SOLANGON VS. SALAZAR We have held that a Central Bank Circular cannot repeal a law.

Only a law can repeal another law. Ponente: Justice SANDOVAL-GUTIERREZ, 2001 FACTS:Petitioners executed a real estate mortgage of a parcel of land to private respondent to secure paymentof a loan of P60,000.00 payable in 4 months, with 6% interest per month.The following year, petitioners executed another real estate mortgage of the same parcel of land toprivate respondent to secure payment of a loan of P136,512.00 payable in 1 year, with interest thereonat the legal rate (the maximum interest rate, set by statute that may be charged on a loan).The following year, petitioners executed another real estate mortgage of the same parcel of land toprivate respondent to secure payment of a loan of P230,000.00 payable in 4 months, with interestthereon at the legal rate.The action was initiated by the petitioners to prevent the foreclosure of the mortgaged property. Theycontend that they obtained only one loan from respondent for the amount of P60,000.00; and that thesubsequent mortgages were merely continuations of the first one, which is null and void because itprovided for unconscionable rate of interest. Moreover, private respondent assured them that he willnot foreclose the mortgage as long as they pay the stipulated interest upon maturity or within areasonable time thereafter.Private respondent allege that there were three separate loans, and that the first two was paid, but thelast was not. He denied having said that he will not foreclose the mortgage. ISSUES:W/N the interest rate of 6% per annum is valid. DECISION:The Court affirmed the decision of the Court of Appeals and modified the interest rate of 72% perannum to 12% per annum. Supplemental Information The Usury Law is Act 2655, as amended by PD 116, provides that in the absence of express contract as tothe rate of interest in loans/mortgages, it shall be set in default at 12% per annum. Any amount inexcess of that fixed by the law is considered usurious, therefore unlawful. However, pursuant to Central Bank Circular No. 905, the Supreme Court declared that the Usury law is now legally inexistent. Itshould be clarified that CB Circular No. 905 did not repeal nor in anyway amend the Usury Law butsimply suspended the latter's effectivity. Interest can now be charged as lender and borrower may agreeupon (Source:http://phbar.org/wikilaw/index.php? title=Usury) In the case at bar, the court held that the Usury Law ceiling on interest rates was lifted by C.B. CircularNo. 905, nothing in the said circular grants lenders carte blanche authority to raise interest rates tolevels which will either enslave their borrowers or lead to a hemorrhaging of their assets.In the case at bar, the 6% interest rate per month cannot be considered usurious; nevertheless it isdefinitely outrageous and inordinate (exceeding reasonable limits)

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GR No. 114286 Consolidated Bank vs CA, GR No. 114286, 19 April 2001, 356 SCRA 671 24FEB FACTS Continental Cement Corp obtained from Consolidated Bank letter of credit used to purchased 500,000 liters of bunker fuel oil. Respondent Corporation made a marginal deposit to petitioner. A trust receipt was executed by respondent corporation, with respondent Gregory Lim as signatory. Claiming that respondents failed to turn over the goods or proceeds, petitioner filed a complaint for sum of money before the RTC of Manila. In their answer, respondents aver that the transaction was a simple loan and not a trust receipt one, and tht the amount claimed by petitioner did not take into account payments already made by them. The court dismissed the complaint, CA affirmed the same. ISSUE Whether or not the marginal deposit should not be deducted outright from the amount of the letter of credit. HELD No. petitioner argues that the marginal deposit should be considered only after computing the principal plus accrued interest and other charges. It could be onerous to compute interest and other charges on the face value of the letter of credit which a bank issued, without first crediting or setting off the marginal deposit which the borrower paid to it-compensation is proper and should take effect by operation of law because the requisited in Art. 1279 are present and should extinguish both debts to the concurrent amount. Unjust enrichment.

-----------------------------------------------------RCBC v. CA - Insurance Proceeds 289 SCRA 292 (1998) Facts: > GOYU applied for credit facilities and accommodations with RCBC. After due evaluation, a credit facility in the amount of P30 million was initially granted. Upon GOYU's application increased GOYU's credit facility to P50 million, then to P90 million, and finally to P117 million > As security for its credit facilities with RCBC, GOYU executed two REM and two CM in favor of RCBC, which were registered with the Registry of Deeds at. Under each of these four mortgage contracts, GOYU committed itself to insure the mortgaged property with an

insurance company approved by RCBC, and subsequently, to endorse and deliver the insurance policies to RCBC. > GOYU obtained in its name a total of 10 insurance policies from MICO. In February 1992, Alchester Insurance Agency, Inc., the insurance agent where GOYU obtained the Malayan insurance policies, issued nine endorsements in favor of RCBC seemingly upon instructions of GOYU > On April 27, 1992, one of GOYU's factory buildings in Valenzuela was gutted by fire. Consequently, GOYU submitted its claim for indemnity. > MICO denied the claim on the ground that the insurance policies were either attached pursuant to writs of attachments/garnishments issued by various courts or that the insurance proceeds were also claimed by other creditors of GOYU alleging better rights to the proceeds than the insured. > GOYU filed a complaint for specific performance and damages. RCBC, one of GOYU's creditors, also filed with MICO its formal claim over the proceeds of the insurance policies, but said claims were also denied for the same reasons that AGCO denied GOYU's claims. > However, because the endorsements do not bear the signature of any officer of GOYU, the trial court, as well as the Court of Appeals, concluded that the endorsements are defective and held that RCBC has no right over the insurance proceeds.

Issue: Whether or not RCBC has a right over the insurance proceeds. Held: RCBC has a right over the insurance proceeds. It is settled that a mortgagor and a mortgagee have separate and distinct insurable interests in the same mortgaged property, such that each one of them may insure the same property for his own sole benefit. There is no question that GOYU could insure the mortgaged property for its own exclusive benefit. In the present case, although it appears that GOYU obtained the subject insurance policies naming itself as the sole payee, the intentions of the parties as shown by their contemporaneous acts, must be given due consideration in order to better serve the interest of justice and equity.

