Credit Digests

CREDIT TRANSACTIONS DIGEST
2J 2016-2017
ABUZO, BELTEJAR, BONIFACIO, BONAOBRA, BRINAS, CABANGBANG, DEIPARINE, DESUASIDO, DIMACULANGAN, GAMO,
MANGILA, MARCILLA, MONTESA, NOBLE, RUBIO, SALONGA, SANGALANG, SIMEON, VIRAY
1ST BATCH
Saura Import and Export Co. vs DBP - ABUZO
FACTS: In July 1953 the plaintiff (hereinafter referred to as Saura, Inc.) applied to the Rehabilitation
Finance Corporation (RFC), before its conversion into DBP, for an industrial loan of P500,000.00, to be
used as follows: P250,000.00 for the construction of a factory building (for the manufacture of jute sacks);
P240,900.00 to pay the balance of the purchase price of the jute mill machinery and equipment; and
P9,100.00 as additional working capital. On January 7, 1954 RFC passed Resolution No. 145 approving
the loan application for P500,000.00, to be secured by a first mortgage on the factory building to be
constructed, the land site thereof, and the machinery and equipment to be installed.
The loan was granted, but plaintiff asked for its cancelation. Then plaintiff asked for the same loan
agreement and on which the RFC was now only willing to grant P300,000 as loan. Discussions followed,
and RFC then allowed the loan to be granted at P500,000 provided that certain conditions be met by
plaintiff. Not having met the conditions, Saura asked that the mortgage be canceled and entered into a
mortgage contract over the same property in favor of Prudential Bank and Trust Co., the latter having
issued Saura letter of credit for the release of the jute machinery. As security, Saura executed a trust
receipt in favor of the Prudential. For failure of Saura to pay said obligation, Prudential sued Saura.
After almost 9 years, Saura Inc, commenced an action against RFC, alleging failure on the latter to
comply with its obligations to release the loan applied for and approved, thereby preventing the plaintiff
from completing or paying contractual commitments it had entered into, in connection with its jute mill
project.
The trial court ruled in favor of Saura, ruling that there was a perfected contract between the parties and
that the RFC was guilty of breach thereof.
ISSUE: Whether or not damages can be claimed by plaintiff from defendant.
DOCTRINE: A perfected consensual contract does not give rise to damages in case of mutual
desistance.
HELD: NO. 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 basic claim that the defendant
failed to fulfill its obligation and the plaintiff is therefore entitled to recover damages.
It should be noted that RFC entertained the loan application of Saura, Inc. on the assumption that the
factory to be constructed would utilize locally grown raw materials, principally kenaf. There is no serious
dispute about this. It was in line with such assumption that when RFC, by Resolution No. 9083 approved
on December 17, 1954, restored the loan to the original amount of P500,000.00. It imposed two
conditions, to wit: "(1) that the raw materials needed by the borrower-corporation to carry out its operation
are available in the immediate vicinity; and (2) that there is prospect of increased production thereof to
provide adequately for the requirements of the factory." Evidently Saura, Inc. realized that it could not
meet the conditions required by RFC, and so wrote its letter of January 21, 1955, stating that local jute
"will not be able in sufficient quantity this year or probably next year," and asking that out of the loan
agreed upon the sum of P67,586.09 be released "for raw materials and labor." RFC turned down the
request. Saura, Inc. obviously was in no position to comply with RFC's conditions. So instead of doing so
and insisting that the loan be released as agreed upon, Saura, Inc. asked that the mortgage be cancelled,
The action thus taken by both parties was in the nature mutual desistance — what Manresa terms "mutuo
disenso" — which is a mode of extinguishing obligations.
The subsequent conduct of Saura, Inc. confirms this desistance. It did not protest against any alleged
breach of contract by RFC, or even point out that the latter's stand was legally unjustified. Its request for
cancellation of the mortgage carried no reservation of whatever rights it believed it might have against
RFC for the latter's non-compliance. In 1962 it even applied with DBP for another loan to finance a rice
2J 2016-2017
and corn project, which application was disapproved. It was only in 1964, nine years after the loan
agreement had been cancelled at its own request, that Saura, Inc. brought this action for damages.All
these circumstances demonstrate beyond doubt that the said agreement had been extinguished by
mutual desistance — and that on the initiative of the plaintiff-appellee itself.
----------------------------------------------------------------------------------------------------------------------------
BPI Investment Corp vs CA - BELTEJAR
FACTS: Frank Roa obtained a loan from Ayala Investment and Development Corporation (AIDC), for the
construction of his house. Said house and lot were mortgaged to AIDC to secure the loan. Roa sold the
properties to ALS and Litonjua, the latter paid in cash and assumed the balance of Roa’s indebtedness
wit AIDC. AIDC was not willing to extend the old interest to private respondents and proposed a grant of
new loan of P500,000 with higher interest to be applied to Roa’s debt, secured by the same property.
Private respondents executed a mortgage deed containing the stipulation. The loan contract was signed
on 31 March 1981 and was perfected on 13 September 1982, when the full loan was released to private
respondents.
BPIIC, AIDC’s predecessor, released to private respondents P7,146.87, purporting to be what was left of
their loan after full payment of Roa’s loan. BPIIC filed for foreclosure proceedings on the ground that
private respondents failed to pay the mortgage indebtedness. Private respondents maintained that they
should not be made to pay amortization before the actual release of the P500,000 loan. The suit was
dismissed and affirmed by the CA.
ISSUE: W/N the contract of loan was perfected only on September 13, 1982 or the second release of the
loan?
DOCTRINE: A loan contract is not a consensual contract but a real contract. It is perfected upon delivery
of the object of the contract. Although a perfected consensual contract can give rise to an action for
damages, it does not constitute a real contract which requires delivery for perfection. A perfected real
contract gives rise only to obligations on the part of the borrower.
HELD: YES. The court agrees with private respondents that based on Article 1934 of the Civil Code, a
simple loan is perfected upon the delivery of the object of the contract, hence a real contract. In this case,
even though the loan contract was signed on March 31, 1981, it was perfected only on September 13,
1982, when the full loan was released to private respondents.They submit that petitioner misread
Bonnevie. To give meaning to Article 1934, according to private respondents, Bonnevie must be
construed to mean that the contract to extend the loan was perfected on March 31, 1981 but the contract
of loan itself was only perfected upon the delivery of the full loan to private respondents on September 13,
1982.
A contract of loan involves a reciprocal obligation, wherein the obligation or promise of each party is the
consideration for that of the other. As averred by private respondents, the promise of BPIIC to extend and
deliver the loan is upon the consideration that ALS and Litonjua shall pay the monthly amortization
commencing on May 1, 1981, one month after the supposed release of the loan. It is a basic principle in
reciprocal obligations that neither party incurs in delay, if the other does not comply or is not ready to
comply in a proper manner with what is incumbent upon him. Only when a party has performed his part of
the contract can he demand that the other party also fulfills his own obligation and if the latter fails, default
sets in. Consequently, petitioner could only demand for the payment of the monthly amortization after
September 13, 1982 for it was only then when it complied with its obligation under the loan contract.
Therefore, in computing the amount due as of the date when BPIIC extrajudicially caused the foreclosure
of the mortgage, the starting date is October 13, 1982 and not May 1, 1981.
----------------------------------------------------------------------------------------------------------------------------
Bonnevie vs CA -BONIFACIO
2J 2016-2017
FACTS: Spouses Lozano mortgaged their property to secure their loan amounting to P75,000.00 with
The Philippine Bank of Commerce (PBCom), herein private respondent. The deed of mortgage was
executed on December 6, 1966 but the proceeds of the said loan were only received by the spouses 6
days after, or on December 12, 1966. Two days after the mortgage was executed or on December 8,
1966, the Spouses entered into a sale with Honesto Bonnevie, herein petitioner, over their mortgaged
property for P100,000.00. The Deed of Sale with Mortgage was executed on the same day. P75,000.00
of the purchase price was payable to PBCom and the P25,000.00 of the same was payable to Spouses
Lozano. Honesto Bonnevie was able to pay a total of P18,944.20 to PBCom.
Thereafter, he assigned his rights under the Deed of Sale with Assumption of Mortgage to his
brother, Raoul Bonnevie, herein petitioner and an intervenor. Raoul Bonnevie then defaulted payments to
PBCom prompting the latter to auction the property after Bonnevie failed to settle despite subsequent
demands, in order to recover the amount loaned. Honesto Bonnevie filed for the annulment of the Deed
of Mortgage dated December 6, 1966 as well as the extrajudicial foreclosure with the Court of First
Instance of Rizal. Honesto Bonnevie contends the validity of the mortgage between Spouses 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.
However, CFI dismissed the complaint which the Court of Appeals affirmed.
ISSUE: Whether or not there was a perfected contract of loan
HELD: YES. A contract of loan being a consensual contract is perfected at the same time the contract of
mortgage was executed. The promissory note executed on December 12, 1966 is only an evidence of
indebtedness and does not indicate lack of consideration of the mortgage at the time of its execution.
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 Spouses Lozano. 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
perfected even before the release of actual proceeds. The promissory note executed is only an evidence
of indebtedness and does not indicate lack of consideration of the mortgage at the time of its execution.
----------------------------------------------------------------------------------------------------------------------------
Central Bank of the Philippines vs CA - BONAOBRA
FACTS: Island Savings Bank 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.
The approved loan application called for a lump sum P80,000.00 loan, repayable in semi-annual
installments for a period of 3 years, with 12% annual interest.
A mere P17,000.00 partial release of the P80,000.00 loan was made by the Bank; and Sulpicio M.
Tolentino and his wife Edita Tolentino signed a promissory note for P17,000.00 at 12% annual interest,
payable within 3 years from the date of execution of the contract at semi-annual installments of
P3,459.00. The Bank promised repeatedly the release of the P63,000.00 balance.
However, the Monetary Board of the Central Bank, after finding Island Savings Bank was suffering
liquidity problems and that it failed to put up the required capital to restore its solvency, issued a
