I. SHORT TITLE: NAVOA V. CA. TOPIC: Security IV.
to Olivia Navoa 15 days after August 15, 1977, and even then, Olivia
STATEMENT OF FACTS: Domdoma gave Olivia Navoa a loan.
The first instance is when Teresita gave Olivia a diamond ring
valued at 15,000.00 which was secured by a PCIB check under the
condition that if the ring was not returned within 15 days from
August 15, 1977 the ring is considered sold. Teresita attempted to
deposit the check on November 1977 but the check was not honored
for lack of funds. After this instance, there were other loans, totaling
of 6 loans, of various amounts that were extended by Teresita to
Olivia, These loans were secured by PCIB checks, which were all
dated to 1 month after the loan. All these checks were not honored
under the same reason as the first loan. V.
STATEMENT OF THE CASE: RTC - On 17 December 1977
private respondents filed with the Regional Trial Court of Manila an
action against petitioners for collection of various sums of money
based on loans obtained by the latter. On 3 January 1978 petitioners
filed a motion to dismiss the complaint on the ground that the
complaint stated no cause of action and that plaintiffs had no
capacity to sue. The trial court dismissed the case and the motion to
reconsider the dismissal was denied.
CA - Private respondents appealed to the Court of Appeals which
modified the order of dismissal "by returning the records of this case
for trial on the merits,
VI. ISSUE: Was the decision of the RTC to dismiss the case due to
having no cause of action valid?
VII. RULING: NO A cause of action is the fact or combination of
facts which affords a party a right to judicial interference in his
behalf. For the first loan it is a fact, that the ring was considered sold
Navoa failed to pay the price for the ring when the payment was due
because of the check issued that was not honored. Thus it is
confirmed that Teresita’s right under the agreement was violated.
The other loans extended by Teresita to Olivia were all secured by
PCIB checks. It can be inferred that since the checks were all dated
to 1 month after the loan, it follows that the loans are then payable 1
month after they were contracted, and also these checks were
dishonored by the bank for lack of funds. Olivia and Ernesto Navoa
failed to make good the checks that were issued as payment for their
obligations. The continuing refusal of Olivia and Ernesto Navoa to
comply with the demand of payment shows the existence of a cause
of action. All the loans granted to petitioners are secured by
corresponding checks dated a month after each loan was obtained. In
this regard, the term security is defined as a means of ensuring the
enforcement of an obligation or of protecting some interest in
property. It may be personal, as when an individual becomes a surety
or a guarantor; or a property security, as when a mortgage, pledge,
charge, lien, or other device is used to have property held, out of
which the person to be made secure can be compensated for loss.
Security is something to answer for as a promissory note. That is
why a secured creditor is one who holds a security from his debtor
for payment of a debt. From the allegations in the complaint there is
no other fair inference than that the loans were payable one month
after they were contracted and the checks issued by petitioners were
drawn to answer for their debts to private respondents.
The trial court erred in dismissing the case on the ground of lack of
cause of action. Respondent Court of Appeals therefore is correct in
remanding the case to the trial court for the filing of an answer by
petitioners and to try the case on the merits.
 VIII. DISPOSITIVE PORTION: WHEREFORE, the petition is
DENIED. The judgment of the Court of Appeals dated 11 December
1980 remanding the case to the trial court for the filing of petitioners'
answer and thereafter for trial on the merits is AFFIRMED. Costs
against petitioners
Acme vs CA
FACTS:
Chua Pac, president and general manager of Acme Shoe, Rubber and
Plastic Corporation, executed a chattel mortgage in favor of
Producers Bank of the Philippines, as a security for a corporate loan
in the amount of P3M. The chattel mortgage contained a clause that
provided for the mortgage to stand as security for all other
obligations contracted before, during and after the constitution of the
mortgage.
The P3M was paid. Subsequently, the corporation obtained
additional financial accommodations totalling P2.7M. This was also
paid on the due date. Again, the bank extended another loan to the
corporation in the amount of P1M, covered by four promissory
notes. However, the corporation was unable to pay this at maturity.
Thereupon, the bank applied for an extra-judicial foreclosure of
mortgage.
For its part, the corporation filed an action for injunction with prayer
for damages. The lower court ultimately dismissed the case and
ordered the extra-judicial foreclosure of mortgage. Hence, this
appeal.
ISSUEs:
o W/N extra-judicial foreclosure of the chattel mortgage is proper
o If not proper, W/N the corporation is entitled to damages as a result
of the extra-judicial foreclosure
HELD:
Contracts of Security
Contracts of security are either personal or real. In contracts of
personal security, such as a guaranty or suretyship, the faithful
performance of the obligation by the principal debtor is secured by
the personal commitment of another (the guarantor or surety). In
contracts of real security, such as a pledge, a mortgage or an
antichresis, that fulfillment is secured by an encumbrance of property
-- in pledge, the placing of movable property in the possession of the
creditor; in chattel mortgage by the execution of the corresponding
and substantially in teh form prescribed by law; in real estate
mortgage, by the execution of a public instrument encumbering the
real property covered thereby; and in antichresis, by a written
instrument granting to the creditor the right to receive the fruits of an
immovable property with the obligation to apply such fruits to the
payment of interest, if owing, and thereafter to the principal of his
credit -- upon the essential condition that if the obligation becomes
due and the debtor defaults, then the property encumbered can be
alienated for the payment of the obligation, but that should the
obligation be duly paid, then the contract is automatically
extinguished proceeding from the accessory character of the
agreement. As the law so puts it, once the obligation is complied
with, then the contract of security becomes, ipso facto, null and void.
After-incurred Obligations
While a pledge, real estate mortgage, or antichresis may exceptionaly
secure after-incurred obligations so long as these future debts are
accurately described, a chattel mortgage, however, can only cover
obligations existing at the time the mortgage is constituted. Although
a promise expressed in a chattel mortgage to include debts that are
yet to be contracted can be a binding commitment that can be
compelled upon, the security itself, however, does not come into
existence or arise until after a chattel mortgage agreement covered
the newly contracted debt is executed either by concluding a fresh
chattel mortgage or by amending the old contract conformably with
the Chattel Mortgage Law. Refusal on the part of borrower to
execute the agreement so as to cover the after-incurred obligation
can constitute as an act of default on the part of the borrower of the
financing agreement wherein the promise is written, but, of course,
the remedy of foreclosure can only cover the debts extant at the time
of constitution and during the life of the chattel mortgage sought to
be foreclosed.
In the case at bar, the chattel mortgage was terminated when
payment for the P3M loan was made so there was no chattel
mortgage to even foreclose at the time the bank instituted the extra-
judicial foreclosure.
PEOPLE vs. CONCEPCION, 44 Phil. 126
FACTS: Venancio Concepcion, President of the Philippine National
Bank and a member of the Board thereof, authorized an extension of
credit in favor of "Puno y Concepcion, S. en C.” to the manager of
the Aparri branch of the Philippine National Bank. "Puno y
Concepcion, S. en C." was a co-partnership where Concepcion is a
partner. Subsequently, Concepcion was charged and found guilty in
the Court of First Instance of Cagayan with violation of section 35 of
Act No. 2747. Section 35 of Act No. 2747 provides that the National
Bank shall not, directly or indirectly, grant loans to any of the
members of the board of directors of the bank nor to agents of the
branch banks. Counsel for the defense argue that the documents of
record do not prove that authority to make a loan was given, but only
show the concession of a credit. They averred that the granting of a
credit to the co-partnership "Puno y Concepcion, S. en C." by
Venancio Concepcion, President of the Philippine National Bank, is
not a "loan" within the meaning of section 35 of Act No. 2747.