It is to be noted that 9 endorsement documents were prepared by Alchester in favor of RCBC. The Court is in a quandary how Alchester could arrive at the idea of endorsing any specific insurance policy in favor of any particular beneficiary or payee other than the insured had not such named payee or beneficiary been specifically disclosed by the insured itself. It is also significant that GOYU voluntarily and purposely took the insurance policies from MICO, a

sister company of RCBC, and not just from any other insurance company. Alchester would not have found out that the subject pieces of property were mortgaged to RCBC had not such information been voluntarily disclosed by GOYU itself. Had it not been for GOYU, Alchester would not have known of GOYU's intention of obtaining insurance coverage in compliance with its undertaking in the mortgage contracts with RCBC, and verify, Alchester would not have endorsed the policies to RCBC had it not been so directed by GOYU.

On equitable principles, particularly on the ground of estoppel, the Court is constrained to rule in favor of mortgagor RCBC. RCBC, in good faith, relied upon the endorsement documents sent to it as this was only pursuant to the stipulation in the mortgage contracts. We find such reliance to be justified under the circumstances of the case. GOYU failed to seasonably repudiate the authority of the person or persons who prepared such endorsements. Over and above this, GOYU continued, in the meantime, to enjoy the benefits of the credit facilities extended to it by RCBC. After the occurrence of the loss insured against, it was too late for GOYU to disown the endorsements for any imagined or contrived lack of authority of Alchester to prepare and issue said endorsements. If there had not been actually an implied ratification of said endorsements by virtue of GOYU's inaction in this case, GOYU is at the very least estopped from assailing their operative effects.

To permit GOYU to capitalize on its non-confirmation of these endorsements while it continued to enjoy the benefits of the credit facilities of RCBC which believed in good faith that there was due endorsement pursuant to their mortgage contracts, is to countenance grave contravention of public policy, fair dealing, good faith, and justice. Such an unjust situation, the Court cannot sanction. Under the peculiar circumstances obtaining in this case, the Court is bound to recognize RCBC's right to the proceeds of the insurance policies if not for the actual endorsement of the policies, at least on the basis of the equitable principle of estoppel.

GOYU cannot seek relief under Section 53 of the Insurance Code which provides that the proceeds of insurance shall exclusively apply to the interest of the person in whose name or for whose benefit it is made. The peculiarity of the circumstances obtaining in the instant case presents a justification to take exception to the strict application of said provision, it having been sufficiently established that it was the intention of the parties to designate RCBC as the party for whose benefit the insurance policies were taken out. Consider thus the following: 1. It is undisputed that the insured pieces of property were the subject of mortgage contracts entered into between RCBC and GOYU in consideration of and for securing GOYU's credit facilities from RCBC. The mortgage contracts contained common provisions whereby GOYU, as mortgagor, undertook to have the mortgaged property properly covered against any loss by an insurance company acceptable to RCBC.

2. GOYU voluntarily procured insurance policies to cover the mortgaged property from MICO, no less than a sister company of RCBC and definitely an acceptable insurance company to RCBC. 3. Endorsement documents were prepared by MICO's underwriter, Alchester Insurance Agency, Inc., and copies thereof were sent to GOYU, MICO and RCBC. GOYU did not assail, until of late, the validity of said endorsements. 4. GOYU continued until the occurrence of the fire, to enjoy the benefits of the credit facilities extended by RCBC which was conditioned upon the endorsement of the insurance policies to be taken by GOYU to cover the mortgaged properties.

This Court can not over stress the fact that upon receiving its copies of the endorsement documents prepared by Alchester, GOYU, despite the absence written conformity thereto, obviously considered said endorsement to be sufficient compliance with its obligation under the mortgage contracts since RCBC accordingly continued to extend the benefits of its credit facilities and GOYU continued to benefit therefrom. Just as plain too is the intention of the parties to constitute RCBC as the beneficiary of the various insurance policies obtained by GOYU. The intention of the parties will have to be given full force and effect in this particular case. The insurance proceeds may, therefore, be exclusively applied to RCBC, which under the factual circumstances of the case, is truly the person or entity for whose benefit the policies were clearly intended. -------------------------------------------------RCBC vs CA GR Nos. 128833, 128834, 128866, 20 April 1998 289 SCRA 292 FACTS GOYU was granted credit facilities and accommodations by the RCBC initially in the amount of P 30 million. Upon GOYUs application, the credit was increased to P50 Million, then P90 Million, then P117 Million. As security, GOYU executed 2 REM and 2 CM in favor of RCBC, which were registered with the RD. Under the 4 contracts, GOYU committed itself to insure the mortgaged properties with an insurance company approved by RCBC, and subsequently endorse and deliver the insurance policies to RCBC. GOYU then obtained 10 policies from MICO. GOYUs buildings were gutted by fire and it claimed indemnity from MICO but the latter denied the claim on the ground that the insurance policies were either attached pursuant to writs of attachments/garnishments issued by various courts or that the proceeds were also claimed by other creditors of GOYU. GOYU, alleging better rights to the proceeds, filed for specific performance and damges before the RTC of Manila Br 3. The trial court ruled in favor of GOYU for the fire loss claims but ordered it to pay RCBC its loan obligations. On appeal to the CA, it affirmed the ruling with regard to the liabilities of MICO and RCBC. The trial court and appellate courts both held that, since the endorsements do not bear the signature of any officer of GOYU, they concluded that the endorsements are