resolution prohibiting Island Savings Bank from doing business in the Philippines.
2J 2016-2017
Island Savings Bank, in view of non-payment of the P17,000.00 covered by the promissory note, filed an
application for the extra-judicial foreclosure of the real estate mortgage covering the 100-hectare land of
Sulpicio M. Tolentino.
ISSUES:
1. Can the action of Sulpicio M. Tolentino for specific performance prosper?
2. Is Sulpicio M. Tolentino liable to pay the P17,000.00 debt covered by the promissory note?
3. If Sulpicio M. Tolentino's liability to pay the P17,000.00 subsists, can his real estate mortgage
be foreclosed to satisfy said amount?
DOCTRINE: When there is partial failure of consideration, the mortgage becomes unenforceable to the
extent of such failure; The mere fact of insolvency of a debtor is never an excuse for the non-fulfillment of
an obligation but 'instead it is taken as a breach of the contract by him.
HELD:
1. No, the action of Sulpicio M. Tolentino for specific performance prosper cannot prosper.
Since Island Savings Bank was in default in fulfilling its reciprocal obligation under their loan
agreement, Sulpicio M. Tolentino, under Article 1191 of the Civil Code, may choose between specific
performance or rescission with damages in either case. But since Island Savings Bank is now prohibited
from doing further business by Monetary Board Resolution No. 967, the Court cannot grant specific
performance in favor of Sulpicio M, Tolentino.
Rescission is the only alternative remedy left. The Court rule, however, that rescission is only for
the P63,000.00 balance of the P80,000.00 loan, because the bank is in default only insofar as such
amount is concerned, as there is no doubt that the bank failed to give the P63,000.00.
2. Yes, Sulpicio M. Tolentino is liable to pay the P17,000.00 debt covered by the promissory note.
As far as the partial release of P17,000.00, which Sulpicio M. Tolentino accepted and executed a
promissory note to cover it, the bank was deemed to have complied with its reciprocal obligation to
furnish a P17,000.00 loan. 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.
Article 1192 of the Civil Code provides that in case both parties have committed a breach of their
reciprocal obligations, the liability of the first infractor shall be equitably tempered by the courts. WE rule
that the liability of Island Savings Bank for damages in not furnishing the entire loan is offset by the
liability of Sulpicio M. Tolentino for damages, in the form of penalties and surcharges, for not paying his
overdue P17,000.00 debt. The liability of Sulpicio M. Tolentino for interest on his P17,000.00 debt shall
not be included in offsetting the liabilities of both parties. Since Sulpicio M. Tolentino derived some benefit
for his use of the P17,000.00, it is just that he should account for the interest thereon.
3. Yes, Tolentino’s real estate mortgage can be foreclosed but not in its entirety to satisfy his
P17,000 debt.
When there is partial failure of consideration, the mortgage becomes unenforceable to the
extent of such failure. 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
2J 2016-2017
subsists as a security for the P17,000.00 debt. 21.25 hectares is more than sufficient to secure a
P17,000.00 debt.
The rule of indivisibility of a real estate mortgage provided for by Article 2089 of the Civil Code is
inapplicable to the facts of this case because it presupposes several heirs of the debtor or creditor which
does not obtain in this case.
----------------------------------------------------------------------------------------------------------------------------
Republic vs Bagtas - BRINAS
FACTS: Jose Bagtas borrowed from the Republic through the Bureau of Animal Industry (BAI) 3 bulls: a
Red Sindhi with a book value of P1,176.46, a Bhagnari of P1,320.56, and a Sahiniwal of P744.46 for a
period of one year. The bulls are for breeding purposes subject to a government charge of breeding fee of
10% of their book value. Upon the expiration of the contract, Bagtas asked for a renewal for another
period of one year, but the Secretary of Agriculture and Natural Resources only approved the renewal of
one bull and requested the return of the other two.
Bagtas then wrote to the Director of Animal Industry that he would pay the value of the 3 bulls with a
deduction of yearly depreciation. The Director advised him that the value cannot be depreciated and
asked Bagtas to either return the bulls or pay their book value, but the latter failed to do either. Hence,
the Republic instituted an action against Bagtas praying that he be ordered to return the 3 bulls loaned to
him or to pay their book value and the unpaid breeding fee.
After the hearing, the trial court rendered a judgment in favor of the Republic wherein it moved ex parte
for a writ of execution which the court granted. Felicidad Bagtas, the surviving spouse and administrator
of her late husband Jose’s estate, filed a motion alleging that the two bulls Sindhi and Bhagnari were
returned. However, the third bull, the Sahiniwal, died from a gunshot wound inflicted during a Huk raid. As
such death was due to force majeure, she contends that she’s relieved from the duty of returning the bull
or paying its value due to the contract being commodatum. The BAI should instead suffer the loss as it
retained ownership to the bull.
ISSUE: Whether or not Bagtas is liable for the death of Sahiniwal?
DOCTRINE: Art. 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.
HELD: YES, Bagtas is liable for the death of Sahiniwal. 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 Art. 1671 of the CC, the lessee would be subject to the responsibilities of a possessor in bad faith
because of its continued possession of the bull after the expiration of the contract. Even if the contract be
commodatum, Bagtas will still be liable, because (1) he kept the bull longer than the period stipulated;
and (2) the thing loaned has been delivered with appraisal of its value (10%). No stipulation that in case
of loss of the bull due to fortuitous event exempts Bagtas from liability.
----------------------------------------------------------------------------------------------------------------------------
Catholic Vicar Apostolic Inc of the Mt. Province - CABANGBANG
FACTS: The whole controversy started when Catholic Vicar Apostolic of the Mt. Province (Vicar) filed with
the CFI of Baguio - Benguet an application for registration of title over Lots 1, 2, 3 and 4 situated in at
Poblacion Central, La Trinidad, Benguet, said lots being the sites of the Catholic Church bldg, convents,
high school bldg, school gymnasium, school dormitories, social hall, stonewalls, etc. On March 22, 1963,
the heirs of Juan Valdez and the heirs of Egmidio Octaviano filed an opposition on Lots 2 and 3, asserting
ownership and title thereto. After the trial, the land registration court confirmed the registrable title of
Vicar. The heirs of Valdez and Octaviano appealed the decision of the land registration court to the CA,
2J 2016-2017
and the CA rendered its decision reversing the land registration court and dismissing the Vicar application
as to Lots 2 and 3. The lots claimed by the two sets of oppositors, the first lot being presently occupied
by the convent and the second by the women dormitory and the sister’s convent. CA touched the
ownership of Lots 2 and 3 in question; that the two lots were possessed by the predecessors-in-interest of
private respondents under claim of ownership in good faith from 1906 to 1951; that petitioner had been in
possession of the same lots as bailee in commodatum up to 1951, when petitioner repudiated the trust
and when it applied for registration in 1962; that petitioner had just been in possession as owner for
eleven years, hence there is no possibility of acquisitive prescription. Thereupon, Vicar filed with the SC
a petition for review or certiorari of the decision of the CA dismissing his application for registration of Lots
2 and 3.
ISSUE: Whether the CA committed an error in finding that Vicar had been in possession of Lots 2 and 3
merely as bailee borrower in commodatum, a gratuitous loan for use.
DOCTRINE:
HELD: The Court ruled that there is no reason to disregard or reverse the ruling of the Court of Appeals.
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 bailers 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 action of
the Vicar by such adverse claim could not ripen into title by way of ordinary acquisitive prescription
because of the absence of just title.
----------------------------------------------------------------------------------------------------------------------------
Quintos and Ansaldo vs Beck - DEIPARINE
FACTS: The defendant, Beck, was a tenant of the plaintiff, Margarita Quintos and Angel Ansaldo, and as
such occupied the latter's house on M. H. del Pilar street, No. 1175. On January 14, 1936, upon the
novation of the contract of lease between the plaintiff and the defendant, the former gratuitously granted
to the latter the use of the furniture (three gas heaters and four electric lamps), subject to the condition
that the defendant would return them to the plaintiff upon the latter's demand. The plaintiff sold the
property to Maria Lopez and Rosario Lopez and on September 14, 1936, these three notified the
defendant of the conveyance, giving him sixty days to vacate the premises under one of the clauses of
the contract of lease. Thereafter the plaintiff required the defendant to return all the furniture transferred to
him for them in the house where they were found. On November 5, 1936, the defendant, through another
person, wrote to the plaintiff reiterating that she may call for the furniture in the ground floor of the house.
On the 7th of the same month, the defendant wrote another letter to the plaintiff informing her that he
could not give up the three gas heaters and the four electric lamps because he would use them until the
15th of the same month when the lease in due to expire. The plaintiff refused to get the furniture in view
of the fact that the defendant had declined to make delivery of all of them. On November 15th,
before vacating the house, the defendant deposited with the Sheriff all the furniture belonging to the
plaintiff and they are now on deposit in the warehouse situated at No. 1521, Rizal Avenue, in the custody
of the said sheriff. The Court of First Instance of Manila ordered that the defendant return to her the three
has heaters and the four electric lamps found in the possession of the Sheriff of said city, that she call for
the other furniture from the said sheriff of Manila at her own expense, and that the fees which the Sheriff
may charge for the deposit of the furniture be paid pro rata by both parties, without pronouncement as to
the costs.
ISSUE: Whether the defendant is entitled to the furniture
HELD: NO. The contract entered into between the parties is one of commadatum, because under it the
plaintiff gratuitously granted the use of the furniture to the defendant, reserving for herself the ownership
thereof; by this contract the defendant bound himself to return the furniture to the plaintiff, upon the latters
2J 2016-2017
demand. The obligation voluntarily assumed by the defendant to return the furniture upon the plaintiff's
demand, means that he should return all of them to the plaintiff at the latter's residence or house. The
defendant did not comply with this obligation when he merely placed them at the disposal of the plaintiff,
retaining for his benefit the three gas heaters and the four eletric lamps.
----------------------------------------------------------------------------------------------------------------------------
Consolidated Bank and Trust Corp vs CA - DESUASIDO