ISSUE: Whether or not the granting of a credit of P300,000 to the
co-partnership "Puno y Concepcion, S. en C." by Venancio
Concepcion, President of the Philippine National Bank, a "loan"
within the meaning of section 35 of Act No. 2747.
HELD: The Supreme Court ruled in the affirmative. The "credit" of
an individual means his ability to borrow money by virtue of the
confidence or trust reposed by a lender that he will pay what he may
promise. A "loan" means the delivery by one party and the receipt by
the other party of a given sum of money, upon an agreement, express
or implied, to repay the sum loaned, with or without interest. The
concession of a "credit" necessarily involves the granting of "loans"
up to the limit of the amount fixed in the "credit,"
HERRERA VS. PETROPHIL
FACTS: On December 5, 1969, the plaintiff-appellant and ESSO
Standard Eastern. Inc., (later substituted by Petrophil Corporation)
entered into a "Lease Agreement" whereby the former leased to the
latter a portion of his property for a period of twenty (20) years from
said date, subject to the following conditions that the lessee shall pay
the lessor a rental of P2,930.20 per month provided that the latter is
paid 8 years advance rental discounted at 12% interest per annum a
total net amount of P130, 288.70 before registration of lease. On
December 31, 1969, pursuant to the said contract, the defendant-
appellee paid to the plaintfff-appellant advance rentals for the first
eight years, subtracting therefrom the amount of P101,010.73, the
amount it computed as constituting the interest or discount for the
first eight years, in the total sum P180,288.47. On August 20, 1970,
the defendant-appellee, explaining that there had been a mistake in
computation, paid to the appellant the additional sum of P2,182.70,
thereby reducing the deducted amount to only P98,828.03.
STATEMENT OF THE CASE: On October 14, 1974, the plaintiff-
appellant sued the defendant-appellee for the sum of P98,828.03,
with interest, claiming this had been illegally deducted from him in
violation of the Usury Law. He also prayed for moral damages and
attorney's fees. In its answer, the defendantappellee admitted the
factual allegations of the complaint but argued that the amount
deducted was not usurious interest but a given to it for paying the
rentals in advance for eight years. Judgment on the pleadings was
rendered for the defendant. Plaintiff-appellant now prays for a
reversal of that judgment, insisting that the lower court erred in the
computation of the interest collected out of the rentals paid for the
first eight years; that such interest was excessive and violative of the
Usury Law; and that he had neither agreed to nor accepted the
defendant-appellant's computation of the total amount to be deducted
for the eight years advance rentals. The thrust of the plaintiff-
appellant's position is set forth in paragraph 6 of his complaint,
which read: 6. The interest collected by defendant out of the rentals
for the first eight years was excessive and beyond that allowable by
law, because the total interest on the said amount is only P33,755.90
at P4,219.4880 per yearly rental; and considering that the interest
should be computed excluding the first year rental because at the
time the amount of P281, 199.20 was paid it was already due under
the lease contract hence no interest should be collected from the
rental for the first year, the amount of P29,536.42 only as the total
interest should have been deducted by defendant from the sum of
P281,299.20. The defendant maintains that the correct amount of the
discount is P98,828.03 and that the same is not excessive and above
that allowed by law. Hence, this appeal.
ISSUES: Whether or not the contract entered into by the parties is on
of loan or lease Whether or not the defendant violated the usury law
RULING: 1. As its title plainly indicates, the contract between the
parties is one of lease and not of loan. It is clearly denominated a
"LEASE AGREEMENT." Nowhere in the contract is there any
showing that the parties intended a loan rather than a lease. The
provision for the payment of rentals in advance cannot be construed
as a repayment of a loan because there was no grant or forbearance
of money as to constitute an indebtedness on the part of the lessor.
On the contrary, the defendant-appellee was discharging its
obligation in advance by paying the eight years rentals, and it was for
this advance payment that it was getting a rebate or discount. The
provision for a discount is not unusual in lease contracts. As to its
validity, it is settled that the parties may establish such stipulations,
clauses, terms and condition as they may want to include; and as
long as such agreements are not contrary to law, morals, good
customs, public policy or public order, they shall have the force of
law between them 2. There is no usury in this case because no
money was given by the defendant-appellee to the plaintiff-appellant,
nor did it allow him to use its money already in his possession. There
was neither loan nor forbearance but a mere discount which the
plaintiff-appellant allowed the defendant-appellee to deduct from the
total payments because they were being made in advance for eight
years. The discount was in effect a reduction of the rentals which the
lessor had the right to determine, and any reduction thereof, by any
amount, would not contravene the Usury Law. The difference
between a discount and a loan or forbearance is that the former does
not have to be repaid. The loan or forbearance is subject to
repayment and is therefore governed by the laws on usury. To
constitute usury, "there must be loan or forbearance; the loan must be
of money or something circulating as money; it must be repayable
absolutely and in all events; and something must be exacted for the
use of the money in excess of and in addition to interest allowed by
law." It has been held that the elements of usury are (1) a loan,
express or implied; (2) an understanding between the parties that the
money lent shall or may be returned; that for such loan a greater rate
or interest that is allowed by law shall be paid, or agreed to be paid,
as the case may be; and (4) a corrupt intent to take more than the
legal rate for the use of money loaned. Unless these four things
concur in every transaction, it is safe to affirm that no case of usury
can be declared.
Saura Import &Export Co., Inc v. DBP G.R. No.
L-24968 April 27, 1972
Facts: Saura Inc. applied to the Rehabilitation Finance Corp (before
its conversion to DBP) for a loan of 500k secured by a first 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: Was there a perfected consensual contract? Was there a real
contract of loan which would warrant recovery of damages arising
out of breach of such contract?
Held: On the first issue, yes, there was indeed a perfected consensual
contract, as recognized in Article 1934 of the Civil Code. There was
undoubtedly offer and acceptance in this case: the application of
Saura, Inc. for a loan of P500,000.00 was approved by resolution of
the defendant, and the corresponding mortgage was executed and
registered. But this fact alone falls short of resolving the second issue
and the basic claim that the defendant failed to fulfill its obligation
and the plaintiff is therefore entitled to recover damages. The action
thus taken by both parties—Saura's request for cancellation and
RFC's subsequent approval of such cancellation—was in the nature
of mutual desistance — what Manresa terms "mutuodisenso"—
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
SHORT TITLE: Bonnevie vs. CA
FACTS: Jose M. Lozano and Josefa P. Lozano (Lozano spouses)
were the owners of the property which they mortgaged to secure
payment of the loan amounting to P75,000 from Philippine Bank of
Commerce (PBC). Thereafter, they executed in favor of Honesto
Bonnevie (Honesto) the Deed of Sale with Mortgage for and in
consideration of P100,000, P25,000 of which being payable to the
Lozano spouses upon execution of the document and the balance of
P75,000 being payable to PBC. Honesto made payments amounting
to P18, 944.22 only and subsequently assigned all his rights under
the Deed of Sale with Assumption of Mortgage to his brother,
intervenor Raoul Bonnevie (Raoul). Consequently, PBC applied for
the foreclosure of the mortgage and notice of sale was duly published
in accordance with the statutory requirements. Auction sale was
conducted and the property was sold to PBC for P84,387. Honesto
failed then to repurchase the property. Three years after, Honesto
filed a complaint against PBC for the annulment of the Deed of
Mortgage and the extrajudicial foreclosure on the following grounds:
1) lack of consideration; and 2) mortgage was executed by the one
who was not the owner of the mortgaged property. STATEMENT
OF THE CASE: The RTC and CA both dismissed the complaint
upholding the validity of the Deed of Mortgage and extrajudicial
foreclosure.
