Laws Applicable: Commodatum FACTS: May 8, 1948: Jose V.

. Bagtas borrowed from the Republic of the Philippines through the Bureau of Animal Industry three bulls: a Red Sindhi with a book value of P1,176.46, a Bhagnari, of P1,320.56 and a Sahiniwal, of P744.46, for a period of 1 year for breeding purposes subject to a breeding fee of 10% of the book value of the bulls May 7, 1949: Jose requested for a renewal for another year for the three bulls but only one bull was approved while the others are to be returned March 25, 1950: He wrote to the Director of Animal Industry that he would pay the value of the 3 bulls October 17, 1950: he reiterated his desire to buy them at a value with a deduction of yearly depreciation to be approved by the Auditor General. October 19, 1950: Director of Animal Industry advised him that either the 3 bulls are to be returned or their book value without deductions should be paid not later than October 31, 1950 which he was not able to do December 20, 1950: An action at the CFI was commenced against Jose praying that he be ordered to return the 3 bulls or to pay their book value of P3,241.45 and the unpaid breeding fee of P199.62, both with interests, and costs July 5, 1951: Jose V. Bagtas, through counsel Navarro, Rosete and Manalo, answered that because of the bad peace and order situation in Cagayan Valley, particularly in the barrio of Baggao, and of the pending appeal he had taken to the Secretary of Agriculture and Natural Resources and the President of the Philippines, he could not return the animals nor pay their value and prayed for the dismissal of the complaint. RTC: granted the action December 1958: granted an ex-parte motion for the appointment of a special sheriff to serve the writ outside Manila December 6, 1958: Felicidad M. Bagtas, the surviving spouse of Jose who died on October 23, 1951 and administratrix of his estate, was notified January 7, 1959: she file a motion that the 2 bulls where returned by his son on June 26, 1952 evidenced by recipt and the 3rd bull died from gunshot wound inflicted during a Huk raid and prayed that the writ of execution be quashed and that a writ of preliminary injunction be issued. ISSUE: W/N the contract is commodatum and NOT a lease and the estate should be liable for the loss due to force majeure due to delay. HELD: YES. writ of execution appealed from is set aside, without pronouncement as to costs If contract was commodatum then Bureau of Animal Industry retained ownership or title to the bull it should suffer its loss due to force majeure. A contract of commodatum is essentially gratuitous. If thebreeding fee be considered a compensation, then the contract would be a lease of the bull. Under article 1671 of the Civil Code the lessee would be subject to the responsibilities of a possessor in bad faith, because she had continued possession of the bull after the expiry of the contract. And even if the contract be commodatum, still the appellant is liable if he keeps it longer than the period stipulated the estate of the late defendant is only liable for the sum of P859.63, the value of the bull which has not been returned because it was killed while in the custody of the administratrix of his estate Special proceedings for the administration and settlement of the estate of the deceased Jose V. Bagtas having been instituted in the CFI, the money judgment rendered in favor of the appellee cannot be enforced by means of a writ of execution but must be presented to the probate court for payment by the appellant, the administratrix appointed by the court. ______________ Carmen Liwanag v. CA and People Facts: Liwanag asked Isidora Rosales to join her and Thelma Tagbilaran in the business of buying and selling cigarettes. Under their agreement, Rosales would give the money needed tobuy the cigarettes while Liwanag and Tabligan would act as her agents, with acorresponding 40% commission to her if the goods are sold; otherwise the money wouldbe returned to Rosales. Rosales gave several cash advances amounting to 633,650. Money was misappropriated. Rosales files a complaint of estafa against them. Issue:

1. WON the parties entered into a partnership agreement; 2. if in the negative, WONthe transaction is a simple loan Held: 1. No. Even assuming that a contract of partnership was indeed entered into by andbetween the parties, when money or property have been received by a partner for a specificpurpose and he later misappropriated it, such partner is guilty of estafa.2. No. In a contract of loan once the money is received by the debtor, ownership over thesame is transferred. Being the owner, the borrower can dispose of it for whatever purposehe may deem proper. ______________ This is an appeal from the decision,1 dated August 8, 1997, of the Regional Trial Court, Branch 1, Manila, finding accused-appellant Deomedes Iglesia guilty of the crime of murder and sentencing him to suffer the penalty ofreclusion perpetua and to pay the heirs of the victim, Demetrio Agua, the amounts of P100,000.00 as moral damages, P30,000.00 as nominal damages, and P50,000.00 as civil indemnity. The information against accused-appellant alleged That on or about the 31st day of March, 1994, in the City of Manila, Philippines, the said accused did then and there willfully, unlawfully and feloniously, with intent to kill, with treachery, and evident premeditation, attack, assault, and use personal violence upon one Demetrio Agua y Ayao, by then and there stabbing the latter on the left chest with a kitchen knife, thereby inflicting upon the said Demetrio Agua y Ayao [the] mortal stab wound which was the direct and immediate cause of his death thereafter, 2 When arraigned on May 18, 1994, accused-appellant pleaded not guilty to the crime charged.3 During the pre-trial conference, the prosecution and the defense entered into the following stipulation of facts: (a) that accused-appellant stabbed the victim on the left chest with a kitchen knife, albeit he claimed that it was in self-defense; (b) that the incident occurred on March 31, 1994, at about 11:50 p.m., at 1155 F. Torres St., Singalong, Malate, Manila; and (c) that accused-appellant and the victim, together with four other male companions, had a drinking spree prior to the stabbing incident.4 Five witnesses, namely, Rodora Agua, SPO2 Conrado Cabigao, Modesta Agua, Dr. Ravell Ronald Baluyot, and Bernardo Babaran, testified for the prosecution. The gist of their testimonies is as follows: On March 30, 1994, from 5 o'clock in the afternoon until 11:30 in the evening, accused-appellant, the victim, Demetrio Agua, and several companions were having a drinking spree behind the victim's house at 1155 F. Torres St., Singalong, Manila.5 At around 12:30 to 12:45 a.m. of March 31, 1994, Rodora, the victim's daughter, and Modesta, the victim's wife, heard a commotion outside. When they went out, they saw accused-appellant6 breaking beer bottles. The victim, Demetrio Agua, tried to pacify accused-appellant and, as the latter would not stop, told him (accused-appellant) not to embarrass him (Demetrio Agua) in the presence of many people, including a barangay tanod, Egay, because he (Demetrio Agua) was a barangay officer. Egay also tried to calm accused-appellant down. Bernardo Babaran, also a barangay tanod, heard accused-appellant and the victim having an argument, after which accused-appellant went inside the room he was renting. At that point, Babaran persuaded . Demetrio Agua to go home. However, while Agua was on his way home, accused-appellant suddenly jumped from the roof and attacked Demetrio Agua. Modesta, Rodora, and Bernardo Babaran looked on helplessly as accused-appellant and the victim struggled. Babaran tried to stop the fight, but he did not succeed. In the course of their struggle, accused-appellant stabbed the victim on the left side with a knife. Demetrio Agua pushed accused- appellant, causing the latter to fall to the ground. Agua shouted for help, saying, " Bernie, tulungan mo ako, may tama ako!" ("Bernie, help me, I've been hit!") Babaran went to the barangay outpost, which was more or less 20 meters away from the scene, to ask for the help. Modesta Agua also left the scene to get help. When she returned, Modesta saw a man, whom she identified as a townmate of accused-appellant, holding the knife used by accused- appellant in stabbing Agua. Modesta recognized the knife because she had seen accused-appellant carrying it before. As described by Babaran, the knife was around eight inches long, with a pointed end and without a handle. Four persons who were on duty that night as barangay tanods responded to Babaran's call for help. These were Mario Jolampang, Dondon Jarabellana, Ricky Maylas, and Roy Torres. On their way, they saw the victim being carried by several people to a taxi so that he could be taken to the hospital. Upon order of the barangay chairman, accused- appellant was arrested and subsequently turned over to the police. He was taken to the hospital to see the victim, Demetrio Agua, but the latter was already dead when they arrived. The policemen, together with the barangay chairman and Babaran, took accused-appellant to the police station for investigation.7 Dr. Ravell Ronald R. Baluyot conducted an autopsy on the body of Demetrio Agua. His report states:

POSTMORTEM FINDINGS Pallor, lips and nailbeds. Surgical Incisions, chest, left inframammary area, 27.0 cms. along the 5th intercostal space; chest, left side, two (2) in number, along the anterior median line, at the 7th and 8th intercostal, one is 5.1 cms. and other is 5.0 cms. Abrasions; left elbow, posterior aspect, 2.0 x 1.0 cms.; left forearm, middle third, posterior aspect, 8.0 x. 4.0 cms.; right knee, anterior aspect, 9.0 x. 4.2 cms.; right, leg, middle third, anterolateral aspect, 5.1 x. 1.2 cms.; left knee, anterior aspect, 1.0 x. 0.5 cm.; Incised wounds: chest, right infraclavicular area, 2.5 cms.; back, left scapular area, 0.5 cm.; left arm, lateral third, posterior aspect, 3.0 cms.; big toe, medial aspect, 3.0 cms. 1. Elliptical, with clean-cut edges, 2.0 cms.; oriented obliquely, with sharp infero-medial and blunt superolateral extremities, located at the chest, right side, level of the 3rd intercostal space and 17.0 cms.; from the anterior median line, directed forwards, upwards and medially, involving the skin and soft tissues, with an approximate depth of about 6.0 cms. 2. Elliptical, with clean-cut edges, 2.0 cms., oriented obliquely with sharp supero-medial and blunt inferolaterally, extremities, located at the chest, left axillary area, 23.0 cms. from the anterior median line, directed backwards, downwards and medially, involving the skin and soft tissues, cutting the 6th rib, into the left thoracic cavity, ventricle of the heart, with an approximate depth of about 13.0 cms. Hemopericardium, 20 cc., non-clotted. Hemothorax, left 450 cc., non-clotted. Brain and other visceral organs, pale. Stomach, contains a small amount of brownish fluid. CAUSE OF DEATH: STAB WOUND OF THE CHEST.8 Dr. Baluyot testified that the victim died of a stab wound on the left chest caused by a pointed and sharp-edged instrument. From his examination of the body, he was able to determine that the incised wounds were made by the hospital personnel as they conducted a thoracostomy on the victim, or an opening of the chest to remove the clotted blood, in order to alleviate the latter's condition. These wounds did not cause the death of the victim. Dr. Baluyot estimated that the victim had already been dead for seven hours at the time of the autopsy. 9 The defense presented accused-appellant Deomedes Iglesia and Joselito Abacaro. Accused-appellant denied that Modesta and Rodora Agua were present at the time of the incident. He claimed that the victim had insulted him, telling him, Putang ina mo, Dodong. Walang ibang siga dito sa ating lugar kundi ako lang, marami akong tauhan dito." ("You son of a bitch, Dodong. I am the only tough guy in this neighborhood because there are a lot of people under me.") Accused-appellant said that the victim was the chief of the barangay tanods in their neighborhood. Accused-appellant claimed he tried to talk to the victim, but the latter tried to stab him. He said he tried to wrest the knife from the victim and, in the course of their struggle, the latter accidentally stabbed himself.10 Joselito Abacaro corroborated accused-appellant's testimony. He stated that accused-appellant and the victim were having drinks, but soon they were shouting at each other. He heard the victim tell accused- appellant, "Putang ina mo, huwag kang sisigaw dito at may paglalagyan ka sa akin. " ("You son of a bitch, don't shout here or I will put you in your place.") A barangay tanod, called Egay, also heard the two men having an argument. He and Abacaro tried to pacify the two and told the victim to go home. But accused-appellant, who had gone up to his room, came out through the window and jumped from the roof because the victim shouted invectives at him. Abacaro did not see either accused-appellant or the victim with a knife, but he saw the victim making a stabbing motion towards accused-appellant. He also said that accused-appellant wrestled with the victim for an object, although he did not see what the object was.11 On the basis of the evidence presented, the trial court rendered its decision on August 8, 1997, the dispositive portion of which reads as follows:

WHEREFORE, this Court finds the accused GUILTY beyond reasonable doubt of the crime of MURDER and, as a consequence, hereby sentences him to suffer the penalty of reclusion perpetua with all the accessory penalties provided by law, and to pay the costs. Further, the accused is ordered to pay moral and nominal damages in the respective sums of P100,000.00 and P30,000.00, and the additional [sum] of P50,000.00 for the death of the victim, with legal interest thereon from the filing of this case.12 Hence this appeal. First. Accused-appellant questions the veracity of the testimonies of Rodora and Modesta Agua. He contends that these witnesses were not at the scene of the incident when it happened and that their absence is shown by the fact that they were not the ones who took the victim to the hospital. The contention has no merit. The mere fact that Rodora and Modesta Agua are the daughter and wife of the victim, respectively, does not necessarily make their testimonies untruthful. The relationship of the witnesses to the victim without further evidence cannot serve as proof of bias.13 It may not be presumed that these witnesses would testify falsely just to obtain retribution for the death of a loved one by blaming it on persons whom they know to be innocent.14 To the contrary, the inclination of the victim's relatives is to see that the real culprits are punished.15 It is true Modesta and Rodora Agua were not among those who took the victim to the hospital. But, as Modesta explained, it was because she had left to get help when she saw that the victim had been stabbed. When she came back, she saw her husband already being taken to the hospital. Indeed, Modesta and her daughter could not have been unaware of the incident as it started near their house. As it was about 12:30 o'clock in the morning when the incident happened, it is highly probable that they were in their house at that time. In ascertaining the credibility of the testimonies of witnesses, the test is whether they agree on the essential facts and substantially corroborate a consistent and coherent whole.16 In this case, Modesta and Rodora gave consistent, straightforward, and credible accounts on how the victim was killed by accused-appellant. Both testified: (1) that because accused-appellant was making trouble by breaking beer bottles, Demetrio Agua tried to pacify him; (2) that accused-appellant went up to his room, but while Demetrio Agua was on his way home, he came out of the window, jumped from the roof, and attacked the latter; (3) that accused- appellant and the victim wrestled with each other for several minutes and then accused-appellant was able to stab Demetrio Agua in the course thereof. What reinforces the credibility of Modesta and Rodora Agua is the fact that their account of the events leading to the victim's death is corroborated by the testimony of Bernardo Babaran and the findings of Dr. Baluyot, who found that the victim died of a stab wound on the left side of his chest. Both are disinterested witnesses whose credibility has not been questioned. Indeed, other than his bare claim that Modesta and Rodora were not present when the incident happened, accusedappellant presented no evidence to prove that these prosecution witnesses were actuated by improper motives in testifying against him. In the absence of such evidence, their testimonies are entitled to full faith and credit. 17 Finally, the findings of the trial court on the credibility of witnesses deserve great weight as it is in the best position to evaluate the same because of its unique opportunity to observe the witnesses, their demeanor, conduct, and attitude on the witness stand.18 Unless some facts or circumstances of weight and substance have been overlooked, misapprehended, or misinterpreted by the trial court, its findings are binding and conclusive on this Court. 19 Finding no reason to make an exception in this case, we uphold the testimonies of Modesta and Rodora Agua. Second. Accused-appellant claims that it was the victim who attacked him with a knife and that the latter was accidentally stabbed during their struggle. This contention is untenable. A plea of self-defense shifts the burden of proof to the defense because the accused then admits having committed the criminal act and only disclaims liability on the ground that his life had been exposed to harm.20 The accused must rely on the strength of his own evidence and not on the weakness of the prosecution's evidence, for even if the latter were weak it could not be disbelieved after the accused has admitted the killing.21 The accused must establish the following requisites by clear and convincing evidence: (a) unlawful aggression on the part of the victim; (b) reasonable necessity of the means employed to present or repel such aggression; and (c) lack of sufficient provocation on the part of the accused. 22 Of these requisites, unlawful aggression, i.e., the sudden unprovoked attack on the person defending himself, is indispensable. 23 This is because the theory of self-defense is based on the necessity on the part of the person being attacked to prevent or repel the aggression.24 As already stated, the prosecution and the defense stipulated during pre-trial that accused-appellant had stabbed the victim although he claimed he acted in self-defense.25 This is binding upon accused-appellant and he cannot later claim that the victim accidentally hit himself. Accused-appellant cannot contradict himself to suit his own purposes without making a mockery of the trial.