FACTS: On July 13, 1982, respondents Continental Cement Corporation and Gregory T. Lim obtained
from petitioner Consolidated Bank and Trust Corporation Letter of Credit in the amount of P1,068,150.00
On the same date, respondent Corporation paid a marginal deposit of P320,445.00 to petitioner. The
letter of credit was used to purchase around 500K liters of bunker fuel oil from Petrophil Corporation,
which the latter delivered directly to respondent Corporation in its Bulacan plant. In relation to the same
transaction, a trust receipt for the amount of P1,001,520.93 was executed by respondent Corporation,
with respondent Lim as signatory.
Claiming that respondents failed to turn over the goods covered by the trust receipt or the proceeds
thereof, petitioner filed a complaint for sum of money with application for preliminary attachment before
the Regional Trial Court of Manila. In answer to the complaint, respondents averred that the transaction
between them was a simple loan and not a trust receipt transaction, and that the amount claimed by
petitioner did not take into account payments already made by them. Respondent Lim also denied any
personal liability in the subject transactions. In a Supplemental Answer, respondents prayed for
reimbursement of alleged overpayment to petitioner of the amount of P490,228.90.
ISSUE: Whether or not the transaction involved is a loan transaction or a trust receipt transaction
DOCTRINE: If the debtor received the goods subject of the trust receipt before the trust receipt itself was
entered into, the transaction in question is a simple loan and not a trust receipt agreement.
HELD: Loan transaction. Petitioner failed to convince the court that its transaction with respondent
Corporation is really a trust receipt transaction instead of merely a simple loan, as found by the lower
court and the Court of Appeals.
The recent case of Colinares v. Court of Appeals appears to be foursquare with the facts obtaining in the
case at bar. There, it was found that inasmuch as the debtor received the goods subject of the trust
receipt before the trust receipt itself was entered into, the transaction in question was a simple loan and
not a trust receipt agreement. Prior to the date of execution of the trust receipt, ownership over the goods
was already transferred to the debtor. This situation is inconsistent with what normally obtains in a pure
trust receipt transaction, wherein the goods belong in ownership to the bank and are only released to the
importer in trust after the loan is granted.
In the case at bar, as in Colinares, the delivery to respondent Corporation of the goods subject of the trust
receipt occurred long before the trust receipt itself was executed. More specifically, delivery of the bunker
fuel oil to respondent Corporations Bulacan plant commenced on July 7, 1982 and was completed by July
19, 1982. Further, the oil was used up by respondent Corporation in its normal operations by August,
1982. On the other hand, the subject trust receipt was only executed nearly two months after full delivery
of the oil was made to respondent Corporation, or on September 2, 1982.
The danger in characterizing a simple loan as a trust receipt transaction was explained in Colinares, to
wit:
The Trust Receipts Law does not seek to enforce payment of the loan, rather it punishes the dishonesty
and abuse of confidence in the handling of money or goods to the prejudice of another regardless of
whether the latter is the owner. Here, it is crystal clear that on the part of Petitioners there was neither
dishonesty nor abuse of confidence in the handling of money to the prejudice of PBC. Petitioners
continually endeavored to meet their obligations, as shown by several receipts issued by PBC
2J 2016-2017
acknowledging payment of the loan.
----------------------------------------------------------------------------------------------------------------------------
Republic vs Grijaldo - DIMACULANGAN

