Inciong v CA; PBCom
Inciong, Naybe and Pantanosas all signed a PN for P50T in favor of Philippine Bank of Communications for a P50T loan (with Naybe as the principal debtor and Inciong and Pantasonas as co-makers.) When the note fell due and despite demands, they were unable to pay the amount owed. This prompted PBCom to file a collection case against them before the RTC averring that the note imposed a solidary obligation on all of the signatories thereto. The note reads:
"Ninety one (91) days after date, for value received, I/we, JOINTLY and SEVERALLY promise to pay to the PHILIPPINE BANK OF COMMUNICATIONS at its office in the City of Cagayan de Oro, Philippines the sum of FIFTY THOUSAND ONLY (P50,000.00) Pesos, Philippine Currency, together with interest . . . at the rate of SIXTEEN (16) per cent per annum until fully paid."
Inciong averred that he merely signed the note as a co-maker to the extent of P5T. He also said that the notes were in blank and even specified in one of the notes that his liability was limited to only 5T. Thus, it was by trickery, fraud and misrepresentation that he was made liable for the amount of P50,000.00.
The case was primarily dismissed for failure to prosecute. However the lower court reconsidered the dismissal order and required the sheriff to serve the summonses. The lower court dismissed the case against defendant Pantanosas as prayed for by PBCom herein. Meanwhile, only the summons addressed to Inciong was served as the sheriff learned that defendant Naybe had gone to Saudi Arabia.
The RTC held that Inciong was solidarily liable with his co-makers. This was affirmed by the CA. the lower court noted that the typewritten figure "P50,000-" clearly appears directly below the admitted signature of the petitioner in the promissory note. 3 Hence, the latter's uncorroborated testimony on his limited liability cannot prevail over the presumed regularity and fairness of the transaction, under the Rules of Court. The lower court also noted that petitioner was a holder of a Bachelor of Laws degree and a labor consultant who was supposed to take due care of his concerns.
Issue
Is Inciong solidarily liable? Held
Inciong is solidarily liable.
He contends that the dismissal of the complaint against Naybe, the principal debtor, and against Pantanosas, his co-maker, constituted a release of his obligation, especially because the dismissal of the case against Pantanosas was upon the motion of PBCom itself. He cites as basis for his argument, Article 2080 of the Civil Code which provides that:
"The guarantors, even though they be solidary, are released from their obligation whenever by some act of the creditor, they cannot be subrogated to the rights, mortgages, and preferences of the latter."
It is to be noted, however, that petitioner signed the promissory note as a solidary co-maker and not as a guarantor. A solidary or joint and several obligation is one in which each debtor is liable for the entire obligation, and each creditor is entitled to demand the whole obligation. Article 2047 of the Civil Code states:
"By guaranty a person, called the guarantor, binds himself to the creditor to fulfill the obligation of the principal debtor in case the latter should fail to do so. If a person binds himself solidarily with the principal debtor, the provisions of Section 4, Chapter 3, Title I of this Book shall be observed. In such a case the contract is called a suretyship."
While a guarantor may bind himself solidarily with the principal debtor, the liability of a guarantor is different from that of a solidary debtor.
"A guarantor who binds himself in solidum with the principal debtor under the provisions of the second paragraph does not become a solidary co-debtor to all intents and purposes. There is a difference between a solidary co-debtor, and a fiador in solidum (surety). The latter, outside of the liability he assumes to pay the debt before the property of the principal debtor has been exhausted, retains all the other rights, actions and benefits which pertain to him by reason of the fianza; while a solidary co-debtor has no other rights than those bestowed upon him in Section 4, Chapter 3, title I, Book IV of the Civil Code."
Section 4, Chapter 3, Title I, Book IV of the Civil Code states the law on joint and several obligations. Under Art. 1207 thereof, when there are two or more debtors in one and the same obligation, the presumption is that the obligation is joint so that each of the debtors is liable only for a proportionate part of the debt. There is a solidary liability only when the obligation expressly so states, when the law so provides or when the nature of the obligation so requires.
Because the promissory note involved in this case expressly states that the three signatories therein are jointly and severally liable, any one, some or all of them may be proceeded against for the entire obligation. The choice is left to the solidary creditor to determine against whom he will enforce collection. Consequently, the dismissal of the case against Judge Pontanosas may not be deemed as having discharged petitioner from liability as well. As regards Naybe, suffice it to say that the court never acquired jurisdiction over him. Petitioner, therefore, may only have recourse against his co-makers, as provided by law.
Vizconde v CA; Pp
Vizconde and a certain Pagulayan were charged and found guilty of the felony of estafa for having appropriated for themselves a P85K worth diamond ring belonging to a certain Dr. Perlas. As an accessory penalty, they were held to be solidarily liable to indemnify the offended party in the sum of P55,000.00 for the unaccounted balance of the value of the ring with legal interest. On appeal, the CA affirmed the decision of the trial court. The solicitor general on this appeal recommends the acquittal of Vizconde on the estafa case but civilly liable on the payment of the balance.
As culled from the records, Dr. Perlas contacted Vizconde to sell her 8-carat diamond ring. Vizonde asked for the ring claiming that a certain Pagulayan has found a sure-buyer of said ring. Perlas was hesitant at first but she acceded when she was given a postdated check for the price (P85,000.00) and, together with Vizconde, signed a receipt prepared by Perlas. This receipt — reads as follows: "RECEIPT
Received from Dra. Marylou Javier-Perlas one (1) solo 8 karat diamond ring, white, double cut, brilliant cut with multiple brilliantitos, which I agree to sell for P85,000.00 (eighty-five thousand pesos) on commission basis and pay her in the following manner:
P85,000.00 — postdated check PNB check 730297 dated April 26, 1975 for P85,000.00
It is understood that in the event the above postdated check is dishonored for any reason whatsoever on its due date, the total payment of the above item, shall become immediately due and demandable without awaiting further demand.
I guarantee that the above check will be sufficiently funded on the respective due date. Quezon City, Philippines
22 April 1975
(SGD.)PILAR A. PAGULAYAN PILAR A. PAGULAYAN
16 Rd. 8 Project 6 I guarantee jointly and severally —
(SGD.)CORAZON J. VIZCONDE CORAZON J. VIZCONDE"
After Pagulayan's postdated check matured, Perlas deposited it to her account at Manila Bank. It was dishonored for the reason, "No arrangement," stated in the debit advice. Perlas then demanded for Vizconde and Pagulayan to return the ring or pay P85,000.00. Vizconde and Pagulayan were able to pay 30T but both reneged on the balance of 55T. Thus, the estafa case. Issue
Was an agency between Vizconde and Dr. Perlas established based on the foregoing agreements and instruments as to warrant the conviction of estafa against Vizconde?
