Saura Import & Export Co., Inc.

vs DBP
FACTS: Saura applied to the Rehabilitation Finance Corporation (RFC), before its conversion into DBP, for an industrial
loan to be used for construction of factory building, for payment of the balance of the purchase price of the jute
machinery and equipment and as additional working capital. In Resolution No.145, the loan application was approved
to be secured first by mortgage on the factory buildings, the land site, and machinery and equipment to be installed.
The mortgage was registered and documents for the promissory note were executed. The cancellation of the mortgage
was requested to make way for the registration of a mortgage contract over the same property in favor of Prudential
Bank and Trust Co., the latter having issued Saura letter of credit for the release of the jute machinery. As security,
Saura execute a trust receipt in favor of the Prudential. For failure of Saura to pay said obligation, Prudential sued
Saura.
After 9 years after the mortgage was cancelled, Saura sued RFc alleging failure to comply with tits obligations to
release the loan proceeds, thereby prevented it from paying the obligation to Prudential Bank.
The trial court ruled in favor of Saura, ruling that there was a perfected contract between the parties ad that the RFC
was guilty of breach thereof.
ISSUE: Whether or not there was a perfected contract between the parties.
HELD: The Court held in the affirmative. Article 1934 provides: An accepted promise to deliver something by way of
commodatum or simple loan is binding upon the parties, but the commodatum or simple loan itself shall not be
perfected until delivery of the object of the contract.
There was undoubtedly offer and acceptance in the case. When an application for a loan of money was approved by
resolution of the respondent corporation and the responding mortgage was executed and registered, there arises a
perfected consensual contract.

BPI Investment Corp V. CA

Facts:

Frank Roa obtained a loan with interest rate of 16 1/4%/annum from Ayala Investment and Development
Corporation (AIDC), the predecessor of BPI Investment Corp. (BPIIC), for the construction of a house on his lot in
New Alabang Village, Muntinlupa.

He mortgaged the house and lot to AIDC as security for the loan.

1980: Roa sold the house and lot to ALS Management & Development Corp. and Antonio Litonjua for P850K
who paid P350K in cash and assumed the P500K indebtness of ROA with AIDC.

AIDC proposed to grant ALS and Litonjua a new loan for P500K with interested rate of 20%/annum and
service fee of 1%/annum on the outstanding balance payable within 10 years through equal
monthly amortization of P9,996.58 and penalty interest of 21%/annum/day from the date
the amortization becomes due and payable.

March 1981: ALS and Litonjua executed a mortgage deed containing the new stipulation with the provision that
the monthly amortization will commence on May 1, 1981

August 13, 1982: ALS and Litonjua paid BPIIC P190,601.35 reducing the P500K principal loan to P457,204.90.

September 13, 1982: BPIIC released to ALS and Litonjua P7,146.87, purporting to be what was left of their loan
after full payment of Roas loan

June 1984: BPIIC instituted foreclosure proceedings against ALS and Litonjua on the ground that they failed to
pay the mortgage indebtedness which from May 1, 1981 to June 30, 1984 amounting to P475,585.31

August 13, 1984: Notice of sheriff's sale was published

February 28, 1985: ALS and Litonjua filed Civil Case No. 52093 against BPIIC alleging that they are not in
arrears and instead they made an overpayment as of June 30, 1984 since the P500K loan was only released
September 13, 1982 which marked the start of the amortization and since only P464,351.77 was released applying
legal compensation the balance of P35,648.23 should be applied to the monthly amortizations

RTC: in favor of ALS and Litonjua and against BPIIC that the loan granted by BPI to ALS and Litonjua was only in
the principal sum of P464,351.77 and awarding moral damages, exemplary damages and attorneys fees for the
publication

CA: Affirmed reasoning that a simple loan is perfected upon delivery of the object of the contract which is on
September 13, 1982
ISSUE: W/N the contract of loan was perfected only on September 13, 1982 or the second release of the loan?
HELD: YES. AFFIRMED WITH MODIFICATION as to the award of damages. The award of moral and exemplary damages
in favor of private respondents is DELETED, but the award to them of attorneys fees in the amount of P50,000 is
UPHELD. Additionally, petitioner is ORDERED to pay private respondents P25,000 as nominal damages. Costs against
petitioner.

obligation to pay commenced only on October 13, 1982, a month after the perfection of the contract

contract of loan involves a reciprocal obligation, wherein the obligation or promise of each party is the
consideration for that of the other. It is a basic principle in reciprocal obligations that neither party incurs in delay,
if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him.
Consequently, petitioner could only demand for the payment of the monthly amortization after September 13,
1982 for it was only then when it complied with its obligation under the loan contract.