ISSUE: Whether or not the Deed of Mortgage and extrajudicial
foreclosure are valid.
RULING: Yes, the Deed of Mortgage and extrajudicial foreclosure
are valid. The ground of lack of consideration is devoid of merit
because when the contract of mortgage was executed, the contract of
loan was already perfected because of its consensual character. Also,
Honesto cannot validly claim that the Lozano spouses do not own
said property. Bonnevies did not secure the consent of PBC to the
sale with Assumption of Mortgage and that said sale was not
registered. As a result, the title remained in the name of the Lozano
spouses and therefore, could mortgage said property. PBC had every
right to rely on the certificate of title applying the Doctrine of
Innocent Purchaser of Value. Since the title remains with the
spouses, the Bonnevies need not be notified of the foreclosure sale as
they did not notify PBC of said sale with Assumption of Mortgage
and as such, do not have the right to redeem the property.
Central Bank vs CA
The bank’s asking for advance interest for the loan is improper
considering that the total loan hasn’t been released. A person can’t
be charged interest for nonexisting debt. The alleged discovery by
the bank of overvaluation of the loan collateral is not an
issue. Since Island Savings Bank failed to furnish the P63,000.00
balance of the P80,000.00 loan, the real estate mortgage of
Sulpicio M. Tolentino became unenforceable to such extent.
Facts: 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. The loan called for a lump sum of
P80,000, repayable in semi-annual installments for 3 yrs, with 12%
annual interest. After the agreement, a mere P17K partial release of
the loan was made by the bank and Tolentino and his wife signed a
promissory note for the P17,000 at 12% annual interest payable w/in
3 yrs. An advance interest was deducted fr the partial release but this
prededucted interest was refunded to Tolentino after being informed
that there was no fund yet for the release of the P63K balance.
Monetary Board of Central Bank, after finding that bank was
suffering liquidity problems, prohibited the bank fr making new
loans and investments. And after the bank failed to restore its
solvency, the Central Bank prohibited Island Savings Bank from
doing business in the Philippines. Island Savings Bank in view of the
non-payment of the P17K filed an application for foreclosure of the
real estate mortgage. Tolentino filed petition for specific
performance or rescission and damages with preliminary injunction,
alleging that since the bank failed to deliver P63K, he is entitled to
specific performance and if not, to rescind the real estate mortgage.
Issues: 1) Whether or not Tolentino’s can collect from the bank for
damages
2) Whether or not the mortgagor is liable to pay the amount
covered by the promissory note
3) Whether or not the real estate mortgage can be foreclosed
Held:
1) Whether or not Tolentino’s can collect from the bank for damages
The loan agreement implied reciprocal obligations. When one party
is willing and ready to perform, the other party not ready nor willing
incurs in delay. When Tolentino executed real estate mortgage, he
signified willingness to pay. That time, the bank’s obligation to
furnish the P80K loan accrued. Now, the Central Bank resolution
made it impossible for the bank to furnish the P63K balance. The
prohibition on the bank to make new loans is irrelevant bec it did not
prohibit the bank fr releasing the balance of loans previously
contracted. Insolvency of debtor is not an excuse for non-fulfillment
of obligation but is a breach of contract.
The bank’s asking for advance interest for the loan is improper
considering that the total loan hasn’t been released. A person can’t
be charged interest for nonexisting debt. The alleged discovery by
the bank of overvaluation of the loan collateral is not an issue. The
bank officials should have been more responsible and the bank bears
risk in case the collateral turned out to be overvalued. Furthermore,
this was not raised in the pleadings so this issue can’t be raised. The
bank was in default and Tolentino may choose bet specific
performance or rescission w/ damages in either case. But considering
that the bank is now prohibited fr doing business, specific
performance cannot be granted. Rescission is the only remedy left,
but the rescission shld only be for the P63K balance.
2) Whether or not the mortgagor is liable to pay the amount covered
by the promissory note
The promissory note gave rise to Sulpicio M. Tolentino’s reciprocal
obligation to pay the P17,000.00 loan when it falls due. 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. If
Tolentino had not signed a promissory note setting the date for
payment of P17,000.00 within 3 years, he would be entitled to ask
for rescission of the entire loan because he cannot possibly be in
default as there was no date for him to perform his reciprocal
obligation to pay. Since both parties were in default in the
performance of their respective reciprocal obligations, that is, Island
Savings Bank failed to comply with its obligation to furnish the
entire loan and Sulpicio M. Tolentino failed to comply with his
obligation to pay his P17,000.00 debt within 3 years as stipulated,
they are both liable for damages.
3) Whether or not the real estate mortgage can be foreclosed
Since Island Savings Bank failed to furnish the P63,000.00 balance
of the P80,000.00 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.
REPUBLIC v. BAGTAS, 116 SCRA 262
FACTS: On May 8, 1948, Jose Bagtas borrowed from the Bureau of
Animal Industry three bulls for one year for breeding purposes upon
payment of a breeding fee of 10% of the book value of the bulls.
After one year, the contract was renewed but only for one bull.
Bagtas offered to buy the bulls at book value less depreciation, but
the Bureau told him that he should either return the bulls or pay for
their book value. Bagtas failed to pay the book value, so the
Republic filed an action with the CFI Manila to order the return of
the bulls or the payment of the book value. Felicidad Bagtas, the
surviving spouse and administratrix of the decedent’s estate, said that
the two bulls have already been returned in 1952, and that the
remaining one died of gunshot during a Huk raid. It was established
that the two bulls were returned, thus, there is no more obligation on
the part of Bagtas. With regards the bull not returned, Felicidad
maintained that the obligation is extinguished since the contract is
that of a commodatum and that the loss through fortuitous event
should be borne by the owner.
ISSUE: Whether or not the contract entered into between Bagtas and
the Republic is that of commodatum making Bagtas not liable for the
death of the bull.
HELD: A contract of commodatum is essentially gratuitous. If the
breeding fee be considered compensation, then the contract would be
a lease of the bull. Under article 1671 of the Civil Code the lessee
would be subject to the responsibilities of a possessor in bad faith
because she had continued possession of the bull after the expiry of
the contract. Even if the contract be commodatum, still Bagtas is
liable because article 1942 of the Civil Code provides that a bailee in
a contract of commodatum is liable for loss of the things even if it
should be through a fortuitous event if he keeps it longer than the
period stipulated or if the thing loaned has been delivered with
appraisal of its value, unless there is a stipulation exempting the
bailee from responsibility in case of a fortuitous event. The loan of
one bull was renewed for another period of one year but Bagtas kept
and used the bull more than one year where during a Huk raid it was
killed by stray bullets. Furthermore, when lent and delivered to the
deceased husband of Bagtas, the bulls had each an appraised book
value. 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.