Indeed, accused-appellant's testimony is belied by the prosecution witnesses who collectively testified that the victim was on his way home when accused-appellant jumped from the roof and attacked him with a knife. Even defense witness Joselito Abacaro admitted that accused-appellant jumped from the roof, although he claimed that neither accused-appellant nor the victim was armed.26 The gaps in Abacaro's testimony may be due to his failure to see the incident in its entirety and do not discount the possibility that accused-appellant was armed. In view of the foregoing, it is clear that the defense failed to show with convincing proof that it was the victim who started the fight between him and accused-appellant. Accordingly, accused-appellant's claim that he acted in self-defense must be rejected. Nor can accused-appellant's assertion that the victim merely hit himself accidentally be believed considering that the victim sustained two stab wounds, one on the right side of the chest and another, the fatal wound, on the left side of his chest. The stab wound on the right side of the victim's chest had a depth of 6 cms., while the one on the left side was 13 cms. deep.27 These wounds could not have been caused by the victim himself. In contrast to accused-appellant's self-serving testimony, the prosecution witnesses were consistent in saying that it was accused-appellant who first attacked the victim as a consequence of a prior verbal altercation between them. In the light of the positive, categorical, and consistent testimonies of the prosecution witnesses and the incredible version of the defense, we find that accused-appellant was correctly held liable by the trial court. Third. We hold, however, that the trial court erred in finding that treachery attended the killing of Demetrio Agua because the latter was caught completely unaware and was unarmed at the time he was attacked by accusedappellant. There is treachery when the offender commits any of the crimes against a person, employing means, methods, or forms in the execution thereof which tend directly and specially to insure its execution, without risk to himself arising from the defense which the offended party might make. 28 Two essential elements must, therefore, be established, to wit: (a) the employment of means of execution that gives the person attacked no opportunity to defend himself or to retaliate; and (b) the said means of execution was deliberately or consciously adopted. What is decisive is that the execution of the attack made it impossible for the victim to defend himself or to retaliate.29 In this case, although the attack was sudden, the evidence shows that the victim was not caught completely off guard. For the fact is that the victim and accused-appellant engaged in combat that lasted for several minutes before the former was finally overpowered and then killed. This negates the existence of the first element of treachery, i.e., a sudden attack giving the victim no opportunity to defend himself or to retaliate. The existence of a struggle before the fatal blow was dealt on the victim shows he was forewarned of the impending attack and that he was afforded the opportunity to put up a defense. 30 In addition, the prosecution witnesses themselves testified that a heated argument arose between accused-appellant and the victim prior to the attack. This would be sufficient to forewarn the victim against any assault which accused-appellant might launch against him.31 Nor was evidence presented to show that accused-appellant consciously adopted his mode of attack in order to insure the execution of the crime without risk to himself.32 The second element, i.e., adoption of means, methods, or forms to ensure the commission of the crime, was thus not proved by the prosecution. Evident premeditation was likewise not established because the prosecution presented no evidence to prove (1) the time when the offender determined to commit the crime; (2) an act manifestly indicating that the offender had clung to his determination; and (3) a sufficient lapse of time between the determination to commit the crime and the execution thereof, to allow the offender to reflect on the consequence of his act. 33 Indeed, it was established that the killing of Demetrio Agua resulted from an argument between him and accused-appellant minutes prior to the attack. In the absence of any qualifying circumstance in this case, the crime committed by accused-appellant is homicide which, in accordance with Art. 249 of the Revised Penal Code, is punishable by reclusion temporal. Applying the Indeterminate Sentence Law, the minimum of the penalty to be imposed on accused-appellant is prision mayor,being the penalty next lower in degree from reclusion temporal. As provided by Art. 64(1) of the Revised Penal Code, there being no aggravating nor mitigating circumstance attending the commission of the crime, the penalty of reclusion temporal in its medium period as the maximum of the penalty should be imposed on accused-appellant. With respect to the items of damages awarded by the trial court, we find the award of indemnity in the amount of P50,000.00 in favor of the heirs of the victim to be in accord with recent rulings of this Court. 34 However, we find the amount of P30,000.00 awarded as nominal damages to be excessive and should therefore be reduced. The amount of P15,000.00 would be appropriate considering that the heirs of the victim actually incurred hospital and funeral expenses as a result of the victim's death, although the exact amount thereof has not been adequately shown.35 The amount of moral damages awarded should likewise be reduced to P50,000.00 in accordance with the current case law.36

The trial court likewise erred in stating that the interest on the damages awarded shall accrue from the time of the filing of this suit. In Eastern Shipping Lines, Inc. v. Court of Appeals,37 we held that when the judgment of the Court awarding a sum of money becomes final and executory, the rate of legal interest shall be 12% per annum from such finality until its satisfaction. The interest should thus be computed from the time of the finality of this decision, and not from the filing of the complaint against accused-appellant. WHEREFORE, the decision of the trial court, dated August 8, 1997, is modified by finding accused-appellant guilty of homicide and sentencing him to suffer the penalty of 12 years of prision mayor, as minimum, to seventeen (17) years and four (4) months of reclusion temporal, as maximum, and to pay the heirs of the victim, Demetrio Agua, the amount of P50,000.00 as civil indemnity, P50,000.00 as moral damages, and P15,000.00 as nominal damages.1wphi1.nt _____________ 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 itcompensation 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. ____________________ First Metro vs Este del Sol GR No. 141811, 15 November 2001 369 SCRA 99 FACTS FMIC granted Este del Sol a loan to finance a sports/resort complex in Montalban, Rizal. Under the agreement, the interest was 16% pa based on the diminishing balance. In case of default, an acceleration clause was provided and the amount due is subject to 20% one-time penalty on the amount due and such amount shall bear interest at the highest rate permitted by law. respondent executed a REM, individual continuing suretyship and an underwriting agreement whereby FMIC shall underwrite the public offering of one P120,000 common shares of respondents capital stock for one-time underwriting fee of P200,000. For failure to pay its obligation, FMIC caused the foreclosure of the REM. At the public auction, FIC was the highest bidder. Petitioner filed to collect for alleged deficiency balance against respondents since it failed to collect from the sureties, plus interest at 21% pa. the trial court ruled in favor of FMIC. Respondents appealed before the CA which held that the fees provided for in the Underwriting and Consultacy Agreements were mere subterfuges to camouflage the excessively usurious interest charged. The CA ordered FMIC to reimburse petitioner representing what is ue to petitioner and what is due to respondent. ISSUE Whether or not the interests are lawful HELD No. an apparently lawful loan is usurious when it is intended that additional compensation for the loan be disguised by an ostensibly unrelated contract for the payment by the borrower for the lenders services which re of little value or which are not in fact to be rendered. Article 1957 clearly provides: contracts and stipulations, under any cloak or device whatever, intended to circumvent the law agaistn usury shall be void. The borrower may recover in accordance with the laws on usury.

___________________ Medel vs. CA Four loans were involved in this case. The first loan was secured by the spouses Medel from Gonzales in the amount of P50,000 wherein P3,000 was withheld by the latter as advance interest. This was secured by a promissory note. The second loan obtained was for P90,000. The spouses only received P84,000. The third loan was for P300,000 and this was secured by a real estate mortgage. The spouses failed to pay for the aforementioned three loans. This was consolidated into one loan in the amount of P500,000. An additional P60,000 was loaned to make the payable P500,000. This was covered with a promissory note containing an acceleration clause. Again the spouses failed to pay. The appellate court modified the interest to be paid by saying that that the interest should be 5.5% per month. ____ Same case: Facts: Defendants obtained a loan from Plaintiff in the amount P50, 000.00, payable in 2 months and executed a promissory note. Plaintiff gave only the amount of P47, 000.00 to the borrowers and retained P3, 000.00 as advance interest for 1 month at 6% per month. Defendants obtained another loan from Defendant in the amount of P90, 000.00, payable in 2 months, at 6% interest per month. They executed a promissory note to evidence the loan and received only P84, 000.00 out of the proceeds of the loan. For the third time, Defendants secured from Plaintiff another loan in the amount of P300, 000.00, maturing in 1 month, and secured by a real estate mortgage. They executed a promissory note in favor of the Plaintiff. However, only the sum of P275, 000.00, was given to them out of the proceeds of the loan. Upon maturity of the three promissory notes, Defendants failed to pay the indebtedness. Defendants consolidated all their previous unpaid loans totalling P440, 000.00, and sought from Plaintiff another loan in the amount of P60, 000.00, bringing their indebtedness to a total of P50,000.00. They executed another promissory note in favor of Plaintiff to pay the sum of P500, 000.00 with a 5.5% interest per month plus 2% service charge per annum, with an additional amount of 1% per month as penalty charges. On maturity of the loan, the Defendants failed to pay the indebtedness which prompt the Plaintiffs to file with the RTC a complaint for collection of the full amount of the loan including interests and other charges. Declaring that the due execution and genuineness of the four promissory notes has been duly proved, the RTC ruled that although the Usury Law had been repealed, the interest charged on the loans was unconscionable and revol ting to the conscience and ordered the payment of the amount of the first 3 loans with a 12% interest per annum and 1% per month as penalty. On appeal, Plaintiff-appellants argued that the promissory note, which consolidated all the unpaid loans of the defendants, is the law that governs the parties. The Court of Appeals ruled in favor of the Plaintiff-appellants on the ground that the Usury Law has become legally inexistent with the promulgation by the Central Bank in 1982 of Circular No. 905, the lender and the borrower could agree on any interest that may be charged on the loan, and ordered the Defendants to pay the Plaintiffs the sum of P500,000, plus 5.5% per month interest and 2& service charge per annum , and 1% per month as penalty charges. Defendants filed the present case via petition for review on certiorari. Issue: WON the stipulated 5.5% interest rate per month on the loan in the sum of P500, 000.00 is usurious. Held: No. A stipulated rate of interest at 5.5% per month on the P500, 000.00 loan is excessive, iniquitous, unconscionable and exorbitant, but it cannot be considered usurious because Central Bank Circular No. 905 has expressly removed the interest ceilings prescribed by the Usury Law and that the Usury Law is now legally inexistent. Doctrine: A CB Circular cannot repeal a law. Only a law can repeal another law. Jurisprudence provides that CB Circular did not repeal nor in a way amend the Usury Law but simply suspended the latters effectivity (Security Bank and Trust Co vs RTC). Usury has been legally non-existent in our jurisdiction. Interest can now be charged as lender and borrower may agree upon. Law: Article 2227, Civil Code The courts shall reduce equitably liquidated damages, whether intended as an indemnity or a penalty if they are iniquitous or unconscionable. Note: While the Usury Law ceiling on interest rates was lifted by the CB Circular 905, nothing in the said circular could possibly be read as granting carte blanche authority to lenders to raise interest rates to levels which would either enslave their borrowers or lead to a haemorrhaging of their assets (Almeda vs. CA, 256 SCRA 292 [1996]). ___________ BRIONES VS CAMMAYO GR 23559 October 4, 1971

FACTS: Aurelio G. Briones filed an action in the Municipal Court of Manila against Primitivo, Nicasio, Pedro, Hilario and Artemio, all surnamed Cammayo, to recover from them, jointly and severally, the amount of P1,500.00, plus damages, attorney's fees and costs of suit. Defendants executed the real estate mortgage as security for the loan of P1,200.00 given to Primitivo P. Cammayo upon the usurious agreement that defendant pays to the plaintiff, out of the alleged loan of P1,500.00 (which includes as interest the sum of P300.00) for one year. Although the mortgage contract was executed for securing the payment of P1,500.00 for a period of one year, without interest, the truth and the real fact is that plaintiff delivered to the defendant Primitivo P. Cammayo only the sum of P1,200.00 and withheld the sum of P300.00 which was intended as advance interest for one year. On account of said loan of P1,200.00, defendant Primitivo P. Cammayo paid to the plaintiff during the period from October 1955 to July 1956 the total sum of P330.00 which plaintiff, illegally and unlawfully refused to acknowledge as part payment of the account but as in interest of the said loan for an extension of another term of one year. ISSUE: Can Briones recover the amount of P1,500.00? RULING: Loan is valid but usurious interest is void. Creditor has the right to recover his capital by judicial action. To discourage stipulations on usurious interest, said stipulations are treated as wholly void, so that the loan becomes one without stipulation as to payment of interest. It should not, however, be interpreted to mean forfeiture even of the principal, for this would unjustly enrich the borrower at the expense of the lender. Furthermore, penal sanctions are available against a usurious lender, as a further deterrence to usury. In simple loan with stipulation of usurious interest, the prestation of the debtor to pay the principal debt, which is the cause of the contract (Article 1350, Civil Code), is not illegal. The illegality lies only as to the prestation to pay the stipulated interest; hence, being separable, the latter only should be deemed void, since it is the only one that is illegal.

Contracts; binding effect. As a general rule, obligations derived from a contract are transmissible (see Article 1311, par.1 of the Civil Code). The loan in this case was contracted by respondent. He died while the case was pending before the Court of Appeals. While he may no longer be compelled to pay the loan, the debt subsists against his estate. No property or portion of the inheritance may be transmitted to his heirs unless the debt has first been satisfied. William Ong Genato vs. Benjamin Bayhon, et al., G.R. No. 171035, August 24, 2009.

