PNB v CA

FACTS:
-

Province of Isabela issued several checks drawn against its account with PNB
(P) in favor of Ibarrola (R), as payments for the purchase of medicines.
The checks were delivered to Rs agents who turned them over to R, except 23
checks amounting to P98k.
Due to failure to receive full amount, R filed case against P
LC, CA and SC ordered PNB to pay however, all 3 courts failed to specify the
legal rate of interest 6% or 12%

ISSUE: WoN the rate to be used is 6%

SC: YES!
-

This case does not involve a loan, forbearance of money or judgment involving a
loan or forbearance of money as it arose from a contract of sale whereby R did
not receive full payment for her merchandise.
When an obligation arises from a contract of purchase and sale and not from a
contract of loan or mutuum, the applicable rate is 6% per annum as provided in
Art. 2209 of the NCC
6% from filing of complaint until full payment before finality of judgment
12% from finality of judgment

PNB v SAYO, JR.

FACTS
-

Noahs Ark Sugar Refinery (Noahs) issued several warehouse receipts

(quedans), which were negotiated to Rosa, RNS and St. Therese (vendees),
which were again negotiated to Luis and Cresencia, which they (Luis and
Cresencia) endorsed to PNB as security for 2 loan agreements.
o Transfer of quedans Noahs Rosa, RNS and St. Therese Luis and
Cresencia PNB
Luis and Cresencia failed to pay their loans hence PNB demanded delivery of
sugar stocks, however, Noahs Ark refused, alleging ownership thereof.
Noahs Ark contended that the agreement made by them with the vendees was
stopped since the bank dishonored the payments made by the vendees to
Noahs Ark. As such, the vendees and the endorsers of the quedans never
acquired ownership thereof.
Noahs Ark claimed for warehousemans lien for the storage of the goods.
LC granted lien
PNB appealed

ISSUE: WoN PNB is entitled to the stocks of sugar as the endorsee of the quedans,
without paying the lien
SC: YES
-

While PNB is entitled to the stocks of sugar as the endorsee of the quedans,
delivery to it shall be effected only upon payment of the storage fees.
The warehouseman is entitled to the warehousemans lien that attaches to the
goods invokable against anyone who claims a right of possession thereon.
However, in this case, the lien was lost when R refused to deliver the goods,
which were not anchored to a valid excuse (i.e. non satisfaction of W/Hman Lien)
but on an adverse claim of ownership.
The loss of W/H Mans lien does not necessarily mean the extinguishment of the
obligation to pay the W/H fees and charges which continues to be a personal
liability of the owners, PNB in this case. However, such fees and charges have
ceased to accrue from the date of the rejection by Noahs Ark to heed the lawful
demand for the release of the goods.

DBPvs.CA449SCRA57
DEVELOPMENT BANK OF THE PHILIPPINES, petitioner vs. Court of Appeals and the ESTATE OF
THE LATE JUAN B. DANS, represented by CANDIDA G. DANS, and the DBP MORTGAGE
REDEMPTION INSURANCE POOL, respondents.

FACTS: Juan B. Dans, 76 years of age, together with his family, applied for a loan worth Php 500, 000 at
the Development Bank of the Philipppines on May 1987. The loan was approved by the bank dated
August 4, 1987 but in the reduced amount of Php 300, 000. Mr. Dans was advised by DBP to obtain a
mortgage redemption insurance at DBP MRI pool. DBP deducted the amount to be paid for MRI Premium
that is worth Php 1476.00. The insurance of Mr. Dans, less the DBP service fee of 10%, was credited by
DBP to the savings account of DBP MRI-Pool. Accordingly, the DBP MRI Pool was advised of the credit.
On September 3, 1987, Mr. Dans died of cardiac arrest. DBP MRI notified DBP was not eligible
for the coverage of insurance for he was beyond the maximum age of 60. The wife, Candida, filed a
complaint to the Regional Trial Court Branch I Basilan against DBP and DBP MRI pool for Collection of
Sum of Money with Damages. Prior to that, DBP offered the administratrix (Mrs. Dans) a refund of the
MRI payment but she refused for insisting that the family of the deceased must receive the amount
equivalent of the loan. DBP also offered and ex gratia for settlement worth Php 30, 000. Mrs. Dans
refused to take the offer. The decision of the RTC rendered in favor of the family of the deceased and
against DBP. However, DBP appealed to the court.

ISSUE: Whether or not the DBP MRI Pool should be held liable on the ground that the contract was
already perfected.

