Olivia Navoa and Ernesto Navoa vs. C.A.

, Teresita Domdoma and Eduardo Domdoma

GR No 59255 20December1995

Facts:

On December 1977 Teresita Domdoma and Eduardo Domdoma filed a case with the RTC for collection of
various sums of money based on loans given by them to Olivia Navoa. They cased was dismissed on the
ground that there was no cause of action and that the Domdomas do not have no capacity to sue. They
appealed to the C.A. and was granted a favourable decision.

There were 6 instances in which the Domdomas gave Olivia Navoa a loan. The first instance is when
Teresita gave Olivia a diamond ring valued at 15,000.00 which was secured by a PCIB check under the
condition that if the ring was not returned within 15 days from August 15, 1977 the ring is considered
sold. Teresita attempted to deposit the check on November 1977 but the check was not honoured for
lack of funds. After this instance, there were other loans of various amounts that were extended by
Teresita to Olivia, loans which were secured by PCIB checks, which were all dated to 1 month after the
loan. All these checks were not honoured under the same reason as the first loan.

Issue:

Was the decision of the RTC to dismiss the case due to having no cause of action valid?

- NO, A cause of action is the fact or combination of facts which affords a party a right to judicial
interference in his behalf.

- For the first loan it is a fact, that the ring was considered sold to Olivia Navoa 15 days after August 15,
1977, and even then, Olivia Navoa failed to pay the price for the ring when the payment was due (check
issued was not honoured. Thus it is confirmed that Teresitas right under the agreement was violated.

- As for the other loans extended by Teresita to Olivia, they were all secured by PCIB checks. It can be
inferred that since the checks were all dated to 1 month after the loan, it follows that the loans are then
payable 1 month after they were contracted, and also these checks were dishonoured by the bank for
lack of funds.

- Olivia and Ernesto Navoa failed to make good the checks that were issued as payment for their
obligations. Art 1169 of the Civil Code is explicit: those obliged to deliver or to do something incur in
delay from the time the obligee judicially or extra-judicially demands from them the fulfilment of the
obligations, the continuing refusal of Olivia and Ernesto Navoa to comply with the demand of payment
shows the existence of a cause of action.

Held:
The petition is DENIED and the decision of the C.A. remanding the case to the RTC for trial on the merits
is affirmed.

Obligations and Contracts terms:

Security- A means of ensuring the enforcement of an obligation or of protecting some interest in

property. It may be personal or property security.

Cause of Action- is the fact or combination of facts which affords a party a right to judicial interference
in his behalf. The requisites for a cause of action are: (a) a right in favour of the plaintiff by whatever
means and under whatever law it arises or created, (b) an obligation on the part of the defendant to
respect and not to violate such right; and, (c) an act or omission on the part of the defendant
constituting a violation of the plaintiffs right or breach of the obligation of the defendant to the
plaintiff.
People v. Concepcion
G.R. No. 19190 (November 29, 1922)

FACTS:
Defendant authorized an extension of credit in favor of Concepcion, a co-
partnership. Defendants wife was a director of this co-partnership. Defendant was found guilty of
violating Sec. 35 of Act No. 2747 which says that The National Bank shall not, directly or indirectly,
grant loans to any of the members of the Board of Directors of the bank nor to agents of the branch
banks. This Section was in effect in 1919 but was repealed in Act No. 2938 approved on January
30, 1921.

ISSUE:
W/N Defendant can be convicted of violating Sections of Act No. 2747, which were repealed
by Act No. 2938.

HELD:
In the interpretation and construction, the primary rule is to ascertain and give effect to the
intention of the Legislature. Section 49 in relation to Sec. 25 of Act No. 2747 provides a punishment
for any person who shall violate any provisions of the Act. Defendant contends that the repeal of
these Sections by Act No. 2938 has served to take away basis for criminal prosecution. The Court
holds that where an act of the Legislature which penalizes an offense repeals a former act which
penalized the same offense, such repeal does not have the effect of thereafter depriving
the Courts of jurisdiction to try, convict and sentence offenders charged with violations of the old law.
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Saura Import & Export Co., Inc.
-vs-
DBP
GR No. L-24968, 27 April 972
44 SCRA 445

FACTS
Saura applied to the Rehabilitation Finance Corporation (RFC), before its conversion into
DBP, for an industrial loan to be used for construction of factory building, for payment of the
balance of the purchase price of the jute machinery and equipment and as additional
working capital. In Resolution No.145, the loan application was approved to be secured first
by mortgage on the factory buildings, the land site, and machinery and equipment to be
installed.

The mortgage was registered and documents for the promissory note were executed. The
cancellation of the mortgage was requested to make way for the registration of a mortgage
contract over the same property in favor of Prudential Bank and Trust Co., the latter having
issued Saura letter of credit for the release of the jute machinery. As security, Saura
execute a trust receipt in favor of the Prudential. For failure of Saura to pay said obligation,
Prudential sued Saura.

After 9 years after the mortgage was cancelled, Saura sued RFc alleging failure to comply
with tits obligations to release the loan proceeds, thereby prevented it from paying the
obligation to Prudential Bank.

The trial court ruled in favor of Saura, ruling that there was a perfected contract between
the parties ad that the RFC was guilty of breach thereof.

ISSUE
Whether or not there was a perfected contract between the parties.

HELD
The Court held in the affirmative. Article 1934 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 delivery of the object of the
contract.

There was undoubtedly offer and acceptance in the case. When an application for a loan of
money was approved by resolution of the respondent corporation and the responding
mortgage was executed and registered, there arises a perfected consensual contract.