Held
No. Vizconde is acquitted from estafa but held liable for the balance of P55T. Reference to what may be taken for an agency agreement appears in the clause ". . . which I agree to sell . . . on commission basis" in the main text of that document. But it is clear that if any agency was established it was one between Perlas and Pagulayan only, this being the only logical conclusion from the use of the singular "I" in said clause, in conjunction with the fact that the part of the receipt in which the clause appears bears only the signature of Pagulayan.
As the Solicitor General correctly puts it, the joint and several undertaking assumed by Vizconde in a separate writing below the main body of the receipt, merely guaranteed the civil obligation of Pagulayan to pay Perlas the value of the ring in the event of her (Pagulayan's) failure to return said article. It cannot, in any sense, be construed as assuming any criminal responsibility consequent upon the failure of Pagulayan to return the ring or deliver its value. It is fundamental that criminal responsibility is personal and that in the absence of conspiracy, one cannot be held criminally liable for the act or default of another.
Thus, the theory that by standing as surety for Pagulayan, Vizconde assumed an obligation more than merely civil in character, and staked her very liberty on Pagulayan's fidelity to her trust is utterly unacceptable; it strikes at the very essence of guaranty (or suretyship) as creating purely civil obligations on the part of the guarantor or surety. To render Vizconde criminally liable for the misappropriation of the ring, more than her mere guarantee written on the first reecipt is necessary. At the least, she must be shown to have acted in concert and conspiracy with Pagulayan, either in obtaining possession of the ring, or in undertaking to return the same or deliver its value, or in the misappropriation or conversion of the same.
The second receipt must be taken in the context of the subsequent events that transpired. That the complainant then already entertained serious apprehensions about the fate of the ring is evident in her having had her lawyers send Vizconde and Pagulayan demands for restitution or payment, with threat of legal action. Given that situation, the second receipt, insofar as it purports to confirm that Vizconde had also received the ring in trust, cannot be considered as anything other than an attempt to "cure" the lack of mention of such an entrustment in the first receipt, and thereby bind Vizconde to a commitment far stronger and more compelling than a mere civil guarantee for the value of the ring. There is otherwise no explanation for requiring Vizconde and Pagulayan to sign the receipt, which needed only the signature of Perlas as an acknowledgment of the P5,000.00 given in part payment, and the delivery of the land titles to secure the balance.
Atok Finance v CA; SANYU CHEMICAL CORPORATION, DANILO E. ARRIETA, NENITA B. ARRIETA, PABLITO BERMUNDO and LEOPOLDO HALILI
Atok and Sanyu Chemical entered into a Continuing Suretyship Agreement in favor of Atok Finance with the latter being the creditor and Sanyu Chemical and several stockholders as sureties. Sanyu Chemical, in consideration of receipt from Atok Finance of the amount of P105,000.00, assigned several receivables in favor of Atok. Later, additional trade receivables were assigned by Sanyu Chemical to Atok Finance with a total face value of P100,378.45.
Atok Finance commenced action against Sanyu Chemical, and the sureties before the RTC to collect the sum of P120,240.00. Atok Finance alleged that Sanyu Chemical had failed to collect and remit the amounts due under the trade receivables.
Sanyu Chemical and the individual private respondents sought dismissal of Atok's claim upon the ground that such claim had prescribed under Article 1629 of the Civil Code and for lack of cause of action. The private respondents contended that the Continuing Suretyship Agreement, being an accessory contract, was null and void since, at the time of its execution, Sanyu Chemical had no pre-existing obligation due to Atok Finance.
It is the contention of respondents that the suretyship agreement is null and void because it is not in consonance with the laws on guaranty and security. The said agreement was entered into by the parties two years before the Deed of Assignment was executed. Thus, allegedly, it ran counter to the provision that guaranty cannot exist independently because by nature it is merely an accessory contract: first, because this contract, just like guaranty, cannot exist without a valid obligation (Art. 2052, Civil Code); and, second, although it may be given as security for future debt (Art. 2053, C.C.), the obligation contemplated in the case at bar cannot be considered 'future debt' as envisioned by this law.
Issue
1. May a surety agreement, being an accessory contract, be effected to secure future (non-existing) debts? May the continuing suretyship agreement be declared null and void for alleged lack of consideration since there was still no pre-existing obligation for the surety to attach to?
2. Whether private respondents are liable under the Deed of Assignment which they, along with the principal debtor Sanyu Chemical, executed in favor of petitioner, on the receivables thereby assigned.
Held
1. Surety agreements may secure future debts. It is true that a guaranty or a suretyship agreement is an accessory contract in the sense that it is entered into for the purpose of securing the performance of another obligation which is denominated as the principal obligation. It is also true that Article 2052 of the Civil Code states that "a guarantee cannot exist without a valid obligation." This legal proposition is not, however, like most legal principles, to be read in an absolute and literal manner and carried to the limit of its logic.
The argument of respondents has been debunked in the cases of National Rice and Corn Corporation (NARIC) v. Jose A. Fojas and Alto Surety Co., Inc. and in Rizal Commercial Banking Corporation v. Arro.
In NARIC v Fojas:
This defense is untenable, because in its complaint the NARIC averred, and the appellant did not deny that these bonds were posted to secure the additional credit that Fojas has applied for, and the credit increase over his original contract was sufficient consideration for the bonds. That the latter were signed and filed before the additional credit was extended by the NARIC is no ground for complaint. Article 1825 of the Civil Code of 1889, in force in 1948, expressly recognized that 'a guaranty may also be given as security for future debts the amount of which is not yet known. In RCBC v Arro:
The surety agreement which was earlier signed by Enrique Go., Sr. and private respondent, is an accessory obligation, it being dependent upon a principal one which, in this case is the loan obtained by Daicor as evidenced by a promissory note. What obviously induced petitioner bank to grant the loan was the surety agreement whereby Go and Chua bound themselves solidarily to guaranty the punctual payment of the loan at maturity. By terms that are unequivocal, it can be clearly seen that the surety agreement was executed to guarantee future debts which Daicor may incur with petitioner, as is legally allowable under the Civil Code.
Thes cases rejected the distinction which the Court of Appeals in the case at bar sought to make with respect to Article 2053, that is, that the "future debts" referred to in that Article relate to "debts already existing at the time of the constitution of the agreement but the amount [of which] is unknown," and not to debts not yet incurred and existing at that time. Of course, a surety is not bound under any particular principal obligation until that principal obligation is born. But there is no theoretical or doctrinal difficulty inherent in saying that the suretyship agreement itself is valid and binding even before the principal obligation intended to be secured thereby is born, any more than there would be in saying that obligations which are subject to a condition precedent are valid and binding before the occurrence of the condition precedent.
