People v.
Concepcion
G. R. No. L-19190, 29 November 1922
44 Phil. 126
Topic: Loans; Article 1933; Distinction Between
Credit and Loan
Facts: Philippine National Bank President Venancio
Concepcion authorized an extension of credit in favor
of “Puno y Concepcion, S. en C.” in the amount of
P300,000.00, in view of his memorandum order
limiting the discretional power of the Aparri, Cagayan
local manager to grant loans and discount negotiable
documents to P5,000.00, which could be increased
to P10,000.00. The said credit was granted to the
said firm, in which six demand notes were taken up
and paid.
Concepcion, as the bank president and as member
of the board of directors of PNB, was charged with
violation of Section 35 of Act No. 2747, in which he
was found guilty.
Issue: Whether or not the granting of the credit by
Concepcion is a “loan” within the meaning of Section
35 of Act No. 2747.
Held: Yes. Counsel argue that the documents of
record do not prove that authority to make a loan was
given,
Development Bank of the Philippines v. Guariña
Agricultural and Realty Development
Corporation
G. R. No. 160758, 15 January 2014
713 SCRA 292
Topic: Loans; Article 1933
Facts:Guariña Corporation applied for a loan from
DBP to finance the development of its resort complex
in Iloilo in the amount of P3,387,000.00, which was
approved later on. Prior to the release of the loan,
DBP required Guariña to put up a cash equity of
P1,470,951.00 for the construction of the buildings
and other improvements on the resort complex.
Guariña used the loan to defray the additional
improvements in the resort complex, in which the
amount released totalled P3,003,617.49, from which
DBP withheld P148,102.98 as interest.
Guariña demanded the release of the loan balance
but DBP refused, instead it paid some suppliers of
Guariña over the latter’s objection. DBP demanded
Guariña to expedite the completion of the project,
when it found out upon inspection that Guariña had
not completed the constructive works. It wanted the
latter that it would initiate foreclosure proceedings
should Guariña not do so, which they later did.
Guariña sued DBP in the RTC to demand specific
performance of the latter’s obligations under the loan
agreement, and to stop the foreclosure of the
mortgages, which was later amended, adding the
nullification of the foreclosure proceedings and the
cancellation of the certificate of sale.
The RTC ruled in favour of Guariña, which was later
affirmed by the CA with modification.
Issue: Whether the contract entered between
Guariña and DBP is a loan.
Held: Yes.
De Los Santos v. Jarra
G. R. No. L-4150, 10 February 1910
15 Phil. 147
Topic: Loans; Article 1933
Facts: A certain Magdaleno Jimenea borrowed from
Felix de los Santos 10 first-class carabaos, to be
used at the animal mill of his hacienda from 1901-02
without recompense or remuneration whatever for
the use thereof, under the sale condition that he will
return them after the completion of the work at the
mill, but Jimenea did not return the carabaos. He
died in 1904 and the trial court appointed Agustina
Jarra as the administratrix of his estate. De los
Santos claimed to the estate requesting for the return
of his carabaos, but it was rejected. Jarra was
summoned by the trial court and denied the
allegation of de los Santos, that the late Jimenea only
obtained 3 second-class animals, and in case of the
carabaos, 4 died of rinderpest, in which only six
surviving carabaos were in issue. The trial court ruled
in favour of de los Santos and ordered Jarra to return
the 6 carabaos and 3 second-class animals or its
value.
Issue: Whether or not the contract is a loan, in this
case a commodatum.
Held: Yes.
Saura Import and Export Co., Inc. v. Development
Bank of the Philippines
G. R. No. L-24968, 27 April 1972
44 SCRA 445
Topic: Loans; Article 1934
Facts: Saura applied to the Rehabilitation Finance
Corporation (RFC), which was later converted into
DBP an industrial loan of P500,000.00 for the
construction of a factory building for the manufacture
of jutesacks, payment of the balance of the purchase
price of the jute mill machinery and equipment, and
additional working capital. The jute mill machinery
had been purchased already by Saura from a letter
of credit extended by Prudential Bank. The loan was
later approved by the RFC by way of a resolution.
After being notified of the resolution, Saura
requested RFC to modify the terms, namely: having
China Engineers, Ltd. Sign as co-maker on the
promissory notes, Saura putting up a bond for
subscription, and that Maria Roca substituting for
Inocencia Arellano as one of the other co-makers.
However, Saura decided to reduce the loan from
P500,000.00 to P300,000.00 due to the refusal of
China Engineers, Ltd. Later on, Saura requested
RFC that the P500,000.00 loan be granted, but it was
denied at first because it will consider the reduced
loan as cancelled, but later on approved, through
another resolution.
After the mortgage was cancelled 9 years later,
Saura filed an action for damages, alleging the failure
of RFC to comply with its obligation to release the
proceeds of the loan applied for and approved,
thereby preventing Saura 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, which was
appealed by the DBP to the Supreme Court.
Issue: Whether there was a perfected contract of
loan.
Held: Yes.
Naguiat v. Court of Appeals
G. R. No. 118375, 3 October 2003
412 SCRA 591
Topic: Loans; Article 1934
Facts: Aurora Queaño applied for a loan worth
P200,000.00 in which Celestina Naguiat granted,
and later on indorsed a check amounting P95,000.00
to Queaño. After the issuance of several checks and
execution of mortgages and promissory notes, the
check issued by Security Bank was dishonoured for
insufficiency of funds. Queaño requested Security
Bank to stop the payment of her check, but the bank
rejected the request pursuant to its policy not to
honor such requests if the check is drawn against
insufficient funds. Queaño was asked by Naguiat’s
lawyer to settle the loan, and later on she talked to
Naguiat informing her that she did not receive the
proceeds of the loan, adding that the checks were
retained by Ruby Ruebenfeldt, who was Naguiat’s
agent. After Naguiat applied for the foreclosure of the
mortgage which was later on scheduled, Queaño
filed an action seeking the annulment of the
mortgage deed.
The trial court ruled in favor of Queaño, which was
affirmed by the Court of Appeals.
Issue: Whether or not the contract of loan was
perfected.
Held: No.
Garcia v. Thio
G. R. No. 154878, 16 March 2007
518 SCRA 433
Topic: Loans; Article 1934
Facts: Rica Marie Thio received from Carolyn Garcia
two crossed checks: first is worth US$ 100,000.00
and another worth P500,000.00, both payable to the
order of a certain Marilou Santiago, and some sum
of money every month for 8 months, but Thio failed
to pay the principal amounts of the loans when they
fell due. Garcia filed a complaint for sum of money
and damages against Thio.
The trial court ruled in favor of Garcia, which was
reversed by the Court of Appeals which ruled that
there was no contract of loan between the parties.
Issue: Whether or not the contract of loan has been
perfected.
Held: Yes.
Pantaleon v. American Express International, Inc.
G. R. No. 174269, 25 August 2010
629 SCRA 276
Topic: Loans; Article 1934; Credit Cards
Facts: Polo Pantaleon, while having a tour in Europe
with his family, presented his American Express
(AmEx) credit card, together with his passport to pay
for his purchases. The sales clerk took the card’s
imprint, and asked him to sign the charge slip, and
later referred to Amsterdam office of AmEx, but later
informed Pantaleon that his card had not yet been
approved, but because of time constraint for the tour,
he cancelled the sale, however, he was asked to wait
for a few minutes, which informed him that AmEx had
demanded bank references, in which he complied.
He returned back to the tour, apologizing for the
delay. After the Europe tour, the Pantaleon family
proceeded to the US before returning to Manila.
While in the US, he continued to use his credit card
for some purchases. When he purchased a golf
equipment, he cancelled his credit card purchase
and borrowed money from a friend instead.
After returning to Manila, Pantaleon filed a case after
sending a letter to AmEx demanding an apology for
the incident happened during the Europe tour, which
the bank refused to apologize. The trial court ruled in
favor of Pantaleon, which was reversed by the Court
of Appeals, in which the Supreme Court reversed the
CA decision, holding that AmEx was guilty of mora
solvendi or debtor’s default. AmEx filed its motion for
reconsideration to reverse the prior ruling.
Issue: Whether or not the use of credit card is a mere
offer to enter into loan agreements.
Held: Yes.
Gironella v. Philippine National Bank
G. R. No. 194515, 16 September 2015
Topic: Loans; Article 1934
Facts: Spouses Oscar and Gina Gironella obtained 2
loans from PNB in the amounts of P7,500,000.00
and P2,000,000.00 for the construction of the
Dagupan Village Hotel and Sports Complex. They
applied for another loan amounting P5,800,000.00
for the construction of a restaurant bar and the
purchase of a generator set. The spouses began to
default in paying their prior 2 loans. They used their
income from the hotel to construct the restaurant bar
while waiting for the P5,800,000.00 loan application.