defective. The CA then ordered GOYU to pay its obligation to RCBC without any interest, surcharges and penalties. ISSUE Whether or not the ruling of the appellate court is correct. HELD The Court held in the negative. The essence or rationale for the payment of interest or cost of money is separate and distinct from that of surcharges and penalties. The charging of interest for loans forms a very essential and fundamental element of the banking business. Petitions granted. ---------------------------------------------PNB vs.CA;Ambrosio Padilla(196SCRA536;1991) Facts: In 1982, Ambrosio Padilla, herein private respondent,applied for, and was granted by petitioner PNB, acredit line of P321.8 million, secured by a real estatemortgage, for a term of two years, with 18% interestper annum. Padilla executed in favor of the PNB a Credit Agreement, two (2) promissory notes in theamount of P900,000.00 each, and a Real EstateMortgage Contract. The Promissory Notes, uniformlyauthorized the PNB to increase the stipulated 18%interest per annum " within the limits allowed bylaw at any time depending on whatever policyit [PNB] mayadopt in the future; Provided, that, the interest rateon the note shall be correspondingly decreased inthe event that the applicable maximum interest rateis reduced by law or by the Monetary Board."However, two years thereafter, when the P1.8 millioncredit line has matured on July 4, 1984, PNB withinthe period of only four months has increased the18% interest rate on the borrowers loan obligationthree times: (a) to 32% in July 1984,; (b) to 41% inOctober 1984; and (c) to 48% in November 1984.Several letters were sent by Padilla to PNBrequesting the latter to increase the interest ratefrom 18% but to be fixed at 21% or 24% per annum.However, PNB despite the objection of Padilla andwithout authority from the Monetary Board stilleffected such increases of interest rates within theaforesaid intervening period. For this reason, Padillawas compelled to file a complaint with the RTCpraying to declare that the unilateral increase of interest rates by PNB is illegal and not valid norbinding upon Padilla. It was also prayed that theamount paid representing the excess interest bereimbursed to him. But the complaint was dismissedby the lower court because according to the latterthe increase of interests was properly made. Padillaappealed to the CA. The appellate court reversed the decision of the RTC, hence this petition forreview. Issue: Whether PNB, within the term of the loan which itgranted to Padilla, may unilaterally change orincrease the interest rate stipulated therein at willand as often as it pleased.

Held: The Court held in a negative. Those increases were null and void, for if the Monetary Board itself was not authorized to make such changesoftener once a year, even less so may a

bank, which is subordinate tothe Board. While the debtor did agree in the Deed of Real EstateMortgage that the interest rate may be increased during the life of thecontract "to such increase within the rate allowed by law, as the Boardof Directors of the MORTGAGEE may prescribe" or "within the limitsallowed by law," no law was ever passed in July to November 1984increasing the interest rates on loans or renewals thereof to 32%, 41%and 48% per annum, and no documents were executed and deliveredby the debtor to effectuate the increases. To unilaterally and successively increase the agreed rate of interest from 18% to 48%within a span of four months is a clear violation of PD 116 which limitssuch changes to once every 12 months. The Court further held, the unilateral action of the PNB in increasingthe interest rate on the private respondent's loan, violated themutuality of contracts ordained in Article 1308 of the Civil Code: "ART.1308. The contract must bind both contracting parties; its validity orcompliance cannot be left to the will of one of them." A contractcontaining a condition which makes its fulfillment dependentexclusively upon the uncontrolled will of one of the contracting partiesis void. Likewise, the increases imposed by PNB contravene Art. 1956of the Civil Code which provides that no interest shall be due unless ithas been expressly stipulated. Here, the debtor never agreed inwriting to pay the interest increases fixed by PNB beyond the 24% perannum; hence, he is not bound to pay a higher rate than that. The petition for review was denied for lack of merit ------------------------------------------Francisco v. Gregorio GR No. L-59519 July 20, 1982 Facts: Petitioner Francisco, through her daughter, agreed to lease a piece of land where a building should be constructed by the former. The contract provided, among others: the deposit to the account of the lessorpetitioner the amount of 150k representing 30K goodwill money and 120K advanced rental and a stipulation that in case the parties will not agree as to the terms and conditions of the final contract of lease, the pre-lease contract shall be declared null and void and the petitioner shall return the deposit plus legal interest. Before final occupancy, the petitioner declared the pre-lease contract null and void, leased the premises to another lessee and offered to return the 150K deposit. Private respondents refused to accept so that petitioner was prompted to make a consignation of the money with the Court. Private respondents then filed a complaint, hence respondent judge ruled in their favor with an order to pay the amount of deposit plus compensatory interests. Issue: Is the petitioner liable for payment of interest despite tender of payment before demand? Held: No. The award for interests in an action for the recovery of a sum of money partakes of a nature of an award for damages. Thus, Article 2209 of the Civil Code provides: Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six percent per annum. Clearly,

the indemnity for interest on a monetary obligation attaches only when the obligor incurs delay, that is, when he is in default, it being a fundamental principle of law that: Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands from them the fulfillment of their obligation. (Art. 1169, Civil Code.) In the case at bar, it is not disputed that no demands, judicial or extrajudicial, were made by private respondents on defendant Boiser (Francisco) for the return of the amount of P150,000.00. There could not have been any because of the nature of the action filed by private respondents, which is for specific performance. Hence, there is no delay of the latter's obligation, assuming that she be eventually required in the decision of the Court to return the same. Thus, no interest is due where there was tender of payment prior to any demand to pay or perform the agreed act. ---------------------------------------Bonnevie v. CA GR No. L-49101 October 24, 1983 Facts: Spouses Lozano mortgaged their property to secure the payment of a loan amounting to 75K with private respondent Philippine Bank of Communication (PBCom). The deed of mortgage was executed on 12-666, but the loan proceeeds were received only on 12-12-66. Two days after the execution of the deed of mortgage, the spouses sold the property to the petitioner Bonnevie for and in consideration of 100k25K of which payable to the spouses and 75K as payment to PBCom. Afterwhich, Bonnevie defaulted payments to PBCom prompting the latter to auction the property after Bonnivie failed to settle despite subsequent demands, in order to recover the amount loaned. The latter now assails the validity of the mortgage between Lozano and Pbcom arguing that on the day the deed was executed there was yet no principal obligation to secure as the loan of P75,000.00 was not received by the Lozano spouses, so that in the absence of a principal obligation, there is want of consideration in the accessory contract, which consequently impairs its validity and fatally affects its very existence. Issue: Was there a perfected contract of loan? Held: Yes. From the recitals of the mortgage deed itself, it is clearly seen that the mortgage deed was executed for and on condition of the loan granted to the Lozano spouses. The fact that the latter did not collect from the respondent Bank the consideration of the mortgage on the date it was executed is immaterial. A contract of loan being a consensual contract, the herein contract of loan was perfected at the same time the contract of mortgage was executed. The promissory note executed on

December 12, 1966 is only an evidence of indebtedness and does not indicate lack of consideration of the mortgage at the time of its execution. --------------------------------------------

----------------------SALES DIGEST.. -----------------------San Miguel Properties vs. Huang (G.R. No. 137290) It is not the giving of earnest money, but the proof of the concurrence of all the essential elements of the contract of sale which establishes the existence of a perfected sale. Was it an earnest deposit? NO. At the time when petitioner accepted the terms of respondents offer of March 29, 1994, their contract had not yet been perfected. It does not satisfy Article 1482. The stages of a contract of sale are as follows: (1) negotiation, (2) perfection, and (3) consummation. The alleged indubitable evidence of a perfected sale cited by the appellate court was nothing more than offers and counter-offers which did not amount to any final arrangement containing the essential elements of a contract of sale. While the parties already agreed on the real properties which were the objects of the sale and on the purchase price, the fact remains that they failed to arrive at mutually acceptable terms of payment, despite the 45-day extension given by petitioner. There was also failure to agree on the manner of payment. The manner of payment of the purchase price is an essential element before a valid and binding contract of sale can exist. Although the Civil Code does not expressly state that the minds of the parties must also meet on the terms or manner of payment of the price, the same is needed, otherwise there is no sale.