BPIIC was negligent in relying merely on the entries found in the deed of mortgage, without checking and
correspondingly adjusting its records on the amount actually released and the date when it was released. Such
negligence resulted in damage for which an award of nominal damages should be given

SSS where we awarded attorneys fees because private respondents were compelled to litigate, we sustain the
award of P50,000 in favor of private respondents as attorneys fees

Bonnevie V. CA
Facts:

December 6, 1966: Spouses Jose M. Lozano and Josefa P. Lozano secured their loan of P75K from Philippine
Bank of Commerce (PBC) by mortgaging their property

December 8, 1966: Executed Deed of Sale with Mortgage to Honesto Bonnevie where P75K is payable to PBC
and P25K is payable to Spouses Lanzano.

April 28, 1967 to July 12, 1968: Honesto Bonnevie paid a total of P18,944.22 to PBC

May 4, 1968: Honesto Bonnevie assigned all his rights under the Deed of Sale with Assumption of Mortgage to
his brother, intervenor Raoul Bonnevie

June 10, 1968: PBC applied for the foreclosure of the mortgage, and notice of sale was published

January 26, 1971: Honesto Bonnevie filed in the CFI of Rizal against Philippine Bank of Commerce for the
annulment of the Deed of Mortgage dated December 6, 1966 as well as the extrajudicial foreclosure made on
September 4, 1968.

CFI: Dismissed the complaint with costs against the Bonnevies

CA: Affirmed
ISSUE: W/N the forclosure on the mortgage is validly executed.
HELD: YES. CA affirmed

A contract of loan being a consensual contract is perfected at the same time the contract of mortgage was
executed. The promissory note executed on December 12, 1966 is only an evidence of indebtedness and does not
indicate lack of consideration of the mortgage at the time of its execution.

Respondent Bank had every right to rely on the certificate of title. It was not bound to go behind the same to
look for flaws in the mortgagor's title, the doctrine of innocent purchaser for value being applicable to an innocent
mortgagee for value.

Thru certificate of sale in favor of appellee was registered on September 2, 1968 and the one year redemption
period expired on September 3, 1969. It was not until September 29, 1969 that Honesto Bonnevie first wrote
respondent and offered to redeem the property.

loan matured on December 26, 1967 so when respondent Bank applied for foreclosure, the loan was already
six months overdue. Payment of interest on July 12, 1968 does not make the earlier act of PBC inequitous nor does
it ipso facto result in the renewal of the loan. In order that a renewal of a loan may be effected, not only the
payment of the accrued interest is necessary but also the payment of interest for the proposed period of renewal
as well. Besides, whether or not a loan may be renewed does not solely depend on the debtor but more so on the
discretion of the bank.