Comprehensive or continuing surety agreements are in fact quite commonplace in present day financial and commercial practice. A bank or a financing company which anticipates entering into a series of credit transactions with a particular company, commonly requires the projected principal debtor to execute a continuing surety agreement along with its sureties. By executing such an agreement, the principal places itself in a position to enter into the projected series of transactions with its creditor; with such suretyship agreement, there would be no need to execute a separate surety contract or bond for each financing or credit accommodation extended to the principal debtor. As we understand it, this is precisely what happened in the case at bar
2. They are liable. The contention of Sanyu Chemical was that Atok Finance had no cause of action under the Deed of Assignment for the reason that Sanyu Chemical's warranty of the debtors' solvency had ceased based on article 1629: In case the assignor in good faith should have made himself responsible for the solvency of the debtor, and the contracting parties should not have agreed upon the duration of the liability, it shall last for one year only, from the time of the assignment if the period had already expired.
Article 1629 of the Civil Code invoked by private respondents and accepted by the Court of Appeals is not, in the case at bar, material. The liability of Sanyu Chemical to Atok Finance rests not on the breach of the warranty of solvency; the liability of Sanyu Chemical was not ex lege (ex Article 1629) but rather ex contractu.
Under the Deed of Assignment, the effect of non-payment by the original trade debtors was a breach of warranty of solvency by Sanyu Chemical, resulting in turn in the assumption of solidary liability by the assignor under the receivables assigned. In other words, the assignor Sanyu Chemical becomes a solidary debtor under the terms of the receivables covered and transferred by virtue of the Deed of Assignment. And because assignor Sanyu Chemical became, under the terms of the Deed of Assignment, solidary obligor under each of the assigned receivables, the other private respondents (the Arrieta spouses, Pablito Bermundo and Leopoldo Halili), ALSO became solidarily liable for that obligation of Sanyu Chemical, by virtue of the operation of the Continuing Suretyship Agreement. Put a little differently, the obligations of individual private respondent officers and stockholders of Sanyu Chemical under the Continuing Suretyship Agreement, were activated by the resulting obligations of Sanyu Chemical as solidary obligor under each of the assigned receivables by virtue of the operation of the Deed of Assignment. That solidary liability of Sanyu Chemical is not subject to the limiting period set out in Article 1629 of the Civil Code.
Fortune Motors; RODRIGUEZA v CA; FILINVEST CREDIT CORPORATION Facts
Chua and Rodrigueza (as sureties of Fortune Motors) each executed a "Surety Undertaking" whereunder they "absolutely, unconditionally and solidarily guaranteed" to Filinvest Credit Corporation and its affiliated and subsidiary companies the "full, faithful and prompt performance, payment and discharge of any and all obligations and agreements" of Fortune Motors (Phils.) Corporation.
Fortune, Filinvest and CARCO entered into an "Automotive Wholesale Financing Agreement" under which CARCO will deliver motor vehicles to Fortune for the purpose of resale in the latter's ordinary course of business; Fortune, in turn, will execute trust receipts over said vehicles and accept drafts drawn by CARCO, which will discount the same together with the trust receipts and invoices and
assign them in favor of Filinvest, which will pay the motor vehicles for Fortune. Under the same agreement, Fortune, as trustee of the motor vehicles, was to report and remit proceeds of any sale for cash or on terms to Filinvest immediately without necessity of demand. (Supplier: CARCO, Seller: Fortune, Capital: Filinvest)
Several motor vehicles were delivered by CARCO to Fortune, and trust receipts covered by demand drafts and deeds of assignment were executed in favor of Filinvest. However, when the demand drafts matured, not all the proceeds of the vehicles which Fortune had sold were remitted to Filinvest. Fortune likewise failed to turn over to Filinvest several unsold motor vehicles covered by the trust receipts. After unheeded demands, Filinvest filed in the RTC a complaint for a sum of money with preliminary attachment against Fortune, Chua and Rodrigueza.
Defendants Chua and Rodrigueza, instead of presenting their evidence, filed a "Motion for Judgment on Demurrer to Evidence" anchored principally on the ground that the Surety Undertakings were null and void because, at the time they were executed, there was no principal obligation existing. The RTC ruled in favor of Filinvest, ordering Fortune, Chua and Rodrigueza to pay Filinvest, jointly and severally the amounts due it. This was affirmed by the CA.
Petitioners argue that future debts which can be guaranteed under Article 2053 of the Civil Code refer only to "debts existing at the time of the constitution of the guaranty but the amount thereof is unknown," and that a guaranty being an accessory obligation cannot exist without a principal obligation. Petitioners claim that the surety undertakings cannot be made to cover the Financing Agreement executed by Fortune, Filinvest and CARCO since the latter contract was not yet in existence when said surety contracts were entered into.
Issue
In the event the car dealer defaults in paying the financing company, may the surety escape liability on the legal ground that the obligations were incurred subsequent to the execution of the surety contract?
Held
No. A Surety May Secure Future Obligations.
The case at bench falls on all fours with Atok Finance Corporation vs. Court of Appeals which reiterated our rulings in National Rice and Corn Corporation (NARIC) vs. Court of Appeals and Rizal Commercial Banking Corporation vs. Arro.
In Atok: x x x a surety is not bound under any particular principal obligation until that principal obligation is born. But there is no theoretical or doctrinal difficulty inherent in saying that the suretyship agreement itself is valid and binding even before the principal obligation intended to be secured thereby is born, any more than there would be in saying that obligations which are subject to a condition precedent are valid and binding before the occurrence of the condition precedent. Also, In Diño vs. Court of Appeals:
A continuing guaranty is one which is not limited to a single transaction, but which contemplates a future course of dealing, covering a series of transactions, generally for an indefinite time or until revoked. It is prospective in its operation and is generally intended to provide security with respect to future transactions within certain limits, and contemplates a succession of liabilities, for which, as they accrue, the guarantor becomes liable. Otherwise stated, a continuing guaranty is one which covers all transactions, including those arising in the future, which are within the description or contemplation of the contract, of guaranty, until the expiration or termination thereof. A guaranty shall be construed as continuing when by the terms thereof it is evident that the object is to give a standing credit to the principal debtor to be used from time to time either indefinitely or until a certain period; especially if the right to recall the guaranty is expressly reserved. Hence, where the contract of guaranty states that the same is to secure advances to be made 'from time to time' the guaranty will be construed to be a continuing one.
We have no reason to depart from our uniform ruling in the abovecited cases. The facts of the instant case bring us to no other conclusion than that the surety undertakings executed by Chua
and Rodrigueza were continuing guaranties or suretyships covering all future obligations of Fortune Motors (Phils.) Corporation with Filinvest Credit Corporation. This is evident from the written contract itself which contained the words "absolutely, unconditionally and solidarily guarantee(d)" to Respondent Filinvest and its affiliated and subsidiary companies the "full, faithful and prompt performance, payment and discharge of any and all obligations and agreements" of Petitioner Fortune "under or with respect to any and all such contracts and any and all other agreements (whether by way of guaranty or otherwise)" of the latter with Filinvest and its affiliated and subsidiary companies "now in force or hereafter made."
