Case No.
1 the same from the debtor, and whatsoever the Assignor does in
G.R. No. L-53955 January 13, 1989
THE MANILA BANKING CORPORATION, plaintiff-
appellee, vs.
ANASTACIO TEODORO, JR. and GRACE ANNA
TEODORO, defendants-appellants.
FACTS
This is an appeal from the decision* of the Court of First
Instance of Manila, for collection of sum of money based on
promissory notes executed by the defendants-appellants in
favor of plaintiff-appellee bank.
In 1966 Defendants, together with Anastacio Teodoro, Sr.,
jointly and severally, executed in favor of plaintiff 3 Promissory
Notes payable in 120 days, at 12% interest per annum.
Defendants failed to pay the first PN of P10,420 and of the other
2 PNs of P9,000 still has unpaid balance of P8,934.74 as of
September 30, 1969 including accrued interest and service
charge.
It appears that on January 24, 1964, the Son executed in favor of
plaintiff a Deed of Assignment of Receivables from the
Emergency Employment Administration in the sum of
P44,635.00. The Deed of Assignment provided that it was for
and in consideration of certain credits, loans, overdrafts and
other credit accommodations extended to defendants as security
for the payment of said sum and the interest thereon, and that
defendants do hereby remise, release and quitclaim all its rights,
title, and interest in and to the accounts receivables. Further.
(1) The title and right of possession to said accounts receivable is
to remain in the assignee, and it shall have the right to collect
connection with the collection of said accounts, it agrees to do as
agent and representative of the Assignee and in trust for said
Assignee ;
The issues, as defined by the parties are: (1) whether or not
plaintiff claim is already considered paid by the Deed of Assign.
judgment of Receivables by the Son; and (2) whether or not it is
plaintiff who should directly sue the Philippine Fisheries
Commission for collection.
RTC: Judgment adverse to defendants. MR: Denied.
ISSUE:
Is the transaction a dation in payment or pledge?
HELD:
Definitely, the assignment of the receivables did not result from
a sale transaction. It cannot be said to have been constituted by
virtue of a dation in payment for appellants' loans with the bank
evidenced by promissory notes which are the subject of the suit
for collection. At the time the deed of assignment was executed,
said loans were non-existent yet. The deed of assignment was
executed on January 24, 1964 (Exh. "G"), while promissory note
No. 11487 is dated April 25, 1966 (Exh. 'A), promissory note
11515, dated May 3, 1966 (Exh. 'B'), promissory note 11699, on
June 20, 1966 (Exh. "C"). At most, it was a dation in payment for
P10,000.00, the amount of credit from appellee bank indicated in
the deed of assignment. At the time the assignment was
executed, there was no obligation to be extinguished except the
amount of P10,000.00. Moreover, in order that an obligation
may be extinguished by another which substitutes the same, it is
imperative that it be so declared in unequivocal terms, or that
the old and the new obligations be on every point incompatible
with each other (Article 1292, New Civil Code).
Obviously, the deed of assignment was intended as collateral
security for the bank loans of appellants, as a continuing
guaranty for whatever sums would be owing by defendants to
plaintiff, as stated in stipulation No. 9 of the deed.
In case of doubt as to whether a transaction is a pledge or a
dation in payment, the presumption is in favor of pledge, the
latter being the lesser transmission of rights and interests
(Lopez v. Court of Appeals, supra).
WHEREFORE, the appeal is Dismissed for lack of merit and the
appealed decision of the trial court is affirmed in toto.
Case No.2
VICENTE C. R EYES
APPLICANT- APPELLEE VS
FRANCISCO SIERRA, EMILIO
SIERRA
OPPOSITORS - APPLICANTS
G.R. NO. L-28658
OCTOBER 18, 1979
DE CASTRO J.
Facts: Reyes wanted to register property in antipolo claiming it
was inherited from his father. It turns out that his father got the
land from Beltran through a mortgage contract. An opposition
was filed by the director of lands, Francisco Sierra and Emilio
Sierra. Later a motion to set aside an interlocutory default was
filed by the rest of the sierras, said Sierras were added as
oppositors to the registration.
Lower court decided in favor of Reyes, declared him the rightful
owner of the land.
Hence this appeal.
Issue: WON the contract between the father of Reyes and
Basilia Beltran a mortgage or a sale.