Agreement on the manner of payment goes into the price such that a disagreement on the manner of payment is tantamount to a failure to agree on the price. ---------------------------------San Miguel Properties vs. Sps. Huang Facts: San Miguel Properties is engaged in the purchase and sale of real properties, of which includetwo parcels of land. These properties were offered for sale at P52,140,000.00. Such offer was madeto Atty. Dauz on behalf of Sps. Huang. Atty. Dauz wrote San Miguel informing the respondentsinterest to buy the property and enclosed therein a check (P1,000,000.00) as earnest deposit subjectto certain conditions, to wit: (1) that they be given the exclusive option to purchase the propertywithin 30 days from acceptance of the offer; (2) that during the option period, the parties wouldnegotiate the terms and conditions of the purchase; and (3) petitioner would secure the necessaryapprovals while respondents would handle the documentation. Sobrecarey, San Miguel Properties VPindicated his conformity to the offer; signed the letter; and accepted the earnest deposit. Byagreement of the parties, they agreed that respondents will be given 6 months within which to pay.Upon failure of respondents to pay despite the extension of time given, petitioner through its Pres &CEO Gonzales, wrote Atty. Dauz, that they are returning the earnest deposit. Respondent spousesthrough counsel, wrote petitioner demanding the execution of a deed of conveyance in their favor.They attempted to return the earnest deposit but was refused by San Miguel. Respondent spousesfiled a complaint for specific performance. Trial court, upon motion, dismissed the complaint, whichwas reversed by the CA.Arguments: San Miguel : the Court of Appeals erred in finding that there was a perfected contract of salebetween the parties because the letter of respondents, which petitioner accepted, merely resulted inan option contract, albeit it was unenforceable for lack of a distinct consideration. Petitioner arguesthat the absence of agreement as to the mode of payment was fatal to the perfection of the contractof sale. Petitioner also disputes the appellate courts ruling that Isidro A. Sobrecarey had authority tosell the subject real properties. Sps. Huang : As held by CA, there is a perfected contract of sale since the earnest money wasallegedly given by respondents and accepted by petitioner through its vicepresident and operationsmanager, Sobrecarey. The Court holds that respondents did not give the P1 million as "earnestmoney" as provided by Art. 1482 of the Civil Code. They presented the amount merely as a depositof what would eventually become the earnest money or downpayment should a contract of sale bemade by them. The amount was thus given not as a part of the purchase price and as proof of theperfection of the contract of sale but only as a guarantee that respondents would not back out of thesale. Respondents in fact described the amount as an "earnest-deposit. Issue:WON the earnest deposit could have been given as earnest money contemplated in Art. 1482, andthus there was a perfected contract of sale Held: No, hence, there was no perfected contract of sale.In the present case, the P1 million "earnest-deposit" could not have been given as earnest money

as contemplated in Art. 1482 because, at the time when petitioner accepted the terms of respondentsoffer, their contract had not yet been perfected. The first condition for an option period of 30 days sufficiently shows that a sale was never perfected. Such option giving respondents the exclusiveright to buy the properties within the period agreed upon is separate and distinct from the contractof sale which the parties may enter. ---------------------------------Atkins Kroll & Co. vs. Cu Hian Tek Atkins Kroll & Co. vs. Cu Hian Tek 102 Phil 984 January 1958

FACTS: On September 13, 1951, petitioner Atkins Kroll & Co. (Atkins) sent a letter to respondent B. Cu Hian Tek (Hian Tek) offering (a) 400 cartons of Luneta brand Sardines in Tomato Sauce 48 / 15-oz. Ovals at $8.25 per carton, (b) 300 cartons of Luneta brand Sardines Natural 48/15 oz. talls at $6.25 per carton, and (c) 300 cartons of Luneta brand Sardines in Tomato Sauce 100/5-oz. talls at $7.48 per carton, with all of the offers subject to reply by September 23, 1951. Hian Tek unconditionally accepted the said offer through a letter delivered on September 21, 1951, but Atkins failed to deliver the commodities due to the shortage of catch of sardines by the packers in California.

Hian Tek, therefore, filed an action for damages in the CFI of Manila which granted the same in his favor. Upon Atkins appeal, the Court of Appeals affirmed said decision but reduced the damages to P3,240.15 representing unrealized profits. Atkins herein contends that there was no such contract of sale but only an option to buy, which was not enforceable for lack of consideration because it is provided under the 2nd paragraph of Article 1479 of the New Civil Code that "an accepted unilatateral promise to buy or to sell a determinate thing for a price certain is binding upon the promisor if the promise is supported by a consideration distinct from the price. Atkins also insisted that the offer was a mere offer of option, because the "firm offer" was a continuing offer to sell until September 23. Was there a contract of sale between the parties or only a unilateral promise to

buy? COURT RULING:

The Supreme Court held that there was a contract of sale between the parties. Petitioners argument assumed that only a unilateral promise arose when the respondent accepted the offer, which is incorrect because a bilateral contract to sell and to buy was created upon respondents acceptance.

