(1) The People of the Philippine Islands vs. Venancio Concepcion (1) The People of the Philippine Islands vs. Venancio Concepcion
G.R. No. L-19190; November 29, 1922 G.R. No. L-19190; November 29, 1922
FACTS: FACTS:
Between April 10 and May 7, 1919, Venancio Concepcion, then President and member of Between April 10 and May 7, 1919, Venancio Concepcion, then President and member of Board of Directors of the Philippine National Bank (PNB), authorized an extension of credit in Board of Directors of the Philippine National Bank (PNB), authorized an extension of credit in favor of “Puno y Concepcion, S.
favor of “Puno y Concepcion, S. en C” in the amount of PHP 300,000. “Puno y Concepcion, S.en C” in the amount of PHP 300,000. “Puno y Concepcion, S. en C” was a co
en C” was a co-partnership where the wife of Concepcion was a member and owns half of its-partnership where the wife of Concepcion was a member and owns half of its capital. Concepcion was charged with a violation of Section 35 of Act No. 2747 and was later capital. Concepcion was charged with a violation of Section 35 of Act No. 2747 and was later found guilty. Section 35 of Act No. 2747 states that the National Bank shall not, directly or found guilty. Section 35 of Act No. 2747 states that the National Bank shall not, directly or indirectly, grant loans to any of the members of the board of the directors of the bank nor to indirectly, grant loans to any of the members of the board of the directors of the bank nor to agents of the branch banks. The counsel of Concepcion appealed the case, and argued that the agents of the branch banks. The counsel of Concepcion appealed the case, and argued that the granting of credit of PHP 300,000 is not a loan within the meaning of Section 35.
granting of credit of PHP 300,000 is not a loan within the meaning of Section 35.
ISSUE: ISSUE:
Whether or not the granting of a credit of PHP 300,000 to the co-partnership is Whether or not the granting of a credit of PHP 300,000 to the co-partnership is considered a "loan" within the meaning of section 35 of Act No. 2747
considered a "loan" within the meaning of section 35 of Act No. 2747
RULING: RULING:
YES
YES. The "credit" of an individual means his ability to borrow money by virtue of the. The "credit" of an individual means his ability to borrow money by virtue of the confidence or trust reposed by a lender that he will pay what he may promise. A "loan" means confidence or trust reposed by a lender that he will pay what he may promise. A "loan" means the delivery by one party and the receipt by the other party of a given sum of money, upon an the delivery by one party and the receipt by the other party of a given sum of money, upon an agreement, express or implied, to repay the sum loaned, with or without interest. The concession agreement, express or implied, to repay the sum loaned, with or without interest. The concession of a "credit" necessarily involves the granting of "loans" up to the limit of the amount fixed in of a "credit" necessarily involves the granting of "loans" up to the limit of the amount fixed in the "credit". Thus, extension or concession of credit to the co-partnership involves the loan of the the "credit". Thus, extension or concession of credit to the co-partnership involves the loan of the amount of PHP 300,000. It is further evidenced by the fact that the demand notes signed by the amount of PHP 300,000. It is further evidenced by the fact that the demand notes signed by the co-partnership are evidences of indebtedness.
2. REPUBLIC v. PHILIPPINE NATIONAL BANK 2. REPUBLIC v. PHILIPPINE NATIONAL BANK
GR No. L-16106, December 30, 1960 GR No. L-16106, December 30, 1960 FACTS:
FACTS:
The Republic of the Philippines filed on September 25, 1957 before the Court of First The Republic of the Philippines filed on September 25, 1957 before the Court of First Instance of Manila a complaint for escheat of certain unclaimed bank deposits balances under the Instance of Manila a complaint for escheat of certain unclaimed bank deposits balances under the provisions
provisions of of Act Act No. No. 3936 3936 against against several several banks, banks, among among them them the the First First National National City City Bank Bank ofof New York (First National).
New York (First National).
It is alleged that pursuant to Section 2 of the said Act, First National forwarded to the It is alleged that pursuant to Section 2 of the said Act, First National forwarded to the Treasurer of the Philippines a statement under oath of their respective managing officials all the Treasurer of the Philippines a statement under oath of their respective managing officials all the credits and deposits held by them in favor of persons known to be dead or who have not made credits and deposits held by them in favor of persons known to be dead or who have not made further deposits or withdrawals during the period of 10 years or
further deposits or withdrawals during the period of 10 years or more.more.
After the hearing, the court a quo rendered judgment holding that cashier's or manager's After the hearing, the court a quo rendered judgment holding that cashier's or manager's checks and demand drafts as those which First National wants excluded from the complaint checks and demand drafts as those which First National wants excluded from the complaint come within the purview of Act No. 3936, but not the telegraphic transfer payment orders which come within the purview of Act No. 3936, but not the telegraphic transfer payment orders which are of different category. Consequently, the complaint was dismissed with regard to the latter. are of different category. Consequently, the complaint was dismissed with regard to the latter. However, after a motion for reconsideration was filed by First National, the court a quo changed However, after a motion for reconsideration was filed by First National, the court a quo changed its view and held that even said demand drafts do not come within the purview of said Act and so its view and held that even said demand drafts do not come within the purview of said Act and so amended its decision accordingly. The Republic of the Philippines has appealed.
amended its decision accordingly. The Republic of the Philippines has appealed. ISSUES:
ISSUES: (1) Whether or not demand drafts come within the meaning of the term "credits" or (1) Whether or not demand drafts come within the meaning of the term "credits" or "deposits" employed in the law.
"deposits" employed in the law. (2)
(2) Whether or not telegraphic orders come within the Whether or not telegraphic orders come within the meaning of the term "credits" ormeaning of the term "credits" or "deposits" employed in the law.
"deposits" employed in the law. RULING:
RULING: (1)
(1) No. A demand No. A demand draft is a draft is a bill of exchanbill of exchange payable ge payable on demand. on demand. Considered as a Considered as a bill ofbill of exchange, a draft is said to be an open letter of request from and an order by one person on exchange, a draft is said to be an open letter of request from and an order by one person on another to pay a sum of money therein mentioned to a third person, on demand or at a future time another to pay a sum of money therein mentioned to a third person, on demand or at a future time therein specified. The law requires that drafts or bills of exchange need to be presented either for therein specified. The law requires that drafts or bills of exchange need to be presented either for acceptance or for payment within a reasonable time after their issuance or after their last acceptance or for payment within a reasonable time after their issuance or after their last negotiation thereof as the case may be. Failure to make such presentment will discharge the negotiation thereof as the case may be. Failure to make such presentment will discharge the drawer from liability or to the extent of the loss caused by the delay. Since it is admitted that the drawer from liability or to the extent of the loss caused by the delay. Since it is admitted that the demand drafts herein involved have not been presented either for acceptance or for payment, demand drafts herein involved have not been presented either for acceptance or for payment, First National never had any chance of accepting or rejecting them and thus they never became a First National never had any chance of accepting or rejecting them and thus they never became a debtor of the payee concerned. As such, the aforesaid drafts cannot be considered as credits debtor of the payee concerned. As such, the aforesaid drafts cannot be considered as credits subject to escheat within the meaning of the law.
subject to escheat within the meaning of the law. (2)
(2) Yes. A telegraphic payment order is for the establishment of a telegraphic or cableYes. A telegraphic payment order is for the establishment of a telegraphic or cable transfer the agreement to remit creates a contractual obligation and has been termed a purchase transfer the agreement to remit creates a contractual obligation and has been termed a purchase and sale transaction. The purchaser of a telegraphic transfer upon making payment completes the and sale transaction. The purchaser of a telegraphic transfer upon making payment completes the transaction insofar as he is concerned, though insofar as the remitting bank is concerned the transaction insofar as he is concerned, though insofar as the remitting bank is concerned the contract is executory until the credit is established. Hence, telegraphic transfers should be contract is executory until the credit is established. Hence, telegraphic transfers should be escheated in favor of the Republic of the Philippines.