They paid P4,219,000.00 on the first 2 loans,
followed by P1,000,000.00 and P1,650,000.00 for
purpose of restructuring their loans with PNB. While
the spouses were restructuring their loan, PNB
attempted to foreclose their properties. Later on,
PNB offered the restructuring plan to the Gironellas,
in which the latter made a counter offer, in which PNB
denied.
After PNB filed for foreclosure, Gironella filed a
complaint against PNB. The trial court issued a TRO
and preliminary injuction. PNB appealed to the CA,
which was granted, reversing the trial court ruling.
Issue: Whether or not PNB is liable to the Gironellas.
Held: No.
BPI Investment Corporation v. Court of Appeals
G. R. No. 133632, 15 February 2002
377 SCRA 117
Topic: Loans; Article 1934
Facts: Frank Roa obtained a loan with interest from
Ayala Investment and Development Corporation
(AIDC) (predecessor of BPI Investment Corporation)
for the construction of a house on his lot in New
Alabang Village, Muntinlupa. He sold the house and
lot to ALS Management and Antonio Litonjua for
P850,000.00. They paid P350,000.00 and assumed
Roa’s indebtedness with AIDC. However, AIDC was
not willing to extend the old interest rate to ALS and
proposed to grant them a P500,000.00 loan to be
applied to Roa’s debt and secured by the same
property. ALS paid BPI Investment P190,601.35 to
reduce Roa’s loan but it was liquidated by the bank.
BPI released P7,146.87, which was the amount left
of their loan after full payment of Roa’s loan.
After the foreclosure of the properties, ALS filed a
case against BPI. The trial court ruled in favour of
ALS, which was affirmed by the CA.
Issue: Whether there is a perfection of the contract
of loan.
Held: Yes.
Pentacapital Investment Corporation v. Mahinay
G. R. No. 171736, 5 July 2010
Topic: Loans; Article 1934
Facts: Makilito Mahinay obtained two separate loans
from Pentacapital amounting P1,520,000.00 and
P416,800.00. Despite repeated demands, Mahinay
failed to pay the loans. According to Mahinay,
Pentacapital offered to buy parcels of land in Molino,
Bacoor, Cavite, which were sold at P400.00 per
square meter. Pentacapital paid only
P12,000,000.00. Ciudad Real instructed
Pentacapital to pay the former creditors including
Mahinay in which the former paid P1,715,156.90.
Then they agreed that Mahinay had a charging lien
equivalent to 20% of the total consideration of the
sale in the amount of P10,277,040.00. Later on,
Mahinay returned the P1,715,156.90 to Pentacapital.
Mahinay filed an action against Pentacapital, which
was dismissed by the RTC. The CA also dismissed
the appeal by Pentacapital.
Issue:
Whether or not there was a perfection of the contract
of loan.
Held:
Sierra v. Court of Appeals
G. R. No. 90270, 24 July 1992
Topic: Loans; Article 1934
Facts: Armando Sierra lent the Ebarles P85,000.00,
which they said they needed “to pay some cattle for
fattening to be inspected by the Land Bank inspector
that day” in connection with their application for a
loan of P400,000.00 from the Land Bank to finance
their logging and cattle business, which was denied.
Sierra demanded for payment but he was ignored.
He filed an action against the Ebarles. The trial court
held that the Ebarles are only liable to Sierra for only
P20,000.00 and the P85,000.00 promissory note is
invalid, which was affirmed by the CA.
1. REPUBLIC V. BAGTAS - LEA
2. PRODUCERS BANK V. CA - DON
Producers Bank of the Philippines vs CA and
Vives
Doctrine: XPN of Commodatum
FACTS:
Franklin Vives (private respondent) was
asked by his friend Angeles Sanchez (Sanchez) to
help her friend Arturo Doronilla (Doronilla) in
incorporating his business, Sterela Marketing and
Services (Sterela). Sanchez asked private
respondent to deposit P200,000.00 in the Producers
Bank of the Philippines account of Sterela for
purposes of its incorporation.
Private respondent learned that part of the
money had been withdrawn by Doronilla. Doronilla
assured private respondent that the money was
intact and would be returned to him. Doronilla issued
postdated check in favor of private respondent.
However, the check was dishonored.
Procedure:
Private respondent instituted an action for
recovery of sum of money in the Regional Trial Court
(RTC). Private respondent won the case. Producers
Bank of the Philippines (petitioner), feeling
aggrieved, appealed the RTC’s decision to the Court
of Appeals (CA). Petitioner lost the case. Petitioner,
being unsatisfied with the ruling, filed the present
petition.
Attack:
Petitioner contends that the transaction
between private respondent and Doronilla is a simple
loan (mutuum) since all the elements of a mutuum
are present: first, what was delivered by private
respondent to Doronilla was money, a consumable
thing; and second, the transaction was onerous as
Doronilla was obliged to pay interest.
Defense:
Private respondent argues that the
transaction between him and Doronilla is not a
mutuum but an accommodation, since he did not
actually part with the ownership of his P200,000.
ISSUE:
Whether or not the transaction between
Doronilla and private respondent was a
commodatum?
RULING:
YES. The transaction between private
respondent and Doronilla was a commodatum and
not a mutuum.
According to Article 1933 of the Civil Code
(Art 1933), the contract is commodatum when one of
the parties delivers to another, either something not
consumable so that the latter may use the same for
a certain time and return it; the contract is mutuum
when the money or consumable thing, upon the
condition that the same amount of the same kind and
quality shall be paid. However, Article 1936 of the
Civil Code (Art 1936) provides for the exception of
Art 1933. Art 1936 provides that: consumable goods
may be the subject of commodatum if the purpose of
the contract is not the consumption of the object, as
when it is merely for exhibition.
The evidence shows that private
respondent merely “accomodated” Doronilla by
lending his money without consideration for the
purpose of making it appear that the Sterela had
sufficient capitalization for incorporation, with the
promise that the money shall be returned. It is clear
that the money borrowed is to be used for exhibition
purposes only. Therefore, Art 1366 shall apply in this
case.
3. REPUBLIC V. BAGTAS –
(ARTICLE 1942)
On 8 May 1948 Jose V. Bagtas borrowed from the
Republic of the Philippines through the Bureau of
Animal Industry three 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 from 8 May 1948 to 7 May 1949 for breeding
purposes subject to a government charge of
breeding fee of 10% of the book value of the bulls.
Upon the expiration on 7 May 1949 of the contract,
the borrower asked for a renewal for another period
of one year. However, the Secretary of Agriculture
and Natural Resources approved a renewal thereof
of only one bull for another year from 8 May 1949 to
7 May 1950 and requested the return of the other
two. On 25 March 1950 Jose V. Bagtas wrote to the
Director of Animal Industry that he would pay the
value of the three bulls. On 17 October 1950 he
reiterated his desire to buy them at a value with a
deduction of yearly depreciation to be approved by
the Auditor General. On 19 October 1950 the
Director of Animal Industry advised him that the
book value of the three bulls could not be reduced
and that they either be returned or their book value
paid not later than 31 October 1950. Bagtas failed
to pay the book value of the three bulls or to return
them. In the Court of First Instance of Manila the
Republic of the Philippines commenced an action
against him praying that he be ordered to return the
three bulls loaned to him or to pay their book value
in the total sum of P3,241.45 and the unpaid
breeding fee in the sum of P199.62, both with
interests, and costs; and that other just and
equitable relief be granted . CFI Manila ruled in
favor of the Republic.
On 7 January 1959 Felicidad M. Bagtas, the
surviving spouse of the defendant Jose Bagtas filed
a motion alleging that on 26 June 1952 the two bull
Sindhi and Bhagnari were returned to the Bureau
Animal of Industry and that sometime in November
1958 the third bull, the Sahiniwal, died from gunshot
wound inflicted during a Huk raid on Hacienda
Felicidad Intal, and praying that the writ of execution
be quashed and that a writ of preliminary injunction
be issued.
Issue:Whether or not the borrower is liable for the
loss of the thing loaned?
Holding:
YES.A contract ofcommodatum is essentially
gratuitous.1 If the breeding fee be considered a
compensation, then the contract would be a lease
of the bull. Under article 1671 of the Civil Code the
lessee would be subject to the responsibilities of a
possessor in bad faith, because she had continued
possession of the bull after the expiry of the
contract. And even if the contract be commodatum,
still the appellant is liable, because article 1942 of
the Civil Code provides that a bailee in a contract
of commodatum —. . . is liable for loss of the things,
even if it should be through a fortuitous event:
(2) If he keeps it longer than the period
stipulated . . .
(3) If the thing loaned has been delivered
with appraisal of its value, unless there is a
stipulation exempting the bailee from
responsibility in case of a fortuitous event;
The original period of the loan was from 8 May 1948
to 7 May 1949. The loan of one bull was renewed
for another period of one year to end on 8 May
1950. But the appellant kept and used the bull until
November 1953 when during a Huk raid it was killed
by stray bullets. Furthermore, when lent and
delivered to the deceased husband of the appellant
the bulls had each an appraised book value, to with:
the Sindhi, at P1,176.46, the Bhagnari at P1,320.56
and the Sahiniwal at P744.46. It was not stipulated
that in case of loss of the bull due to fortuitous event
the late husband of the appellant would be exempt
from liability.
