PEOPLE vs. CONCEPCION, 44 Phil. 126
BAGTAS, 116 SCRA 262
FACTS: Venancio Concepcion, President of the
Philippine National Bank and a member of the
Board thereof, authorized an extension of credit in
favor of "Puno y Concepcion, S. en C.” to the
manager of the Aparri branch of the Philippine
National Bank. "Puno y Concepcion, S. en C." was
a co-partnership where Concepcion is a partner.
Subsequently, Concepcion was charged and found
guilty in the Court of First Instance of Cagayan with
violation of section 35 of Act No. 2747. Section 35
of Act No. 2747 provides that the National Bank
shall not, directly or indirectly, grant loans to any of
the members of the board of directors of the bank
nor to agents of the branch banks. Counsel for the
defense argue that the documents of record do not
prove that authority to make a loan was given, but
only show the concession of a credit. They averred
that the granting of a credit to the co-partnership
"Puno y Concepcion, S. en C." by Venancio
Concepcion, President of the Philippine National
Bank, is not a "loan" within the meaning of section
35 of Act No. 2747.
ISSUE: Whether or not the granting of a credit of
P300,000 to the co-partnership "Puno
Concepcion, S. en C." by Venancio Concepcion,
President of the Philippine National Bank, a "loan"
within the meaning of section 35 of Act No. 2747.
HELD: The Supreme Court ruled in
affirmative. The "credit" of an individual means his
ability to borrow money by virtue of the confidence
or trust reposed by a lender that he will pay what he
may promise. A "loan" means the delivery by one
party and the receipt by the other party of a given
sum of money, upon an agreement, express or
implied, to repay the sum loaned, with or without
interest. The concession of a "credit" necessarily
involves the granting of "loans" up to the limit of
the amount fixed in the "credit,"
REPUBLIC v.
FACTS: On May 8, 1948, Jose Bagtas borrowed
from the Bureau of Animal Industry three bulls for
one year for breeding purposes upon payment of a
breeding fee of 10% of the book value of the bulls.
After one year, the contract was renewed but only
for one bull. Bagtas offered to buy the bulls at book
value less depreciation, but the Bureau told him that
he should either return the bulls or pay for their
book value. Bagtas failed to pay the book value, so
the Republic filed an action with the CFI Manila to
order the return of the bulls or the payment of the
book value. Felicidad Bagtas, the surviving spouse
and administratrix of the decedent’s estate, said that
the two bulls have already been returned in 1952,
and that the remaining one died of gunshot during a
Huk raid. It was established that the two bulls were
returned, thus, there is no more obligation on the
part of Bagtas. With regards the bull not returned,
Felicidad maintained that the obligation is
extinguished since the contract is that of a
commodatum and that the loss through fortuitous
event should be borne by the owner.
ISSUE: Whether or not the contract entered into
y between Bagtas and the Republic is that of
commodatum making Bagtas not liable for the
death of the bull.
HELD: A contract of commodatum is essentially
the gratuitous. If the breeding fee be considered
compensation, then the contract would be a lease of
the bull. Under article 1671 of the Civil Code the
lessee would be subject to the responsibilities of a
possessor in bad faith because she had continued
possession of the bull after the expiry of the
contract. Even if the contract be commodatum, still
Bagtas is liable because article 1942 of the Civil
Code provides that a bailee in a contract
of commodatum is liable for loss of the things even
if it should be through a fortuitous event if he keeps
it longer than the period stipulated or if the thing
loaned has been delivered with appraisal of its
value, unless there is a stipulation exempting the
bailee from responsibility in case of a fortuitous
event. The loan of one bull was renewed for another
period of one year but Bagtas kept and used the bull
more than one year where during a Huk raid it was
killed by stray bullets. Furthermore, when lent and
delivered to the deceased husband of Bagtas, the
bulls had each an appraised book value. It was not
stipulated that in case of loss of the bull due to
fortuitous event the late husband of the appellant
would be exempt from liability.