FACTS: In the year 1943 Jose Grijaldo obtained five loans from the branch office of the Bank of Taiwan
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 all notes without due dates, but because the loans were
due one year after they were incurred. To secure the payment of the loans the appellant executed a
chattel mortgage on the standing crops on his land. However, by virtue of Vesting Order No. P-4, 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. These assets, including the
loans in question, were subsequently transferred to the Republic of the Philippines under Transfer
Agreement.
On September 29, 1954 the Republic of the Philippines made a written extrajudicial demand 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. It prompted the petitioner to file a complaint to collect
from the appellant the unpaid account in question. However, the case was dismissed upon the ground
that the action had already prescribed. An appeal was then made to the CFI, which held that Grijaldo
must pay.
Grijaldo then appealed directly to the Supreme Court upon the ground that there was no cause of
action as against him 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
ISSUE: 1. Is the respondent’s obligation to pay the loans already extinguished?
DOCTRINE: 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
HELD: NO. 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 namely, the crops to be harvested
from his land, or the value of the crops that would be harvested from his land. 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.
----------------------------------------------------------------------------------------------------------------------------
2J 2016-2017
Casa Filipina Development Corp vs Deputy Executive Secretary - GAMO

FACTS:
On June 30, 1986, Jose Valenzuela, Jr. filed a complaint against petitioner Casa Filipina Development
Corporation before the Office of Appeals, Adjudication and Legal Affairs (OAALA) of the then Human
Settlements Regulatory Commission (now Housing and Land Use Regulatory Board) for its failure to
execute and deliver the deed of sale and transfer certificate of title. He alleged on May 2, 1984, he
entered into a contract to sell with Casa Filipino for the purchase of a 120 sq. m. lot in San Dionisio,
Parañaque, for a total purchase price of P68,400.00 with P16,416.00 as downpayment and the balance of
P51,984.00 to be paid in 12 equal monthly installments of P4,915.16 with 24% interest per annum starting
September 3, 1984. On October 7, 1985, he made his full payment. Despite full payment of the lot, Casa
Filipino refused to execute the necessary deed of absolute sale and deliver the corresponding transfer
certificate of title to him. Since October 1985, he had offered to pay for or reimburse Casa Filipino the
expenses for the transfer of the title but was refused.
In Casa Filipino’s defense, it contended that the action was premature because of his failure to comply
with the other conditional requirements of their contract such as payment of transfer expenses, and that
had the latter paid said fees, it would have been very much willing to effect the transfer of the title.
On January 21, 1987, the OAALA rendered judgment in favor of Valenzuela, relying on Section 25 of
Presidential Decree No. 957 (Regulating the Sale of Subdivision Lots and Condominiums, Providing
Penalties for Violations thereof). OALLA ordered Casa Filipino to to execute and deliver within 15 days
the deed of absolute sale and to bill complainant the total amount due for the registration and transfer
expenses of the title. OAALA also specified that in the event respondent is unable to deliver the title to the
said lot, Casa Filipino was ordered to refund the total payment (P76,180.82) plus 24% interest per annum
from June 30, 1986, the date of the filing of the complaint, until fully paid.
Casa Filipino filed an appeal before the Housing and Land Use Regulatory Board. In petitioner's
memorandum, it narrated that its original mortgagee bank was Royal Savings Bank which was absorbed
by Comsavings Bank due to bankrun. Comsavings Bank is not amenable to petitioner's earlier
arrangement with Royal Savings Bank on individual redemption of title, thus, it demanded that Casa
Filipino’s obligations should be paid prior to the release of any individual title; it cannot seasonably meet
such demand due to the inability of the past administration to put up a viable and progressive economic
program that brought it into a fix situation wherein it has no participation either intentionally or by
negligence.
The HLURB dismissed petitioner's appeal for lack of merit and affirmed in toto the questioned decision of
the OAALA. The defense of the respondent-appellant that its failure to deliver the title allegedly due to the
inability of the past administration to put up a viable and progressive economic program which led to the
closure of the Royal Savings Bank as its original mortgagee bank in not well-taken since there is no proof
submitted to this Board to substantiate the claim.Petitioner appealed further to the Office of the President.
Again, on April 11, 1989, its appeal was dismissed for lack of merit and the questioned decision of the
HLURB was affirmed.
ISSUE:
1. Whether or not the granting of both remedies of specific performance and rescission was valid? (as the
petitioner insists that both cannot be availed of at the same time)
2. Whether or not the 24% interest imposed by OAALA is high and without basis?
3. Whether or not specified under Sec. 25 of PD 957 has begun to run?
DOCTRINE: If a particular rate of interest has been expressly stipulated by the parties, that
interest, not the legal rate of interest, shall be applied.
HELD:
2J 2016-2017
1. It is plain enough in the OAALA decision that rescission is being ordered only in the event specific
performance is not feasible. Moreover, petitioner is already estopped from raising this issue because in its
appeal memorandum submitted before the HLURB, it leaded that it “prays that it be given a period/time to
redeem the title or the demand for issuance of title be suspended from the Comsavings Bank before any
deed of absolute sale be executed so that the Transfer Certificate of Title be issued and/or refund be
ordered.”
2. The OAALA found as a fact that "the complaint-appellee was ready, willing and able to pay for the
expenses for the transfer of title as stipulated in the Contract to Sell . . . " We accord respect and finality
to this finding. Adopting the disposition of the Office of the Solicitor General, the Court rules that: “It is,
thus, evident that if a particular rate of interest has been expressly stipulated by the parties, that interest,
not the legal rate of interest, shall be applied.”
3. Section 25 of P.D. No. 957 imposes an obligation on the part of the owner or developer, in the event
the mortgage over the lot or unit is outstanding at the time of the issuance of the title to the buyer, to
redeem the mortgage or the corresponding portion thereof within six months from such issuance. The
argument of petitioner that the issuance of the title is a prerequisite to the running of the six month period
of redemption, fails to convince. Otherwise, the owner or developer can readily concoct a thousand and
one reasons as justifications for its failure to issue the title and in the process, prolong the period within
which to deliver the title to the buyer free from any liens or encumbrances.
Additionally, by not issuing/delivering the title of the lot to private respondent upon full payment thereof,
petitioner has already violated the explicit mandate of the first sentence of Section 25 of P.D. No. 957. If
We were to count the six month period of redemption from the belated issuance of the title, petitioner will
have a lot to gain from its own non-observance of said provision. We shall not countenance such
absurdity.
----------------------------------------------------------------------------------------------------------------------------
PNB vs CA - MANGILA
FACTS:
The private respondent was granted by PNB, a credit line of 321.8 million secured by real estate
mortgage, for a term of 2 years, with 18% interest per annum. In return, private respondents executed in
favor of PNB two promissory notes. In the said promissory notes, it authorized the PNB the stipulated
18% interest per annum within the limits allowed by law any time depending on whatever policy PNB may
adopt in the future. On August 1984, PNB informed the private respondent of the increase of the interest
rate which is 32% for loan. In letter dated September 1984, private respondent was again informed that
the interest rate on the outstanding loan is adjusted from 32% per annum to 41% per annum. On October
1984, petitioner informed again private respondent that the interest rate is adjusted from 41% to 48% per
annum.
ISSUE: Whether or not the bank may unilaterally change or increase the interest rate stipulated as often
as it pleased
DOCTRINE:
Although Section 2, P.D. No. 116 of January 29, 1973, authorizes the Monetary Board to prescribe the
maximum rate or rates of interest for loans or renewal thereof and to change such rate or rates whenever
warranted by prevailing economic and social conditions, it expressly provides that "such changes shall
not be made oftener than once every twelve months. "If the Monetary Board itself was not authorized to
make such changes oftener than once a year, even less so may a bank which is subordinate to the
Board.
HELD:
2J 2016-2017
No. The Supreme Court held that Sec. 2 of PD 116 authorizes the change of such interest rate provided
that such changes shall not be made oftener than once every twelve months. In the case at bar PNB,
within a period of only 4 months, increased the 18% interest rate three times. Those increases were null
and void, for if the Monetary Board itself was not authorized to make such changes oftener than once a
year, even less so may a bank which is subordinate to the Board. Moreover, the unilateral action of PNB
in increasing the interest rate on the private respondent’s loan violated the mutuality of contracts. Express
provision of the Credit Agreement further provides that its terms may be emended only by an instrument
in writing signed by the party to be bound as burdened by such amendment. The debtor never agreed in
writing to pay the interest increases fixed by the PNB beyond 24% per annum, hence, he is not bound to
pay a higher rate than that.
------------------------------------------------------------------------------------------------------------------ ----------
Relucio vs Garfin - MARCILLA