Held: Mortgage. The land was originally owned by Basilia
Beltrans parents, from whom she inherited the property. She
borrowed money from Vicente Reyes, Sr. the amount of P100.00
and secured the loan with the piece of land. Since then, the older
Reyes began paying the realty taxes up to the time of his death
after which his children continued to pay the taxes.
Beltran died before the loan was paid. In registering the
property, Vicente jr. relied on his belief that the
property belonged to his father who bought the same from
Beltran and that there is a document to prove sale (contract
of mortgage between Beltran and Reyes sr.)
Court held that the contract was a mortgage contract. The
intention of the parties at the time was the lending of money
with security. The use of the word debt(utang) helps to point
out that the transaction was intended to be a loan with
mortgage. Intention of the parties must govern and not the
form of the transaction. Macapinlac v. Gutierrez Rapide; if the
instrument is in its essence a mortgage, the parties cannot by
any stipulations, however express and positive, render it
anything but a mortgage or deprive it of the essential attributes
belonging to a mortgage in equality
Failure of mortgagor to redeem the property does not
automatically vest ownership of the property to the mortgagee.
This violates Art. 2088 of the Civil code (the creditor
cannot appropriate the thigns given by way of pledge or
mortgage, or dispose by them. Any stipulation to the contrary is
null and void.

Otherwise it would amount to a pactum commissorium
which is against good morals and public policy The property
hasnt been acquired through prescription either since Reyes
didnt possess it as owner, Reyes did not have adverse
nor continuous possession. Mortgage does not constitute just
title on the part of the mortgagee, since ownership is retained by
mortgagor. Payment of realty taxes does not amount to adverse
possession or title. Mere failure of the owner (mortgagor) to pay
taxes doesnt amount to abandonment. Doctrine of once a
mortgage always a mortgage has been firmly established
whatever be its form.
Case No. 3: . Olea vs. Court of Appeals, G.R. No. 109696, August
14, 1995 - Edu Riparip
Case No. 4
AJAX MARKETING & DEVELOPMENT CORPORATION
VS COURT OF APPEALS
FACTS:
The spouses Marcial See and Lilian Tan constituted three real
estate mortgages over their property in Paco, Manila in favor of
and for the following amounts:
1.) Ylang-Ylang Merchandising Co. for P250,000,
2.) Ajax Marketing Co. (formerly Ylang-Ylang Merchandising
Co.) for P150,000, and
3.) Ajax Marketing and Development Corporation (from
partnership to corporation) for P600,000.
The 3 loans with an aggregate amount of P1,000,000 were
restructured and consolidated into 1 loan, and Ajax Marketing
and Development Corporation executed a promissory note. On
its face, the promissory note has these words typewritten:
secured by REM and 9. Collateral. This is wholly/partly
secured by: (x) real estate. The property was extra-judicially
foreclosed in favor of Metrobank for the P1,000,000 promissory
note.
Petitioners Contend:
A novation occurred when their 3 loans which were all
secured by the same property, were consolidated into a single
loan of 1 Million under the promissory note, thereby
extinguishing their monetary obligation and releasing the
mortgaged property from liability.
ISSUE:
Whether or not there was indeed a novation in this case?
HELD:
There was no novation. There was no change in the object
of the prior obligation.
(Objective Novation):
The 1 Million loan still represented and renewed the 3
loans obtained.
It merely restructured and renewed that 3 previous loans
to make the loan current and merely consolidated such loan.
There was no change or substitution in the part of the
debtors upon the consolidation of the loans in the promissory
note.
(Subjective Novation):
 The fact that the petitioners changed from a partnership to
a corporation without evidence that they were expressly
released from their obligation did not make petitioner AJAX
(with its new corporate personality) a 3rd person or the new
debtor.
Doctrine: Novation is a juridical action with a dual function. It
extinguishes an obligation and created a new one in lieu of the
old one. Novation is never presumed and will not be allowed
unless there was an express agreement or the new obligation is
incompatible with the old one.
OLD DEBTOR should be released expressly from an
obligation and the 3rd person or new debtor assumed his
place. There is no novation if the old debtor would not be
released. The new debtor would only become a co-debtor or
surety.