3. SAURA IMPORT & EXPORT CO., INC. vs. DEVELOPMENT BANK OF THE 3. SAURA IMPORT & EXPORT CO., INC. vs. DEVELOPMENT BANK OF THE
PHILIPPINES PHILIPPINES G.R. No. L-24968 April 27, 1972 G.R. No. L-24968 April 27, 1972 Facts: Facts:
Saura Import and Export Co. (Saura) applied for an industrial loan of ₱ 500,000 with Saura Import and Export Co. (Saura) applied for an industrial loan of ₱ 500,000 with RFC to be used in the construction of a factory for the manufacture of jute sacks. RFC initially RFC to be used in the construction of a factory for the manufacture of jute sacks. RFC initially approved the loan which was to be secured by promissory notes and a deed of mortgage. When approved the loan which was to be secured by promissory notes and a deed of mortgage. When Saura requested for modification of the terms, RFC passed a Resolution calling for the Saura requested for modification of the terms, RFC passed a Resolution calling for the reexamination of the proposed project.
reexamination of the proposed project.
After the reexamination of the proposed project, RFC resolved to reduce the loan from After the reexamination of the proposed project, RFC resolved to reduce the loan from P500,00 to P300,000 to whi
P500,00 to P300,000 to which Saura appealed. Eventually, RFC agreed to loan ₱ 500,000 toch Saura appealed. Eventually, RFC agreed to loan ₱ 500,000 to Saura on the condition that the Department of Agriculture and Natural Resources would certify Saura on the condition that the Department of Agriculture and Natural Resources would certify that there are enough raw materials in the immediate vicinity. However, Saura later informed that there are enough raw materials in the immediate vicinity. However, Saura later informed RFC that the Department certified a shortage of local raw materials and asked RFC for the RFC that the Department certified a shortage of local raw materials and asked RFC for the release of part of the loan to be used for importing raw materials. The RFC refused to release the release of part of the loan to be used for importing raw materials. The RFC refused to release the requested amounts
requested amounts Negotiations
Negotiations between between the the two two had had been been going going on on for for the the implementation implementation of of thethe agreement but then the same reached an impasse.
agreement but then the same reached an impasse. Saura did not pursue the matter Saura did not pursue the matter further.further. Instead, it requested RFC to cancel the mortgage, and RFC also agreed to it.
Instead, it requested RFC to cancel the mortgage, and RFC also agreed to it.
Saura executed another contract of mortgage with Prudential Bank to secure a trust Saura executed another contract of mortgage with Prudential Bank to secure a trust receipt. When Saura eventually defaulted with its obligation, it was sued by Prudential.
receipt. When Saura eventually defaulted with its obligation, it was sued by Prudential. Nine
Nine years years after after RFC RFC cancelled cancelled the the mortgage, mortgage, Saura Saura filed filed an an action action for for damages damages due due toto breach of
breach of contract against contract against the former. the former. CFI Manila CFI Manila ruled in ruled in favor of favor of Saura. Hence, Saura. Hence, this appeal this appeal byby RFC (now DBP).
RFC (now DBP). Issue:
Issue:Whether or not there was a perfected Whether or not there was a perfected contract consensual contract in the said ccontract consensual contract in the said case.ase. Held:
Held:
Yes. The Supreme Court held the view that there was indeed a perfected consensual Yes. The Supreme Court held the view that there was indeed a perfected consensual contract, as recognized in Article 1934 of the Civil Code, which provides:
contract, as recognized in Article 1934 of the Civil Code, which provides: “Art. 1934. An“Art. 1934. An accepted promise to deliver something, by way of commodatum or simple loan is binding upon 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 parties, but the commodatum or simple loan itself shall not be perfected until the delivery of the object of the contract.
the object of the contract.””
There was undoubtedly offer and acceptance in this case: the application of Saura for a There was undoubtedly offer and acceptance in this case: the application of Saura for a loan of P500,000.00 was approved by resolution of the defendant, and the corresponding loan of P500,000.00 was approved by resolution of the defendant, and the corresponding mortgage was executed and registered. But this fact alone falls short of resolving the basic claim mortgage was executed and registered. But this fact alone falls short of resolving the basic claim that the defendant failed to fulfill its obligation and the plaintiff is therefore entitled to recover that the defendant failed to fulfill its obligation and the plaintiff is therefore entitled to recover damages.
damages.
Hence, when Saura was obviously no longer in a position to comply with the condition Hence, when Saura was obviously no longer in a position to comply with the condition set forth by RFC, it opted to request that the mortgage be cancelled and this was also agreed set forth by RFC, it opted to request that the mortgage be cancelled and this was also agreed upon by RFC. The action thus taken by both parties was in the nature of mutual desistance or, upon by RFC. The action thus taken by both parties was in the nature of mutual desistance or, what Manresa calls, “mutuo disenso”. M
what Manresa calls, “mutuo disenso”. Mutual desistance is a mode of extinguishing obligations.utual desistance is a mode of extinguishing obligations. It is derived from the principle that since mutual agreement can create a contract, mutual It is derived from the principle that since mutual agreement can create a contract, mutual disagreement by parties can cause its extinguishment.
4. BPI Investment Co. v. CA 4. BPI Investment Co. v. CA G.R. 133632, February 15, 2002 G.R. 133632, February 15, 2002 FACTS
FACTS::
Frank Roa obtained a loan from Ayala Investment and Development Co. (AIDC), Frank Roa obtained a loan from Ayala Investment and Development Co. (AIDC), predecessor of
predecessor of BPI Investment BPI Investment Co. Co. (BPIIC) for the (BPIIC) for the construction of construction of a house a house on his on his lot. To lot. To securesecure the loan, Roa mortgaged the said property to AIDC. Roa subsequently sold the house and lot to the loan, Roa mortgaged the said property to AIDC. Roa subsequently sold the house and lot to ALS and Antonio who assumed the former’s indebtedness with AIDC. AIDC, not willing to ALS and Antonio who assumed the former’s indebtedness with AIDC. AIDC, not willing to extend the old interest, grant
extend the old interest, granted ALS and Antonio a new loan to be applied to Roa’s loan balanceed ALS and Antonio a new loan to be applied to Roa’s loan balance and to be secured by the same property. The twothen executed a mortgage deed containing the and to be secured by the same property. The twothen executed a mortgage deed containing the new stipulations. Later, BPIIC released to ALS and Antonio what was left of their loan after full new stipulations. Later, BPIIC released to ALS and Antonio what was left of their loan after full payment of Roa’s indebtedness.
payment of Roa’s indebtedness.