HELD: No. DBP MRI Pool is not liable. Though the power to approve the insurance is lodged to the pool,
the DBP MRI Pool did not approve the application of the deceased. There was no perfected contract
between the insurance pool and Mr. Dans.
DBP was wearing two legal hats: as a lender and insurance agent. As an insurance agent, DBP
made believed that the family already fulfilled the requirements for the said insurance although DBP had a
full knowledge that the application would never be approved. DBP acted beyond the scope of its authority
for accepting applications for MRI. If the third person who contracted is unaware of the authority
conferred by the principal on the agent and he has been deceived, the latter is liable for damages. The
limits of the agency carries with it the implication that a deception was perpetratedArticles 19-21 come
into play.

However, DBP is not entitled to compensate the family of the deceased with the entire value of
the insurance policy. Speculative damages are too remote to be included in the cost of damages. Mr.
Dans is entitled only to moral damages. Such damages do not need a proof of pecuniary loss for
assessment. The court granted only moral damages (Php 50, 000) plus attorney feess (Php 10, 000) and
the reimbursement of the MRI fees with legal interest from the date of the filing of the complaint until fully
paid.

Government Service Insurance System v. CA

G.R. No. 40824
February 23, 1989
When Instrument is Payable to Order
FACTS: Respondents Spouses Racho together with
Spouses
Lagasca executed 2 deeds of mortgage on November 13,
1957
and April 14, 1958 respectively, in favor of petitioner
Government
Service Insurance System (GSIS). At the same time, they
gave a
parcel of land as security covered by a TCT and executed
a
promissory note. Lasagca Spouses executed an
instrument,
Assumption of Mortgage wherein they obligated to
assume the
aforesaid obligation to the GSIS and to secure the release
of the
mortgage covering the land owned by private respondent
which
was mortgaged to the GSISall of which was not fulfilled.
Respondent failed to comply with the conditions of the
mortgage,
particularly the amortizations, that led GSIS
extrajudicially
foreclose the mortgage and sell the same though public
auction.
After two years, respondents filed a complaint against
petitioner
and the Lagasca spouses praying that the extrajudicial
foreclosure

made on their property be declared null and void and to

be able to
recover the property and/or GSIS to pay them the value
and/or be
allowed to repurchase the land. They also ask for moral
damages
and attorneys fees.
ISSUE/S: Whether or not the extrajudicial foreclosure
made by
GSIS was null and void.
HELD: Both parties relied on Section 29 of the Negotiable
Instruments Law that provides an accommodation party
is one
who has signed an instrument as maker, drawer, acceptor
of
indoors without receiving value therefor, but is held liable
on the
instrument to a holder for value although the latter knew
him to be
only an accommodation party. The promissory note as
well as the
mortgage deeds are not negotiable instruments since
they do not
comply with the fourth requisite (Section 1)neither one
are
payable to order nor to bearer. Said note is payable to a
specified
party, GSIS. Respondents signed the documents only to
give their
consent to the mortgage with GSIS having full knowledge
that
loans are secured solely for the benefit of the Lagasca
spouses.

There is no information that the respondents executed

the
instruments for a consideration, confirming that they did
such to
their original agreement. The parol evidence rule cannot
be used
by the petitioner for it is clear that there was no objection
in the
court below regarding the admissibility of the testimony
and
documents presented to prove that private respondents
signed
the mortgage papers to accommodate their co-owners,
the
respondents. However, contrary to the respondent court,
it cannot
be said that respondents are without liability under the
mortgage
contracts. Under Art. 2085, the effect that third persons
who are
not parties to the principal obligation may secure the
latter by
pledging or mortgaging their own property.

NORTHERN MOTORS VS. COQUIA

G.R. No. L-40018 December 15, 1975
Facts:
Manila Yellow Taxicab, executed a chattel mortgage over several taxicabs in
favor of Northern Motors. TROPICAL is a judgment creditor of Yellow Taxicab
who assigned the judgment to ONG. On December 12 1974, Sheriff then
levied upon 20 taxicabs, 8 of which are security for the chattel mortgage.
Northern Motors filed an intervention on December 18, 1974; however, the
levied taxicabs were sold the same day at 2pm although agreement shows
that it should have happened at 4pm. Indemnity bond was posted by
TROPICAL, but the bond was cancelled after the sale without notice to
Northern Motors. The petitioner now seek reconsideration also on the
reinstatement of the bond.
A second levy was made upon 35 taxicabs, 7 of which are mortgaged to
Northern Motors.
This is a motion for reconsideration in the SC decision pronouncing that the
Mortgagee has a better right than the judgment debtor over the taxicabs.
The taxies were levied and sold at an auction sale. Ong argues admits that
the mortgagee has a better right that the judgment creditor, but argues that
the purchaser from the auction sale must have a right superior to that of the
mortgagee. The auction sale proceeded and the purchasers were of unknown
addresses, hence the 8 taxicabs cannot be recovered. The proceeds of the
auction were in contest and the sheriff is deducting the expenses of the
execution sale from the proceeds.
Issue/s:
Whether the expenses for the execution sale should be deducted from the
proceeds thereof?
Whether the purchaser has a better right than the creditor?
Whether the bond should be reinstated?
Held:
1st: No, it was already established that the levy on the property was illegal,
it is therefore improper to deduct the expenses of an illegal auction from the