"There was undoubtedly offer and acceptance in this case: the application of Saura, Inc. for a loan of
P500,000.00 was approved by resolution of the defendant, and the corresponding mortgage was
executed and registered. But this fact alone falls short of resolving the basic claim that the defendant
failed to fulfill its obligation and the plaintiff is therefore entitled to recover damages."
BPI Investment vs CA
Lessons Applicable: Simple Loan

Laws Applicable:

Facts:

Frank Roa obtained a loan with interest rate of 16 1/4%/annum from Ayala Investment and
Development Corporation (AIDC), the predecessor of BPI Investment Corp. (BPIIC), for the
construction of a house on his lot in New Alabang Village, Muntinlupa.
He mortgaged the house and lot to AIDC as security for the loan.
1980: Roa sold the house and lot to ALS Management & Development Corp. and Antonio
Litonjua for P850K who paid P350K in cash and assumed the P500K indebtness of ROA with
AIDC.
AIDC proposed to grant ALS and Litonjua a new loan for P500K with interested rate of
20%/annum and service fee of 1%/annum on the outstanding balance payable within 10 years
through equal monthly amortization of P9,996.58 and penalty interest of 21%/annum/day from
the date the amortization becomes due and payable.
March 1981: ALS and Litonjua executed a mortgage deed containing the new stipulation with the
provision that the monthly amortization will commence on May 1, 1981
August 13, 1982: ALS and Litonjua paid BPIIC P190,601.35 reducing the P500K principal loan
to P457,204.90.
September 13, 1982: BPIIC released to ALS and Litonjua P7,146.87, purporting to be what was
left of their loan after full payment of Roas loan
June 1984: BPIIC instituted foreclosure proceedings against ALS and Litonjua on the ground
that they failed to pay the mortgage indebtedness which from May 1, 1981 to June 30, 1984
amounting to P475,585.31
August 13, 1984: Notice of sheriff's sale was published
February 28, 1985: ALS and Litonjua filed Civil Case No. 52093 against BPIIC alleging that they
are not in arrears and instead they made an overpayment as of June 30, 1984 since the P500K
loan was only released September 13, 1982 which marked the start of the amortization and
since only P464,351.77 was released applying legal compensation the balance of P35,648.23
should be applied to the monthly amortizations
RTC: in favor of ALS and Litonjua and against BPIIC that the loan granted by BPI to ALS and
Litonjua was only in the principal sum of P464,351.77 and awarding moral damages, exemplary
damages and attorneys fees for the publication
CA: Affirmed reasoning that a simple loan is perfected upon delivery of the object of the contract
which is on September 13, 1982
ISSUE: W/N the contract of loan was perfected only on September 13, 1982 or the second release
of the loan?

HELD: YES. AFFIRMED WITH MODIFICATION as to the award of damages. The award of moral
and exemplary damages in favor of private respondents is DELETED, but the award to them of
attorneys fees in the amount of P50,000 is UPHELD. Additionally, petitioner is ORDERED to pay
private respondents P25,000 as nominal damages. Costs against petitioner.
obligation to pay commenced only on October 13, 1982, a month after the perfection of the
contract
contract of loan involves a reciprocal obligation, wherein the obligation or promise of each party
is the consideration for that of the other. It is a basic principle in reciprocal obligations that
neither party incurs in delay, if the other does not comply or is not ready to comply in a proper
manner with what is incumbent upon him. 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.
BPIIC was negligent in relying merely on the entries found in the deed of mortgage, without
checking and correspondingly adjusting its records on the amount actually released and the date
when it was released. Such negligence resulted in damage for which an award of nominal
damages should be given
SSS where we awarded attorneys fees because private respondents were compelled to litigate,
we sustain the award of P50,000 in favor of private respondents as attorneys fees
Bonnevie vs CA

Lessons Applicable: Simple Loan

Laws Applicable:

Facts:

December 6, 1966: Spouses Jose M. Lozano and Josefa P. Lozano secured their loan of P75K
from Philippine Bank of Commerce (PBC) by mortgaging their property
December 8, 1966: Executed Deed of Sale with Mortgage to Honesto Bonnevie where P75K is
payable to PBC and P25K is payable to Spouses Lanzano.
April 28, 1967 to July 12, 1968: Honesto Bonnevie paid a total of P18,944.22 to PBC
May 4, 1968: Honesto Bonnevie assigned all his rights under the Deed of Sale with Assumption
of Mortgage to his brother, intervenor Raoul Bonnevie
June 10, 1968: PBC applied for the foreclosure of the mortgage, and notice of sale was
published
January 26, 1971: Honesto Bonnevie filed in the CFI of Rizal against Philippine Bank of
Commerce for the annulment of the Deed of Mortgage dated December 6, 1966 as well as the
extrajudicial foreclosure made on September 4, 1968.
CFI: Dismissed the complaint with costs against the Bonnevies
CA: Affirmed
ISSUE: W/N the forclosure on the mortgage is validly executed.

HELD: YES. CA affirmed

A contract of loan being a consensual contract is perfected at the same time the contract of
mortgage was executed. The promissory note executed on December 12, 1966 is only an
evidence of indebtedness and does not indicate lack of consideration of the mortgage at the time
of its execution.
Respondent Bank had every right to rely on the certificate of title. It was not bound to go behind
the same to look for flaws in the mortgagor's title, the doctrine of innocent purchaser for value
being applicable to an innocent mortgagee for value.
Thru certificate of sale in favor of appellee was registered on September 2, 1968 and the one
year redemption period expired on September 3, 1969. It was not until September 29, 1969 that
Honesto Bonnevie first wrote respondent and offered to redeem the property.
loan matured on December 26, 1967 so when respondent Bank applied for foreclosure, the loan
was already six months overdue. Payment of interest on July 12, 1968 does not make the earlier
act of PBC inequitous nor does it ipso facto result in the renewal of the loan. In order that a
renewal of a loan may be effected, not only the payment of the accrued interest is necessary but
also the payment of interest for the proposed period of renewal as well. Besides, whether or not
a loan may be renewed does not solely depend on the debtor but more so on the discretion of
the bank.
 Central Bank of the Philippines v. CA, 139 SCRA 46 (1985)

Tolentino made a loan from Island Savings Bank secured by a mortgage. The Bank did
not release the whole amount but only a portion thereof. Later, the Bank experienced
liquidity problems and the Monetary Board of Central Bank prohibited it from making
new loans and much later, from doing business in the Philippines. Thereafter, the Acting
Superintendent of Central Bank took charge of its assets. Upon expiration of the loan
term, the Bank filed extrajudicial foreclosure of the mortgage. Was there a perfected
contract of loan when only a portion of the amount was delivered?

