Beruflich Dokumente
Kultur Dokumente
TABLE OF CONTENTS
CASE TITLE
PAGE NO.
25. SECURITY BANK AND TRUST COMPANY vs. REGIONAL TRIAL COURT OF
MAKATI, BR 61.......................................................................................................... 8
26. PNB vs. CA........................................................................................................... 9
ARQUILLO, Buena........................................................................................ 10
33. ATLANTIC GULF AND PACIFIC COMPANY OF MANILA, INC., vs. COURT OF
APPEALS, CARLITO D. CASTILLO, HEIRS OF CRISTETA CASTILLO and
CORNELIO CASTILLO............................................................................................ 16
34. CRISMINA GARMENTS, INC., vs. COURT OF APPEALS and NORMA
SIAPNO..................................................................................................................... 18
CUEVAS, May Zyra...................................................................................... 19
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51. ONGSIAKO vs. THE WORLD WIDE INSURANCE AND SURETY CO., INC....35
52. CITIZENS SURETY AND INSURANCE COMPANY, INC. vs. COURT OF
APPEALS................................................................................................................. 36
LASCANO, Karell Marie................................................................................ 37
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71. PAMECA WOOD TREATMENT PLANT, INC vs. COURT OF APPEALS and
DBP........................................................................................................................... 56
72. DIZON vs. GABORRO....................................................................................... 57
RECENO, Pia Mitzi........................................................................................ 58
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85. CITIBANK N.A. vs. SPS. LUIS AND CARMELITA CABAMONGAN and their
sons LUIS CABAMONGAN JR. and LITO CABAMONGAN..................................73
86. DURBAN APARTMENTS CORP. vs. PIONEER INSURANCE AND SURETY
CORP........................................................................................................................ 74
YOUNG, Wesley........................................................................................... 75
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ARPAFO, Josephine
25. SECURITY BANK AND TRUST COMPANY vs. REGIONAL TRIAL COURT OF
MAKATI, BR 61
G.R. NO. 113926, APRIL 30, 1991
PONENTE
FACTS: Private respondent MagtanggolEusebio executed separate promissory
notes in favor of petitioner Security Bank and Trust Co. (SBTC) with a stipulated
interest of 23% per annum. On all of the promissory notes, private respondent Leila
Ventura had signed as co-maker.
Eusebio failed and refused to settle the balance payable and by reason of
which a collection case was filed in court by petitioner SBTC. The court a quo
rendered a judgment in favor of petitioner SBTC and the dispositive portion states
that the interest due should only be 12% annum.
ISSUE: Whether or not the 23% rate of interest per annum agreed upon by petitioner
bank and respondents is allowable and not against the Usury Law.
HELD: Yes. The rate of interest was agreed upon by the parties freely. Significantly,
respondent did not question that rate. It is not for respondent court a quo to change
the stipulations in the contract where it is not illegal. Furthermore, Article 1306 of the
New Civil Code provides that contracting parties may establish such stipulations,
clauses, terms and conditions as they may deem convenient, provided they are not
contrary to law, morals, good customs, public order, or public policy. We find no valid
reason for the respondent court a quo to impose a 12% rate of interest on the
principal balance owing to petitioner by respondent in the presence of a valid
stipulation. In a loan or forbearance of money, the interest due should be that
stipulated in writing, and in the absence thereof, the rate shall be 12% per annum.
Hence, only in the absence of a stipulation can the court impose the 12% rate of
interest.
The promissory notes were signed by both parties voluntarily. Therefore,
stipulations therein are binding between them. Respondent Eusebio, likewise, did not
question any of the stipulations therein. In fact, in the Comment filed by respondent
Eusebio to this court, he chose not to question the decision and instead expressed
his desire to negotiate with the petitioner bank for "terms within which to settle his
obligation."
IN VIEW OF THE FOREGOING, the decision of the respondent court a quo,
is hereby AFFIRMED with the MODIFICATION that the rate of interest that should be
imposed be 23% per annum.
26. PNB vs. CA
G.R. NO. 88880, APRIL 30, 1991
PONENTE
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FACTS: In July 1982, private respondent Ambrosio Padilla applied for, and was
granted by petitioner PNB, a credit line of P1.8 million, secured by a real estate
mortgage, for a term of two (2) years, with 18% interest per annum. Private
respondent executed in favor of the PNB a Credit Agreement, two (2) promissory
notes in the amount of P900,000.00 each, and a Real Estate Mortgage Contract.
The instruments that are in contention are the Promissory Notes and the Real Estate
Mortgage Contract which uniformly authorized the PNB to increase the stipulated
18% interest per annum within the limits allowed by law at any time depending on
whatever policy it [PNB] may adopt in the future; Provided, that, the interest rate on
this note shall be correspondingly decreased in the event that the applicable
maximum interest rate is reduced by law or by the Monetary Board.
Private respondent renewed his credit line on July 4, 1984 with a request that
the "increase of the interest rate of my mortgage loan be from 18% to 21%." PNB
replied a month thereafter and said that such request cannot be granted as "Existing
Loan Policies of the bank requires 32% for loan of more than one year." Padilla
thereafter reiterated his request to which PNB replied that his interest rate has now
increased to 41% per annum.
Padilla protested the increase of his interest rates through another letter to
PNB and like rubbing salt on his wound, the petitioner informed him on October 29,
1984, that the interest rate on your outstanding line/loan is hereby adjusted from
41% p.a. to 48% p.a. Left with no recourse, private respindent filed a complaint
against PNB in the RTC praying that the latter declare the increases in interest rate
as illegal, not valid nor binding. The RTC of Manila ruled in favor of PNB dismissing
the complaint because the increases of interest were properly made.
The private respondent appealed to the Court of Appeals and the CA
reversed the trial court.
ISSUE: Whether the bank, within the term of the loan which it granted to the private
respondent, may unilaterally change or increase the interest rate stipulated therein at
will and as often as it pleased.
HELD: No. Although Section 2, P.D. No. 116 of January 29, 1973, authorizes the
Monetary Board to prescribe the maximum rate or rates of interest for loans or
renewal thereof and to change such rate or rates whenever warranted by prevailing
economic and social conditions, it expressly provides that such changes shall not be
made oftener than once every twelve months.
In this case, PNB, over the objection of the private respondent, and without
authority from the Monetary Board, within a period of only four (4) months, increased
the 18% interest rate on the private respondents loan obligation three times. Those
increases were null and void, for if the Monetary Board itself was not authorized to
make such changes oftener than once a year, even less so may a bank which is
subordinate to the Board.
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Secondly, while the private respondent-debtor did agree that the interest rate
may be increased during the life of the contract to such increase within the rate
allowed by law, as the Board of Directors of the MORTGAGEE may prescribe or
within the limits allowed by law," no law was ever passed in July to November 1984
increasing the interest rates on loans or renewals thereof to 32%, 41% and 48% (per
annum), and no documents were executed and delivered by the debtor to effectuate
the increases.
Furthermore, the unilateral action of the PNB in increasing the interest rate on
the private respondents loan, violated the mutuality of contracts ordained in Article
1308 of the Civil Code.ART. 1308. The contract must bind both contracting parties;
its validity or compliance cannot be left to the will of one of them.
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 equality. A contract containing a condition which makes its fulfillment
dependent exclusively upon the uncontrolled will of one of the contracting parties, is
void. It would have invested the loan agreement with the character of a contract of
adhesion, where the parties do not bargain on equal footing, the weaker partys (the
debtor) participation being reduced to the alternative to take it or leave it.
The increases imposed by PNB also contravene Art. 1956 of the Civil Code
which provides that no interest shall be due unless it has been expressly stipulated
in writing.
The debtor herein never agreed in writing to pay the interest increases fixed by the
PNB beyond 24% per annum, hence, he is not bound to pay a higher rate than
that.That an increase in the interest rate from 18% to 48% within a period of four (4)
months is excessive, as found by the Court of Appeals, is indisputable.
ARQUILLO, Buena
27. THE ROYAL SHIRT FACTORY, INC. vs. CO BON TIC
G.R. NO. L-6313, MAY 14, 1954
MONTEMAYOR, J.
FACTS:The defendant had 9 days from delivery of the shoes to make his choice of
the two alternatives, that is to consider the sale of the 350 pairs of shoes closed at
the flat rate of P7 per pair, sales tax included, or, at the expiration of 9 days to pay for
the shoes sold at P8 per pair, and to return the remaining unsold ones to plaintiff. At
the expiration of the 9 days stipulated, failed to return the shoes, and actually began
making partial payments on account of the purchase price agreed upon.
ISSUE:Whether it was an outright sale as contended by the plaintiff, or a sale merely
on consignment.
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HELD:It was a straight sale at the rate of P7 per pair of shoes. It was evidently not
only accepted by the defendant but on it he noted down in his own handwriting the
different partial payments of P500, P528 and lastly of the controversial P420 by
check. e obviously accepted the straight sale to him on credit of the whole 350 pairs
of shoes for P2,450 and made partial payments on account thereof. if the sale had
been on consignment, a stipulation as to the period of time for the return of the
unsold shoes should have been made; but evidently that had not been done and
defendant kept the shoes unsold more or less indefinitely, but giving the same
excuse that he could not return them to the plaintiff because he did not know where
to return them.
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When the plaintiff became the creditor of the defendants Azarraga by virtue of
the sale and cession which Attorney Azarraga had made in his favor of the rights
which said attorney had, he allowed the defendants an extension of a few years over
the five years with in which they would have to pay him his credit, or up to February
16, 1926, but with the express condition that they would pay him interest at the rate
of 12 per cent per annum, from August 30, 1924 This term was later extended to
April 26, 1926 on the request of the defendants.
Aside from the above transactions between the plaintiff and the defendants
Azarraga, one of the latter, Joaquin Azarraga, executed in favor of the former, the
deed known as Exhibit E of the record and dated October 14, 1922, by which he sold
to the plaintiff, for the sum of P4,000, his portion of the inheritance in the testate
estate of the late Juan Azarraga y Galvez, consisting of an undivided tract of land.
By virtue of the transfer made to him by Joaquin Azarraga and also of the
terms conditions enumerated in said Exhibit A, the plaintiff took possession of
practically the whole land of the defendants Azarraga.
ISSUES:1. Was the contract entered into by-the Azarraga brothers, the defendants
herein, with Attorney LeodegarioAzarraga from whom the plaintiff derived his right, a
sale with pacto de retro, or an assignment in payment of a debt, or was it an
antichresis partaking of the nature of what was anciently known as pactocomisorio,
or a mortgage, or was it merely a loan with real estate security?
2. Was the contract executed by the defendant Joaquin Azarraga, on the one hand,
and the plaintiff, on the other, embodied in Exhibit E, a sale with pacto de retro or
simply a loan with real estate security?
HELD: 1. It is considered as a antichresis or pactocomisorio not an assignment in
payment of a debt, or a sale with pacto de retro because there is nothing in Exhibit A
to indicate that such was the intention of the defendants Azarraga or, at least, that
they bound themselves to deliver the land in question to the plaintiff and that the
latter should pay them the value thereof; and because there was what may be
considered the resolutory condition of five years was converted into a simple loan
by the decisive circumstance that plaintiff chose to collect thereafter, and the obligors
agreed to pay him, 12 per cent annual interest. It is only in contracts of loan, with or
without guaranty, that interest may be demanded.
2. Considering the various novations which, as has been said, had taken place and
had been extended not only to the Azarraga brothers with respect to their obligation
of P3,000 or P2,700, but also to the defendant Joaquin Azarraga as regard his
personal debt of P4,000. He novated it on February 16, 1926, considering it from the
time on as a simple loan, inasmuch as on that date he began to charge the said
defendant 12 per cent annual interest with the latter's assent and confirmity
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BAUTISTA, Rodmel L.
31. EASTERN SHIPPING LINES, INC. vs. COURT OF APPEALS
G.R. NO. 97412 JULY 12, 1994
VITUG, J.