Had B. Cua Hian Tek backed out after accepting, by refusing to get the sardines and / or to pay for their price, he could also be sued. But his letter-reply to Atkins indicated that he accepted "the firm offer for the sale" and that "the undersigned buyer has immediately filed an application for import license. After accepting the promise and before he exercises his option, the holder of the option is not bound to buy. In this case at bar, however, upon respondents acceptance of herein petitioner's offer, a bilateral promise to sell and to buy ensued, and the respondent had immediately assumed the obligations of a purchaser. -----------------------------------------------------------------------Acceptance Option Contract Atkins, Kroll and Co. v. Cua Hian TekG.R. No. L-9871 January 31, 1958 Facts : Petitioner sent a letter to respondent dated September 13, 1951 offering the latter certain goods with their respectiveprices until September 23. Respondent accepted the offer unconditionally and delivered the letter of acceptance onSeptember 21, 1951. However, petitioner failed to deliver the commodities it had offered due to shortage of catch of sardines.Due to this failure, respondent sued petitioner. Petitioner was ordered by the CFI of Manila to pay damages. On appeal, theCourt of Appeals upheld the ruling of the trial court with some modifications. Petitioner however argued that upon theacceptance of the offer, it became an accepted unilateral promise to sell a determinate thing for price certain. Hence, for petitioner, there was no contract of sale but merely an option to buy which, though timely accepted, was not enforceable for lack of a separate consideration. Issue : Whether there is a perfected contract of sale in the case at bar? Held : Yes, a contract of sale was perfected in this case. The assumption that only a unilateral promise was created upon theacceptance of the offer is incorrect. A bilateral contract to sell and to buy was created upon acceptance. In addition,

theoption, though not supported by an independent consideration, obligates the offeror to keep the offer open up to specifiedtime, in this case September 23, 1951. Moreover, while it is true that an option not supported by a separate consideration canbe withdrawn by the offeror, this can be done only before acceptance and such withdrawal should be communicated with theofferee as provided for by Art. 1324. The Supreme Court affirmed the decision of the Court of Appeals. --------------------------------------EMILIA MANZANO vs. MIGUEL PEREZ SR., LEONCIO PEREZ, MACARIO PEREZ,FLORENCIO PEREZ, NESTOR PEREZ, MIGUEL PEREZ JR. and GLORIA PEREZ Commodatum (The Bailor)Facts: Petitioner Emilia Manzano alleged that she is the owner of a residential house and lotsituated at General Luna St. Laguna. In 1979, Nieves Manzano, sister of the petitioner borrowedthe aforementioned property as collateral for a projected loan.Pursuant to their understanding, the petitioner executed two deeds of conveyance for the sale of the residential lot and the house erected, both for a consideration of P1.00 plus other valuablesallegedly received by her from Nieves Manzano.Nieves Manzano, together with her husband, respondent Miguel Perez, Sr. obtained a loan fromthe Rural Bank of Infanta, Inc. in the sum of P30,000.00.To secure payment of theirindebtedness, they executed a Real Estate Mortgage over the subject property in favor of thebank.Nieves Manzano died on 18 December 1979 leaving her husband and children as heirs. Theseheirs refused to return the subject property to the petitioner even after the payment of their loanwith the Rural Bank.The petitioner sought the annulment of the deeds of sale and execution of a deed of transfer orreconveyance of the subject property in her favor, and award of damages.The Court of Appeals ruled that it was not convinced by petitioner's claim that there was asupposed oral agreement of commodatum over the disputed house and lot. Hence, this petition. Contention of petitioner : The petitioner alleged that properties in question after they have beentransferred to Nieves Manzano, were mortgaged in favor of the Rural Bank of Infante, Inc tosecure payment of the loan. The documents covering said properties which were given to thebank as collateral of said loan, upon payment and release to the private respondents, werereturned to petitioner by Florencio Perez. These are a clear recognition by respondents thatpetitioner is the owner of the properties in question Contention of respondents: the respondents countered that they are the owners of the propertyin question being the legal heirs of Nieves Manzano who purchased the same from the petitionerfor value and in good faith, as shown by the deeds of sale which contain the true agreementsbetween the parties therein that except for the petitioner's bare allegations, she failed to show anyproof that the transaction she entered into with her sister was a loan and not a sale. Resolution: The court ruled that petitioner has presented no convincing proof of her continuedownership of the subject property. In addition to her own oral testimony, she submitted proof of payment of real property taxes, but such payment was made only after her Complaint had alreadybeen lodged before the trial court. Neither can the court give weight to her allegation thatrespondent's possession of the subject property was merely by virtue of her tolerance.Oral

testimony cannot, as a rule, prevail over a written agreement of the parties. In order to contradictthe facts contained in a notarial document, such as the two " Kasulatan ng BilihangTuluyan" there must be clear and convincing evidence that is more than merely preponderant. Petitioner has failed to come up with even a preponderance of evidence to prove her claim.Jurisprudence on the subject matter, when applied thereto, points to the existence of a sale, nota commodatum over the subject house and lot.WHEREFORE, the Petition is hereby DENIED. -----------------------------------------The Case : Petition for certiorari and mandamus. Facts : Sometime in 1948 the defendants verbally sold to her the two parcels of land in question for P3,000.00 Pesos and, inconsequence, delivery thereof together with the corresponding transfer certificates of title (TCT) was made to her, but no deed of sale was executed at the time because private respondents promised they would do so as soon as the titles which were then inthe name of their predecessor in interest were transferred to their names , and that despite demands made by her for theexecution of such deed, said respondents, "without justifiable cause therefor adamantly failed and refused to comply with (such) just and valid demand." In their answer, defendants denied that the transaction was a sale and alleged that it was merely a contractof antichresis whereby petitioner had loaned to them P1, 500.00, for which she demanded the delivery of the lands in question andthe titles thereto as security, with the right to collect or receive the income therefrom pending the payment of the loan. And by wayof affirmative defenses, respondents interposed (1) unenforceability by action of the alleged sale, under the statute of frauds, and(2) prescription of petitioner's action, the same having allegedly accrued in 1948. Subsequently, respondents reiterated their saidaffirmative defense of prescription in a formal motion to dismiss and as no opposition thereto was filed by petitioner, on July 31,1967, respondent court issued the impugned order of dismissal reading as follows:Submitted for resolution is a motion to dismiss filed counsel for the defendants to which no opposition has been filed despitethe fact that the plaintiff was furnished with a copy thereof. Finding the said motion to dismiss to be well-taken for the reasonsstated therein, this Court grants the same and the complaint, dated October 16, 1964, is hereby dismissed with costs againstthe plaintiff.SO ORDERED.Petitioner filed the complaint of October 20, 1964