FACTS: Private respondent Garfin filed a complaint for specific performance with damages against
petitioner Relucio to compel the latter to 1) execute a deed of sale in her favour over two residential lots in
Mariano Village Subdivision, Naga City; and 2) construct roads to the lots. Garfin alleged that the lots,
which have a total contract price of P10,800.00, have already been paid for, as she had already paid
P200.00 as down payment, and had subsequently completed payment of 128 equal monthly installments
of P89.45 each amounting to P11,450.00; that as the law allows the charging of interest only as monetary
interest or as compensatory interest, none of which have obtained in her case, as she had never incurred
in delay in the payment of installments due, the stipulated interest of six percent (6%) per annum on the
outstanding balance is null and void; and that the amount of 650.00 representing overpayment be
returned to her.
Petitioner resisted the complaint, maintaining that private respondent, contrary to the latter's allegations,
is obliged to pay interest on the installment payments of the unpaid outstanding balance even if paid on
their "due dates" per schedule of payments; that private respondent had actually been in arrears in the
amount of P4,269.40, representing such interest as of June 1979, which therefore entitled petitioner to
cancel the contract in question. Petitioner then prayed for judicial affirmance of her Notarial Notice of
Cancellation over the said contract in question. The lower court ruled in favour of Garfin. The same was
affirmed by the CA. Thus, this petition to the Supreme Court.
ISSUES:
1) Whether or not petitioner may validly charge interest on installment payments, notwithstanding
that private respondent had been prompt in her monthly payments
2) Whether or not petitioner’s notice of cancellation is valid and effective
DOCTRINE: Vendor and vendee are legally free to stipulate for the payment of either the cash price of a
subdivision lot or its installment price. Should the vendee opt to purchase a subdivision lot via the
installment payment system, he is in effect paying interest on the cash price, whether the fact and rate of
such interest payment is disclosed in the contract or not.
HELD:
1) YES. The Supreme Court held that the questioned Contract to Buy and Sell provided a stipulation
that an interest charge of six percent (6%) per annum was included in the monthly installment price:
private respondent could not have helped noticing that P89.45 multiplied by 180 monthly installments
equals P16,101.00, and not P10,600.00. The installment price, as in the instant case, has an interest
component which compensates the vendor for waiting fifteen (15) years before receiving the total
principal amount of P10,600.00. Economically or financially, P10,600.00 delivered in full today is simply
worth much more than a long series of small payments totalling, after fifteen (15) years, P10,600.00. That
economic fact is, of course, recognized by law, which authorizes the payment of interest when
contractually stipulated for by the parties 4 or when implied in recognized commercial custom or usage.
2J 2016-2017
2) NO. The Supreme Court held that petitioner could not rescind the contract. As the law vests upon
the buyer the option to demand reimbursement of the total amount paid, or to wait for further development
of the subdivision, private respondent who opted for the latter alternative by waiting for the proper
development of the site, may not be ousted from the subdivision.
----------------------------------------------------------------------------------------------------------------------------
Eastern Shipping Lines Inc. vs CA - NOBLE

FACTS: On December 4, 1981, two fiber drums of riboflavin were shipped from Yokohama, Japan for
delivery vessel "SS EASTERN COMET" owned by defendant Eastern Shipping Lines. The shipment was
insured under plaintiff's Marine Insurance Policy No. 81/01177 for P36,382,466.38. Upon arrival of the
shipment in Manila on December 12, 1981, it was discharged unto the custody of defendant Metro Port
Service, Inc. The latter excepted to one drum, said to be in bad order, which damage was unknown to
plaintiff. On January 7, 1982 defendant Allied Brokerage Corporation received the shipment from
defendant Metro Port Service, Inc., one drum opened and without seal. On January 8 and 14, 1982,
defendant Allied Brokerage Corporation made deliveries of the shipment to the consignee's warehouse.
The latter excepted to one drum which contained spillages, while the rest of the contents was
adulterated/fake. Plaintiff contended that due to the losses/damage sustained by said drum, the
consignee suffered losses totaling P19,032.95, due to the fault and negligence of defendants. Claims
were presented against defendants who failed and refused to pay the same. As a consequence of the
losses sustained, plaintiff was compelled to pay the consignee P19,032.95 under the aforestated marine
insurance policy, so that it became subrogated to all the rights of action of said consignee against
defendants.
The trial court held defendants as jointly and severally liable to plaintiff in the amount of
P19,032.95, with the present legal interest of 12% per annum from October 1, 1982, the date of filing of
this complaints, until fully paid.
ISSUE: (a) Whether the payment of legal interest on an award for loss or damage is to be computed from
the time the complaint is filed or from the date the decision appealed from is rendered; and
(b) whether the applicable rate of interest, referred to above, is twelve percent (12%) or six
percent (6%).
DOCTRINE: With regard particularly to an award of interest in the concept of actual and compensatory
damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the
absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on
the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until
the demand can be established with reasonable certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the
time the demand is made, the interest shall begin to run only from the date the judgment of the court is
made (at which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount
finally adjudged.
2J 2016-2017
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate
of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per
annum from such finality until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.
HELD: The legal interest to be paid is SIX PERCENT (6%) on the amount due computed from the
decision, dated 03 February 1988, of the court a quo. A TWELVE PERCENT (12%) interest, in lieu of
SIX PERCENT (6%), shall be imposed on such amount upon finality of this decision until the payment
thereof.
----------------------------------------------------------------------------------------------------------------------------
Phil American Accident Inc. vs Flores -RUBIO