Central Bank v Court of Appeals

The banks asking for advance interest for the loan is improper considering that the total loan hasnt been released. A
person cant be charged interest for nonexisting debt. The alleged discovery by the bank of overvaluation of the loan
collateral is not an issue. Since Island Savings Bank failed to furnish the P63,000.00 balance of the P80,000.00 loan,
the real estate mortgage of Sulpicio M. Tolentino became unenforceable to such extent.
Facts: Island Savings Bank, upon favorable recommendation of its legal department, approved the loan application for
P80,000.00 of Sulpicio M. Tolentino, who, as a security for the loan, executed on the same day a real estate mortgage
over his 100-hectare land located in Cubo, Las Nieves, Agusan. The loan called for a lump sum of P80,000, repayable
in semi-annual installments for 3 yrs, with 12% annual interest. After the agreement, a mere P17K partial release of
the loan was made by the bank and Tolentino and his wife signed a promissory note for the P17,000 at 12% annual
interest payable w/in 3 yrs. An advance interest was deducted fr the partial release but this prededucted interest was
refunded to Tolentino after being informed that there was no fund yet for the release of the P63K balance.
Monetary Board of Central Bank, after finding that bank was suffering liquidity problems, prohibited the bank fr making
new loans and investments. And after the bank failed to restore its solvency, the Central Bank prohibited Island
Savings Bank from doing business in the Philippines. Island Savings Bank in view of the non-payment of the P17K filed
an application for foreclosure of the real estate mortgage. Tolentino filed petition for specific performance or rescission
and damages with preliminary injunction, alleging that since the bank failed to deliver P63K, he is entitled to specific
performance and if not, to rescind the real estate mortgage.
Issues: 1) Whether or not Tolentinos can collect from the bank for damages
2) Whether or not the mortgagor is liable to pay the amount covered by the promissory note
3) Whether or not the real estate mortgage can be foreclosed
Held:
1) Whether or not Tolentinos can collect from the bank for damages
The loan agreement implied reciprocal obligations. When one party is willing and ready to perform, the other party not
ready nor willing incurs in delay. When Tolentino executed real estate mortgage, he signified willingness to pay. That
time, the banks obligation to furnish the P80K loan accrued. Now, the Central Bank resolution made it impossible for
the bank to furnish the P63K balance. The prohibition on the bank to make new loans is irrelevant bec it did not
prohibit the bank fr releasing the balance of loans previously contracted. Insolvency of debtor is not an excuse for nonfulfillment of obligation but is a breach of contract.
The banks asking for advance interest for the loan is improper considering that the total loan hasnt been released. A
person cant be charged interest for nonexisting debt. The alleged discovery by the bank of overvaluation of the loan
collateral is not an issue. The bank officials should have been more responsible and the bank bears risk in case the
collateral turned out to be overvalued. Furthermore, this was not raised in the pleadings so this issue cant be raised.
The bank was in default and Tolentino may choose bet specific performance or rescission w/ damages in either case.
But considering that the bank is now prohibited fr doing business, specific performance cannot be granted. Rescission
is the only remedy left, but the rescission shld only be for the P63K balance.
2) Whether or not the mortgagor is liable to pay the amount covered by the promissory note

The promissory note gave rise to Sulpicio M. Tolentinos reciprocal obligation to pay the P17,000.00 loan when it falls
due. His failure to pay the overdue amortizations under the promissory note made him a party in default, hence not
entitled to rescission (Article 1191 of the Civil Code). If there is a right to rescind the promissory note, it shall belong to
the aggrieved party, that is, Island Savings Bank. If Tolentino had not signed a promissory note setting the date for
payment of P17,000.00 within 3 years, he would be entitled to ask for rescission of the entire loan because he cannot
possibly be in default as there was no date for him to perform his reciprocal obligation to pay. Since both parties were
in default in the performance of their respective reciprocal obligations, that is, Island Savings Bank failed to comply
with its obligation to furnish the entire loan and Sulpicio M. Tolentino failed to comply with his obligation to pay his
P17,000.00 debt within 3 years as stipulated, they are both liable for damages.
3) Whether or not the real estate mortgage can be foreclosed
Since Island Savings Bank failed to furnish the P63,000.00 balance of the P80,000.00 loan, the real estate mortgage of
Sulpicio M. Tolentino became unenforceable to such extent. P63,000.00 is 78.75% of P80,000.00, hence the real estate
mortgage covering 100 hectares is unenforceable to the extent of 78.75 hectares. The mortgage covering the
remainder of 21.25 hectares subsists as a security for the P17,000.00 debt. 21.25 hectares is more than sufficient to
secure a P17,000.00 debt.

Republic vs Bagtas
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 the breeding 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.

CATHOLIC VICAR APOSTOLIC v. CA

Doctrine: The bailees' failure to return the subject matter of commodatum to the bailor does not mean adverse
possession on the part of the borrower. The bailee held in trust the property subject matter of commodatum.
Facts: Catholic Vicar Apostolic of the Mountain Province (VICAR for brevity) filed an application for registration of title
over Lots 1, 2, 3, and 4, said Lots being the sites of the Catholic Church building, convents, high school building, school
gymnasium, school dormitories, social hall, stonewalls, etc. The Heirs of Juan Valdez and the Heirs of Egmidio
Octaviano filed their Answer/Opposition on Lots Nos. 2 and 3, respectively, asserting ownership and title thereto since
their predecessors' house was borrowed by petitioner Vicar after the church and the convent were destroyed.. After