The Supreme Court held that there was only partial delivery. As such, the contract is
deemed perfect only in so far as what has been delivered. The mortgage cannot be
entirely foreclosed, except for up to the amount of the actual amount released, but the
Bank can recover the interest of the partial loan. Tolentino cannot anymore demand the
remaining amount of the loan from the Bank because he defaulted on his payment. His
liability offsets the liability of the Bank to him.

RIGHTS AND OBLIGATIONS OF THE PARTIES

Obligations of the Bailee

- to return the object

o pay for the ordinary expenses for the use and preservation of the thing loaned
- no reimbursement for ordinary expenses

o liable for loss of the thing even if fortuitous if:

1. he devotes the thing for a different purpose
2. he keeps it longer than the period stipulated or after the accomplishment of the use for which the
commodatum has been constituted
3. thing loaned has been delivered with appraisal of its value, unless there is a stipulation
exempting bailee from fortuitous event
4. lends or leases the thing to a third person not a member of the household
5. being able to save either the thing borrowed or his own thing, he chose to save his
o not answer for the deterioration of the thing loaned due to use thereof and without fault
o bailee cannot retain on ground that the bailor owes him something, even if expenses
- but if bailor knew of defect and did not advise the bailee about it, then bailee has the
right of retention but only to recover damages

o bailee is not entitled to the fruits of the thing loaned, EXCEPT if there is a stipulation to the
contrary
o bailee must take care good care of the thing with the diligence of a good father of the family (art.
1163)
Q: If the parties in a commodatum can stipulate that the bailee may make use of
the fruits, wouldnt that make the contract one of usufruct?
A: A usufruct is a contract by which the usufructuary is allowed by the owner to enjoy
the fruits. By that, it means that the main cause of the usufruct is to enjoy the fruits. In a
contract of commodatum, the consideration is the use of the thing and if there is a
stipulation for the enjoyment of the fruits, it must only be incidental to the use of the
thing itself.
 Mina v. Pascual, 25 Phil 540

Francisco is the owner of land and he allowed his brother, Andres, to erect a warehouse
in that lot. Both Francisco and Andres died and their children became their respective
heirs: Mina for Francisco and Pascual for Andres. Pascual sold his share of the
warehouse and lot. Mina opposed because the lot is hers because her predecessor
(Francisco) never parted with its ownership when he let Andres construct a warehouse,
hence, it was a contract of commodatum. What is the nature of the contract between
Francisco and Andres?

The Supreme Court held that it was not a commodatum. It is an essential feature of
commodatum that the use of the thing belonging to another shall be for a certain period.
The parties never fixed a definite period during which Andres could use the lot and
afterwards return it.

NOTA BENE: It would seem that the Supreme Court failed to consider the possibility of a
contract of precardium between Francisco and Andres. Precardium is a kind of
commodatum wherein the bailor may demand the object at will if the contract does not
stipulate a period or use to which the thing is devoted.
CATHOLIC VICAR APOSTOLIC V CA 165 SCRA 515 (1988)

The whole controversy started when Catholic Vicar of the Mountain Province (Vicar for brevity) filed
with the CFI of Baguio, Benguet an application for registration of title for Lots 1,2,3 and 4 of Psu-194357
situated at Poblacion Central, La Trinidad, Benguet. Said lots being the sites of the Catholic Church
building, convents, school, etc., Upon learning of the application, the Heirs of Juan Valdez and the Heirs
of Emigdio Octaviano filed an Answer/Opposition thereto on Lots 2 and 3,respectively, asserting
ownership and title thereto. The land registration court promulgated its decision confirming the
registrable title to Vicar. Both heirs of Valdez and Octaviano appealed to the Court of Appeals. The CA
modified the decision of the land registration court and found that Lots 2 and 3 were possessed by the
predecessors-in-interest of private respondents under claim of ownership in good faith from 1906 to
1951; that Vicar has been in possession of the same lots as bailee in commodatum up to 1951, when
Vicar repudiated the trust and when it applied for registration in1962; that Vicar had just been in
possession as owner for 11years, hence there is no possibility of acquisitive prescription which requires
10 years possession with just title and 30 years possession without.

ISSUE: WON the failure of Vicar to return the subject property to private respondents would constitute
an adverse possession that would entitle Vicar to have a just title in order for ordinary acquisitive
prescription to set in.

RULING:

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

The Court of Appeals found that the predecessors-in-interest and private respondents were
possessors under claim of ownership in good faith from 1906; that petitioner Vicar was only a bailee
in commodatum; and that the adverse claim and repudiation of trust came only in 1951.
 Tolentino vs. Gonzalez Sy Chiam 50 Phil 558

Tolentino purchased land from Luzon Rice Mills for Php25,000 payable in three installments.
Tolentino defaulted on the balance so the owner sent a letter of demand to him. To pay,
Tolentino applied for loan from Gonzalez on condition that he would execute a pacto de retro
sale on the property in favor of Gonzalez. Upon maturation of loan, Tolentino defaulted so
Gonzalez is demanding recovery of the land. Tolentino contends that the pacto de retro sale is a
mortgage and not an absolute sale.