PRODUCERS BANK OF THE PHILIPPINES
vs. COURT OF APPEALS, GR No. 115324
FACTS: Sometime in 1979, private respondent
Franklin Vives, upon request of his friend Angeles
Sanchez and relying on the assurance that he could
withdraw his money within a month’s time, issued a
check in the amount of Two Hundred Thousand
Pesos in favor of Sterela Marketing and Services
owned by one Col. Arturo Doronilla. Subsequently,
private respondent and his wife found out that
Sterela can’t be found on the address previously
given to then, so they went to petitioner Producer’s
Bank of the Philippines to verify if their money was
still intact. They were informed that part of the
amount had been withdrawn by Doronilla and that
the latter instructed the bank to debit from the
savings account the amount and deposit it in his
current account Private respondent filed an action
for recovery of sum of money against Doronilla,
Sanchez, Dumagpi and petitioner. The trial court
ruled in favour of herein private respondents. On
appeal of the case, the appellate court affirmed the
decision of the RTC. Petitioner contends that the
transaction between private respondent and
Doronilla is a simple loan (mutuum) since all the
elements of a mutuum are present: first, what was
delivered by private respondent to Doronilla was
money, a consumable thing; and second, the
transaction was onerous as Doronilla was obliged to
pay interest. Hence, petitioner argues that it cannot
be held liable because it is not privy to the
transaction between the latter and Doronilla. Private
respondent, on the other hand, argues that the
transaction between him and Doronilla is not a
mutuum but an accommodation, since he did not
actually part with the ownership of his P200,000.00
but retained some degree of control over his money
through his wife who was made a signatory to the
savings account and in whose possession the
savings account passbook was given.
ISSUE: Whether or not the contract between
Sanchez and Doronilla and Vives is a contract of
commodatum, thus making petitioner Bank liable.
HELD: Supreme Court held that the contract is
commodatum. Although in view of Article 1933 of
the Civil Code, the object in commodatum is non-
consumable, but Article 1936 of the Civil Code
provides “Consumable goods may be the subject of
commodatum if the purpose of the contract is not
the consumption of the object, as when it is merely
for exhibition.” Thus, if consumable goods are
loaned only for purposes of exhibition or when the
intention of the parties is to lend consumable goods
and to have the very same goods returned at the end
of the period agreed upon, the loan is commodatum
and not a mutuum. The evidence shows that private
respondent merely "accommodated" Doronilla by
lending his money without consideration, as a favor
to his good friend Sanchez. It was however clear to
the parties to the transaction that the money would
not be removed from Sterela’s savings account and
would be returned to private respondent after thirty
(30) days.
CAROLYN M. GARCIA vs. RICA MARIE S.
THIO, GR. No. 154878, March 16, 2007
FACTS: Sometime in February 1995, respondent
Rica Marie S. Thio received from petitioner
Carolyn M. Garccia a crossed check in the amount
of $100,000.00 payable to the order of Marilou
Santiago. Thereafter, Carolyn received from Rica
payments of the sum due. In June 1995, Rica
received another check in the amount of
P500,000.00 from Carolyn and payable to the order
of Marilou. Payments were made by Rica
representing interests. There was failure to pay the
principal amount hence a complaint for sum of
money with damages was filed by Carolyn. Rica
contended that she had no obligation to petitioner as
it was Marilou who was indebted as she was merely
asked to deliver the checks to the latter and that the
check payments she issued were merely intended to
accommodate Marilou. The RTC ruled in favor of
Carolyn but the CA reversed on the ground that
there was no contract between Rica and Carolyn as
there is nothing in the record that shows that
respondent received money from petitioner and that
the checks received by respondent, being crossed,
may not be encashed but only deposited in the bank
by the payee thereof, that is, by Marilou Santiago
herself.
ISSUE: Whether or not there was a contract of loan
between petitioner and respondent.
HELD: There Court ruled in the affirmative. A loan
is a real contract, not consensual, and as such is
perfected only upon the delivery of the object of the
contract. Art. 1934 of the Civil Code provides that
“an accepted promise to deliver something by way
of commodatum or simple loan is binding upon the
parties, but the commodatum or simple loan itself
shall not be perfected until the delivery of the object
of the contract.” Upon delivery of the object of the
contract of loan (in this case the money received by
the debtor when the checks were encashed the
debtor acquires ownership of such money or loan
proceeds and is bound to pay the creditor an equal
amount. It is undisputed that the checks were
delivered to respondent. However, these checks
were crossed and payable not to the order of
respondent but to the order of a certain Marilou
Santiago. The Supreme Court agrees with petitioner
that delivery is the act by which the res or substance
thereof is placed within the actual or constructive
possession or control of another. Although
respondent did not physically receive the proceeds
of the checks, these instruments were placed in her
control and possession under an arrangement
whereby she actually re-lent the amounts to
Santiago. Hence, Rica is the debtor and not
Marilou.