FACTS:Eastern Shipping Lines [Eastern] is a common carrier engaged in
transportation of goods. It was supposed to deliver goods to the consignee wherein
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the latters goods was covered by marine insurance policy by Mercantile Insurance
Company, Inc. [Mercantile]. The goods upon reaching the consignee were damaged
and thus claimed benefits from Mercantile which made the latter be subrogated to
the case at bar. Mercantile filed damage against Eastern which was granted by the
lower court with the imposition of 12% interest. Eastern contends that neither the
contract was explicit in imposing the rate of interest, thus, at most, the interest after
the judgment should have only been 6%.
ISSUE:Whether the imposition of 12% interest by the lower court was justified.
HELD: No. In deciding the case, the Court laid down principle with regard to the
imposition of interest for the payment of damages, to wit:
When the obligation is breached, and it consists in the payment
of a sum of money, i.e., a loan or forbearance of money, the interest due
should be that which may have been stipulated in writing [Art 1956
NCC]. Furthermore, the interest due shall itself earn legal interest from the
time it is judicially demanded. In the absence of stipulation, the rate of interest
shall be 12% per annum to be computed from default, i.e., from judicial or
extrajudicial demand under and subject to the provisions of Article 1169 of the
Civil Code.
When an obligation, not constituting a loan or forbearance of money,
is breached, an interest on the amount of damages awarded may be imposed
at the discretion of the court at the rate of 6% per annum. No interest,
however, shall be adjudged on unliquidated claims or damages except when
or until the demand can be established with reasonable certainty. Accordingly,
where the demand is established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or extrajudicially (Art.
1169, Civil Code) but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run
only from the date the judgment of the court is made (at which time the
quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in
any case, be on the amount finally adjudged.
When the judgment of the court awarding a sum of money becomes
final and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.
Rosa. The latter gave an initial payment and the rest to be paid at a certain period.
Dela Rosa was not able to pay such balance. Case was filed in court and petitioners
won in the lower court that rescinded the contract. But the appellate court ruled in
favor of Dela Rosa. The main issue when the case was elevated with the high court
is to what was the proper rate of interest to be imposed and how should it be
computed. The terms of the contract stated as follows:
xxxxxxxxx
b.) The balance of P163,408.00 to be paid on or before December 31, 1982
without interest and penalty charges;
c.) Should the said balance [remain unpaid] by the VENDEE, the VENDORS
hereby agree to give the VENDEE a grace period of SIX (6) months or up to
June 30, 1983 to pay said balance provided that interest at the rate of 12%
per annum shall be charged and 1% penalty charge a month shall be
imposed on the remaining diminishing balance.
ISSUE:Whether the contract fully states the intention of the parties with regard to the
proper computation of interest in case of defaulted payments.
HELD: Yes. The Court held,
The stipulation in the "Deed of Conditional Sale" requiring the
payment of interest is not unlawful. The validity of the contract of conditional
sale itself has not been put to question by private respondent dela Rosa and
there is nothing in the record to suggest that the same may be contrary to
law, morals, good custom, public order or public policy. Accordingly, the
contractual stipulation must be regarded as binding and enforceable as the
law between the parties.
X xx
Summarizing the import of the contractual stipulation of the parties:
(1) During the period from 1 January 1983 up to 30 June 1983, private
respondent vendee dela Rosa was bound to pay interest at the rate of
12% per annum on the unpaid balance of P163,408.00.
(2) Commencing on 1 July 1983, and until full payment, dela Rosa
was bound to pay interest at the rate of 12% per annum plus another
12% per annum (or 1% penalty charge a month), or a total of 24% per
annum to be computed on the "remaining diminishing [unpaid] balance."
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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 . . . 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 forbearance of
credit.
Because the amount due in this case arose from a contract for a piece of
work, not from a loan or forbearance of money, the legal interest of six percent (6%)
per annum should be applied. Furthermore, since the amount of the demand could
be established with certainty when the Complaint was filed, the six percent (6%)
interest should be computed from the filing of the said Complaint. But after the
judgment becomes final and executory until the obligation is satisfied, the interest
should be reckoned at twelve percent (%12) per year.
Central Bank Circular No. 416, the Court of Appeals held that the applicable rate of
interest is 12% per annum. Petitioner argues that the applicable law is Article 2209
of the Civil Code, not the Central Bank Circular No. 416, said article saying that 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.
ISSUE: What is the applicable rate of interest?
HELD: P.D. No. 116, the Monetary Board of Central Bank issued Central Bank
Circular No. 416, which provides: that the rate of interest for the loan, or forbearance
of any money, goods, or credits and the rate allowed in judgments, in the absence of
express contract as to such rate of interest, shall be twelve (12%) per cent per
annum.
Circular No. 416, fixing the rate of interest at 12% per annum, deals with (1)
loans; (2) forbearance of any money, goods or credit; and (3) judgments. Judgments
spoken of and referred to in Circular No. 416 are "judgments in litigation involving
loans or forbearance of any money, goods or credits.
Any other kind of monetary judgment which has nothing to do with nor
involving loans or forbearance of any money, goods or credits does not fall within the
coverage of the said law for it is not, within the ambit of the authority granted to the
Central Bank." The amount to be paid was a portion of the P7,776,335.69 which
petitioner was obligated to pay Greatland as consideration for the sale of several
parcels of land. The amount of P2,300,000.00 was assigned by Greatland in favor of
private respondent. The said obligation therefore arose from a contract of purchase
and sale and not from a contract of loan or mutuum. Hence, what is applicable is the
rate of 6% perannum as provided in Article 2209 of the Civil Code of the Philippines
and not the rate of 12% per annum as provided in Circular No. 416
cent as insisted upon by petitioner's counsel. The CA reduced the interest to 6% per
annum.
ISSUE:What is the applicable rate of interest?
HELD: Petitioner maintains that not only is it unjust and unfair but it is also contrary
to the correct interpretation of the fixing of interest rates under Sections 243 and 244
of the Insurance Code. And since petitioner's claims is based on an insurance
contract, then it is the Insurance Code which must govern and not the Civil Code.
The court stated that the Insurance Code is not pertinent to the instant case.
It applies only when the court finds an unreasonable delay or refusal in the payment
of the claims.
Neither does Circular No. 416 of the Central Bank which raised the legal rate
of interest from six (6%) to twelve (12%) per cent apply to the case at bar as by the
petitioner. The adjusted rate mentioned in the circular refers only to loans or
forbearances of money, goods or credits and court judgments thereon but not to
court judgments for damages arising from injury to persons and loss of property
which does not involve a loan.
In the case of Philippine Rabbit Bus Lines, Inc. vs. Cruz the Court declared
that the legal rate of interest is six (6%) per cent per annum, and not twelve (12%)
per cent, where a judgment award is based on an action for damages for personal
injury, not use or forbearance of money, goods or credit. In the same vein, the Court
held in GSIS vs. Court of Appeals, that the rates under the Usury Law (amended by
P.D. 116) are applicable only to interest by way of compensation for the use or
forbearance of money, interest by way of damages is governed by Article 2209 of the
Civil Code. And in the light of the fact that the contending parties did not allege the
rate of interest stipulated in the insurance contract, the legal interest was properly
pegged by the Appellate Court at six (6%) per cent.
CUYEGKENG, ChrystenGiann C.
37.
A.C.
ENTERPRISES,
INC., vs.
CONSTRUCTION
INDUSTRY
ARBITRATION COMMISSION and DEE CONSTRUCTION CORPORATION
G.R. NO. 101444 MAY 9, 1995
QUIASON, J.
FACTS: Private respondent in its Second Partial Motion for Reconsideration insists
that it is entitled to interest at the rate of 12% per annum on the monetary award
given them by the Construction Industry Arbitration Commission (CIAC). It contends
that under Executive Order No. 1008 dated February 4, 1985 and the Rules of
Procedure Governing Construction Arbitration, arbitral awards are final and
"inappealable" and pursuant to our ruling in Eastern Shipping Lines, Inc. v. Court of
Appeals, 234 SCRA 78 (1994), monetary awards in all judgments that became final
and executory, regardless of the nature of the obligation, shall bear legal interest of
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12% per annum. The obligation that was breached in the arbitration case at bench
was not based on a loan or forbearance of money, and therefore was not covered by
Central Bank Circular No. 416.
In Reformina v. Tomol, Jr., 139 SCRA 260 (1985), the Supreme Court made it
clear that the award of legal interest at 12% per annum under said Central Bank
Circular shall be adjudged only in cases involving the loan or forbearance of money.
However, in Eastern Shipping Lines, Inc., we held that 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.
ISSUE:Whether or not legal interest of 12% per annum shall set in from the moment
a judgment has become final and inappealable
HELD: No. It appears that private respondent equated, and wrongly at that, the term
"final and inappealable" as used in E.O. No. 1008 and the Rules of Procedure
Governing Construction Arbitration with the term "final and executory" as used
in Eastern Shipping Lines, Inc. A "final and inappealable" judgment is not the same
as a "final and executory" one. The former becomes executory only as in the case of
an award by the CIAC after the lapse of 30 days from receipt of notice thereof and
no petition for review to the Supreme Court is made (Rules of Procedure Governing
Construction Arbitration, Art. XVI, Sec. 1).The CIAC award did not become "final and
executory" until after service of a copy of the Resolution dated April 8, 1992 of this
Court, denying the motion for reconsideration.
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However, on October 19, 1981, petitioner returned the check to PBCom and
debited PBCom's account for the amount covered by the check, the reason being
that there was a "material alteration" of the check number. PBCom then proceeded
to debit the account of Capitol for the same amount, and subsequently, sent the
check back to petitioner. Petitioner, however, returned the check to PBCom. Capitol
could not, in turn, debit F. Abante Marketing's account since the latter had already
withdrawn the amount. Capitol demanded the re-crediting of the amount. PBCom
followed suit from petitioner. The parties demanded the re-crediting of the amount.
Since the demands of Capitol were not heeded, it filed a civil suit with the Regional
Trial Court of Manila against PBCom which, in turn, filed a third-party complaint
against petitioner for reimbursement/indemnity with respect to the claims of Capitol.
Petitioner, on its part, filed a fourth-party complaint against F. Abante Marketing.
Regional Trial Court ordered PBCom to re-credit or reimburse plaintiff Capitol
City Development Bank the amount of P97,650.00, plus interest of 12 percent and
ordered to pay Capitol City Development Bank attorney's fees in the amount of Ten
Thousand (P10,000.00) Pesos; but PBCom is entitled to reimbursement/indemnity
from PNB; and Philippine National Bank to be, in turn reimbursed or indemnified by
F. Abante Marketing for the same amount.
Court of Appeals modified by exempting PBCom from liability to plaintiffappellee for attorney's fees and ordering PNB to honor the check for P97,650.00,
with interest as declared by the trial court, and pay plaintiff-appellee attorney's fees
of P10,000.00. Petitioner appealed.
ISSUE: Whether or not the award of attorney's fees is proper.
HELD: No. The amount of P10,000.00 as attorney's fees was deleted. The trial court
and the Court of Appeals failed to explicitly state the rationale for the said award. In
Consolidated Bank & Trust Corporation (Solidbank) v. Court of Appeals the Supreme
Court ruled that: the award of attorney's fees lies within the discretion of the court
and depends upon the circumstances of each case. However, the discretion of the
court to award attorney's fees under Article 2208 of the Civil Code of the Philippines
demands factual, legal and equitable justification, without which the award is a
conclusion without a premise and improperly left to speculation and conjecture. It
becomes a violation of the proscription against the imposition of a penalty on the
right to litigate. The reason for the award must be stated in the text of the court's
decision. If it is stated only in the dispositive portion of the decision, the same shall
be disallowed. As to the award of attorney's fees being an exception rather than the
rule, it is necessary for the court to make findings of fact and law that would bring the
case within the exception and justify the grant of the award.
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DAVID, SheiglaNerie V.
39. SENTINEL INSURANCE CO., INC. vs. CA
G.R. NO. L-52482, FEBRUARY 23, 1990
REGALADO, J.