4. MINA V. PASCUAL -YELA
GR NO L- 8321 OCTOBER 14, 1913
FACTS
Francisco Fontanilla and Andres Fontanilla
were brothers. Francisco Fontanilla acquired during
his lifetime the property having been awarded to
him through its purchase at a public auction held by
the alcalde mayor of that province. Andres
Fontanilla, with the consent of his brother
Francisco, erected a warehouse on a part of the
said lot.
Alejandro Mina, et al were recognized as
Francisco Fontanilla’s heirs and the children of
Ruperta Pascual were recognized as Andres
Fontanilla’s heirs. Ruperta Pascual petitioned the
Court of First Instance of Ilocos Norte for
authorization to sell "the six-sevenths of the one-
half of the warehouse, of 14 by 11 meters, together
with its lot." Mina et al pposed the petition of
Ruperta Pascual for the reason that the latter had
included therein the lot occupied by the warehouse,
which they claimed was their exclusive property.
Mina et al requested the court to decide
the question of the ownership of the lot before it
pass upon the petition for the sale of the
warehouse. Despite this, the court ordered the sale
of the building. So, the warehouse, together with the
lot on which it stands, was sold to Cu Joco. Mina et.
al insisted upon a decision of the question of the
ownership of the lot, and the court decided it by
holding that this land belonged to the owner of the
warehouse which had been built thereon thirty
years before.
Mina et al appealed and this court
reversed the judgment of the lower court and held
that they were the owners of the lot in question.
When the judgment became final and executory,
the trial court annulled this possession for the
reason that it affected Cu Joco, who had not been a
party to the suit in which that writ was served. It
was then that the plaintiffs commenced the present
action for the purpose of having the sale of the said
lot declared null and void and of no force and effect.
ISSUE
Whether or not Ruperta Pascual had the
right to sell the warehouse and the lot where it was
situated on the ground that she only acquired the
said property by way of a commodatum agreement
between Andres and Francisco
RULING
No. Article 1740 of the Civil Code provides
“By the contract of loan, one of the parties delivers
to the other, either anything not perishable, in order
that the latter may use it during the certain period
and return it to the former, in which case it is called
commodatum” It is, therefore, an essential feature
of the commodatum that the use of the thing
belonging to another shall for a certain period.
Francisco Fontanilla did not fix any definite period
or time during which Andres Fontanilla could have
the use of the lot whereon the latter was to erect a
stone warehouse of considerable value, and so it is
that for the past thirty years of the lot has been used
by both Andres and his successors in interest.
5. QUINTOS V. BECK - JODELLE
G.R. No. L-46240 November 3, 1939
MARGARITA QUINTOS and ANGEL A.
ANSALDO, plaintiffs-appellants, vs. BECK,
defendant-appellee.
IMPERIAL, J.:
The defendant was a tenant of the plaintiff and as
such occupied the latter's house. 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 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. the
defendant wrote a 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.
Plaintiffs contended that the trial court incorrectly
applied the law: in holding that they violated the
contract by not calling for all the furniture on
November 5, 1936, when the defendant placed them
at their disposal; in not ordering the defendant to pay
them the value of the furniture in case they are not
delivered; in holding that they should get all the
furniture from the Sheriff at their expenses; in
ordering them to pay-half of the expenses claimed by
the Sheriff for the deposit of the furniture; in ruling
that both parties should pay their respective legal
expenses or the costs;
Issue:
Whether or not the defendant complied with his
obligation to return the furniture upon the plaintiff’s
demand?
Holding:
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 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.
The trial court, therefore, erred when it came to the
legal conclusion that the plaintiff failed to comply
with her obligation to get the furniture when they
were offered to her. The defendant, as bailee, was
not entitled to place the furniture on deposit; nor
was the plaintiff under a duty to accept the offer to
return the furniture, because the defendant wanted
to retain the three gas heaters and the four electric
lamps.
6. PAJUYO V. CA - HAZELLE
G.R. No. 146364. June 3, 2004
Facts:
Petitioner Colito Pajuyo, paid to a certain
Pedro Perez or the rights over a 250-square meter
lot in Barrio Payatas, Quezon City. Pajuyo and
private respondent Eddie Guevarra (Guevarra)
executed a Kasunduan or agreement. Pajuyo, as
owner of the house, allowed Guevarra to live in the
house for free provided Guevarra would maintain the
cleanliness and orderliness of the house. Guevarra
promised that he would voluntarily vacate the
premises on Pajuyos demand. Pajuyo informed
Guevarra of his need of the house and demanded
that Guevarra vacate the house. Guevarra refused.
Pajuyo filed an ejectment case against Guevarra with
the Metropolitan Trial Court of Quezon City, Branch
31 (MTC).
Guevarra claimed that Pajuyo had no valid
title or right of possession over the lot where the
house stands because the lot is within the 150
hectares set aside by Proclamation No. 137 for
socialized housing.
Judgment of MTC and RTC was thus
rendered in favor of Pajuyo. Guevarra filed with SC
directly motion for extension under Rule 42, and as
approved it referred the case to CA. CA, reversed the
decision of RTC. CA stated that both parties are
squatters. Both illegally occupied the lot, which a
government owned. CA also stated that the
kasunduan between Pajuyo and Guevarra created a
legal tie akin to that of Landlord- Tenant relationship
ruled that the Kasunduan is not a lease contract but
a commodatum because the agreement is not for a
price certain.
ISSUE:WON the agreement of the parties falls under
commodatum or contract of lease.
HELD:
· No. it is not commodatum.
· Based on the Kasunduan, Pajuyo permitted
Guevarra to reside in the house and lot free of rent,
but Guevarra was under obligation to maintain the
premises in good condition. Guevarra promised to
vacate the premises on Pajuyos demand but
Guevarra broke his promise and refused to heed
Pajuyos demand to vacate.
· Where the plaintiff allows the defendant to use
his property by tolerance without any contract, the
defendant is necessarily bound by an implied
promise that he will vacate on demand, failing which,
an action for unlawful detainer will lie. Pajuyo did not
require Guevarra to pay any rent but only to maintain
the house and lot in good condition.
· In a contract of commodatum, one of the
parties delivers to another something not
consumable so that the latter may use the same
for a certain time and return it.
· An essential feature of commodatum is that it
is gratuitous. Another feature of commodatum is that
the use of the thing belonging to another is for a
certain period. Thus, the bailor cannot demand the
return of the thing loaned until after expiration of the
period stipulated, or after accomplishment of the use
for which the commodatum is constituted. If the bailor
should have urgent need of the thing, he may
demand its return for temporary use. If the use of the
thing is merely tolerated by the bailor, he can
demand the return of the thing at will, in which case
the contractual relation is called a precarium. Under
the Civil Code, precarium is a kind of commodatum.
· The Kasunduan reveals that the
accommodation accorded by Pajuyo to Guevarra
was not essentially gratuitous. While the Kasunduan
did not require Guevarra to pay rent, it obligated him
to maintain the property in good condition. The
imposition of this obligation makes the Kasunduan a
contract different from a commodatum. The effects of
the Kasunduan are also different from that of a
commodatum. Case law on ejectment has treated
relationship based on tolerance as one that is akin to
a landlord-tenant relationship where the withdrawal
of permission would result in the termination of the
lease.
7. PEOPLE V. BALOY – LEA (pero parang
walang ganitong case sa net)-WAG
NALANG :)
SIMPLE LOAN
1. REPUBLIC V. GRIJALDO - DON
2. REPUBLIC V. GRIJALDO - JODELLE
1953 REPUBLIC V. GRIJALDO G.R. No. L-20240
December 31, 1965
ZALDIVAR, J.:
Facts:
Appellant Jose Grijaldo obtained five loans from the
branch office of the Bank of Taiwan, Ltd. in Bacolod
City, in the total sum of P1,281.97 with interest at the
rate of 6% per annum, compounded quarterly. These
loans are evidenced by five promissory notes
executed by the appellant in favor of the Bank of
Taiwan, Ltd. To secure the payment of the loans the
appellant executed a chattel mortgage on the
standing crops on his land.
By virtue of Vesting Order No. P-4 and Trading with
the Enemy Act, as amended, the assets in the
Philippines of the Bank of Taiwan, Ltd. were vested
in the Government of the United States. Pursuant to
the Philippine Property Act of 1946 of the United
States, these assets, including the loans in question,
were subsequently transferred to the Republic of the
Philippines by the Government of the United States
under Transfer Agreement dated July 20, 1954.
These assets were among the properties that were
placed under the administration of the Board of
Liquidators created under Executive Order No. 372,
dated November 24, 1950, and in accordance with
Republic Acts Nos. 8 and 477 and other pertinent
laws.
