Saura Import &Export Co., Inc v.

DBP

G.R. No. L-24968 April 27, 1972

Facts: Saura Inc. applied to the Rehabilitation Finance Corp (before its conversion to DBP) for a loan of 500k secured by a
first mortgage of the factory building to finance for the construction of a jute mill factory and purchase of factory
implements. RFC accepted and approved the loan application subject to some conditions which Saura admitted it could
not comply with. Without having received the amount being loaned, and sensing that it could not at anyway obtain the
full amount of loan, Saura Inc. then asked for cancellation of the mortgage which RFC also approved. Nine years after the
cancellation of the mortgage, Saura sued RFC for damages for its non-fulfillment of obligations arguing that there was
indeed a perfected consensual contract between them.

Issue: Was there a perfected consensual contract? Was there a real contract of loan which would warrant recovery of
damages arising out of breach of such contract?

Held: On the first issue, yes, there was indeed a perfected consensual contract, as recognized in Article 1934 of the Civil
Code. There was undoubtedly offer and acceptance in this case: the application of Saura, Inc. for a loan of P500,000.00
was approved by resolution of the defendant, and the corresponding mortgage was executed and registered. But this fact
alone falls short of resolving the second issue and the basic claim that the defendant failed to fulfill its obligation and the
plaintiff is therefore entitled to recover damages. The action thus taken by both parties—Saura's request for cancellation
and RFC's subsequent approval of such cancellation—was in the nature of mutual desistance — what Manresa terms
"mutuo disenso"— which is a mode of extinguishing obligations. It is a concept derived from the principle that since mutual
agreement can create a contract, mutual disagreement by the parties can cause its extinguishment. In view of such
extinguishment, said perfected consensual contract to deliver did not constitute a real contract of loan.
BPI INVESTMENT CORPORATION, petitioner, vs. HON. COURT OF APPEALS and ALS MANAGEMENT & DEVELOPMENT
CORPORATION, respondents.

FACTS:

Frank Roa obtained a loan at 16 1/4% per annum from Ayala Investment and Development Corporation for the
construction of his house. To secure the loan, the said house and lot were mortgaged to AIDC. In 1980, Roa sold the house
and lot to ALS and Antonio Litonjua. AIDC, however, refused to extend the old interest rate to ALS and proposed to grant
them an additional loan at a rate of 20% per annum and service fee of 1% per annum on the outstanding principal balance
and penalty interest at 21% per annum per day from the date the amortization became due and payable.

Consequently, in 1984, BPIIC instituted foreclosure proceedings against ALS for failure of payment of mortgage.

ISSUE:

Whether a Contract of Loan is a consensual contract.

HELD:

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.

In the present case, the loan contract was only perfected on the date of the second release of the loan.

A contract of loan involves a reciprocal obligation, wherein the obligation or promise of each party is the consideration
for that of the other. 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.
Bonnevie v. CA

GR No. L-49101 October 24, 1983

Facts: Spouses Lozano mortgaged their property to secure the payment of a loan amounting to 75K with private
respondent Philippine Bank of Communication (PBCom). The deed of mortgage was executed on 12-6-66, but the loan
proceeeds were received only on 12-12-66. Two days after the execution of the deed of mortgage, the spouses sold the
property to the petitioner Bonnevie for and in consideration of 100k—25K of which payable to the spouses and 75K as
payment to PBCom. Afterwhich, Bonnevie defaulted payments to PBCom prompting the latter to auction the property
after Bonnivie failed to settle despite subsequent demands, in order to recover the amount loaned. The latter now assails
the validity of the mortgage between Lozano and Pbcom arguing that on the day the deed was executed there was yet no
principal obligation to secure as the loan of P75,000.00 was not received by the Lozano spouses, so that in the absence of
a principal obligation, there is want of consideration in the accessory contract, which consequently impairs its validity and
fatally affects its very existence.

Issue: Was there a perfected contract of loan?