FACTS: Petitioner Sentinel Insurance Co., Inc., was the surety in a contract of
suretyship entered into with NemesioAzcueta, Sr., doing business under 'Malayan
Trading. Both of them bound themselves, 'jointly and severally, to fully and
religiously guarantee the compliance with the terms and stipulations of the credit line
granted by private respondent Rose Industries, Inc., in favor of Azcueta, in the
amount of P180,00.00. Between November 23 to December 23, 1974, Azcueta
made various purchases of tires, batteries and tire tubes from the private respondent
but failed to pay, prompting the latter to demand payment but because Azcueta failed
to settle his accounts, the case was referred to the Insurance Commissioner who
invited the attention of the petitioner on the matter and the latter cancelled the
Suretyship Agreement on May 13, 1975 with due notice to the private respondent.
Meanwhile, private respondent filed with the Makati CFI a complaint for collection of
sum of money against petitioner and Azcueta.
The CFI ruled in favor of the respondent and ordered the petitioner to pay
interest on the principal obligation at the rate of 14% per annum at the rate of 2%
every 45 days commencing from April 30, 1975 until the amount is fully paid.
The petitioner filed a motion for clarification of the judgment because it would
appear that aside from the 14% interest imposed on the principal obligation, an
additional 2% every 45 days corresponding to the additional penalty has been
imposed against the petitioner which imposition would be usurious.
The judge denied the motion on the theory that the judgment, having become
final and executory, can no longer be amended or corrected.
The petitioner then filed a petition with the CA. The CA granted the petition,
stating that courts are empowered, even after decisions have become final, to
correct clerical errors or mistakes in the decisions.
Hence, the present petition.
ISSUE:
Whether
or
not
the
imposition
of
interest
is
proper.
HELD: No. The CA did not err in ordering the clarification of the decision of the trial
court by amending the questioned part of its dispositive portion to include the phrase
damage dues to modify the stated rate of 2%, removing any misconception that it is
being imposed as interest.
To clarify an ambiguity or correct a clerical error in the judgment, the court
may resort to the pleadings filed by the parties, the findings of fact and the
conclusions of law expressed in the text or body of the decision.
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Indeed, this was what the CA did in resolving the original petition. It examined
the complaint filed against the petitioner and noted that to "order defendant to pay
interest at 14 per centum and damage dues at the rate of 2% every 45 days
commencing from April 30, 1975 up to the time the full amount is fully paid."
The statement that the imposition of 2% interest every 45 days commencing
from April 30, 1975 on top of the 14% per annum (as would be the impression from a
superficial reading of the dispositive portion of the trial court's decision) would be
usurious is a sound observation. It should, however, be stressed that such
observation was on the theoretical assumption that the rate of 2% is being imposed
as interest, not as damage dues which was the intendment of the trial court.
Certainly, the damage dues in this case do not include and are not included in
the computation of interest as the two are of different categories and are distinct
claims which may be demanded separately.While interest forms part of the
consideration of the contract itself, damage dues (penalties, and so forth) are usually
made payable only in case of default or non-performance of the contract.
DESOACIDO, JamesMareck
41. SANTULAN vs. FULE
G.R. NO. L-59664 DECEMBER 26, 1984
AQUINO,J.
FACTS: This case is about the collection of legal interest on the sum of P30,000 as
the value of improvements on a foreshore land, which interest was not included in
this Court's decision of December 15, 1977 in Santulan vs. Executive Secretary, L28021, 80 SCRA 548.
In that decision this Court affirmed the order of the Undersecretary of
Agriculture and Natural Resources dated December 14, 1954 which gave due
course to the lease application of Julian Santulan provided that he reimbursed
Antonio Lusin the appraised value of the existing improvements (pp. 574-5, 80
SCRA).
When the case was remanded to the trial court, Judge Fule in his order of
September 2, 1981 directed the heirs of Santulan to reimburse the heirs of Lusin the
sum of P30,000 as the value of the improvements "with legal interest" from
1955 until paid. He affirmed said order in his order of January 13, 1982. Santulan's
heirs appealed under Republic Act No. 5440 from the order imposing 6% legal
interest.
ISSUE: WON the imposition of legal interest by the trial court when the fruits have
been gathered by the possessor and it was not agreed upon by the parties was
correct?
HELD: We hold that the order is devoid of legal basis. It is obviously not sanctioned
by article 2209 of the Civil Code which provides that "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
percent per annum. "
Santulan's obligation to reimburse Lusin the value of his improvements was
intended to avoid unjust enrichment. Interest was not demanded by Lusin when the
case was pending in the administrative agencies and in the courts. This Court's final
judgment, which is the law of the case, did not provide for interest. There is no
reason for the trial court to add interest to the judgment.
The exaction of interest is not only illegal. It is also manifestly unjust under
the facts of this protracted controversy. Lusin and his heirs have received the fruits of
the disputed land since they have been in possession thereof. As noted in Trillana
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vs. Manansala, 96 Phil. 865, no interest is to be satisfied because the fruits gathered
by the possessor are considered as interest.
when the case was pending before the lower court, hence, there is no reason for this
Court to grant such claim. As ruled by this Court, such claim is groundless since the
decision and orders sought to be enforced do not direct the payment of interest and
have long become final (Canonizado v. Ordoez-Benitez, 149 SCRA 555 [1987]).
than the defendants Venturanzasthemselves admitted in their brief that they were
delayed in the payment of the balance of their obligation to the plaintiffs. One cannot
admit being delayed in the payment of his obligation unless he believes that his
obligation is already due and demandable. Stated otherwise, there is no delay if the
obligation is not yet due.
The alleged cause of their default in paying the balance of the price, for
failure to receive the price for the purchase of their haciendas in Cagayan de Oro
and Camairnes Sur, is neither force majeure nor an act of God. Hence, their failure
to pay is not justified.
As to the defense of defendants Oledan, the agreement relied upon by
defendants does not show that plaintiffs intervened in, much less gave their consent
to, the substitution. The plaintiffs denied having consented to the transfer of rights
from the Oledans to the Venturanzas alone. Thus, defendants Oledan failed to
establish animus novandi, whether expressed or implied, on the part of the creditors,
the Corteses, plaintiffs. Thus, the defendants Venturanzas and Oledans are ordered
to pay jointly and severally plaintiffs-appellees.
may insure the same property for his own sole benefit. It is to be noted that nine
endorsement documents were prepared by Alchester, in favor of RCBC. RCBC, in
good faith, relied upon the endorsement documents sent to it, as per stipulation.
Over and above this, GOYU continued, in the meantime, to enjoy the benefits of the
credit facilities extended to it by RCBC.
GOYU cannot seek relief under Section 53 of the Insurance Code which
provides that the proceeds of insurance shall exclusively apply to the interest of the
person in whose name or for whose benefit it is made. The peculiarity of the
circumstances presents a justification to take exception to the application of the said
provision. It has been established that it was the intention of the parties to designate
RCBC as the party for whose benefit the insurance policies were taken out.
GOYU continued until the occurrence of the fire, to enjoy the benefits of the
credit facilities extended by RCBC which was conditioned upon the endorsement of
the insurance policies to be taken by GOYU to cover the mortgaged properties.
Thus, the insurance proceeds may, therefore, be exclusively applied to
RCBC, which under the factual circumstances of the case, is truly the person or
entity for whose benefit the policies were clearly intended.
DOMINGO, Julie-Anne D.
45. BRIONES vs. CAMMAYO, ET AL.
G.R. NO. L- 23559, OCTOBER 4, 1971
DIZON, J.
FACTS:Aurelio G. Briones filed an action in the Municipal Court of Manila against
defendants, 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. The
defendants answered that a mortgage contract was executed for securing the
payment of P1,500.00 for a period of one year, without interest, but the plaintiff
delivered to the defendant Primitivo only the sum of P1,200.00 and withheld the sum
of P300.00 which was intended as advance interest for one year; that on account of
said loan of P1,200.00, defendant Primitivo paid to the plaintiff the total sum of
P330.00 which plaintiff, illegally and unlawfully refuse to acknowledge as part
payment of the account but as an interest of the said loan for an extension of another
term of one year; and that said contract of loan entered into between plaintiff and
defendant Primitivo is a usurious contract. Briones denied the allegations of the
counterclaim. The Municipal Court rendered judgment sentencing the defendants to
pay the plaintiff with interests thereon plus attorney's fees. The Court of First
Instance of Manila also ordered the defendants to pay the plaintiff. Defendants claim
that the trial court erred in sentencing them to pay the principal of the loan
notwithstanding its finding that the same was tainted with usury. It is not now
disputed that the contract of loan in question was tainted with usury.
ISSUE: Whether the creditor is entitled to collect from the debtor the amount
representing the principal obligation
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HELD: Yes. Under Act 2655 a usurious contract is void; that the creditor had no right
of action to recover the interest in excess of the lawful rate; but that this did not mean
that the debtor may keep the principal received by him as loan thus unjustly
enriching himself to the damage of the creditor. The Usury Law, by its letter and
spirit, did not deprive the lender of his right to recover from the borrower the money
actually loaned to and enjoyed by the latter. 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, 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. The principal debt remaining without
stipulation for payment of interest can be recovered by judicial action. And in case of
such demand, and the debtor incurs in delay, the debt earns interest from the date of
the demand. Such interest is not due to stipulation, for there was none, the same
being void. Rather, it is due to the general provision of law that in obligations to pay
money, where the debtor incurs in delay, he has to pay interest by way of damages.
pursuant to Article 2209 and then interest on the legal interest should also be
computed in accordance with the language of Article 2212 of the Civil Code.
ISSUE: Whether compounded interest could be further earned where no interest is
stipulated
HELD:No. In cases where no interest stipulated, no compounded interest could be
further earned. The Court ruled that Article 2212 contemplates the presence of
stipulated or conventional interest which has accrued when demand was judicially
made. In cases where no interest had been stipulated by the parties, as in the case
of Philippine American Accident Insurance, no accrued conventional interest could
further earn interest upon judicial demand. In this case, no interest was stipulated by
the parties. In the promissory note denominated Compromise Agreement signed by
the Afable, Jr. which was duly accepted by the David no interest was mentioned.
That being the case, the interest should only be subject to a simple interest.
conveying such real estate at an interest, than twelve percent per annum." The usury
law therefore, as amended by Presidential Decree 116, fixed all interest rates for all
loans with maturity of more than 360 days at twelve (12%) per cent per annum
including premiums, fines and penalties.
The law should not be interpreted to mean forfeiture of the principal loan as
that would be unjustly enriching the borrower. The unpaid principal debt still stands
and remains valid but the stipulation as to the usurious interest is void, consequently,
the debt is to be considered without stipulation as to the interest.
the other to the Pugaos. A guard key remained in the possession of the respondent
Bank. The safety deposit box has two (2) keyholes, one for the guard key and the
other for the renter's key, and can be opened only with the use of both keys.
Petitioner claims that the certificates of title were placed inside the said box. A certain
Mrs. Ramos wanted to buy the said lands and the parties agreed thereto, but, when
they opened the safety deposit box, the titles were not there and the sale did not
materialize. As a result, the Pugao spouses sued the bank but the latter invoked the
stipulations.
ISSUE:Whether or not the contract was that of a lease or a deposit.
HELD: It was neither both, it was a special kind of deposit. It cannot be
characterized as an ordinary contract of lease under Article 1643 because the full
and absolute possession and control of the safety deposit box was not given to the
joint renters the petitioner and the Pugaos. The guard key of the box remained
with the respondent Bank; without this key, neither of the renters could open the box.
On the other hand, the respondent Bank could not likewise open the box without the
renter's key. In this case, the said key had a duplicate which was made so that both
renters could have access to the box. We observe, however, that the deposit theory
itself does not altogether find unanimous support even in American jurisprudence.
We agree with the petitioner that under the latter, the prevailing rule is that the
relation between a bank renting out safe-deposit boxes and its customer with respect
to the contents of the box is that of a bail or and bailee, the bailment being for hire
and mutual benefit. This is just the prevailing view because: There is, however, some
support for the view that the relationship in question might be more properly
characterized as that of landlord and tenant, or lessor and lessee. It has also been
suggested that it should be characterized as that of licensor and licensee. The
relation between a bank, safe-deposit company, or storage company, and the renter
of a safe-deposit box therein, is often described as contractual, express or implied,
oral or written, in whole or in part. But there is apparently no jurisdiction in which any
rule other than that applicable to bailments governs questions of the liability and
rights of the parties in respect of loss of the contents of safe-deposit boxes.