On September 29, 1954 the appellee made a written
extrajudicial demand upon the appellant for the
payment of the account in question but he failed to
pay. The appellee filed a complaint in the Justice of
the Peace Court of Hinigaran, Negros Occidental,
but the case was dismissed on the ground that the
action had prescribed. However, the CFI of Negros
Occidental reversed the decision and ordered the
appellant to pay the appellee.
Issue:
Whether or not the lost of the crops growing at
appellant’s land as security for the fulfillment of
appellant’s obligation extinguishes his obligation to
pay?
Holding:
No, 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.
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.
3. TAN V. VALDEHUESA -YELA
GR NO L- 38745 AUGUST 6, 1975
FACTS
An action instituted by the plaintiff-appellee Lucia
Tan against the defendants-appellants Arador
Valdehueza and Rediculo Valdehueza for (a)
declaration of ownership and recovery of
possession of the parcel of land described in the
first cause of action of the complaint, and (b)
consolidation of ownership of two portions of
another parcel of (unregistered) land described in
the second cause of action of the complaint,
purportedly sold to the plaintiff in two separate
Deeds of Pacto De Retro.
The parcel of land described in the first cause of
action was the subject matter of the public auction
wherein Lucia Tan was the highest bidder. Due to
the failure of defendant Arador Valdehueza to
redeem the said land within the period of one year,
an absolute deed of sale was executed in favor of
Lucia Tan. In the second cause of action, Arador
Valdehueza and Rediculo Valdehueza have
executed two documents of Deed of Pacto De Retro
Sale in favor of Lucia Tan of two portions of a parcel
of land. From the execution of the Deed of Sale
with right to repurchase mentioned in the second
cause of action, Arador Valdehueza and Rediculo
Valdehueza remained in the possession of the land
and as such paid the corresponding land taxes.

ISSUE
Whether or not the second cause of action that the
transactions between the parties were a simple loan
RULING
No. The trial court treated the registered Deed of
Pacto De Retro as an equitable mortgage but
considered the unregistered deed of pacto de retro
"as a mere case of simple loan, secured by the
property thus sold under pacto de retro," on the
ground that no suit lies to foreclose an unregistered
mortgage. It would appear that the trial judge had
not updated himself on law and jurisprudence; he
cited, in support of his ruling, article 1875 of the old
Civil Code and decisions of this Court circa 1910
and 1912. Under article 1875 of the Civil Code of
1889, registration was a necessary requisite for the
validity of a mortgage even as between the parties,
but under article 2125 of the new Civil Code (in
effect since August 30,1950), this is no longer so. 4
If the instrument is not recorded, the mortgage is
nonetheless binding between the parties. (Article
2125, 2nd sentence).
The Valdehuezas having remained in possession of
the land and the realty taxes having been paid by
them, the contracts which purported to be pacto de
retro transactions are presumed to be equitable
mortgages, 5 whether registered or not, there being
no third parties involved.
4. JARDENIL V. SALAS - JODELLE
G.R. No. L-47878 July 24, 1942
GIL JARDENIL, plaintiff-appellant, vs.HEFTI
SOLAS (alias HEPTI SOLAS, JEPTI SOLAS),
defendant-appellee.
Facts: This is an action for foreclosure of mortgage.
Solas agreed to pay interest only up to the date of
maturity. The contract is silent as to whether after
the date of maturity, in the event of non-payment,
the debtor would continue to pay interest.
Issue:
Whether or not Solas was bound to pay interest up
to the date the payment is effected?
Holding:
No, he is obliged to pay interest only up to the date
of maturity as fixed in the promissory note. As the
contract is silent as to whether after that date, in the
event of non-payment, the debtor would continue to
pay interest, we cannot in law, indulge in any
presumption as to such interest; otherwise, we
would be imposing upon the debtor an obligation
that the parties have not chosen to agree upon.
Article 1755 of the Civil Code provides that "interest
shall be due only when it has been expressly
stipulated." The act of the mortgage of granting to
the mortgagor on the same date of execution of the
deed of mortgage, an extension of one year from
the date of maturity within which to make payment,
without making any mention of any interest which
the mortgagor should pay during the additional
period, indicates that the true intention of the parties
was that no interest should be paid during the
period of grace. What reason the parties may have
therefor, we need not here seek to explore.
5. FRIAS V. SAN DIEGO - HAZELLE
Frias vs San Diego-Sison
G.R. No. 155223 April 4, 2007
Facts:
Frias is the owner of a house in Ayala Alabang
acquired from Island Masters Realty and
Development Corp (IMRDC). She entered into a
MOA with respondent San Diego-Sison.
In the MOA they had agreed that the petitioner would
receive from respondent P3M. That respondent has
a period of 6 months from the date of execution of
the contract to notify petitioner of her intention to
purchase the parcel of land at the price of 6.4M Upon
notice, there is another six months to pay the
remaining balance.
Prior to the six months given to the respondent,
petitioner may still offer the property to other persons
provided that the first P3M be returned to respondent
including interest based on prevailing compounded
bank interest plus amount of sale in excess of P7M.
In case there are no other buyers, no interest shall
be charged by the respondent on the P3M, but in the
event that on the 6th month, respondent would decide
not to purchase, the petitioner has a period of
another 6 months to pay P3M provided that the said
amount shall earn compounded bank interest for the
last six months only.
Petitioner received P2M in cash and P1M in a post-
dated check dated February 28, 1990 instead of
1991 which rendered the check stale.
Defendant decided not to purchase the property so
what happened was that the P3M would be
considered as a loan payable within six months.
Petitioner failed to pay the P2M. Defendant filed with
the RTC a complaint for sum of money.
RTC rules in favor or defendant. Orders the payment
of P2M plus interest at 32% interest per annum
Petitioner appeals to CA, CA affirms RTC decision
with modification with regard to the interest from 32%
to 25% starting from June 7, 1991
Issue:
WON the CA correct in awarding a 25% per annum
on the P2M loan even beyond the second six months
stipulated period? Yes
HELD:
  The Memorandum of Agreement provides
that in the event that respondent opts not to
buy the property, the money given by
respondent to petitioner shall be treated as
a loan and the property shall be considered
as the security for the mortgage. It was
testified to by respondent that after they
executed the agreement on December 7,
1990, petitioner gave her the owners copy
of the title to the property, the Deed of Sale
between petitioner and IMRDC, the
certificate of occupancy, and the certificate
of the Secretary of the IMRDC who signed
the Deed of Sale.
 The phrase “for the last six months only”
should be taken in the context of the entire
agreement. In the agreement, there were
two periods of 6 months each. The first six
months was for the respondent to make up
her mind WON she would purchase the
property. The second 6 months was for the
petitioner to pay the P2M in the event that
respondent decide not to buy the property,
in which case interest will be charged for the
“last six months only” So that means, no
interest shall be charged for the first six
month period while appellee was making up
her mind whether to buy the property.
 The agreement that the amount given shall
bear compounded bank interest for the last
six months only, i.e., referring to the second
six-month period, does not mean that
interest will no longer be charged after the
second six-month period since such
stipulation was made on the logical and
reasonable expectation that such amount
would be paid within the date stipulated.
Considering that petitioner failed to pay the
amount given which under the
Memorandum of Agreement shall be
considered as a loan, the monetary interest
for the last six months continued to accrue
until actual payment of the loaned amount.
6. ARWOOD V. DMCI -LEA
7. SONAYA V. AZARRAGA - DON
Doctrine: When there is an interest that is expressly
stipulated in writing, such contract is considered
mutuum and not a sale with pacto de retro.
Note: This is not absolute and subject to the intention
of the parties.
FACTS:
The defendants surnamed Azarraga
(defendants) became indebted to Attorney
Leodegario Azarraga (attorney). The defendants
agreed among themselves to pay attorney his
attorney’s fees by special mortgage of the former’s
parcels of land (property). It is stated in their
agreement that: the property will be adjudicated to
the attorney if the defendants were unable to pay in
full the former’s said fees within five years. Attorney
sell his credit against the defendant to Josue
Soncuya (plaintiff) for the sum of P2,500 with all the
rights inherent therein.
When the plaintiff became the creditor of
the defendants by virtue of the sale and cession
which attorney had made, the plaintiff allowed the
defendants an extension but with express condition
that the defendants would pay the plaintiff an interest
rate of 12 per cent per annum. Upon expiration of the
extension, the plaintiff went to the house of the
defendants and asked for the delivery of the credit.
Attack:The contracts entered by the plaintiff with
attorney and the defendants are a sale with pacto de
recto.
Defense: The contracts entered by the defendants
with attorney and the plaintiff are simply a loan
(mutuum) with real estate security.
ISSUE:Whether or not the contacts entered into by
the parties are mutuum with real estate security?
RULING:YES. The fact that the plaintiff never
considered the contract entered into by him with the
other parties a sale with pacto de retro.
What could have been considered as a
antichresis or pacto comisorio – not an assignment
in payment of a debt or a sale with pacto de retro
because there is nothing to indicate that such was
the intention of the defendants.