WILLIAM ONG GENATO, Petitioner,vs. BENJAMIN BAYHON, MELANIE BAYHON, BENJAMIN BAYHON, JR., BRENDA BAYHON, ALINA BAYHON-CAMPOS, IRENEBAYHON-TOLOSA, and the minor GINO BAYHON, as represented herein by his natural mother as guardian-ad-litem,JESUSITA M. BAYHON, Respondents. Preliminaries: The death of a person does not extinguish his obligation. At bar is a Petition for Review on Certiorari assailing the Decision of the Court of Appeals and Resolution denying thepetitioners motion for reconsideration. This is a consolidated case stemming from two civil cases filed before the RegionalTrial Court for the payment of a debt by the respondent. Facts: Respondent Benjamin Bayhon obtained a loan from the petitioner amounting to P1,000,000.00 to be paid monthly with 5%interest. That respondent executed a Deed of Real Estate Mortgage in favor of the petitioner to cover the loan which wasconditioned upon the personal assurance of the petitioner that the said instrument is only a private memorandum of indebtedness and that it would neither be notarized nor enforced according to its tenor. During the proceeding for thereconstitution of said real estate property before the RTC, Quezon City, Branch 87 petitioner filed an Answer in Interventionin the said proceeding and attached a copy of an alleged dacion en pago covering said lot. Respondent assailed the dacion en pago as a forgery alleging that neither he nor his wife, who had died 3 years earlier, had executed it.In separate case petitioner filed an action for specific performance, before the RTC, Quezon City. In his Complaint, petitioneralleged that respondent failed to pay the loan and executed on October 21, 1989 a dacion en pago in favor of the petitioner.The dacion en pago was inscribed and recorded with the Registry of Deeds of Quezon City.Petitioner further averred that despite demands, respondent refused to execute the requisite documents to transfer to himthe ownership of the lot subject of the dacion en pago. Petitioner prayed,inter

alia, for the court to order the respondent toexecute the final deed of sale and transfer of possession of the said lot.In the decision of the lower court, it stated that the dacion en pago was novated by the payments made by the respondentand that the Deed of Real Estate Mortgage was void considering that respondents wife was already dead during theexecution of the deed.On appeal by the respondent to the CA, the CA held that the real estate mortgage and the dacion en pago were both void.The appellate court ruled that at the time the real estate mortgage and the dacion en pago were executed, the wife of respondent Benjamin Bayhon was already dead. Thus, she could not have participated in the execution of the two documents. The appellate court struck down both the dacion en pago and the real estate mortgage as being simulated orfictitious contracts pursuant to Article 1409 of the Civil Code.During the appeal, respondent Benjamin Bayhon died.The Court of Appeals held further that while the principal obligation is valid, the death of respondent Benjamin Bayhonextinguished it. The heirs could not be ordered to pay the debts left by the deceased. Issue: Whether or not the heirs of the decedent can be ordered to pay the debt left by the deceased? Held: The Court held, with regards to the dacion en pago, the Court affirm the ruling of the appellate court that the subject dacionen pago is a simulated or fictitious contract, and hence void. The evidence shows that at the time it was allegedly signed by the wife of the respondent, his wife was already dead. This finding of fact cannot be reversed. With regards to the appellate court extinguishing the obligation of respondent, as a general rule, obligations derived from a contract are transmissible. According to Article 1311 of the Civil Code, contracts take effect only between the parties, their assigns and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, or by stipulation or by provision of law. The heir is not liable beyond the value of the property he received from the decedent. The loan in this case was contracted by respondent. He died while the case was pending before the Court of Appeals. While he may no longer be compelled to pay the loan, the debt subsists against his estate. No property or portion of the inheritance may be transmitted to his heirs unless the debt has first been satisfied. _________________ Petitioner Angelito Colmenares assails the Decision[1] dated July 27, 2005 of the Court of Appeals in CAG.R. CV No. 57877 and its Resolution[2] datedNovember 15, 2005, denying his motion for reconsideration. The Court of Appeals had affirmed the judgment of the trial court which ordered petitioner to pay a sum of money to respondent Hand Tractor Parts and Agro-Industrial Corporation. The facts, culled from the records, are briefly as follows: Respondent is a domestic corporation[3] engaged in selling tractor and agro-industrial parts. Petitioner is one of its customers.[4] On June 15, 1988, petitioner bought on credit paddle wheels from respondent.[5] The paddle wheels were delivered on June 18 and 29, 1988.[6] On November 9, 1988, respondent issued to petitioner a charge invoice[7] for P80,200, the price of the paddle wheels and their accessories. Petitioner paid P25,000 on November 16, 1988, P10,000 on May 18, 1991 and P3,000 on April 17, 1993[8] or a total of P38,000. In a letter[9] dated September 18, 1995, respondents counsel demanded that petitioner pay P156,266 for his unpaid account, including interest computed at 3% per month.[10] In response, petitioner wrote: xxxx While I do not deny the fact that I have purchased some tractor parts from your client on credit, my records of my account with your client do not show that I am indebted to your client in the amount of P156,266.00. May I ask therefore from your client a period of 45 days from today, to check my records, compare them with the records of your client and settle my actual accountability with your client within said period.[11] On November 28, 1995, respondent sued petitioner for a sum of money.[12] Respondent claimed that despite demand, petitioner failed to pay. For his defense, petitioner testified that he did not purchase the paddle wheels and accessories stated in the November 9, 1988 charge invoice.[13] The Regional Trial Court (RTC) of Bacolod City, Branch 44, found petitioner liable to respondent. It ruled that petitioners denial of his obligation was insufficient against the invoices, delivery receipts, and official receipts showing his partial payments. Petitioner was ordered to pay respondent P166,466 plus 3% interest per month from June 1996 and 25% of the net amount due as attorneys fees and cost of collection. [14] On appeal, the Court of Appeals affirmed the decision of the trial court.[15] It found respondents testimonial and documentary evidence sufficient to support the trial courts decision. The Court of Appeals ruled: Exhibit A [charge invoice] will show that, on June 18, 1988, [petitioner] purchased from [respondent] several farm implements. Other than his bare denial, [petitioner] failed to present other convincing testimonial and documentary evidence to rebut [respondents] evidence. Exhibits B and C [delivery receipts] will show that the farm implements were delivered to [petitioner] through his representative. It is easy for the [petitioner] to deny outright receiving such items and likewise deny to have authorized persons to receive said items. However, again, [petitioner] failed to present witnesses and other documentary evidence to support his allegation. As to the rest of the evidence adduced by the [respondent], we find the [trial court] to have correctly weighed and appreciated the same when it held:

The [petitioners] mere denial of his obligation would not suffice against the invoices and delivery receipts, especially the official receipts issued by the [respondent]. It would be absurd for the [respondent] to fabricate official receipts just to solicit a phony obligation. As agreed upon by the [petitioner] himself, he was a customer of the [respondent] before the controversial sale was made. Thus, the general manager of the [respondent] cannot mistake him for anyone of their other clients, considering their transactions were done in personal.xxx[16] After his motion for reconsideration was denied, petitioner filed the instant petition which raised the following issues: I. WHETHER OR NOT THE DECISION OF THE COURT OF APPEALS IS IN ACCORD WITH LAW AND SUPREME COURT DECISIONS ON SUFFICIENCY OF EVIDENCE TO MEET THE QUANTUM OF PROOF IN CIVIL CASES WHICH IS PREPONDERANCE OF EVIDENCE. II. WHETHER OR NOT THE DECISION OF THE COURT OF APPEALS IS IN ACCORD WITH LAW AND SUPREME COURT DECISIONS ON BURDEN OF PROOF IN CIVIL CASES. III. WHETHER OR NOT THE DECISION OF THE COURT OF APPEALS IS IN ACCORD WITH LAW AND SUPREME COURT DECISIONS ON AWARD OF DAMAGES.[17] Essentially, the issues are: (1) Was respondent able to prove by a preponderance of evidence its claim for a sum of money against petitioner? (2) Was the award of interest and attorneys fees proper? Petitioner contests the finding that he was respondents customer even before the sale of the paddle wheels. He says that respondents lone witness even testified that the first and last transaction between him (witness) and petitioner was on June 29, 1988. He adds that the Court of Appeals also made a presumptuous finding that on June 18, 1988 he purchased from respondent several farm implements and the same were delivered to him. Petitioner claims that he or his duly authorized representative never signed the exhibits cited for this finding. The delivery receipts are also anomalous or questionable because they are consecutively numbered although the deliveries had a gap of 11 days. Moreover, the statement of account and the demand letter cannot prove his account. Not all statements of account are truthful statements and not all demand letters contain valid demands. In addition, the official receipts may be good proof of payment but they are not good proof of the existence of his account. While the transaction was in June 1988, the official receipts show that the first payment was made five months after the purchase, the second payment was made two years and six months after the first payment, the third payment was made one year and 11 months after the second payment, and respondent sued him seven years after he obtained credit. Petitioner concludes that respondent failed to prove its affirmative assertions and there is no evidence to prove the existence of his account with respondent. Consequently, he avers, the decision of the Court of Appeals is not supported by sufficient evidence. For it to conclude that it would be absurd for the [respondent] to fabricate official receipts just to solicit a phony obligation is error because said documents, according to petitioner, are plainly and simply self-serving, fabricated pieces of evidence with no probative value.[18] Respondent counters that petitioner has raised factual issues, and that petitioner assails its evidence but has failed to present his own countervailing evidence other than mere denial.[19] On the first issue, we find for the respondent. Indeed, it is obvious that petitioners submissions involve factual issues that call for review of all evidence presented before the trial court. Whether petitioner was respondents customer before the subject transaction, whether petitioner purchased the paddle wheels, whether his unpaid account exists, whether the documents presented as evidence are questionable, anomalous or fabricated, are all questions of fact. It is settled that questions of fact cannot be the subject of a petition for review under Rule 45 of the Rules of Court. The rule finds more stringent application where the Court of Appeals upholds the findings of fact of the trial court. In such instance, as in this case, this Court is generally bound to adopt the facts as determined by the lower courts.[20] This Court has held also that when supported by substantial evidence, the findings of fact of the Court of Appeals are conclusive and binding on the parties and are not reviewable by this Court.[21] Needless to stress, under Section 1, Rule 45 of the Rules of Court, the petition shall raise only questions of law.[22] The reason is that this Court is not a trier of facts, and is not to review and calibrate the evidence on record.[23] Here, we find no exception to the general rule. The trial court and the Court of Appeals are one in finding that petitioner bought paddle wheels from respondent, that the same were delivered to petitioner through his representative, and that petitioner failed to fully pay the price as he made partial payments only. This finding is amply supported by the evidence on record. Raul Chua, respondents general manager, testified on petitioners credit purchase. Respondent also presented the delivery receipts, charge invoice, official receipts of partial payment, and petitioners reply to the demand letter. Regarding petitioners denial of his obligation, we find him less than candid in his submissions. He conveniently ignores his admission captured by the transcripts and the evidence he himself wrote. First, he contests the finding that he was respondents customer before the subject transaction. But he has testified that he used to purchase farm implements from respondent in cash or credit.[24] Thus, we see nothing wrong in the conclusion of the trial court and the Court of Appeals which was based on his testimony. Second, petitioner assails the finding that the paddle wheels were delivered to him through his representative. We note that Raul Chua identified petitioners secretary as the one who received the deliveries.[25] Petitioner, on the other hand, denied knowing the person who received the deliveries and

having said person in his employ.[26] Interestingly, petitioners counsel, Atty. Cris Dionela, manifested after petitioners testimony that he will present petitioners secretary during the next hearing. [27] Since petitioner denied knowing the person who received the deliveries, the reason should be clear why we do not find on record the testimony of his secretary. This time, however, petitioner laments that the persons who only the respondent claimed to be [petitioners] employees were never presented in court to be identified and confronted by him.[28] Third, that there is no evidence of petitioners account with respondent is belied by petitioner himself when he replied to the demand letter and said that he will check his records and settle his actual accountability within 45 days. Relatedly, petitioners unpaid account was duly proven by the charge invoice for his credit purchase worth P80,200 and official receipts for his partial payment of P38,000 only. Petitioner, in his belabored challenge to respondents evidence, has not informed the Court what other evidence could possibl y prove his unpaid account. Perhaps he could think of no other because any evidence other than proof of credit and proof of partial payment would only be superfluous in proving his unpaid account. And his reply to the demand letter only confirms what he has to settle. Thus, we are in agreement that respondent was able to prove by preponderant evidence, which means evidence which is of greater weight or is more convincing than that which is in opposition to it,[29] that petitioner ought to pay his unpaid account. On the matter of damages, petitioner contends that the award of 3% interest per month is baseless because the legal rate is 12% per annum. The charge invoice also states 12% interest per annum on overdue accounts. The award of attorneys fees and cost of collection is also baseless in view of the policy that no premium should be placed on the right to litigate. Respondent counters that attorneys fees may be awarded when a party is compelled to litigate. On this issue, petitioner is partly correct. The interest payable for an overdue account as stated in the charge invoice is only 12% per annum,[30] not 3% per month. The handwritten modification to 36% was not explained by respondent. In its comment,[31] respondent did not even dispute petitioners assertion and limited its argument on the propriety of attorneys fees. Accordingly, as of November 28, 2008, 13 years after respondents judicial demand, petitioners unpaid account amounts to P108,032, computed as follows: Unpaid Account = Unpaid Price + Interest Unpaid Account = (80,200 38,000) + [(80,200-38,000)x .12 x 13] Unpaid Account = 42,200 + 65,832 Unpaid Account = P108,032 Additional interest can be computed after November 28, 2008. Finally, we agree with the lower courts on the award of attorneys fees. Article 2208[32] of the Civil Code provides that in the absence of stipulation, attorneys fees and expenses of litigation, other than judicial costs, cannot be recovered. In this case, however, the charge invoice provides that 25% of the amount due is further charged for attorneys fees and cost of collection in case of suit. Thus, we agree that respondent is also entitled to 25% of P108,032 or P27,008 as attorneys fees. WHEREFORE, the petition is PARTLY GRANTED. The assailed Decision dated July 27, 2005 and Resolution dated November 15, 2005 of the Court of Appeals in CA-G.R. CV No. 57877 are hereby MODIFIED. Petitioner is ORDERED to pay respondent (a) P108,032 plus additional interest after November 28, 2008, and (b) P27,008 as attorneys fees. ________________ PRISMA CONSTRUCTION & DEVELOPMENT CORPORATION and ROGELIO S. PANTALEON vs ARTHUR F. MENCHAVEZ G.R. No. 160545; March 9, 2010 FACTS:On December 8,1993 PRISMA obtained a 1 million loan from respondent with a monthly interest of 40,000.00 andis payable for six months which is secured by a promissory note issued byRogelio S Pantaleon, President and Chairmanof the Board of PRISMA. Its total obligation is1,240,000.00 to be paid under the following schedule of payments: January 8, 1994......40,000.00February 8, 1994.....40,000.00March 8, 1994.........40,000.00April 8, 1994............40,000.00May 8, 1994.............40,000.00June 8,1994.............1,040,000.00The petitioners failed to completely pay the loan within the stipulated 6 month period. From September 8, 1994 to January 4, 1997, the petitioners paid a total of 1,108,772.00. However, therespondent found that the petitioners still had an outstanding balanceof 1,364,151.00 as of Jan uary4, 1997 to which it applied a 4% monthly interest.On August 28, 1997, respondent filed a complaint for sum of money with the RTC to enforcethe unpaid balance plus 4% monthly interest. The RTC ordered the petitioners to jointly and severally pay the respondent the amount of 3,526,117.00 plus 4% per month interest from February11,1999 until fully paid.CA affirmed the RTC Decision by imposing a 12% per annum interest, computed from the filling of the complaint until finality of judgment and thereafter. ISSUE:Whether or not the parties agreed to the 4% monthly interest on the loan? If so, does the rate of interest apply to the 6-month payment period only or until full payment of the loan? RULING: NO.The parties did not agree to the 4% monthly interest on the loan. Interest due should be stipulated in writing; otherwise,12% per annum. Obligations arising from contracts have the force of law between the contracting parties and shouldbe complied with in good faith. When the terms of a contract are