trial on the merits, the land registration court promulgated its Decision confirming the registrable title of VICAR to Lots
1, 2, 3, and 4.
The Heirs of Juan Valdez appealed the decision of the land registration court to the then Court of Appeals, The Court of
Appeals reversed the decision. Thereupon, the VICAR filed with the Supreme Court a petition for review on certiorari of
the decision of the Court of Appeals dismissing his application for registration of Lots 2 and 3.
Issue: Whether or not the failure to return the subject matter of commodatum constitutes an adverse possession on
the part of the owner
Held: No. The bailees' failure to return the subject matter of commodatum to the bailor did not mean adverse
possession on the part of the borrower. The bailee held in trust the property subject matter of commodatum.
Petitioner repudiated the trust by declaring the properties in its name for taxation purposes.

QUINTOS vs BECK
Facts: Quintos and Beck entered into a contract of lease, whereby the latter occupied the formers house. On Jan 14,
1936, the contract of lease was novated, wherein the QUintos gratuitously granted to Beck the use of the furniture,
subject to the condition that Beck should return the furnitures to Quintos upon demand. Thereafter, Quintos sold the
property to Maria and Rosario Lopez. Beck was notified of the conveyance and given him 60 days to vacate the
premises. IN addition, Quintos required Beck to return all the furniture. Beck refused to return 3 gas heaters and 4
electric lamps since he would use them until the lease was due to expire. Quintos refused to get the furniture since
Beck had declined to return all of them. Beck deposited all the furniture belonging to QUintos to the sheriff.
ISSUE: WON Beck complied with his obligation of returning the furnitures to Quintos when it deposited the furnitures
to the sheriff.
RULING: The contract entered into between the parties is one of commadatum, because under it the plaintiff
gratuitously granted the use of the furniture to the defendant, reserving for herself the ownership thereof; by this
contract the defendant bound himself to return the furniture to the plaintiff, upon the latters demand (clause 7 of the
contract, Exhibit A; articles 1740, paragraph 1,and 1741 of the Civil Code). The obligation voluntarily assumed by the
defendant to return the furniture upon the plaintiff's demand, means that he should return all of them to the plaintiff at
the latter's residence or house. The defendant did not comply with this obligation when he merely placed them at the
disposal of the plaintiff, retaining for his benefit the three gas heaters and the four eletric lamps.As the defendant had
voluntarily undertaken to return all the furniture to the plaintiff, upon the latter's demand, the Court could not legally
compel her to bear the expenses occasioned by the deposit of the furniture at the defendant's behest. The latter, as
bailee, was nt entitled to place the furniture on deposit; nor was the plaintiff under a duty to accept the offer to return
the furniture, because the defendant wanted to retain the three gas heaters and the four electric lamps

Consolidated Bank vs CA
FACTS: Continental Cement Corp obtained from Consolidated Bank letter of credit used to purchased 500,000 liters of
bunker fuel oil. Respondent Corporation made a marginal deposit to petitioner. A trust receipt was executed by
respondent corporation, with respondent Gregory Lim as signatory. Claiming that respondents failed to turn over the
goods or proceeds, petitioner filed a complaint for sum of money before the RTC of Manila. In their answer,
respondents aver that the transaction was a simple loan and not a trust receipt one, and tht the amount claimed by
petitioner did not take into account payments already made by them. The court dismissed the complaint, CA affirmed
the same.
ISSUE: Whether or not the marginal deposit should not be deducted outright from the amount of the letter of credit.
HELD: No. petitioner argues that the marginal deposit should be considered only after computing the principal plus
accrued interest and other charges. It could be onerous to compute interest and other charges on the face value of the
letter of credit which a bank issued, without first crediting or setting off the marginal deposit which the borrower paid
to it-compensation is proper and should take effect by operation of law because the requisited in Art. 1279 are present
and should extinguish both debts to the concurrent amount. Unjust enrichment.