Held: Yes. From the recitals of the mortgage deed itself, it is clearly seen that the mortgage deed was executed for and on
condition of the loan granted to the Lozano spouses. The fact that the latter did not collect from the respondent Bank the
consideration of the mortgage on the date it was executed is immaterial. A contract of loan being a consensual contract,
the herein contract of loan was perfected at the same time the contract of mortgage was executed. The promissory note
executed on December 12, 1966 is only an evidence of indebtedness and does not indicate lack of consideration of the
mortgage at the time of its execution.
Central Bank v Court of Appeals

Facts: Island Savings Bank, upon favorable recommendation of its legal department, approved the loan application for
P80,000.00 of Sulpicio M. Tolentino, who, as a security for the loan, executed on the same day a real estate mortgage over
his 100-hectare land located in Cubo, Las Nieves, Agusan. The loan called for a lump sum of P80,000, repayable in semi-
annual installments for 3 yrs, with 12% annual interest. After the agreement, a mere P17K partial release of the loan was
made by the bank and Tolentino and his wife signed a promissory note for the P17,000 at 12% annual interest payable
w/in 3 yrs. An advance interest was deducted from the partial release but this prededucted interest was refunded to
Tolentino after being informed that there was no fund yet for the release of the P63K balance.

Monetary Board of Central Bank, after finding that bank was suffering liquidity problems, prohibited the bank fr making
new loans and investments. And after the bank failed to restore its solvency, the Central Bank prohibited Island Savings
Bank from doing business in the Philippines. Island Savings Bank in view of the non-payment of the P17K filed an
application for foreclosure of the real estate mortgage. Tolentino filed petition for specific performance or rescission and
damages with preliminary injunction, alleging that since the bank failed to deliver P63K, he is entitled to specific
performance and if not, to rescind the real estate mortgage.

Issues: Whether or not Tolentino’s can collect from the bank for damages

Held:

Whether or not Tolentino’s can collect from the bank for damages

The loan agreement implied reciprocal obligations. When one party is willing and ready to perform, the other party not
ready nor willing incurs in delay. When Tolentino executed real estate mortgage, he signified willingness to pay. That time,
the bank’s obligation to furnish the P80K loan accrued. Now, the Central Bank resolution made it impossible for the bank
to furnish the P63K balance. The prohibition on the bank to make new loans is irrelevant bec it did not prohibit the bank
fr releasing the balance of loans previously contracted. Insolvency of debtor is not an excuse for non-fulfillment of
obligation but is a breach of contract.

The bank’s asking for advance interest for the loan is improper considering that the total loan hasn’t been released. A
person can’t be charged interest for nonexisting debt. The alleged discovery by the bank of overvaluation of the loan
collateral is not an issue. The bank officials should have been more responsible and the bank bears risk in case the collateral
turned out to be overvalued. Furthermore, this was not raised in the pleadings so this issue can’t be raised. The bank was
in default and Tolentino may choose bet specific performance or rescission w/ damages in either case. But considering
that the bank is now prohibited fr doing business, specific performance cannot be granted. Rescission is the only remedy
left, but the rescission shld only be for the P63K balance.
Republic v Bagtas (Credit Transactions)

FACTS:

Jose Bagtas borrowed from the Bureau of Animal Industry three bulls for a period of one year for breeding purposes
subject to a government charge of breeding fee of 10% of the book value of the books. Upon the expiration of the contract,
Bagtas asked for a renewal for another one year, however, the Secretary of Agriculture and Natural Resources approved
only the renewal for one bull and other two bulls be returned. Bagtas then wrote a letter to the Director of Animal Industry
that he would pay the value of the three 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. Bagtas neither paid nor
returned the bulls. The Republic then commenced an action against Bagtas ordering him to return the bulls or pay their
book value.

Felicidad Bagtas, the surviving spouse and administrator of Bagtas' estate, returned the two bulls and filed a motion to
quash the writ of execution since one bull cannot be returned for it was killed by gunshot during a Huk raid. The Court
denied her motion hence, this appeal certified by the Court of Appeals because only questions of law are raised.

ISSUES & RULING: 1. WON the contract was commodatum; WON Bagtas should be held liable for its loss due to force
majeure.

NO, the contract is not commodatum. YES, he is liable for the loss.

A contract of commodatum is essentially gratuitous. Supreme Court held that Bagtas was liable for the loss of the bull
even though it was caused by a fortuitous event. If the contract was one of lease, then the 10% breeding charge is
compensation (rent) for the use of the bull and Bagtas, as lessee, is subject to the responsibilities of a possessor. He is also
in bad faith because he continued to possess the bull even though the term of the contract has already expired.

If the contract was one of commodatum, he is still 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 the late husband of the appellant would be exempt from liability.