clear and leave no doubt as to the intention of thecontracting parties, the literal meaning of its stipulations governs In such cases, courts have no authority to alter the contract byconstruction or to make a new contract for the parties; a court's duty is confined to the interpretation of the contract theparties made for themselves without regard to its wisdom or folly, as the court cannot supply material stipulationsor read into the contract words the contract does not contain. It is only when the contract is vague and ambiguousthat courts are permitted to resort to the interpretation of its terms to determine the parties intent. The 1 million loan with 40,000.00per month interest for six months having a total obligation f 1,240,000.00 for the total six month period is an agreed sumwhich can be computed at 4% interest per month, but no such rate of interest was stipulated in the promissory note; rather afixed sum equivalent to this fixed rate was agreed upon Article 1956 of the Civil Code specifically mandates that "no interest shall bedue unless it has been expressly stipulated in writing." Under this provision, the payment of interest in loans or forbearance of money is allowed only if: (1) there was an express stipulation for the payment of interest; and (2) the agreementfor the payment of interest was reduced in writing. The concurrence of the two conditions is required for the payment of interest at a stipulated rate. Applying this provision, we find that the interest of P40, 000.00 per month correspondsonly to the six (6)-month period of the loan, or from January 8, 1994 to June 8, 1994, as agreed upon by theparties in the promissory note. Thereafter, the interest on the loan should be at the legal interest rate of 12%per annum.It is a familiar doctrine in obligations and contracts that the parties are bound by the stipulations, clauses, terms and conditions theyhave agreed to, which is the law between them, the only limitation being that these stipulations, clauses, terms and conditions are notcontrary to law, morals, public order or public policy.The payment of the specific sum of money of P 40,000.00 per month was voluntarily agreed upon by the petitioners andthe respondent. There is nothing from the records and, in fact, there is no allegation showing that petitioners werevictims of fraud when they entered into the agreement with the respondent. Therefore, as agreed by the parties,the loan of P1,000,000.00 shall earn P 40,000.00 per month for a period of six (6) months, or from December 8,1993 to June 8, 1994, for a total principal and interest amount of P1,240,000.00. Thereafter, interest at the rate of 12% per annum shall apply. The amounts already paid by the petitioners during the pendency of the suit,amounting toP1,228,772.00 as of February12, 1999 should be deducted from the total amount due, computed asindicated above. __________ Legal compensation takes place by operation of law when all the requisites are present, as opposed to conventional compensation which takes place when the parties agree to compensate their mutual obligations even in the absence of some requisites. The only requisites of conventional compensation are (1) that each of the parties can dispose of the credit he seeks to compensate, and (2) that they agree to the mutual extinguishment of their credits. United Planters Sugar Milling Co., Inc. (UPSUMCO) vs. The Honorable Court of Appeals, et al., G.R. No. 126890, April 2, 2009. __________ Siga-an v. Villanueva (2009)Chico-Nazario, J. Facts: Alicia Villanueva filed a complaint against Sebastian Sigaan bec she wants a return of her money (the excess interest shepaid). Events according to her: Sigaan, the comptroller of the Phillipine Navy, offered to loan money to her. She accepted because she neededcapital for her office supply business venture. She currently supplies office matl and equipment to the Phil Navy. She agrees to the loan of P540k. Loan was not in writing and there was no stipulation as to payment of interest. She issues a check worth P500; as partial payment. 2 months later, she issues another check worth P200k. Sigaan (who now received P700k from Villanueva) said the excess money Villanueva paid would be applied asinterest. But Sigaan still kept pestering her for additional interest and threatened to block her transactions with the Phil Navy if she wont comply. Fearing this, she paid additional amounts totalling to P1.2m. She asked for a receipt but was told that there was no need because they had mutual trust and confidence. She then consulted a lawyer who told her that Sigaan could not validly collect interest because there was no agreement of interest. She demands from Sigaan the return of the P660k. According to Sigaan, however: He did not offer to loan but was instead propositioned by Villanueva and insists that there was no overpayment, as that there was a promissory note by Villanueva admitting to having borrowed P1.24m. As payment, Villanueva issued 6 postdated checks. Only 1 was honoured. He filed criminal cases againstVillanueva (BP 22). In this BP 22 case, Sigaan claims that Villanueva, in her testimony, admitted to havingagreed to a 7% interest. This should be an exception (to the rule that interests should be in writing) because itwould be unfair since Villanueva already admits to the interest. Also Villanueva was already estopped from complaining because she was given several times to settle her obligation but failed. RTC says: there was overpayment. Villanu evas obligation only amounted to P540k because there was no interest agreement. CA affirmed.

Issue: Was there overpayment? What about interest? Held: [Yes. Sigaan should return the excess amounts.] [No interest to be paid by Villanueva. However, Sigaan should pay intereston the amounts he should refund Villanueva.]Ratio: SC defines interest: monetary and compensatory: Monetary interest: Interest is a COMPENSATION fixed by the PARTIES for the use or forbearance of money. Compensatory: Interest imposed by LAW or by COURTS as PENALTY or INDEMNITY. The right to interest arises only:1. By a contract; or 2. By virtue of damages for delay or failure to pay the principal loan RE: Interest should be stipulated in writing NCC 1956: Refers to monetary interest and mandates that no interest shall be due unless stipulated in writing. So, it isallowed only when the following concur:1. If there was express stipulation for interest payment2. AND if the agreement was in wri ting In this case, the parties did not agree. As explained by Villanueva, the presented promissory note was in her handwriting because Sigaan told her to copy it and she did because she feared the threats of Sigaan to block her deals with the PhilNavy. (this was not rebutted by Sigaan so the SC believed this explanation) Clearly, there was NO CONSENT to the payment of interest, she was coerced.RE: Exceptions Sigaans claim that Villanueva admitting to the interest should be an exception, SC says: In the BP22 case, Villanueva didnot declare to have made an express stipulation in writing as to the interest. There instances in which interest may beimposed in the absence of stipulation, verbal or written, are:1. NCC 2209: If obligation consists in payment of sum of money, no stipulation on interest, and debtor incurs delay= legal interest 12% per annum2. NCC 2212: interest due shall earn legal interest from the time it is judicially demanded Under those 2 instances, interest MAY be imposed only as PENALTY or damages for breach of CONTRACTUALobligations and NOT for compensation for the use or forbearance of money. MEANING: those 2 are only applicable to COMPENSATORY interests and not to monetary interest. This case involves a claim for monetary interest. Compensatory is not chargeable because it was not proven that Villanueva defaulted in paying the loan.RE: Solutio indebiti (NCC 2154: 1. if something is received where there is no right to demand it and 2. it was delivered through mistake, the obligation to return it arises) Principle: no one shall enrich himself unjustly at expense of another RE: Interest payment Eastern Shipping v. CA: when an obligation NOT constituting a loan or forbearance of money is breached, interest on amount of damages may be imposed at the rate of 6% per annum. When judgment awarding a sum of money becomes final and executory, legal interest (whether loan/forbearance or money or not) shall be 12% per annum from finality The INTERIM period is deemed a forbearance of credit Sigaans obligation arises from a quasi-contract of solutio indebitu and NOT from a loan or forbearance of money. So: 6% per annum should be imposed on the amount to be refunded (as well as to the damages and atty fees)from time of extra judicial demand (March 3, 1998) up to finality . Amount shall become 12% per annum from finality of decisionup to its satisfaction. _________________ Land Bank vs. Ong Facts : On March 18, 1996, spouses Johnson and Evangeline Sy secured a loan from Land Bank Legazpi City in the amount of PhP 16 million.The loan was secured by three (3) residential lots, five (5) cargo trucks, and a warehouse. Under the loan agreement, PhP 6 million of theloan would be short-term and would mature on February 28, 1997, while the balance of PhP 10 million would be payable in seven (7) years.The Spouses Sy could no longer pay their loan which resulted to the sale of three (3) of their mortgaged parcels of land for PhP 150,000 to Angelina Gloria Ong, Evangelines mother, under a Deed of Sale with Assumption of Mortgage. Evangelines father, petitioner Alfredo Ong, later went to Land Bank to inform them about the sale and assumption of mortgage. Land BankBanch Head told Alfredo that there was nothing wrong with agreement with the Spouses Sy and provided him requirements for theassumption of mortgage. Alfredo later found out that his application for assumption of mortgage was not approved by Land Bank. OnDecember 12, 1997, Alfredo initiated an action for recovery of sum of money with damages against Land Bank, as Alfredos payment wasnot returned by Land Bank. Alfredo said that Land Banks foreclosure without informing him of the denial of his assumption of the mortgage was done in bad faith and that he was made to believed that P750,000 would cause Land Bank to approve his assumption to themortgage. He also claimed incurring expenses for attorneys fees of PhP 150,000, filing fee of PhP 15,000, and PhP 250,000 in moraldamages.

This prompted Alfredo to file a case with RTC against Land Bank.On its decision to the case, RTC held that the contract approving the assumption of mortgage was not perfected as a result of the creditinvestigation conducted on Alfredo where he was disapproved.. As such, it ruled that it would be incorrect to consider Alfredo a third person with no interest in the fulfillment of the obligation under Article1236 of the Civil Code. Although Land Bank was not bound by the Deed between Alfredo and the Spouses Sy, the appellate court found that Alfredo and Land Banks active preparations for Alfredos assumption of mortgage essentially novated the agreement. Issues : 1) Whether or not the Court of Appeals erred in holding that Art. 1236 of the Civil Code does not apply and in finding that thereis novation.2) Whether or not the Court of Appeals misconstrued the evidence and the law when it affirmed the trial court decisions ordering Land Bank to pay Ong the amount of Php750,000.00 with interest at 12% annum. Ruling : The Supreme Court affirmed with modification to the appealed decision that recourse against Land Bank. Land Bank contends that Art.1236 of the Civil Code backs their claim that Alfredo should have sought recourse against the Spouses Sy instead of Land Bank. The courtagreed with Land Bank on the point mentioned as to the first part of paragraph 1 of Art. 1236. However,. Alfredo made a conditionalpayment so that the properties subject of the Deed of Sale with Assumption of Mortgage which Land Bank required from him would beapproved. Thus, he made payment not as a debtor but as a prospective mortgagor. Furthermore, the contract between Alfredo and LandBank was not perfected nor consummated because of the adverse disapproval of the proposed assumption. The Supreme Court did notagree with the Court of Appeals that there was novation in the contract between the parties because not all elements of novation werepresent.The court further stresses that the instant case would not have been litigated had Land Bank been more circumspect in dealing with Alfredo. The bank chose to accept payment from Alfredo even before a credit investigation was underway and also failed to informed him of the disapproval. The court found that there was negligence to a certain degree on the part of Land Bank in handling the transaction with Alfredo. A bank as a business entity should observe a higher standard of diligence when dealing with the public which Land Bank neglect toobserve in this case.The petitionersappeal was denied by the Supreme Court and the decision of the Court of Appeals was affirmed with modification in thatthe amount of PhP 750,000 will earn interest at 6% per annum and the total aggregate monetary awards will in turn earn 12% per annumfrom the finality of this Decision until fully paid. _____________________________ ST. CATHERINE REALTY CORPORATION and LAND KING REALTY DEVELOPMENT CORPORATION,Petitioners, vs. FERDINAND Y. PINEDA and DOLORES S. LACUATA, Respondents. The Antecedent Facts On 5 March 1991, Ferdinand Y. Pineda (Pineda) bought a parcel of land from George Lizares (Lizares) which was part of a 19.42 hectare property known as Lot No. 2012 registered under Transfer Certificate of Title (TCT) No. 3533. On even date, Dolores S. Lacuata (Lacuata) bought from Lizares 1.83 hectares of land known as Lot No. 2013 registered under TCT No. 3531. At the time of the sale, the properties were still under the name of Encarnacion Lizares (Encarnacion) from whom Lizares acquired them, prompting Pineda and Lacuata (respondents) to record adverse claims on the titles. On 26 July 1994, respondents filed an action for specific performance against Lizares and his wife Francesca Musni before the Regional Trial Court of San Fernando, Pampanga, Branch 45 (RTC Branch 45). Respondents prayed for the surrender and cancellation of TCT Nos. 3531 and 3533 and for the issuance of new copies to allow the registration of the sale in favor of Lacuata on TCT No. 3531 and the segregation of the parcel of land bought by Pineda from TCT No. 3533. Respondents were joined in their complaint by their counsel, Atty. Ernesto Pineda (Atty. Pineda), who also bought from Lizares a portion of a five-hectare land covered by TCT No. 3522. Atty. Pineda filed a notice of lis pendens over the lots covered by TCT Nos. 3522, 3531 and 3533, as well as other lots over which he claimed attorneys lien. It appears that the lots covered by TCT Nos. 3531 and 3533 were placed under the land reform program and were parceled out to agricultural tenants through emancipation patents issued in 1993. In February 1994, prior to the filing of Civil Case No. 10265, Lizares filed an action before the Provincial Agrarian Reform Adjudicator (PARAD) for the annulment of the inclusion of his lands under Presidential Decree No. 27. 4 In April 1995, Lizares filed three more complaints for the cancellation of the emancipation patents issued in favor of the agricultural tenants. PARAD dismissed the complaints. In 1997, the Department of Agrarian Reform Adjudication Board (DARAB) affirmed the PARADs decision. The recipients of the emancipation patents, which at that time had become the registered owners of the land subject of the complaint, filed a Motion for Leave to Intervene as Party Defendants, with Motion to Dismiss and Cancellation of Lis Pendens, in Civil Case No. 10265. In an Order 5 dated 5 May 1997, the RTC Branch 45 dismissed Civil Case No. 10265 without prejudice. The RTC Branch 45 ruled that the prayer for the cancellation of