The Supreme Court held that upon its terms, the deed of pacto de retro sale is an absolute sale
with right of repurchase and not a mortgage. Thus, Gonzalez is the owner of the land and
Tolentino is only holding it as a tenant by virtue of a contract of lease.

**LOAN: A contract of loan signifies the giving of a sum of money, goods or credits to another,
with a promise to repay, but not a promise to return the same thing. It has been defined as an
advancement of money, goods, or credits upon a contract or stipulation to repay, not to return,
the thing loaned at some future day in accordance with the terms of the contract. The moment the
contract is completed, the money, goods or chattels given cease to be the property of the former
owner and become the property of the obligor to be used according to his own will, unless the
contract itself expressly provides for a special or specific use of the same. At all events, the
money, goods or chattels, the moment the contract is executed, cease to be the property of the
former owner and become the sole property of the obligor.

Commodatum Defined

Art. 1933: By the contract of loan, 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, in which case the
contract is called a commodatum. xxx

- the bailee acquires the use of the thing loaned but not its fruits (Art. 1935), EXCEPT if the
parties stipulate use of fruits (Art. 1940)
Consolidated Bank vs CA Credit Digest
Consolidated Bank vs CA
GR No. 114286, 19 April 2001
356 SCRA 671

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

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

HELD
No. petitioner argues that the marginal deposit should be considered only after computing the
principal plus accrued interest and other charges. It could be onerous to compute interest and other
charges on the face value of the letter of credit which a bank issued, without first crediting or setting off
the marginal deposit which the borrower paid to it-compensation is proper and should take effect by
operation of law because the requisited in Art. 1279 are present and should extinguish both debts to the
concurrent amount. Unjust enrichment.
 CASA FILIPINA DEVELOPMENT CORPORATION, PETITIONER, VS.
THE DEPUTY EXECUTIVE SECRETARY, OFFICE OF THE PRESIDENT,
MALACAANG, MANILA, AND JOSE VALENZUELA, JR.,
RESPONDENTS.