Case No. 5: Diosdado Yuliongsui v. PNB, G.R. No. L-19227,
February 17, 1968 - De Los Reyes AT
Case No. 6. Pacific Commercial Company v. Philippine National
Bank, G.R. No. L-24893, August 23, 1926 - Danica Echague
Case. No. 7
PNB vs. LAUREANO ATENDIDO
By: Quintana
Facts
Atendido obtained from PNB a loan of P3,000 payable in 120
days with interest at 6% per annum from the date of
maturity. To guarantee the payment of the obligation,
Atendido pledged to PNB 2,000 cavanes of palay deposited
in a warehouse in Bulacan. Atendido endorsed the
corresponding warehouse receipt in favor of PNB.
Before the maturity of the loan, the 2,000 cavanes of palay
disappeared for unknown reasons in the warehouse. When
the loan matured Atendido failed to pay. The present action
was instituted.
Atendido claims that the warehouse receipt covering the
palay which was given as security having been endorsed in
blank in favor of PNB, and the palay having been lost or
disappeared, he thereby became relieved of liability. He also
claims that he is entitled to an indemnity which represents
the difference between the value of the palay lost and the
amount of his obligation.
CFI ruled in favor of PNB. Atendido appealed
Issue:
Whether the surrender of the warehouse receipt covering the
2,000 cavanes of palay given as a security, endorsed in blank, to
PNB, has the effect of transferring their title or ownership to
PNB.
Ruling
SC affirmed CFIs decision.
The surrendering of the warehouse receipt was not that of a
final transfer but merely as a guarantee to the fulfillment of
the original obligation of P3,000.00.
The 2,000 cavanes of palay covered by the warehouse receipt
were given to PNB only as a guarantee to secure the
fulfillment by Atendido of his obligation. This appears in the
contract between them wherein it is expressly stated that
said 2,000 cavanes of palay were given as a collateral
security.
The delivery of said palay being merely by way of security,
it follows that by the very nature of the transaction its
ownership remains with Atendido (the pledgor) subject only
to foreclosure in case of non-fulfillment of the obligation.
 If the obligation is not paid upon maturity the most that PNB
(the pledgee) can do is to sell the property and apply the
proceeds to the payment of the obligation and to return the
balance, if any, to the pledgor (Article 1872, Old Civil Code).
According to the SC, this is the essence of this contract, for,
according to law, a pledgee cannot become the owner of, nor
appropriate to himself, the thing given in pledge (Article
1859, Old Civil Code).
If by the contract of pledge the pledgor continues to be the
owner of the thing pledged during the pendency of the
obligation, in case of loss of the property, the loss should be
borne by the pledgor (owner).
The fact that the warehouse receipt covering the palay was
delivered, endorsed in blank, to PNB does not alter the
situation, the purpose of such endorsement being merely to
transfer the juridical possession of the property to the
pledgee and to forestall any possible disposition thereof on
the part of the pledgor.
Case No. 8.
FILOMENA SARMIENTO and her husband EUSEBIO M.
VILLA SENOR, plaintiffs-appellants, vs. GLICERIO
JAVELLANA, defendant-appellant. [G.R. No. 18500. October
2, 1922.]
AVANCEA, J p:
FACTS: On August 28, 1911, the defendant Glicerio Javellana
loaned the plaintiffs Filomena Sarmiento and her husband
Eusebio Villa Senor the sum of P1,500 with interest at the rate of
25 per cent per annum for the term of one year.
In order to guarantee this loan, Sarmiento and Villa Senor
pledged a large medal with a diamond in the center and
surrounded with ten diamonds, a pair of diamonds earrings, a
small comb with twenty-diamonds, and two diamond rings,
which the contracting parties appraised at P4,000. This loan is
evidenced by two documents wherein the amount appears to be
P1,875 (inclusive of 25 per cent interest on the sum of P1,500) for
the term of one year.
PETITIONERS ARGUMENT: The plaintiff allege that at the
maturity of this loan on August 31, 1912, the plaintiff Eusebio
M. Villasenor, was unable to pay the loan, ask for an extenstion
from Javellana and was able to obtain it with the condition that
the loan was to continue, drawing interest at the rate of 25 per
cent per annum, so long as the security given (the pledge in this
case) was sufficient to cover the capital and the accrued interest.
In the month of August, 1919, the Sarmiento went to the house
of the Javellana and offered to pay the loan and redeem the
jewels, taking with him, for this purpose, the sum of P11,000,
but the defendant then informed them that the time for the
redemption had already elapsed. The plaintiffs renewed their
offer to redeem the jewelry by paying the loan, but met with the
same reply. These facts are proven by the testimony of the
plaintiffs, corroborated by Carlos M. Dreyfus.