COLITO T. PAJUYO vs. COURT OF
APPEALS, GR. No. 146364, June 3, 2004
FACTS: In June 1979, petitioner Colito T. Pajuyo
purchased the rights over a property from Pedro
Perez. Thereafter, he constructed a house therein
and he and his family lived there. Later, Pajuyo
agreed to let private respondent Eddie Guevarra to
live in the house for free provided that the latter
maintain the cleanliness and orderliness of the
house. They also agreed that Guevarra should leave
the premises upon demand. Subsequently, when
Pajuyo told Guevarra that he needed the house,
Guevarra refused, hence an ejectment case was
filed. Guevarra claimed that Pajuyo had no valid
title or right of possession over the lot where the
house stands because the lot is within the 150
hectares set aside for socialized housing. The MTC
ruled that the subject of the agreement between
Pajuyo and Guevarra is the house and not the lot.
Pajuyo is the owner of the house, and he allowed
Guevarra to use the house only by tolerance. Thus,
Guevarra’s refusal to vacate the house on Pajuyo’s
demand made Guevarra’s continued possession of
the house illegal. Aggrieved, Guevarra appealed to
the Regional Trial Court which only affirmed the
MTC decision. At the CA, the latter reversed the
RTC decision. The Court of Appeals ruled that the
Kasunduan is not a lease contract
a commodatum because the agreement is not for a
price certain. Since Pajuyo admitted that he
resurfaced only in 1994 to claim the property, the
appellate court held that Guevarra has a better right
over the property under Proclamation No. 137. At
that time, Guevarra was in physical possession of
the property.
ISSUE: Whether or not the contract between
petitioner and private respondent is one of
commodatum.
HELD: The Supreme Court held that the contract is
not a commodatum. “In a contract of commodatum,
one of the parties delivers to another something not
consumable so that the latter may use the same for a
certain time and return it. An essential feature of
commodatum is that it is gratuitous. Another feature
is that the use of the thing belonging to another is
for a certain period. Thus, the bailor cannot demand
the return of the thing loaned until after the
expiration of the period stipulated, or after
accomplishment of the use for which
commodatum is constituted. If the bailor should
have urgent need of the thing, he may demand its
return for temporary use. If the use of the thing is
merely tolerated by the bailor, he can demand the
return of the thing at will, in which case the
contractual relation is called a precarium.
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.
but QUINTOS vs. BECK, 69 Phil 108
FACTS: Beck is a tenant of defendant Margarita
Quintos. As such, Beck occupied Quintos’ house.
Quintos granted Beck the use of the furniture found
on the leased house, among these were three gas
heaters and 4 electric lamps, subject to the condition
that the defendant would return them to the plaintiff
upon the latter's demand. Quintos sold the pieces of
furniture to Maria Lopez and Rosario Lopez and
thereafter notified Beck of the conveyance. Beck
informed Quintos that the latter can get the furniture
at the ground floor of the house, however, at a later
date, Beck told Quintos that he will return only the
other furniture but not the gas heaters and the
electric lamps as he is to return them only after the
expiration of the lease contract. When the lease
contract expires, Beck deposited the furniture to the
sheriff’s warehouse. Quintos refused to get the
furniture in view of the fact that the defendant had
declined to make delivery of all of them.
Consequently, Quintos brought an action to compel
Beck to return her certain furniture which she lent
the him for his use. The trial court ruled in favour of
Beck holding that Quintos failed to comply with her
obligation to get the furniture when they were
offered to her. On appeal of the case, the Court of
First Instance of Manila affirmed the lower court’s
decision. Hence, this petition.
ISSUE: Whether or not the trial court erred in
ruling that Quintos failed to comply with her
obligation to get the furniture when they were
offered to her.
HELD: The contract entered into between the
parties is one of commadatum. Under it the plaintiff
gratuitously granted the use of the furniture to the
defendant, reserving for herself the ownership
thereof. By this contract the defendant bound
himself to return the furniture to the plaintiff, upon
the latter’s demand. The obligation voluntarily
assumed by the defendant to return the furniture
upon the plaintiff's demand, means that he should
return all of them to the plaintiff at the latter's
residence or house. The defendant did not comply
with this obligation when he merely placed them at
the disposal of the plaintiff, retaining for his benefit
the three gas heaters and the four electric lamps.
The trial court, therefore, erred when it came to the
legal conclusion that the plaintiff failed to comply
with her obligation to get the furniture when they
were offered to her.
FRIAS vs. SAN DIEGO-SISON, GR. No.
155223, April 4, 2007
FACT: Petitioner Bobie Rose V. Frias owned a
house and lot which she acquired from Island
Masters Realty and Development Corporation
(IMRDC) by virtue of a Deed of Sale. She entered
into a MOA with respondent Flora San Diego-Sison.