Moreover, Petitioner Rodrigueza and Joseph Chua knew exactly where they stood at the time they executed their respective surety undertakings in favor of Fortune.
Rodrigueza and Chua were fully aware of the business of Fortune, an automobile dealer; Chua being the corporate president of Fortune and even a signatory to the Financial Agreement with Filinvest. Both sureties knew the purpose of the surety undertaking which they signed and they must have had an estimate of the amount involved at that time. Their undertaking by way of the surety contracts was critical in enabling Fortune to acquire credit facility from Filinvest and to procure cars for resale, which was the business of Fortune. Filinvest, for its part, relied on the surety contracts when it agreed to be the assignee of CARCO with respect to the liabilities of Fortune with CARCO. After benefiting therefrom, petitioners cannot now impugn the validity of the surety contracts on the ground that there was no preexisting obligation to be guaranteed at the time said surety contracts were executed. They cannot resort to equity to escape liability for their voluntary acts, and to heap injustice to Filinvest, which relied on their signed word.
This is a clear case of estoppel by deed. By the acts of petitioners, Filinvest was made to believe that it can collect from Chua and/or Rodrigueza in case of Fortune's default. Filinvest relied upon the surety contracts when it demanded payment from the sureties of the unsettled liabilities of Fortune.
JACINTO UY DIÑO and NORBERTO UY, petitioners, vs. HON. COURT OF APPEALS and METROPOLITAN BANK AND TRUST COMPANY
In 1977, Uy Tiam Enterprises and Freight Services (UTEFS), thru its representative Uy Tiam, applied for and obtained credit accommodations (letter of credit and trust receipt accommodations) from the Metropolitan Bank and Trust Company. To secure the aforementioned credit accommodations, Norberto Uy and Jacinto Uy Diño executed separate Continuing, dated 25 February 1977, in favor of the MBTC. This credit accommodation has been fully paid.
Subsequent transactions flowed smoothly until UTEFS executed and delivered to METROBANK a Trust Receipt whereby the former acknowledged receipt in trust from the latter of the received goods from Planters Products which amounted to P815,600.00. Being the entrustee, the UTEFS agreed to deliver to METROBANK the entrusted goods in the event of non-sale or, if sold, the proceeds of the sale thereof, on or before September 2, 1979.
However, UTEFS did not acquiesce to the obligatory stipulations in the trust receipt. As a consequence, METROBANK sent letters to the said principal obligor and its sureties, Norberto Uy and Jacinto Uy Diño, demanding payment of the amount due. They denied liability on the transaction. In its reply, the bank informed him that the source of his liability is the Continuing Suretyship which he executed on February 25, 1977. On demand, UTEFS paid some of the outstanding amount.
As a rejoinder, Diño maintained that he cannot be held liable for the 1979 credit accommodation because it is a new obligation contracted without his participation. Besides, the 1977 credit accommodation which he guaranteed has been fully paid.
Since it could no longer collect the balance of amount due, METROBANK thus filed a complaint for collection of a sum of money. Norberto Uy and Jacinto Uy Diño (sureties-defendants) filed a motion to dismiss the complaint on the ground of lack of cause of action. They maintained that the obligation which they guaranteed in 1977 has been extinguished since it has already been paid in the same year. Accordingly, the Continuing Suretyships executed in 1977 cannot be availed of to
secure Uy Tiam's Letter of Credit obtained in 1979 because a guaranty cannot exist without a valid obligation. It was further argued that they cannot be held liable for the obligation contracted in 1979 because they are not privies thereto as it was contracted without their participation.
METROBANK filed its opposition to the motion to dismiss. Invoking the terms and conditions embodied in the comprehensive suretyships separately executed by sureties-defendants, the bank argued that sureties-movants bound themselves as solidary obligors of defendant Uy Tiam to both existing obligations and future ones. The RTC and the CA ruled in favor of MBTC and held the sureties solidarily liable.
Issues
1. Whether petitioners are liable as sureties for the 1979 obligations of Uy Tiam to METROBANK by virtue of the Continuing Suretyship Agreements they separately signed in 1977; and 2. On the assumption that they are, what is the extent of their liabilities for said 1979
obligations. Held
1. Yes, they are still liable. Under the Civil Code, a guaranty may be given to secure even future debts, the amount of which may not be known at the time the guaranty is executed. This is the basis for contracts denominated as a continuing guaranty or suretyship. A continuing guaranty is one which is not limited to a single transaction, but which contemplates a future course of dealing, covering a series of transactions, generally for an indefinite time or until revoked. It s prospective in its operation and is generally intended to provide security with respect to future transactions within certain limits, and contemplates a succession of liabilities, for which, as they accrue, the guarantor becomes liable. Otherwise stated, a continuing guaranty is one which covers all transactions, including those arising in the future, which are within the description or contemplation of the contract of guaranty, until the expiration or termination thereof.
A guaranty shall be construed as continuing when by the terms thereof it is evident that the object is to give a standing credit to the principal debtor to be used from time to time either indefinitely or until a certain period, especially if the right to recall the guaranty is expressly reserved. Hence, where the contract of guaranty states that the same is to secure advances to be made "from time to time" the guaranty will be construed to be a continuing one.
Paragraph IV of both agreements stipulate that:
"VI. This is a continuing guaranty and shall remain in full force and effect until written notice shall have been received by the BANK that it has been revoked by the SURETY, but any such notice shall not release the SURETY from any liability as to any instruments, loans, advances or other obligations hereby guaranteed, which may be held by the BANK, or in which the BANK may have any interest at the time of the receipt of such notice. x x x
The foregoing stipulations unequivocally reveal that the suretyship agreements in the case at bar are continuing in nature. Petitioners do not deny this; in fact, they candidly admitted it. Neither have they denied the fact that they had not revoked the suretyship agreements.
Petitioners maintain, however, that their Continuing Suretyship Agreements cannot be made applicable to the 1979 obligation because the latter was not yet in existence when the agreements were executed in 1977; under Article 2052 of the Civil Code, a guaranty "cannot exist without a valid obligation." We cannot agree. First of all, the succeeding article provides that "[a] guaranty may also be given as security for future debts, the amount of which is not yet known." Secondly. Article 2052 speaks about a valid obligations, as distinguished from a void obligation, and not an existing or current obligation. This distinction is made clearer in the second paragraph of Article 2052 which reads:
"Nevertheless, a guaranty may be constituted to guarantee the performance of a voidable or an unenforceable contract. It may also guarantee a natural obligation."
2. By express mandate of the Continuing Suretyship Agreements which they had signed, petitioners separately bound themselves to pay interests, expenses, attorney's fees and costs. The last two items are pegged at not less than ten percent (10%) of the amount due.