Thereafter, BPIIC instituted foreclosure proceedings against ALS and Antonio on the Thereafter, BPIIC instituted foreclosure proceedings against ALS and Antonio on the ground that they failed to pay the monthly amortization from the date of the execution of the ground that they failed to pay the monthly amortization from the date of the execution of the mortgage. BPIIC claimed that a contract of loan is a consensual contract and is perfected at the mortgage. BPIIC claimed that a contract of loan is a consensual contract and is perfected at the time the contract of mortgage is executed.
time the contract of mortgage is executed.
On the other hand, ALS and Antonio contended that they were not in arrears in their On the other hand, ALS and Antonio contended that they were not in arrears in their payment.They
payment.They maintained maintained that that they they should should not not be be made made to to pay pay amortization amortization before before the the actualactual release of the full amount of the loan. They likewise asserted based on Article 1934 of the Civil release of the full amount of the loan. They likewise asserted based on Article 1934 of the Civil Code that a simple loan is perfected upon delivery of the object of the contract, hence, a real Code that a simple loan is perfected upon delivery of the object of the contract, hence, a real contract. Their loan contract was perfected onl
contract. Their loan contract was perfected only when the full loan was released y when the full loan was released to them.to them. ISSUE
ISSUE::
Whether or not a contract of loan isa consensual contract. Whether or not a contract of loan isa consensual contract. HELD:
HELD:
No. The Court held
No. The Court held that a contract of that a contract of loan is not a loan is not a consensual contract but a consensual contract but a real contract.real contract. It is perfected only upon the delivery of the object of the contract. Here, the loan contract It is perfected only upon the delivery of the object of the contract. Here, the loan contract between
between BPIIC BPIIC and and ALS ALS and and Antonio Antonio was was perfected perfected only only on on the the date date of of the the full full release release of of thethe loan.
loan.
The court likewise ruled that a contract of loan involves a reciprocal obligation, wherein The court likewise ruled 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. The promise of the obligation or promise of each party is the consideration for that of the other. The promise of BPIIC to extend and deliver the loan is upon the consideration that ALS and Antonio shall pay BPIIC to extend and deliver the loan is upon the consideration that ALS and Antonio shall pay the monthly amortization commencing one month after the supposed release of the loan.
the monthly amortization commencing one month after the supposed release of the loan.
It is basic principle in reciprocal obligations that neither party incurs in delay, if the other It is 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 of what is incumbent upon him. does not comply or is not ready to comply in a proper manner of what is incumbent upon him. Only when a party has performed his part of the contract can he demand that the other party also Only when a party has performed his part of the contract can he demand that the other party also fulfils his own obligation and if the latter fails, default sets in. Here, the BPIIC could only fulfils his own obligation and if the latter fails, default sets in. Here, the BPIIC could only demand for the payment of the monthly amortization only after when it complied with its demand for the payment of the monthly amortization only after when it complied with its obligation.
(5) Raoul Bonnevie and Honesto Bonnevie vs. Court of Appeals and The Philippine Bank of (5) Raoul Bonnevie and Honesto Bonnevie vs. Court of Appeals and The Philippine Bank of
Commerce /
Commerce / G.R. No. LG.R. No. L--49101; October 24, 198349101; October 24, 1983 FACTS:
FACTS:
On December 6, 1966, spouses Jose and Josefa Lozano mortgaged their lot to Philippine On December 6, 1966, spouses Jose and Josefa Lozano mortgaged their lot to Philippine Bank of Commerce (PBCom) to secure the payment of PHP 75, 000 loan. At the time of the Bank of Commerce (PBCom) to secure the payment of PHP 75, 000 loan. At the time of the execution of the mortgage, the amount of PHP 75, 000 was not yet received by them. Later, they execution of the mortgage, the amount of PHP 75, 000 was not yet received by them. Later, they executed a Deed of Sale with Mortgage in favor of Honesto Bonnevie for the amount of PHP executed a Deed of Sale with Mortgage in favor of Honesto Bonnevie for the amount of PHP 100, 000. Of this amount, the PHP 25, 000 is payable to Lozano spouses, and the PHP 75, 000 is 100, 000. Of this amount, the PHP 25, 000 is payable to Lozano spouses, and the PHP 75, 000 is payable
payable to to PBCom. PBCom. In In 1968, 1968, Honesto Honesto assigned assigned all all his his rights rights under under the the Deed Deed of of Sale Sale withwith Mortgage to his brother, Raoul Bonnevie. Both the sale and the assignment were not registered Mortgage to his brother, Raoul Bonnevie. Both the sale and the assignment were not registered and made without the consent of PBCom. On June 1968 PBCom applied for the foreclosure of and made without the consent of PBCom. On June 1968 PBCom applied for the foreclosure of the mortgage. An auction sale was conducted where PBCom, as the highest bidder, acquired the the mortgage. An auction sale was conducted where PBCom, as the highest bidder, acquired the property
property..
In 1971 Honesto filed a complaint against PBCom seeking the annulment of the Deed of the In 1971 Honesto filed a complaint against PBCom seeking the annulment of the Deed of the Mortgage as well as the ex
Mortgage as well as the extrajudicial foreclosure. In his complaint he alleged that the mortgatrajudicial foreclosure. In his complaint he alleged that the mortga ge isge is invalid because it was executed by one who was not the owner of the mortgaged property and invalid because it was executed by one who was not the owner of the mortgaged property and that at the time its execution, the PHP 75, 000 loan was not yet received by the Lozano spouses, that at the time its execution, the PHP 75, 000 loan was not yet received by the Lozano spouses, hence there was yet no principal obligation to secure. In addition, they contend that the hence there was yet no principal obligation to secure. In addition, they contend that the extrajudicial sale is invalid because they were not notified of such. PBCom, in its Answer, extrajudicial sale is invalid because they were not notified of such. PBCom, in its Answer, averred that the sale to Honesto was made without its consent and that they had no knowledge of averred that the sale to Honesto was made without its consent and that they had no knowledge of the sale until after the foreclosure.
the sale until after the foreclosure. ISSUE/S:
ISSUE/S: 1.
1. Whether or not the Deed of Whether or not the Deed of Mortgage is validMortgage is valid 2.
2. Whether or not the extrajudicial foreclosure is validWhether or not the extrajudicial foreclosure is valid RULING:
RULING: 1.
1. YES.YES. From the recitals of the mortgage deed itself, it is clearly seen that the mortgage deed 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 was executed for and on condition of the loan granted to the Lozano spouses. The fact that the spouses did not collect from PBCom the consideration of the mortgage on the date it was spouses did not collect from PBCom 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 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. Thus, there was a loan was perfected at the same time the contract of mortgage was executed. Thus, there was a principal
principal obligation obligation to to secure secure existing existing at at the the time time of of execution execution of of mortgage. mortgage. In In addition,addition, Honesto voluntarily assumed the mortgage when they entered into the Deed of Sale with Honesto voluntarily assumed the mortgage when they entered into the Deed of Sale with Assumption of Mortgage. They are, therefore, estopped from impugning its validity whether Assumption of Mortgage. They are, therefore, estopped from impugning its validity whether on the original loan or renewals thereof.
on the original loan or renewals thereof. 2.