the TCTs in the name of Encarnacion was rendered moot but the plaintiffs could file a criminal action or an action for damages against Lizares. The RTC Branch 45 opined that when the lots were brought under the Land Reform Program, they could no longer be sold and the sale to respondents was null and void. Respondents, as well as Atty. Pineda, appealed from the decision in Civil Case No. 10265 before the Court of Appeals. The case was docketed as CA-G.R. CV No. 56769. In a Resolution dated 8 March 2000, 6 the Court of Appeals dismissed the appeal. In a Resolution dated 17 May 2000,7 the Court of Appeals denied the motion for reconsideration for late filing. A petition for review, docketed as G.R. No. 143492, was filed before this Court. This Court denied the petition on 21 August 20008 for failure of petitioners to give an explanation on why service of copies of the petition on respondents was not done personally. This Court denied the motion for reconsideration on 25 June 2001. 9 Meanwhile, Lizares filed a petition for review from the DARABs decision before the Court of Appeals. The case was docketed as CA-G.R. SP No. 47502. On 29 November 2000, 10 the Court of Appeals dismissed the petition and affirmed the DARABs decision. On 26 June 2001, 11 the Court of Appeals denied the motion for reconsideration. Lizares, representing the estate of Encarnacion, file a petition for review12 before this Court, docketed as G.R. No. 148777. The case was still pending upon the filing of CA-G.R. SP No. 82909. The case before us originated from Civil Case No. 12194 filed on 8 January 2001 by respondents before the Regional Trial Court of San Fernando, Pampanga, Branch 44 (RTC Branch 44) against St. Catherine Realty Corporation (SCRC) and Land King Realty Development Corporation (LKRDC), the Registrar of Deeds of San Fernando, Pampanga, and Tomas Dizon for annulment of titles and damages. At the time of filing of Civil Case No. 12194, G.R. No. 143492 (originating from Civil Case No. 10265) was still pending before this Court and CA-G.R. SP No. 47502 was still pending before the Court of Appeals. Respondents alleged that the properties they purchased from Lizares were subdivided and transferred to subsequent buyers, 13 the latest buyers being SCRC and LKRDC (petitioners) who were buyers in bad faith. Respondents alleged that the Registar of Deeds failed to carry over their adverse claims annotated on TCT Nos. 3533 and 3531 in the subsequent titles. Petitioners filed a motion to dismiss on the ground that respondents submitted a false certification of forum shopping. The Decision of the Trial Court In an Order dated 29 August 2001,14 the RTC Branch 44 granted the motion to dismiss and dismissed the complaint. Respondents filed a motion for reconsideration. In an Order dated 31 July 2002, 15 the RTC Branch 44 set aside its 29 August 2001 Order and directed petitioners to file their answer to the complaint. It was petitioners turn to move for reconsideration of the trial courts order, with motion for inhibition of Judge Patrocinio R. Cor puz (Judge Corpuz). In an Order dated 23 September 2002, Judge Corpuz inhibited himself from further hearing the case. The case was re-raffled to the Regional Trial Court of San Fernando, Pampanga, Branch 47 (RTC Branch 47). In an Order dated 20 January 2004,16 the RTC Branch 47 denied the motion for reconsideration for lack of merit. Petitioners filed a petition for certiorari before the Court of Appeals assailing the 31 July 2002 Order of RTC Branch 44 and the 20 January 2004 Order of RTC Branch 47. The case was docketed as CA-G.R. SP No. 82909. The Decision of the Court of Appeals In its 29 December 2005 Decision, the Court of Appeals dismissed the petition. Petitioners filed a motion for reconsideration. In its 14 February 2006 Resolution, the Court of Appeals denied the motion. Hence, the petition before this Court. The Issue The issue in this case is whether respondents were guilty of forum shopping. The Ruling of this Court The petition has merit. Forum shopping is the institution of two or more suits in different courts, either simultaneously or successively, in order to ask the courts to rule on the same or related causes or to grant the same or substantially the same reliefs.17 It is an act of malpractice that is prohibited and condemned because it trifles with the courts and abuses their processes.18 It degrades the administration of justice and adds to the already congested court dockets. 19 Its requisites are: (1) identity of parties, or at least such parties who represent the same interests in both actions; (2) identity of the rights asserted and the relief prayed for, the relief being founded on the same facts; and (3) identity of the two preceding particulars such that any judgment rendered in the pending case, regardless of which party is successful, would amount to res judicata in the other.20

We agree with the Court of Appeals that there was no identity of parties between this case for annulment of title and damages, which originated from Civil Case No. 12194, and the DARAB cases filed by Lizares against the emancipation tenants. The Court of Appeals noted that Lizares already sold portions of the estate to respondents three years before he filed the DARAB cases. Respondents were not even parties in the DARAB cases. However, we agree with petitioners that there was forum shopping when Civil Case No. 12194 was filed. Contrary to the findings of the Court of Appeals, Civil Case No. 10265 was not discussed in the complaint in Civil Case No. 12194. The complaint in Civil Case No. 12194 merely stated: 2.5 During the pendency of Civil Case No. 10265, the lot covered by TCT No. 3533 was subdivided and transferred to subsequent buyers. In pursuance of the law, the Lis Pendens was carried over to the subsequent titles, particularly: Xerox copies of said titles evidencing the Lis Pendens are hereto attached at Annexes "E", "F", "G", "H", "I", "J" and "K" respectively which are made integral parts hereof. 2.6 In May 2000 or thereabouts, the aforesaid titles were cancelled and new titles issued in the respective names of the following defendants: Xerox copies of said titles are hereto attached at Annexes "E-1", "F-1", "G-1", "H-1", "I-1", "J-1" and "K-1" respectively which are all made integral parts hereof.21 The complaint merely enumerated the transfer of titles. Respondents failed to apprise the RTC Branch 44 about the status of Civil Case No. 10265 at the time of the filing of the complaint in Civil Case No. 12194, particularly the pendency of G.R. No. 143492 before this Court. Further, we do not agree with the Court of Appeals that the subject properties were not re-litigated just because the titles of the intervenors in Civil Case No. 10265 are TCT Nos. 21087, 21089-91 and 21093-93 while the titles affected in Civil Case No. 12194 are TCT Nos. 432435-R to 432439-R, 43241-R and 432444-R. The subject matter of the complaint in Civil Case No. 10265 were the lots covered by TCT Nos. 3531 and 3533. The intervenors were claiming the lots covered by TCT Nos. 3531 and 3533. TCT Nos. 432435-R to 432439-R, 43241-R and 432444-R were titles issued to petitioners but were all derived from TCT Nos. 3531 and 3533. Petitioners were the successorsin-interest of Lizares as the buyers of the lots previously covered by TCT Nos. 3531 and 3533.1avvphi1 As to the presence of intervenors, litis pendencia does not require a literal identity of parties.22 It is sufficient that there is identity of interests represented.23 The main parties in Civil Case No. 10265 and Civil Case No. 12194 are substantially the same despite the presence of intervenors in Civil Case No. 10265. On the identity of rights asserted and relief prayed for, respondents were claiming the lots they purchased from Lizares in both cases except that in Civil Case No. 12194, they were claiming from petitioners as Lizares successors-in-interest. It follows that the judgment rendered in one case will invariably affect, and would constituteres judicata, in the other case. WHEREFORE, we GRANT the petition. We SET ASIDE the 29 December 2005 Decision and 14 February 2006 Resolution of the Court of Appeals in CA-G.R. SP No. 82909, the Order dated 20 January 2004 of the Regional Trial Court of San Fernando, Pampanga, Branch 47 and the Order dated 31 July 2002 of the Regional Trial Court of San Fernando, Pampanga, Branch 44. We REINSTATE the Order dated 29 August 2001 of the Regional Trial Court of San Fernando, Pampanga, Branch 44 which dismissed the complaint. _______________________ SOLIDBANK CORPORATION, (now Metroplolitan Bank and Trust Company) , Petitioner, vs. PERMANENT HOMES, INCORPORATED , Respondent . FACTS: The records disclose that PERMANENT HOMES is a real estate development company, and to finance its housing project known as the Buena Vida Townhome located within Merville Subdivision,Paraaque City, it applied and was subsequently granted by SOLIDBANK with an Omnibus Line credit facility in the total amount of SIXTY MILLION PESOS. Of the entire loan, FIFTY NINE MILLION as time loanfor a term of up to three hundred sixty (360) days, with interest thereon at prevailing market rates, andsubject to monthly repricing. The remaining ONE MILLION was available for domestic bills purchase.To secure the aforesaid

loan, PERMANENT HOMES initially mortgaged three(3) townhouse units withinthe Buena Vida project in Paraaque. At the time, however, the instant complaint was filed againstSOLIDBANK, a total of thirty six (36) townhouse units were mortgaged with said bank. Of the 60 millionavailable to PERMANENT HOMES, it availed of a total of 41.5 million pesos covered by three(3)promissory notes. There was a standing agreement by the parties that any increase or decrease ininterest rates shall be subject to the mutual agreement of the parties.For the three loan availments that PERMANENT HOMES obtained, the herein respondent argued thatSOLIDBANK unilaterally and arbitrarily accelerated the interest rates without any declared basis of suchincreases, of which PERMANENT HOMES had not agreed to, or at the very least, been informed of.On July 5, 2002, the trial court promulgated its Decision in favor of Solidbank. Permanent then filed anappeal before the appellate court which was granted, in which reversed and set aside the assaileddecision dated July 5, 2002. Hence, the present petition. ISSUES: (1) WON the Honorable Court of Appeals was correct in ruling that the increases in the interest rates on Permanents loans are void for having been unilate rally imposed without basis. (2) WON the Honorable Court of Appeals was correct in ordering the parties to enter into an express agreement regarding the applicable interest rates on Permanents loan availments subsequent to the initial thirty-day (30) period. RULING: (1) Yes. Although interest rates are no longer subject to a ceiling, the lender still does not havean unbridled license to impose increased interest rates. The lender and the borrower should agree onthe imposed rate, and such imposed rate should be in writing of which was not provided by petitioner. (2) Yes. In order that obligations arising from contracts may have the force of law between the parties,there must be mutuality between the parties based on their essential quality. A contract containing acondition which makes its fulfillment dependent exclusively upon the uncontrolled will of one of thecontracting parties is void. There was no showing that either Solidbank or Permanent coerced eachother to enter into the loan agreements. The terms of the Omnibus Line Agreement and the promissorynotes were mutually and freely agreed upon by the parties ______________ Pentacapital investment Co. vs Mahinay Loan; promissory note: elements. To ascertain whether or not respondent is bound by the promissory notes, it must be established that all the elements of a contract of loan are present. Like any other contract, a contract of loan is subject to the rules governing the requisites and validity of contracts in general. It is elementary in this jurisdiction that what determines the validity of a contract, in general, is the presence of the following elements: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation which is established. Under Article 1354 of the Civil Code, it is presumed that consideration exists and is lawful unless the debtor proves the contrary. Moreover, under Section 3, Rule 131 of the Rules of Court, the following are disputable presumptions: (1) private transactions have been fair and regular; (2) the ordinary course of business has been followed; and (3) there was sufficient consideration for a contract. Pentacapital Investment Corporation vs. Makilito Mahinay/Pentacapital Investment Corporation Vs. Mikilito Mahinay, G.R. No. 171736, July 5, 2010 ______________ The Facts Petitioner filed a complaint for a sum of money against respondent Makilito Mahinay based on two separate loans obtained by the latter, amounting to P1,520,000.00 and P416,800.00, or a total amount of P1,936,800.00. These loans were evidenced by two promissory notes5 dated February 23, 1996. Despite repeated demands, respondent failed to pay the loans, hence, the complaint.6 In his Answer with Compulsory Counterclaim,7 respondent claimed that petitioner had no cause of action because the promissory notes on which its complaint was based were subject to a condition that did not occur. 8 While admitting that he indeed signed the promissory notes, he insisted that he never took out a loan and that the notes were not intended to be evidences of indebtedness.9 By way of counterclaim, respondent prayed for the payment of moral and exemplary damages plus attorneys fees.10 Respondent explained that he was the counsel of Ciudad Real Development Inc. (CRDI). In 1994, Pentacapital Realty Corporation (Pentacapital Realty) offered to buy parcels of land known as the Molino Properties, owned by CRDI, located in Molino, Bacoor, Cavite. The Molino Properties, with a total area of 127,708 square meters, were

sold at P400.00 per sq m. As the Molino Properties were the subject of a pending case, Pentacapital Realty paid only the down payment amounting to P12,000,000.00. CRDI allegedly instructed Pentacapital Realty to pay the formers creditors, including respondent who thus received a check worth P1,715,156.90.11 It was further agreed that the balance would be payable upon the submission of an Entry of Judgment showing that the case involving the Molino Properties had been decided in favor of CRDI.12 Respondent, Pentacapital Realty and CRDI allegedly agreed that respondent had a charging lien equivalent to 20% of the total consideration of the sale in the amount of P10,277,040.00. Pending the submission of the Entry of Judgment and as a sign of good faith, respondent purportedly returned the P1,715,156.90 check to Pentacapital Realty. However, the Molino Properties continued to be haunted by the seemingly interminable court actions initiated by different parties which thus prevented respondent from collecting his commission. On motion13 of respondent, the Regional Trial Court (RTC) allowed him to file a Third Party Complaint 14 against CRDI, subject to the payment of docket fees.15 Admittedly, respondent earlier instituted an action for Specific Performance against Pentacapital Realty before the RTC of Cebu City, Branch 57, praying for the payment of his commission on the sale of the Molino Properties. 16 In an Amended Complaint,17 respondent referred to the action he instituted as one of Preliminary Mandatory Injunction instead of Specific Performance. Acti ng on Pentacapital Realtys Motion to Dismiss, the RTC dismissed the case for lack of cause of action.18 The dismissal became final and executory. With the dismissal of the aforesaid case, respondent filed a Motion to Permit Supplemental Compulsory Counterclaim.19 In addition to the damages that respondent prayed for in his compulsory counterclaim, he sought the payment of his commission amounting to P10,316,640.00, plus interest at the rate of 16% per annum, as well as attorneys fees equivalent to 12% of his principal claim.20 Respondent claimed that Pentacapital Realty is a 100% subsidiary of petitioner. Thus, although petitioner did not directly participate in the transaction between Pentacapital Realty, CRDI and respondent, the latters claim against petitioner was based on the doctrine of piercing the veil of corporate fiction. Simply stated, respondent alleged that petitioner and Pentacapital Realty are one and the same entity belonging to the Pentacapital Group of Companies.21 Over the opposition of petitioner, the RTC, in an Order 22 dated August 22, 2002, allowed the filing of the supplemental counterclaim. Aggrieved, petitioner sought recourse in the CA through a special civil action for certiorari, seeking to reverse and set aside the RTC Order. The case was docketed as CA-G.R. SP No. 74851. On December 20, 2005, the CA rendered the assailed Decision dismissing the petition. 23 The appellate court sustained the allowance of the supplemental compulsory counterclaim based on the allegations in respondents pleading. The CA further concluded that there was a logical relationship between the claims of petitioner in its complaint and those of respondent in his supplemental compulsory counterclaim. The CA declared that it was inconsequential that respondent did not clearly allege the facts required to pierce the corporate separateness of petitioner and its subsidiary, the Pentacapital Realty.241avvphi1 Petitioner now comes before us in G.R. No. 171736, raising the following issues: A. WHETHER RESPONDENT MAHINAY IS BARRED FROM ASSERTING THE CLAIM CONTAINED IN HIS "SUPPLEMENTAL COMPULSORY COUNTERCLAIM" ON THE GROUNDS OF (1) RES JUDICATA, (2) WILLFUL AND DELIBERATE FORUM SHOPPING, AND (3) FAILURE TO INTERPOSE SUCH CLAIM ON TIME PURSUANT TO SECTION 2 OF RULE 9 OF THE RULES OF COURT; B. WHETHER RESPONDENT MAHINAYS SUPPLEMENTAL COMP ULSORY COUNTERCLAIM IS ACTUALLY A THIRD-PARTY COMPLAINT AGAINST PENTACAPITAL REALTY, THE INTRODUCTION OF WHICH REQUIRES THE PAYMENT OF THE NECESSARY DOCKET FEES; C. ASSUMING FOR THE SAKE OF PURE ARGUMENT THAT IT IS PROPER TO PIERCE THE CORPORATE VEIL AND TO ALLOW RESPONDENT MAHINAY TO LODGE A "SUPPLEMENTAL COMPULSORY COUNTERCLAIM" AGAINST HEREIN PETITIONER PENTACAPITAL INVESTMENT FOR AN ALLEGED OBLIGATION OF ITS SUBSIDIARY, PENTACAPITAL REALTY, ON THE THEORY THAT THEY ARE "ONE AND THE SAME COMPANY," WHETHER PENTACAPITAL REALTY SHOULD HAVE AT LEAST BEEN MADE A PARTY TO THE CASE AS RULED BY THIS HONORABLE COURT IN FILMERCO COMMERCIAL CO., INC. VS. INTERMEDIATE APPELLATE COURT; D.