Even without such stipulations, the petitioners would, nevertheless, be liable for the interest and judicial costs. Article 2055 of the Civil Code provides:
"ARTICLE 2055. A guaranty is not presumed; it must be express and cannot extend to more than what is stipulated therein.
The limit of the petitioners' respective liabilities must be determined from the suretyship agreement each had signed. It is undoubtedly true that the law looks upon the contract of suretyship with a jealous eye, and the rule is settled that the obligation of the surety cannot be extended by implication beyond its specified limits. To the extent, and in the manner, and under the circumstances pointed out in his obligation, he is bound, and no farther.
Indeed, the Continuing Suretyship Agreements signed by petitioner Diño — and petitioner Uy fix the aggregate amount of their liability, at any given time, at P800,000.00 and P300,000.00, respectively. The law is clear that a guarantor may bind himself for less, but not for more than the principal debtor, both as regards the amount and the onerous nature of the conditions.
WILLEX PLASTIC INDUSTRIES, CORPORATION, vs. CA and INTERNATIONAL CORPORATE BANK
Inter-Resin Industrial Corporation opened a letter of credit with the Manila Banking Corporation. To secure payment of the credit accommodation, Inter-Resin Industrial and the Investment and Underwriting Corporation of the Philippines (IUCP) executed two documents, both entitled "Continuing Surety Agreement", whereby they bound themselves solidarily to pay Manilabank. Thereafter, Inter-Resin Industrial, together with Willex Plastic Industries Corp., executed a "Continuing Guaranty" in favor of IUCP whereby "For and in consideration of the sum or sums obtained and/or to be obtained by Inter-Resin Industrial Corporation" from IUCP, Inter-Resin Industrial and Willex Plastic jointly and severally guarantee "the prompt and punctual payment at maturity of the NOTE/S issued by the DEBTOR/S to the extent of the aggregate principal sum of FIVE MILLION PESOS (P5,000,000.00) Philippine Currency and such interests, charges and penalties as hereafter may be specified."
Following demand upon it, IUCP paid to Manilabank the sum of P4,334,280.61 representing Inter-Resin Industrial's outstanding obligation. Atrium Capital Corp., which in the meantime had succeeded IUCP, demanded from Inter-Resin Industrial and Willex Plastic the payment of what it (IUCP) had paid to Manilabank. As neither one of the sureties paid, Atrium filed this case in the court below against Inter-Resin Industrial and Willex Plastic.
Inter-Resin Industrial paid some of the amounts due. Willex Plastic denied the material allegations of the complaint. It argues that under the "Continuing Guaranty," its liability is for sums obtained by Inter-Resin Industrial from Interbank, not for sums paid by the latter to Manilabank for the account of Inter-Resin Industrial.
As already stated, the amount had been paid by Interbank's predecessor-in-interest, Atrium Capital, to Manilabank pursuant to the "Continuing Surety Agreements" made on December 1, 1978. In denying liability to Interbank for the amount, Willex Plastic argues that under the "Continuing Guaranty," its liability is for sums obtained by Inter-Resin Industrial from Interbank, not for sums paid by the latter to Manilabank for the account of Inter-Resin Industrial.
Issue
Whether under the "Continuing Guaranty" signed on April 2, 1979, Willex Plastic may be held jointly and severally liable with Inter-Resin Industrial for the amount by Interbank to Manilabank. Held
Yes. Willex Plastic has overlooked is the fact that evidence aliunde was introduced in the trial court to explain that it was actually to secure payment to Interbank (formerly IUCP) of amounts paid by the latter to Manilabank that the "Continuing Guaranty" was executed.
Interbank adduced evidence to show that the "Continuing Guaranty" had been made to guarantee payment of amounts made by it to Manilabank and not of any sums given by it as loan to Inter-Resin Industrial.
Accordingly, the trial court found that it was "to secure the guarantee made by plaintiff of the credit accommodation granted to defendant IRIC [Inter-Resin Industrial] by Manilabank, [that] the plaintiff required defendant IRIC to execute a chattel mortgage in its favor and a Continuing Guaranty which was signed by the defendant Willex Plastic Industries Corporation."
Similarly, the Court of Appeals found it to be an undisputed fact that "to secure the guarantee undertaken by plaintiff-appellee [Interbank] of the credit accommodation granted to Inter-Resin Industrial by Manilabank, plaintiff-appellee required defendant-appellants to sign a Continuing Guaranty.
Willex Plastic admitted that it was "to secure the aforesaid guarantee, that INTERBANK required principal debtor IRIC [Inter-Resin Industrial] to execute a chattel mortgage in its favor, and so a 'Continuing Guaranty' was executed on April 2, 1979 by WILLEX PLASTIC INDUSTRIES CORPORATION (WILLEX for brevity) in favor of INTERBANK for and in consideration of the loan obtained by IRIC [Inter-Resin Industrial]."
Put in another way the consideration necessary to support a surety obligation need not pass directly to the surety, a consideration moving to the principal alone being sufficient. For a "guarantor or surety is bound by the same consideration that makes the contract effective between the principal parties thereto. . . . It is never necessary that a guarantor or surety should receive any part or benefit, if such there be, accruing to his principal."
CENTRAL SURETY and INSURANCE COMPANY, INC., petitioner, vs. Hon. ALBERTO Q. UBAY as Judge of the Court of First Instance of Rizal, Caloocan City, Branch XXXII and ONG CHI, doing business under the Firm Name. "TABLERIA DE LUXE," respondents.
Ong Chi, doing business under the firm name "Tableria de Luxe", sued Francisco Reyes, Jr. for a sum of money in the City Court of Caloocan City. Ong Chi applied for a writ of attachment and upon filing a bond in the amount of P6,464.18, a jeep belonging to Reyes was placed in custodia legis. Reyes moved to dissolve the writ of attachment. He posted a counterbond in the amount of P6,465.00; his surety was Central Surety and Insurance Co., the petitioner herein. The condition of the counterbond is that "in consideration of the dissolution of said attachment, [Francisco Reyes, Jr., as principal and Central Surety and Insurance Co., as surety] hereby jointly and severally, bind ourselves in the sum of SIX THOUSAND FOUR HUNDRED SIXTY FIVE ONLY (P6,465.00) Philippine Currency, under the condition that in the case the plaintiff recovers judgment in the action the defendant will on demand redeliver the attached property so released to the officer of the Court to be applied to the payment of the judgment or in default thereof that the defendant and surety will on demand pay to the plaintiff the full value of the property released." (Rollo, p. 11) The writ of attachment was thereafter lifted and the jeep was returned to Reyes.
In the course of time, the City Court rendered judgment as follows:
"WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant, ordering said defendant to pay plaintiff the sum of P6,964.18, with legal interests thereon from the date of the filing of this complaint until fully paid, plus the sum of P500.00, as and by way of attorney's fees, and the costs of the suit." (Id., p. 14.)