The defendants bound themselves to
deliver the property in question to the plaintiff and
that the latter should pay the former the value
thereof. Such was converted into a simple loan
because of the following: (1) there was a resolutory
condition of five years, and (2) the plaintiff chose to
collect the 12 per cent per annum interest.
8. ROYAL SHIRT V. CO -JODELLE
G.R. No. L-6313 May 14, 1954
THE ROYAL SHIRT FACTORY, INC., plaintiff-
appellee, vs.CO BON TIC, defendant-appellant.
MONTEMAYOR, J.:
Facts:
The present appeal involves an action originally
brought in the Municipal Court of Manila by the
plaintiff, the ROYAL SHIRT COURT, INC., to recover
from defendant CO BON TIC the sum of P1,422 said
to represent the balance of the purchase price of 350
pairs of "Balleteenas" shoes at P7 a pair, with interest
at 12 per cent per annum from August 27, 1948, and
25 per cent of said sum as attorney's fees, and costs.
The Municipal Court held that the contract was of
sale on consignment. But the Court of First Instance
of Manila held that the transaction involved was one
of outright sale at P7 per pair of shoes, sales tax
included, the court accepting the version given by the
plaintiff to the effect that on the basis of the order slip
(Exhibit A), the defendant had 9 days from delivery
of the shoes to make his choice of the two
alternatives, that is to consider the sale of the 350
pairs of shoes closed at the flat rate of P7 per pair,
sales tax included, or, at the expiration of 9 days to
pay for the shoes sold at P8 per pair, and to return
the remaining unsold ones to plaintiff; and that,
inasmuch as defendant, at the expiration of the 9
days stipulated, failed to return the shoes, and
actually began making partial payments on account
of the purchase price agreed upon, the transaction in
the nature of a straight sale, was considered closed.
Issue:
Whether or not the Municipal Court was correct when
it ordered the defendant to pay the unpaid balance
with interest on the amount due at the rate of
12percent per annum plus 25percent of the same
sum for attorney’s fees as stipulated?
Holding:
No. In the order slip, the conditions of sale printed
provide for 20percent only as attorney’s fees and no
rate of interest in case of litigation. But the
defendant did not sign such order slip. Because of
the absence of stipulation as to the rate of interest
he would be paying only the legal rate of 6percent
per annum. Hence, the defendant should only pay
6percent interest on the amount due him from the
date of the filing of the complaint, with costs, and
nothing for attorney’s fees.
9. OVERSEAS V. CORDERO -YELA
GR NO L-33582 MARCH 30, 1982
FACTS
On July 20, 1967, Vicente Cordero opened a one-
year time deposit with The Overseas Bank of
Manila in the amount of P80,000.00 to mature on
July 20, 1968 with interest at the rate of 6% per
annum. However, due to its distressed financial
condition, the Overseas Bank of Manila was unable
to pay Cordero his said time deposit together with
the interest. To enforce payment, Cordero instituted
an action in the Court of First Instance of Manila.
The Overseas Bank of Manila raised as special
defense the finding by the Monetary Board of its
state of insolvency. It cited the Resolution of August
1, 1968 of the Monetary Board which authorized the
Overseas Bank of Manila’s board of directors to
suspend all its operations, and the Resolution of
August 13, 1968 of the same Board, ordering the
Superintendent of Banks to take over the assets of
the Overseas Bank of Manila for purposes of
liquidation. The second is a Manifestation
acknowledging receipt of the sum of P73,840. Said
Manifestation is in the nature of a quit claim
ISSUE
Whether or not the Overseas Bank of Manila is still
obligated to return to Cordero his time deposit
despite the bank’s state of insolvency
RULING
Certain supervening events, however, have
rendered these issues moot and academic. The first
of these supervening events is the letter of Julian
Cordero, brother and attorney-in-fact of respondent
Vicente Cordero, addressed to the Commercial
Bank of Manila (Combank), successor of petitioner
Overseas Bank of Manila. In this letter dated
February 13, 1981, copy of which was furnished this
Court, it appears that respondent Cordero had
received from the Philippine Deposit Insurance
Company the amount of P10,000.00.
10. RAMOS V. CENTRAL BANK - JODELLE
EMERITO M. RAMOS, et al., petitioners, vs.
CENTRAL BANK OF THE PHILIPPINES,
respondents; COMMERCIAL BANK OF MANILA,
intervenor.
GR NO. L-29352 JULY 22 1985
Facts:
This involves a clarificatory question as to
applicability of Tapia ruling wherein the Court held
that "the obligation to pay interest on the deposit
ceases the moment the operation of the bank is
completely suspended by the duly constituted
authority, the Central Bank," to loans and advances
by the Central Bank.
Government Corporate Counsel and general
counsel of the COMBANK Manuel Lazaro claimed
that applying the Tapia ruling as reaffirmed by the
Court in subsequent cases, COMBANK is not liable
for interest on CB loans and advances during the
period of its closure form August 2, 1968 to January
8, 1981.
Issue:
Whether or not COMBANK is liable for interest on CB
loans and advances during the period of its closure
Held:
No. Respondents have failed to adduce any cogent
argument to persuade the Court to reconsider its
Resolution at bar that the Tapia ruling is fully
applicable to the non-payment of interest, during the
period of the bank's forcible closure, on loans and
advances made by respondent Central Bank.
Respondent Central Bank itself when it was then
managing the Overseas Bank of Manila (now
Commercial Bank of Manila) under a holding trust
agreement, held the same position in Idelfonso D.
Yap vs. OBM wherein it argued that "(I)n a suit
against the receiver of a national bank for money
loaned to the Bank while it was a going concern, it
was error to permit plaintiff to recover interest on the
loan after the bank's suspension"
It should be further noted that the respondent Central
Bank when called upon to deal with commercial
banks and extend to them emergency loans and
advances, deals with them not as an ordinary
creditor engaged in business, but as the ultimate
monetary authority of government charged with the
supervision and preservation of the banking system.
A significant development of the case, the
Government Service Insurance System (GSIS) has
acquired ownership of 99.93% of the outstanding
capital stock of COMBANK. The Court's Resolution
manifestly redounds to the benefit of another
government institution, the GSIS, and to the
preservation of the banking system.
11. LIRAG V. SSS - HAZELLE
G.R. No. L-33205 August 31, 1987
Facts:
Plaintiff SSS and defendants Lirag Textile entered
into a Purchase Agreement under which the plaintiff
agreed to purchase from the said defendant
preferred shares of stock worth ONE MILLION
PESOS [P1,000,000.00].
That pursuant to the Purchase Agreement the
plaintiff, on January 31, 1962, paid the defendant
Lirag Textile Mills, Inc. the sum of FIVE HUNDRED
THOUSAND PESOS [P500,000.00] for which the
said defendant issued to plaintiff 5,000 preferred
shares with a par value of one hundred pesos
[P10000] per share as evidenced by stock
Certificate. the plaintiff paid to the Lirag Textile Mills,
Inc. the sum of FIVE UNDRED THOUSAND PESOS
[P500,000.00] for which the said defendant issued to
plaintiff 5,000 preferred shares with a par value of
one hundred pesos.
That to guarantee the redemption of the stocks
purchased by the plaintiff, the payment of dividends,
as well as the other obligations of the Lirag Textile
Mills, Inc., defendants Basilio L. Lirag signed the
Purchase Agreement of September 4, 1961 not only
as president of the defendant corporation, but also
as surety so that should the Lirag Textile Mills, Inc.
fail to perform any of its obligations in the said
Purchase Agreement, the surety shall immediately
pay to the vendee the amounts then outstanding.
That defendant corporation failed to redeem
certificates of Stock No. That the Lirag Textile Mills,
lnc. has not paid dividends in the amounts and within
the period set forth in paragraph 10 of the complaint;
For failure of Lirag Textile Mills, Inc. and Basilio L.
Lirag to comply with the terms of the Purchase
Agreement, the SSS filed an action with RTC.
Praying for specific performance, adjudge that they
should be liable for the entire obligation of 1M which
became due and demandable upon defendants'
failure to repurchase the stocks as scheduled; [21
dividends in the amount of P220,000.00; [31
liquidated damages in an amount equivalent to
twelve percent (12%) of the amount then
outstanding; [4] exemplary damages in the amount
of P100,000.00 and [5] attorney's fees of
P20,000.00.
Lirag Textile Mills, Inc. and Basilio L. Lirag moved for
the dismissal of the complaint, but were denied the
relief sought. RTC ruled in favor of SSS.
Issue:
WON the Purchase Agreement entered into by
petitioners and respondent SSS is a debt instrument.
Held:
Yes. We uphold the lower court's finding that the
Purchase Agreement is, indeed, a debt instrument.
Its terms and conditions unmistakably show that the
parties intended the repurchase of the preferred
shares on the respective scheduled dates to be an
absolute obligation which does not depend upon the
financial ability of petitioner corporation.