proceeds thereof. The mortgagee can only able to collect the proceeds from
the auction sale because the purchasers are of unknown addresses. The full
proceeds of the sale are due to the mortgagee without any unreasonable and
illegal deductions.
2nd: No, the purchaser of the auction sale merely steps in the shoes of the
judgment creditor as they have been aware of the claim of the mortgagee.
The mortgagee has a better right to the possession of the taxicabs, however,
since the addresses of the purchasers are unknown, the proceeds of the sale
must be delivered to the mortgagee.
3rd: Yes, the bond should be reinstated, as it is to serve as indemnity for
damages in cases that the sold taxicabs cannot be recovered. Proceedings in
the lower court would be an exercise in futility if the bond will not be
reinstated.

Filipinas Marble Corporation v. Intermediate Appellate Court, 142 SCRA 180

(1986)

FACTS:

-Filipinas Marble Corporation applied for a loan with Development Bank of the
Philippines (DBP) in its desire todevelop the fun potentials of its mining
claims and deposits and to finance acquisition of machinery. DBP grantedthe
loan subject, however, to sixty onerous conditions, among which are:
Filipinas Marble shall have to enter into amanagement contract with
respondent Bancom Systems Control, Inc. [Bancom] and that the loan be
secured by amortgage.-The mortgage was not registered.-Bancom and its
directors/ officers mismanaged and misspent the loan.-Bancom resigned with
the approval of DBP even before the expiration of the management contract,
leavingFilipinas Marble desolate and devastated.-Machineries arrived in the
Philippines but alleged not delivered to Filipinas Marble.-Also, instead of
helping Filipinas Marble get back on its feet, DBP completely abandoned
Filipinas Marbles projectand proceeded to foreclose the properties mortgage
without previous demand or notice.-In essence, the Filipinas Marble seeks the
annulment of the deeds of mortgage and deed of assignment becausethere
was no loan at all to secure since what DBP "lent" to Filipinas Marble with its
right hand, it also got back withits left hand; and that, there was failure of
consideration with regard to the execution of said deeds as the loan
wasnever delivered to the Filipinas Marble.-The Filipinas Marble further
prayed that pending the trial on the merits of the case, the trial court
immediately issuea restraining order and then a writ of preliminary injunction
against the sheriffs to enjoin the latter from proceedingwith the foreclosure
and sale of the Filipinas Marbles properties in Metro Manila and in Romblo

n.DBPs DEFENSE:

-opposed the issuance of a writ of preliminary injunction stating that under

Presidential Decree No. 385, DBP's rightto foreclose is mandatory as the
arrearages of petitioner had already amounted to P123,801,265.82 as
against itstotal obligation of P151,957,641.72; that under the same decree,
no court can issue any restraining order or injunction against it to stop the
foreclosure since Filipinas Marble's arrearages had already reached at least
twentypercent of its total obligations; that the alleged non-receipt of the loan
proceeds by the petitioner could, at best, beaccepted only in a technical
sense because the money was received by the officers of the petitioner
acting in suchcapacity and, therefore, irrespective of whoever is responsible
for placing them in their positions.

TC AND CA:

-While evidence of Filipinas Marble Corporation appears persuasive, still it

cannot enjoin DBP from complying withthe mandatory provisions of PD 385.

ISSUES:

If there was no valid contract of loan for failure of consideration, whether or

not the mortgage can exist or stand byitself being a mere accessory
contract.Whether or not the non-registration of the Chattel Mortgage affects
its validity.