2. YES.YES. Since PBCom was not a party to the Deed of Sale with Mortgage and the sale and the Since PBCom was not a party to the Deed of Sale with Mortgage and the sale and the assignment were not registered, it can validly claim that it was not aware of the same. Hence, assignment were not registered, it can validly claim that it was not aware of the same. Hence, it may not be obliged to notify Honesto and Raoul. In addition, Honesto is not entitled to it may not be obliged to notify Honesto and Raoul. In addition, Honesto is not entitled to notice since he had transferred all his rights and interests over the property and PBCom was notice since he had transferred all his rights and interests over the property and PBCom was not informed of the same, while Raoul is not entitled to notice for the same reason. Most not informed of the same, while Raoul is not entitled to notice for the same reason. Most importantly
6.
6. Central Bank of the Philippines vs CACentral Bank of the Philippines vs CA GR L-45710, October 3, 1985
GR L-45710, October 3, 1985 FACTS:
FACTS:
On April 28, 1965, Island Savings Bank, approved the loan application for ₱80,000.00 of On April 28, 1965, Island Savings Bank, approved the loan application for ₱80,000.00 of Sulpicio M. Tolentino, who, as a security for the loan, executed on the same day a real estate 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 mortgage over his 100-hectare land located in Cubo, Las Nieves, Agusan. The loan called for a lump sum of ₱80,000, repayable in semi
lump sum of ₱80,000, repayable in semi-annual installments for 3 years, with 12% annual-annual installments for 3 years, with 12% annual interest. On May 22, 1965, a mere ₱
interest. On May 22, 1965, a mere ₱17,000 partial release of the loan was made by Island17,000 partial release of the loan was made by Island Savings and Sulpicio and his wife signed a promissory note for P17,000 at 12% annual interest Savings and Sulpicio and his wife signed a promissory note for P17,000 at 12% annual interest payable
payable w/in w/in 3 3 yrs. yrs. An An advance advance interest interest was was deducted deducted from from the the partial partial release release but but the the saidsaid interest was also refunded to Tolentino after being informed that there was no fund yet for the interest was also refunded to Tolentino after being informed that there was no fund yet for the release of the ₱63,000 balance.
release of the ₱63,000 balance.
On August 13, 1965, the Monetary Board of Central Bank, after finding out that Island On August 13, 1965, the Monetary Board of Central Bank, after finding out that Island Savings Bank was suffering from liquidity problems, issued Board Resolution No. 1049. The Savings Bank was suffering from liquidity problems, issued Board Resolution No. 1049. The said resolution prohibited Island Savings from making new loans and investments. And after the said resolution prohibited Island Savings from making new loans and investments. And after the said bank failed to restore its solvency, the Central Bank prohibited Island Savings Bank from said 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 by Mr. doing business in the Philippines. Island Savings Bank, in view of the non-payment by Mr. Tolentino in the amount of ₱17,000, filed an application for foreclosure of the real estate Tolentino in the amount of ₱17,000, filed an application for foreclosure of the real estate mortgage. Mr. Tolentino, on the other hand, filed a petition for specific performance or mortgage. Mr. Tolentino, on the other hand, filed a petition for specific performance or rescission and damages with preliminary injunction, claiming that since Island Savings failed to rescission and damages with preliminary injunction, claiming that since Island Savings failed to deliver the remaining balance of ₱63,000, he is now entitled to specific performance or to deliver the remaining balance of ₱63,000, he is now entitled to specific performance or to rescission of the real estate mortgage.
rescission of the real estate mortgage. ISSUE:
ISSUE: Whether or not Tolentino can demand for specific performance.Whether or not Tolentino can demand for specific performance. RULING:
RULING: No.
No. The The loan loan agreement agreement implied implied reciprocal reciprocal obligations. obligations. In In reciprocal reciprocal obligations, obligations, thethe obligation or promise of each other is the consideration for that of the other, and when one party obligation or promise of each other is the consideration for that of the other, and when one party is willing and ready to perform, the other party who is not ready nor willing, incurs in delay. is willing and ready to perform, the other party who is not ready nor willing, incurs in delay. When Mr. Tolentino executed the real estate mortgage, he signified his willingness to pay. The When Mr. Tolentino executed the real estate mortgage, he signified his willingness to pay. The prohibition
prohibition on on the the bank bank to to make make new new loans loans is is irrelevant irrelevant since since it it did did not not prohibit prohibit the the bank bank fromfrom releasing the balance of loans from previous contracts. The mere fact of insolvency by the debtor releasing the balance of loans from previous contracts. The mere fact of insolvency by the debtor is never an excuse for the
is never an excuse for the non-fulfillment of obligation and is taken as a brenon-fulfillment of obligation and is taken as a breach of contract.ach of contract.
When Island Savings Bank and Mr. Sulpicio M. Tolentino undertook reciprocal When Island Savings Bank and Mr. Sulpicio M. Tolentino undertook reciprocal obligations by entering an
obligations by entering an ₱80,000 loan agreement, with Mr. Tolentino executing a real estate₱80,000 loan agreement, with Mr. Tolentino executing a real estate mortgage and Island Savings was only able to release ₱17,000, the said bank was held in default mortgage and Island Savings was only able to release ₱17,000, the said bank was held in default for the remaining balance of ₱63,000. Since Island Savings Bank was in default, Mr. Tolentin for the remaining balance of ₱63,000. Since Island Savings Bank was in default, Mr. Tolentinoo may choose bet specific performance or rescission with damages in either case. But considering may choose bet specific performance or rescission with damages in either case. But considering that Island Savings is now prohibited by the Central Bank Board Resolution from doing that Island Savings is now prohibited by the Central Bank Board Resolution from doing business, specific performance cannot be
business, specific performance cannot be granted. Thus, rescission for thgranted. Thus, rescission for the ₱63,000 balance is thee ₱63,000 balance is the rightful remedy.
7.
7. CATHOLIC VICAR CATHOLIC VICAR APOSTOLIC OF APOSTOLIC OF THE MOUNTAIN PTHE MOUNTAIN PROVINCE VS.ROVINCE VS. COURT OF APPEALS, HEIRS OF EGMIDIO OCTAVIANO AND JUAN VALDEZ COURT OF APPEALS, HEIRS OF EGMIDIO OCTAVIANO AND JUAN VALDEZ
G.R. No. 80294-95 September 21, 1988 G.R. No. 80294-95 September 21, 1988 Facts
Facts::
Catholic Vicar Apostolic of the Mountain Province (VICAR for brevity) filed an Catholic Vicar Apostolic of the Mountain Province (VICAR for brevity) filed an application for registration of title over Lots 1, 2, 3, and 4, said Lots being the sites of the application for registration of title over Lots 1, 2, 3, and 4, said Lots being the sites of the Catholic Church building, convents, high school building, school gymnasium, school Catholic Church building, convents, high school building, school gymnasium, school dormitories, social hall, stonewalls, etc. The Heirs of Juan Valdez and the Heirs of Egmidio dormitories, social hall, stonewalls, etc. The Heirs of Juan Valdez and the Heirs of Egmidio Octaviano filed their Answer/Opposition on Lots Nos. 2 and 3, respectively, asserting ownership Octaviano filed their Answer/Opposition on Lots Nos. 2 and 3, respectively, asserting ownership and title thereto since their predecessors’ house was borrowed by petitioner Vicar after the and title thereto since their predecessors’ house was borrowed by petitioner Vicar after the church and the convent were destroyed. After trial on the merits, the land registration court church and the convent were destroyed. After trial on the merits, the land registration court promulgated its Decision confirming the registr
promulgated its Decision confirming the registrable title of VICAR to Lots 1, 2, 3, and 4.able title of VICAR to Lots 1, 2, 3, and 4.