I. SHORT TITLE: MINA vs. PASCUAL
FACTS • Francisco and Andres Fontanilla were brothers. Francisco,
during his lifetime, acquired a parcel of land in Laoag, Ilocos Norte
on which Andres built a warehouse, with the consent of the former. •
Upon Andres’ death, respondent Ruperta Pascual, as the
representative of her children, was considered to be entitled to the
warehouse built by Andres, more specifically, sixsevenths of one-
half of the warehouse. V.
STATEMENT OF THE CASE • On May 6, 1909, Ruperta filed a
petition before the Court of First Instance of Ilocos Norte asking for
authorization to sell six-sevenths of one-half of the warehouse
including the lot on which it was built. • The petition was opposed by
herein plaintiffs Alejandra Mina, et al. and they requested the court
to pass judgment on the ownership of the land. But before it rendered
judgment regarding the ownership of the land, the court ordered the
sale of the warehouse and the lot at a price of not less than P2,890.
The buyer was Cu Joco who is one of the defendants in this case. •
Thereafter, the court ruled that the land belonged to the warehouse
but this decision was later on reversed by the Supreme Court. Upon
finality of the decision, the plaintiffs were given possession of the lot
but it was then annulled because the Court held that the said decision
affected the rights of Cu Joco. • The present petition seeks to declare
the sale of the land null and void. The following was agreed upon by
the parties: “9. That the herein plaintiffs excepted to the judgment
and appealed therefrom to the Supreme Court which found for them
by holding that they are the owners of the lot in question, although
there existed and still exists a commodatum by virtue Loan 14 of
which the guardianship (meaning the defendants) had and has the
use, and the plaintiffs the ownership, of the property, with no finding
concerning the decree of the lower court that ordered the sale.”
VI. ISSUE WON the agreement between Francisco and Andres
Fontanilla is that of a contract of commodatum.
VII. RULING NO. Although the parties have agreed upon the idea of
commodatum, “that denomination given by them to the use of the lot
granted” by Franciso to Andres is not applicable. Article 1740
provides that “By the contract of loan, one of the parties delivers to
the other, either anything not perishable, in order that the latter may
use it during the certain period and return it to the former, in which
case it is called commodatum…” It is essential that the use of a thing
which belongs to another be for a certain period. In this case,
however, Francisco did not fix any period as to the length of time
within which Andres could use the lot where the latter built his
warehouse. Therefore, the question should be decided in accordance
with the laws on accessions to real estate then in effect. Laws 41 and
42, title 28, of the third Partida which is identical to the provisions of
article 361 and 362 of the Civil Code, the owner of the land on which
a building is constructed in good faith has a right to appropriate the
building to himself after payment of indemnity or to oblige the
builder to pay him the value of the land.
Abella v. Abella (GR 195166)
In a loan or forbearance of money, according to the Civil Code, the
interest due should be that stipulated in writing, and in the absence
thereof, the rate shall be 12% per annum.
Recently, however, the BangkoSentral ng Pilipinas amending
Section 2 of Circular No. 905, Series of 1982:
Section 1. The rate of interest for the loan or forbearance of any
money, goods or credits and the rate allowed in judgments, in the
absence of an express contract as to such rate of interest, shall be six
percent (6%) per annum.
This Circular shall take effect on 1 July 2013.
FACTS: Petitioners alleged that respondents obtained a loan from
them in the amount of P500,000.00. The loan was evidenced by an
acknowledgment receipt dated March 22, 1999 and was payable
within one (1) year. Petitioners added that respondents were able to
pay a total of P200,000.00—P100,000.00 paid on two separate
occasions—leaving an unpaid balance of P300,000.00.
On March 22, 1999, respondents executed an acknowledgment
receipt to petitioners, which states:
This is to acknowledge receipt of the Amount of Five Hundred
Thousand (P500,000.00) Pesos from Mrs. Alma R. Abella, payable
within one (1) year from date hereof with interest.
Annie C. Abella (sgd.) Romeo M. Abella (sgd.
In their Answer, respondents alleged that the amount involved did not
pertain to a loan they obtained from petitioners but was part of the
capital for a joint venture involving the lending of money.
Specifically, respondents claimed that they were approached by
petitioners, who proposed that if respondents were to "undertake the
management of whatever money [petitioners] would give them,
[petitioners] would get 2.5% a month with a 2.5% service fee to
[respondents]." The 2.5% that each party would be receiving
represented their sharing of the 5% interest that the joint venture was
supposedly going to charge against its debtors. Respondents further
alleged that the one year averred by petitioners was not a deadline
for payment but the term within which they were to return the money
placed by petitioners should the joint venture prove to be not
lucrative. Moreover, they claimed that the entire amount of
P500,000.00 was disposed of in accordance with their agreed terms
and conditions and that petitioners terminated the joint venture,
prompting them to collect from the joint venture's borrowers. They
were, however, able to collect only to the extent of P200,000.00;
hence, the P300,000.00 balance remained unpaid.
Trial Court ruled in favor of petitioners. Ordering respondents to pay
the petitioner the sum of P300,000 with interest of 30% per annum.
The CA ruled that while respondents had indeed entered into a
simple loan with petitioners, respondents were no longer liable to
pay the outstanding amount of P300,000.00.CA noted that while the
acknowledgement receipt showed that interest was to be charged, no
particular interest rate was specified.Thus, at the time respondents
were making interest payments of 2.5% per month, these interest
payments were invalid for not being properly stipulated by the
parties. Since petitioners' charging of interest was invalid, the Court
of Appeals reasoned that all payments respondents made by way of
interest should be deemed payments for the principal amount of
P500,000.00.aThe Court of Appeals further noted that respondents
made a total payment of P648,500.00, which, as against the principal
amount of P500,000.00, entailed an overpayment of P148,500.00.
Applying the principle of solutioindebiti, the Court of Appeals
concluded that petitioners were liable to reimburse respondents for
the overpaid amount of P148,500.
ISSUE 1.WON the party entered into a simple loan or mutuum as
agreement?
2. Whether interest accrued on respondents' loan from
petitioners, If so, at what rate?
RULING:
1. As noted by the CA and RTC, respondents entered into a simple
loan or mutuum, rather than a joint venture, with petitioners.
Art. 1933. By the contract of loan, one of the parties delivers to
another, either something not consumable so that the latter may use
the same for a certain time and return it, in which case the contract is
called a commodatum; or money or other consumable thing, upon
the condition that the same amount of the same kind and quality
shall be paid, in which case the contract is simply called a loan or
mutuum.
Commodatum is essentially gratuitous.
Simple loan may be gratuitous or with a stipulation to pay interest.
In commodatum the bailor retains the ownership of the thing loaned,
while in simple loan, ownership passes to the borrower.