FACTS:
Private respondent was the plaintiff and the petitioner was the defendant in a Civil Case of the Court of
First Instance of La Union.
On January 22, 1973, the respondent judge rendered judgment in said case, the dispositive portion of
which reads:
IN VIEW OF THE FOREGOING, the Court hereby renders judgment and sentences the defendant to pay
Concordia Garcia Navalta the amount of P75,000.00 with legal interest from October, 1968, Pl,000.00, as
attorney's fees am the cost of suit.
The decision was appealed by the petitioner to the Court of Appeals but was affirmed
On February 24, 1977, the petitioner paid the following amounts to the private respondent:
o On the principal P75,000.00
o Interest at 6% per annum from Oct. 1968* to April 30, 1977 P 38,250.00
o Attorney's fee P 1,000.00
Total P114,250.00
The petitioner was advised by the respondent and her counsel that the payment was not in full
satisfaction of the judgment because the former had to pay compound interest or an additional sum of
P10,375.77.
Upon refusal of the petitioner to pay the sum additionally claimed, the private respondent secured a writ
of execution for the same which was granted
ISSUE: whether or not the petitioner is obligated to pay compound interest under the judgment.
DOCTRINE: Fundamental is the rule that execution must conform to that ordained or decreed in the
dispositive part of the decision. Likewise, a court cannot, except for clerical errors or omissions, amend a
judgment that has become final.
HELD: No.
The judgment which was sought to be executed ordered the payment of simple "legal interest" only.
It said nothing about the payment of compound interest.

2J 2016-2017
Fundamental is the rule that execution must conform to that ordained or decreed in the dispositive part of
the decision.
Likewise, a court cannot, except for clerical errors or omissions, amend a judgment that has become final.
----------------------------------------------------------------------------------------------------------------------------
2ND BATCH
BPI vs IAC (164 SCRA 630, August 19, 1988) - SALONGA

FACTS: The root of the case comes from the judgment rendered against BPI which are as follows:
Ordering defendant COMTRUST to return to the plaintiff the amount of U.S. $3,000.00 immediately upon
the finality of this decision, without interest for the reason that the said amount was merely held in custody
for safekeeping, but was not actually deposited with the defendant COMTRUST because being cash
currency, it cannot by law be deposited with plaintiffs dollar account and defendant's only obligation is to
return the same to plaintiff upon demand;
Background:
Rizaldy Zshornack and his wife, Shirley Gorospe, maintained in COMTRUST(inabsorb na to ng BPI), QC
Branch, a dollar savings account and a peso current account.
On December 8, 1975, Zshornack entrusted to COMTRUST, thru Garcia, US $3,000.00 cash (popularly
known as greenbacks) for safekeeping, and that the agreement was embodied in a document (“the
document”).
That despite demands, the bank refused to return the money.
In its answer, COMTRUST averred that the US$3,000 was credited to Zshornack's peso current account
at prevailing conversion rates.
COMTRUST did not deny specifically under oath the authenticity and due execution of “the document”.
During trial, it was established that Zshornack indeed delivered to the bank US $3,000 for safekeeping.
When he requested the return of the money, COMTRUST explained that the sum was disposed of in this
manner:
US$2,000.00 was sold on December 29, 1975 and the peso proceeds amounting to P14,920.00 were
deposited to Zshornack's current account per deposit slip accomplished by Garcia;
US$1,000.00 was sold on February 3, 1976 and the peso proceeds amounting to P8,350.00 were
deposited to his current account per deposit slip also accomplished by Garcia.
Aside from asserting that the US$3,000.00 was properly credited to Zshornack's current account at
prevailing conversion rates, BPI argues that the contract embodied in “the document” is a contract of
depositum (as defined in Article 1962, New Civil Code), which banks do not enter into. The bank alleges
2J 2016-2017
that Garcia exceeded his powers when he entered into the transaction. Hence, it is claimed, the bank
cannot be liable under the contract, and the obligation is purely personal to Garcia.
ISSUE/S: Can Zshornack recover the 3000 USD?
DOCTRINE: Art. 1962. A deposit is constituted from the moment a person receives a thing belonging to
another, with the obligation of safely keeping it and of returning the same. If the safekeeping of the thing
delivered is not the principal purpose of the contract, there is no deposit but some other contract.
HELD: No. The document states that the US$3,000.00 was received by the bank for safekeeping. The
subsequent acts of the parties also show that the intent of the parties was really for the bank to safely
keep the dollars and to return it to Zshornack at a later time.
The above arrangement is that contract defined under Article 1962, New Civil Code, which reads:
Art. 1962. A deposit is constituted from the moment a person receives a thing belonging to another, with
the obligation of safely keeping it and of returning the same. If the safekeeping of the thing delivered is
not the principal purpose of the contract, there is no deposit but some other contract.
Moreover, the object of the contract between Zshornack and COMTRUST was foreign exchange. Hence,
the transaction was covered the Central Bank Circular No. 20 which prohibited the act of selling such
dollars.
The parties did not intended to sell the US dollars to the Central Bank within one business day from
receipt. Otherwise, the contract of depositum would never have been entered into at all.
Since the mere safekeeping of the greenbacks, without selling them to the Central Bank within one
business day from receipt, is a transaction which is not authorized by CB Circular No. 20, it must be
considered as one which falls under the general class of prohibited transactions. Hence, pursuant to
Article 5 of the Civil Code, it is void, having been executed against the provisions of a
mandatory/prohibitory law. More importantly, it affords neither of the parties a cause of action against the
other. "When the nullity proceeds from the illegality of the cause or object of the contract, and the act
constitutes a criminal offense, both parties being in pari delicto, they shall have no cause of action against
each other. . ." [Art. 1411, New Civil Code.] The only remedy is one on behalf of the State to prosecute
the parties for violating the law.
We thus rule that Zshornack cannot recover under the second cause of action.
----------------------------------------------------------------------------------------------------------------------------
Triple V Food Services Inc vs Filipino Merchant Insurance Company (GR NO 1605 44, Feb 21,
2005) - SANGALANG
FACTS: : Mary Jo-Anne De Asis (De Asis) dined at petitioner's Kamayan Restaurant at West Avenue,
Quezon City. De Asis was using a Mitsubishi Galant Super Saloon Model 1995 assigned to her by her
employer Crispa Textile Inc. (Crispa). On said date, De Asis availed of the valet parking service of
petitioner and entrusted her car key to petitioner's valet counter. A corresponding parking ticket was
issued as receipt for the car. The car was then parked by petitioner's valet attendant, a certain Madridano,
at the designated parking area. Few minutes later, Madridano noticed that the car was not in its parking
slot and its key no longer in the box where valet attendants usually keep the keys of cars entrusted to
2J 2016-2017
them. The car was never recovered. Thereafter, Crispa filed a claim against its insurer, herein respondent
Filipino Merchants Insurance Company, Inc. (FMICI). Having indemnified Crispa in the amount of
P669.500 for the loss of the subject vehicle, FMICI, as subrogee to Crispa's rights, filed an action for
damages against petitioner Triple-V Food Services, Inc.
Petitioner further argued that in accepting the complimentary valet parking service, De Asis received a
parking ticket whereunder it is so provided that "[Management and staff will not be responsible for any
loss of or damage incurred on the vehicle nor of valuables contained therein", a provision which, to
petitioner's mind, is an explicit waiver of any right to claim indemnity for the loss of the car; and that De
Asis knowingly assumed the risk of loss when she allowed petitioner to park her vehicle, adding that its
valet parking service did not include extending a contract of insurance or warranty for the loss of the
vehicle.
ISSUE/S: (1) Whether or not there is a contract of deposit