Defendant Reyes appealed to the Court of First Instance of Rizal but said court affirmed the judgment in toto. (Rollo, p. 16.) Upon finality of the judgment, a writ of execution was issued against Reyes. The jeep which was the object of the attachment was sold by the sheriff for P4,000.00 and the amount was credited against the judgment in partial satisfaction thereof.
Soon after the sale of the jeep, Central Surety and Insurance Co. filed a motion to cancel the counterbond. Ong Chi not only opposed the motion but he also asked that the surety company pay the deficiency on the judgment in the amount of P5,730.00 (P9,730.00 as of the filing of the motion, less P4,000.00 the proceeds of the sale of the jeep). The motion for a deficiency judgment was opposed by the surety on the ground that it had fulfilled the condition of the counterbond. Despite the opposition, the court ordered the surety to pay. A motion for reconsideration was denied which accounts for the instant petition.
The issue is whether or not the petitioner surety is liable for the deficiency. The petitioner urges a negative answer; it relies on the terms of the counterbond. Upon the other hand, the private respondent claims that an affirmative answer is proper, he relies on Section 17 of Rule 57, Rules of Court which stipulates thus:
"SEC. 17. When execution returned unsatisfied, recovery had upon bond. —If the execution be returned unsatisfied in whole or in part, the surety or sureties on any counterbond given pursuant to the provisions of this rule to secure the payment of the judgment shall become charged on such counterbond, and bound to pay to the judgment creditor upon demand, the amount due under the judgment, which amount may be recovered from such surety or sureties after notice and summary hearing in the same action."
The petition is highly impressed with merit.
The stipulation in the counterbond executed by the petitioner is the law between the parties in this case and not the provisions of the Rules of Court.
Under the counterbond, the petitioner surety company bound itself solidarily with the principal obligor "in the sum of P6,465.00 under the condition that in case the plaintiff recovers judgment in the action, the defendant will, on demand, redeliver the attached property so released to the officer of the court to be applied to the payment of the judgment or in default thereof that the defendant and surety will, on demand, pay to the plaintiff the full value of the property released." The main obligation of the surety was to redeliver the jeep so that it could be sold in case execution was issued against the principal obligor. The amount of P6,465.00 was merely to fix the limit of the surety's liability in case the jeep could not be reached. In the instant case, the jeep was made available for execution of the judgment by the surety. The surety had done its part; the obligation of the bond had been discharged; the bond should be cancelled.
The impropriety of the orders of the respondent judge is made more manifest by still another circumstance. The petitioner's surety bond was for the amount of P6,465.00. So even on the assumption that the bond was not discharged, since the sale of the jeep yielded P4,000.00, the surety can be held liable at most for P2,465.00. But the respondent judge ordered the surety to pay P5,730.00 which is the entire deficiency and is in excess of P2,465.00. It is axiomatic that the obligation of a surety cannot extend beyond what is stipulated.
WHEREFORE, the petition is granted; the questioned orders of the respondent judge are hereby set aside and in lieu thereof another is entered cancelling the petitioner's counterbond, with costs against the private respondent.
SO ORDERED. BPI v ALS
Roa loaned from AIDC for the construction of a house and lot which was mortgaged to secure the loan. Roa sold the same to ALS for 850T: 350T in cash and 500T assumption of the mortgage indebtedness. Instead of assuming the balance, AIDC instead proposed a new 500T loan to be applied to the 500T loan balance of Roa. They agreed to this on March 1981. On August 13, 1982, ALS updated Roa's arrearages by paying BPIIC the sum of P190,601.35. This reduced Roa's
principal balance to P457,204.90 which, in turn, was liquidated when BPIIC applied thereto the proceeds of private respondents' loan of P500T. On September 13, 1982, BPIIC released to private respondents P7,146.87, purporting to be what was left of their loan after full payment of Roa's loan.
In June 1984, BPIIC instituted foreclosure proceedings against private respondents on the ground that they failed to pay the mortgage indebtedness which from May 1, 1981 to June 30, 1984, amounted to P475,585.31. ALS opposed this and alleged that it in fact made an overpayment as of June 30, 1984. It maintained that it should not be made to pay amortization before the actual release of the P500,000 loan in August and September 1982.
Petitioner contends that the loan was perfected on March 1981, not on September 1982, averring that a loan is a consensual contract.
Issue
When was the contract of loan perfected? Held
On September 13, 1982. A loan contract is not a consensual contract but a real contract. It is perfected only upon the delivery of the object of the contract. In the present case, the loan contract between BPI, on the one hand, and ALS, on the other, was perfected only on September 13, 1982, the date of the second release of the loan. Following the intentions of the parties on the commencement of the monthly amortization, private respondents' obligation to pay commenced only on October 13, 1982, a month after the perfection of the contract.
A perfected consensual contract can give rise to an action for damages. However, said contract does not constitute the real contract of loan which requires the delivery of the object of the contract for its perfection and which gives rise to obligations only on the part of the borrower. We also agree with private respondents that a contract of loan involves a reciprocal obligation, wherein the obligation or promise of each party is the consideration for that of the other. As averred by private respondents, the promise of BPIIC to extend and deliver the loan is upon the consideration that ALS and Litonjua shall pay the monthly amortization commencing on May 1, 1981, one month after the supposed release of the loan. It is a basic principle in reciprocal
obligations that neither party incurs in delay, if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. Only when a party has performed his part of the contract can he demand that the other party also fulfills his own obligation and if the latter fails, default sets in. Consequently, petitioner could only demand for the payment of the monthly amortization after September 13, 1982 for it was only then when it complied with its obligation under the loan contract. Therefore, in computing the amount due as of the date when BPIIC extrajudicially caused the foreclosure of the mortgage, the starting date is October 13, 1982 and not May 1, 1981.
Naguiat v CA
Q loaned from N P200T. N issued 2 checks worth 95T each. The loan was secured by a post dated check issued by Q in favor of N, a REM and a PN. When the loan was due, N deposited the postdated check issued by Q. It was dishonored by the bank. N demanded that Q pay his indebtedness. When said demand remained unheeded, N sought for the foreclosure of the mortgage. Q enjoined N from proceeding with the foreclosure contending in main that he never received the proceeds of the loan in the first place.
Issue
Was the loan herein perfected when N delivered the checks to Q? Held
No. The loan was never perfected since the checks were never proven to have been encashed by Q.
Absolutely no evidence was submitted by N that the checks she issued or endorsed were actually encashed or deposited. The mere issuance of the checks did not result in the perfection of the contract of loan. For the Civil Code provides that the delivery of bills of exchange and mercantile documents such as checks shall produce the effect of payment only when they have been cashed.