DECISION

MEDIALDEA, J.:
This is a petition for review on certiorari (treated as a petition
for certiorari) seeking reversal of the decision of the Office of the President
dated April 11, 1989, in O.P. Case No. 3722, entitled "Casa Filipina
Development Corporation, Respondent-Appellant, v. Jose Valenzuela, Jr.,
Complainant-Appellee," which affirmed the decision of the Housing and
Land Use Regulatory Board dated October 6, 1987; and its resolution dated
September 26, 1989, which denied the motion for reconsideration for lack
of merit.
The antecedent facts are, as follows:
On June 30, 1986, private respondent Jose Valenzuela, Jr. filed a complaint
against petitioner Casa Filipina Development Corporation before the Office
of Appeals, Adjudication and Legal Affairs (OAALA) of the then Human
Settlements Regulatory Commission (now Housing and Land Use
Regulatory Board) for its failure to execute and deliver the deed of sale and
transfer certificate of title. He alleged therein that on May 2, 1984, he
entered into a contract to sell with petitioner for the purchase of a 120 sq.
m. lot denominated as Lot 8, Block 9, Phase II of Casa Filipina, Sucat II, Bo.
San Dionisio, Paraaque, Metro Manila, for a total purchase price of
P68,400.00 with P16,416.00 as downpayment and the balance of
P51,984.00 to be paid in 12 equal monthly installments of P4,915.16 with
24% interest per annum starting September 3, 1984; that on October 7,
1985, he made his full and final payment under O.R. No. 6266; that despite
full payment of the lot, petitioner refused to execute the necessary deed of
absolute sale and deliver the corresponding transfer certificate of title to
him; that since October 1985, he had offered to pay for or reimburse
petitioner the expenses for the transfer of the title but the latter refused to
accept the same; and that he was constrained to hire a lawyer for a fee to
protect his interests.
For petitioner's defense, it contended that private respondent'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
that had the latter paid said fees, it would have been very much willing to
effect the transfer of the title.
On January 21, 1987, the OAALA rendered judgment in favor of private
respondent, relying on Section 25 of Presidential Decree No. 957
(Regulating the Sale of Subdivision Lots and Condominiums, Providing
Penalties for Violations thereof), which provides:
SEC. 25. Issuance of Title - The owner or developer shall deliver the title of
the lot or unit to the buyer upon full payment of the lot or unit. No fee
except those required for the registration of the deed of sale in the Registry
of Deeds, shall be collected for the issuance of such title. In the event a
mortgage over the lot or unit is outstanding at the time of the issuance of
the title to the buyer, the owner of or developer shall redeem the mortgage
or the corresponding portion thereof within six months from such issuance
in order that the title over any fully paid lot or unit may be secured and
delivered to the buyer in accordance herewith.
The dispositive portion of its decision reads (p. 19, Rollo):
"WHEREFORE, PREMISES CONSIDERED, judgment is rendered ordering
respondent, within 15 days from finality of this decision, to execute the
deed of absolute sale for Lot 8, Block 9, Phase II, Casa Filipina, Sucat II, Bo.
San Dionisio, Paraaque, Metro Manila in favor of the complainant and
thereafter to bill complainant the total amount due for the registration and
transfer expenses of the title. Respondent is further ordered, within 15 days
from receipt of complainant's payment for registration and transfer
expenses, to deliver to the latter the transfer certificate of title of subject lot
free from all liens and encumbrances. In the event respondent is unable to
deliver the title to the said lot, respondent is hereby ordered to refund (to)
complainant his total payments amounting to SEVENTY SIX THOUSAND
ONE HUNDRED EIGHTY PESOS and 82/100 (P76,180.82) plus 24%
interest per annum from June 30, 1986, the date of the filing of the
complaint, until fully paid. Respondent is likewise ordered to pay
complainant TWO THOUSAND PESOS (P2,000.00) by way of attorney's
fees, for compelling the latter to litigate and incur expenses in the
protection of his rights.
"It is SO ORDERED."
Petitioner then filed an appeal before the Housing and Land Use
Regulatory Board. In petitioner's memorandum, it narrated the events that
transpired which led to its failure to deliver the title, namely: its original
mortgagee bank was Royal Savings Bank which was absorbed by
Comsavings Bank apparently due to bankrun; Comsavings Bank is not
amenable to petitioner's earlier arrangement with Royal Savings Bank on
individual redemption of title, thus, it demanded that petitioner's
obligations should be paid prior to the release of any individual title;
petitioner cannot seasonably meet such demand due to the inability of the
past administration to put up a viable and progressive economic program
that brought it into a fix situation wherein it has no participation either
intentionally or by negligence.
On October 6, 1987, the HLURB dismissed petitioner's appeal for lack of
merit and affirmed in toto the questioned decision of the OAALA (p.
23, Rollo). It opined that (ibid):
"x x x. Suffice it to state that the payment in full by the complainant-
appellee of the purchased (sic) price of the lot should warrant the
immediate delivery of the title to the lot so purchased. Section 25 of P.D.
957 clearly provides that the redemption by the mortgagor or (sic) any
mortgage (sic) property shall be within a period of six (6) months from
(the) date of issuance of the title in favor of the buyer. Obviously from the
moment full payment is made by the buyer to (sic) his purchased lot, the
maximum period contemplated by law for delivery of title is only six (6)
months. Within this period it becomes mandatory upon the owner or
developer of a subdivision to deliver (the) title to the lot buyer. In the case
at bar, full payment was made on October 7, 1985 and despite the lapse of
one (1) year more or less from (the) date of full payment, delivery of (the)
title is still uncertain.
"The defense of the respondent-appellant that its failure to deliver the title
allegedly due to the inability of the past administration to put up a viable
and progressive economic program which led to the closure of the Royal
Savings Bank as its original mortgagee bank is not well-taken since there is
no proof submitted to this Board to substantiate appellant's claim. On the
contrary it was only the OAALA decision that made the respondent-
appellant change its line of justification which happened to be just an
allegation which need not be passed upon by this Board."
Petitioner appealed further to the Office of the President. Again, on April 11,
1989, its appeal was dismissed for lack of merit and the questioned decision
of the HLURB was affirmed (p. 32, Rollo). On September 26, 1989, the
motion for reconsideration was denied for lack of merit (p. 36, Rollo).
Hence, the present petition, wherein petitioner raises the following issues
(pp. 9-10 Rollo):
"1. THE RESPONDENT DEPUTY EXECUTIVE SECRETARY, WITH DUE
RESPECT ERRED IN NOT APPLYING SETTLED JURISPRUDENCE AND
THE PROVISION OF LAW APPLICABLE IN THIS CASE.
"2. THE RESPONDENT DEPUTY EXECUTIVE SECRETARY, WITH DUE
RESPECT, ERRED IN ARRIVING AT A CONCLUSION CONTRADICTORY
OF (sic) THE FACTS AND EVIDENCE, AMOUNTING TO GRAVE ABUSE
OF DISCRETION."
Mainly, petitioner asseverates that in granting both remedies of specific
performance and rescission, public respondent ignored a well-pronounced
rule that these remedies cannot be availed of at the same time. There is no
evidence showing that private respondent had offered to pay the expenses
for the transfer of the title. Furthermore, the amount of 24% 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 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 payments but not with respect to
refunds; thirdly, since the contract between them is not a forbearance of
money or loan, the doctrine laid down in the case of Reformina v. Tomol,
Jr., G.R. No. 59096, 139 SCRA 260 applies, that is, except where the action
involves forbearance of money or loan, interest which courts may award is
only up to 12% (should be 6%). Finally inasmuch as issuance of the title has
not yet been effected because of the take over by Comsavings Bank of Royal
Savings Bank, the period specified under Section 25 of P. D. No. 957 has not
begun to run for the purpose of redemption.
The arguments advanced by petitioner utterly lack merit.
It is plain enough in the OAALA decision that rescission is being ordered
only in the event specific performance is not feasible. Moreover, petitioner
is already estopped from raising this issue because in its appeal
memorandum submitted before the HLURB, it pleaded that (p. 28, Rollo):
"5. Appellant
prays that it be given a period/time to redeem title or the demand for issua
nce of title be suspended from theComSavings Bank before any deed of abs
olute sale be executed so that the Transfer Certificate of Title be issued and/
or refund beordered."
The OAALA found as a fact that "the complainant-appellee was ready,
willing and able to pay for the expenses for the transfer of title as stipulated
in the Contract to Sell x x x" (p. 22, Rollo). We accord respect and finality to
this finding (Filipinas Manufacturers Bank v. NLRC et al., G.R. No. 72805,
February 28, 1990, 182 SCRA 848; Vda. de Pineda, et al. v. Pea, etc., et al.,
G.R. No. 57665, July 2, 1990, 187 SCRA 22).
We adopt the disposition of the Office of the Solicitor General on the
correct rate of interest as Our own (pp. 124-125, Rollo):
"The ruling in Reformina v. Tomol, it must be underscored, deals
exclusively with cases where damages in the form of interest is due but no
specific rate has been previously set by the parties. In such cases, the legal
interest of 12% per annum must be applied. In the present case, however,
the interest rate of 24% per annum was mutually agreed upon by petitioner
and private respondent in their contract to sell -- this was the interest rate
imposed on private respondent for the payment of the installments on the
contract price and there is no reason why this same interest rate should not
be equally applied to petitioner which is guilty of violating the reciprocal
obligation.
"In Solid Homes Inc. v. Court of Appeals (170 SCRA 63 [1989]), a
subdivision owner, in violation of their Offsetting Agreement, incurred
delay in the delivery of a house and lot to the supplier of the construction
materials. On review, the issue of which rate of interest -- the 6% per
annum which was then the legal interest or the stipulated interest rate of
12% -- was raised. This Honorable Court ruled:
'On the matter of interest, we agree with the trial court and the Court of
Appeals that the proper rate of interest is twelve (12%) per centum per
annum, which is the rate of interest expressly agreed upon in writing by the
parties, as appearing in the invoices (Exhibits 'C' and 'D'), and sanctioned
by Art. 2209 of the Civil Code, x x x'
(Underscoring supplied)
"It is, thus, evident that if a particular rate of interest has been expressly
stipulated by the parties, that interest, not the legal rate of interest, shall be
applied."
Section 25 of P.D. No. 957 imposes an obligation on the part of the owner
or developer, in the event the mortgage over the lot or unit is outstanding at
the time of the issuance of the title to the buyer, to redeem the mortgage or
the corresponding portion thereof within six months from such issuance.
We focus Our attention on the period of "six months" to be reckoned "from
the issuance of the title." Supposing there is no such issuance of the title, as
in this case, from what event is the six month period to be counted? Or, will
this period not begin to run at all unless the title has been issued? The
argument of petitioner that the issuance of the title is a prerequisite to the
running of the six month period of redemption, fails to convince Us.
Otherwise, the owner or developer can readily concoct a thousand and one
reasons as justifications for its failure to issue the title and in the process,
prolong the period within which to deliver the title to the buyer free from
any liens or encumbrances. Additionally, by not issuing/delivering the title
of the lot to private respondent upon full payment thereof, petitioner has
already violated the explicit mandate of the first sentence of Section 25 of
P.D. No. 957. If We were to count the six month period of redemption from
the belated issuance of the title, petitioner will have a lot to gain from its
own non-observance of said provision. We shall not countenance such
absurdity. Of equal importance as the preceding ratiocination are the
reasons behind the enactment of P.D. No. 957, as expressed succinctly in its
"whereas" clauses, to wit:
"WHEREAS, reports of alarming magnitude aIso show cases of swindling
and fraudulent manipulations perpetrated by unscrupulous subdivision
and condominium sellers and operators, such as failure to deliver titles to
the buyers or titles free from liens and encumbrances, and to pay real estate
taxes, and fraudulent sales of the same subdivision lots to different
innocent purchasers for value;
"WHEREAS, these acts not only undermine the land and housing program
of the government but also defeat the objectives of the New Society,
particularly the promotion of peace and order and the enhancement of the
economic, social and moral condition of the Filipino people;
"WHEREAS, this state of affairs has rendered it imperative that the real
estate subdivision and condominium businesses be closely supervised and
regulated, and that penalties be imposed on fraudulent practices and
manipulations committed in connection therewith."
ACCORDINGLY, the petition is hereby DISMISSED. The decision of the
Office of the President dated April 11, 1989 and its resolution dated
September 26, 1989 are AFFIRMED.
SO ORDERED.
PHILIPPINE NATIONAL BANK petitioner, vs, THE HON. COURT OF "PEALS and AMBROSIO
PADILLA, respondents.
GR# 88880. April 30, 1991. GRIRO-AQUINO, J.:

