodwithinwhichtodeliverthetitleto
thebuyerfreefromanyliensorencumbrances.Additionally,bynotissuing/delivering
thetitleofthelottoprivaterespondentuponfullpaymentthereof,petitionerhasalready
violatedtheexplicitmandateofthefirstsentenceofSection25ofP.D.No.957.IfWe
weretocountthesixmonthperiodofredemptionfromthebelatedissuanceofthetitle,
petitionerwillhavealottogainfromitsownnonobservanceofsaidprovision.

(Section25ofP.D.No.957imposesanobligationonthepartoftheownerordeveloper,
intheeventthemortgageoverthelotorunitisoutstandingatthetimeoftheissuanceof
thetitletothebuyer,toredeemthemortgageorthecorrespondingportionthereofwithin
sixmonthsfromsuchissuance.)

PNB vs CA, 30 April 1991

Facts:

Privaterespondent,AmbrosioPadilla,appliedforandwasgrantedacreditlineof
321.8million,bypetitionerPNB.Thiswasforatermof2yearsat18%interestper
annumandwassecuredbyrealestatemortgageand2promissorynotesexecutedinfavor
ofpetitionerbyPR.Thecreditagreementandthepromissorynotes,ineffect,provide
thatprivaterespondentagreestobeboundbyincreasestotheinterestratestipulated,
provideditiswithinthelimitsprovidedforbylaw.Conflictinthiscasearosewhen
Petitionerunilaterallyincreasedtheinterestratefrom18%to:(1)32%[July1984];(2)
41%[October1984];and(3)48%[November1984],or3timeswithinthespanofa
singleyear.

ThiswasdonedespitethenumerouslettersofrequestmadebyPRthattheinterestratebe
increasedonlyto21%or24%.RespondentfiledacomplaintagainstPetitionerwiththe
RTC.Thelatterdismissedthecaseforlackofmerit.AppealbyrespondenttoCA
resultedinhisfavor.HencethepetitionforcertiorariunderRule45ofROCfiledbyPNB
withSC.

Issue:Whetherornotthebankmayvalidlyincreasethestipulatedinterestrateonloans
asoftenasitdeemednecessary,despitetheremovalofUsuryLawceilingoninterests.

Held:NO.AlthoughunderSec.2ofPD116,theMonetaryBoardisauthorizedto
prescribethemaximumrateofinterestforloansandtochangesuchrateswhenever
warrantedbyprevailingeconomicandsocialconditions,byexpressprovision,itmay
notdosooftenerthanonceevery12months.IftheMonetaryBoardcannot,much
lesscanPNB,effectincreasesontheinterestratesmorethanonceayear.

Inthiscase,basingonthecreditagreementandpromissorynotesexecutedbetweenthe
parties,althoughrespondentagreedtoincreaseontheinterestratesallowedbylaw,there
wasnolawthatwaspassedwarrantingpetitionertoeffectincreaseontheinterestrates
ontheexistingloanofrespondentforthemonthsofJulytoNovemberof1984.Neither
therebeinganydocumentexecutedanddeliveredbyrespondenttoeffectsuchincrease.

Forescalationclausestobevalidandwarranttheincreaseoftheinterestratesonloans,
theremustbe:

(1)increasewasmadebylaworbytheMonetaryBoard;

(2)stipulationmustincludeaclauseforthereductionofthestipulatedinterestrateinthe
eventthatthemaximuminterestisloweredbylaworbytheMonetaryboard.

Inthiscase,PNBmerelyreliedonitsownBoardResolutions,whicharenotlawsnor
resolutionsoftheMonetaryBoard.DespitethesuspensionoftheUsuryLaw,imposinga
ceilingoninterestrates,thisdoesnotauthorizebankstounilaterallyandsuccessively
increaseinterestratesinviolationofSec.2PD116.
IncreasesunilaterallyeffectedbyPNBwasinviolationoftheMutualityofContracts
underArt.1308.Thisprovidesthatthevalidityandcomplianceofthepartiestothe
contractcannotbelefttothewillofoneofthecontractingparties.Increasesmadeare
thereforevoid.IncreaseonthestipulatedinterestratesmadebyPNBalsocontravenes
Art.1956.Itprovidesthat,nointerestshallbedueunlessithasbeenexpresslystipulated
inwriting.RespondentneveragreedinwritingtopayinterestimposedbyPNBin
excessof24%perannum.InterestrateimposedbyPNB,ascorrectlyfoundbyCA,is
indubitablyexcessive.