In the MOA, they had agreed among others that in
the event that on the 6thmonth of the 6-month period
to purchase land, respondent would decide not to
purchase, the petitioner has a period of another 6
months to pay P3M provided that the said amount
shall earn compounded bank interest for the last six
months only. Respondent decided not to purchase
the property so what happened was that the P3M
would be considered as a loan payable within six
months. Petitioner failed to pay the P2M.
Consequently, respondent filed with the RTC a
complaint for sum of money. RTC rules in favor of
respondent and orders the payment of P2M plus
compounded interest at 32% interest per annum
pursuant to the MOA. Petitioner appeals to CA. The
CA affirms RTC decision with modification with
regard to the interest from32% to 25%. Petitioner
opposed to the said decision contending that the
interest is contrary to the parties’ Memorandum of
Agreement; that the agreement provides that if
respondent would decide not to purchase the
property, petitioner has the period of another six
months to pay the loan with compounded bank
interest for the last six months only; that the CA’s
ruling that a loan always bears interest otherwise it
is not a loan is contrary to Art. 1956 of the New
Civil Code which provides that no interest shall be
due unless it has been expressly stipulated in
writing.
ISSUE: Whether or not the compounded bank
interest should be limited to six months as contained
in the MOA.
HELD: The agreement stipulated in the MOA that the
amount given shall bear compounded bank interest
for the last six months only (referring to the second
six-month period), does not mean that interest will
no longer be charged after the second six-month
period since such stipulation was made on the
logical and reasonable expectation that such amount
would be paid within the date stipulated.
Considering that the petitioner failed to pay the
amount given which under the MOA shall be
considered as a loan, the monetary interest for the
last six months continued to accrue until the actual
payment of the loaned amount. The payment of
regular interest constitutes the price or cost of the
money use and thus, until the principal sum due is
returned to the creditor, regular interest continues to
accrue since the debtor continues to use such
principal amount.
LIGUTAN vs. COURT OF APPEALS, GR. No.
138677, February 12, 2002
FACTS:
Petitioners Tolomeo Ligutan and Leonidas dela Lla
na obtained a loan from private respondent Security
Bank and Trust Company. Petitioners executed a
promissory note to pay the sum loaned with an
interest of 15.189% per annum upon maturity and to
pay a penalty of 5% every month on the outstanding
principal and interest in case of default. On
maturity of the obligation, petitioners failed to settle
the debt despite several demands from the bank.
Consequently, the bank filed a complaint for
recovery of the due amount. After trial of the case,
the Trial court ruled in favour of the Bank, ordering
petitioners to pay the respondent the sum of
P114,416.00 with interest thereon at the rate of
15.189% per annum and 5% per month penalty
charge among others. On appeal of the case,
petitioners prayed for the reduction of the 5%
stipulated penalty for being unconscionable. The
Court of Appeals ruled that in the interest of justice
and public policy, a penalty of 3% per month or
36% per annum would suffice. But still, petitioners
dispute the said decision.
ISSUE: Whether or not the 15.189% interest and
the penalty of three (3%) percent per month or
thirty-six (36%) percent per annum imposed by
private respondent bank on petitioners’ loan
obligation are exorbitant, iniquitous and
unconscionable.
HELD: The question of whether a penalty is
reasonable or iniquitous can be partly subjective
and partly objective. Its resolution would depend
on such factors as, but not necessarily confined to,
the type, extent and purpose of the penalty, the
nature of the obligation, the mode of breach and its
consequences, the supervening realities, the
standing and relationship of the parties, and the like,
the application of which, by and large, is addressed
to the sound discretion of the court. The essence or
rationale for the payment of interest is not exactly
the same as that of a surcharge or a penalty. A
penalty stipulation is not necessarily preclusive of
interest. What may justify a court in not allowing
the creditor to impose full surcharges and penalties,
despite an express stipulation therefor in a valid
agreement, may not equally justify the non-payment
or reduction of interest. Indeed, the interest
prescribed in loan financing arrangements is a
fundamental part of the banking business and the
core of a bank's existence. The Court of Appeals,
exercising its good judgment in the instant case, has
rightly reduced the penalty interest from 5% a
month to 3% a month.
EASTERN SHIPPING LINES, INC. vs. CA, GR.
No. 97412, July 12, 1994
FACTS: Two fiber drums of riboflavin were
shipped from Yokohama, Japan on board the vessel
owned by herein petitioner Eastern Shipping Lines.
When it arrives in Manila, it was put unto the
custody of Metro Port Service, Inc. The latter
excepted to one drum which is said to be in bad
order and which damage was unknown to Eastern
Shipping Lines. Later, Allied Brokerage
Corporation received the shipment from Metro Port
Service, Inc. With one drum damaged, Allied
Brokerage Corporation made deliveries to the
consignee's warehouse. The latter excepted to one
drum that is damaged. Eastern Shipping Lines
averred that due to the one drum that is damaged
and due to the fault and negligence of Metro Port
Service, Inc. and Allied Brokerage Corporation, the
consignee suffered losses. The two failed and
refused to pay the claims for damages.