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.
Catholic Vicar Apostolic of the Mountain Province vs. Court of Appeals, Heirs of Egmidio Octaviano and Juan Valdez

Facts:

The whole controversy started when the herein petitioner filed an application for registration of lands 1, 2, 3 and 4 in La
Trinidad, Benguet on September 5, 1962. The heirs of Juan Valdez and the heirs of Egmidio Octaviano filed an opposition
on lots 2 and 3, respectively. On November 17, 1965, the land registration court confirmed the registrable title of the
petitioner. On May 9, 1977, the Court of Appeals reversed the decision and dismissed the Vicar’s application. The heirs
filed a motion for reconsideration, praying that the lots be ordered registered under their names. The Court of Appeals
denied the motion for lack of sufficient merit. Both parties then came before the Supreme Court. The Supreme Court, in
a minute resolution, denied both petitions. The heirs filed the instant cases for the recovery and possession of the lots.

Respondents argue that the petitioner is barred from setting up the defense of ownership or long and continuous
possession by the prior judgment of the Court of Appeals under the principle of res judicata. Petitioner contends that the
principle is not applicable because the dispositive portion of the judgment merely dismissed the application for
registration.

Issues:

Whether the petitioner has acquired the lots through acquisitive prescription

Held:

Private respondents were able to prove that their predecessors' house was borrowed by petitioner Vicar after the church
and the convent were destroyed. They never asked for the return of the house, but when they allowed its free use, they
became bailors in commodatum and the petitioner the bailee. The bailees' failure to return the subject matter of
commodatum to the bailor did not mean adverse possession on the part of the borrower. The bailee held in trust the
property subject matter of commodatum. The adverse claim of petitioner came only in 1951 when it declared the lots for
taxation purposes. The action of petitioner Vicar by such adverse claim could not ripen into title by way of ordinary
acquisitive prescription because of the absence of just title.
Quintos v. Beck

FACTS: Beck is a tenant of defendant Margarita Quintos . Quintos granted gratuitously Beck the use of the furniture
found on the leased house, among these were three gas heaters and 4 electric lamps , subject to the condition that the
defendant would return them to the plaintiff upon the latter's demand .

Quintos sold the pieces of furniture to Maria Lopez and Rosario Lopez and thereafter notified Beck of the conveyance,
giving him sixty days to vacate the premises under one of the clauses of the contract of lease. On November 5, 1936, Beck
informed Quintos that the latter can get the furniture at the ground floor of the house. However, at a later date, Beck told
Quintos that he will return only the other furniture but not the gas heaters and the electric lamps as he is to return them
only after the expiration of the lease contract .

Quintos refused to get the furniture in view of the fact that the defendant had declined to make delivery of all of them .
When the lease contract expires, Beck deposited all of the furniture to the sheriff’s warehouse. Consequently, Quintos
brought an action to compel Beck to return her certain furniture which she lent him for his use. The trial court ruled in
favor of Beck, holding that Quintos failed to comply with her obligation to get the furniture when they were offered to
her. On appeal of the case, the Court of First Instance of Manila affirmed the lower court’s decision.

ISSUE: WON the trial court erred in ruling that Quintos failed to comply with her obligation to get the furniture when they
were offered to her?

RULING: YES. It should be Beck to be declared the one who failed to comply with her obligation as a bailee to return all
the furniture upon bailor Quintos’ demand. 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, defendant Beck bound himself to return the furniture to plaintiff, Quintos upon the
latter’s 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 electric lamps.

The latter, as bailee, was not entitled to place the furniture on deposit; nor was the plaintiff under a duty to accept the
offer to return the furniture, because the defendant wanted to retain the three gas heaters and the four electric lamps .
Defendant Beck was the one who breached the contract of commodatum , and without any reason he refused to return
and deliver all the furniture upon the plaintiff's demand. In these circumstances, it is just and equitable that he pay the
legal expenses and other judicial costs which the plaintiff would not have otherwise defrayed.
Consolidated Bank vs CA

FACTS: Continental Cement Corp obtained from Consolidated Bank letter of credit used to purchased 500,000 liters of
bunker fuel oil. Respondent Corporation made a marginal deposit to petitioner. A trust receipt was executed by
respondent corporation, with respondent Gregory Lim as signatory. Claiming that respondents failed to turn over the
goods or proceeds, petitioner filed a complaint for sum of money before the RTC of Manila. In their answer, respondents
aver that the transaction was a simple loan and not a trust receipt one, and that the amount claimed by petitioner did not
take into account payments already made by them. The court dismissed the complaint, CA affirmed the same.