This absolute obligation on the part of petitioner
corporation is made manifest by the fact that a surety
was required to see to it that the obligation is fulfilled
in the event of the principal debtor's inability to do so.
The unconditional undertaking of petitioner
corporation to redeem the preferred shares at the
specified dates constitutes a debt which is defined
"as an obligation to pay money at some fixed future
time, or at a time which becomes definite and fixed
by acts of either party and which they expressly or
impliedly, agree to perform in the contract.
The aforementioned rights specially stipulated for the
benefit of the plaintiff [respondent SSS] suggest
eloquently an intention on the part of the plaintiff
[respondent SSS] to facilitate a loan to the defendant
corporation upon the latter's request.
The plaintiff [respondent SSS] to facilitate a loan to
the defendant corporation upon the latter's request.
In order to afford protection to the plaintiff which
otherwise is provided by means of collaterals, as the
plaintiff exacts in its grants of loans in its ordinary
transactions of this kind, as it is looked upon more as
a lending institution rather than as an investing
agency, the purchase agreement supplied these
protective rights which would otherwise be furnished
by collaterals to the loan.
Moreover, the Purchase Agreement provided that
failure on the part of petitioner to repurchase the
preferred shares on the scheduled due dates renders
the entire obligation due and demandable, with
petitioner in such eventuality liable to pay 12% of the
then outstanding obligation as liquidated damages.
12. ANGEL JOSE V. CHELDA - LEA
13. CUUNYIENG V. MABALACAT -DON
Cu Unjieng vs Mabalacat
Doctrine: Interest cannot be allowed in the absence
of stipulation. Interest due and unpaid shall not earn
interest.
FACTS:
Mabalacat Sugar Company (appellant) is
indebted to Cu Unjieng e Hijos (appellee) with
interest and mortgage. The debt of appellant become
due. However, appellee extends the time for
payment of the mortgage indebtedness, yet,
appellant failed to comply with the terms of this
extension. Appellee imposes compound interest
charges to the debt of appellant in estimating the
amount of indebtedness.
Attack:Interest should be calculated upon
indebtedness at the rate of 12 per cent per annum
and not by compound interest charges made by the
appellee.
Defense:
Interest of the appellant should be
estimated by appellee’s compound interest charges.
ISSUE: Whether or not the imposition of compound
interest charges is proper?
RULING:
NO. The compound interest must be
eliminated from the judgment.
The parties may stipulate that interest shall
be compounded, but in the absence of express
stipulation for the accumulation of compound
interest, no interest can be collected upon interest
until the debt is judicially claimed.
It is evident in the precedent that there was
no express stipulation for the accumulation of
compound interest nor a judicial claim for
indebtedness prior to this case.
14. DAVID V. CA - JODELLE
David vs. Court of Appeals
G.R. No. 115821 | October 13, 1999
Facts:
RTC Manila Judge Diaz issued a writ of attachment
over the real properties of private respondents.
Judge Diaz ordered private respondent to pay
petitioner P 66,500.00 with interest from July 24,
1974, until fully paid. However, Judge Diaz amended
said Decision, so that the legal rate of interest should
be computed from January 4, 1966, instead of from
July 24, 1974. Private respondent appealed to CA
and SC, which both affirmed the decision of the lower
court. Subsequently, entries of judgment were made
and the record of the case was remanded to RTC
Branch 27, presided by respondent Judge Cruz, for
the final execution of the decision as amended.
Upon petitioner's motion, Judge Cruz issued an alias
writ of execution by virtue of which respondent
Sheriff Peña conducted a public auction. Sheriff
Peña informed the petitioner that the total amount of
the judgment is P 270,940.52. The amount included
a computation of simple interest. Petitioner, however,
claimed that the judgment award should be P
3,027,238.50, because the amount due ought to be
based on compounded interest. Although the
auctioned properties were sold to the petitioner,
Sheriff Peña did not issue the Certificate of Sale
because there was an excess in the bid price in the
amount of P 2,941,524.47, which the petitioner failed
to pay despite notice.
Petitioner filed a motion praying that respondent
Judge Cruz issue an order directing respondent
Sheriff Peña to prepare and execute a certificate of
sale in favor of the petitioner, placing therein the
amount of the judgment as P 3,027,238.50, the
amount he bid during the auction which he won. His
reason is that compound interest, which is allowed
by Article 2212 of the Civil Code, should apply in this
case. RTC and CA did not favor petitioner. Petitioner
argued that the Court of Appeals erred in ruling that
Article 2212 of the Civil Code applies only where the
parties to an obligation stipulated or agreed to pay
compounded interest.
Issue: Whether or not CA erred in affirming
respondent Judge's order for the payment of simple
interest only rather than compounded interest?
Ruling:
Petitioner insists that in computing the interest due of
the P 66,500.00, interest should be computed at 6%
on the principal sum of P 66,500.00 pursuant to
Article 2209 and then "interest on the legal interest"
should also be computed in accordance with the
language of Article 2212 of the Civil Code.
Article 2212 contemplates the presence of stipulated
or conventional interest which has accrued when
demand was judicially made. In cases where no
interest had been stipulated by the parties, no
accrued conventional interest could further earn
interest upon judicial demand. the Court of Appeals
made the factual finding that . . . no interest was
stipulated by the parties. In the promissory note
denominated as Compromise Agreement signed by
the private respondent which was duly accepted by
petitioner no interest was mentioned. In his
complaint, petitioner merely prayed that defendant
be ordered to pay plaintiff the sum of P66,500.00 with
interest thereon at the legal rate from the date of the
filing of the complaint until fully paid
15. VELDEZ V. BALZARSA - YELA
GR NO L -48389 JULY 27, 1942
FACTS
On November 16, 1937, Cleofe Velez in an
amended complaint prayed for the return of certain
parcels of land which she alleged had been sold by
the Maximo Balzarsa and Flavia Mabilin to her
deceased husband, Ramon Neri San Jose, with
right of repurchase. She further alleged that Maximo
Balzarsa and Flavia Mabilin had remained in
possession of said land under a contract of lease,
but that for over two years Maximo Balzarsa and
Flavia Mabilin had not paid the agreed rentals. In
their amended answer, Maximo Balzarsa and Flavia
Mabilin alleged that the real agreement was loan
secured by a mortgage of those lands; and that
whereas the amount borrowed was only P2,400,
Maximo Balzarsa and Flavia Mabilin had however
already paid P4,420.88. Maximo Balzarsa and
Flavia Mabilin therefore prayed for the return of the
excess, or P2,029.88.
ISSUE Whether or not the payments made by
Maximo Balzarsa and Flavia Mabilin were for the
rent of the land
RULING: No. The payments could not have been
intended as rents because in accordance with a
clause in the contract, Neri took possession of the
lands, and collected the fruits thereof. The creditor
having enjoyed the beneficial use of lands delivered
as security of loan, it appears to have been the
intention of the parties that the creditor should be
compensated thereby. Furthermore, in none of the
contracts offered in evidence is there any promise
made by Maximo Balzarsa and Flavia Mabilin to
pay rents. It is true that in the receipts signed by
Neri and by plaintiff these payments are called
rents. But these receipts have been prepared by
Neri and by plaintiff, and defendants in their
ignorance did not look into the wording, being
merely satisfied that they were proofs of payment.
16. GSIS. CA - DON
GSIS vs CA and Spouses Medina
Doctrine: The parties may stipulate a compound
interest. The contracting parties may by stipulation
capitalize the interest due and unpaid, which as
added principal, shall earn new interest.
FACTS:
Spouses Namencio R. Medina and
Josefina G. Medina (private respondents) applied
with the Government Service Insurance System
(petitioner) for a loan of P600,000. The approved
loan was only P350,000 at the interest rate of 9% per
annum compounded monthly and the rate of
9%/12% per month for any installment or
amortization that remains due and unpaid. The
approved loan amount was further reduced to
P295,000. The private respondents accepted the
reduced amount and executed a promissory note
and a real estate mortgage in favor of the petitioner.
Subsequently, upon application by the private
respondents, the petitioner approved an additional
loan of P230,000 on the security of the same
mortgaged properties to bear interest at 9% per
annum compounded monthly and repayable in ten
years. However, the private respondents defaulted in
payment of the monthly amortization loan. Hence,
the petitioner imposed 9%/12% interest on
installments that are due and unpaid.
Attack:
Petitioner claims that the amendment of the
real estate mortgage did not supersede the original
mortgage contract which was being amended only
with respect to the amount secured thereby, and the
amount of monthly amortizations. All other provisions
of aforesaid mortgage contract including that on
compounding of interest were deemed rewritten and
thus binding on and enforceable against the private
respondents.
Defense:
Private respondents maintain that there is
no express stipulation on compounded interest in the
amendment of mortgage contract so that the
compounded interest stipulation in the original
mortgage contract which has been superseded
cannot be enforced in the later mortgage.

ISSUE:
Whether or not there is compound interest
in the stipulation?