The Heirs of Juan Valdez appealed the decision of the land registration court to the then The Heirs of Juan Valdez appealed the decision of the land registration court to the then Court of Appeals. The Court of Appeals reversed the decision. Thereupon, the VICAR filed with Court of Appeals. The Court of Appeals reversed the decision. Thereupon, the VICAR filed with the Supreme Court a petition for review on certiorari of the decision of the Court of Appeals the Supreme Court a petition for review on certiorari of the decision of the Court of Appeals dismissing his application for registration of Lots 2 and 3.
dismissing his application for registration of Lots 2 and 3. Issue
Issue: Whether or not the failure to return the subject matter of commodatum constitutes an: Whether or not the failure to return the subject matter of commodatum constitutes an adverse possession.
adverse possession. Held
Held::
No. The
No. The bailees’ failure to bailees’ failure to return the subject return the subject matter of commodatum matter of commodatum to the to the bailor did nobailor did nott mean adverse possession on the part of the borrower. The bailee held in trust the property subject mean adverse possession on the part of the borrower. The bailee held in trust the property subject matter of commodatum. Catholic Vicar was in possession as borrower in commodatum up to matter of commodatum. Catholic Vicar was in possession as borrower in commodatum up to 1951, when it repudiated the trust by declaring the properties in its name for taxation purposes. 1951, when it repudiated the trust by declaring the properties in its name for taxation purposes. When he applied for registration of Lots 2 and 3 in 1962, it had been in possession in concept of When he applied for registration of Lots 2 and 3 in 1962, it had been in possession in concept of owner only for eleven years. Ordinary acquisitive prescription requires possession for ten years, owner only for eleven years. Ordinary acquisitive prescription requires possession for ten years, but
but always always with with just just title. title. Extraordinary Extraordinary acquisitive acquisitive prescription prescription requires requires 30 30 years. years. The The CourtCourt found that Catholic Vicar did not meet the requirement of 30 years possession for acquisitive found that Catholic Vicar did not meet the requirement of 30 years possession for acquisitive prescription over
prescription over Lots 2 Lots 2 and and 3. 3. Neither did Neither did it it satisfy the satisfy the requirement of requirement of 10 10 years possession years possession forfor ordinary acquisitive prescription because of the absence of just title.
ordinary acquisitive prescription because of the absence of just title.
The heirs of Valdez and Octaviano were able to prove that their predecessors' house was The heirs of Valdez and Octaviano were able to prove that their predecessors' house was borrowed by petitioner
borrowed by petitioner Vicar after the Vicar after the church and church and the convent the convent were destroyed. Thewere destroyed. They never askedy never asked for the return of the house, but when they allowed its free use, they became bailors for the return of the house, but when they allowed its free use, they became bailors in commodatum and the petitioner Vicar the bailee. The bailees' failure to return the subject in commodatum and the petitioner Vicar the bailee. The bailees' failure to return the subject matter of
matter of commodatum commodatum to the to the bailor did bailor did not mean not mean adverse possession adverse possession on the on the part of part of thethe borrower.
borrower. The The bailee bailee held held in in trust trust the the property property subject subject matter matter of of commodatum. commodatum. The The adverseadverse claim of petitioner came only in 1951 when it declared the lots for taxation purposes. The action 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 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.
8. Tolentino and Manio v. Gonzales 8. Tolentino and Manio v. Gonzales
G.R. 26085, August 12
G.R. 26085, August 12,, 1927 1927
FACTS: FACTS:
Severino Tolentino and Potenciana Manio purchased a parcel of land from Luzon Rice Severino Tolentino and Potenciana Manio purchased a parcel of land from Luzon Rice Mills, Inc., situated in the municipality of Tarlac with a promise to pay in three installments. The Mills, Inc., situated in the municipality of Tarlac with a promise to pay in three installments. The first two installments were paid but realizing that they would be unable to pay the balance on due first two installments were paid but realizing that they would be unable to pay the balance on due date, Tolentino and Manio applied from the defendant Benito Gonzales a loan to satisfy their date, Tolentino and Manio applied from the defendant Benito Gonzales a loan to satisfy their indebtedness on the condition that they would execute a pacto de retro sale on the property in indebtedness on the condition that they would execute a pacto de retro sale on the property in favor of Gonzales. As stated in the said contract of pacto de retro, the vendor became the favor of Gonzales. As stated in the said contract of pacto de retro, the vendor became the “tenant” of the purchaser and during the period of right to repurchase, the fo
“tenant” of the purchaser and during the period of right to repurchase, the former was required armer was required a monthly rental fee of P375 and default thereof for two consecutive months will terminate the monthly rental fee of P375 and default thereof for two consecutive months will terminate the lease and forfeit the right to repurchase.
lease and forfeit the right to repurchase.
Assailing that the amount of rental price paid during the period of the existence of the Assailing that the amount of rental price paid during the period of the existence of the right to repurchase, or the sum of P375 per month, based upon the real value of the property, right to repurchase, or the sum of P375 per month, based upon the real value of the property, amounts to a usurious rate of interest, Tolentino and Manio charged Gonzales in violation of the amounts to a usurious rate of interest, Tolentino and Manio charged Gonzales in violation of the Usury Law.
Usury Law. ISSUE: ISSUE:
Whether or not the rental price rendered the contract usurious when the amount paid as Whether or not the rental price rendered the contract usurious when the amount paid as rent, computed upon the purchase price, amounts to a higher rate of interest upon said amount rent, computed upon the purchase price, amounts to a higher rate of interest upon said amount than that allowed by law.
than that allowed by law. HELD:
HELD: No.
No. The The Court Court held held that that a a contract contract for the for the lease lease of of property property is is not not a a "loan." "loan." Thus, Thus, underunder the Usury Law the defense of usury cannot be based thereon.
the Usury Law the defense of usury cannot be based thereon.