Consequently, Eastern Shipping Lines was
compelled to pay the consignee being subrogated to
all the rights of action of said consignee against
Metro Port Service, Inc. and Allied Brokerage
Corporation. Trial ensued and on appeal of the case,
the appellate court affirmed the decision of the trial
court ordering Metro Port Service and Allied
Brokerage to pay Eastern Shipping Lines, jointly
and severally, the amount of P19,032.95, with the
present legal interest of 12% per annum from the
date of filing of the complaints, until fully paid.
Metro Port Service and Allied Brokerage opposed
especially as to the payment of interest contending
that the legal interest on an award for loss or
damage should be 6% in view of Article 2209 of the
Civil Code.
ISSUE: Whether or not the payment of legal
interest on an award for loss or damage is twelve
percent (12%) or six percent (6%).
HELD: Article 2209 of the New Civil Code
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
interest agreed upon, and in the absence of
stipulation, the legal interest which is six
percent per annum. With regard particularly to an
award of interest in the concept of actual and
compensatory damages, the rate of interest, as well
as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it
consists in the payment of a sum of
money, the interest due should be that which
may have been stipulated in
writing. Furthermore, the interest due shall
itself earn legal interest from the time it is
judicially demanded. In the absence of
stipulation, the rate of interest shall be
12% per annum to be computed from
default under and subject to the provisions
of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan
or forbearance of money, is breached, an
interest on the amount of damages awarded
may be imposed at the discretion of the
court at the rate of 6% per annum. No
interest, however, shall be adjudged on
unliquidated claims or damages except when
or until the demand can be established with
reasonable certainty. Accordingly, where the
demand is established with reasonable
certainty, the interest shall begin to run from
the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but
when such certainty cannot be so reasonably
established at the time the demand is made,
the interest shall begin to run only from the
date the judgment of the court is made (at
which time the quantification of damages
may be deemed to have been reasonably
ascertained). The actual base for the
computation of legal interest shall, in any
case, be on the amount finally adjudged.
3. When the judgment of the court awarding a
sum of money becomes final and executory,
the rate of legal interest, whether the case
falls under paragraph 1 or paragraph 2,
above, shall be 12% per annum from such
finality until its satisfaction, this interim
period being deemed to be by then an
equivalent to a forbearance of credit.
SIGA-AN vs. VILLANUEVA, GR. No. 173227,
January 20, 2009
FACTS: Herein respondent Alicia Villanueva is
engaged in supplying office materials and
equipments to the Philippine Navy Office (PNO)
where herein Sebastian Siga-an works as a military
officer and comptroller. Villanueva alleged that
Siga-an offered to loan her the amount of
P540,000.00. Having needed capital for her
business transactions with the PNO, Villanueva
accepted petitioner’s proposal. The loan agreement
was not reduced in writing and there was no
stipulation as to the payment of interest for the loan.
Villanueva issued two checks worth P500,000.00
and P200,000.00. Siga-an wanted to apply the
payment of P540,000.00 to the principal amount
and the excess amount of P160,000.00 would be
applied for the interest. He demanded from
Villanueva to pay additional interest with a threat to
block or disapprove her transactions with the PNO
if she would not comply with his demand thus
respondent paid additional amounts as interests for
the loan. Villanueva asked Siga-an for receipt but
petitioner refused to give as it was not necessary as
there was mutual trust and confidence between
them. The total amount paid by Villanueva totalled
P1,200,000.00. When Villanueva was advised by
her lawyer that she made an overpayment, she sent
a demand letter to Siga-an asking for the return of
the excess amount of P660,000.00. Siga-an just
ignored Villanueva’s claim for reimbursement.
Hence, Villanueva instituted a complaint for sum of
money against herein petitioner Sebastian Siga-an.
After trial of the case, the Trial Court ordered
petitioner Siga-an to refund the excess amount to
Villanueva pursuant to the principle of solutio
indebiti. On appeal of the case, the appellate court
affirmed the decision of the RTC. Petitioner filed a
motion for reconsideration but this was denied.
Hence, the instant petition.
ISSUE: Whether or not there was interest due to
petitioner.
HELD: There was no interest due to petitioner.