It is only after the checks have produced the effect of payment that the contract of loan may be deemed perfected. Art. 1934 of the Civil Code provides:
"An accepted promise to deliver something by way of commodatum or simple loan is binding upon the parties, but the commodatum or simple loan itself shall not be perfected until the delivery of the object of the contract."
A loan contract is a real contract, not consensual, and, as such, is perfected only upon the delivery of the object of the contract. In this case, the objects of the contract are the loan proceeds which Q would enjoy only upon the encashment of the checks signed or indorsed by N. If indeed the checks were encashed or deposited, N would have certainly presented the corresponding documentary evidence, such as the returned checks and the pertinent bank records. Since N presented no such proof, it follows that the checks were not encashed or credited to Q’s account.
The Court finds no compelling reason to disturb the finding of the courts a quo that the lender did not remit and the borrower did not receive the proceeds of the loan. That being the case, it follows that the mortgage which is supposed to secure the loan is null and void. The consideration of the mortgage contract is the same as that of the principal contract from which it receives life, and without which it cannot exist as an independent contract.
Pajuyo v CA
Pajuyo, as owner of a house, allowed Guevarra to live in the house for free via a Kasunduan provided Guevarra would maintain the cleanliness and orderliness of the house. Guevarra promised that he would voluntarily vacate the premises on Pajuyo's demand. Pajuyo eventually informed Guevarra of his need of the house and demanded that Guevarra vacate the house. Guevarra refused. Pajuyo contends that he can do so since the same was a lease. Guevarra contends that the contract was a commodatum.
What contract was perfected between them? May Pajuyo unilaterally eject Guevarra from the premises?
The Kasunduan is not one of commodatum.
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. The tenant's withholding of the property would then be unlawful. This is settled jurisprudence.
Even assuming that the relationship between Pajuyo and Guevarra is one of commodatum,
Guevarra as bailee would still have the duty to turn over possession of the property to Pajuyo, the bailor. The obligation to deliver or to return the thing received attaches to contracts for
safekeeping, or contracts of commission, administration and commodatum. These contracts certainly involve the obligation to deliver or return the thing received.
V was asked by S to aid S’s friend D in forming a corporation by depositing in the account of D in Producer’s Bank a certain amount for purposes of the incorporation. S assured V that he could withdraw his money from said account within a month's time. V deposited 200T in said account. V eventually discovered that D withdrew the amount and only 90T remained. V demanded the return of the funds from D. D issued several checks which were all dishonored. This prompted V to file an action for recovery of sum of money before the RTC. The trial court ruled in favor of V and ordered S, D and Producer’s Bank to return the amount lent.
The bank contends that the transaction between V and D is a simple loan (mutuum) since all the elements of a mutuum are present: first, what was delivered by private respondent to D was money, a consumable thing; and second, the transaction was onerous as D was obliged to pay interest, as evidenced by the check issued by D in the amount of P212,000.00, or P12,000 more than what V deposited in D’s account. Moreover, the fact that V sued his good friend S for his failure to recover his money from S shows that the transaction was not merely gratuitous but "had a business angle" to it. Hence, it argues that it cannot be held liable for the return V P200,000.00 because it is not privy to the transaction between the latter and D.
V, on the other hand, argues that the transaction between him and D is not a mutuum but an accommodation, since he did not actually part with the ownership of his P200,000.00 and in fact asked his wife to deposit said amount in the account of D so that a certification can be issued to the effect that D had sufficient funds for purposes of incorporation but at the same time, he
retained some degree of control over his money through his wife who was made a signatory to the savings account and in whose possession the savings account passbook was given.
Issue
Is the contract herein a commodatum or a mutuum? Held
Commodatum. No error was committed by the Court of Appeals when it ruled that the transaction between V and D was a commodatum and not a mutuum. A circumspect examination of the records reveals that the transaction between them was a commodatum. Article 1933 of the Civil Code distinguishes between the two kinds of loans in this wise:
By the contract of loan, 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, in which case the contract is called a commodatum; or money or other consumable thing, upon the condition that the same amount of the same kind and quality shall be paid, in which case the contract is simply called a loan or mutuum. Commodatum is essentially gratuitous. Simple loan may be gratuitous or with a stipulation to pay interest. In commodatum, the bailor retains the ownership of the thing loaned, while in simple loan, ownership passes to the borrower.
The foregoing provision seems to imply that if the subject of the contract is a consumable thing, such as money, the contract would be a mutuum. However, there are some instances where a commodatum may have for its object a consumable thing. Article 1936 of the Civil Code provides: 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.
Thus, if consumable goods are loaned only for purposes of exhibition, or when the intention of the parties is to lend consumable goods and to have the very same goods returned at the end of the period agreed upon, the loan is a commodatum and not a mutuum.
The rule is that the intention of the parties thereto shall be accorded primordial consideration in determining the actual character of a contract. In case of doubt, the contemporaneous and subsequent acts of the parties shall be considered in such determination.
As correctly pointed out by both the Court of Appeals and the trial court, the evidence shows that V agreed to deposit his money in the savings account of D specifically for the purpose of making it appear "that said firm had sufficient capitalization for incorporation, with the promise that the amount shall be returned within thirty (30) days. V merely "accommodated" D by lending his
money without consideration, as a favor to his good friend S. It was however clear to the parties to the transaction that the money would not be removed from D’s account and would be returned to V after thirty (30) days.
D’s attempts to return to V the amount of P200,000.00 which the latter deposited in D’s account together with an additional P12,000.00, allegedly representing interest on the mutuum, did not convert the transaction from a commodatum into a mutuum because such was not the intent of the parties and because the additional P12,000.00 corresponds to the fruits of the lending of the P200,000.00. Article 1935 of the Civil Code expressly states that "[t]he bailee in commodatum acquires the use of the thing loaned but not its fruits." Hence, it was only proper for D to remit to V the interest accruing to the latter's money deposited with the bank.
Neither does the Court agree with the bank’s contention that it is not solidarily liable for the return of V's money because it was not privy to the transaction between D and V. The nature of said transaction, that is, whether it is a mutuum or a commodatum, has no bearing on the question of the bank’s liability for the return of V’s money because the factual circumstances of the case clearly show that the bank, through its employee, was partly responsible for the loss of V’s money and is liable for its restitution.
Biesterbos v CA
L advanced 600T to the spouses B without any agreement as to the interest on April 1992. The amount remained unpaid prompting L to demand the payment thereof on May 18, 1993. The spouses contended that they had already tendered P518,791.76 in trust for L at the PNB since July 3, 1993. The court ordered the spouses to reimburse the remaining balance of the amount
advanced by L. This was affirmed by the CA and it added a 12% interest from the time of demand until paid. The spouses question the imposition of this interest since they agreed to none and the ruling thus violated Art. 2209 of the NCC. They also allege that they had already paid the amount since July 3, 1993 via the deposit in favor of L with the PNB.
Issues
What was the contract entered into by the parties? Was the imposition of the CA of the interest, where none was agreed on by the parties, valid?