(2) Whether or not the parking ticket which contains a clear exclusion of its liability operates as an explicit
waiver by the customer of any right to claim indemnity for any loss of or damage to the vehicle.
DOCTRINE: It is not necessary that the depositary receives a fee before it becomes obligated to keep
the item entrusted for safekeeping and to return it later to the depositor.
HELD: : (1) YES, here is a contract of deposit. When De Asis entrusted the car in question to petitioners
valet attendant while eating at petitioner's Kamayan Restaurant, the former expected the car's safe return
at the end of her meal. Thus, petitioner was constituted as a depositary of the same car. Petitioner cannot
evade liability by arguing that neither a contract of deposit nor that of insurance, guaranty or surety for the
loss of the car was constituted when De Asis availed of its free valet parking service. In a contract of
deposit, a person receives an object belonging to another with the obligation of safely keeping it and
returning the same. A deposit may be constituted even without any consideration. It is not necessary that
the depositary receives a fee before it becomes obligated to keep the item entrusted for safekeeping and
to return it later to the depositor.
(2) NO, the parking ticket does not constitute as a valid waiver. Petitioner must not be allowed to use its
parking claim stub's exclusionary stipulation as a shield from any responsibility for any loss or damage to
vehicles or to the valuables contained therein. The parking claim stub embodying the terms and
conditions of the parking, including that of relieving petitioner from any loss or damage to the car, is
essentially a contract of adhesion, drafted and prepared as it is by the petitioner alone with no
participation whatsoever on the part of the customers, like De Asis, who merely adheres to the printed
stipulations therein appearing. While contracts of adhesion are not void in themselves, yet this Court will
not hesitate to rule out blind adherence thereto if they prove to be one-sided under the attendant facts
and circumstances. Here, it is evident that De Asis deposited the car in question with the petitioner as
part of the latter's enticement for customers by providing them a safe parking space within the vicinity of
its restaurant. Having entrusted the subject car to petitioner's valet attendant, customer De Asis, like all of
petitioner's customers, fully expects the security of her car while at petitioner's premises/designated
parking areas and its safe return at the end of her visit at petitioner's restaurant.
----------------------------------------------------------------------------------------------------------------------------
CA Agro-Industrial Dev’t Corp. vs CA and Security Bank (GR NO 90021, March 3, 1933) - SIMEON
FACTS: On July 3, 1979, petitioner (through its President- Sergio Aguirre) and the Spouses Ramon and
Paula Pugao entered into an agreement whereby the former purchase two parcel of lands from the latter.
It was paid of downpayment while the balance was covered by there postdated checks. Among the terms
and conditions embodied in the agreement were the titles shall be transferred to the petitioner upon full
payment of the price and the owner's copies of the certificate of titles shall be deposited in a safety
deposit box of any bank. Petitioner and the Pugaos then rented Safety Deposit box of private respondent
Security Bank and Trust Company. or this purpose, both signed a contract of lease (Exhibit "2") which
contains, inter alia, the following conditions:
2J 2016-2017
13. The bank is not a depositary of the contents of the safe and it has neither the possession nor
control of the same.
14. The bank has no interest whatsoever in said contents, except herein expressly provided, and it
assumes absolutely no liability in connection therewith.
Two renter's keys were given to the renters — one to Aguirre (for the petitioner) and the other to
the Pugaos. A guard key remained in the possession of the respondent Bank. The safety deposit box has
2 keyholes, one for the guard key and the other for the renter's key, and can be opened only with the use
of both keys. Petitioner claims that the certificates of title were placed inside the said box.
Mrs. Ramos offered to buy from the petitioner the 2 lots and demanded the execution of a deed of
sale which necessarily entailed the production of the certificates of title. In view thereof, Aguirre,
accompanied by the Pugaos, then proceeded to the respondent Bank on 4 October 1979 to open the
safety deposit box and get the certificates of title. However, when opened in the presence of the Bank's
representative, the box yielded no such certificates. Because of the delay in the reconstitution of the title,
Mrs. Ramos withdrew her earlier offer to purchase the lots; as a consequence thereof, the petitioner
allegedly failed to realize the expected profit of P280,500.00. Hence, the latter filed on 1 September 1980
a complaint for damages against the respondent Bank with the Court of First Instance.
ISSUE/S: Whether or not the contractual relation between a commercial bank and
another party in the contract of rent of a safety deposit box is one of bailor
and bailee?
Ruling: Yes. The contract in the case at bar is a special kind of deposit. It cannot be
characterized as an ordinary contract of lease under Article 1643 because the full and absolute
possession and control of the safety deposit box was not given to the joint renters – the petitioner and
Pugaos.
The prevailing rule is that the relation between a bank renting out safe-deposit
boxes and its customer with respect to the contents of the box is that of a bail or bailee, the bailment
being for hire and mutual benefit. Our provisions on safety deposit boxes are governed by Section 72 (a)
of the General Banking Act, and this primary function is still found within the parameters of a contract of
deposit like the receiving in custody of funds, documents and other valuable objects for
safekeeping. The renting out of the safety deposit boxes is not independent from, but related
to or in conjunction with, this principal function. Thus, depositary’s liability is governed by our civil code
rules on obligation and contracts, and thus the SBTC would be liable if, in performing its obligation, it is
found guilty of fraud, negligence, delayor contravention of the tenor of the agreement.
----------------------------------------------------------------------------------------------------------------------------
Roman Catholic Bishop of Juro vs Dela Pena (26 PHIL 144, Nov 21, 1913) - MONTESA
FACTS:
ISSUE/S:
DOCTRINE:
HELD: YES/NO.
----------------------------------------------------------------------------------------------------------------------------
YHT Realty Corp vs CA (451 SCRA 638, Feb 17, 2005) -BELTEJAR
FACTS: Maurice Peaches McLoughlin is an Australian businessman-philanthropist who used to stay at
the Sheraton Hotel during his trips to the Philippines prior to 1984. He met Brunhilda Mata-Tan who
befriended him and showed him around. Tan convinced Mcloughlin to transfer to the Tropicana from the
Sheraton where afterwards he stayed during his trips from Dec 1984 to Sept 1987.
2J 2016-2017
· On 30 Oct 1987, McLoughlin arrived from Australia and registered with Tropicana. He rented a
safety deposit box as his usual practice. The box required two keys, the guest had one and one from the
management. He placed US $10,000 in one envelope and US$5,000 in another , AU$10,000 in another
envelope and other envelopes with his passport and credit cards. On 12 Dec 1987, he took from the box
the envelope with US$5,000 and the one with AU$10,000 to go to Hong Kong for a short visit, because
he was not checking out. When he arrived in HK, the envelope with US$5,000 only contained US$3,000,
but because he had no idea if the safety deposit box has been tampered, he thought it was just bad
accounting.
· After returning to Manila, he checked out of the Tropicana on 18 Dec 1987 and left for Australia.
When he arrived he discovered that the envelope with US$10,000 was short of US$5,000. He also
noticed that the jewelry he bought in Hong Kong which he stored in the safety deposit box upon his return
to Tropicana was likewise missing, except for a diamond bracelet.
· He went back to the PH on 4 Apr 1988 and asked Lainez (who had custody of the management
key) if some money was missing or returned to her, to which the latter answered there was not. He again
registered at the Tropicana and rented a safety deposit box. He placed an envelope containing
US$15,000, another of AU$10,000. On 16 Apr, he opened his safety deposit box and noticed that
US$2,000 and AU$4,500 was missing from the envelopes.
· He immediately confronted Lainez and Payam who admitted that Tan opened the safety deposit
box with the key assigned to McLoughlin. McLoughlin went up to his room where Tan was staying and
confronted her. Tan admitted that she had stolen McLoughlin’s key and was able to open the safety
deposit box with the assistance of Lopez, Payam and Lainez. Lopez also told McLoughlin that Tan stole
the key assigned to McLoughlin while the latter was asleep.
· McLoughlin requested the management for an investigation of the incident. Lopez got in touch
with Tan and arranged for a meeting with the police and McLoughlin. When the police did not arrive,
Lopez and Tan went to the room of McLoughlin at Tropicana and thereat, Lopez wrote on a piece of
paper a promissory note.
· He made Lopez and Tan sign a promissory note for him for the loss. However, Lopez refused
liability on behalf of the hotel, reasoning that McLoughlin signed an "Undertaking for the Use of Safety
Deposit Box" which disclaims any liability of the hotel for things put inside the box.
· On 17 May 1988 McLoughlin went back to AU and consulted his lawyers. They wrote a letter
addressed to Pres. Cory Aquino which was pushed back to the DOJ and the Western Police District. He
went back from the PH to AU several times more to attend business and follow up but the matter was
only filed on 3 Dec 1990 since he was not there to personally follow up.
· McLoughlin filed an action against YHT Realty Corporation, Lopez, Lainez, Payam and Tan. The
RTC rendered judgment in favor of McLoughlin. The CA modified only the amount of damages awarded.
· Tan and Lopez, however, were not served with summons, and trial proceeded with only Lainez,
Payam and YHT Realty Corporation as defendants.
ISSUE/S:
1.) WON whether there was gross negligence on the part of the innkeepers
2.) WON the "Undertaking for the Use of the Safety Deposit Box" is null and void.
DOCTRINE: Article 2180, paragraph (4) of the same Code provides that the owners and managers of an
establishment or enterprise are likewise responsible for damages caused by their employees in the
service of the branches in which the latter are employed or on the occasion of their functions. Also, this
Court has ruled that if an employee is found negligent, it is presumed that the employer was negligent in
2J 2016-2017
selecting and/or supervising him for it is hard for the victim to prove the negligence of such employer.
Thus, given the fact that the loss of McLoughlins money was consummated through the negligence of
Tropicanas employees in allowing Tan to open the safety deposit box without the guests consent, both
the assisting employees and YHT Realty Corporation itself, as owner and operator of Tropicana, should
be held solidarily liable pursuant to Article 2193.
HELD:
1. YES. Payam and Lainez, who were employees of Tropicana, had custody of the master key of the
management when the loss took place. They even admitted that they assisted Tan on three separate
occasions in opening McLoughlin’s safety deposit box. This only proves that Tropicana had prior
knowledge that a person aside from the registered guest had access to the safety deposit box. Yet the
management failed to notify McLoughlin of the incident and waited for him to discover the taking before it
disclosed the matter to him. Therefore, Tropicana should be held responsible for the damage suffered by
McLoughlin by reason of the negligence of its employees.
The management contends that McLoughlin made its employees believe that Tan was his spouse
for she was always with him most of the time. The evidence on record is bereft of any showing that
McLoughlin introduced Tan to the management as his wife. Mere close companionship and intimacy are
not enough to warrant such conclusion. They should have confronted him as to his relationship with Tan
considering that the latter had been observed opening McLoughlin’s safety deposit box a number of times
at the early hours of the morning.
Art 2180, par (4) of the same Code provides that the owners and managers of an establishment
or enterprise are likewise responsible for damages caused by their employees in the service of the
branches in which the latter are employed or on the occasion of their functions. Given the fact that the
loss of McLoughlin’s money was consummated through the negligence of Tropicana’s employees both
the employees and YHT, as owner of Tropicana, should be held solidarily liable pursuant to Art 2193.
2.) YES, it is null and void. Art. 2003 is controlling. This is an expression of public policy that the hotel
business like common carriers are imbued with public interest. This responsibility cannot be waived away
by any contrary stipulation in so-called "undertakings" that ordinarily appear in prepared forms imposed
by hotel keepers on guests for their signature.
The CA (former case) even ruled before that hotelkeepers are liable even though the effects are
not delivered to them or their employees, but it is enough that the effects are within the hotel or inn.
Pars. 2 and 4 of the undertaking manifestly contravene Art. 2003 of the NCC. Meanwhile, the
defense that Art. 2002 exempts the hotel-keeper from liability if the loss is due to the acts of the guest,
family or visitors falls because the hotel is guilty of negligence as well. This provision presupposes that
the hotel-keeper is not guilty of concurrent negligence or has not contributed in any degree to the
occurrence of the loss.
dispositive
----------------------------------------------------------------------------------------------------------------------------
3RD BATCH