Article 1956 of the Civil Code, which refers to
monetary interest, specifically mandates that no
interest shall be due unless it has been expressly
stipulated in writing. Payment of monetary interest
is allowed only if there was an express stipulation
for the payment of interest; and the agreement for
the payment of interest was reduced in writing. The
concurrence of the two conditions is required for the
payment of monetary interest. Thus, the collection
of interest without any stipulation therefore in
writing is prohibited by law. It appears that
petitioner and respondent did not agree on the
payment of interest for the loan. Neither was there
convincing proof of written agreement between the
two regarding the payment of interest.
Compensatory interest is not chargeable in the
instant case because it was not duly proven that
respondent defaulted in paying the loan. Also, as
earlier found, no interest was due on the loan
because there was no written agreement as regards
payment of interest.
CARPO vs. CHUA & DY NG, GR. Nos. 150773
& 153599, September 30, 2005
FACTS: Herein petitioner spouses David Carpo
and Rechilda Carpo contracted a loan from Eleanor
Chua and Elma Dy Ng for a certain sum of money
payable within six (6) months with an interest rate
of six percent (6%) per month secured by a
mortgaged of the spouses Carpo of their residential
house and lot. Petitioners failed to pay the loan
upon demand. Consequently, the real estate
mortgage was extrajudicially foreclosed, mortgaged
property sold at a public auction, and the house and
lot was awarded to respondents, who were the only
bidders. Unable to exercise their right of redemption
by petitioners, a certificate of sale was issued in the
name of respondents. However, petitioners
continued to occupy the said house and lot, thus
respondents file a petition for writ of possession
which was granted by the Trial Court. Petitioners
filed a complaint for annulment of real estate
mortgage and the consequent foreclosure
proceedings claiming that the rate of interest
stipulated in the principal loan agreement is clearly
null and void for being excessive, iniquitous,
unconscionable and exorbitant. Consequently, they
also argue that the nullity of the agreed interest rate
affects the validity of the real estate mortgage.
ISSUE: Whether or not the agreed rate of interest
of 6% per month or 72% per annum is so excessive,
iniquitous, unconscionable and exorbitant that it
should have been declared null and void.
HELD: In a long line of cases, the Supreme Court
has invalidated similar stipulations on interest rates
for being excessive, iniquitous, unconscionable and
exorbitant. Pursuant to the freedom of contract
principle embodied in Article 1306 of the Civil
Code, 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. In the ordinary course, the codal
provision may be invoked to annul the excessive
stipulated interest. In the case at bar, the stipulated
interest rate is 6% per month, or 72% per annum.
By the standards set by jurisprudence, this
stipulation is similarly invalid.
penalty charge of 3% per month or the 36% per
annum should be reduced to 2% per month or 24%
per annum. In a long line of cased decided by the
Supreme Court, it considered the 36% per annum to
be excessive and unconscionable. Citing
Article1229, in exercising this power to determine
what is iniquitous and unconscionable; courts must
consider the circumstances of each case since what
may be iniquitous and unconscionable in one maybe
totally just and equitable in another. In the
instant case, Macalinao made partial payments to
BPI .Therefore, the interest rate and penalty charge
of 3% per month or 36% per annum should be
reduced to 2% per month or 24% per annum.

MACALINAO V. BPI, 600 SCRA 67

FACTS: Petitioner Ileana Macalinao defaulted on

the payment of her BPI credit card dues. There was
a stipulation in a contract that the charges and/or
balance shall earn 3% per month and additional
penalty fee of another 3% per month. The Regional
Trial Court reduced the 3% monthly interest to 2%.
On appeal of the case, the Court of Appeals
reversed the decision of the RTC holding that
petitioner Macalinao freely availed herself of the
BANK OF THE PHILIPPINE ISLANDS VS
credit card facility offered by respondent Bank of
IAC, 164 SCRA 630
the Philippine Islands to general public; contracts of
adhesion are not invalid per se. Petitioner assailed
FACTS: Arthur and Vivienne Canlas opened a joint
the appellate court’s decision alleging that the
current account in CBTC now Bank of the
interest rate and penalty charges are unconscionable
Philippine Islands. However, the bank teller
and iniquitous at 36% per annum.
erroneously placed the old account number of Mr.
ISSUE: Whether or not the interest rate and penalty Canlas on the new account. Consequently, the
charges are unconscionable and iniquitous at 36% subsequent deposits made by the spouses Canlas
per annum. were not reflected in the new account. It was found
out only when a check issued by Viviene was
HELD: The interest rate and penalty charges are
dishonored due to insufficiency of funds. Thus, the
unconscionable and iniquitous at 36% per annum.
spouses Canlas instituted a suit for damages. The
The Supreme Court held that the interest rate and
bank on the other hand alleged that it should not be
held liable merely on account of the inadvertence of
its employees.