FACTS: Private respondent (PR) Ambrosio Padilla, applied for and was granted a credit line of 321.8
million, by petitioner PNB. This was for a term of 2 years at 18% interest per annum and was secured by
real estate mortgage and 2 promissory notes executed in favor of Petitioner by PR. The credit agreement
and the promissory notes, in effect, provide that PR agrees to be bound by increases to the interest rate
stipulated, provided it is within the limits provided for by law.

Conflict in this case arose when Petitioner unilaterally increased the interest rate from 18% to: (1) 32%
[July 1984]; (2) 41% [October 1984]; and (3) 48% [November 1984], or 3 times within the span of a single
year. This was done despite the numerous letters of request made by PR that the interest rate be
increased only to 21% or 24%.

PR filed a complaint against Petitioner with the RTC. The latter dismissed the case for lack of merit.
Appeal by PR to CA resulted in his favor. Hence the petition for certiorari under Rule 45 of ROC filed by
PNB with SC.

ISSUE: Despite the removal of the Usury Law ceiling on interest, may the bank validly increase the
stipulated interest rate on loans contracted with third persons as often as necessary and against the
protest of such persons.

HELD: NO

RATIO: Although under Sec. 2 of PD 116, the Monetary Board is authorized to prescribe the maximum
rate of interest for loans and to change such rates whenever warranted by prevailing economic and social
conditions, by express provision, it may not do so oftener than once every 12 months. If the Monetary
Board cannot, much less can PNB, effect increases on the interest rates more than once a year.
Based on the credit agreement and promissory notes executed between the parties, although PR did
agree to increase on the interest rates allowed by law, no law was passed warranting Petitioner to effect
increase on the interest rates on the existing loan of PR for the months of July to November of 1984.
Neither there being any document executed and delivered by PR to effect such increase.

For escalation clauses to be valid and warrant the increase of the interest rates on loans, there must be:
(1) increase was made by law or by the Monetary Board; (2) stipulation must include a clause for the
reduction of the stipulated interest rate in the event that the maximum interest is lowered by law or by the
Monetary board. In this case, PNB merely relied on its own Board Resolutions, which are not laws nor
resolutions of the Monetary Board.

Despite the suspension of the Usury Law, imposing a ceiling on interest rates, this does not authorize
banks to unilaterally and successively increase interest rates in violation of Sec. 2 PD 116.

Increases unilaterally effected by PNB was in violation of the Mutuality of Contracts under Art. 1308. This
provides that the validity and compliance of the parties to the contract cannot be left to the will of one of
the contracting parties. Increases made are therefore void.