ISSUE: Whether or not the marginal deposit should not be deducted outright from the amount of the letter of credit.

HELD: No. petitioner argues that the marginal deposit should be considered only after computing the principal plus
accrued interest and other charges. It could be onerous to compute interest and other charges on the face value of the
letter of credit which a bank issued, without first crediting or setting off the marginal deposit which the borrower paid to
it-compensation is proper and should take effect by operation of law because the requisited in Art. 1279 are present and
should extinguish both debts to the concurrent amount. Unjust enrichment.
REPUBLIC OF THE PHILIPPINES v JOSE GRIJALDO

FACTS:
Grijaldo obtained 5 loans from the Bank of Taiwan, Ltd evidenced by 5 promissory notes. All notes are without due dates,
but because the loans were due one year after they were incurred. As a security the appellant executed a chattel mortgage
on the standing crops on his land. 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. The
Republic of the Philippines made a written extrajudicial demand upon the appellant for the payment of the loans. The
record shows that the appellant had actually received the written demand for payment, but he failed to pay. The appellee
filed a complaint in to collect from the appellant the unpaid account in question. The Justice of the Peace Of Hinigaran,
dismissed the case on the ground that the action had prescribed.

ISSUE:
Whether the obligation to pay is extinguished.

HELD: No
The obligation of Grijaldo 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.
CASA FILIPINO DEVT CORP V. DEPUTY EXECUTIVE SECRETARY, G.R. NO 96494

FACTS: In June 1986, private respondent Jose Valenzuela filed a complaint against petitioner Casa Filipina Devt Corp before
the Office of Appeals, Adjudication and Legal Affairs (OAALA) of the then Human Settlements Regulatory Commission
(now HLURB) for failure to execute and deliver the deed of sale and transfer of certificate title.

1. Valenzuela alleged that he entered into a contract to sell with petitioner on May 2, 1984 to purchase a parcel of land in
Paranaque for the amount of P68,400 with the condition that he will pay a down payment and pay the remaining balance
in 12 equal monthly installments:

2. Valenzuela made his final payment on October 7, 1985 (as evidenced by OR no 6266) but despite full payment of the
lot, petitioner refused to execute the necessary deed of absolute sale and deliver the corresponding TCT. He also averred
that he has offered to pay for or reimburse petitioner for the transfer of the title but the latter refused to accept the same

4. In its defense, Casa Filipina contended that Valenzuela’s action is premature because of his failure to comply with other
conditional requirements of their contract, i.e. payment of transfer expenses

5. OAALA held in favor of Valenzuela. Petitioner filed an appeal and contended that
a. the amount of 24% interest imposed by OAALA in case of refund is high and without basis since HLURB Resolution R-
421 (series of 1988) states that the maximum interest to be awarded in case of refund is 12%
b. Although the contract to sell provides for said rate of interest, it merely applies on installment payments but not with
respect to refund; and
c. since the contract between both parties is not a forbearance of money or loan the doctrine in the case of Reformina v.
Tomol is applicable, i.e. except where the action involves forbearance of money or loan, interest which courts may award
is only up to 12%

ISSUE: WON the ruling in Reformina v. Tomol is applicable

HELD: No. The ruling in Reformina v. Tomol deals exclusively with cases where damages in the form of interest is due but
no specific rate has been previously set by the parties. In such cases the legal interest of 12% per annum must be applied.
In the present case, however, the interest rate of 24% per annum was mutually agreed upon by petitioner and private
respondent in their contract to sell—this was the interest rate imposed on the private respondent for the payment of the
installments on the contract price and there is no reason why the same interest rate should be equally applied to petitioner
who is guilty of violating the reciprocal obligation.
PNB v CA

FACTS:
Ambrosio Padilla, private respondents, was granted by petitioner Philippine National Bank, a credit line, secured by a real
estate mortgage, for a term of 2 years, with 18% interest per annum.

Private respondent executed in favor of the PNB a Credit Agreement, 2 promissory notes in the amount of P900,000.00
each, and a Real Estate Mortgage Contract. Stipulations in the PN authorizes PNB to increase the stipulated 18% interest
per annum "within the limits allowed by law at any time depending on whatever policy it [PNB] may adopt in the future;
Provided, that, the interest rate on this note shall be correspondingly decreased in the event that the applicable maximum
interest rate is reduced by law or by the Monetary Board." Padilla requested to the increase in the rate of interest from
18% be fixed at 21% or 24% but was denied by PNB.