P120,240.00. Atok Finance alleged that Sanyu Chemical had failed to collect and
remit the amounts due under the trade receivables. Sanyu Chemical and the
individual private respondents sought dismissal of Atok's claim upon the ground that
such claim had prescribed under Article 1629 of the Civil Code and for lack of cause
of action. The private respondents contended that the Continuing Suretyship
Agreement, being an accessory contract, was null and void since, at the time of its
execution, Sanyu Chemical had no pre-existing obligation due to Atok Finance.
It is the contention of respondents that the suretyship agreement is null and
void because it is notin consonance with the laws on guaranty and security. The said
agreement was entered into by theparties two years before the Deed of Assignment
was executed.
Thus, allegedly, it ran counter to the provision that guaranty cannot exist
independently because by nature it is merely an accessory contract: first, because
this contract, just like guaranty, cannot exist without a valid obligation (Art. 2052, Civil
Code); and, second, although it may be given as security for future debt (Art. 2053,
C.C.), the obligation contemplated in the case at bar cannot be considered 'future
debt' as envisioned by this law.
ISSUE: Whether or not a surety agreement, being an accessory contract, be
effected to secure future (non-existing) debts. May the continuing suretyship
agreement be declared null and void for alleged lack of consideration since there
was still no pre-existing obligation for the surety to attach to.
HELD: Surety agreements may secure future debts. It is true that a guaranty or a
suretyship agreement is an accessory contract in the sense that it is entered into for
the purpose of securing the performance of another obligation which is denominated
as the principal obligation. It is also true that Article 2052 of the Civil Code states that
"a guarantee cannot exist without a valid obligation." This legal proposition is not,
however, like most legal principles, to be read in an absolute and literal manner and
carried to the limit of its logic.
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In the judgment, the principal debtor was ordered to pay the creditor. The
surety was likewise ordered to pay the creditor but with the proviso that execution
should not issue against [the surety] until a return is made by the Sheriff upon
execution against [the principal debtor] showing that the judgment against her
remained unsatisfied in whole or in part; and provided, further, that [the principal
debtor] shall reimburse to [the surety] whatever amount the latter might pay under
this judgment together with such expenses as may be necessary to effectuate said
reimbursement.
ISSUE:Whether or not the surety only acted as a guarantor and as such its liability
cannot be exacted until after the property of the principal shall have been exhausted.
HELD: NO. The surety has no justification whatever to resist the claim of the creditor
for in the judgment appealed from it is precisely provided that execution of judgment
should not issue against the surety until after it is shown that the execution of the
judgment against the principal debtor has been returned by the sheriff unsatisfied,
which was the only excuse given by said surety in not fulfilling its commitment under
the bond. And yet, the surety appealed from said judgment just to put up the
additional defense that its liability under the bond has already expired because of the
condition that its liability shall expire on February 10, 1952. The Court considers this
stipulation as unfair and unreasonable for it practically nullifies the nature of the
undertaking assumed by the surety. It should be noted that the principal obligation is
payable 90 days from date of issue, which falls on February 10, 1952. Only on this
date can demand for payment be made on the principal debtor. If the principal debtor
should fail to pay and resort is made to the surety for payment on the next day, it
would be unfair for the surety to allege that its liability has already expired. As the
terms of the bond should be given a reasonable interpretation, it is logical to hold
that the liability of the surety attaches as soon as the principal debtor defaults, and
notice thereof is given the surety within reasonable time to enable it to take steps to
protect its interest. After all, the surety has a remedy under the law, which is to
foreclose the counterbond put up by the principal debtor.
The principal debtor failed to comply with its obligation with the creditor.
Consequently, the surety was compelled to pay, as it did pay. The principal debtor
was able to partially indemnify the surety leaving an unpaid balance. Notwithstanding
several demands for the unpaid portion, the principal debtor failed to reimburse the
surety. The surety filed a money claim against the estate of the late Nicasia
Sarmiento which was being administered by the principal debtor. In opposing the
money claim, the principal debtor asserts that the surety bonds and the indemnity
agreements had been extinguished by the execution of the deed of assignment.
ISSUE:Whether or not the surety bonds are extinguished by virtue of the execution
of the deed of assignment.
HELD: No. The deed of assignment cannot be regarded as an absolute conveyance
whereby the obligation under the surety bonds was automatically extinguished. The
subsequent acts of the principal debtor bolster the fact that the deed of assignment
was intended merely as a security for the issuance of the 2 surety bonds. Partial
payments were made after the execution of the deed of assignment to satisfy the
obligation under the 2 surety bonds. Since later payments were made to pay the
indebtedness, it follows that no debt was extinguished upon the execution of the
deed of assignment. Moreover, a second real estate mortgage was executed and
eventually cancelled. If indeed the deed of assignment extinguished the obligation,
there was no reason for a second mortgage to still have to be executed.
The proper procedure was for the surety to collect the remaining unpaid
portion of the surety from the sales of lumber and to return whatever remained to the
principal debtor. The Court cannot order the return because the estate of the spouse
of the principal debtor has not asked for any return of excess lumber or its value.
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Duran claims that the Deed of Sale in favor of her mother is a forgery, saying
that at the time of its execution in 1963 she was in the United States. On the other
hand, the adverse party alleges that the signatures of Duran in the said Deed are
genuine and, consequently, the mortgage made by her mother in favor of Tiangco is
valid.
ISSUE: Whether Tiangco was a buyer in good faith and for value
HELD: YES. An innocent purchaser for value relying on a torrens title issued is
protected. A mortgagee has the right to rely on what appears in the certificate of title
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 said certificate.
In the case at bar, Tiangco, in good faith relied on the certificate of title in the
name of Durans mother and even on the supposition that the sale was void, the
general rule that the direct result of a previous illegal contract cannot be valid (on the
theory that the spring cannot rise higher than its source) cannot apply here for the
Court is confronted with the functionings of the Torrens System of Registration. The
doctrine to follow is simple enough: a fraudulent or forged document of sale may
become the ROOT of a valid title if the certificate of title has already been transferred
from the name of the true owner to the name of the forger or the name indicated by
the forger.
LIMJAP, Michelle F.
55. A. FRANCISCO REALTY AND DEVELOPMENT CORPORATION vs.
COURT OF APPEALS
G.R. NO. 125055 OCTOBER 30, 1998
MENDOZA, J.
FACTS: A. Francisco Realty and Development Corporation granted a loan of P7.5
Million to spouses Romulo and ErlindaJavillonar, in consideration of which the latter
executed the following documents: (a) a promissory note stating an interest charge
of 4% per month for six months; (b) a deed of mortgage over realty; and (c) an
undated deed of sale of the mortgaged property in favor of the mortgagee. The
promissory note expressly provided that upon "failure of the MORTGAGOR to pay
the interest without prior arrangement with the MORTGAGEE, full possession of the
property will be transferred and the deed of sale will be registered. For this purpose,
the owner's duplicate of TCT No. 58748 was delivered to petitioner. Petitioner claims
that private respondents failed to pay the interest and, as a consequence, it
registered the sale of the land in its favor on February 21, 1992. Petitioner
demanded possession of the mortgaged realty and the payment of 4% monthly
interest from May 1992, plus surcharges. As respondent spouses refused to vacate,
petitioner filed the present action for possession before the Regional Trial Court in
Pasig City. In their answer, respondents admitted liability on the loan but alleged that
it was not their intent to sell the realty as the undated deed of sale was executed by
39 | P a g e
them merely as an additional security for the payment of their loan. The RTC
rendered decision in favor of petitioner. On appeal, the Court of Appeals reversed the
decision of the trial court and ruled that the deed of sale was void for being in fact a
pactumcommissorium which is prohibited by Art. 2088 of the Civil Code.
ISSUE: Whether or not the agreement constitutes pactumcommissorium.
HELD: Yes. The stipulations in the promissory notes providing that, upon failure of
respondent spouses to pay interest, ownership of the property would be
automatically transferred to petitioner and the deed of sale in its favor would be
registered, are in substance a pactumcommissorium. They embody the two
elements of pactumcommissorium, to wit: The prohibition on pactumcommissorium
stipulations is provided for by Article 2088 of the Civil Code: (1) that there should be
a pledge or mortgage wherein a property is pledged or mortgaged by way of security
for the payment of the principal obligation; and (2) that there should be a stipulation
for an automatic appropriation by the creditor of the thing pledged or mortgaged in
the event of non-payment of the principal obligation within the stipulated period. The
contention that the proscribed stipulation should be found in the mortgage deed itself
to be declared void is without merit. Court categorically ruled that a mortgagee's
mere act of registering the mortgaged property in his own name upon the
mortgagor's failure to redeem the property amounted to the exercise of the privilege
of a mortgagee in a pactumcommissorium.Thus, the subject transaction is void
rendering the registration of the deed of sale covering the subject lot also void.
FACTS: Lydia P. Cuba is a grantee of a Fishpond Lease Agreement No. 2083 from
the Government. She obtained loans from the Development Bank of the Philippines
in the amounts of P109,000.00; P109,000.00; and P98,700.00 under the terms
stated in the Promissory Notes. As security for said loans, Cuba executed two Deeds
of Assignment of her Leasehold Rights. Subsequently, Cuba failed to pay her loan on
the scheduled dates. Without foreclosure proceedings, whether judicial or extrajudicial, DBP appropriated the Leasehold Rights of Cuba over the fishpond in
question. After DBP has appropriated the Leasehold Rights of Cuba over the
fishpond in question, DBP, in turn, executed a Deed of Conditional Sale of the
Leasehold Rights in favor of Cuba over the same fishpond in question. After which, a
new Fishpond Lease Agreement No. 2083-A dated March 24, 1980 was issued in
favor Cuba only, excluding her husband. When Cuba failed to pay the amortization
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as stated in Deed of Conditional Sale, DBP sent a Notice of Rescission thru Notarial
Act. After the Notice of Rescission, DBP took possession of the Leasehold Rights of
the fishpond in question. Thereafter, DBP conducted a public bidding and thereafter
executed a Deed of Conditional Sale in favor of AgripinaCaperal. Caperal was
awarded Fishpond Lease Agreement No. 2083-A. Thus, Cuba filed a
complaintagainst DBP and AgripinaCaperal filed Cuba for the declaration of nullity of
DBPs appropriation of Cubas rights, title, and interests over a 44-hectare fishpond
located in Bolinao, Pangasinan, for being violative of Article 2088 of the Civil Code
The trial court resolved the issue in favor of Cuba. On appeal, the Court of Appeals
declared as valid the act of DBP in appropriating Cubas leasehold rights and interest
under Fishpond Lease Agreement No. 2083.
ISSUE: Whether the act of DBP in appropriating to itself CUBAs leasehold rights
over the fishpond in question without foreclosure proceedings was contrary to Article
2088 of the Civil Code and, therefore, invalid.
HELD: Yes. Condition no. 12 did not provide that the ownership over the leasehold
rights would automatically pass to DBP upon CUBAs failure to pay the loan on
time. It merely provided for the appointment of DBP as attorney-in-fact with
authority, among other things, to sell or otherwise dispose of the said real rights, in
case of default by Cuba and to apply the proceeds to the payment of the loan. This
provision is in conformity with Article 2087 of the Civil Code, which authorizes the
mortgagee to foreclose the mortgage and alienate the mortgaged property for the
payment of the principal obligation. DBP, however, exceeded the authority vested by
condition no. 12 of the deed of assignment when it appropriated the leasehold rights
without foreclosure proceedings. Besides, an assignment to guarantee an obligation,
as in the present case, is virtually a mortgage and not an absolute conveyance of
title which confers ownership on the assignee. At any rate, DBPs act of
appropriating CUBAs leasehold rights was violative of Article 2088 of the Civil Code,
which forbids a creditor from appropriating, or disposing of, the thing given as
security for the payment of a debt.
family corporation, N. Domingo Realty & Development Corporation but alleged the
agreement was actually a loan secured by mortgage.