Relucio vs. Garfin, GR 76518 (1990)

Facts:On22October1979,privaterespondentfiledacomplaintinthelowercourtfor
specificperformancewithdamagesagainstpetitioner,tocompelthelatterto:(a)execute,
incompliancewiththeContracttoBuyandSellinquestion,afinaldeedofsaleinfavor
oftheformerovertwo(2)residentialsubdivisionlotsintheMarianoVillage
Subdivision,NagaCity;and(b)constructpavedroadsonthenorthernandsouthernsides
ofthelots,as"necessaryfacilities,improvements,infrastructuresandotherformsof
developmentofthesubdivisionarea."PrivaterespondentallegesP10,800.00,have
alreadybeenpaidfor,asshehadalreadypaidP200.00asdownpayment,andhad
subsequentlycompletedpaymentof128equalmonthlyinstallmentsofP89.45each
amountingtoP11,450.00thatasthelawallowsthechargingofinterestonlyasmonetary
interestorascompensatoryinterest,noneofwhichhaveobtainedinhercase,asshehad
neverincurredindelayinthepaymentofinstallmentsdue,thestipulatedinterestofsix
percent(6%)perannumontheoutstandingbalanceisnullandvoid;andc.thatthe
amountof650.00representingoverpaymentbereturnedtoher.

Petitionermaintainedthatprivaterespondent,isobligedtopayinterestontheinstallment
paymentsoftheunpaidoutstandingbalanceevenifpaidontheir"duedates"perschedule
ofpayments;thatprivaterespondenthadactuallybeeninarrearsintheamountof
P4,269.40,representingsuchinterestasofJune1979,whichthereforeentitledpetitioner
tocancelthecontractinquestion.Petitionerthenprayedforjudicialaffirmanceofher
NotarialNoticeofCancellationoverthesaidcontractinquestion.DECISIONOF
LOWERCOURTS:*orderedpetitioner:Toexecuteadeedofabsolutesale.*courtof
appeal:affirmedlowercourt.

Issue/s:WONprivaterespondentcanrescindthecontractofsale

WONprivaterespondenthasfullypaidthestipulatedpriceinthecontractsoastobe
entitledlawfullytodemandtheexecutionofadeedofabsolutesaleinherfavor.

WONrespondentiscorrectinsayingthatasthelawallowsthechargingofinterest
onlyasmonetaryinterestorascompensatoryinterest,noneofwhichhaveobtainedinher
case,asshehadneverincurredindelayinthepaymentofinstallmentsdue,thestipulated
interestofsixpercent(6%)perannumontheoutstandingbalanceisnullandvoid
Held:

NO,ithasnotyetbeenfullypaid.Therespondentshouldpayatotalof16,101andnot
10,600or10,800only.

NO,ExaminationoftherecordshowsthatthequestionedContracttoBuyandSellthe
subdivisionlotsprovidedforpaymentbyprivaterespondentofthesumofP200.00as
downpayment,andthat"thebalance[ofP10,600.00]shallbepaidin180monthly
installmentsatP89.45permonth,includinginterestrateatsixpercent(6%)perannum,
untilthepurchasepriceisfullypaid."Thisstipulationclearlyspecifiedthataninterest
chargeofsixpercent(6%)perannumwasincludedinthemonthlyinstallmentprice:
privaterespondentcouldnothavehelpednoticingthatP89.45multipliedby180monthly
installmentsequalsP16,101.00,andnotP10,600.00.ThecontractpriceofP10,800.00
maythusbeseentobethecashpriceofthesubdivisionlots.Aninstallmentsalehas
impliedinterest.Theinstallmentpriceisalmostalwayshigherthanthecashpriceand
thisisavalidstipulationfortheparties.Forthevendor,uponreceivingthefullcash
price,couldhavedepositedthatamountinabank,forinstance,andearnedinterest
incomewhichatsixpercent(6%)peryearandforfifteen(15)years,wouldprecisely
totalP5,501.00(thedifferencebetweentheinstallmentpriceofP16,101.00andthe
cashpriceofP10,600.00)Tosuppose,asprivaterespondentargues,thatmereprompt
paymentofthemonthlyinstallmentsastheyfellduewouldobviateapplicationofthe
interestchargeofsixpercent(6%)perannum,istoignorethatsimpleeconomicfact.
Thateconomicfactis,ofcourse,recognizedbylaw,whichauthorizesthepaymentof
interestwhencontractuallystipulatedforbytheparties4orwhenimpliedinrecognized
commercialcustomorusage.

(3)NO.Despiteprivaterespondent'sfailuretofullypaythestipulatedpriceofthetwo
lotsinquestion,petitioner,however,couldnotvalidlyrescindthecontractnotbeing
lawfullyentitledtodoso.Petitionerfailedtorebutprivaterespondents'allegationsthat
theformerhadfailedtointroducerequiredimprovementsinthesubdivision;theformer's
bareallegationthattheimprovementshavealreadybeendonatedtothecitygovernment
wasnotacceptedbythetrialcourt.Section23ofPresidentialDecreeNo.957,otherwise
knownasTheSubdivisionandCondominiumBuyers'ProtectiveDecree,vestsuponthe
buyertheoptiontodemandreimbursementofthetotalamountpaid,ortowaitforfurther
developmentofthesubdivision,privaterespondentwhooptedforthelatteralternativeby
waitingfortheproperdevelopmentofthesite,maynotbeoustedfromthesubdivision.