ISSUE:
Whether PNB, within the term of the loan which it granted to the private respondent, may unilaterally change or increase
the interest rate stipulated therein at will and as often as it pleased.

HELD: No.
Central Bank Circular No. 905, Series of 1982 removed the Usury law ceiling on interest rates, however, it did not authorize
the PNB, or any bank for that matter, to unilaterally and successively increase the agreed interest rates from 18% to 48%
within a span of four (4) months, in violation of P.D. 116 which limits such changes to "once every twelve months."
RELUCIO v Brillante-Garfin
Eastern Shipping Lines v. CA
GR No. 97412 July 12, 1994

Facts: Petitioner-defendant was consigned to deliver a cargo. Upon embarkment, the cargo was found to be damaged
while on transit. Private respondent-plaintiff, Mercantile Insurance, paid the consignee the amount of damage based on
a marine insurance policy. Mercantile consquently sued the petitioner for recovery of damages it paid to the consignee.
The court a quo decided in favor of the plaintiff and further stressing the amount paid by the insurance company to the
consignee be paid and with the present legal interest of 12% per annum commencing on the date of filing of the complaint,
until fully paid. The petitioner now constests the ruling particularly on the issue of interest.

Issue: When should the reckoning period be for the computation of the payment of legal interest on an award for loss or
damage? What is the applicable rate of interest?

Held: The Court laid down the following rules of thumb for guidance in cases like that of the above:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the
contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the Civil Code govern in
determining the measure of recoverable damages.

II. 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.

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.
Philippine American Accident Insurance Company Inc. v. Hon. Jose Flores and Concordia G. Navalta

FACTS: Respondent Judge Flores rendered a judgment in favor of the Respondent Navalta asking Petitioner Phil-Am
Accident Incurance Company Inc. to pay the former the amount of P75,000.00 with legal interest from Oct. 1968, as
attorney’s fees and the cost of the suit. Petitioner paid respondent the principal amount with legal interest at 6% per
annum from Oct 1968 to Apr. 30 1978 (in accordance with Art. 2209 of the CC which provides: “If the obligation consists
in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation
to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest,
which is six per cent per annum."

This appears to be the basis for the awarding interest at the legal rate from Oct. 1968, although the debt was judicially
demanded only on July 6 1970) and attorney’s fees and the cost of the suit. Later on, Respondent advised the petitioner
that payment was not in full satisfaction of the judgment because he has to pay compound interest or additional sum of
P10,375.77. The respondent secured a writ if execution upon the refusal of the petitioner to pay the additional sum
claimed; which was affirmed by the Judge. Hence this review.

ISSUE: Whether or not the petitioner is obligated to pay compound interest under the judgment.

HELD: The questioned Order cannot be sustained. 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. Accordingly, when the respondent
judge ordered the payment of compound interest he went beyond the confines of his own judgment which had been
affirmed by the Court of Appeals and which had become final.
Private Respondent invokes Sec. 5 of the Usury Law which reads in part as follows: “In computing the interest on any
obligation, promissory note or other instrument or contract, compound interest shall not be reckoned, except by
agreement, or in default thereof, whenever the debt is judicially claimed in which case it shall draw sic per centum per
annum interest xxx as well as Art. 2212 of the Civil Code which stipulates: “Interest due shall earn legal interest from the
time it is judicially demanded, although the obligation may be silent upon this point.”

Both legal provisions are inapplicable for they contemplate the presence of stipulated or conventional interest which had
accrued when demand was judicially made. In this case, no interest had been stipulated by the parties. In other words,
there was no accrued conventional interest which could further earn interest upon judicial demand. Wherefore, decision
was set aside.
BPI v IAC

FACTS:
The original parties to this case were Zshornack and COMTRUST. In 1980, BPI absorbed COMTRUST through a corporate
merger, and was substituted as party to the case. 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.
Despite demands, the bank refused to return the money. COMTRUST averred that the US$3,000 was credited to
Zshornack's peso current account at prevailing conversion rates.