Issue: Whether petitioners right to demand the execution of the TCTs already prescribed. Held/Ruling :The right to demand the execution of the document required under Article 1358 1 is not imprescriptible.The nature of petitioner s action may be said to be one founded on an oral contract, which, to be sure, cannot be considered amongthose rendered unenforceable by the statute of frauds, for the simple reason that it has already been, from petitioners own point of view, almost fully consummated by the delivery of the lands and the corresponding titles to her. X X X. The petitioners action, basedas it is upon oral contract, prescribes in 6 years according to Artcle 1145 of the Civil Code. Assuming otherwise, the only otherpossibility is that petitioners case comes under Article 1149 and the action prescribes in 5 years. In either case, since the cause of action of petitioner accrued in 1948 and the present suit was instituted in 1964 or sixteen years later, and none interruptingcircumstances enumerated in Article 1155 has been shown to have intervened, it is unquestionable that petitioners action filed inthe court below has already prescribed. 1 ART. 1357 . If the law requires a document or other special form, as in the acts and contracts enumerated in the following article,the contracting parties may compel each other to observe that form, once the contract has been perfected. This right may beexercised simultaneously with the action upon the contract. (1279a)

----------------------------------------Levy Hermanos, Inc. v. Gervacio G.R. No. L-46306 October 27, 1939 Santos, J. Facts: Levy Hermanos, Inc. ( Levy

for brevity) sold to Lazaro Blas Gervacio, a Packard car. The latter, after making the initial payment, executed a promissory note for the balance of P2,400, payable on or before June 15, 1937, with interest at 12% per annum; to secure thepayment of the note, he mortgaged said car to Levy Gervacio failed to pay the note it itsmaturity. Levy foreclosed the mortgage and the car was sold at public auction, at whichplaintiff was the highest bidder for P1,800. It brought an action to collect the balance P1,600and interest (note that P2,400 was the amount due from Gervacio). Issue: whether or not the cash payment made by Gervacio should be considered as aninstallment in order to bring the contract sued upon within the ambit of Art. 1454-A of theold Civil Code Held: No. Article 1454-A of the Civil Code reads as follows:In a contract for the sale of personal property payable in installments shall confer upon the vendor the right to cancel the sale or foreclose the mortgagei f o n e h a s b e e n g i v e n o n t h e p r o p e r t y , w i t h o u t r e i m b u r s e m e n t t o t h e purchaser of the installments already paid, if there be an agreement to thiseffect.However, if the vendor has chosen to foreclose the mortgage he shall have nofurther action against the purchaser for the recovery of any unpaid balanceowing by the same and any agreement to the contrary shall be null and void.In order to apply the provisions of article 1454-A of the old Civil Code it must appearthat there was a contract for the sale of personal property payable in installments and thatthere has been a failure to pay two or more installments. The contract in this case, while asale of personal property, is not, however, one on installments, but on straight term, in which the balance, after payment of the initial sum, should be paid in its totality at the times p e c i f i e d i n t h e p r o m i s s o r y n o t e . T h e t r a n s a c t i o n i s n o t i s n o t , t h e r e f o r e , t h e o n e contemplated in Article 1454-A and a c c o r d i n g l y t h e m o r t g a g e e i s n o t b o u n d b y t h e prohibition therein contained as to the right to the recovery of the unpaid balance. -----------------------------------------------------------------------LEVY HERMANOS, INC., plaintiff-appellant, vs. LAZARO BLAS GERVACIO, defendant On March 15, 1937, plaintiff Levy Hermanos, Inc., sold to defendant Lazaro Blas Gervacio, a Packardcar. Defendant, after making the initial payment, executed a promissory note for the balance of P2,400, to secure the payment of the note, he mortgaged the car to the plaintiff. Defendant failed to paythe note at its maturity; plaintiff foreclosed the mortgage and the car was sold at public auction, at which plaintiff was thehighest bidder for P800. The present action is for the collection of the balance of P1,600 and interest.Defendant admittedthe allegations of the complaint, and with this admission, the parties submitted the case fordecision.

The lower court applied the provisions of Act No. 4122, inserted as articles 1454-A of the Civil Code,and rendered judgment in favor of the defendant. Plaintiff appealed. Article 1454-A of the Civil Code reads as follows:"In a contract for the sale of personal property payable in installments, failure t o pay twoo r m o r e i n s t a l l m e n t s s h a l l c o n f e r u p o n t h e v e n d o r t h e r i g h t t o c a n c e l t h e s a l e o r foreclose the mortgage if one has been given on the prope rty, without reimbursement to thepurchaser of the installments already paid, if there b e an agreement to this effect."However, if the vendor has chosen to foreclose the mo rtgage he shall have no furtheraction against the purchaser for the recovery of any u npaid balance owing by the same,and any agreement to the contrary shall be null and voi d."ISSUE: W/N the lower court correctly applied Article 1454-A of the Civil CodeHELD: No. In order to apply the provisions of article 1454-A of the Civil Code it must appear that there wasa contract for the sale of personal property payable in installments and that there has been a failureto pay two or more installments." The contract, in the instant case, while a sale of personal p r o p e r t y , i s n o t , h o w e v e r , o n e o n installments, but on straight term, in which the balance, after payment of the initial sum, should bepaid in its totality at the time specified in the promissory note. accordingly the mortgagee is not bound by the prohibition therein contained as to its right to therecovery of the unpaid balance. Undoubtedly, the law is aimed at those sales where the price is payable in several installments, for,generally, it is in these cases that partial payments consist in relatively small amounts, constitutingthus a great temptation for improvident purchasers to buy beyond their means. The suggestion that the cash payment made in this case should be considered as an installment inorder to bring the contract sued upon under the operation of the law, is completely untenable. A cash payment cannot be considered as a payment by installment, and even if it can be soconsidered, still the law does not apply, for it requires nonpayment of two or more installments inorder that its provisions may be invoked. Here, only one installment was unpaid. ---------------------------------------------------------------------------------------------Sales Cases Phil Trust vs. National Bank