ISSUE: Is the contract an Absolute Sale or an Equitable Mortgage?
HELD:Based on the conduct of the petitioner and private respondent and even the
terminology of the second option to purchase, the intent and agreement between
them was undoubtedly one of equitable mortgage and not of sale.
First, possession of the property in the controversy remained with Petitioner
Manuel Lao who was the beneficial owner of the property, before, during and after
the alleged sale.It is settled that a pacto de retro sale should be treated as a
mortgage where the (property) sold never left the possession of the vendors.
Second, the option given to Manuel Lao to purchase the property in
controversy had been extended twice through documents executed by Mr. Tan Bun
Uy, President and Chairman of the Board of Better Homes Realty & Housing
Corporation. The wording of the first extension is a revelation that the parties really
intended to be bound by a loan with mortgage, not by a pacto de retro.
Third, Manuel Lao and his brother were in such dire need of money that
they mortgaged their townhouse units registered under the name of N. Domingo
Realty Corporation, the family corporation put up by their parents, to Private
Respondent Better Homes Realty & Housing Corporation. In retrospect, it is easy to
blame Petitioner Manuel Lao for not demanding a reformation of the contract to
reflect the true intent of the parties. But this seeming inaction is sufficiently
explained by the Lao brothers desperate need for money, compelling them to sign
the document purporting to be a sale after they were told that the same was just for
formality.
There was no sale of the disputed property. Hence, it still belongs to
petitioners family corporation, N. Domingo Realty & Development
Corporation. Private respondent, being a mere mortgagee, has no right to eject
petitioner. Private respondent, as a creditor and mortgagee, xxx cannot
appropriate the things given by way of pledge or mortgage, or dispose of them. Any
stipulation to the contrary is null and void.
MAGBUHOS, Denise
59. FLANCIA vs. COURT OF APPEALS
G.R. NO. 146997, APRIL 26, 2005
CORONA, J.
FACTS: Plaintiffs spouses Godofredo and Dominica Flancia purchased from
defendant Oakland Development Resources Corp. a parcel of land in Quezon City.
Defendant corporation authorized plaintiffs to transport all their personal belongings
to their house at the aforesaid lot. On December 24, 1992, plaintiffs received a copy
of the execution foreclosing the mortgage issued by the RTC, Branch 98 ordering
defendant Sheriff Ernesto Sula to sell at public auction several lots formerly owned
by defendant corporation including subject lot of plaintiffs. Plaintiffs said that the
alleged mortgage of subject lot is null and void as it is not authorized by plaintiffs
pursuant to Art. 2085 of the Civil Code which requires that the mortgagor must be the
absolute owner of the mortgaged property.
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Defendant William Ong Genato, then filed his answer averring that codefendant Oakland Development Resources Corporation mortgaged to Genato two
parcels of land including that of the Flancias as security and guaranty for the
payment of a loan in the sum of P2,000,000.00. The said real estate mortgage has
been duly annotated at the back of TCT No. 366380. Due to non-payment of the
loan, defendant Genato filed an action for foreclosure of the real estate mortgage
against co-defendant corporation. The trial court ruled against defendant corporation
and ordered defendant Sheriff Ernesto Sula to cause the sale at public auction of the
properties covered by TCT No. 366380.
Genato said plaintiffs have no cause of action against him and that the
alleged plaintiffs Contract to Sell is not registered with the Register of Deeds of
Quezon City to affect defendant Genato and the latter is thus not bound by the
plaintiffs Contract to Sell. Genato likewise avers that registered mortgage is superior
to plaintiffs alleged Contract to Sell and it is sufficient for defendant Genato as
mortgagee to know that the subject TCT No. 366380 was clean at the time of the
execution of the mortgage contract with defendant corporation.
ISSUES:Whether or not the registered mortgage constituted over the property was
valid.
HELD: YES, the registered mortgage constituted over the property was valid. Under
Art. 2085 of the Civil Code, the essential requisites of a contract of mortgage are: (a)
that it be constituted to secure the fulfillment of a principal obligation; (b) that the
mortgagor be the absolute owner of the thing mortgaged; and (c) that the persons
constituting the mortgage have the free disposal of their property, and in the absence
thereof, that they be legally authorized for the purpose.
All these requirements are present in this case. As to the first essential
requisite of a mortgage, it is undisputed that the mortgage was executed on May 15,
1989 as security for a loan obtained by Oakland from Genato. As to the second and
third requisites, we need to discuss the difference between a contract of sale and a
contract to sell.
In a contract of sale, title to the property passes to the vendee upon the
delivery of the thing sold; in a contract to sell, ownership is, by agreement, reserved
by the vendor and is not to pass to the vendee until full payment of the purchase
price. Otherwise stated, in a contract of sale, the vendor loses ownership over the
property and cannot recover it unless and until the contract is resolved or rescinded;
in a contract to sell, title is retained by the vendor until full payment of the price.
In the contract between petitioners and Oakland, aside from the fact that it
was denominated as a contract to sell, the intention of Oakland not to transfer
ownership to petitioners until full payment of the purchase price was very clear. Acts
of ownership over the property were expressly withheld by Oakland from petitioner.
All that was granted to them by the "occupancy permit" was the right to possess it.
Clearly, when the property was mortgaged to Genato in May 1989, what was in
44 | P a g e
effect between Oakland and petitioners was a contract to sell, not a contract of sale.
Oakland retained absolute ownership over the property.
Ownership is the independent and general power of a person over a thing for
purposes recognized by law and within the limits established thereby. According to
Art. 428 of the Civil Code, this means that:
The owner has the right to enjoy and dispose of a thing, without other
limitations than those established by law.
Aside from the jus utendi and the jus abutendi inherent in the right to enjoy
the thing, the right to dispose, or the jus disponendi, is the power of the owner to
alienate, encumber, transform and even destroy the thing owned. Because Oakland
retained all the foregoing rights as owner of the property, it was entitled absolutely to
mortgage it to Genato. Hence, the mortgage was valid.
45 | P a g e
Joselito sold Lot 23-A to Lilian Toundjis who, pursuant to a Contract to Sell
undertook to pay Joselito the balance of the P2.5 Million purchase price once she is
placed in possession of a fenced-off property. And, for shares of stock, Joselito
assigned Lot 23-B and Lot 23-C to Century Realty and Development
Corporation which, after securing TCT Nos. 34390 and 34391 therefor,
mortgaged the same to Premiere Development Bank, Inc. to secure a P2.5 Million
loan.
ISSUE: Whether or not the mortgage constituted in favor of Premiere Development
Bank was valid.
HELD: NO. Premiere Bank cannot be accorded the status of an innocent mortgagee
for value vis--vis the mortgage of the lots constituted in its favor by Century Realty.
Premiere Bank acted in bad faith because despite the existence of alleged shanties
which are in fact and in truth big structures in the said lot Premiere Bank proceeded
in the execution of the mortgage contract.
If the land mortgaged is in the possession of a person other than the
mortgagor, the mortgagee is required to go beyond the certificate of title and make
inquiries as to the rights of the actual possessors. Failure to do so would make him a
mortgagee in bad faith and thus invalidate the mortgage.
MANUEL, Maxine
61. DELA MERCED vs. GSIS
G.R. NO. 140398, SEPTEMBER 11, 2001
YNARES-SANTIAGO, J.
FACTS:On September 25, 1956, Spouses Zulueta obtained a loan from GSIS, as
security for which they mortgaged the lands covered by TCT No. 26105 of the
Antonio Subdivision Village with stipulation that certain lots within TCT No. 26105
shall be excluded from the mortgage because they have been either previously sold
to third parties or donated to the government.
46 | P a g e
On October 15, 1957, another loan was extended by GSIS to the Zulueta
spouses, secured by a mortgage on the properties included in TCT Nos. 26105 and
50256 also within the Antonio Subdivision.
47 | P a g e
mortgage and its foreclosure. Indeed, those letters could have led respondent bank
to believe that petitioners recognized the validity of the Deed of Absolute Sale and
the mortgage as well as its subsequent foreclosure.
Article 1431 of the Civil Code states that "through estoppel an admission or
representation is rendered conclusive upon the person making it, and cannot be
denied or disproved as against the person relying thereon."A person, who by his
deed or conduct has induced another to act in a particular manner, is barred from
adopting an inconsistent position, attitude or course of conduct that thereby causes
loss or injury to another.
MORELOS, Michelle
63. URSAL VS. COURT OF APPEALS
G.R. No. 142411, October 14, 2005
AUSTRIA-MARTINEZ, J.:
FACTS: The spouses Jesus and CristitaMoneset (Monesets) are the registered
owners of a 333-square meter land together with a house thereon situated at Sitio
Laguna, Basak, Cebu City. On January 9, 1985, they executed a Contract to Sell
Lot & House in favor of petitioner WinifredaUrsal. After paying six monthly
installments, petitioner stopped paying due to the Monesets failure to deliver to her
the transfer certificate of title of the property as per their agreement; and because of
the failure of the Monesets to turn over said title, petitioner failed to have the contract
of sale annotated thereon.Unknown to petitioner, the Monesets executed on
November 5, 1985 an absolute deed of sale in favor of Dr. Rafael Canora, Jr. over
the said property for P14,000.00.
On September 15, 1986, the Monesets executed another sale, this time
with pacto de retro with RestitutoBundalo.On the same day, Bundalo, as attorney-infact of the Monesets, executed a real estate mortgage over said property with Rural
Bank of Larena (hereafter Bank) located in Siquijor for the amount
of P100,000.00.For the failure of the Monesets to pay the loan, the Bank served a
notice of extrajudicial foreclosure dated January 27, 1988 on Bundalo. Ursal filed an
action for declaration of non-effectivity of mortgage and damages against the
Monesets, Bundalo and the Bank due to fraud and bad faith in mortgaging the
property.
ISSUE: Whether the Bank failed to look beyond the transfer certificate of title of the
property for which it must be held liable
HELD: We agree. Banks cannot merely rely on certificates of title in ascertaining the
status of mortgaged properties; as their business is impressed with public interest,
they are expected to exercise more care and prudence in their dealings than private
individuals. Indeed, the rule that persons dealing with registered lands can rely solely
on the certificate of title does not apply to banks.Petitioners rights were limited to
asking for specific performance and damages from the Monesets. Specific
49 | P a g e
is to countenance grave contravention of public policy, fair dealing, good faith, and
justice. Such an unjust situation, the Court cannot sanction. Under the peculiar
circumstances obtaining in this case, the Court is bound to recognize RCBCs right
to the proceeds of the insurance policies if not for the actual endorsement of the
policies, at least on the basis of the equitable principle of estoppel.
MUPAS, Janelle
65. RAMIREZ vs. COURT OF APPEALS
G.R. NO. 133841, AUGUST 15, 2003
CARPIO-MORALES, J.
FACTS: Private respondents spouses Loreto Claravall and Victoria Claravall
executed a deed of sale in favor of the spouses Francisco Ramirez, Jr. and Carolina
Ramirez covering a parcel of land with an option to repurchase the property within a
period of two years. At the expiration of the two-year period, the Claravalls failed to
redeem the property, prompting them to file a complaint against the spouses
Ramirez to compel the latter to sell the property back to them. After trial, judgment
was rendered in favor of the spouses Ramirez which was, on appeal, affirmed by the
Court of Appeals. On review, however, this Court, finding that the Deed of Absolute
Sale with option to repurchase executed was one of equitable mortgage, reversed
the decision. Following the death of Francisco Ramirez, Jr., private respondents filed
a complaint for accounting and damages against herein petitioners.
Petitioners alleged that the complaint does not state a cause of action since
prior to the date when redemption was to be effected, the registered owners of the
property were the spouses Ramirez who were entitled to the rentals and fruits
thereof.
ISSUE: Whether petitioners contention that they own the subject property is correct.
HELD:The flaw in petitioners argument stems from their submission that the
spouses Ramirez, as vendees, were the owners of the property after it was
registered in their names following the execution of the deed of sale in their favor.