BPI argues that the contract embodied in the document is the contract of deposit as defined in Article 1962, NCC, which
banks do not enter into. The bank alleges 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: Whether the nature of contract entered into by the parties was a contract of deposit.

HELD: The document which embodies the contract 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, Thus, Zshornack demanded the return of the money. 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.
TRIPLE-V FOOD SERVICES INC. VS. FILIPINO MECHANTS INSURANCE

Facts: Mary Jo-Anne De Asis dined at petitioner’s Kamayan Restaurant. De Asis was using a Mitsubishi Galant Super Saloon
Model 1995 issued by her employer Crispa Textile Inc., On said date, De Asis availed of the valet parking service of
petitioner and entrusted her car key to petitioner’s valet counter. Afterwards, a certain Madridano, valet attendant,
noticed that the car was not in the parking slot and its key is no longer in the box where valet attendants usually keep the
keys of cars entrusted to them. The car was never recovered. Thereafter, Crispa filed a claim against its insurer, herein
respondent Filipino Merchants Insurance Company Inc. Having indemnified Crispa for the loss of the subject vehicle,
FMICI, as subrogee to Crispa’s rights, filed with the RTC at Makati City an action for damages against petitioner Triple –V
Food Services Inc., Petitioner claimed that the complaint failed to adduce facts to support the allegations of recklessness
and negligence committed in the safekeeping and custody of the subject vehicle. Besides, when De Asis availed the free
parking stab which contained a waiver of the petitioner’s liability in case of loss, she hereby waived her rights.

Issue: WON petitioner Triple V Food Services Inc. is liable for the loss

Held: The SC ruled in the affirmative. 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. 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.
CA Agro-Industrial Development Corporation vs CA GR No. 90027. March 3, 1993

Facts: CA Agro (through its President, Aguirre) and spouses Pugao entered into an agreement whereby the former
purchased two parcels of land for P350, 525 with a P75, 725 down payment while the balance was covered by three (3)
postdated checks. Among the terms embodied in a Memorandum of True and Actual Agreement of Sale of Land were that
titles to the lots shall be transferred to the petitioner upon full payment of the purchase price and that the owner’s copies
of the certificates of titles thereto shall be deposited in a safety deposit box of any bank. The same could be withdrawn
only upon the joint signatures of a representative of the petitioner upon full payment of the purchase price. They then
rented Safety Deposit box of private respondent Security Bank and Trust Company (SBTC). For this purpose, both signed
a contract of lease which contains the following conditions:
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.

After the execution of the contract, two (2) renter’s key were given to Aguirre, and Pugaos. A key guard remained with
the bank. The safety deposit box has two key holes and can be opened with the use of both keys. Petitioner claims that
the CTC were placed inside the said box.

Thereafter, a certain Mrs. Ramos offered to buy from the petitioner the two (2) lots at a price of P225 per sqm. Mrs. Ramos
demanded the execution of a deed of sale which necessarily entailed the production of the CTC. Aguirre and Pugaos then
proceeded to the bank to open the safety deposit box. However, when opened in the presence of bank’s representative,
the box yielded no certificates. Because of the delay in reconstitution of title, Mrs. Ramos withdrew her earlier offer and
as a consequence petitioner failed to realize the expected profit of P280, 500. Hence, the latter filed a complaint for
damages. RTC: Dismissed the complaint. CA: Affirmed

Issue: 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.

American Jurisprudence:
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,
delay or contravention of the tenor of the agreement.
THE ROMAN CATHOLIC BISHOP OF JARO vs. GREGORIO DE LA PEÑA

FACTS : The plaintiff is the trustee of a charitable bequest made for the construction of a leper hospital and that father
Agustin de la Peña was the duly authorized representative of the plaintiff to receive the legacy. The defendant is the
administrator of the estate of Father Dela Peña. In the year 1898 the books Father De la Peña, as trustee, showed that he
had on hand as such trustee the sum of P6,641, collected by him for the charitable purposes aforesaid. In the same year
he deposited in his personal account P19,000 in the Hongkong and Shanghai Bank at Iloilo. Shortly thereafter and during
the war of the revolution, Father De la Peña was arrested by the military authorities as a political prisoner, and while thus
detained made an order on said bank in favor of the United States Army officer under whose charge he then was for the
sum thus deposited in said bank.