The Sarmiento and Senor now bring this action to court in order
to compel the defendant to return the jewels pledged, or their
value, upon the payment by them of the sum they owe the
defendant, with the interest thereon.
RESPONDENTS ARGUMENT: Javellana alleges, in his defense,
that upon the maturity of the loan, August 31, 1912, he
requested the plaintiff, Eusebio M. Villasenor, to secure the
money, pay the loan and redeem the jewels, as he needed
money to purchase a certain piece of land. A month thereafter,
the plaintiff, Filomena Sarmiento, went to his house and offered
to sell him the jewels pledged for P3,000; that the defendant
then told her to come back on the next day, as he was to see his
brother, Catalino Javellana, and ask him if the latter wanted to
take the jewels for that sum; that on the next day the plaintiff,
Sarmiento went back to the house of the Javellana, paid him the
sum of P1,125, which was the balance remaining of the P3,000
after deducting the plaintiffs' loan.
It appears that the defendant possessed these jewels originally,
as a pledge to secure the payment of a loan stated in writing, the
mere testimony of the defendant to the effect that later they
were sold to him by the plaintiff, Filomena Sarmiento, against
the positive testimony of the latter that she did not make any
such sale, requires a strong corroboration to be accepted.
ISSUE: Whether or not the defendant's contention that the thing
pledged was sold to him afterwards is correct?
HELD: NO, the defendant's contention is incorrect. If Javellana
really bought these jewels, it seems natural that Sarmiento
would have demanded the surrender of the documents
evidencing the loan and the pledge, and Javellana would have
returned them to Sarmiento. Our conclusion is that the jewels
pledged to defendant were not sold to him afterwards.
Also, we do not find the testimony of Jose Sison to be of
sufficient value as such corroboration. This witness testified to
having been in the house of the defendant when Filomena went
there to offer to sell the defendant the jewels, as well as on the
third day when she returned to receive the price.
According to this witness, he happened to be in the house of the
defendant remained in the house of the defendant for three
days, and that was how he happened to witness the offer to sell,
as well as the receipt of the price on the third day. But not only
do we find that the defendant has not sufficiently established,
by his evidence, the fact of the purchase of the jewels, but also
that there is a circumstance tending to show the contrary, which
is the fact that up to the trial of this cause the defendant
continued in possession of the documents, Exhibits A and 1,
evidencing the loan and the pledge.
Another point on which evidence was introduced by both
parties is as to the value of the jewels in the event that they were
not returned by the defendant. In view of the evidence of
record, we accept the value of P12,000 fixed by the trial court.
From the foregoing that, as the jewels in question were in the
possession of the defendant to secure the payment of a loan of
P1,500, with interest thereon at the rate of 25 per cent annum
from August 31, 1911, to August 31, 1912, and the defendant
having subsequently extended the term of the loan indefinitely,
and so long as the value of the jewels pledge was sufficient to
secure the payment of the capital and accrued interest, the
defendant is bound to return the jewels or their value (P12,000)
to plaintiffs, and the plaintiffs, and the plaintiffs have the right
to demand the same upon the payment by them of the rate of 25
per cent per annum from August 28, 1911.
The judgment appealed from being in accordance with this
finding, the same is affirmed without special pronouncement as
to costs. So ordered.
RESOLUTION ON A MOTION FOR RECONSIDERATION
April 4, 1923
AVANCEA, J p:
DEFENDANTS ARGUMENT: The defendant contends that the
plaintiffs' action for the recovery of the jewels pledged has
prescribed. Without deciding whether or not the action to
recover the thing pledged may prescribe in any case, it not
being necessary for the purposes of this opinion, but supposing
that it may, still the defendant's contention is untenable.
In the document evidencing the loan in question there is stated:
"I transfer by way of pledge the following jewels." That this is a
valid contract of pledge there can be no question. As a matter of
fact the defendant does not question it, but takes it for granted.
However, it is contended that the obligation of the defendant to
return the jewels pledged must be considered as not stated in
writing, for this obligation is not expressly mentioned in the
document. But if this contract of pledge is in writing, it must
necessarily be admitted that the action to enforce the right,
which constitutes the essence of this contract, is covered by a
written contract.