The declaration, however, by this Court in the first case that the deed of sale with
option to repurchase entered into by the spouses Ramirez and private respondents
was an equitable mortgage necessarily takes the deed out of the ambit of the law on
sales and puts into operation the law on mortgage. It is a well-established doctrine
that the mortgagors default does not operate to vest the mortgagee the ownership of
the encumbered property and the act of the mortgagee in registering the mortgaged
property in his own name upon the mortgagors failure to redeem the property
amounts to pactumcommissorium, a forfeiture clause declared by this Court as
contrary to good morals and public policy and, therefore, void. Before perfect title
over a mortgaged property may thus be secured by the mortgagee, he must, in case
of non-payment of the debt, foreclose the mortgage first and thereafter purchase the
mortgaged property at the foreclosure sale.
51 | P a g e
FACTS: DRossa Incorporated (DRI) agreed to mortgage its parcels of land in favor
of Union Bank of the Philippines (Union Bank) as security for the credit facility of
Josephine Marine Trading Corporation (JMTC). JMTC availed P3 million from the
credit line.
Subsequently, Union Bank increased the credit facility of JMTC to P27 million, from
which JMTC availed of about P18 million. Upon JMTCs failure to pay its obligation,
Union Bank instituted foreclosure proceedings on DRIs properties. DRIs properties
were auctioned where Union Bank was declared the highest bidder for
P15,300,000.00.
Thereafter, DRI filed a supplemental complaint seeking to declare the public
sale as null. It claimed that its liability is only P3 million which was the liability
incurred by JMTC under its first agreement with Union Bank. However, Union Bank
alleged that DRI was liable to JMTCs total outstanding obligations, regardless of
whether it was incurred during or subsequent to the first agreement.
The RTC dismissed the complaint for lack of merit. On appeal, the CA
reversed said decision. While it upheld Union Banks right to foreclose, it found that
DRIs mortgage liability is pegged at P3 million and which was later amended and
increased to P8.61 million. It ruled that DRI could not be held liable for more than
P8.61 million even if JMTC availed more than this amount.
ISSUE: Whether the liability of DRI is limited only to P8.61 million.
HELD: No. The pertinent provisions of the Real Estate Mortgage provide the parties
intent to constitute DRIs real estate properties as continuing securities, liable for the
current as well as the future obligations of JMTC. Indeed, a mortgage liability is
usually limited to the amount mentioned in the contract, but where the intent of the
contracting parties is manifest that the mortgage property shall also answer for future
loans or advancements, the same is valid and binding between the parties. This is
what the SC referred to as blanket mortgage clause or dragnet clause. A
blanket mortgage clause, also known as a dragnet clause in American
jurisprudence, is one which is specifically phrased to subsume all debts of past or
future origins.
In this case, DRI expressly agreed to secure all the obligations of JMTC,
whether presently owing or subsequently incurred. Thus, its liability is not limited to
P8.61 million only. Even if DRI is considered as an accommodation mortgagor only,
its liability would still exceed P8.61 million.
Maglaque obtained a loan of P2,000 from the Bulacan Development Bank evidenced
by a promissory note, payable on or before March 19, 1975, in two installments, the
first payment of P1,000.00, shall be due on September 19, 1974, and the second
payment of P1,000.00, shall be due on March 19, 1975, with interest at 12% per
annum. To secure the loan, the spouses executed a deed of real estate mortgage on
said land, including its improvements.
On September that same year, Sabina Payawal died. On December 1977,
EgmidioMaglaque paid Planters Development Bank the amount of P2,000.00, which
the bank accepted. On April 9, 1979, EgmidioMaglaque died.
On September 15, 1978, for non-payment in full of the loan, the bank extrajudicially foreclosed on the real estate mortgage. The bank was the highest bidder.
After the lapse of the redemption period, the bank consolidated its title to the
property and became its registered owner. Meanwhile, David Maglaque, as heir of
the deceased spouses filed with the CFI ofBulacan a complaint for annulment of the
sale conducted by the Provincial Sheriff of Bulacan, reconveyance of title, with
damages, and injunction. The RTC and the CA both dismissed the complaint for lack
of merit.
ISSUE: Whether the Bank should have filed its claim in the settlement of estate of
the deceased mortgagors.
HELD: NO. According to Rule 86, Section 7 of the Revised Rules of Court, the rule is
that a secured creditor holding a real estate mortgage has 3 options in case of death
of the debtor. These are:
(l) to waive the mortgage and claim the entire debt from the estate of the
mortgagor as an ordinary claim;
(2) to foreclose the mortgage judicially and prove any deficiency as an
ordinary claim; and
(3) to rely on the mortgage exclusively, foreclosing the same at anytime
before it is barred by prescription, without right to file a claim for any
deficiency.
Obviously, respondent bank availed itself of the third option. Thus, the SC
affirms in full the appealed decision.
which were in the possession of the judgment-debtor Manila Yellow Taxicab Co.,
while Northern Motors, Inc., as unpaid seller and mortgagee, still has "an
independent legal remedy" to recover the unpaid balance of the price against the
mortgagor.
Furthermore, Ong admits "that the mortgagee's right to the mortgaged
property is superior to that of the judgment creditor", but he contends that the rights
of the purchasers of the cars at the execution sale should be respected. He reasons
out they were not parties to the mortgage and that they acquired the cars prior to the
mortgagee's assertion of its rights thereto.
ISSUE: Whether respondent Ong has the right to levy upon the mortgaged taxicabs?
HELD: No. The essence of the chattel mortgage is that the mortgaged chattels
should answer for the mortgage credit and not for the judgment credit of the
mortgagor's unsecured creditor. The mortgagee is not obligated to file an
"independent action" for the enforcement of his credit. To require him to do so would
be a nullification of his lien and would defeat the purpose of the chattel mortgage
which is to give him preference over the mortgaged chattels for the satisfaction of his
credit. Respondent Ong's proposition is devoid of any legal sanction and is glaringly
contrary to the nature of a chattel mortgage. To uphold that contention is to destroy
the essence of chattel mortgage as a paramount encumbrance on the mortgaged
chattel.
The other argument raised by respondent Ong is also untenable. The thirdparty claim filed by Northern Motors, Inc. should have alerted the purchasers to the
risk which they were taking when they took part in the auction sale. Moreover, at an
execution sale the buyers acquire only the right of the judgment-debtor which in this
case was a mere right or equity of redemption. The sale did not extinguish the preexisting mortgage lien.
Thus, the Court denied the Motion for Reconsideration filed by Ong and the
Sheriff of Manila.
to release the balance allegedly because respondents failed to comply with the
banks requirement that Nelly Bedrejo should execute an undertaking or a lessors
conformity provided in Real Estate and Chattel Mortgage contract. The said
undertaking states that "It is a condition of this mortgage that while the obligations
remained unpaid, the acquisition by the lessor of the permanent improvements
covered by this Real Estate Mortgage as provided for in the covering Lease
Contract, shall be subject to this mortgage. For this purpose, the mortgagor hereby
undertakes to secure the lessors conformity hereto." For the alleged failure on the
part of the respondents, PNB foreclosed the mortgaged properties.
Thereafter, respondents instituted an action against PNB. Petitioner PNB filed
its Answer with Counterclaim alleging that the lessor's conformity was not an
additional requirement but was already part of the terms and conditions contained in
the Real Estate and Chattel Mortgage contract and that the release of the balance of
the loan was conditioned on the compliance and submission of the required lessors
conformity.
ISSUE: Whether the non-release of the balance of the loan by petitioner PNB is
justified?
HELD: No. PNB's contention that the lessors signature in the conforme portion of
the Real Estate and Chattel Mortgage Contract was a condition precedent to the
release of the balance of the loan to respondents is not persuasive. If the parties
truly intended to suspend the release of the P1,000,000 balance of the loan until the
lessors conformity to the Mortgage Contract would have been obtained, such
condition should have been plainly stipulated either in that Contract or in the Credit
Agreement. The tenor of the language used provision on the contract, as well as its
position relative to the whole Contract, negated the supposed intention to make the
release of the loan subject to the fulfillment of the clause. Nowhere did PNB explicitly
state that the release of the second half of the loan accommodation was subject to
the mortgagors procurement of the lessors conformity to the Mortgage Contract.
Absent such a condition, the efficacy of the Credit Agreement stood, and petitioner
was obligated to release the balance of the loan. Its refusal to do so constituted a
breach of its reciprocal obligation under the Loan Agreement.
PAMECA and private petitioners herein, as solidary debtors with PAMECA under the
promissory note. The RTC, affirmed by the CA ordered that the plaintiffs pay the
amounts prayed for. They also invoke that Art. 2015 applies in the case at bar in that
deficiencies and excesses in auction sales of thing pledged can no longer be
recovered
as
it
applies
to
chattel
mortgage
as
well.
ISSUE: Whether deficiencies can be recovered by the bank in a Chattel Mortgage
sale.
HELD: YES. In pledge, the sale of the thing pledged extinguishes the entire principal
obligation, such that the pledgor may no longer recover proceeds of the sale in
excess of the amount of the principal obligation. The Chattel Mortgage Law
expressly entitles the mortgagor to the balance of the proceeds, upon satisfaction of
the principal obligation and costs. Since the Chattel Mortgage Law bars the creditormortgagee from retaining the excess of the sale proceeds there is a corollary
obligation on the part of the debtor-mortgagee to pay the deficiency in case of a
reduction in the price at public auction.The lower court overlooked the fact that the
chattels included in the chattel mortgage are only given as security and not as a
payment of the debt, in case of a failure of payment.
The theory of the lower court would lead to the absurd conclusion that if the
chattels mentioned in the mortgage, given as security, should sell for more than the
amount of the indebtedness secured, that the creditor would be entitled to the full
amount for which it might be sold, even though that amount was greatly in excess of
the indebtedness.
Lastly, the language of the note as signed by the petitioners show that private
petitioners intended to bind themselves solidarily as co-makers with petitioner
PAMECA in the loan.
true intention and agreement between the parties; that their real agreement was not
an absolute sale of the said parcels of land but merely an equitable mortgage. DBP
contended that by October 1959, Dizon was not the owner but only had a right of
redemption to the lands. The trial court and the Court of Appeals held that such
contract was an absolute sale.
ISSUE: Whether the 'Deed of Sale with Assumption of Mortgage', and "Option to
Purchase Real Estate" is an absolute sale or an equitable mortgage.
HELD:No.
Such an instrument cannot be legally considered a real and
unconditional sale of the parcels of land because there was absolutely no money
consideration AND because the properties had already been previously sold at a
foreclosure sale divesting the petitioner of his right to ownership. The only legal
effect of this Option Deed is to grant Dizon the right to recover the properties upon
reimbursing Gaborro of the total sums of money that he may have paid to DBP and
PNB on account of the mortgage debts, the said right to be exercised within the
stipulated 5 years period.
The agreement between Dizon and Gaborro s one of those innominate
contracts under Art. 1307 of the New Civil Code but partaking of the nature of the
antichresis insofar as the principal parties are concerned. Reformation of the
contract is thereby called for. Jurisprudence is to the effect that the purchaser of land
sold at public auction under a writ of execution only has an inchoate right in the
property, subject to be defeated and terminated within the period of 12 months from
the date of sale, by a redemption on the part of the owner. Therefore, the judgment
debtor in possession of the property is entitled to remain therein during the period
allowed for redemption.
A judgment debtor, whose property is may transfer his right of redemption to
any one whom he may desire. The right to redeem land sold under execution within
12 months is a property right and may be sold voluntarily by its owner and may also
be attached and sold under execution.
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While on 26 July 1951 the RFC did execute a deed selling back the property
to the erstwhile mortgagors and former owners Cruzados in installments, subject to
the condition (among others) that the title to the property and its improvements "shall
remain in the name of the Corporation (RFC) until after said purchase price,
advances and interest shall have been fully paid", as of 27 September 1952,
Cruzado had only paid a total of P1,360, and had defaulted on six monthly
amortizations; for which reason the RFC rescinded the sale, and forfeited the
payments made, in accordance with the terms of the contract of 26 July 1951.