Republic vs Grijaldo
FACTS: In the year 1943 appellant Jose Grijaldo obtained five loans from the branch office of the Bank of Taiwan, Ltd.
in Bacolod City, in the total sum of P1,281.97 with interest at the rate of 6% per annum, compounded quarterly. These
loans are evidenced by five promissory notes executed by the appellant in favor of the Bank of Taiwan, Ltd., as follows:
On June 1, 1943, P600.00; on June 3, 1943, P159.11; on June 18, 1943, P22.86; on August 9, 1943,P300.00; on August
13, 1943, P200.00, all notes without due dates, but because the loans were due one year after they were incurred. To
secure the payment of the loans the appellant executed a chattel mortgage on the standing crops on his land, Lot No.
1494 known as Hacienda Campugas in Hinigiran, Negros Occidental.
By virtue of Vesting Order No. P-4, dated January 21, 1946, and under the authority provided for in the Trading with the
Enemy Act, as amended, the assets in the Philippines of the Bank of Taiwan, Ltd. were vested in the Government of the
United States. Pursuant to the Philippine Property Act of 1946 of the United States, these assets, including the loans in
question, were subsequently transferred to the Republic of the Philippines by the Government of the United States
under Transfer Agreement dated July 20, 1954. These assets were among the properties that were placed under the
administration of the Board of Liquidators created under Executive Order No. 372, dated November 24, 1950, and in
accordance with Republic Acts Nos. 8 and 477 and other pertinent laws.
On September 29, 1954 the appellee, Republic of the Philippines, represented by the Chairman of the Board of
Liquidators, made a written extrajudicial demand upon the appellant for the payment of the account in question. The
record shows that the appellant had actually received the written demand for payment, but he failed to pay.

On January 17, 1961 the appellee filed a complaint in the Justice of the Peace Court of Hinigaran, Negros Occidental, to
collect from the appellant the unpaid account in question. The Justice of the Peace Of Hinigaran, after hearing,
dismissed the case on the ground that the action had prescribed. The appellee appealed to the Court of First Instance
of Negros Occidental and on March 26, 1962 the court a quo rendered a decision ordering the appellant to pay the
appellee the sum of P2,377.23 as of December 31, 1959, plus interest at the rate of 6% per annum compounded
quarterly from the date of the filing of the complaint until full payment was made. The appellant was also ordered to
pay the sum equivalent to 10% of the amount due as attorney's fees and costs.
The appellant appealed directly to this Court. During the pendency of this appeal the appellant Jose Grijaldo died. Upon
motion by the Solicitor General this Court, in a resolution of May 13, 1963, required Manuel Lagtapon, Jacinto
Lagtapon, Ruben Lagtapon and Anita L. Aguilar, who are the legal heirs of Jose Grijaldo to appear and be substituted as
appellants in accordance with Section 17 of Rule 3 of the Rules of Court.
ISSUE: Whether or not the obligation to pay is extinguished.
The appellant likewise maintains, in support of his contention that the appellee has no cause of action, that because
the loans were secured by a chattel mortgage on the standing crops on a land owned by him and these crops were lost
or destroyed through enemy action his obligation to pay the loans was thereby extinguished.
HELD: This argument is untenable. The terms of the promissory notes and the chattel mortgage that the appellant
executed in favor of the Bank of Taiwan, Ltd. do not support the claim of appellant. The obligation of the appellant
under the five promissory notes was not to deliver a determinate thing namely, the crops to be harvested from his
land, or the value of the crops that would be harvested from his land. Rather, his obligation was to pay a generic thing
the amount of money representing the total sum of the five loans, with interest. The transaction between the
appellant and the Bank of Taiwan, Ltd. was a series of five contracts of simple loan of sums of money. "By a contract of
(simple) loan, one of the parties delivers to another ... money or other consumable thing upon the condition that the
same amount of the same kind and quality shall be paid." (Article 1933, Civil Code) The obligation of the appellant
under the five promissory notes evidencing the loans in questions is to pay the value thereof; that is, to deliver a sum
of money a clear case of an obligation to deliver, a generic thing. Article 1263 of the Civil Code provides:
In an obligation to deliver a generic thing, the loss or destruction of anything of the same kind does not extinguish the
obligation.
The chattel mortgage on the crops growing on appellant's land simply stood as a security for the fulfillment of
appellant's obligation covered by the five promissory notes, and the loss of the crops did not extinguish his obligation
to pay, because the account could still be paid from other sources aside from the mortgaged crops.