Increase on the stipulated interest rates made by PNB also contravenes Art. 1956. It provides that, no
interest shall be due unless it has been expressly stipulated in writing. PR never agreed in writing to pay
interest imposed by PNB in excess of 24% per annum. Interest rate imposed by PNB, as correctly found
by CA, is indubitably excessive.
RELUCIO vs. BRILLANTE-GARFIN G.R. NO. 76518, JULY 13, 1990 FELICIANO, J. FACTS:Private
respondent Zeida B. Brillante-Garfin filed a complaint for specific performance with damages against
petitioner Irene P. Relucio, to compel the latter to execute, in compliance with the Contract to Buy
and Sell, a final deed of sale in favor of the former over two (2) residential subdivision lots in the
Mariano Village Subdivision, Naga City. Private respondent alleged that the lots, which have a total
contract price of P10,800.00, have already been paid for, as she had already paid P200.00 as down
payment, and had subsequently completed payment of 128 equal monthly installments of P89.45
each amounting to P11,450.00; that as the law allows the charging of interest only as monetary
interest or as compensatory interest, none of which have obtained in her case, as she had never
incurred in delay in the payment of installments due, the stipulated interest of six percent (6%) per
annum on the outstanding balance is null and void; and that the amount of 650.00 representing
overpayment be returned to her. Petitioner alleged that private respondent is obliged to pay interest
on the installment payments of the unpaid outstanding balance even if paid on their "due dates" per
schedule of payments; that private respondent had actually been in arrears in the amount of
P4,269.40, representing such interest as of June 1979, which therefore entitled petitioner to cancel
the contract in question.

ISSUE:Whether or not petitioner has the right to rescind the contract for private respondent's
continued refusal to pay the monthly installments on the contract price

HELD:No. Vendor and vendee are legally free to stipulate for the payment of either the cash price of
a subdivision lot or its installment price. Should the vendee opt to purchase a subdivision lot via the
installment payment system, he is in effect paying interest on the cash price, whether the fact and
rate of such interest payment is disclosed in the contract or not. The contract for the purchase and
sale of a piece of land on the installment payment system in the case at bar is not only quite lawful; it
also reflects a very wide spread usage or custom in our present day commercial life. Despite private
respondent's failure to fully pay the stipulated price of the two lots in question, petitioner, however,
could not validly rescind the contract not being lawfully entitled to do so. Petitioner failed to rebut
private respondents' allegations that the former had failed to introduce required improvements in the
subdivision.
EASTERN SHIPPING LINES, INC. vs. COURT OF APPEALS G.R. NO. 97412 JULY 12, 1994
VITUG, J.

FACTS:Eastern Shipping Lines [Eastern] is a common carrier engaged in transportation of goods. It

was supposed to deliver goods to the consignee wherein the latters goods was covered by marine
insurance policy by Mercantile Insurance Company, Inc. [Mercantile]. The goods upon reaching the
consignee were damaged and thus claimed benefits from Mercantile which made the latter be
subrogated to the case at bar. Mercantile filed damage against Eastern which was granted by the
lower court with the imposition of 12% interest. Eastern contends that neither the contract was
explicit in imposing the rate of interest, thus, at most, the interest after the judgment should have
only been 6%.

ISSUE:Whether the imposition of 12% interest by the lower court was justified.

HELD: No. In deciding the case, the Court laid down principle with regard to the imposition of
interest for the payment of damages, to wit: 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 [Art 1956 NCC]. 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. 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. 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.
 Nacar v. Gallery Frames, GR 189871, August 13, 2013

Dario Nacar filed a labor case against Gallery Frames and its owner Felipe Bordey, Jr.
Nacar alleged that he was dismissed without cause by Gallery Frames on January 24,
1997. On October 15, 1998, the Labor Arbiter (LA) found Gallery Frames guilty of illegal
dismissal hence the Arbiter awarded Nacar P158,919.92 in damages consisting of
backwages and separation pay.
Gallery Frames appealed all the way to the Supreme Court (SC). The Supreme Court
affirmed the decision of the Labor Arbiter and the decision became final on May 27, 2002.
After the finality of the SC decision, Nacar filed a motion before the LA for recomputation as
he alleged that his backwages should be computed from the time of his illegal dismissal
(January 24, 1997) until the finality of the SC decision (May 27, 2002) with interest. The LA
denied the motion as he ruled that the reckoning point of the computation should only be
from the time Nacar was illegally dismissed (January 24, 1997) until the decision of the LA
(October 15, 1998). The LA reasoned that the said date should be the reckoning point
because Nacar did not appeal hence as to him, that decision became final and executory.
ISSUE: Whether or not the Labor Arbiter is correct.
HELD: No. There are two parts of a decision when it comes to illegal dismissal cases
(referring to cases where the dismissed employee wins, or loses but wins on appeal). The
first part is the ruling that the employee was illegally dismissed. This is immediately final
even if the employer appeals but will be reversed if employer wins on appeal. The second
part is the ruling on the award of backwages and/or separation pay. For backwages, it will
be computed from the date of illegal dismissal until the date of the decision of the Labor
Arbiter. But if the employer appeals, then the end date shall be extended until the day when
the appellate courts decision shall become final. Hence, as a consequence, the liability of
the employer, if he loses on appeal, will increase this is just but a risk that the employer
cannot avoid when it continued to seek recourses against the Labor Arbiters decision. This
is also in accordance with Article 279 of the Labor Code.
Anent the issue of award of interest in the form of actual or compensatory damages, the
Supreme Court ruled that the old case of Eastern Shipping Lines vs CA is already modified
by the promulgation of the Bangko Sentral ng Pilipinas Monetary Board Resolution No. 796
which lowered the legal rate of interest from 12% to 6%. Specifically, the rules on interest
are now as follows:
1. Monetary Obligations ex. Loans:
a. If stipulated in writing:
a.1. shall run from date of judicial demand (filing of the case)
a.2. rate of interest shall be that amount stipulated
b. If not stipulated in writing
b.1. shall run from date of default (either failure to pay upon extra-judicial demand or upon
judicial demand whichever is appropriate and subject to the provisions of Article 1169 of the
Civil Code)
b.2. rate of interest shall be 6% per annum
2. Non-Monetary Obligations (such as the case at bar)
a. If already liquidated, rate of interest shall be 6% per annum, demandable from date of
judicial or extra-judicial demand (Art. 1169, Civil Code)
b. If unliquidated, no interest
Except: When later on established with certainty. Interest shall still be 6% per annum
demandable from the date of judgment because such on such date, it is already deemed
that the amount of damages is already ascertained.
3. Compounded Interest
This is applicable to both monetary and non-monetary obligations
6% per annum computed against award of damages (interest) granted by the court. To be
computed from the date when the courts decision becomes final and executory until the
award is fully satisfied by the losing party.
4. The 6% per annum rate of legal interest shall be applied prospectively:
Final and executory judgments awarding damages prior to July 1, 2013 shall apply the
12% rate;
Final and executory judgments awarding damages on or after July 1, 2013 shall apply the
12% rate for unpaid obligations until June 30, 2013; unpaid obligations with respect to said
judgments on or after July 1, 2013 shall still incur the 6% rate.
First Metro Investment Corporation vs. Este del Sol
Mountain Reserve, Inc. (362 SCRA 101)
10DEC
FACTS:
Petitioner FMIC granted respondent a loan of Seven Million Three Hundred Eighty Five Thousand Five
Hundred Pesos (P7,385,500.00) to finance the construction of a sports complex at Montalban, Rizal.
Respondent also executed, as provided for by the Loan Agreement, an Underwriting Agreement with
underwriting fee, annual supervision fee and consultancy fee with Consultancy Agreement for four (4)
years, coinciding with the term of the loan. The said fees were deducted from the first release of loan.
Respondent failed to meet the schedule of repayment. Petitioner instituted an instant collection suit. The
trial court rendered its decision in favor of petitioner. The Court of Appeals reversed the decision of the
trial court in favor of herein respondents after its factual findings and conclusion.