The Usury Law in this jurisdiction prohibits a certain rate of interest on "loans." A The Usury Law in this jurisdiction prohibits a certain rate of interest on "loans." A contract of "loan" is a very different contract from that of "rent." A "loan," as that term is used in contract of "loan" is a very different contract from that of "rent." A "loan," as that term is used in the statute, signifies the giving of a sum of money, goods or credit to another, with a promise to the statute, signifies the giving of a sum of money, goods or credit to another, with a promise to repay, but not a promise to return the same thing. In a con-tract of "rent' the owner of the repay, but not a promise to return the same thing. In a con-tract of "rent' the owner of the property does not lose his ownership. He simply loses his control over
property does not lose his ownership. He simply loses his control over the property rented duringthe property rented during the period of the contract. In a contract of rent the relation between the contractors is that of the period of the contract. In a contract of rent the relation between the contractors is that of landlord and tenant. In a contract of loan of money, goods, chattels or credits, the relation landlord and tenant. In a contract of loan of money, goods, chattels or credits, the relation between the parties is that of obligor and obligee.
(9) Consolidated Bank And Trust Corporation vs. Court of Appeals, Continental Cement (9) Consolidated Bank And Trust Corporation vs. Court of Appeals, Continental Cement
Corporation, Gregory Lim and spouse Corporation, Gregory Lim and spouse
G.R. No. 114286; April 19, 2001 G.R. No. 114286; April 19, 2001
FACTS: FACTS:
On July 13, 1982, Continental Cement Corporation (Continental Cement) and its On July 13, 1982, Continental Cement Corporation (Continental Cement) and its President, Gregory Lim, obtained from Consolidated Bank and Trust Corporation (CBTC) Letter President, Gregory Lim, obtained from Consolidated Bank and Trust Corporation (CBTC) Letter of Credit in the amount of P1,068,150.00 which was used to purchase fuel oil from Petrophil of Credit in the amount of P1,068,150.00 which was used to purchase fuel oil from Petrophil Corporation. On the same date, Continental Cement paid a marginal deposit of P320,445.00 to Corporation. On the same date, Continental Cement paid a marginal deposit of P320,445.00 to CBTC. In relation to the same transaction, a trust receipt for the amount of P1,001,520.93 was CBTC. In relation to the same transaction, a trust receipt for the amount of P1,001,520.93 was executed by Continental Cement.
executed by Continental Cement.
CBTC filed a complaint for sum of money claiming that Continental Cement and Lim CBTC filed a complaint for sum of money claiming that Continental Cement and Lim failed to turn over the goods covered by the trust receipt or the proceeds. In its answer, failed to turn over the goods covered by the trust receipt or the proceeds. In its answer, Continental Cement argued that the transaction was a simple loan and not a trust receipt Continental Cement argued that the transaction was a simple loan and not a trust receipt transaction.
transaction. ISSUE: ISSUE:
Whether or not the transaction involved is a simple loan Whether or not the transaction involved is a simple loan RULING:
RULING: YES
YES. In Colinares v. Court of Appeals, it was found that inasmuch as the debtor received. In Colinares v. Court of Appeals, it was found that inasmuch as the debtor received the goods subject of the trust receipt before the trust receipt itself was entered into, the the goods subject of the trust receipt before the trust receipt itself was entered into, the transaction was a simple loan and not a trust receipt agreement. Prior to the date of execution of transaction was a simple loan and not a trust receipt agreement. Prior to the date of execution of the trust receipt, ownership over the goods was already transferred to the debtor. This situation is the trust receipt, ownership over the goods was already transferred to the debtor. This situation is inconsistent with what normally obtains in a pure trust receipt transaction, wherein the goods inconsistent with what normally obtains in a pure trust receipt transaction, wherein the goods belong
belong in in ownership ownership to to the the bank bank and and are are only only released released to to the the importer importer in in trust trust after after the the loan loan isis granted. In this case, the delivery to Continental Cement of the goods subject to the trust receipt granted. In this case, the delivery to Continental Cement of the goods subject to the trust receipt occurred long before the trust receipt itself was executed.
occurred long before the trust receipt itself was executed.
Furthermore, Continental Cement is not an importer, which acquired the bunker fuel oil Furthermore, Continental Cement is not an importer, which acquired the bunker fuel oil for re-sale; it needed the oil
for re-sale; it needed the oil for its own operations. More importantly, at no for its own operations. More importantly, at no time did title over thetime did title over the oil pass to CBTC, but directly to Continental Cement to which the oil was directly delivered long oil pass to CBTC, but directly to Continental Cement to which the oil was directly delivered long before
before the the trust trust receipt receipt was exwas executed. ecuted. Continental Continental Cement Cement was was required required to to sign thsign the e trust receipttrust receipt simply to facilitate collection by CBTC of the loan it had extended to the former.
10.
10. Casa Filipina Development Corp. v. Deputy Executive SecretaryCasa Filipina Development Corp. v. Deputy Executive Secretary GR No. 96494, October 16, 1995
GR No. 96494, October 16, 1995 FACTS:
FACTS:
Jose Valenzuela Jr. filed a complaint against Casa Filipina Development Jose Valenzuela Jr. filed a complaint against Casa Filipina Development Corporation(CFDC) before the Office of Appeals, Adjudication and Legal Affairs (OAALA) of Corporation(CFDC) before the Office of Appeals, Adjudication and Legal Affairs (OAALA) of the Human Housing and Land Use Regulatory Board for failure to execute and deliver the deed the Human Housing and Land Use Regulatory Board for failure to execute and deliver the deed of sale and transfer certificate of title, alleging: that he entered into a contract to sell with CFDC of sale and transfer certificate of title, alleging: that he entered into a contract to sell with CFDC for purchase of a lot for a price of P68,400 with P16,416 as down payment, the remaining for purchase of a lot for a price of P68,400 with P16,416 as down payment, the remaining balance
balance to to be be paid paid in in 12 12 equal equal monthly monthly installments installments with with 24% 24% interest interest per per annum annum startingstarting September 3, 1984; that CFDC refused to execute necessary deed of absolute sale and deliver the September 3, 1984; that CFDC refused to execute necessary deed of absolute sale and deliver the transfer certificate of title even after full payment; that he had offered to pay for/reimburse transfer certificate of title even after full payment; that he had offered to pay for/reimburse CFDC the expenses for the transfer of the title but the latter refused. According to CFDC, CFDC the expenses for the transfer of the title but the latter refused. According to CFDC, Valenzuela’s action is premature because of his failure to comply with the other conditional Valenzuela’s action is premature because of his failure to comply with the other conditional requirements of their contract such as payment of transfer expenses; and had the latter paid said requirements of their contract such as payment of transfer expenses; and had the latter paid said fees, it would have been very much willing to effect the transfer of the title. The OAALA fees, it would have been very much willing to effect the transfer of the title. The OAALA ordered CFDC to execute said deed to bill Valenzuela the total amount due for registration and ordered CFDC to execute said deed to bill Valenzuela the total amount due for registration and transfer expenses, and to deliver the transfer certificate of title after said payment. In event transfer expenses, and to deliver the transfer certificate of title after said payment. In event CFDC is unable to deliver, Valenzuela is to receive full refund of his total payments plus 24% CFDC is unable to deliver, Valenzuela is to receive full refund of his total payments plus 24% interest per annum from the date of the filing of the complaint until fully paid. HLURB interest per annum from the date of the filing of the complaint until fully paid. HLURB dismissed the appeal. An appeal and a motion for reconsideration were filed to the Office of the dismissed the appeal. An appeal and a motion for reconsideration were filed to the Office of the President and were both denied. The main contention of the CFDC is that the amount of 24% President and were both denied. The main contention of the CFDC is that the amount of 24% interest imposed by the OAALA in case of refund is high and without basis: firstly, HLURB interest imposed by the OAALA in case of refund is high and without basis: firstly, HLURB Resolution No. R-421, series of 1988, strictly enjoins the maximum interest to be awarded in Resolution No. R-421, series of 1988, strictly enjoins the maximum interest to be awarded in case of refund to 12%; secondly, although condition no. 1 of their contract to sell provides for case of refund to 12%; secondly, although condition no. 1 of their contract to sell provides for said rate of interest, it merely applies to interest on installment, not to refunds; thirdly, since the said rate of interest, it merely applies to interest on installment, not to refunds; thirdly, since the contract between them is not a forbearance of money or loan, the doctrine laid down in the case contract between them is not a forbearance of money or loan, the doctrine laid down in the case of Reformina v. Tomol, Jr. applies, that is, except where the action involves forbearance of of Reformina v. Tomol, Jr. applies, that is, except where the action involves forbearance of money or loan, interest which courts may award is only up to 12%.