WHETHER RESPONDENT MAHINAY SHOULD BE ALLOWED TO PRESENT EVIDENCE ON HIS SOCALLED "SUPPLEMENTAL COMPULSORY COUNTERCLAIM" INASMUCH AS (1) RESPONDENT MAHINAYS PLEADINGS ARE BEREFT OF ANY ALLEGATIONS TO BUTTRESS THE MERGING OF PENTACAPITAL REALTY AND PENTACAPITAL INVESTMENT INTO ONE ENTITY AND THE CONSEQUENT IMPUTATION ON THE LATTER OF THE FORMERS SUPPOSED LIABILITY ON RESPONDENT MAHINAYS SUPPLEMENTAL COMPULSORY COUNTERCLAIM, AND (2) THE INCIDENTS ALLEGEDLY PERTAINING TO, AND WHICH WOULD THEREBY SUPPORT, THE PIERCING OF CORPORATE VEIL ARE NOT EVIDENTIARY MATTERS MATERIAL TO THE PROCEEDINGS BEFORE THE COURT A QUO CONSIDERING THAT THE SAME ARE BEYOND THE SCOPE OF THE PLEADINGS; E. WHETHER THE DOCTRINE OF PIERCING THE CORPORATE VEIL MAY BE INVOKED AND APPLIED IN ORDER TO EVADE AN OBLIGATION AND FACILITATE PROCEDURAL WRONGDOING; AND F. WHETHER PETITIONER PENTACAPITAL INVESTMENT COMMITTED FORUM SHOPPING WHEN IT FILED THE PRESENT PETITION DURING THE PENDENCY OF THE MOTION FOR RECONSIDERATION IT FILED BEFORE THE COURT A QUO AND, SUBSEQUENTLY, OF THE APPEAL BEFORE THE COURT OF APPEALS TO QUESTION THE JUDGMENT OF THE COURT A QUO.25 There being no writ of injunction or Temporary Restraining Order (TRO), the proceedings before the RTC continued and respondent was allowed to present his evidence on his supplemental compulsory counterclaim. After trial on the merits, the RTC rendered a decision26 dated March 20, 2006, the dispositive portion of which reads: WHEREFORE, PREMISES CONSIDERED, plaintiffs complaint is hereby ordered dismissed for lack of merit. This court, instead, finds that defendant was able to prove by a clear preponderance of evidence his cause of action against plaintiff as to defendants compulsory and supplemental counterclaims. That, therefore, this court hereby orders the plaintiff to pay unto defendant the following sums, to wit: 1. P1,715,156.90 representing the amount plaintiff is obligated to pay defendant as provided for in the deed of sale and the supplemental agreement, plus interest at the rate of 16% per annum, to be computed from September 23, 1998 until the said amount shall have been fully paid; 2. Php 10,316,640.00 representing defendants share of the proceeds of the sale of the Molino property (defendants charging lien) plus interest at the rate of 16% per annum, to be computed from September 23, 1998 until the said amount shall have been fully paid; 3. Php 50,000.00 as attorneys fees based on quantum meruit; 4. Php 50,000.00 litigation expenses, plus costs of suit. This court finds it unnecessary to rule on the third party complaint, the relief prayed for therein being dependent on the possible award by this court of the relief of plaintiffs complaint.27 On appeal, the CA, in CA-G.R. CV No. 86939, affirmed in toto the above decision. The CA found no basis for petitioner to collect the amount demanded, there being no perfected contract of loan for lack of consideration. 28As to respondents supplemental compulsory counterclaim, quoting the findings of the RTC, the appellate court held that respondent was able to prove by preponderance of evidence that it was the intent of Pentacapital Group of Companies and CRDI to give him P10,316,640.00 and P1,715,156.90.29 The CA likewise affirmed the award of interest at the rate of 16% per annum, plus damages.30 Unsatisfied, petitioner moved for reconsideration of the aforesaid Decision, but it was denied in a Resolution 31dated January 21, 2008. Hence, the present petition in G.R. No. 181482, anchored on the following arguments: A. Considering that the inferences made in the present case are manifestly absurd, mistaken or impossible, and are even contrary to the admissions of respondent Mahinay, and inasmuch as the judgment is premised on a misapprehension of facts, this Honorable Court may validly take cognizance of the errors relative to the findings of fact of both the Honorable Court of Appeals and the court a quo. B.

Respondent Mahinay is liable to petitioner PentaCapital Investment for the PhP1,936,800.00 loaned to him as well as for damages and attorneys fees. 1. The Honorable Court of Appeals erred in concluding that respondent Mahinay failed to receive the money he borrowed when there is not even any dispute as to the fact that respondent Mahinay did indeed receive the PhP1,936,800.00 from petitioner PentaCapital Investment. 2. The Promissory Notes executed by respondent Mahinay are valid instruments and are binding upon him. C. Petitioner PentaCapital Investment cannot be held liable on the supposed "supplemental compulsory counterclaim" of respondent Mahinay. 1. The findings of fact as well as the conclusions arrived at by the Court of Appeals in its decision were based on mistaken assumptions and on erroneous appreciation of the evidence on record. 2. There is no evidence on record to support the merging of PentaCapital Realty and petitioner PentaCapital Investment into one entity and the consequent imputation on the latter of the formers supposed liability on respondent Mahinays supplemental compulsory counterclaim. 3. Inasmuch as the claim of respondent Mahinay is supposedly against PentaCapital Realty, and considering that petitioner PentaCapital Investment is a separate, distinct entity from PentaCapital Realty, the latter should have been impleaded as it is an indispensable party. D. Assuming for the sake of pure argument that it is proper to disregard the corporate fiction and to consider herein petitioner PentaCapital Investment and its subsidiary, PentaCapital Realty, as one and the same entity, respondent Mahinays "supplemental compulsory counterclaim" must still necessarily fail. 1. The cause of action of respondent Mahinay, as contained in his "supplemental compulsory counterclaim," is already barred by a prior judgment (res judicata). 2. Considering that the dismissal on the merits by the RTC Cebu of respondent Mahinays complaint against PentaCapital Realty for attorneys fees has attained finality, respondent Mahinay committed a willful act of forum shopping when he interposed the exact same claim in the proceedings a quo as a supposed supplemental compulsory counterclaim against what he claims to be "one and the same" company. 3. Respondent Mahinays supplemental compulsory counterclaim is actually a third party complaint against PentaCapital Realty; the filing thereof therefore requires the payment of the necessary docket fees. E. The doctrine of piercing the corporate veil is an equitable remedy which cannot and should not be invoked, much less applied, in order to evade an obligation and facilitate procedural wrongdoing. 32

Simply put, the issues for resolution are: 1) whether the admission of respondents supplemental compulsory counterclaim is proper; 2) whether respondents counterclaim is barred by res judicata; and (3) whether petitioner is guilty of forum-shopping. The Courts Ruling Admission of Respondents Supplemental Compulsory Counterclaim The pertinent provision of the Rules of Court is Section 6 of Rule 10, which reads: Sec. 6. Supplemental pleadings. Upon motion of a party, the court may, upon reasonable notice and upon such terms as are just, permit him to serve a supplemental pleading setting forth transactions, occurrences or events which have happened since the date of the pleading sought to be supplemented. The adverse party may plead thereto within ten (10) days from notice of the order admitting the supplemental pleading. As a general rule, leave will be granted to a party who desires to file a supplemental pleading that alleges any material fact which happened or came within t he partys knowledge after the original pleading was filed, such being the office of a supplemental pleading. The application of the rule would ensure that the entire controversy might be settled in one action, avoid unnecessary repetition of effort and unwarranted expense of litigants, broaden the scope of the issues in an action owing to the light thrown on it by facts, events and occurrences which have accrued after the filing of the original pleading, and bring into record the facts enlarging or charging the kind of relief to which plaintiff is entitled. It is the policy of the law to grant relief as far as possible for wrongs complained of, growing out of the same transaction and thus put an end to litigation.33 In his Motion to Permit Supplemental Compulsory Counterclaim, respondent admitted that, in his Answer with Compulsory Counterclaim, he claimed that, as one of the corporations composing the Pentacapital Group of Companies, petitioner is liable to him for P10,316,640.00, representing 20% attorneys fees and share in the proceeds of the sale transaction between Pentacapital Realty and CRDI. In the same pleading, he further admitted that he did not include this amount in his compulsory counterclaim because he had earlier commenced another action for the collection of the same amount against Pentacapital Realty before the RTC of Cebu. With the dismissal of the RTC-Cebu case, there was no more legal impediment for respondent to file the supplemental counterclaim. Moreover, in his Answer with Compulsory Counterclaim, respondent already alleged that he demanded from Pentacapital Group of Companies to which petitioner supposedly belongs, the payment of his 20% commission. This, in fact, was what prompted respondent to file a complaint before the RTC-Cebu for preliminary mandatory injunction for the release of the said amount. Given these premises, it is obvious that the alleged obligation of petitioner already existed and was known to respondent at the time of the filing of his Answer with Counterclaim. He should have demanded payment of his commission and share in the proceeds of the sale in that Answer with Compulsory Counterclaim, but he did not. He is, therefore, proscribed from incorporating the same and making such demand via a supplemental pleading. The supplemental pleading must be based on matters arising subsequent to the filing of the original pleading related to the claim or defense presented therein, and founded on the same cause of action. 34 Supplemental pleadings must state transactions, occurrences or events which took place since the time the pleading sought to be supplemented was filed.35 Even on the merits of the case, for reasons that will be discussed below, respondents counterclaim is doomed to fail. Petitioners Complaint In its complaint for sum of money, petitioner prayed that respondent be ordered to pay his obligation amounting toP1,936,800.00 plus interest and penalty charges, and attorneys fees. This obligation was evidenced by two promissory notes executed by respondent. Respondent, however, denied liability on the ground that his obligation was subject to a condition that did not occur. He explained that the promissory notes were dependent upon the happening of a remote event that the parties tried to anticipate at the time they transacted with each other, and the event did not happen.36 He further insisted that he did not receive the proceeds of the loan. To ascertain whether or not respondent is bound by the promissory notes, it must be established that all the elements of a contract of loan are present. Like any other contract, a contract of loan is subject to the rules governing the requisites and validity of contracts in general. It is elementary in this jurisdiction that what determines the validity of a contract, in general, is the presence of the following elements: (1) consent of the contracting parties; (2) object certain which is the subject matter of the contract; and (3) cause of the obligation which is established. 37

In this case, respondent denied liability on the ground that the promissory notes lacked consideration as he did not receive the proceeds of the loan. We cannot sustain his contention. Under Article 1354 of the Civil Code, it is presumed that consideration exists and is lawful unless the debtor proves the contrary.38 Moreover, under Section 3, Rule 131 of the Rules of Court, the following are disputable presumptions: (1) private transactions have been fair and regular; (2) the ordinary course of business has been followed; and (3) there was sufficient consideration for a contract. 39 A presumption may operate against an adversary who has not introduced proof to rebut it. The effect of a legal presumption upon a burden of proof is to create the necessity of presenting evidence to meet the legal presumption or the prima facie case created thereby, and which, if no proof to the contrary is presented and offered, will prevail. The burden of proof remains where it is, but by the presumption, the one who has that burden is relieved for the time being from introducing evidence in support of the averment, because the presumption stands in the place of evidence unless rebutted. 40 In the present case, as proof of his claim of lack of consideration, respondent denied under oath that he owed petitioner a single centavo. He added that he did not apply for a loan and that when he signed the promissory notes, they were all blank forms and all the blank spaces were to be filled up only if the sale transaction over the subject properties would not push through because of a possible adverse decision in the civil cases involving them (the properties). He thus posits that since the sale pushed through, the promissory notes did not become effective. Contrary to the conclusions of the RTC and the CA, we find such proof insufficient to overcome the presumption of consideration. The presumption that a contract has sufficient consideration cannot be overthrown by the bare, uncorroborated and self-serving assertion of respondent that it has no consideration.41 The alleged lack of consideration must be shown by preponderance of evidence. 42 As it now appears, the promissory notes clearly stated that respondent promised to pay petitioner P1,520,000.00 and P416,800.00, plus interests and penalty charges, a year after their execution. Nowhere in the notes was it stated that they were subject to a condition. As correctly observed by petitioner, respondent is not only a lawyer but a law professor as well. He is, therefore, legally presumed not only to exercise vigilance over his concerns but, more importantly, to know the legal and binding effects of promissory notes and the intricacies involving the execution of negotiable instruments including the need to execute an agreement to document extraneous collateral conditions and/or agreements, if truly there were such.43 This militates against respondents claim that there was indeed such an agreement. Thus, the promissory notes should be accepted as they appear on their face. Respondents liability is not negated by the fact that he has uncollected commissions from the sale of the Molino properties. As the records of the case show, at the time of the execution of the promissory notes, the Molino properties were subject of various court actions commenced by different parties. Thus, the sale of the properties and, consequently, the payment of respondents commissions were put on hold. The non -payment of his commissions could very well be the reason why he obtained a loan from petitioner. In Sierra v. Court of Appeals,44 we held that: A promissory note is a solemn acknowledgment of a debt and a formal commitment to repay it on the date and under the conditions agreed upon by the borrower and the lender. A person who signs such an instrument is bound to honor it as a legitimate obligation duly assumed by him through the signature he affixes thereto as a token of his good faith. If he reneges on his promise without cause, he forfeits the sympathy and assistance of this Court and deserves instead its sharp repudiation. Aside from the payment of the principal obligation of P1,936,800.00, the parties agreed that respondent pay interest at the rate of 25% from February 17, 1997 until fully paid. Such rate, however, is excessive and thus, void. Since the stipulation on the interest rate is void, it is as if there was no express contract thereon. To be sure, courts may reduce the interest rate as reason and equity demand.45 In this case, 12% interest is reasonable. The promissory notes likewise required the payment of a penalty charge of 3% per month or 36% per annum. We find such rates unconscionable. This Court has recognized a penalty clause as an accessory obligation which the parties attach to a principal obligation for the purpose of ensuring the performance thereof by imposing on the debtor a special prestation (generally consisting of the payment of a sum of money) in case the obligation is not fulfilled or is irregularly or inadequately fulfilled. 46 However, a penalty charge of 3% per month is unconscionable;47 hence, we reduce it to 1% per month or 12% per annum, pursuant to Article 1229 of the Civil Code which states: Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable.48