Credit Digests

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Credit Digests

Uploaded by

Copyright:

Available Formats

CREDIT TRANSACTIONS DIGEST

Saura Import and Export Co. vs DBP - ABUZO

ISSUE: Whether or not damages can be claimed by plaintiff from defendant.

ISSUE: Whether or not there was a perfected contract of loan

Central Bank of the Philippines vs CA - BONAOBRA

Republic vs Bagtas - BRINAS

ISSUE: Whether or not Bagtas is liable for the death of Sahiniwal?

Catholic Vicar Apostolic Inc of the Mt. Province - CABANGBANG

Quintos and Ansaldo vs Beck - DEIPARINE

ISSUE: Whether the defendant is entitled to the furniture

Consolidated Bank and Trust Corp vs CA - DESUASIDO

acknowledging payment of the loan.

Republic vs Grijaldo - DIMACULANGAN

ISSUE: 1. Is the respondent’s obligation to pay the loans already extinguished?

Casa Filipina Development Corp vs Deputy Executive Secretary - GAMO

3. Whether or not specified under Sec. 25 of PD 957 has begun to run?

Relucio vs Garfin - MARCILLA

Eastern Shipping Lines Inc. vs CA - NOBLE

Phil American Accident Inc. vs Flores -RUBIO

It said nothing about the payment of compound interest.

BPI vs IAC (164 SCRA 630, August 19, 1988) - SALONGA

That despite demands, the bank refused to return the money.

ISSUE/S: Can Zshornack recover the 3000 USD?

ISSUE/S: (1) Whether or not there is a contract of deposit

You might also like