money or loan, interest which courts may award is only up to 12%. ISSUE:
ISSUE: Whether Whether or or not not the the legal legal rate rate of of interest interest shall shall be be appliedapplied RULING:
RULING: No.
No. The The Court Court adopted adopted the the disposition disposition of of the the Office Office of of the the Solicitor Solicitor General General on on thethe correct rate of interest stating that Reformina v. Tomol deals exclusively with cases where correct rate of interest stating that 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. 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, 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 Casa Filipina and Valenzuela in the interest rate of 24% per annum was mutually agreed upon by Casa Filipina and Valenzuela in their contract to sell
their contract to sell — — this was the interest rate imposed on Valenzuela for the payment of thethis was the interest rate imposed on Valenzuela for the payment of the installments on the contract price and there is no reason why this same interest rate should not be installments on the contract price and there is no reason why this same interest rate should not be equally applied to CFDC which is guilty of violating the reciprocal obligation. Thus, it is evident equally applied to CFDC which is guilty of violating the reciprocal obligation. Thus, it is evident that if a particular rate of interest has been expressly stipulated by the parties, that interest, not that if a particular rate of interest has been expressly stipulated by the parties, that interest, not the legal rate of interest, shall be applied.
11. PHILIPPINE NATIONAL BANK, vs. THE HON. COURT OF APPEALS and 11. PHILIPPINE NATIONAL BANK, vs. THE HON. COURT OF APPEALS and
AMBROSIO PADILLA. AMBROSIO PADILLA. G.R. No. 88880. April 30, 1991 G.R. No. 88880. April 30, 1991 Facts: Facts:
Ambrosio Padilla (“Padilla”, for brevity) was granted a credit line amounting to 321.8 Ambrosio Padilla (“Padilla”, for brevity) was granted a credit line amounting to 321.8 million by the Philippine National Bank (“PNB”,
million by the Philippine National Bank (“PNB”, for brevity). Padilla executed in favor of PNB a for brevity). Padilla executed in favor of PNB a credit agreement, two promissory notes amounting to P900,000 each and a real estate mortgage credit agreement, two promissory notes amounting to P900,000 each and a real estate mortgage contract all of which contained stipulations allowing the bank to unilaterally increase the interest contract all of which contained stipulations allowing the bank to unilaterally increase the interest rates within the limits prescribed by law.
rates within the limits prescribed by law.
Later, PNB told Padilla of the credit line expiration to which Padilla submitted a new Later, PNB told Padilla of the credit line expiration to which Padilla submitted a new request for extension for two more years and submitted that the increase of interest rate from18% request for extension for two more years and submitted that the increase of interest rate from18% be
be fixed fixed at at 21% 21% of of 24% 24% but but the the PNB PNB denied denied his his request request stating stating that that the the company company policy policy nownow requires that the interest rates on loans with more than one-year maturity is at 32% to which requires that the interest rates on loans with more than one-year maturity is at 32% to which Padilla replied he’d pay the loan within a year and reiterated the previously mentioned interest Padilla replied he’d pay the loan within a year and reiterated the previously mentioned interest rate. However, in succeeding letters the PNB
rate. However, in succeeding letters the PNB increased his interest rates until it reached to 48%.increased his interest rates until it reached to 48%. Padilla then filed a complaint in the Regional Trial Court of Manila (“RTC”) praying that Padilla then filed a complaint in the Regional Trial Court of Manila (“RTC”) praying that the unilateral increase of interest rate to 48% be considered not binding to him, the same was the unilateral increase of interest rate to 48% be considered not binding to him, the same was dismissed by the trial court rendering that the increases in interest rates were properly made. dismissed by the trial court rendering that the increases in interest rates were properly made. Padilla then appealed to the Court of appeals which reversed the RTC decision.
Padilla then appealed to the Court of appeals which reversed the RTC decision. Issue:
Issue: Whether or not PNB may unilaterally change or increase the interest rate stipulatedWhether or not PNB may unilaterally change or increase the interest rate stipulated therein at will and as often as it
therein at will and as often as it pleased.pleased. Held:
Held:
No.
No. PNB PNB cannot cannot unilaterally unilaterally change change or or increase increase interest interest rates. rates. The The imposition imposition waswas excessive and Padilla never agreed in writing to be bound by the increased interest rates.
excessive and Padilla never agreed in writing to be bound by the increased interest rates.
Central Bank Circular No. 905 series of 1982 removed the Usury Law ceiling on interest rates Central Bank Circular No. 905 series of 1982 removed the Usury Law ceiling on interest rates but
but it it did did not not authorize authorize any any bank, bank, even even PNB, PNB, to to unilaterally unilaterally and and successively successively increase increase interestinterest rates in violation Presidential Decree No. 116 which limits changes in interest rate once every rates in violation Presidential Decree No. 116 which limits changes in interest rate once every twelve months. Besides, Art. 1956 requires that for interest to be due it must be in writing. twelve months. Besides, Art. 1956 requires that for interest to be due it must be in writing. Padilla never agreed in writing. Hence, he is not bound to pay higher interest rate than that Padilla never agreed in writing. Hence, he is not bound to pay higher interest rate than that stipulated by him that is 24%.
12. Eastern Shipping Lines vs. CA 12. Eastern Shipping Lines vs. CA
G.R. No. 97412, July 12 1994 G.R. No. 97412, July 12 1994
FACTS: FACTS:
An action was filed against Eastern Shipping Lines (shipping company), Metro Port An action was filed against Eastern Shipping Lines (shipping company), Metro Port Service, Inc. (arrastre operator) and Allied Brokerage Corporation (broker-forwarder) for Service, Inc. (arrastre operator) and Allied Brokerage Corporation (broker-forwarder) for damages sustained by a shipment of one of the fiber drums of riboflavin while in their custody, damages sustained by a shipment of one of the fiber drums of riboflavin while in their custody, by
by Mercantile Mercantile Insurance CompaInsurance Company, ny, Inc. Inc. (insurer-subrogee) who (insurer-subrogee) who paid paid the the consignee consignee the the value value ofof such losses/damages. The Court of Appeals affirmed in toto the judgement of the lower court such losses/damages. The Court of Appeals affirmed in toto the judgement of the lower court that the defendants shall pay damages, with the present legal interest of 12%
that the defendants shall pay damages, with the present legal interest of 12% per annum per annum from the from the date of filing of complaint until fully paid.
date of filing of complaint until fully paid.