Lastly, respondent promised to pay 25% of his outstanding obligations as attorneys fees in case of non-payment thereof. Attorneys fees here are in the nature of liquidated damages. As long as said stipulation does not contravene law, morals, or public order, it is strictly binding upon respondent. Nonetheless, courts are empowered to reduce such rate if the same is iniquitous or unconscionable pursuant to the above-quoted provision.49 This sentiment is echoed in Article 2227 of the Civil Code, to wit: Art. 2227. Liquidated damages, whether intended as an indemnity or a penalty, shall be equitably reduced if they are iniquitous or unconscionable. Hence, we reduce the stipulated attorneys fees from 25% to 10%. 50 Respondents Counterclaim and Supplemental Counterclaim The RTC, affirmed by the CA, granted respondents counterclaims as it applied the doctrine of piercing the veil of corporate fiction. It is undisputed that the parties to the contract of sale of the subject properties are Pentacapital Realty as the buyer, CRDI as the seller, and respondent as the agent of CRDI. Respondent insisted, and the RTC and the CA agreed, that petitioner, as the parent company of Pentacapital Realty, was aware of the sale transaction, and that it was the former who paid the consideration of the sale. Hence, they concluded that the two corporations should be treated as one entity. Petitioner assails the CA Decision sustaining the grant of respondents counterclaim and supplemental counterclaim on the following grounds: first, respondents claims are barred by res judicata, the same having been adjudicated with finality by the RTC-Cebu in Civil Case No. CEB-25032; second, piercing the veil of corporate fiction is without basis; third, the case is dismissible for failure to implead Pentacapital Realty as indispensable party; and last, respondents supplemental counterclaim is actually a third party complaint against Pentacapital Realty, the filing thereof requires the payment of the necessary docket fees. Petitioners contentions are meritorious. Res judicata means "a matter adjudged; a thing judicially acted upon or decided; a thing or matter settled by judgment." It lays the rule that an existing final judgment or decree rendered on the merits, without fraud or collusion, by a court of competent jurisdiction, upon any matter within its jurisdiction, is conclusive of the rights of the parties or their privies, in all other actions or suits in the same or any other judicial tribunal of concurrent jurisdiction on the points and matters in issue in the first suit. 51 The requisites of res judicata are: (1) The former judgment or order must be final; (2) It must be a judgment on the merits; (3) It must have been rendered by a court having jurisdiction over the subject matter and the parties; and (4) There must be between the first and second actions, identity of parties, subject matter, and cause of action.52 These requisites are present in the instant case. It is undisputed that respondent instituted an action for Preliminary Mandatory Injunction against Pentacapital Realty, before the RTC of Cebu City, docketed as Civil Case No. CEB25032. On motion of Pentacapital Realty, in an Order dated August 15, 2001, the court dismissed the complaint on two grounds: 1) non-payment of the correct filing fee considering that the complaint was actually a collection of sum of money although denominated as Preliminary Mandatory Injunction; and 2) lack of cause of action. The court treated the complaint as a collection suit because respondent was seeking the payment of his unpaid commission or share in the proceeds of the sale of the Molino Properties. Additionally, the RTC found that respondent had no cause of action against Pentacapital Realty, there being no privity of contract between them. Lastly, the court held that it was CRDI which agreed that 20% of the total consideration of the sale be paid and delivered to respondent. 53 Instead of assailing the said Order, respondent filed his supplemental compulsory counterclaim, demanding again the payment of his commission, this time, against petitioner in the instant case. The Order, therefore, became final and executory. Respondents supplemental counterclaim against petitioner is anchored on the doctrine of piercing the veil of corporate fiction. Obviously, after the dismissal of his complaint before the RTC-Cebu, he now proceeds against petitioner, through a counterclaim, on the basis of the same cause of action. Thus, if we follow respondents contention that petitioner and Pentacapital Realty are one and the same entity, the latter being a subsidiary of the former, respondent is barred from instituting the present case based on the principle of bar by prior judgment. The RTC-Cebu already made a definitive conclusion that Pentacapital Realty is not a privy to the contract between respondent and CRDI. It also categorically stated that it was CRDI which agreed to pay respondents com mission equivalent to 20% of the proceeds of the sale. With these findings, and considering that petitioners alleged liability stems from its supposed relation with Pentacapital Realty, logic dictates that the findings of the RTC-Cebu, which had become final and executory, should bind petitioner.

It is well-settled that when material facts or questions in issue in a former action were conclusively settled by a judgment rendered therein, such facts or questions constitute res judicata and may not again be litigated in a subsequent action between the same parties or their privies regardless of the form of the latter. 54 Absolute identity of parties is not required, and where a shared identity of interest is shown by the identity of the relief sought by one person in a prior case and the second person in a subsequent case, such was deemed sufficient. 55There is identity of parties not only when the parties in the cases are the same, but also between those in privity with them. No other procedural law principle is indeed more settled than that once a judgment becomes final, it is no longer subject to change, revision, amendment, or reversal, except only for correction of clerical errors, or the making of nunc pro tunc entries which cause no prejudice to any party, or where the judgment itself is void. The underlying reason for the rule is two-fold: (1) to avoid delay in the administration of justice and thus make orderly the discharge of judicial business; and (2) to put judicial controversies to an end, at the risk of occasional errors, inasmuch as controversies cannot be allowed to drag on indefinitely and the rights and obligations of every litigant must not hang in suspense for an indefinite period of time.56 In view of the foregoing disquisitions, we find no necessity to discuss the other issues raised by petitioner. Forum Shopping For his part, respondent adopts the conclusions made by the RTC and the CA in granting his counterclaims. He adds that the petition should be dismissed on the ground of forum-shopping. He argues that petitioner is guilty of forumshopping by filing the petition for review (G.R. No. 181482), assailing the CA Decision dated October 4, 2007, despite the pendency of G.R. No. 171736 assailing the CA Decision dated December 20, 2005. We do not agree with respondent. Forum-shopping is the act of a litigant who repetitively availed of several judicial remedies in different courts, simultaneously or successively, all substantially founded on the same transactions and the same essential facts and circumstances, and all raising substantially the same issues, either pending in or already resolved adversely by some other court, to increase his chances of obtaining a favorable decision if not in one court, then in another.57 What is important in determining whether forum-shopping exists is the vexation caused the courts and partieslitigants by a party who asks different courts and/or administrative agencies to rule on the same or related causes and/or grant the same or substantially the same reliefs, in the process creating the possibility of conflicting decisions being rendered by the different fora upon the same issues.58 Forum-shopping can be committed in three ways: (1) by filing multiple cases based on the same cause of action and with the same prayer, the previous case not having been resolved yet (where the ground for dismissal is litis pendentia); (2) by filing multiple cases based on the same cause of action and with the same prayer, the previous case having been finally resolved (where the ground for dismissal is res judicata); and (3) by filing multiple cases based on the same cause of action but with different prayers (splitting of causes of action, where the ground for dismissal is also either litis pendentia or res judicata).591avvphi1 More particularly, the elements of forum-shopping are: (a) identity of parties or at least such parties that represent the same interests in both actions; (b) identity of rights asserted and reliefs prayed for, the relief being founded on the same facts; (c) identity of the two preceding particulars, such that any judgment rendered in the other action will, regardless of which party is successful, amount to res judicata in the action under consideration.60 These elements are not present in this case. In G.R. No. 171736, petitioner assails the propriety of the admission of respondents supplemental compulsory counterclaim; while in G.R. No. 181482, petitioner assails the grant of respondents supplemental compulsory counterclaim. In other words, the first case originated from an interlocutory order of the RTC, while the second case is an appeal from the decision of the court on the merits of the case. There is, therefore, no forum-shopping for the simple reason that the petition and the appeal involve two different and distinct issues. WHEREFORE, premises considered, the petitions are hereby GRANTED. The Decisions and Resolutions of the Court of Appeals dated December 20, 2005 and March 1, 2006, in CA-G.R. SP No. 74851, and October 4, 2007 and January 21, 2008, in CA-G.R. CV No. 86939, are REVERSED and SET ASIDE. Respondent Makilito B. Mahinay is ordered to pay petitioner Pentacapital Investment Corporation P1,936,800.00 plus 12% interest per annum, and 12% per annum penalty charge, starting February 17, 1997. He is likewise ordered to pay 10% of his outstanding obligation as attorneys fees. No pronouncement a s to costs.

Isaguirre v. de Lara G.R. No. 138053, 31 May 2000, 332 SCRA 803 Facts: Alejandro de Lara was the original applicant-claimant for a Miscellaneous Sales Application over a parcel of land filed with the Bureau of Lands on January 17, 1942 and with an area of 2,324 square meters. Upon his death, Alejandro de Lara was succeeded by his wife respondent Felicitas de Lara, as claimant. On November 19, 1954, the Undersecretary of Agriculture and Natural Resources amended the sales application to cover only 1,600 square meters. Then, on November 3, 1961, by virtue of a decision rendered by the Secretary of Agriculture and Natural Resources dated November 19, 1954, a subdivision survey was made and the area was further reduced to 1,000 square meters. On this lot stands a two-story residential-commercial apartment declared for taxation purposes under TD 43927 in the name of respondent's sons Apolonio and Rodolfo, both surnamed de Lara. Sometime in 1953, respondent obtained several loans from the Philippine National Bank. When she encountered financial difficulties, respondent approached petitioner Cornelio M. Isaguirre, who was married to her niece, for assistance. On February 10, 1960, a document denominated as "Deed of Sale and Special Cession of Rights and Interests" was executed by respondent and petitioner, whereby the former sold a 250 square meter portion of Lot No. 502, together with the two-story commercial and residential structure standing thereon, in favor of petitioner, for and in consideration of the sum of P5,000. On August 21, 1969, petitioner filed a sales application over the subject property on the basis of the deed of sale. His application was approved on January 17, 1984, resulting in the issuance of Original Certificate of Title No. P-11566 on February 13, 1984, in the name of petitioner. Meanwhile, the sales application of respondent over the entire 1,000 square meters of subject property (including the 250 square meter portion claimed by petitioner) was also given due course, resulting in the issuance of Original Certificate of Title No. P-13038 on June 19, 1989, in the name of respondent. Due to the overlapping of titles, petitioner filed an action for quieting of title and damages with the Regional Trial Court of Davao City against respondent. After trial on the merits, the trial court rendered judgment on in favor of petitioner, declaring him to be the lawful owner of the disputed property. However, the Court of Appeals reversed the trial court's decision, holding that the transaction entered into by the parties, as evidenced by their contract, was an equitable mortgage, not a sale. As a consequence of its decision, the appellate court also declared Original Certificate of Title No. P-11566 issued in favor of petitioner to be null and void. On July 8, 1996, in a case docketed as G.R. No. 120832, this Court affirmed the decision of the Court of Appeals. Issue: Whether or not the mortgagee has a right of possession over the property Held: A mortgage is a contract entered into in order to secure the fulfillment of a principal obligation. It is constituted by recording the document in which it appears with the proper Registry of Property, although, even if it is not recorded, the mortgage is nevertheless binding between the parties. Thus, the only right granted by law in favor of the mortgagee is to demand the execution and the recording of the document in which the mortgage is formalized. As a general rule, the mortgagor retains possession of the mortgaged property since a mortgage is merely a lien and title to the property does not pass to the mortgagee. However, even though a mortgagee does not have possession of the property, there is no impairment of his security since the mortgage directly and immediately subjects the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation for whose security it was constituted. If the debtor is unable to pay his debt, the mortgage creditor may institute an action to foreclose the mortgage, whether judicially or extrajudicially, whereby the mortgaged property will then be sold at a public auction and the proceeds therefrom given to the creditor to the extent necessary to discharge the mortgage loan. Apparently, petitioner's contention that "[t]o require [him] . . . to deliver possession of the Property to respondent prior to the full payment of the latter's mortgage loan would be equivalent to the cancellation of the mortgage" is without basis. Regardless of its possessor, the mortgaged property may still be sold, with the prescribed formalities, in the event of the debtor's default in the payment of his loan obligation.

Like an innocent purchaser for value, the mortgagee has the right to rely on what appears

on the certificate of title presented to him. In the absence of anything to excite suspicion, he is under no obligation to look beyond the certificate and investigate the title of the mortgagor appearing on the face of the said certificate. _____________
Cabuhat v. Court of Appeals 366 SCRA 176 Facts: Mary Ann Arede, informally adopted by the appellant, obtained a reconstituted owner's duplicate of TCT No. T -56225 thru the use of a falsified court order supposedly issued by the Regional Trial Court of Cavite on December 16, 1988, whereby the court purportedly directed the Register of Deeds of Cavite to issue another owner's duplicate copy of TCT No. T-56225, which Mary Ann Arede claimed to have lost. Using this reconstituted title, Mary Ann Arede mortgaged the land to the Rural Bank, of Noveleta, Cavite on February 28, 1989. Upon release of the mortgage, the land was again mortgaged by Mary Ann Arede on May 16, 1990, this time to appellee Flordeliza Cabuhat for the amount of P300,000.00, which mortgage was registered by appellee on the following day at the Register of Deeds of Cavite. It appeared however that prior to the second mortgage on May 16, 1990, the subject lot was sold by Mary Ann Arede to appellant Mercedes Arede in consideration of the sum of P100,000.00 as evidenced by a Deed of Sale dated January 17, 1990. Unfortunately, this sale was not registered by appellant. Hence, upon knowledge of the mortgage to appellee Cabuhat, appellant was prompted to commence the instant suit for annulment of title. Issue: Whether or not petitioner's mortgage lien over the subject property is valid. Held: Yes. Just as an innocent purchaser for value may rely on what appears in the certificate of title, a mortgagee has the right to rely on what appears in the title presented to him, and in the absence of anything to excite suspicion, he is under no obligation to look beyond the certificate and investigate the title of the mortgagor appearing on the face of the said certificate. Furthermore, it is a well-entrenched legal principle that when an innocent mortgagee who relies upon the correctness of a certificate of title consequently acquires rights over the mortgaged property, the courts cannot disregard such rights. this Court has uniformly held that when a mortgagee relies upon what appears on the face of a Torrens title and loans money in all good faith on the basis of the title in the name of the mortgagor, only thereafter to learn that the latter's title was defective, being thus an innocent mortgagee for value, his or her right or lien upon the land mortgaged must be respected and protected, even if the mortgagor obtained her title thereto through fraud. In the case at bar, there is no doubt that petitioner was an innocent mortgagee for value. When Mary Ann mortgaged the subject property, she presented to petitioner Flordeliza an owner's duplicate certificate of title that had been issued by the Register of Deeds. The title was neither forged nor fake. Petitioner had every right to rely on the said title which showed on its face that Mary Ann was the registered owner. There was no reason to suspect that Mary Ann's ownership was defective. Besides, even if there had been a cloud of doubt, Flordeliza would have found upon verification with the Register of Deeds that Mary Ann was the titled owner and that the original title on file with the said office was free from any lien or encumbrance, and that no adverse claim of ownership was annotated thereon. Petitioner's reliance on the clean title of Mary Ann was reinforced by the fact that the latter had previously mortgaged the same property to a bank which accepted the property as collateral on the strength of the same owner's duplicate copy of the title presented by Mary Ann. Certainly, petitioner Flordeliza cannot be expected or obliged to inquire whether the said owner's duplicate copy presented to her was regularly or irregularly issued, when by its very appearance there was no reason to doubt its validity .Where there is nothing in the certificate of title that would indicate any cloud or vice in the ownership of the property, or any encumbrance thereon, the mortgagee is not required to explore further than what the certificate of title on its face indicates in search of any hidden defect or inchoate right that may thereafter defeat her right thereto. We are not unmindful of the fact that both petitioner and respondent are innocent parties who have been forced to litigate due to the duplicitous acts of Mary Ann, who has not even bothered to make an appearance or participate throughout the litigation of this case. Nevertheless, there is an equitable maxim that between two innocent persons, the one who made it possible for the wrong to be done should be the one to bear the resulting loss. It cannot be denied that Mercedes, in her failure or neglect to register the sale in her favor made it possible for Mary Ann to mortgage the subject property to the

petitioner. Having failed to properly safeguard her own rights, she cannot ask the courts to come to her rescue, when to do so would be at the expense of an innocent mortgagee in good faith. The law and jurisprudence dictate that petitioner's right as a registered mortgagee in good faith and for value is better deserving of protection.