Casa Filipino Development Corporation vs. Deputy Executive Secretary

PHILIPPINE NATIONAL BANK vs THE HON. COURT OF APPEALS and AMBROSIO PADILLA
FACTS: Private respondent (PR) Ambrosio Padilla, applied for and was granted a credit line of 321.8million, by
petitioner PNB. This was for a term of 2 years at 18% interest per annum and was secured by real estate mortgage and
2 promissory notes executed in favor of Petitioner by PR. The credit agreement and the promissory notes, in effect,
provide that PR agrees to be bound by increases to the interest rate stipulated, provided it is within the limits
provided for by law. Conflict in this case arose when Petitioner unilaterally increased the interest rate from 18% to: (1)
32% [July 1984]; (2) 41% [October 1984]; and (3) 48% [November 1984], or 3 times within the span of a single year.
This was done despite the numerous letters of request made by PR that the interest rate be increased only to 21% or
24%.PR filed a complaint against Petitioner with the RTC. The latter dismissed the case for lack of merit. Appeal by PR
to CA resulted in his favor. Hence the petition for certiorari under Rule 45 of ROC filed by PNB with SC.
ISSUE: Despite the removal of the Usury Law ceiling on interest, may the bank validly increase the stipulated interest
rate on loans contracted with third persons as often as necessary and against the protest of such persons.
HELD: NO. Although under Sec. 2 of PD 116, the Monetary Board is authorized to prescribe the maximum rate of
interest for loans and to change such rates whenever warranted by prevailing economic and social conditions, by
express provision, it may not do so oftener than once every 12 months. If the Monetary Board cannot, much less can
PNB, effect increases on the interest rates more than once a year. Based on the credit agreement and promissory
notes executed between the parties, although PR did agree to increase on the interest rates allowed by law, no law
was passed warranting Petitioner to effect increase on the interest rates on the existing loan of PR for the months of
July to November of 1984.Neither there being any document executed and delivered by PR to effect such increase. For
escalation clauses to be valid and warrant the increase of the interest rates on loans, there must be:(1) increase was
made by law or by the Monetary Board; (2) stipulation must include a clause for the reduction of the stipulated interest
rate in the event that the maximum interest is lowered by law or by the Monetary board. In this case, PNB merely
relied on its own Board Resolutions, which are not laws nor resolutions of the Monetary Board. Despite the suspension
of the Usury Law, imposing a ceiling on interest rates, this does not authorize banks to unilaterally and successively
increase interest rates in violation of Sec. 2 PD 116.Increases unilaterally effected by PNB was in violation of the
Mutuality of Contracts under Art. 1308. This provides that the validity and compliance of the parties to the contract
cannot be left to the will of one of the contracting parties. Increases made are therefore void. Increase on the
stipulated interest rates made by PNB also contravenes Art. 1956. It provides that, no interest shall be due unless it
has been expressly stipulated in writing. PR never agreed in writing to pay interest imposed by PNB in excess of 24%
per annum. Interest rate imposed by PNB, as correctly found by CA, is indubitably excessive.