RULING:
YES. There appears no ambiguity
whatsoever in the terms and conditions of the
amendment of the mortgage contract as stated
earlier. As correctly stated by the petitioner, the said
Amendment was never intended to completely
supersede the mortgage contract. First, the title
"Amendment of Real Estate Mortgage" recognizes
the existence and effectivity of the previous
mortgage contract. Second, nowhere in the aforesaid
Amendment did the parties manifest their intention to
supersede the original contract.
17. LIGUTAN V. CA -HAZELLE
G.R. No. 138677. February 12, 2002
Facts:
Petitioners Tolomeo Ligutan and Leonidas dela
Llana obtained on 11 May 1981 a loan in the amount
of P120,000.00 from respondent Security Bank and
Trust Company, to which they have executed
promissory note with an interest of 15.189% per
annum upon maturity and to pay a penalty of 5%
every month on the outstanding principal and interest
in case of default, but then petitioners defaulted on
their scheduled payments. The bank filed a
complaint for recovery with the RTC. To which the
lower court rendered judgment in favor of the bank.
Petitioner prayed for the reduction of the 5% monthly
charge for being unconscionable. The bank, on the
other hand, asked that the payment of interest and
penalty be commenced not from the date of filing of
complaint but from the time of default as so stipulated
in the contract of the parties.
Petitioners contended that the execution of the real
estate mortgage had the effect of novating the
contract between them and the bank. Petitioners
further averred that the mortgage was extrajudicially
foreclosed on 26 August 1986, that they were not
informed about it, and the bank did not credit them
with the proceeds of the sale.
CA find merit in plaintiff-appellees claim that the
principal sum of P114,416.00 with interest thereon
must commence not on the date of filing of the
complaint as we have previously held in our decision
but on the date when the obligation became due.
Default generally begins from the moment the
creditor demands the performance of the obligation.
However, demand is not necessary to render the
obligor in default when the obligation or the law so
provides.
In the case at bar, defendants-appellants executed a
promissory note where they undertook to pay the
obligation on its maturity date 'without necessity of
demand.' They also agreed to pay the interest in
case of non-payment from the date of default.
ISSUE: WON the execution of REM had the effect of
novating the contract of loan.
HELD: NO.
· At any rate, the subsequent execution of the
real estate mortgage as security for the existing loan
would not have resulted in the extinguishment of the
original contract of loan because of novation.
Petitioners acknowledge that the real estate
mortgage contract does not contain any express
stipulation by the parties intending it to supersede the
existing loan agreement between the petitioners and
the bank. Respondent bank has correctly postulated
that the mortgage is but an accessory contract to
secure the loan in the promissory note.
· An obligation to pay a sum of money is not
extinctively novated by a new instrument which
merely changes the terms of payment or adding
compatible covenants or where the old contract is
merely supplemented by the new one.
· When not expressed, incompatibility is required
so as to ensure that the parties have indeed intended
such novation despite their failure to express it in
categorical terms. The incompatibility, to be sure,
should take place in any of the essential elements of
the obligation, i.e.,
· (1)the juridical relation or tie, such
as from a mere commodatum to lease of things, or
from negotiorum gestio to agency, or from a
mortgage to antichresis, or from a sale to
one of loan;
o (2) the object or principal conditions, such as a
change of the nature of the prestation; or
o (3) the subjects, such as the substitution of a
debtor or the subrogation of the creditor. Extinctive
novation does not necessarily imply that the new
agreement should be complete by itself; certain
terms and conditions may be carried, expressly or by
implication, over to the new obligation.
18. EASTERN SHIPPING LINES V. CA - LEA
19. BPI Family Bank V. FRANCO and CA -
DON
Doctrine: The deposits of money in banks is
governed by the Civil Code provisions on simple loan
or mutuum.
FACTS:
 Amado Franco (private respondent)
opened three accounts, namely: (1) current, (2)
savings, and (3) time deposit, with BPI Family Bank
(petitioner). The current and savings accounts were
respectively funded with an initial deposit of
P500,000 each, while the time deposit account had
P1,000,000. The total amount of P2,000,000 used to
open these accounts is traceable to a check issued
by Tevesteco Arraste-Stevedoring Co., Inc.
(Tevesteco). The funding for the P2,000,000 check
was part of the P80,000,000 debited by petitioner
from First Metro Investment Corporation (FMIC) time
deposit account and credited to Tevesteco’s current
account pursuant to an Authority to Debit purportedly
signed by FMICs officer.
FMIC alleges that the Authority to Debit was
forged. Because of this incident, the petitioner
freezes the accounts of the private respondent.
Private respondent demands the petitioner to
unfreeze his account. The petitioner refused the
demand of private respondent. Hence, private
respondent filed a complaint and prayed for the
unfreezing of his account with interest.
Attack: Petitioner has no right to freeze the account
of private respondent.
Defense: Petitioner insist that it was correct in
freezing the accounts of private respondent and
refusing to release the latter’s deposits, claiming that
it had a better right to the amounts which consisted
of part of the money allegedly fraudulently
withdrawn.
ISSUE/s:
1.) Whether or not the petitioner has the right
to freeze the accounts of the private
respondent?
2.) Whether or not the petitioner has a better
right to money in the accounts of the private
respondent?
RULING:
1.) NO. Petitioner does not have a unilateral
right to freeze the accounts of the private
respondent based on its mere suspicion
that the funds therein were proceeds of the
multi-million peso scam the latter was
allegedly involved in. If such would be
allowed, it would open the floodgates of
public distrust in the banking industry.
2.) NO. The deposit money in banks is
governed by the Civil Code provisions on
simple loan or mutuum. Petitioner acquired
ownership of the private respondent’s
deposits, but such ownership is coupled
with a corresponding obligation to pay the
latter an equal amount of demand as there
is a debtor-creditor relationship between a
bank and its depositor.
20. PEOPLE V. PUIG -JODELLE
G.R. Nos. 173654-765 August 28,
2008
PEOPLE OF THE PHILIPPINES, petitioner,
vs.TERESITA PUIG and ROMEO PORRAS,
respondents.
Facts:
On 7 November 2005, the Iloilo Provincial
Prosecutor’s Office filed before Branch 68 of the RTC
in Dumangas, Iloilo, 112 cases of Qualified Theft
against respondents Teresita Puig (Puig) and
Romeo Porras (Porras) who were the Cashier and
Bookkeeper, respectively, of private complainant
Rural Bank of Pototan, Inc.. The allegations in the
Informations filed before the RTC were uniform and
pro-forma, except for the amounts, date and time of
commission.
After perusing the Informations in these cases, the
trial court did not find the existence of probable cause
that would have necessitated the issuance of a
warrant of arrest and eventually dismissed the case.
The trial court reasoned out that the element of
taking without the consent of the owners was missing
on the ground that it is the depositors-clients and not
the bank, who are the owners of the money allegedly
taken by respondents and hence are the real parties-
in-interest. Petitioner went directly to SC via petition
for review on certiorari.
Issue: Whether or not the 112 Informations for
qualified theft sufficiently allege the element of taking
without the consent of the owner?
Holding:
Yes, under Article 1980 of the New Civil Code, "fixed,
savings, and current deposits of money in banks and
similar institutions shall be governed by the
provisions concerning simple loans." Corollary
thereto, Article 1953 of the same Code provides that
"a person who receives a loan of money or any other
fungible thing acquires the ownership thereof, and is
bound to pay to the creditor an equal amount of the
same kind and quality." Thus, it posits that the
depositors who place their money with the bank are
considered creditors of the bank. The bank acquires
ownership of the money deposited by its clients,
making the money taken by respondents as
belonging to the bank.
21. RIZAL COMMERCIAL BANKING
CORPORATION VS. ALFA RTW
MANUFACTURING CORPORATION -YELA
GR NO 133877 NOVEMBER 14, 2001
FACTS: Alfa RTW Manufacturing Corporation (Alfa
RTW), on separate instances, had applied for and
was granted by the plaintiff Rizal Commercial
Banking Corporation (RCBC) four Letters of Credit
to facilitate its purchase of raw materials for its
garments business. Upon such letters of credit,
corresponding bills of exchange of various amounts
were drawn, and charged to the account of said
defendants. Alfa RTW, in turn, had executed four
Trust Receipts stipulating that it had received in
trust for RCBC the goods and merchandise
described therein, and which were purchased with
the drawings upon the letters of credit.
When the obligations upon the said commercial
documents became due, RCBC demanded
payment of the Alfa RTW undertakings, citing two
documents allegedly executed by the individual
defendants Johnny Teng, Ramon Lee, Antonio D.
Lacdao and Ramon Uy and Alfa Integrated Textile
Mills Inc. (Alfa ITM), labeled Comprehensive Surety
Agreements dated September 8, 1978 and October
10, 1979. Under such Comprehensive Surety
Agreements, it was essentially agreed that Alfa ITM
and the signatory officers agreed to guarantee in
joint and several capacity the punctual payment at
maturity to RCBC of any and all such indebtedness
and also any and all indebtedness of every kind
which was then or may thereafter become due or
owing to plaintiff bank by RTW, together with any
and all expenses of collection, etc.