Art. 1953. A person who receives a loan of money or any other
fungible thing acquires the ownership thereof, and is bound to pay to
the creditor an equal amount of the same kind and quality.
2.12% per annum. In a loan or forbearance of money, according to
the Civil Code, the interest due should be that stipulated in writing,
and in the absence thereof, the rate shall be 12% per annum.
Recently, however, the BangkoSentral ng PilipinasMonetary Board,
approved the following revisions governing the rate of interest in the
absence of stipulation in loan contracts, thereby amending Section 2
of Circular No. 905, Series of 1982:LawlibraryofCRAlaw
ChanRoblesVirtualawlibrary
Section 1. The rate of interest for the loan or forbearance of any
money, goods or credits and the rate allowed in judgments, in the
absence of an express contract as to such rate of interest, shall be six
percent (6%) per annum.
This Circular shall take effect on 1 July 2013.
Applying this, the loan obtained by respondents from petitioners is
the conventional interest at the rate of 12% per annum, the legal rate
at the time the parties executed their agreement. Proceeding from
these premises, we find that respondents made an overpayment in the
amount of P3,379.17.
Petitioners Spouses Salvador and Alma Abella are DIRECTED to
jointly and severally reimburse respondents Spouses Romeo and
Annie Abella the amount of P3,379.17, which respondents have
overpaid.
Catholic Vicar Apostolic Inc. of the Mt. Province vs. CA
Facts:
- 1962: Catholic Vicar Apostolic of the Mountain Province (Vicar),
petitioner, filed with the court an application for the registration of
title over lots 1, 2, 3 and 4 situated in Poblacion Central, Benguet,
said lots being used as sites of the Catholic Church, building,
convents, high school building, school gymnasium, dormitories,
social hall and stonewalls.
- 1963: Heirs of Juan Valdez and Heirs of EgmidioOctaviano
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, EgmidioOctaviano; 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 EgmidioOctaviano 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
EgmidioOctaviano by petitioner Vicar because there was absolutely
no documentary evidence to support the same and the alleged
purchases were never mentioned in the application for registration.
QUINTOS VS BECK 69 PHIL 108
Facts:
Quintos and Beck entered into a contract of lease, whereby the latter
occupied the former’s house. On Jan 14, 1936, the contract of lease
was novated, wherein the Quintos gratuitously granted to Beck
the use of the furniture, subject to the condition that Beck should return the
furnitures to Quintos upon demand. Thereafter, Quintos sold the property
to Maria and Rosario Lopez. Beck was notified of the conveyance
and given him 60 days to vacate the premises. In addition, Quintos
required Beck to return all the furniture. Beck refused to return 3 gas heaters and 4
electric lamps since he would use them until the lease was due to expire. Quintos
refused to get the furniture since Beck had declined to return all of them. Beck
deposited all the furniture belonging to Q#intos to the sheriff.
ISSUE: WON
Beck complied with his obligation of returning the furnitures to Quintos when it
deposited the furnitures to the sheriff.
RULING:
&he contract entered into between the parties is one of
commadatum
,because under it the plaintiff gratuitously $ranted the use of the furniture to the
defendant, reserving for herself the ownership thereof2 by this
contract the defendant bound himself to return the furniture to the plaintiff, upon
the lattersdemand (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 thefurniture upon the plaintiff’s
demand, means that he should return all of them to theplaintiff at the latter’s
residence or house. The defendant did not comply with thisobligation when he
merely placed them at the disposal of the plaintiff, retaining forhis
benefit the three gas heaters and the four electric lamps. As the defendant had
voluntarily undertaken to return all the furniture to theplaintiff, upon the
latter’s demand, the Court could not legally compel her to bearthe
expenses occasioned by the deposit of the furniture at the defendant’s behest. &
the latter, 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.
Cebu International Corp. vs. CA
TOPIC: Article 1249 of the Civil Code - The payment of debts in
money shall be made in the currency stipulated, and if it is not
possible to deliver such currency, then in the currency, which is legal
tender in the Philippines.
IV. STATEMENT OF FACTS: • Petitioner is a quasi-banking
institution involved in money market transactions. Alegre invested
with petitioner P500, 000. • Petitioner issued then a promissory note,
which would mature approximately after a month. • The note
covered for Alegre’s placement plus interest. On the maturity of the
note, petitioner issued a check payable to Alegre, covering the whole
amount due. It was drawn from petitioner’s current account in BPI. •
When the wife of Alegre tried to deposit the check, the bank
dishonored the check. • Petitioner was notified of this matter and
Alegre demanded the immediate payment in cash. In turn, petitioner
promised to replace the check on the impossible premise that the first
issued be returned to them. • This prompted Alegre to file a
complaint against petitioner and petitioner in turn, filed a case
against BPI for allegedly unlawfully deducting from its account
counterfeit checks. • The trial court decided in favor of Alegre. V.
STATEMENT OF THE CASE: On September 27, 1993, RTC-
Makati, Branch 132, rendered judgment in favor of Vicente Alegre.
CIFC appealed from the adverse decision of the trial court. The
respondent court affirmed the decision of the trial court. Hence this
appeal, in which petitioner interposes the following assignments of
errors: • The Honorable Court of Appeals erred in affirming the
finding of the Honorable Trial Court holding that petitioner was not
discharged from the liability of paying the value of the subject check
to private respondent after BPI has debited the value thereof against
petitioner's current account. • The Honorable Court of Appeals erred
in applying the provisions of paragraph 2 of Article 1249 of the Civil
Code in the instant case. The applicable law being the Negotiable
Instruments Law. • The Honorable Court of Appeals erred in
affirming the Honorable Trial Court's findings that the petitioner was
guilty of negligence and delay in the performance of its obligation to
the private respondent. • The Honorable Court of Appeals erred in
affirming the Honorable Trial Court's decision ordering petitioner to
pay legal interest and the cost of suit. • The Honorable Court of
Appeals erred in affirming the Honorable Trial Court's dismissal of
petitioner's third-party complaint against BPI. VI. ISSUE: • Whether
or not the BPI check was validly discharged
VII. RULING: • NO • Considering the nature of the money market
transaction, Article 1249 of the Civil Code is the applicable
provision should be applied. A money market has been defined to be
a market dealing in standardized short-term credit instruments where
lenders and borrowers don’t deal directly with each other but through
a middleman or dealer in the open market. In a money market
transaction, the investor is the lender who loans his money to a
borrower through a middleman or dealer. • In the case at bar, the
transaction is in the nature of a loan. Petitioner accepted the check
but when he tried to encash it, it was dishonored. The holder has an
immediate recourse against the drawer, and consequently could
immediately file an action for the recovery of the value of the check.
• Furthermore, in a loan transaction, the obligation to pay a sum
certain in money may be paid in money, which is the legal tender or,
by the use of a check. A check is not legal tender, and therefore
cannot constitute valid tender of payment.
SHORT TITLE: Tolentino vs Gonzalez
STATEMENT OF FACTS: Sometime prior to the 28th day of
November, 1922, the appellants purchased of the Luzon Rice Mills,
Inc., a piece or parcel of land with the camarin located thereon,
situated in the municipality of Tarlac of the Province of Tarlac for
the price of P25,000, promising to pay therefor in three installments.