Relucio vs. Garfin

Eastern Shipping Lines Inc. vs. CA

FACTS: This is an action against defendants shipping company, arrastre operator and broker-forwarder for damages
sustained by a shipment while in defendants' custody, filed by the insurer-subrogee who paid the consignee the value
of such losses/damages.
the losses/damages were sustained while in the respective and/or successive custody and possession of defendants
carrier (Eastern), arrastre operator (Metro Port) and broker (Allied Brokerage).
As a consequence of the losses sustained, plaintiff was compelled to pay the consignee P19,032.95 under the
aforestated marine insurance policy, so that it became subrogated to all the rights of action of said consignee against
defendants.
DECISION OF LOWER COURTS: * trial court: ordered payment of damages, jointly and severally * CA: affirmed trial
court.
ISSUES AND RULING:
(a) whether or not a claim for damage sustained on a shipment of goods can be a solidary, or joint and several, liability
of the common carrier, the arrastre operator and the customs broker;
YES, it is solidary. Since it is the duty of the ARRASTRE to take good care of the goods that are in its custody and to
deliver them in good condition to the consignee, such responsibility also devolves upon the CARRIER. Both the
ARRASTRE and the CARRIER are therefore charged with the obligation to deliver the goods in good condition to the
consignee.
The common carrier's duty to observe the requisite diligence in the shipment of goods lasts from the time the articles
are surrendered to or unconditionally placed in the possession of, and received by, the carrier for transportation until
delivered to, or until the lapse of a reasonable time for their acceptance by, the person entitled to receive them (Arts.
1736-1738, Civil Code; Ganzon vs. Court of Appeals, 161 SCRA 646; Kui Bai vs. Dollar Steamship Lines, 52 Phil. 863).
When the goods shipped either are lost or arrive in damaged condition, a presumption arises against the carrier of its
failure to observe that diligence, and there need not be an express finding of negligence to hold it liable.
(b) whether the payment of legal interest on an award for loss or damage is to be computed from the time the
complaint is filed or from the date the decision appealed from is rendered; and
FOLLOW THESE VERY IMPORTANT RULES (GUIDANCE BY THE SUPREME COURT)
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached,
the contravenor can be held liable for damages. The provisions under Title XVIII on "Damages" of the Civil Code govern
in determining the measure of recoverable damages.
II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of
interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall
itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall
be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of
damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however,
shall be adjudged on unliquidated claims or damages except when or until the demand can be established with
reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin
to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty
cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date
the judgment of the court is made (at which time the quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount
finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest,
whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its
satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.
(c) whether the applicable rate of interest, referred to above, is twelve percent (12%) or six percent (6%).
SIX PERCENT (6%) on the amount due computed from the decision, dated 03 February 1988, of the court a quo (Court
of Appeals) AND A TWELVE PERCENT (12%) interest, in lieu of SIX PERCENT (6%), shall be imposed on such amount
upon finality of the Supreme Court decision until the payment thereof.
RATIO: when the judgment awarding a sum of money becomes final and executory, the monetary award shall earn
interest at 12% per annum from the date of such finality until its satisfaction, regardless of whether the case involves a
loan or forbearance of money. The reason is that this interim period is deemed to be by then equivalent to a
forbearance of credit.
NOTES: the Central Bank Circular imposing the 12% interest per annum applies only to loans or forbearance of money,
goods or credits, as well as to judgments involving such loan or forbearance of money, goods or credits, and that the

6% interest under the Civil Code governs when the transaction involves the payment of indemnities in the concept of
damage arising from the breach or a delay in the performance of obligations in general. Observe, too, that in these
cases, a common time frame in the computation of the 6% interest per annum has been applied, i.e., from the time
the complaint is filed until the adjudged amount is fully paid.

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

This appears to be the basis for the awarding interest at the legal rate from Oct. 1968, although the debt was judicially
demanded only on July 6 1970) and attorneys fees and the cost of the suit. Later on, Respondent advised the
petitioner that payment was not in fun satisfaction of the judgment because he has to pay compound interest or
additional sum of P10, 375.77. The respondent secured a writ if execution upon the refusal of the petitioner to pay the
additional sum claimed; which was affirmed by the Judge. Hence this review.
ISSUE: Whether or not the petitioner is obligated to pay compound interest under the judgment.
HELD: The questioned Order cannot be sustained. The judgment which was sought to be executed ordered the
payment of simple "legal interest" only. It said nothing about the payment of compounded interest. Accordingly, when
the respondent judge ordered the payment of compound interest he went beyond the confines of his own judgment
which had been affirmed by the Court of Appeals and which had become final.
Private Respondent invokes Sec. 5 of the Usury Law which reads in part as follows: In computing the interest on any
obligation, promissory note or other instrument or contract, compound interest shall not be reckoned, except by
agreement, or in default thereof, whenever the debt is judicially claimed in which case it shall draw sic per centum per
annum interest xxx as well as Art. 2212 of the Civil Code which stipulates: Interest due shall earn legal interest from
the time it is judicially demanded, although the obligation may be silent upon this point. Both legal provisions are
inapplicable for they contemplate the presence of stipulated or conventional interest which had accrued when demand
was judicially made. In this case, no interest had been stipulated by the parties. In other words, there was no accrued
conventional interest which could further earn interest upon judicial demand. Wherefore, decision was set aside.
Doctrine: Both Art. 2212 of the Civil code and Section 5 of the Usury Law refer to stipulated or conventional interest
and does not apply where no interest was stipulated by the parties