Meanwhile, on 10 March 1953 that the Cruzados sold to Pura L. Villanueva all
"their rights, title, interest and dominion on and over" the property, lot, house, and
improvements for P19,000.00, the buyer undertaking to assume payment of the
obligation to the RFC. However, the buyer could only pay P5,500 on account of the
note, for which reason the vendor obtained judgment for the unpaid balance. In the
meantime, the buyer Villanueva was able to secure a clean certificate of title (No.
32526), and mortgaged the property to appellant Magdalena Barretto to secure a
loan of P30,000.03, said mortgage having been duly recorded.
Pura Villanueva defaulted on the mortgage loan in favor of Barretto. The latter
foreclosed the mortgage in her favor, obtained judgment, and upon its becoming final
asked for execution on 31 July 1958. On 14 August 1958, Cruzado filed a motion for
recognition for her "vendor's lien" in the amount of P12,000.00 plus legal interest,
invoking Articles 2242, 2243, and 2249 of the new Civil Code. After hearing, the court
below ordered the "lien" annotated on the back of Certificate of Title No. 32526, with
the proviso that in case of sale under the foreclosure decree the vendor's lien and
the mortgage credit of appellant Barretto should be paid pro rata from the proceeds
ISSUE: Whether or not their right as mortgagees (Barettos) remain superior to the
unrecorded claim of herein appellee (Cruzado) for the balance of the purchase price
of her rights, title, and interest in the mortgaged property.
HELD: The right of the mortgagees (Barrettos) remain superior. It is clear from the
facts above-stated that ownership of the property had passed to the Rehabilitation
Finance Corporation since 1950, when it consolidated its purchase at the foreclosure
sale and obtained a certificate of title in its corporate name. The subsequent contract
of resale in favor of the Cruzados did not revest ownership in them, since they failed
to comply with its terms and conditions, and the contract itself provided that the title
should remain in the name of the RFC until the price was fully paid.
Therefore, when after defaulting in their payments due under the resale
contract with the RFC the appellant Cruzados sold to Villanueva "their rights, title,
interest and dominion" to the property, they merely assign whatever rights or claims
they might still have thereto; the ownership of the property rested with the RFC. The
sale from Cruzado to Villanueva, therefore, was not much a sale of the land and its
improvements as it was a quitclaim deed in favor of Villanueva. In law, operative sale
was that from the RFC to the latter, and it was the RFC that should be regarded as
the true vendor of the property. At the most, the Cruzados transferred to Villanueva
an option to acquire the property, but not the property itself, and their credit,
59 | P a g e
therefore, can not legally constitute a vendor's lien on the corpus of the property that
should stand on an equal footing with mortgaged credit held by appellants Barretto.
although the lower court found that "there were no known creditors other than the
plaintiff and the defendant herein," this cannot be conclusive. It will not bar other
creditors in the event they show up and present their claims State petitioner bank,
claiming that they also have preferred liens against the property involved.
Consequently, Transfer Certificate of Title No. 101864 issued in favor of the bank
which is supposed to be indefeasible would remain constantly unstable and
questionable. Such could not have been the intention of Article 2243 of the Civil
Code although it considers claims and credits under Article 2242 as statutory liens.
Neither does the De Barreto case sanction such instability. In fact, an annotation, as
suggested above, would insure to the benefit of the public, particularly those who
may subsequently wish to buy the property in question or who have a business
transaction in connection therewith. It would facilitate the enforcement of a legal
statutory right which cannot be barred by laches (See Manila Railroad Co. v. Luzon
Stevedoring Co., 100 Phil. 135).
Under the De Barreto decision, the full application of Articles 2242 and 2249
demands that there must first be some proceeding where the class of all the
preferred creditors may be bindingly adjudicated, such as insolvency, the settlement
of a decedents estate under Rule 87 of the Rules of Court, or other liquidation
proceedings of similar import.
RUTOR, Lyndon
75. A.C. RANSOM LABOR UNION-CCLU vs. NLRC
G.R. No. L-69494 May 29, 1987
MELENCIO-HERRERA, J.
FACTS:In two previous CIR cases, AC RANSOM Corporation was held guilty of
ULP of interference and discrimination and thus ordered to reinstate 22 employees
with backwages from July 25, 1969 until actually reinstated, amounting to at P
199,276.00, and without loss of seniority rights and other privileges appurtenant to
their employment. Successive executions were filed but was opposed until Later this
was reduced to 164,984.00. RANSOM later was granted clearance to cease
operation due to financial difficulties and terminate its employment without prejudice
to the right of the subject employees to seek redress of grievances under existing
laws and decrees.
Sometime in 1974, the UNION filed another Motion for Execution alleging that
although RANSOM had assumed a posture of suffering from business reverse, its
officers and principal stockholders had organized a new corporation, the Rosario
Industrial Corporation. Execution still failed.
UNION again filed an ex-parte Motion for Writ of Execution and Garnishment
praying that the Writ issue against the Officers/Agents of RANSOM personally and or
their estates.
LA Tito F. Genilo issued in 1980, an Order declaring private corp ROSARIO
and its officer liable and that a writ of execution be issued for P 164,984.00 against
respondent corporation and its officers/agents. NLRC, on appeal, modified the
61 | P a g e
Decision by relieving the officers and agents, holding only its president as liable for
the backwages.
The SC in the first Certiorari, set aside the NLRC order and reinstated with
modification the Order of the Labor Arbiter Tito F. Genilo of 1980 that personal
liability for the backwages due the 22 strikers shall be limited to Ruben Hernandez,
who was President of RANSOM in 1974, jointly and severally with other Presidents
of the same corporation who had been elected as such after 1972 or up to the time
the corporate life was terminated. MR was sought by both parties.
ISSUE: Whether or not alleged bankruptcy of RANSOM furnishes no justification for
non-payment of backwages to the employees
HELD: NO, the alleged bankruptcy of RANSOM furnishes no justification for nonpayment of backwages to the employees concerned taking into consideration Article
110 of the Labor Code, which provides:
ART. 110. Worker preference in case of bankruptcy. - In the event of bankruptcy
or liquidation of an employer's business, his workers shall enjoy first preference
as regards wages due them for services rendered during the period prior to the
bankruptcy or liquidation, any provision of law to the contrary notwithstanding.
Unpaid wages shag be paid in full before other creditors may establish any
claim to a share in the assets of the employer.
The term "wages" refers to all remunerations, earnings and other benefits in
terms of money accruing to the employees or workers for services rendered.
They are to be paid in full before other creditors may establish any claim to a
share in the assets of the employer.
Section 10. Payment of wages in case of bankruptcy.-Unpaid wages earned by
the employees before the declaration of bankruptcy or judicial liquidation of the
employer's business shall be given first preference and shall be paid in full
before other creditors may establish any claim to a share in the assets of the
employer.
The foregoing provisions are but in consonance with the principles of social
justice and protection to labor guaranteed by past and present Constitutions and are
not really being given any retroactive effect when applied herein.
The right of the employees concerned to backwages awarded them had
already vested at the time and even before clearance was granted. Note should also
be taken of the fact that the clearance was without prejudice to the right of subject
employees to seek redress of grievances under existing laws and decrees.
The worker preference applies even if the employer's properties are
encumbered by means of a mortgage contract, as in this case. So that, when
62 | P a g e
63 | P a g e
SACRO, MarielleKrizza
77. PHILIPPINE NATIONAL BANK vs. TERESITA CRUZ, ET.AL.
G.R.NO. 80593, DECEMBER 18, 1989
GANCAYCO, J.
65 | P a g e
properties of RMC after having extra-judicially foreclosed the same at public auction.
The writ of possession prevented the scheduled auction sale of the RMC properties
which were levied upon by the private respondents. In a petition filed by the private
respondents, the Labor Arbiter TeodoricoDogelio declared the latters preference as
regards the wages and other benefits due them. On appeal, the NLRC remanded the
case to respondent Labor Arbiter Ariel Santos, who likewise declared that the former
employees of RMC enjoy first preference as regards separation pay and other
benefits over the encumbrances asserted by DBP. In the present petition, DBP now
argues that there must be a judicial declaration, or at least, a cognizance by an
appropriate court or administrative agency of bankruptcy of the employer. On the
other hand, respondents contend, among others, that under Article 110 of the Labor
Code and its implementing rule, the claims of the laborers for unpaid wages and
other monetary benefits due them for services rendered prior to bankruptcy enjoy
first preference in the satisfaction of credits against a bankrupt company.
ISSUE: Whether or not the workers preference under Article 110 of the Labor Code
can be enforced even if theres no declaration of bankruptcy of the employer or
judicial liquidation of its properties.
HELD: No. A declaration of bankruptcy or a judicial liquidation must be present
before the worker's preference may be enforced. Article 110 of the Labor Code and
its implementing rule cannot be invoked by the respondents absent a formal
declaration of bankruptcy or a liquidation order. Article 110 must not be viewed in
isolation and must always be reckoned with the provisions of the Civil Code.
Furthermore, as explained in the case of Philippine Savings Bank v. Lantin, the
reason behind the necessity for a judicial proceeding or a proceeding in rem before
the concurrence and preference of credits may be applied, is that proceedings in
rem, such as insolvency and settlement of a decedents estate, are binding against
the whole world. All persons having interest in the subject matter involved, whether
they were notified or not, are equally bound. Consequently, a liquidation of similar
import or 'other equivalent general liquidation must also necessarily be a proceeding
in rem so that all interested persons whether known to the parties or not may be
bound by such proceeding.
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it was undergoing liquidation and that it is the liquidation court which has exclusive
jurisdiction to take cognizance of the petitioners claim.
The RTC denied the motion to dismiss holding that the subject lots were no
longer considered assets of RBO when its liquidation was commenced.The appellate
court reversed the decision and noted that the provisions of R.A. No. 265 states that
the liquidation court shall have jurisdiction to adjudicate disputed claims against the
bank. Disputed claims refer to all claims, whether they be against the assets of the
insolvent bank, for specific performance, breach of contract, damages, or whatever.
ISSUE: Whether or not the liquidation court has jurisdiction over petitioners claim.
HELD: Yes, the petition should have been filed with the liquidation court. The judicial
liquidation is intended to prevent multiplicity of actions against the insolvent bank.
The lawmaking body contemplated that for convenience only one court, if possible,
should pass upon the claims against the insolvent bank.
It is not necessary that a claim be initially disputed in a court or agency before
it is filed with the liquidation court. Since RBO is insolvent, other claimants not privy
to their transaction may be involved. As far as those claimants are concerned, in the
absence of certificates of title in the name of petitioner, subject lots still form part of
the assets of the insolvent bank.
We do not think that this jurisdiction would be lost simply because a former
employer had been placed under liquidation. The legislature deemed it wise to
confer jurisdiction over labor disputes to a body exclusively of others and We are not
prepared to divest such authority from the labor arbiter and the NLRC absent any
clear provision of law to that effect.
contractual relation is called a precarium. Under the Civil Code, precarium is a kind
of commodatum.
The Kasunduan reveals that the accommodation accorded by Pajuyo to
Guevarra was not essentially gratuitous. While the Kasunduan did not require
Guevarra to pay rent, it obligated him to maintain the property in good condition. The
imposition of this obligation makes the Kasunduan a contract different from a
commodatum. The effects of the Kasunduan are also different from that of a
commodatum. Case law on ejectment has treated relationship based on tolerance as
one that is akin to a landlord-tenant relationship where the withdrawal of permission
would result in the termination of the lease. The tenants withholding of the property
would then be unlawful. This is settled jurisprudence.
Even assuming that the relationship between Pajuyo and Guevarra is one of
commodatum, Guevarra as bailee would still have the duty to turn over possession
of the property to Pajuyo, the bailor. The obligation to deliver or to return the thing
received attaches to contracts for safekeeping, or contracts of commission,
administration and commodatum. These contracts certainly involve the obligation to
deliver or return the thing received. The Supreme Court held Pajuyo has a better
right of possession over the property involved than Guevarra.
of the Corporation Code. Although the trust relationship supposedly arose from
Cojuangcos being an officer and member of the Board of Directors of the UCPB, the
link between this alleged fact and the borrowings or advances was not established.