One of the conditions of that contract of purchase was that on failure
of the purchaser (plaintiffs and appellants) to pay the balance of said
purchase price or any of the installments on the date agreed upon, the
property bought would revert to the original owner. The payments
due on the 2nd and 31st of May, 1921, amounting to P10,000 were
paid so far as the record shows upon the due dates. The balance of
P15,000 due on said contract of purchase was paid on or about the
1st day of December, 1922, in the manner which will be explained
below. On the date when the balance of P15,000 with interest was
paid, the vendor of said property had issued to the purchasers
transfer certificate of title to said property, No. 528. Said transfer
certificate of title (No. 528) was transfer certificate of title from No.
40, which shows that said land was originally registered in the name
of the vendor on the 7th day of November, 1913. On the 7th day of
November, 1922 the representative of the vendor of the property in
question wrote a letter to the appellant Potenciana Manio (Exhibit A,
p. 50), notifying the latter that if the balance of said indebtedness
was not paid, an action would be brought for the purpose of
recovering the property, together with damages for non compliance
with the condition of the contract of purchase. According to Exhibits
B and D, which represent the account rendered by the vendor, there
was due and payable upon said contract of purchase on the 30th day
of November, 1922, the sum P16,965.09. Upon receiving the letter of
the vendor of said property of November 7, 1922, the purchasers, the
appellants herein, realizing that they would be unable to pay the
balance due, began to make an effort to borrow money with which to
pay the balance due, began to make an effort to borrow money with
which to pay the balance of their indebtedness on the purchase price
of the property involved. Finally an application was made to the
defendant for a loan for the purpose of satisfying their indebtedness
to the vendor of said property. After some negotiations the
defendants agreed to loan the plaintiffs to loan the plaintiffs the sum
of P17,500 upon condition that the plaintiffs execute and deliver to
him a pacto de retro of said property. In accordance with that
agreement the defendant paid to the plaintiffs by means of a check
the sum of P16,965.09. The defendant, in addition to said amount
paid by check, delivered to the plaintiffs the sum of P354.91 together
with the sum of P180 which the plaintiffs paid to the attorneys for
drafting said contract of pacto de retro, making a total paid by the
defendant to the plaintiffs and for the plaintiffs of P17,500 upon the
execution and delivery of said contract.
STATEMENT OF THE CASE: In September 1983, two (2)
complaints for Estafa were filed against the petitioner before the
Municipal Circuit Trial Court at Guimbal, Iloilo, docketed as
Criminal Case Nos. 628 and 631.After trial in Criminal Case No.
628, the Municipal Circuit Trial Court rendered a decision which
finds that the accused, Yong Chan Kim is guilty beyond reasonable
doubt for the crime of Loan 38 Estafa penalized under paragraph l(b)
of Article 315, Revised Penal Code. Petitioner appealed from the
decision of the Municipal Circuit Trial Court in Criminal Case No.
628. On 30 July 1987, the Regional Trial Court in Iloilo City in
Criminal Case No. 20958 affirmed in toto the trial court's decision.
The Regional Trial Court which ordered the elevation of the records
of the case to the then Intermediate Appellate Court. On 30 October
1987, petitioner filed with the appellate court a petition for review.
As earlier stated, on 29 April 1988, the Court of Appeals dismissed
the petition for having been filed out of time. Petitioner's motion for
reconsideration was denied for lack of merit
ISSUE: I. Whether the contract is one of a loan or pacto de retro, II.
If the contract is really a loan, whether the rent can be considered
usurious
RULING: In the present case the plaintiffs allege in their complaint
that the contract in question is a pacto de retro. They admit that they
signed it. They admit they sold the property in question with the right
to repurchase it. The terms of the contract quoted by the plaintiffs to
the defendant was a "sale" with pacto de retro, and the plaintiffs have
shown no circumstance whatever which would justify us in
construing said contract to be a mere "loan" with guaranty. In every
case in which this court has construed a contract to be a mortgage or
a loan instead of a sale with pacto de retro, it has done so, either
because the terms of such contract were incompatible or inconsistent
with the theory that said contract was one of purchase and sale. In
the present case the property in question was sold. It was an absolute
sale with the right only to repurchase. During the period of
redemption the purchaser was the absolute owner of the property.
During the period of redemption the vendor was not the owner of the
property. During the period of redemption the vendor was a tenant of
the purchaser. During the period of redemption the relation which
existed between the vendor and the vendee was that of landlord and
tenant. That relation can only be terminated by a repurchase of the
property by the vendor in accordance with the terms of the said
contract. The contract was one of rent. The contract was not a loan,
as that word is used in Act No. 2655. As obnoxious as contracts of
pacto de retro are, yet nevertheless, the courts have no right to make
contracts for parties. They made their own contract in the present
case. There is not a word, a phrase, a sentence or paragraph, which in
the slightest way indicates that the parties to the contract in question
did not intend to sell the property in question absolutely, simply with
the right to repurchase. People who make their own beds must lie
thereon. What has been said above with reference to the right to
modify contracts by parol evidence, sufficiently answers the third
questions presented above. The language of the contract is explicit,
clear, unambiguous and beyond question. It expresses the exact
intention of the parties at the time it was made. There is not a word, a
phrase, a sentence or paragraph found in said contract which needs
explanation. The parties thereto entered into said contract with the
full understanding of its terms and should not now be permitted to
change or modify it by parol evidence.
SHORT TITLE:REPUBLIC V. GRIJALDO
STATEMENT OF FACTS: In the year 1943 appellant Jose Grijaldo
obtained five loans from the branch office of the Bank of Taiwan,
Ltd. in Bacolod City, in the total sum of P1,281.97 with interest at
the rate of 6% per annum, compounded quarterly. These loans are
evidenced by five promissory notes executed by the appellant in
favor of the Bank of Taiwan, Ltd. To secure the payment of the loans
the appellant executed a chattel mortgage on the standing crops on
his land, Lot No. 1494 known as Hacienda Campugas in Hinigiran,
Negros Occidental. By virtue of Vesting Order No. P-4, dated
January 21, 1946, and under the authority provided for in the
Trading with the Enemy Act, 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. These assets were among the
properties that were placed under the administration of the Board
of Liquidators. On September 29, 1954 the appellee, 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 the account in question. The record
shows that the appellant had actually received the written demand
for payment, but he failed to pay. The aggregate amount due as
principal of the five loans in question, as of the time that the loans
were incurred in 1943, was P889.64; and the interest due thereon
at the rate of 6% per annum compounded quarterly, computed as
of 1959 was P2,377.23.
STATEMENT OF THE CASE: The appellee filed a complaint in the
Justice of the Peace Court of Hinigaran, Negros Occidental, to
collect from the appellant the unpaid account in question. The
Justice of the Peace of Hinigaran, after hearing, dismissed the case
on the ground that the action had prescribed. The appellee
appealed to the Court of First Instance of Negros Occidental and the
court a quo rendered a decision ordering the appellant to pay the
appellee the sum of P2,377.23, plus interest at the rate of 6% per
annum compounded quarterly from the date of the filing of the
complaint until full payment was made. Loan 53 The appellant
appealed directly to this Court. During the pendency of this appeal
the appellant Jose Grijaldo died. Upon motion by the Solicitor
General this Court, the legal heirs of Jose Grijaldo to appear and be
substituted as appellants.