The duty of the creditor to return the thing pledge in case the
principal obligation is fulfilled is essential in all contracts of
pledge. This constitutes, precisely, the consideration of the
debtor in this accessory contract, so that if this obligation of the
creditor to return the thing pledge, and the right of the debtor to
demand the return thereof, are eliminated, the contract would
not be a contract of pledge. It would be a donation.
It is the right of the plaintiffs to recover the thing pledged is
covered by a written contract, the time for the prescription of
this action is ten years, according to section 43 of the Code of
Civil Procedure.
The defendant contends that the time of prescription of the
action of the plaintiffs to recover the things pledged must be
computed from August 28, 1911, the date of the making of the
contract of loan secured by this pledge. The term of this loan is
one year. However, it is contended that the action of the
plaintiffs to recover the thing pledged accrued on the very date
of the making of the contract, inasmuch as from that date they
could have recovered the same by paying the loan even before
the expiration of the period fixed for payment. This view is
contrary to law.
Whenever a term for the performance of an obligation is fixed, it
is presumed to have been established for the benefit of the
creditor as well as that of the debtor, unless from its tenor or
from other circumstances it should appear that the term was
established for the benefit of one or the other only (art. 1128 of
the Civil Code).
ISSUES:
1) Whether or not the defendant's action for the recovery of the
loan had already prescribed?
2) Whether or not the defendant's theory that the action of the
plaintiffs to recover the thing pledged accrued from the date of
the execution of the contract is correct?
1) NO, the action of the defendant for the recovery of the loan
does not prescribed until after ten years. It is unjust to hold that
the action of the plaintiffs for the recovery of the thing pledged,
after the payment of the loan, has already prescribed while the
action of the defendant for the recovery of the loan has not yet
prescribed. The result of this would be that the defendant might
have collected the loan and at the same time kept the thing
pledge.
In this case it does not appear, either from any circumstance, or
from the tenor of the contract, that the term of one year allowed
the plaintiffs to pay the debt was established in their favor only.
Hence it must be presumed to have been established for the
benefit of the defendant also. And it must be so, for this is a case
of a loan, with interest, wherein the term benefits the plaintiffs
by the use of the money, as well as the defendant by the interest.

This being so, the plaintiffs had no right to pay the loan before
the lapse of one year, without the consent of the defendant,
because such a payment in advance would have deprived the
latter of the benefit of the stipulated interest. It follows from this
that appellant is in error when he contends that the plaintiffs
could have paid the loan and recovered the thing pledged from
the date of the execution of the contract
2) NO. It must, therefore, be admitted that the action of the
plaintiffs for the recovery of the thing pledged did not accrue
until August 31, 1912, when the term fixed for the loan expired.
Computing the time from that date to that of the filing of the
complaint in this cause, October 9, 1920, it appears that the ten
years fixed by the law for the prescription of the action have not
yet elapsed.
Separate Opinions
STREET, J., concurring :
I agree. Prescription cannot become effective against the right of
the pledgor to redeem so long as the written contract evidencing
the debt remains in the hands of the pledge as evidence of a
valid and unbarred debt. The pledgor may always claim at least
as long a period within which to redeem as is allowed to the
creditor as is allowed to the creditor to enforce his dept. (Gilmer
vs. Morris, 80 Ala., 78; 60 Am. Rep., 85,89.)
Case No. 9
MANILA SURETY & FIDELITY COMPANY, INC., plaintiff-
appellee, vs. RODOLFO R. VELAYO, defendant-appellant.
1967
REYES, J.B.L., J
Briefed by: Liwag, Angelene L
1. CIVIL LAW; PLEDGE; ACCESSORY CHARACTER OF.
The accessory character is of the essence of pledge and
mortgage. Under Art. 2085 of the CC, an essential requisite of
these contracts is that they be constituted to secure the
fulfillment of a principal obligation.
2. ID.; ID.; SALE OF THING PLEDGED, EFFECT OF; WAIVER.
Where the pieces of jewelry were delivered to a surety
company "as collateral security and by way of pledge" in a
contract of guaranty, and sold at a lower price than the amount
of surety, the PRINCIPAL OBLIGATION WAS
EXTINGUISHED AND THE GUARANTOR CANNOT
RECOVER THE DEFICIENCY, because Art. 2115 of the Civil
Code, in its last portion, clearly establishes that the extinction
of the principal obligation supervenes by operation of
imperative law that the parties cannot override: "If the PRICE
OF THE SALE IS LESS, NEITHER SHALL THE CREDITOR
BE ENTITLED TO RECOVER THE DEFICIENCY,
notwithstanding any stipulation to the contrary." The effect of
this provision cannot be evaded. By electing to sell the articles
pledged, instead of suing on the principal obligation, the
CREDITOR HAS WAIVED ANY OTHER REMEDY, and
MUST ABIDE BY THE RESULTS OF THE SALE.