Held
The contract is one of a loan or a forbearance of money.
The deposit with the bank, although did not strictly constitute a valid tender of payment and
consignation, could be considered an act of good faith on the part of petitioners to fully settle their obligation. Equity and justice would demand that such an act, placing at the disposal of respondent the deposited sum, should have the effect of suspending the running of the interest on said
outstanding amount.
With regard the payment of interest, the ruling of this Court in Eastern Shipping Lines, Inc. vs. Court of Appeals should be worthwhile reiterating for guidance. Thus —
"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."
Thus, the Court holds that the legal interest to be paid on the principal amount of P518,791.76 is TWELVE PERCENT (12%) per annum which shall commence from May 18 1993 when extrajudicial demand was made on petitioners up until July 3 1993 when the spouses notified L that the amount of P521,691.76 had been deposited in his name with the PNB withdrawable by him at any time during banking hours. Another 12% interest per annum shall be paid on the amount due and owing as of, and from, the date of finality of this decision until full payment would have actually been made.
DBP v COA
The DBP established a Special Loan Program (SLP) availed thru the facilities of the DBP Provident Fund and funded the placements from the Gratuity Plan Fund. Under the SLP, a prospective retiree is allowed the option to utilize in the form of a loan a portion of his "outstanding equity" in the gratuity fund and to invest it in an undertaking specified by the DBP. The earnings thereof shall be applied to the interest due on the gratuity loan and the excess shall then be distributed to the investor-members. Does this SLP cover normal loan transactions?
No. In a loan transaction or mutuum, the borrower or debtor acquires ownership of the amount borrowed. As the owner, the debtor is then free to dispose of or to utilize the sum he loaned, subject to the condition that he should later return the amount with the stipulated interest to the creditor. In contrast, the amount borrowed by a qualified employee under the SLP is not even released to him. In the present case, the Fund allowed the debtor-employee to "borrow" a portion of his gratuity fund credit solely for the purpose of investing it in certain instruments specified by DBP. The debtor-employee could not dispose of or utilize the loan in any other way. These
instruments were, incidentally, some of the same securities where the Fund placed its investments. At the same time the Fund obligated the debtor-employee to assign immediately his loan to DBP-TSD so that the amount could be commingled with the loans of other employees. The DBP-DBP-TSD — the same department which handled and had custody of the Fund's accounts — then purchased or re-allocated existing securities in the portfolio of the Fund to correspond to the employees' loans. Simply put, the amount ostensibly loaned from the Fund stayed in the Fund, and remained under the control and custody of the DBP-TSD. The debtor-employee never had any control or custody over the amount he supposedly borrowed. However, DBP-TSD listed new or existing investments of the Fund corresponding to the "loan" in the name of the debtor-employee, so that the latter could collect the interest earned from the investments.
Tanzo v Drilon
T was convinced by S to invest money in the latter’s business. S represented that T’s money will be held in trust and administered by both S and his brother for the exclusive use of their
forwarding and transporting business. T further alleged that S promised him a return on his
investment equivalent to ten per centum (10%) for one month, at the end of which his money plus interest earned shall be returned to him. After some time, T demanded from S proper accounting of his financial investment and/or the return of his capital plus interest earned. This was not
heeded by S. When S continued to ignore T’s demand for the return of his money, the latter filed a complaint-affidavit for estafa against S. This was dismissed by the prosecutor and the Justice Secretary Drilon as the elements of estafa were not present; and that the transaction was but simple loan not a trust agreement as alleged by T. Is the transaction a loan or a trust agreement? Simple loan. T’s contention that S has committed the crime of estafa “with unfaithfulness or abuse of confidence” under A 315 of the RPC fails.
A 315 (b) provides: By misappropriating or converting, to the prejudice of another, money, goods or any other personal property received by the offender in trust, or on commission, or for
administration, or under any other obligation involving the duty to make delivery of, or to return the same, even though such obligation be totally or partially guaranteed by a bond, or by denying having received such money, goods, or other property.
This Court has ruled that when the relation is purely that of debtor and creditor, the debtor cannot be held liable for the crime of estafa, under the above quoted provision, by merely refusing to pay or by denying the indebtedness. The reason behind this rule is simple. In order that a person can be convicted of estafa under Article 315, par. 1(b) of the Revised Penal Code, it must be proven that he has the obligation to deliver or return the same money, goods or personal property that he has received. The obligation to deliver exactly the same money, that is, bills or coins, is non-existent in a simple loan of money because in the latter, the borrower acquires ownership of the money borrowed. Being the owner, the borrower can dispose of the thing borrowed and his act will not be considered misappropriation thereof.
Liwanag v CA
L was charged with the crime of Estafa before the RTC for defrauding one R in the amount of P536,650.00. It appears therein that L received in trust from R the aforesaid cash money with the express obligation involving the duty to act as R's agent in purchasing local cigarettes, to resell them to several stores, to give her commission corresponding to 40% of the profits and to return the aforesaid amount of private complainant. Unfortunately, L was remiss in her obligation. After trial on the merits, the trial court rendered a decision finding L guilty as charged. On appeal to the Court of Appeals, said decision was affirmed. L then filed her appeal before the Court alleging that the appellate court erred in affirming her conviction for the crime of estafa, when clearly the contract that existed between them was either that of a simple loan or that of a partnership or joint venture, hence purely civil in nature and not criminal. Is she correct? No. The elements of estafa are present, as follows: (1) that the accused defrauded another by abuse of confidence or deceit; and (2) that damage or prejudice capable of pecuniary estimation is caused to the offended party or third party, 5 and it is essential that there be a fiduciary relation between them either in the form of a trust, commission or administration.
The receipt signed by Liwanag states thus:
“Received from Mrs. Isidora P. Rosales the sum of FIVE HUNDRED TWENTY SIX THOUSAND AND SIX HUNDRED FIFTY PESOS (P526,650.00) Philippine Currency, to purchase cigarettes (Philip &
Marlboro) to be sold to customers. In the event the said cigarettes are not sold, the proceeds of the sale or the said products (shall) be returned to said Mrs. Isidora P. Rosales the said amount of P526,650.00 or the said items on or before August 30, 1988.”
The language of the receipt could not be any clearer. It indicates that the money delivered to Liwanag was for a specific purpose, that is, for the purchase of cigarettes, and in the event the cigarettes cannot be sold, the money must be returned to Rosales.
Neither can the transaction be considered a loan, since in a contract of loan once the money is received by the debtor, ownership over the same is transferred. Being the owner, the borrower can dispose of it for whatever purpose he may deem proper.
In the instant petition, however, it is evident that Liwanag could not dispose of the money as she pleased because it was only delivered to her for a single purpose, namely, for the purchase of cigarettes, and if this was not possible then to return the money to Rosales. Since in this case