ISSUE: Whether or not the appellant are correct in saying that the
appellee has no cause of action, that because the loans were
secured by a chattel mortgage on the standing crops on a land
owned by him and these crops were lost or destroyed through
enemy action his obligation to pay the loans was thereby
extinguished.
RULING: No, the appellants’ arguments are incorrect. The terms of
the promissory notes and the chattel mortgage that the appellant
executed in favor of the Bank of Taiwan, Ltd. do not support the
claim of appellant. The obligation of the appellant under the five
promissory notes was not to deliver a determinate thing. Rather, his
obligation was to pay a generic thing — the amount of money
representing the total sum of the five loans, with interest. The
transaction between the appellant and the Bank of Taiwan, Ltd. was
a series of five contracts of simple loan of sums of money. "By a
contract of (simple) loan, one of the parties delivers to another ...
money or other consumable thing upon the condition that the same
amount of the same kind and quality shall be paid." (Article 1933,
Civil Code). The obligation of the appellant under the five
promissory notes evidencing the loans in questions is to pay the
value thereof; that is, to deliver a sum of money — a clear case of
an obligation to deliver, a generic thing. Article 1263 of the Civil
Code provides: In an obligation to deliver a generic thing, the loss or
destruction of anything of the same kind does not extinguish the
obligation. The chattel mortgage on the crops growing on
appellant's land simply stood as a security for the fulfillment of
appellant's obligation covered by the five promissory notes, and the
loss of the crops did not extinguish his obligation to pay, because
the account could still be paid from other sources aside from the
mortgaged crops. On the other hand, the action of the appellee had
not yet prescribed. Firstly, it should be considered that the
complaint in the present case was brought by the Republic of the
Philippines not as a nominal party but in the exercise of its
sovereign functions, to protect the interests of the State over a
public property. Secondly, the running of the period of prescription
of the action to collect the loan from the appellant was interrupted
by the moratorium laws. By the appellant's own admission, the
cause of action on the five promissory notes in question arose on
June 1, 1944. The complaint in the present case was filed on January
17, 1961, or after a period of 16 years, 6 months and 16 days when
the cause of action arose. If the prescriptive period was not
interrupted by the moratorium laws, the action would have
prescribed already; but, as we have stated, the prescriptive period
was suspended by the moratorium laws for a period of 8 years and
6 months. If we deduct the period of suspension (8 years and 6
months) from the period that elapsed from the time the cause of
action arose to the time when the complaint was filed (16 years, 6
months and 16 days) there remains a period of 8 years and 16 days.
In other words, the prescriptive period ran for only 8 years and 16
days. There still remained a period of one year, 11 months and 14
days of the prescriptive period when the complaint was filed.
SONCUYA'V.'AZARRAGA
ROYAL'SHIRT'FACTORY,'INC.'v'CO
FACTS: - The'parJes'entered'into'a'contract'wherein'it'is'
sJpulated'that'350'pairs'of'ballet'shoes'will'be'sold'
by'Co'and'that'Co'had'9'days'from'delivery'of'the'
shoes'to'make'his'choice'of'2'alternaJves:'a)'
consider'the'sale'for'the'shoes'closed'at'a'flat'rate,'
or'b)'return'the'remaining'unsold'ones'to'Royal.'
- Co'failed'to'return'the'unsold'pairs'aber'9'days'and'
actually'began'making'parJal'payments'on'account'
of'the'purchase'price'agreed'upon.'
Co'then'contended'that'there'was'merely'a'
consignment'of'the'goods'and'he'wanted'to'return'
the'unsold'shoes.'Royal'refused'contending'that'it'
was'an'outright'sale.'
ISSUE:'WoN'the'sale'was'an'outright'sale'/'WoN'Co'is'bound'
by'the'interest'sJpulated'in'the'invoice.
SC:'YES!'/'NO! - OUTRIGHT'SALE' o
Co'accepted'the'invoice'of'the'ballet'shoes'
and'he'even'noted'down'in'his'own'
handwriJng'the'parJal'payments'that'he' made.' o
If'the'sale'has'been'on'consignment,'a'
sJpulaJon'as'to'the'period'of'Jme'for'the'
return'of'the'unsold'shoes'should'have'
been'made,'however,'this'was'not'done' –
NOT'BOUND'BY'THE'INTEREST' o
He'did'not'sign'the'invoice'slip'the'
sJpulated'interest'was'20%,'hence,'not' binding'' o
However,'he'is'bound'by'the'legal'interest' of'6%' -
Hence,'Co'was'ordered'to'pay'the'balance'of'the'
purchase'price'for'the'ballet'shoes'+'legal'interest'
I.SHORT TITLE: STATE INVESTMENT HOUSE, INC. VS.
CA
III. TOPIC: PAYMENT OF INTEREST
IV. STATEMENT OF FACTS: • Respondents, Spouses Rafael and
Refugia Aquino, pledged certain shares of stock to State Investment
House (State) to secure a loan of P120,000 designated as Account
No. IF-82-0631-AA. • Prior to the execution of such pledge,
respondents, as an accommodation to and together with Spouses Jose
and Marcelina Aquino, signed an agreement with State for the
latter’s purchase of receivables amounting to P375,000. •
Respondent spouses paid their loan partly from their own money and
from the proceeds of a new loan (IF-82-0904-AA) secured by the
same pledge. • Upon maturity of the new loan, petitioner demanded
payment. • Respondents expressed willingness to pay and requested
that upon payment the shares of stocks pledged be released. •
Petitioner denied the request to release the stocks because they
wanted that the loan extended to Jose and Marcelina be paid first.
V. STATEMENT OF THE CASE: Trial Court • The Trial Court
initially dismissed the complaint.
• However, in their Motion for Reconsideration, the respondents
prayed that a new decision be rendered ordering petitioner to release
the shares upon payment of respondent’s loan “without interest”
since they did not incur delay in performance. The trial court
reversed its initial decision and ordered the State to immediately
release the pledge and to deliver to respondents the share of stock
upon payment of the loan. The Court of Appeals and Supreme Court
affirmed the decision of the trial court. However, during execution,
the petitioner refused to accept the payment demanding that interests
be paid.
VI. ISSUE: Whether the respondents are liable for payment of
interest even without fault and if they are, on what rate should the
interests be?
Ruling: On the first issue, the Supreme Court ruled that the
respondents are liable for interest even though they are not in default
since they expressed willingness to pay the loan upon demand, only
that the petitioner did not want to accept it. However, mere tender of
payment is not enough because it should have been followed by
proper consignment with the court. On the second issue, the
respondents were only liable for the principal of the loan and the
stipulated regular or monetary interest of 17% per annum and not for
penalty or compensatory interest, fixed by the promissory note in
Account No. IF-82-0904-AA at 2% per month or 24% per annum.