Facts Salvador Hermanos is a copartnership who then executed to PNB 8 promissory

notes, payable on demand, and each secured by a quedan or a warehouse receipt by the firm of Nieva, Ruiz and Company. Each receipt is coupled with a collateral security (mostly piculs of copra) it moreover states that the non-performance of the promise, or the non-fulfillment of the obligation will with or without notice furnish satisfactory additional securities and full power and authority are hereby given to said bank to sell, assign, transfer and deliver the whole of the said securities, or any property left in the possession of said bank, or these properties may be sold in a private or public sale option of the bank. Demand, advertisement or notice of any kind is considered to be waived. It furthermore stipulates that it is free from any right of redemption and such is a negotiable warrant, such note is stamped in red ink across the face of each quedan. Sometime in 1979, the firm withdrew with the banks consent, 3 of its receipts. Such withdrawal was not in writing, except in a form of receipt from the firm stipulation the actual content of the bodega, as of the date it withdrew the said receipts. The firm then filed a petition for insolvency, in its petition it stipulated that such receipts were in pledged before the PNB. Subsequently, the defendant bank sold all the personal properties held by the warehouse receipts, except the properties described in the 3 warehouse receipts taken by the firm in 1979. Afterwhich, the court appointed Philippine Trust Company as its assignee. It then made a demand to PNB to surrender the receipts upon the banks refusal caused action to recover the value of Php 242,579.61 claiming that the firm is the sole and exclusive owner of the property, and by virtue of the petition for insolvency filed by the firm, the PNB unlawfully sold the personal property of the firm.

Issue Whether or not the firm transferred ownership of the personal property stipulated in the warehouse receipts to PNB?

Held The Supreme Court held that the firm transferred ownership of the personal property stipulated in the warehouse receipts to PNB upon its physical surrender of the receipt to the firm. The execution of the notes, the physical possession of the negotiable quedan, or warehouse receipt, and the recognition of ownership by the warehouse, legally carried with it the title and the possession of the property. Provided for in Article 1863 of the Civil Code that, it shall be necessary, in order to constitute the contract of pledge, that the pledge be placed in the possession of the creditor or of a third person, appointed by common consent. Contrary to the

argument of Phil Trust, a public instrument is not necessary to prove ownership of goods, transfer of ownership by delivery is enough in this case. Moreover, the note further stipulated that the full power and authority are hereby given to said bank to sell, assign, transfer and deliver the whole of the said securities or any part thereof or any additions thereto, or any other securities or property given unto or left in the possession of or hereafter given unto or left in the possession of the said bank by the undersigned. Thus, in this case, it is evident that the ownership is given to PNB by the firm, even before the petition for insolvency was filed; therefore, the sale of the personal property of PNB was valid. In the case of the 3 warehouse receipts earlier mentioned, such receipts is ruled by the court to still be owned by the firm since its possession remained to the firm. ------------------------------------------SPOUSES RESTITUTO NONATO and ESTER NONATO, petitioners, vs. THE HONORABLE INTERMEDIATE APPELLATE COURT and INVESTOR'S FINANCECORPORATION respondents. G.R. No. L-67181 November 22, 1985 Instalment Sales of Movables Facts: On June 28, 1976, defendant spouses Restituto Nonato and Ester Nonato purchased one unit of VolkswagenSakbayan from the People's Car, Inc., on installment basis. To secure complete payment, the defendants executed a promissory note and a chattel mortgage in favor of People's Car, Inc. The latter assigned its rights and interests overthe note and mortgage in favor of plaintiff Investor's Finance Corporation (IFC). For failure of defendants to pay two ormore installments, despite demands, the car was repossessed by plaintiff on March 20, 1978. Despite repossession,plaintiff demanded from defendants that they pay the balance of the price of the car.In their answer, the spouses Nonato alleged by way of defense that when the company repossessed the vehicle, it had, bythat act, effectively cancelled the sale of the vehicle. It is therefore barred from exacting recovery of the unpaid balance of the purchase price, as mandated by the provisions of Article 1484 of the Civil Code . The trial court rendered a decisionin favor of the IFC and against the Nonatos. The appellate court affirmed the judgment. Issue: Whether or not a vendor, or his assignee, who had cancelled the sale of a motor vehicle for failure of the buyer topay two or more of the stipulated installments, may also demand payment of the balance of the purchase price.

Held: No. The applicable law in the case at bar, involving as it does a sale of personal property on installment, is Article1484 of the Civil Code. The meaning of the provision has been repeatedly enunciated in a long line of cases. Thus: Shouldthe vendee or purchaser of a personal property default in the payment of two or more of the agreed installments, thevendor or seller has the option to avail of any of these three remedies-either to exact fulfillment by the purchaser of theobligation, or to cancel the sale, or to foreclose the mortgage on the purchased personal property, if one was constituted. These remedies have been recognized as alternative, not cumulative, that the exercise of one would bar theexercise of the others. Respondent corporation further asserts that it repossessed the vehicle merely for the purpose of appraising its current value. The allegation is untenable, for even after it had notified the Nonatos that the value of the car was not sufficient tocover the balance of the purchase price, there was no attempt at all on the part of the company to return the repossessedcar. WHEREFORE , the judgment of the appellate court is hereby set aside and the complaint filed by respondent InvestorsFinance Corporation against petitioner in Civil Case should be, as it is hereby, dismissed ----------------------------------SPOUSES NONATO V. IAC & INVESTOR'S FINANCE CORP 140 SCRA 255 (1985) FACTS: In 1976, Spouses Restituto Nonato and Ester Nonato purchased a volkswagen from the Peoples Car Inc on installment basis. 1. 2. 3. 4. To secure their complete payment, Nonato executed a promissory note and a chattel mortgage in favor of Peoples Car Inc. Subsequently, Peoples Car Inc assigned its rights and interest over the note and mortagge in favor of Investors Finance Corp (IFC). For failure of the spouses to pay two or more installments, despite demands, the car was repossessed by IFC. Despite repossession, IFC still demanded from Nonato that they pay the balance of the price of the car. IFC, then, filed a complaint for the payment of the price of the car with damages Nonato, in their defense, argued that when the company repossessed the car, IFC had, by that act, effectively cancelled the sale of the vehicle. As such, it was barred from exacting the recovery of the unpaid balance of the purchase price as mandated by Art 1484.