Facts:
-Manila Surety & Fidelity Co., Inc., upon request of Velayo,
executed a bond for P2,800.00 for the dissolution/cessation of a
writ of attachment obtained by one Jovita Granados in a suit
against Velayo in the CFI of Manila. Velayo undertook to pay
the surety company an annual premium of P112.00; to
indemnify the Company for any damage and loss of
whatsoever kind and nature that it shall or may suffer, as well
as reimburse the same for all money it should pay or become
-The Municipal Court disallowed Velayo's claims and
liable to pay under the bond including costs and attorneys'
rendered judgment against him.
fees.
-Appealed to the CFI, the defense was once more overruled.
-As "collateral security and by way of pledge" Velayo also
delivered 4 pieces of jewelry to the Surety Company "for the -Velayo resorted to the SC on appeal.
latter's further protection", with POWER TO SELL the same in
case the surety paid or BECOME OBLIGATED TO PAY any
amount of money in connection with said bond, applying the
proceeds to the payment of any amounts it paid or will be liable
Issue: WoN the sale of the pledged jewelry extinguished any
to pay, and turning the balance, if any, to the persons entitled
further liability under Article 2115 of the CC?
thereto, after deducting legal expenses and costs.
HELD:
-Judgment having been rendered in favor of Jovita Granados
and against Velayo, and execution having been returned Yes.
unsatisfied, the surety company was forced to pay P2,800.00
Article 2115, in its last portion, clearly establishes that the
that it later sought to redeem from Velayo; and upon Velayos
extinction of the principal obligation supervenes by operation of
failure to do so, the surety caused the pledged jewelry to be
imperative law that the parties cannot override:
sold, realizing therefrom a net product of P235.00 only.
If the price of the sale is less, neither shall the creditor be
-Thereafter and upon Velayo's failure to pay the balance, the
entitled to recover the deficiency notwithstanding any
surety company brought suit in the Municipal Court.
stipulation to the contrary.
-Velayo countered with a claim that the sale of the pledged
-The provision is clear and unmistakable, and its effect cannot
jewelry extinguished any further liability on his part under
be evaded. By electing to sell the articles pledged, instead of
Article 2115 of the 1950 Civil Code, which recites:
suing on the principal obligation, the creditor has waived any
Article 2115, CC. The sale of the thing pledged shall extinguish other remedy, and must abide by the results of the sale. No
the principal obligation, whether or not the proceeds of the sale deficiency is recoverable.
are equal to the amount of the principal obligation, interest and
-It is well to note that the rule of Article 2115 is by no means
expenses in a proper case. If the price of the sale is more than
unique. It is but an extension of the legal prescription contained
said amount, the debtor shall not be entitled to the excess,
in Article 1484(3) of the CC, concerning the effect of
unless it is otherwise agreed. [If the price of the sale is less,
a foreclosure of a chattel mortgage constituted to secure the
neither shall the creditor be entitled to recover the deficiency,
price of the personal property sold in installments.
notwithstanding any stipulation to the contrary.]
Article 1484. In a contract of sale of personal property, the price
of which is payable in installments, the vendor may exercise any
of the following remedies:

(3) Foreclose the chattel mortgage on the thing sold, if one has
been constituted, should the vendee's failure to pay cover two
or more installments. In this case, he shall have no further
action against the purchaser to recover any unpaid balance of
the price. Any agreement to the contrary shall be void.

The sale of the thing pledged shall extinguish the principal

obligation, whether or not the proceeds of the sale are equal to
the amount of the principal obligation, interest and expenses
in a proper case.

=> WHEREFORE, the decision under appeal is modified and

the defendant Velayo absolved from the complaint, except as
to his liability for the 1954 premium in the sum of P120.93, and
interest at 12-1/2% per annum from June 13, 1954. In this
respect the decision of the Court below is affirmed. No costs. So
ordered.