The appropriate measure for damages in case of delay in discharging
an obligation consisting of the payment of a sum or money is the
payment of penalty interest at the rate agreed upon; and in the
absence of a stipulation of a particular rate of penalty interest, then
the payment of additional interest at a rate equal to the regular
monetary interest; and if no regular interest had been agreed upon,
then payment of legal interest or 6% per annum, or in the case of
loans or forbearances of money, 12 %per annum as provided for in
Central Bank Circular No. 416. The appropriate measure for
damages in case of delay in discharging an obligation consisting of
the payment of a sum of money is the payment of the penalty interest
at the rate agreed upon; and in the absence of a stipulation of a
particular rate of penalty interest, then the payment of additional
interest at a rate equal to the regular monetary interest, and if
noregular interest had been agreed upon, then payment of legal
interest.
Jalandoni vs Encomienda
Facts: Encomienda narrated that she met petitioner Georgia
Osmeña-Jalandoni in Cebu on October 24, 1995, when the former
was purchasing a condominium unit and the latter was the real estate
broker. Thereafter, Encomienda and Jalandoni became close friends.
On March 2, 1997, Jalandoni called Encomienda to ask if she could
borrow money for the search and rescue operation of her children in
Manila, who were allegedly taken by their father, Luis Jalandoni. All
in all, Encomienda spent around ₱3,245,836.02 and $6,638.20 for
Jalandoni.
When Jalandoni came back to Cebu on July 14, 1997, she never
informed Encomienda. Encomienda then later gave Jalandoni six (6)
weeks to settle her debts. Despite several demands, no payment was
made. Jalandoni insisted that the amounts given were not in the form
of loans. When they had to appear before the Barangay for
conciliation, no settlement was reached. Hence, Encomienda filed a
complaint. She impleaded Luis as a necessary party, being Georgia’s
husband.
For her defense, Jalandoni claimed that there was never a discussion
or even just an allusion about a loan. She confirmed that Encomienda
would indeed deposit money in her bank account and pay her bills in
Cebu. But when asked, Encomienda would tell her that she just
wanted to extend some help and that it was not a loan. When
Jalandoni returned to Cebu, Encomienda wanted to fetch her at the
airport but the former refused. This allegedly made Encomienda
upset, causing her to eventually demand payment for the amounts
originally intended to be gratuitous.
Issue: Whether or not Encomienda is entitled to be reimbursed for
the amounts she defrayed for Jalandoni considering that she claimed
they were given without her knowledge.
Rulings: It must be stressed, however, that the trial court merely
found that no documentary evidence was offered showing
Jalandoni’s authorization or undertaking to pay the expenses. But the
second paragraph of Article 1236 of the Civil Code provides:
Whoever pays for another may demand from the debtor what he has payment has no right to receive it. The CA is then correct when it
paid, except that if he paid without the knowledge or against the will ruled that allowing Jalandoni to keep the amounts received from
of the debtor, he can recover only insofar as the payment has been Encomienda will certainly cause an unjust enrichment on Jalandoni’
beneficial to the debtor. s part and to Encomienda’s damage and prejudice.

Clearly, Jalandoni greatly benefited from the purportedly Spouses SY vs Westmont

unauthorized payments. Thus, even if she asseverates that
Encomienda’s payment of her household bills was without her
knowledge or against her will, she cannot deny the fact that the same
still inured to her benefit and Encomienda must therefore be
consequently reimbursed for it.
The RTC likewise harped on the fact that if Encomienda really
intended the amounts to be a loan, normal human behavior would
have prompted at least a handwritten acknowledgment or a
promissory note the moment she parted with her money for the
purpose of granting a loan. This would be particularly true if the loan
obtained was part of a business dealing and not one extended to a
close friend who suddenly needed monetary aid. In fact, in case of
loans between friends and relatives, the absence of acknowledgment
receipts or promissory notes is more natural and real. Contracts are
binding between the parties, whether oral or written. The law is
explicit that contracts shall be obligatory in whatever form they may
have been entered into, provided all the essential requisites for their
validity are present.
FACTS
 Spouses Sy, et al., doing business under the tradename of
Moondrops General Merchandising (“Moondrops”), obtained a
loan with Westmont Bank in the amount of P2,429,500
evidenced by a Promissory Note No. GP-5280.
 They obtained another loan from Westmont Bank in the amount
of P4,000,000 evidenced by a Promissory Note No. GP-5285.
 A Continuing Suretyship Agreement was executed between
Westmont and Sps. Sy, et al. for the purpose of securing any
future indebtedness of Moondrops.
 Westmont filed a complaint when Sps. Sy, et al. allegedly
defaulted in the payment of their loan obligations.

 Sps. Sy, et al., however, countered that Westmont, through its

The principle of unjust enrichment finds application in this case.
bank manager, Lao, required them to sign blank forms of
Unjust enrichment exists when a person unfairly retains a benefit to
promissory notes and disclosure statements and promised that he
the loss of another, or when a person retains money or property of
would notify them immediately regarding the status of their loan
another against the fundamental principles of justice, equity, and
application.
good conscience. There is unjust enrichment under Article 22 of the
Civil Code when (1) a person is unjustly benefited, and (2) such
benefit is derived at the expense of or with damages to another. The
 The loan applications were disapproved but Lao offered to help
principle of unjust enrichment essentially contemplates payment
them secure a loan through a certain Chua, who lend them the
when there is no duty to pay, and the person who receives the
 amounts of P2,500,000 and P4,000,000, which Sps. Sy, et al.
accepted.
ISSUE
Whether or not there is a perfected contract of loan
HELD
NO.
Sps. Sy, et al., have shown the Court that their loan applications with
Westmont were disapproved.
On the other hand, Westmont failed to prove that it delivered the
proceeds of the loan to petitioners.
A simple loan or mutuum is a contract where one of the parties
delivers to another, either money or other consumable thing, upon
the condition that the same amount of the same kind and quality shall
be paid. A simple loan is a real contract and it shall not be perfected
until the delivery of the object of the contract.Necessarily, the
delivery of the proceeds of the loan by the lender to the borrower is
indispensable to perfect the contract of loan. Once the proceeds have
been delivered, the unilateral characteristic of the contract arises and
the borrower is bound to pay the lender an amount equal to that
received.
their applications and they had to acquire loans from other persons.
They presented a cashier's check, in the amount of P2,429,500.00,
obtained from Chua, which showed that the latter personally
provided the loan, and not the bank. As the bank did not deliver the
proceeds of the loan, petitioners stressed that there was no perfected
contract of loan. In addition, they doubt the reliability of the
promissory notes as their original copies were not presented before
the RTC.
The Court finds that Westmont miserably failed to establish that it
released and delivered the proceeds of the loans in the total amount
of P6,429,500.00 to petitioners. Westmont could have easily
presented a receipt, a ledger, a loan release manifold, or a statement
of loan release to indubitably prove that the proceeds were actually
released and received by petitioners. During trial, Westmont
committed to the RTC that it would submit as evidence a loan
manifold indicating the names of petitioners as recipients of the
loans,but these purported documents were never presented, identified
or offered.
As Westmont failed to prove that it had delivered the loan proceeds
to respondents, then there is no perfected contract of loan.

Here, there were purported contracts of loan entered between

Westmont and petitioners for the amounts of P2,429,500.00 and
P4,000,000.00, respectively. The promissory notes evidencing such
loans were denied by petitioners, thus, the genuineness and due
execution of such documents were not admitted. Petitioners averred
that they never received such loans because the bank disapproved