Upon appeal, Eastern Shipping Lines assailed that 6%
Upon appeal, Eastern Shipping Lines assailed that 6% per per annumannum should be applied as should be applied as prescribed under Art. 2209 of the Civil Code from the date of the finality of decision until paid. prescribed under Art. 2209 of the Civil Code from the date of the finality of decision until paid.
ISSUES: ISSUES:
a. Whether the payment of legal interest on an award for loss or damage is to be a. Whether the payment of legal interest on an award for loss or damage is to be computed from the time the complaint is filed or from the date the decision appealed from is computed from the time the complaint is filed or from the date the decision appealed from is rendered; and
rendered; and b.
b. Whether Whether the the applicable applicable rate rate of of interest, interest, referred referred to to above, above, is is twelve twelve percent percent (12%) (12%) oror six percent (6%).
six percent (6%). HELD:
HELD:
The Court held that the legal interest to be paid is SIX PERCENT (6%) on the amount The Court held that the legal interest to be paid is SIX PERCENT (6%) on the amount due computed from the decisionof the court
due computed from the decisionof the court a quo (lower court a quo (lower court ). A TWELVE PERCENT (12%)). A TWELVE PERCENT (12%) interest, in lieu of SIX PERCENT (6%), shall be imposed on such amount upon finality of this interest, in lieu of SIX PERCENT (6%), shall be imposed on such amount upon finality of this decision until the payment thereof.
decision until the payment thereof.
The court provided that when an obligation, not constituting a loan or forbearance of The court provided that 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 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 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 unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the dema
reasonable certainty. Accordingly, where the demand is established with reasonable certainty, thend is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, 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 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 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). 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 The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.
adjudged.
Also, when the judgment of the court awarding a sum of money becomes final and Also, when the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, shall be 12%
executory, the rate of legal interest, shall be 12% per per annumannum from such finality until its from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.
(13) Dario Nacar vs. Gallery Frames and/or Felipe Bordey, Jr. (13) Dario Nacar vs. Gallery Frames and/or Felipe Bordey, Jr.
G.R. No. 189871; August 13, 2013 G.R. No. 189871; August 13, 2013
FACTS: FACTS:
Dario Nacar filed a complaint for constructive dismissal against Gallery Frames and its Dario Nacar filed a complaint for constructive dismissal against Gallery Frames and its owner, Felipe Bordey, Jr. On October 15, 1998, the Labor Arbiter (LA) found Gallery Frames owner, Felipe Bordey, Jr. On October 15, 1998, the Labor Arbiter (LA) found Gallery Frames guilty of illegal dismissal hence Nacar was awarded PHP 158,919.92 as backwages and guilty of illegal dismissal hence Nacar was awarded PHP 158,919.92 as backwages and separation pay. Gallery Frames sought relief before the Supreme Court (SC). The SC affirmed separation pay. Gallery Frames sought relief before the Supreme Court (SC). The SC affirmed the decision of the LA in a resolution which became final on May 27, 2002.
the decision of the LA in a resolution which became final on May 27, 2002.
On November 5, 2002, Nacar filed a motion, praying that his backwages should be On November 5, 2002, Nacar filed a motion, praying that his backwages should be computed from the time of his dismissal on January 24, 1997 up to the finality of the SC computed from the time of his dismissal on January 24, 1997 up to the finality of the SC resolution on May 27, 2002 with interest. LA granted the motion and a recomputation was made. resolution on May 27, 2002 with interest. LA granted the motion and a recomputation was made. Nacar
Nacar later later filed filed a a Manifestation Manifestation and and Motion Motion praying praying for for the the recomputation recomputation of of the the monetarymonetary award to include appropriate interests. LA granted the motion but ruled that the amount is to be award to include appropriate interests. LA granted the motion but ruled that the amount is to be computed only up to the date of LA decision in 1998, since it was the one that became final and computed only up to the date of LA decision in 1998, since it was the one that became final and executory. Thus, legal interest is to be computed
executory. Thus, legal interest is to be computed from the date of the finality of from the date of the finality of LA decision.LA decision.
ISSUE: ISSUE:
Whether or not the legal interest is to b
Whether or not the legal interest is to be computed from the date of the computed from the date of the finality of LA decisione finality of LA decision
RULING: RULING: NO
NO. In the landmark case of Eastern Shipping Lines, Inc. v. Court of Appeals, the Court. In the landmark case of Eastern Shipping Lines, Inc. v. Court of Appeals, the Court held that when the judgment of the court awarding a sum of money becomes final and executory, held that when the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether or not it is a loan or forbearance of money, shall be 12% per the rate of legal interest, whether or not it is a loan or forbearance of money, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. Recently, however, the Bangko Sentral ng Pilipinas equivalent to a forbearance of credit. Recently, however, the Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), issued Circular No. 799, where the legal interest is changed to six Monetary Board (BSP-MB), issued Circular No. 799, where the legal interest is changed to six percent
percent (6%), (6%), effective effective July July 1, 1, 2013. 2013. Thus, Thus, the the twelve twelve percent percent (12%) (12%) per per annum annum legal legal interestinterest shall apply only until June 30, 2013 and with regard to those judgments that have become final shall apply only until June 30, 2013 and with regard to those judgments that have become final and executory prior to July 1, 2013, said judgments shall not be disturbed and shall continue to and executory prior to July 1, 2013, said judgments shall not be disturbed and shall continue to be implemented applying the rate of interest fixed therein.
be implemented applying the rate of interest fixed therein.
The LA decision consists of two parts: (1) finding of illegality of the dismissal and the The LA decision consists of two parts: (1) finding of illegality of the dismissal and the awards of separation pay in
awards of separation pay in lieu of reinstatement, backwages, attorney’s fees, and legal interests,lieu of reinstatement, backwages, attorney’s fees, and legal interests, and (2) computation of the awards made. The first part cannot now be disputed because it has and (2) computation of the awards made. The first part cannot now be disputed because it has been confirmed
been confirmed with finality. The with finality. The second part, second part, being merely being merely a computation a computation of what of what the first the first partpart of the decision established and declared, can, by its nature, be re-computed. Hence, as to the of the decision established and declared, can, by its nature, be re-computed. Hence, as to the computation of the awards, the finality is deemed to be on the time of finality of SC resolution. computation of the awards, the finality is deemed to be on the time of finality of SC resolution. Therefore, legal interest to be awarded should be 12 % per annum from May 27, 2002 (SC Therefore, legal interest to be awarded should be 12 % per annum from May 27, 2002 (SC resolution finality) to June 30, 2013 and 6 % per annum from July 1, 2013 until their full resolution finality) to June 30, 2013 and 6 % per annum from July 1, 2013 until their full satisfaction.