5.

6.

The trial court rendered in favor of IFC and ordered the spouses Nonato pay the balance of the purchase price of the car with interest. CA affirmed the same.

ISSUE: WON a vendor or his assignee, who had cancelled the sale of a motor vehicle for failure of the buyer to pay two or more of the stipulated installments, may also demand payment of the balance of the purchase price

HELD: No. The applicable law in the case at bar is Art 1484 which provides that: 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: (1) Exact fulfillment of the obligation, should the vendee fail to pay; (2) Cancel the sale, should the vendee's failure to pay cover two or more installments; (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. This provision means that should the vendee or the purchaser of a personal property default in the payment of two or more of the agreed installments, the vendor or the seller has the option to avail any of these 3 remedieseither to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to foreclose the mortgage on the purchased personal property, if one was constituted. These remedies have been recognized as an alternative, not cumulative, that the exercise of one should bar the exercise of the others. In the present case, it is not disputed that IFC had taken possession of the car purchased by the Nonatos after the spouses defaulted in their payments. The defense of IFC that it the repossession of the vehicle was only for the purpose of appraising its value and for storage and safekeeping pending full payment of the spouses is untenable. The receipt issued by IFC to the spouses when it took possession of the vehicle that the vehicle could be redeemed within 15 days. This could only mean that should the spouses fail to redeem the car within the period provided, IFC would retain permanent possession of the vehicle. IFC even notified the spouses Nonato that the value of the car was not sufficient to cover the balance of the purchase price and there was no attempt at all on the part of the company to return the car.

The acts performed by IFC are consistent with the conclusion that it had opted to cancel the sale of the vehicle. Therefore, it is barred from exacting payment from the petitioners of the balance of the price of the vehicle which it had already repossessed (it cannot have its cake and eat it too) -----------------------------------------Zayas, Jr. v. Luneta Motor Company, et al. G.R. No. L-30583 October 23, 1982 Gutierrez, Jr., J. Facts: Eutropio Zayas, Jr, purchased on installment basis a motor vehicle from Mr. RoqueEscao of the Escao Enterprises in Cagayan de Oro City, dealer of respondent Luneta MotorCompany , under the following terms and conditions:S e l l i n g p r i c e P 7 , 5 0 0 . 0 0 F i n a n c i n g c h a r g e P 1 , 4 2 6 . 8 2 Total Selling P r i c e P 8 , 9 2 6 . 8 2 P a y a b l e o n D e l i v e r y P 1 , 0 0 6 . 8 2 Payable in 24 months at 12% interest per annumP7,920.00 The motor vehicle was delivered to the petitioner who paid the initial payment in theamount of P1,006.82, and executed a promissory note in the amount of P7,920.00, theb a l a n c e o f t h e t o t a l s e l l i n g p r i c e , i n f a v o r o f r e s p o n d e n t L u n e t a M o t o r C o m p a n y . T h e promissory note stated the amounts and dates of payment of 26 installments covering theP7,920.00 debt. Simultaneously with the execution of the promissory note and to secure itspayment, the petitioner executed a chattel mortgage on the subject motor vehicle in favorof the respondent. After paying a total amount of P3,148.00, the petitioner was unable topay further monthly installments prompting the respondent Luneta Motor Company to extra- judicially foreclose the chattel mortgage. The motor vehicle was sold at public auction withthe respondent Luneta Motor Company as the highest bidder in the amount of P5,000.00.Since the payments made by petitioner Zayas, Jr. plus the P5,000.00 realized from theforeclosure of the chattel mortgage could not cover the total amount (P7,920.00) of thep r o m i s s o r y n o t e e x e c u t e d b y t h e p e t i t i o n e r i n f a v o r o f t h e r e s p o ndent Luneta MotorCompany, the latter filed an action for the recovery of the balance of P1,551.74 p l u s interests. Issue: whether or not a deficiency amount after the motor vehicle, subject of the chattelmortgage, has been sold at public auction could still be recovered by respondent company Held: No. The main defense of respondent Luneta Motor Company i s t h a t E s c a o Enterprises, Cagayan de Oro City from which petitioner Zayas, Jr. purchased the subjectmotor vehicle was a distinct and different entity; that the role of Luneta Motor Company inthe said transaction was only to finance the purchase price of the motor vehicle; and that inorder to protect its interest as regards the promissory note executed in its favor, a chattelmortgage covering the

same motor vehicle was also executed by petitioner Zayas, Jr. In short, respondent Luneta Motor Company maintains that the contract between the companyand the petitioner was only an ordinary loan removed from the coverage of Article 1484 of the New Civil Code. This is untenable. The Escao Enterprises of Cagayan de Oro City was an agent of LunetaMotor Company. Avery significant evidence which proves the nature of the relationshipbetween Luneta Motor Company and Escao Enterprises is Annex A of the petitionersOpposition to Urgent Motion for Reconsideration. Annex A is a Certification from thec a s h i e r o f E s c a o E n t e r p r i s e s o n t h e m o n t h l y i n s t a l l m e n t s p a i d by Zayas, Jr. In thecertification, the promissory note in favor of Lu n e t a M o t o r C o m p a n y w a s s p e c i f i c a l l y mentioned. There was Escao Enterprises, a dealer of respondent Luneta Motor Company,

was merely a collecting-agent as far as the purchase of the subject motor vehicle wasconcerned. The principal and agent relationship is clear.But even assuming that the distinct and independent entity theory of the privater e s p o n d e n t i s v a l i d , t h e n a t u r e o f t h e t r a n s a c t i o n a s a s a l e o f p e r s o n a l p r o p e r t y o n installment basis remains. When, therefore, Escao Enterprises, assigned its rights vis--visthe sale to respondent Luneta Motor Company, the nature of the transaction involvingEscao Enterprises and Zayas, Jr. did not change at all. As assignee, respondent LunetaMotor Company had no better rights than assignor Escao Enterprises under the samet r a n s a c t i o n . T h e t r a n s a c t i o n w o u l d s t i l l b e a s a l e o f p e r s o n a l p r o p e r t y i n i n s t a l l m e n t s covered by Article 1484 of the New Civil Code ------------------------------