ISSUE: Whether or not the Bank of the Philippine
Islands is liable.
HELD: The Supreme Court ruled in the
affirmative. There is no merit in petitioner's
argument that it should not be considered negligent,
much less held liable for damages on account of the
inadvertence of its bank employee for Article 1173
of the Civil Code only requires it to exercise the
diligence of a good father of family. The bank is not
expected to be infallible but it must bear the blame
for not discovering the mistake of its teller despite
the established procedure requiring the papers and
bank books to pass through a battery of bank
personnel whose duty it is to check and
countercheck them for possible errors. Apparently,
the officials and employees tasked to do that did not
perform their duties with due care.
BISHOP OF JARO VS DELA PENA, 26 Phil 144
FACTS: In 1898, Fr. Agustin Dela Pena deposited
in his personal account a sum of money entrusted to
him for the construction of a leper hospital.
Thereafter, Father De la Peña was arrested by the
military authorities as a political prisoner. While
under detention, Fr. Dela Pea made an order on said
bank in favor of the United States Army officer
under whose charge he was then for the sum thus
deposited in said bank. The arrest of Father De la
Peña and the confiscation of the funds in the bank
were the result of the claim of the military
authorities that he was an insurgent and that the
funds thus deposited had been collected by him
for revolutionary purposes. The money was taken
from the bank by the military authorities by virtue
of such order and was turned over to the
Government.
ISSUE: Whether or not Father de la Peña is liable
for the loss of the money under his trust.
HELD: The Supreme Court ruled in the negative.
Father De la Peña's liability is determined by those
portions of the Civil Code which relate to
obligations. Although the Civil Code states that "a
person obliged to give something is also bound to
preserve it with the diligence pertaining to a good
father of a family". It also provides, following the
principle of the Roman law, major casus est, cui
humana infirmitas resistere non potest, that "no one
shall be liable for events which could not be
foreseen, or which having been foreseen were
inevitable, with the exception of the cases expressly
mentioned in the law or those in which the
obligation so declares."

TRIPLE-V FOOD SERVICES INC. vs.
FILIPINO MERCHANTS INSURANCE
COMPANY, GR. No. 160554, February 21, 2005
FACTS: Mary Jo-Anne De Asis dined at
petitioner's Kamayan Restaurant. De Asis was using
a Mitsubishi Galant Super Saloon Model 1995
issued by her employer Crispa Textile Inc.. On said
date, De Asis availed of the valet parking service of
petitioner and entrusted her car key to petitioner's
valet counter. Afterwards, a certain Madridano,
valet attendant, noticed that the car was not in its
parking slot and its key no longer in the box where
valet attendants usually keep the keys of cars
entrusted to them. The car was never recovered.
Thereafter, Crispa filed a claim against its insurer,
herein respondent Filipino Merchants Insurance
Company, Inc. Having indemnified Crispa for the
loss of the subject vehicle, FMICI, as subrogee to
Crispa's rights, filed with the RTC at Makati City an
action for damages against petitioner Triple-V Food
Services, Inc. Petitioner claimed that the complaint
failed to adduce facts to support the allegations of
recklessness and negligence committed in the
safekeeping and custody of the subject vehicle.
Besides, when De Asis availed the free parking stab
which contained a waiver of petitioner’s liability in
case of loss, she had thereby waived her rights.
ISSUE: Whether or not petitioner Triple-V Food
Services, Inc. is liable for the loss.
HELD: The Supreme Court ruled in the
affirmative. In a contract of deposit, a person
receives an object belonging to another with the
obligation of safely keeping it and returning the
same. A deposit may be constituted even without
any consideration. It is not necessary that the
depositary receives a fee before it becomes
obligated to keep the item entrusted for safekeeping
and to return it later to the depositor. Petitioner
cannot evade liability by arguing that neither a
contract of deposit nor that of insurance, guaranty
or surety for the loss of the car was constituted
when De Asis availed of its free valet parking
service.
CA AGRO-INDUSTRIAL DEVELOPMENT
CORP. VS CA, 291 SCRA 426
FACTS: Petitioner CA Agro-Industrial
Development Corp. and the spouses Ramon and
Paula Pugao rented a Safety Deposit Box Security
Bank and Trust Company. Certificates of title of
parcels of land were then stored therein. Thereafter,
a certain Mrs. Margarita Ramos offered to buy two
lots from petitioner. Mrs. Ramos demanded the
execution of a deed of sale which necessarily
entailed the production of the certificates of title. In
view thereof, Aguirre, accompanied by the Pugaos,
then proceeded to the Bank to open the safety
deposit box and get the certificates of title.