Petitioner RCBC contends that the Court of
Appeals erred in awarding to it the minimal sum of
P3,060,406.25 instead of P18,961,372.43 granted
by the trial court.
ISSUE
Whether or not the Court of Appeals can deviate
from the provisions of the contract, which itself is
the law between the parties
RULING
No. Herein lies the reversible error on the part of the
Court of Appeals. When it ruled that only
P3,060,406.25 should be awarded to petitioner
RCBC, the Appellate Court disregarded the parties’
stipulations in their contracts of loan, more
specifically, those pertaining to the agreed (1)
Interest rates, (2) service charge and (3) penalties
in case of any breach thereof. The CA failed to
apply the honoured doctrine”
In the determination and computation of interest of
payment, this court, in Eastern Shipping Lines,
Inc. (234 SCRA 18, 1994) vs Court of Appeals,
through Justice Jose C. Vitug, held:
When the obligation is breached and it consist in
the payment of a sum of money, the interest due
should be that which may be have 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 169 of the Civil Code
When the obligation, not constituting a loan or
forbearance of money, is breached, and 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.
22. ESTORES V. SPOUSES SUPANGAN –
HAZELLE
G.R. No. 175139
FACTS:
Petitioner Hermojina Estores and respondent-
spouses Arturo and Laura Supangan entered into a
Conditional Deed of Sale whereby petitioner offered
to sell, and respondent-spouses offered to buy, a
parcel of land in Cavite for P4.7M. After almost seven
years from the time of the execution of the contract
and notwithstanding payment of P3.5 million on the
part of respondent-spouses, petitioner still failed to
comply with her obligation respondent-spouses
demanded the return of the amount of P3.5 million
within 15 days from receipt of the letter.
Respondent-spouses were amenable to the
proposal provided an interest of 12% compounded
annually shall be imposed on the P3.5 million.When
petitioner still failed to return the amount despite
demand, respondent-spouses were constrained to
file a Complaint for sum of money before the
Regional Trial Court (RTC) of Malabon against
herein petitioner.
In their Answer with Counterclaim, petitioner and
Arias averred that they are willing to return the
principal amount of P3.5 million but without any
interest as the same was not agreed upon. In their
Pre-Trial Brief, they reiterated that the only remaining
issue between the parties is the imposition of
interest.
RTC ruled that the interest is only at 6% per annum
and not 12%. CA affirmed the decision of the RTC.
Petitioner a argues that the award of attorneys fees
in favor of the respondent-spouses is unwarranted
because it cannot be said that the latter won over the
former since the CA even sustained her contention
that the imposition of 12% interest compounded
annually is totally uncalled for.
ISSUE:
WON the interest rate of 12% is acceptable in the
case at bar.
HELD:
We sustain the ruling of both the RTC and the CA
that it is proper to impose interest notwithstanding
the absence of stipulation in the contract. Article
2210 of the Civil Code expressly provides that
[i]nterest may, in the discretion of the court, be
allowed upon damages awarded for breach of
contract. In this case, there is no question that
petitioner is legally obligated to return the P3.5
million because of her failure to fulfill the obligation
under the Conditional Deed of Sale, despite demand.
The interest at the rate of 12% is applicable in the
instant case.
Anent the interest rate, the general rule is that the
applicable rate of interest shall be computed in
accordance with the stipulation of the parties. Absent
any stipulation, the applicable rate of interest shall be
12% per annum when the obligation arises out of a
loan or a forbearance of money, goods or credits. In
other cases, it shall be six percent (6%).
In this case, the parties did not stipulate as to the
applicable rate of interest. The only question
remaining therefore is whether the 6% as provided
under Article 2209 of the Civil Code, or 12% under
Central Bank Circular No. 416, is due.
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.
Decision affirmed with modification that from
judgment of 6% interest, it be changed to 12%.
23. SPOUSES SILOS V. PNB – HAZELLE
G.R. No. 181045 JULY 02, 2014
FACTS:
Petitioner spouses has been in business of
department store. They secure a one year revolving
credit line with respondent PNB amouting to 150,000
and in return they constituted a deed of REM. The
credit line was increased to 1.8m same as to the
mortgage, then increased to 2.5 M. Petitioner issued
8 prom notes and signed a credit agreement.
The eight Promissory Notes, on the other hand,
contained a stipulation granting PNB the right to
increase or reduce interest rates “within the limits
allowed by law or by the Monetary Board.” The Real
Estate Mortgage agreement provided the same right
to increase or reduce interest rates “at any time
depending on whatever policy PNB may adopt in the
future.”
Petitioners religiously paid the interest on the prom
notes. The petitioner thus made an amendment to
the credit agreement and issued 18 Prom Notes.
Respondent regularly renewed the line from 1990 up
to 1997, and petitioners made good on the
promissory notes, religiously paying the interests
without objection or fail. But in 1997, petitioners
faltered when the interest rates soared due to the
Asian financial crisis. Despite demand, SPS failed to
pay. The foreclosure mortgage went through and
eventually sold for auction. Petitioners filed
annulment for the foreclosure of the sale, also
contended that the interest were fixed by the
respondent without their agreement. They even
prayed for the reimbursement of alleged
overpayments that they made to which PNB denied
all.
RTC rendered judgment dismissing the case While
the Credit Agreement allows PNB to unilaterally
increase its spread over the floating interest rate at
any time depending on whatever policy it may adopt
in the future, it likewise allows for the decrease at any
time of the same. Thus, such stipulation authorizing
both the increase and decrease of interest rates as
may be applicable is valid. The Promissory Note, as
the principal contract evidencing petitioners’ loan,
prevails over the Credit Agreement and the Real
Estate Mortgage.
On appeal, CA affirmed the judgment but then
modifying that the interest should be 12% per
annum.
ISSUE: WON that the interest rate to be applied after
the expiration of the first 30-day interest period
should be 12% per annum;
HELD: YES.
Contract changes must be made with the consent of
the contracting parties. The minds of all the parties
must meet as to the proposed modification,
especially when it affects an important aspect of the
agreement. In the case of loan contracts, it cannot be
gainsaid that the rate of interest is always a vital
component, for it can make or break a capital
venture. Thus, any change must be mutually agreed
upon; otherwise, it is bereft of any binding effect.
In order that obligations arising from contracts may
have the force of law between the parties, there must
be mutuality between the parties based on their
essential equality. A contract containing a condition
which makes its fulfillment dependent exclusively
upon the uncontrolled will of one of the contracting
parties, is void.
It is plainly obvious, therefore, from the undisputed
facts of the case that respondent bank unilaterally
altered the terms of its contract with petitioners by
increasing the interest rates on the loan without the
prior assent of the latter.
from a lack of awareness of the true cost of credit
to the user by using a full disclosure of such cost
with a view of preventing the uninformed use of
credit to the detriment of the national economy.”
The rationale of this provision is to protect users
of credit from a lack of awareness of the true cost
thereof, proceeding from the experience that
banks are able to conceal such true cost by
hidden charges, uncertainty of interest rates,
deduction of interests from the loaned amount,
and the like. The law thereby seeks to protect
debtors by permitting them to fully appreciate the
true cost of their loan, to enable them to give full
consent to the contract, and to properly evaluate
their options in arriving at business decisions.

in Article 1956 that “No interest shall be due unless it

has been expressly stipulated in writing.” What has
been “stipulated in writing” from a perusal of interest
rate provision of the credit agreement signed
between the parties is that petitioners were bound
merely to pay 21% interest, subject to a possible
escalation or de-escalation, when 1) the
circumstances warrant such escalation or de-
escalation; 2) within the limits allowed by law; and 3)
upon agreement.

Indeed, the interest rate which appears to have been

agreed upon by the parties to the contract in this case
was the 21% rate stipulated in the interest provision.
Any doubt about this is in fact readily resolved by a
careful reading of the credit agreement because the
same plainly uses the phrase “interest rate agreed
upon,” in reference to the original 21% interest rate.

Petitioners never agreed in writing to pay the

increased interest rates demanded by respondent
bank in contravention to the tenor of their credit
agreement. That an increase in interest rates from
18% to as much as 68% is excessive and
unconscionable is indisputable.

To repeat what has been said in the above-cited

cases, any modification in the contract, such as the
interest rates, must be made with the consent of the
contracting parties. The minds of all the parties must
meet as to the proposed modification, especially
when it affects an important aspect of the agreement.
In the case of loan agreements, the rate of
interest is a principal condition, if not the most
important component. Thus, any modification
thereof must be mutually agreed upon;
otherwise, it has no binding effect.

It appears that by its acts, respondent violated

the Truth in Lending Act, or Republic Act No.
3765, which was enacted “to protect x x x citizens