HELD:

- Presidential Decree No. 385 was issued primarily to see to it that

government financial institutions are not deniedsubstantial cash inflows,
which are necessary to finance development projects all over the country, by
largeborrowers who, when they become delinquent, resort to court actions in
order to prevent or delay the government'scollection of their debts and
loans.-The government, however, is bound by basic principles of fairness and
decency under the due process clause of the Bill of Rights. P.D. 385 was
never meant to protect officials of government lending institutions who take
over themanagement of a borrower corporation, lead that corporation to
bankruptcy through mismanagement or misappropriation of its funds, and
who, after ruining it, use the mandatory provisions of the decree to avoid

theconsequences of their misdeeds.-The designated officers of the

government financing institution cannot simply walk away and then state
that sincethe loans were obtained in the corporation's name, then P.D. 385
must be peremptorily applied and that there is noway the borrower
corporation can prevent the automatic foreclosure of the mortgage on its
properties once thearrearages reach twenty percent (20%) of the total
obligation no matter who was responsible.-In the case at bar, the
respondents try to impress upon this Court that the $5,000,000.00 loan was
actually grantedand released to the petitioner corporation and whatever the
composition of the management which received theloan is of no moment
because this management was acting in behalf of the corporation. The
respondents alsoargue that since the loan was extended to the corporation,
the releases had to be made to the then officers of thatborrower
corporation.-Precisely, what the petitioner is trying to point out is that the
DBP and Bancom people who managed FilipinasMarble misspent the
proceeds of the loan by taking advantage of the positions that they were
occupying in thecorporation which resulted in the latter's devastation instead
of its rehabilitation. The petitioner does not question theauthority under
which the loan was delivered but stresses that it is precisely this authority
which enabled the DBPand Bancom people to misspend and misappropriate
the proceeds of the loan thereby defeating its very purpose,that is, to
develop the projects of the corporation. Therefore, it is as if the loan was
never delivered to it and thus,there was failure on the part of the respondent
DBP to deliver the consideration for which the mortgage and theassignment
of deed were executed.- Article 2125 of the Civil Code clearly provides that
the non-registration of the mortgage does not affect theimmediate parties. It
states: Art. 2125. In addition to the requisites stated in article 2085, it is
indispensable, in order that a mortgage may bevalidly constituted that the
document in which it appears be recorded in the Registry of Property. If the
instrument isnot recorded, the mortgage is nevertheless binding between
the parties.Filipinas marble, however, cannot invoke the above provision to
nullify the chattel mortgage it executed in favor of respondent DBP.

Cerna v. Court of Appeals, 220 SCRA 517 (1993)

FACTS:

-Celerino Delgado (Delgado) and Conrad Leviste (Leviste) entered into a loan
agreement which was evidenced by apromissory note. worded as follows:-On
the same date, Delgado executed a chattel mortgage over a Willy's jeep
owned by him. And acting as theattorney-in-fact, Manolo P. Cerna, he also
mortgage a "Taunus' car owned by the latter.

-The period lapsed without Delgado paying the loan. This prompted Leviste to
a file a collection suit against Delgadoand Cerna as solidary debtors.-Cerna
filed a Motion to Dismiss on the ground of lack of cause of action against
Cerna and the death of Delgado. Anent the latter, Cerna claimed that the
claim should be filed in the proceedings for the settlement of
Delgado'sestate as the action did not survive Delgado's death. Moreover, he
also stated that since Leviste already opted tocollect on the note, he could
no longer foreclose the mortgage.

CA and TC:

-Denied the Motion to Dismiss.

ISSUES:

-Whether or not a third party, who is not a debtor under the note but
mortgaged his property to secure the paymentof the loan of another is
solidarily liable with the principal debtor.Whether or not a mortgagee who
opted to collect may still foreclose the mortgage.

HELD:

- There is also no legal provision nor jurisprudence in our jurisdiction which

makes a third person who secures thefulfillment of another's obligation by
mortgaging his own property to be solidarily bound with the principal obligor.
Achattel mortgage may be "an accessory contract" to a contract of loan, but
that fact alone does not make a third-party mortgagor solidarily bound with
the principal debtor in fulfilling the principal obligation that is, to pay the
loan.The signatory to the principal contract loan remains to be primarily
bound. It is only upon the default of thelatter that the creditor may have
been recourse on the mortgagors by foreclosing the mortgaged properties in
lieu of an action for the recovery of the amount of the loan. And the liability
of the third-party mortgagors extends only tothe property mortgaged. Should
there be any deficiency, the creditors has recourse on the principal debtor.The Special Power of Attorney did not make petitioner a mortgagor. All it did
was to authorized Delgado tomortgage certain properties belonging to
petitioner -Hence, Leviste, having chosen to file the collection suit, could not
now run after petitioner for the satisfaction of thedebt. This is even more
true in this case because of the death of the principal debtor, Delgado.
Leviste was pursuinga money claim against a deceased person.