Nor was there evidence on the loans or borrowings, their amounts, the approving
authority, etc.
The thrust of the Republic that the funds were borrowed or lent might even
preclude any consequent trust implication. In a contract of loan, one of the parties
(creditor) delivers money or other consumable thing to another (debtor) on the
condition that the same amount of the same kind and quality shall be paid. Owing to
the consumable nature of the thing loaned, the resulting duty of the borrower in a
contract of loan is to pay, not to return, to the creditor or lender the very thing loaned.
This explains why the ownership of the thing loaned is transferred to the debtor upon
perfection of the contract. Ownership of the thing loaned having transferred, the
debtor enjoys all the rights conferred to an owner of property, including the right to
use and enjoy (jus utendi), to consume the thing by its use (jus abutendi), and to
dispose (jus disponendi), subject to such limitations as may be provided by law.
Evidently, the resulting relationship between a creditor and debtor in a contract of
loan cannot be characterized as fiduciary.
A trust receipt transaction is not classified as a simple loan and is
characterized as fiduciary, because the Trust Receipts Law (P.D. No. 115) punishes
the dishonesty and abuse of confidence in the handling of money or goods to the
prejudice of another regardless of whether the latter is the owner.
Based on the foregoing, a debtor can appropriate the thing loaned without
any responsibility or duty to his creditor to return the very thing that was loaned or to
report how the proceeds were used. Nor can he be compelled to return the proceeds
and fruits of the loan, for there is nothing under our laws that compel a debtor in a
contract of loan to do so. As owner, the debtor can dispose of the thing borrowed and
his act will not be considered misappropriation of the thing. The only liability on his
part is to pay the loan together with the interest that is either stipulated or provided
under existing laws.
TEJANO, Sherina
83. ADVOCATES FOR TRUTH IN LENDING, INC. vs. BANGKO SENTRAL
MONETARY BOARD
G.R. NO. 192986, JANUARY 15, 2013
REYES, J.
FACTS: Petitioner "Advocates for Truth in Lending, Inc." (AFTIL) is a non-profit, nonstock corporation organized to engage in pro bono concerns and activities relating to
money lending issues. R.A. No. 265, which created the Central Bank (CB) of the
Philippines on June 15, 1948, empowered the CB-MB to, among others, set the
maximum interest rates which banks may charge for all types of loans and other
credit operations, within limits prescribed by the Usury Law. On March 17, 1980, the
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Usury Law was amended by Presidential Decree (P.D.) No. 1684, giving the CB-MB
authority to prescribe different maximum rates of interest which may be imposed for
a loan or renewal thereof or the forbearance of any money, goods or credits,
provided that the changes are effected gradually and announced in advance. In its
Resolution No. 2224 dated December 3, 1982, the CB-MB issued CB Circular No.
905, Series of 1982, effective on January 1, 1983. Section 1 of the Circular, under its
General Provisions, removed the ceilings on interest rates on loans or forbearance of
any money, goods or credits. The Circular then went on to amend Books I to IV of
the CBs "Manual of Regulations for Banks and Other Financial Intermediaries"
(Manual of Regulations) by removing the applicable ceilings on specific interest
rates. On June 14, 1993, President Fidel V. Ramos signed into law R.A. No. 7653
establishing the BangkoSentralngPilipinas (BSP) to replace the CB.
ISSUE: Whether or not the lifting of the ceilings for interest rates authorize
stipulations charging excessive, unconscionable, and iniquitous interest
HELD: No. It is settled that nothing in CB Circular No. 905 grants lenders a carte
blanche authority to raise interest rates to levels which will either enslave their
borrowers or lead to a hemorrhaging of their assets. As held in Castro v. Tan: The
imposition of an unconscionable rate of interest on a money debt, even if knowingly
and voluntarily assumed, is immoral and unjust. It is tantamount to a repugnant
spoliation and an iniquitous deprivation of property, repulsive to the common sense
of man. It has no support in law, in principles of justice, or in the human conscience
nor is there any reason whatsoever which may justify such imposition as righteous
and as one that may be sustained within the sphere of public or private morals.
Stipulations authorizing iniquitous or unconscionable interests have been
invariably struck down for being contrary to morals, if not against the law.
Nonetheless, the nullity of the stipulation of usurious interest does not affect the
lenders right to recover the principal of a loan, nor affect the other terms thereof.
Thus, in a usurious loan with mortgage, the right to foreclose the mortgage subsists,
and this right can be exercised by the creditor upon failure by the debtor to pay the
debt due. The debt due is considered as without the stipulated excessive interest,
and a legal interest of 12% per annum will be added in place of the excessive
interest formerly imposed.
grade to Philphos. Prior to the release of the commodities, however, Kamalig sent
letters requesting for readjustments which, in turn, were granted. Subsequently,
Philphos informed Kamalig that the latter made overwithdrawals of stocks in Manila
and Ilo-ilo, hence, obliged to pay the former P546,645.30. Philphos demanded that
the amount be settled on or before July 31, 1986, otherwise 34% interest per annum
will be charged against Kamalig. Kamalig denied making overwithdrawals and
refused to make payments.
A case for the collection of the sum of money was filed before the RTC of
Makati, which ruled in favor of Philphos. On appeal, the Court of Appeals reversed
the ruling of the trial court. Hence, this petition to the Supreme Court.
ISSUE: Whether or not Kamalig is liable to pay P546,645.30 with 34% interest per
annum
HELD: No, petition does not have merit. The Supreme Court held that the
overwithdrawals were caused by Philphos failure to comply with the policy of using
prescribed forms. The Court furthers that as Philphos could have prevented the loss,
it is but fair that it should suffer the loss. Thus, the value of the unauthorized
withdrawals should be for the account of Philphos and not shifted to Kamalig. As to
the interest, the Court reaffirmed that no stipulation was made showing that the
parties intended to pay for interest. Pursuant to Article 1956 of the Civil Code, no
interest shall be due unless it has been expressly stipulated in writing. Unilateral
imposition of interest, like what Philphos did in this case, shall not be allowed.
VALENCIA, CharlonReinier O.
85. CITIBANK N.A. vs. SPS. LUIS AND CARMELITA CABAMONGAN and
their sons LUIS CABAMONGAN JR. and LITO CABAMONGAN
G.R. NO. 146918, MAY 2, 2006
AUSTRIA-MARTINEZ, J.
FACTS: On August 16, 1993, Respondent Spouses opened a joint and/or foreign
currency time deposit from herein petitioner bank. It was a deposit in trust for their
sons, amounting to $55,216.69 for a term of 182 days or until February 14, 1994, at
2.5625 per cent interest per annum.
On November of that same year, a woman introducing herself as Carmelita
Cabamongan went to the Makati branch of petitioner and indicated her intention of
pre-terminating the said foreign currency deposit. She presented several proof of
identification, including a passport and three cards. The transaction was done after
40 minutes with said person getting the deposited money. The account officer
realized that said person left an identification card, prompting her to call the
residence of respondents. She was able to talk to the wife of LitoCabamongan and
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Herein respondent indemnified Mr. See for the loss and thereafter, filed a
claim against petitioner for their negligence in the loss of said vehicle. Respondent
showed evidence pointing out to a similar previous case of carnapping involving
petitioner and noted their lack of precaution to prevent a repetition of such incident.
In their answer, herein petitioner stated that See never checked in at the hotel
and was merely a guest of one Mr. Montero. It further claimed that Mr. See merely
requested their attendant to park the vehicle at any available parking space to which
they merely obliged as a special privilege.
Petitioner failed to appear during pre-trial and thus, the Court granted
respondents motion to present ex-parte. The evidence presented showed that
petitioner has an agreement with Equitable PCI Bank to use the latters parking
space as petitioner only has 12 parking spaces for guests. A decision in favor of
respondent herein was issued holding petitioner liable for the loss of Mr. Sees
vehicle.
ISSUE: Whether or not petitioner is liable for the loss of the vehicle and on what
ground does said liability stand on?
HELD: The Court upheld the ruling of the lower court, stating that respondent was
able to prove that a contract of necessary deposit existed between the insured See
and petitioner.
Records show that upon arrival at the City Garden Hotel, Mr. See gave notice
to the doorman and parking attendant of the said hotel about his Vitara when he
entrusted its ignition key to the latter. The attendant issued a valet parking customer
claim stub to Mr. See, parked the Vitara at the Equitable PCI Bank parking area, and
placed the ignition key inside a safety key box while Mr. See proceeded to the hotel
lobby to check in. The Equitable PCI Bank parking area became an annex of City
Garden Hotel when the management of the said bank allowed the parking of the
vehicles of hotel guests thereat in the evening after banking hours.
Clearly, the insured deposited his vehicle for safekeeping with petitioner,
through the latters employee. In turn, the attendant issued a claim stub to Mr. See.
Thus, the contract of deposit was perfected from Mr. Sees delivery, when he handed
over to the attendant the keys to his vehicle, which the latter received with the
obligation of safely keeping and returning it. Ultimately, petitioner is liable for the loss
of Sees vehicle.
YOUNG, Wesley
87. SPS LADANGA VS ASENETA
G.R. NO. 145874, SEPTEMBER 30, 2005
CORONA, J.
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FACTS: Bernardo Aseneta and Salvacion Ladanga are both reared and educted by
Celemencia Ladanga. Bernardo was legally adopted by Clementia while Salvacion is
her niece. During her lifetime Clemenia complained of not receiving rentals of her
property from Salvacion, with whom she entrusted such collection. Upon
investigation, Bernado found out that said properties was sold by Clementia to
Salvacion for a price much lower that its fair market value and he also alleged that it
was fraudulent because upon inquiry with Clementia the latter denied of the sale.
Upon his instance, Bernardo was awarded with the guardianship of spinster
Clementia. By such power, Bernardo filed several actions of reconveyance.
Clementia died during pendency of said cases and was thereafter substituted by her
legal heir Bernardo.Bernardo won the case for which the land subject of simulated
sale was ordered to be returned. However, it was discovered that Salvacion sold the
land to another during pendency of case decided.
Bernardo filed contempt proceedings against Salvacion.
ISSUE: Whether selling property annotated with lis pendens is contempt.
HELD: No. A land annotated with lis pendens can be sold. The only effect only of
such annotation is that the land sold is subject to the outcome of the case
In order there be contempt in case of land annotated with lis pendens, there
should first be custodial legis by the court on the subject property. If there be
custodial legis then selling the same when the property is in safekeeping of the court
and without its consent is a clear disobedience and disrespect of the authority of the
court holding the property.
There being no custodia legis over the property in this case, then charge of
contempt shall not be sustained
YOUNG, Wesley
88. LAND BANK OF THE PHILIPPINES vs PAGAYATAN
G.R. NO. 182572, JUNE 18, 2012
SERENO, J.
FACTS: Lubrica is the assignee of Federico C. Suntay over certain parcels of
agricultural land a portion of the said property with an area of 311.7682 hectares,
was placed under the land reform.The Department of Agrarian Reform (DAR) and
the LBP fixed the value of the land at 5,056,833.54 which amount was deposited in
cash and bonds in favor of Lubrica.
Petitioners rejected the valuation of their properties, hence the Office of the
Provincial Agrarian Reform Adjudicator (PARAD) conducted summary administrative
proceedings for determination of just compensation and thereafter fixed the
preliminary just compensation at 51,800,286.43 for the 311.7682 hectares and
21,608,215.28 for the 128.7161 hectares. LBP Contested it before RTC
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The Court of Appeals held that the trial court correctly ordered LBP to deposit
the amounts provisionally determined by the PARAD as there is no law which
prohibits LBP to make a deposit pending the fixing of the final amount of just
compensation. A TRO was subsequenty issued enjoining the owners to collect the
provisional value of the land determinded by PARAD, notwithstanding approval of
the court for LBP to make such deposit provisionally determined.
An order was made to the effect that the cash deposit and bonds be turned
over to clerk of court. One of the heirs contended that it is in violation of the TRO
enjoining collection and that there was no necessity to physically transfer possession
to latter since the bonds and MC was in clerk of courts name.
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