The arrest of Father De la Peña and the confiscation of the funds in the bank were the result of the claim of the military
authorities that he was an insurgent and that the funds thus deposited had been collected by him for revolutionary
purposes. The money was taken from the bank by the military authorities by virtue of such order, was confiscated and
turned over to the Government. While there is considerable dispute in the case over the question whether the P6,641 of
trust funds was included in the P19,000 deposited as aforesaid, nevertheless, a careful examination of the case leads us
to the conclusion that said trust funds were a part of the funds deposited and which were removed and confiscated by
the military authorities of the United States

ISSUE: Whether or not Father de la Peña is liable for the loss of the money under his
trust?

RULINGS : The court finds and declares that the money which is the subject matter of this action was deposited by Father
De la Peña in the Hongkong and Shanghai Banking Corporation of Iloilo; that said money was forcibly taken from the bank
by the armed forces of the United States during the war of the insurrection; and that said Father De la Peña was not
responsible for its loss. Father De la Peña's liability is determined by Those portions of the Civil Code which relate to
obligations.(Book 4, Title 1.) Although the Civil Code states that "a person obliged to give something is also bound to
preserve it with the diligence pertaining to a good father of a family" (art.1094), it also provides, following the principle of
the Roman law, major casus est, cui humana infirmitas resistere non potest , that "no one shall be liable for events which
could not be foreseen, or which having been foreseen were inevitable, with the exception of the cases expressly
mentioned in the law or those in which the obligation so declares." (Art. 1105.)

By placing the money in the bank and mixing it with his personal funds De la Peña did not thereby assume an obligation
different from that under which he would have lain if such deposit had not been made, nor did he thereby make himself
liable to repay the money at all hazards. If he had been forcibly taken from his pocket or from his house by the military
forces of one of the combatants during a state of war, it is clear that under the provisions of the Civil Code he would have
been exempt from responsibility. The fact that he placed the trust fund in the bank in his personal account does not add
to his responsibility. Such deposit did not make him a debtor who must respond at all hazards.
YHT Realty Corp, et al vs. Court of Appeals

Facts: MAURICE McLaughlin is an Australian national who comes to the Philippines for business. During his trips he stays
in Tropicana Copacobana, a hotel recommended to him by Brunhilda Tan. McLaughlin deposited cash (American and
Australian dollars) and jewelry to the safety deposit box of the Hotel. The safety deposit box cannot be opened unless the
key of the guest and that of the management are present. Lainez and Payam are employees of Tropicana who is charged
with the custody of the keys. Thereafter, McLaughlin found out that some of the money and jewelry he deposited were
missing. Lainez and Payam admitted that they assisted Tan to open his deposit box. Tan admitted that she stole
McLaughlin’s keys. Tan executed a promissory note to cover the amount of the stolen money and jewelry. McLaughlin
wanted to make the management liable.

Issue: Whether or not a hotel may evade liability for the loss of items left with it for safekeeping by its guests, by having
these guests execute written waivers holding the establishment or its employees free from blame for such loss in light of
Article 2003 of the Civil Code which voids such waivers.

Held: The issue of whether the ―Undertaking For The Use of Safety Deposit Box‖ executed by McLoughlin is tainted with
nullity presents a legal question appropriate for resolution in this petition. Notably, both the trial court and the appellate
court found the same to be null and void. We find no reason to reverse their common conclusion. Article 2003 is
controlling, thus: Art. 2003. The hotelkeeper cannot free himself from responsibility by posting notices to the effect that
he is not liable for the articles brought by the guest. Any stipulation between the hotel-keeper and the guest whereby the
responsibility of the former as set forth in Articles 1998 to 2001[37] is suppressed or diminished shall be void.

Article 2003 was incorporated in the New Civil Code as an expression of public policy precisely to apply to situations such
as that presented in this case. The hotel business like the common carrier’s business is imbued with public interest.
Catering to the public, hotelkeepers are bound to provide not only lodging for hotel guests and security to their persons
and belongings. The twin duty constitutes the essence of the business. The law in turn does not allow such duty to the
public to be negated or diluted by any contrary stipulation in so-called ―undertakings‖ that ordinarily appear in prepared
forms imposed by hotel keepers on guests for their signature. Under the law, the hotel-keeper cannot free himself from
responsibility by posting notices to the effect that he is not liable for the articles brought by the guest. Any stipulation
between the hotel-keeper and the guest whereby the responsibility of the former as set forth in Articles 1998 to 2001 is
suppressed or diminished shall be void.