Who is mortgagee in good faith? Adriano v. Pangilinan, G.R. No. 137471, 16 January 2002 ___________

FACTS (Robles v. CA)

Petitioners (all surnamed Robles) trace their ownership of a parcel of land (9,985 sq m.) to Leon and Silvino, their grandfather and father, respectively. Upon Silvinos death in 1942, said petitioners inherited the property and started cultivation thereof. Hilario Robles, private respondent and half-brother of the petitioners, was entrusted with the payment of land taxes due on the property. In 1962, Hilario caused both the cancellation of the tax declaration covering the property and its transfer to Ballane (his father-in-law). Ballane mortgaged the property and, for some reason, the tax declaration thereon was subsequently named to Hilario. The latter then mortgaged the property to private respondent Rural Bank of Cardona. The mortgage was foreclosed and said bank acquired by public bidding the property which was then sold by it to the spouses Santos. Petitioners learned of the mortgage only in 1987. Subsequently, the action was filed, impleading also as parties-defendant the Director of Lands and the District Land Officer sue to an issuance of a free patent in favour of spouses Santos. Trial court ruled in favour of petitioners, declaring null the patent, declaring the heirs of Silvino absolute owners of the subject land. CA reversed on the ground that petitioners no longer had title to the property.

ISSUES
(1) whether petitioners have the appropriate title essential to an action for quieting of title (relevant issue) and whether title claimed by respondents is valid (2) whether REM between Hilario and RBC is valid (3) whether issuance of free patent is valid

HELD
(1) Petitioners have valid title by virtue of their continued and open occupation and possession as owners of the subject property. In this case, the cloud on petitioners title emanate from the apparent validity of the free patent issued and the tax declarations and other evidence in favour of respondents ultimately leading to the transfer of the property to spouses Santos. WRT title of the spouses Santos, such is deemed invalid/inoperative insofar as it is rooted in the title and appropriation of Hilario. Hilario could not have prejudiced the rights of his co-heirs as co-owners of the real estate. He must have first repudiated the ownership clearly and evidently. CA failed to consider the irregularities in the transactions involving the property. No instrument/deed of conveyance was presented to show any transaction between petitioners and Ballane or even Hilario.

(2) Mortgage was only valid insofar as Hilarios undivided interest is concerned there being co-

ownership between the heirs. Court also delved into gross negligence which amounted to bad faith on part of bank by not exercising due diligence in verifying the ownership of the land considering such was unregistered. Free patent was also not valid, the land in question having been converted ipso jure to private land by virtue of the adverse possession in the concept of owners since.

(3) 1916 by the petitioners. Issuance of patents covering private lands is out of the jurisdiction of the Director of Lands or Bureau of Lands.

Hence, the sale of the property in favour of the spouses Santos WRT the share of Hiario was valid but the patent issued was null.

_____________
DEVELOPMENT BANK OF THE PHILIPPINES (DBP) vs. COURT OF APPEALS 331 SCRA 267, April 28, 2000 FACTS :The land in dispute, 19.4 has., was owned by Ulpiano Mumar since 1917. He sold it torespondent Cajes in 1950 for which tax declarations wereissued in 1950, 1961, and1974.In 1969, unknown to Cajes, Jose Alvarez obtained registration of a parcel of land withan area of 1,512,468 sq. m. in his name, on June 16, 1969, which included the 19.4has. Occupied by Cajes.In 1972, Alvarez sold the land to Sps. Beduya who, like Alvarez, were neverin possession of the property. Sps. Beduya then obtained a loan from petitioner DBP(Development Bank of the Philippines) for P 526,000.00 and mortgaged the land.In 1978, another mortgage over the land was executed by SAAD InvestmentCorp. represented by G. Beduya and Sps. Beduya in favour of DBP for P 1.43 million.In 1985, mortgage on the property was foreclosed. In the foreclosure sale,DBP was the highest bidder.It appears that respondent Cajes had also applied for a loan from DBP in1978, offering his 19.4 has. as security for the loan which was approved. However,after the release of the loan, DBP found out that the land mortgaged by Cajes wasincluded in the land mortgaged by the Sps. Beduya. Petitioner DBP cancelled the loan & demanded payment from Cajes.Sometime in April of 1986, more than a year after the foreclosure sale, a re-appraisalof the property covered by TCT No. 10101 was conducted by petitioners representatives. It was then discovered that private respondent Cajes was occupyinga portion of said land. Private respondent Cajes wasinformed that petitioner had become the owner of the land he wasoccupying, & he was asked to vacate the property. As private respondentrefused to do so, petitioner filed a complaint for recovery of possession withdamages against him, invoking that it was an innocent purchaser for value.The Regional Trial Court-Tagbilaran City rendered a decision declaring petitioner DBP the lawful owner of the entire land on the ground that thedecree of registration was binding upon the land.The Court of Appeals reversed the RTC decision. Hence, this petition. ISSUES: 1. Whether or not petitioner bank is a mortgagee in good faith?2. Whether or not petitioner bank can can be considered an innocent purchaser for value? HELD: No. At the time of the constitution of the mortgagee, the mortgageebankfailed to conduct an ocular inspection. While an innocent mortgagee isnot expected to conduct an exhaustive investigation on the history of the mortgagors title, in the case of banking institutions, a mortgagee must exercise due diligence before entering into said contract. Judicial notice istaken of the standard practice for banks, before approving a loan, to sendrepresentatives to the premises of the land offered as collateral & toinvestigate who are the legal owners thereof. Banks, having been impressedwith public interest, are expected to exercise more care & prudence thanprivate individuals in their dealings, even those involving registered lands.Petitioner was already aware that a person other than the registeredowner was in actual possession of the land when it bought the same at the foreclosure sale. A person who deliberately ignores a significant fact

whichwould create a suspicion in an otherwise reasonable man is not an innocent purchaser for value. It is a well -settled rule that a purchaser cannot closehis eyes to facts which should put a reasonable man upon his guard, & thenclaim that he acted in good faith under the belief that there was no defect in the title of the vendor. Judgment AFFIRMED in toto
PBTC vs. Dahican F: AG&P sold and assigned all its rights to Dahican Lumber Concession to DALCO for $500k (but only $50k was paid). -1ST MORTGAGE: DALCO thereafter obtained loans from PBTC amounting to P200k. In addition, DALCO obtained from Export-Import Bank a loan of $250k evidenced by 5 PNs of $50k each. As security, DALCO executed in favor of PBTC (also as trustee for Export-Import Bank) a deed of mortgage covering 5 parcels of land in Camarines Norte + all the buildings, improvements and other personal property in DALCO's place of business. *DALCO and DAMCO pledged to bank 7,296 shares of stock of DALCO and 9,286 of DAMCO to secure same obligations. -2ND MORTGAGE: DALCO also executed on the same date ANOTHER DEED OF MORTGAGE ON THE SAME PROPERTIES in favor of AG&P *both deeds of mortgage contained a provision EXTENDING THE MORTGAGE LIEN TO PROPERTIES TO BE SUBSEQUENTLY ACQUIRED (AFTER ACQUIRED PROPERTIES) BY DALCO. *both mortgages were registered in the Office of the Register of Deeds of Camarines Norte -DEFAULT: DALCO & DAMCO failed to pay the 5th PN - but was given by PBTC up extension to pay the overdue PN -before the deadline given by PBTC, DALCO purchased various machines, equipment, and spare parts and supplies in addition to or in replacement of some of those already owned and used by it. PURSUANT TO THE AFTER ACQUIRED PROPERTIES PROVISION IN THE MORTGAGE, PBTC requested DALCO to submit the complete list of properties acquired. -DALCO failed to provide PBTC the list requested. It subsequently decided (through Board of directors) to rescind the alleged sales of property recently acquired and corresponding agreements of rescission of sale were executed. -PBTC (in its own behalf and that of AG&P) DEMANDED THE CANCELLATION OF THE RESCISSION AGREEMENTS. DAMCO refused. -PBTC & AG&P commenced foreclosure proceedings in CFI over the machineries, equipment and supplies of DALCO. The proceeds of the sale were agreed to be divided between "UNDEBATED PROPERTIES" AND "AFTER ACQUIRED PROPERTIES" and were deposited with the TC pending litigation. TC ruled in favor of PBTC & AG&P.

1 WON AFTER ACQUIRED PROPERTIES ARE INCLUDED IN THE DEED OF MORTGAGE?

YES -it is clear from the provision in both deeds of mortgage that the Lumber concession "shall immediately be and become subject to the lien" of both mortgages as if already included therein at the time of execution. - It is common and logical in cases where the properties given as collateral are perishable or subject to inevitable wear and tear or were intended to be sold or were intended to be used thus becoming inevitable to wear and tear -purpose: to maintain, to the extent allowed by circumstances, the original value of the properties given as security.

2. WON the mortgage of the after acquired properties is void because they were not registered in accordance with the Chattel Mortgage Law
CML DOES NOT APPLY TO THIS CASE. THIS CONCERNS REAL ESTATE MORTGAGE! -The Mortgages were executed when the OLD CIVIL CODE was still in force. Still, BOTH old and new civil codes recognize that machinery, receptacles, instruments or replacements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and shall tend directly to meet the needs of the said industry or works. SO, the properties in dispute should be deemed as real estate and the mortgages executed are REMs not CMs! *So does not need to be registered a second time as chattel mortgages in order to bind the "after acquired properties" and affect third parties. *DAVAO SAW MILL CASE not applicable because in this case both parties recognized the after acquired properties as REAL PROPERTIES and not as chattel. (ruling on other issues deleted)

This is a mortgage-trust indenture since the bank is a trustee for the foreign bank. You could actually cite this case On the discussion of perishable collateralthen goes on to say that it is not immoral, etc. poor judgment on the creditor not to include such provision in the agreement. BUT THERE's SECTION

7 WHICH PROHIBITS PRECISELY INCLUSION OF AFTER-ACQUIRED PROPERTY CLAUSE!!! How can it be poor judgment???? Plus sweeping pronouncement on exclusion of collaterals subject to wear and tear. BUT ALL PROPERTIES ARE SUBJECT TO WEAR AND TEAR!!! No need even to discuss the said exception since this involves property which was considered REAL ESTATE MORTGAGE, NOT CHATTEL MORTGAGE!!! ___________________ State Investment House vs. CA
Negotiable Instruments Law 217 SCRA 32 Holder in Due Course Notice of Dishonor Corazon Victoriano provided pieces of jewelry to Nora Moulic so that the latter may sell the same. As security for the jewelries, Moulic issued to Victoriano two post dated checks in the aggregate amount of P100,000.00. Moulic was not able to sell the jewelries so she returned the same to Victoriano. Victoriano was however unable to return the checks hence Moulic withdrew all her funds from the bank. Apparently, the checks were negotiated by Victoriano to State Investment House. So when the checks were dishonored, State Investment demanded Moulic to pay. Moulic refused to pay because she said the checks were merely used as security for the jewelry. Moulic further averred that she received no notice of dishonor. ISSUE: Whether or not State Investment House is entitled to be paid. HELD: Yes. State Investment is a holder in due course as it met all the requirements to be one pursuant to Section 52 of the Negotiable Instruments Law. In particular, it is clearly shown that: (a) on their faces the post-dated checks were complete and regular: (b) State Investment bought these checks from Victoriano, before their due dates; (c) State Investment took these checks in good faith and for value, (d) State Investment was never informed nor made aware that these checks were merely issued to Victoriano as security and not for value. Further, there is no need to issue a notice of dishonor to Moulic. After Moulic withdrew her funds, she could not have expected her checks to be honored. It would only be futile for State Investment to be sending her notices of dishonor for the two checks.

__________________ PNB v. CA GR No. 107569 November 8, 1994

Facts: Private respondents, who are owners of a NACIDA-registered enterprise, obtained from petitioner PNB a loan initially pegged at 12% per annum interest. The contract agreement includes, among others, a clause which allows PNB to raise the rate of interest depending onn the bank's future policies. During the term of the agreement, PNB on several occasions imposed subsequent raises to the applicable rate ranging from the original 12% up to 42%, imposing also a 6% penalty per annum. Issue: Can a creditor raise the rate of interest based solely on a certain clause in the contract and without consent from the debtor as to the amount and rate of increase? Held: No. It is basic that there can be no contract in the true sense in the absence of the element of agreement, or of mutual assent of the parties. If this assent is wanting on the part of the one who contracts, his act has no more efficacy than if it had been done under duress or by a person of unsound mind. Similarly, contract changes must be made with the consent of the contracting parties. The minds of all the parties must meet as to the proposed modification, especially when it affects an important aspect of the agreement. In the case of loan contracts, it cannot be gainsaid that the rate of interest is always a vital component, for it can make or break a capital venture. Thus, any change must be mutuallya greed upon, otherwise, it is bereft of any binding effect. The Court cannot countenance petitioner bank's posturing that the escalation clause at bench gives it unbridled right tounilaterally upwardly adjust the interest on private respondents' loan. That would completely take away from private respondents the right to assent to an important modification in their agreement, and would negate the element of mutuality in contracts.