ISSUE:
Whether or not the Underwriting and Consultancy Agreements were mere subterfuges to camouflage the
usurious interest charged by the petitioner.

RULING:
YES. In the instant case, several facts and circumstances taken altogether show that the Underwriting
and Consultancy Agreements were simply cloaks or devices to cover an illegal scheme employed by
petitioner FMIC to conceal and collect excessively usurious interest. Art. 1957. Contracts and
stipulations, under any cloak or device whatever, intended to circumvent the laws against usury shall be
void. The stipulated penalties, liquidated damages and attorneys fees, excessive, iniquitous and
unconscionable and revolting to the conscience as they hardly allow the borrower any chance of survival
in case of default. Hence, the instant petition was denied and the assailed decision of the appellate court
is affirmed.
Dino vs. Jardines

G.R. No. 145871

January 31, 2006

FACTS:

Petitioner Leonides filed a petition for Consolidation of Ownership with the RTC of Baguio City alleging
that on January 31, 1987, respondent Jardines executed in her favor a Deed of Sale with Pacto de retro
over a parcel of land with improvements which amounted to P165,000.00. It was stipulated that the
period for redemption would expire in six months or on July 29 1987 however none among Dino and his
heirs were able to redeem the property. Jardines countered that the true contract of the parties was
that of a loan and the deed with pacto de retro sale was a mere security to such loan. The amount of the
property was around half a million and respondent averred that it was unthinkable for her to sell the
property for only P165,000.00 In fact, the loan was even covered by interest at the rate of 9% to be paid
monthly. The court rendered its decision declaring the contract as one of deed of sale with right to
repurchase or pacto de retro and that petitioner acquired whatever rights Jardines had over the parcel
of land, and she now became owner of the same. However, upon appeal to the Court of Appeals, the
judgment was reversed with the finding that the contract was one of Equitable Mortgage and not one of
Pacto de Retro.

Issue:

Whether or not the contract was one of Pacto de Retro or an Equitable Mortgage

Held:

The Supreme Court upheld the ruling of the Court of Appeals. The findings of said court are based on
documentary evidence and on admissions and stipulation of facts made by the parties. It was
strengthened by the fact that a) respondent is still in actual physical possession of the property; b)
respondent is the one paying the real property taxes on the property; and c) the amount of the
supposed sale price, P165,000.00 earns monthly interest.

Under Article 1602 of the Civil Code: The Contract shall be presumed to be an equitable mortgage, in
any of the following cases:

1. When the price of a sale with right to repurchase is unusually inadequate;

2. When the vendor remains in possession as lessee or otherwise;
3. When upon or after the expiration of the right to repurchase another instrument extending the
period of redemption or granting a new period is executed;
4. When the purchases retains for himself a part of the purchase price;
5. In any other case where it may be fairly inferred that the real intention of the parties is that
the transaction shall secure the payment of a debt or the performance of any other obligation.
In any of the foregoing cases, any money, fruits, or other benefit to be received by the vendee as
rent or otherwise shall be considered as interest which shall be subject to usury laws.

It was held in the case of Legaspi vs. Ong that the presence of even one of the above-mentioned
circumstances as enumerated in Article 1602 is enough basis to declare a contract of sale with pacto
de retro as an equitable mortgage. Further, under Article 1603, in case f doubt, a contract
purporting to be a sale with right to repurchase shall be construed as an equitable mortgage. The
circumstances under paragraphs 2 and 5 are present in the case at bar. The property is still in the
hands of petitioner and it is clearly shown that intention of the parties was merely for the property
to stand as security for the loan.