However, when opened in the presence of the
Bank's representative, the box yielded no such
certificates. By virtue of which, petitioner filed an
action against the bank for the loss. The bank,
however, contended that they are not liable for the
loss because, aside from the waiver signed by the
petitioner, what transpired between them is a
contract of lease and not deposit.
ISSUE: Whether or not the contractual relation
between a commercial bank and another party in a
contract of rent of a safety deposit box with respect
to its contents placed by the latter one of bailor and
bailee or one of lessor and lessee.
HELD: The contract for the rent of the safety
deposit box is not an ordinary contract of lease as
defined in Article 1643 of the Civil Code. However,
the Court do not fully subscribe to its view that the
same is a contract of deposit that is to be strictly
governed by the provisions in the Civil Code on
deposit; the contract in the case at bar is 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.
YHT REALTY CORPORATION VS. CA, GR.
No. 126780, February 17, 2005
FACTS: Maurice Mcloughlin is an Australian
philanthropist, businessman, and a tourist. In his
various trips from Australia going to different
countries, one of which is the Philippines, he would
stay in Tropicana Inn which is owned by YHT
Realty Corp. After series of transactions with the
inn as depositary of his belongings, he noticed that
his money and several jewelries would be either
reduced or lost. He then decided to file an action
against Tropicana and its inn-keepers. However, the
latter argued that they have no liability with regard
to the loss by virtue of the undertaking signed by
Mcloughlin. Such undertaking is a waiver of the
inn’s liability in case of any loss. The RTC and CA
both decided that such undertaking is null and void
as contrary to the express provisions of the law.
Hence, the petition.
ISSUE: Whether or not the subject undertaking is
null and void
HELD: The court ruled in the affirmative. Art.
2003 of the Civil Code provides that, the hotel-
keeper cannot free himself from responsibility by
posting notices to the effect that he is not liable for
the articles brought by the guest. Any stipulation
between the hotel-keeper and the guest whereby the
responsibility of the former as set forth in Articles
1998 to 2001 is suppressed or diminished shall be
void.

E.ZOBEL INC. vs. COURT OF APPEALS, GR.
No. 113931, May 6, 1998
FACT: Private respondent spouses Raul and Elea
Claveria, doing business under the name "Agro
Brokers," applied for a loan with respondent
Consolidated Bank and Trust Corporation (now
SOLIDBANK) to finance the purchase of two
maritime barges and one tugboat which would be
used in their molasses business. The loan was
granted subject to the condition that respondent
spouses will execute a chattel mortgage over the
three vessels to be acquired and that a continuing
guarantee be executed by Ayala International
Philippines, Inc., now petitioner E. Zobel, Inc. in
favor of SOLIDBANK. Respondent spouses
defaulted in the payment of the entire obligation
upon maturity. Hence, SOLIDBANK filed a
complaint for sum of money with a prayer for a writ
of preliminary attachment against respondent
spouses and petitioner. Petitioner moved for
dismissal. The trial court denied the motion to
dismiss and required petitioner to file an answer.
Petitioner assailed the trial court’s order. The
appellate court dismissed the petition.
ISSUE: Whether or not petitioner E. Zobel Inc.,
under the continuing guaranty obligated itself to
SOLIDBANK as a guarantor or a surety.
Held: Petitioner under the continuing guaranty
obligated itself to SOLIDBANK as a surety. A
surety is distinguished from a guaranty in that a
guarantor is the insurer of the solvency of the debtor
and thus binds himself to pay if the principal
is unable to pay, it is the guarantor's own separate
undertaking, in which the principal does not
join while a surety is the insurer of the debt, and he
obligates himself to pay if the principal does not
pay and is usually bound with his principal by the
same instrument, executed at the same time, and on
the same consideration. The contract clearly
discloses that petitioner assumed liability to
SOLIDBANK, as a regular party to the undertaking
and obligated itself as an original promissor. It
bound itself jointly and severally to the obligation
with the respondent spouses. The use of the term
"guarantee" does not ipso facto mean that the
contract is one of guaranty. Authorities recognize
that the word "guarantee" is frequently employed in
business transactions to describe not the security of
the debt but an intention to be bound by a primary
or independent obligation. The trial court has
observed that the interpretation of a contract is not
limited to the title alone but to the contents and
intention of the parties.
INTERNATIONAL FINANCE CORP. vs.
IMPERIAL TEXTILE MILLS INC. GR. No.
160324, Nov. 15, 2005
FACTS: Petitioner International Finance
Corporation (IFC) and respondent Philippine
Polyamide Industrial Corporation (PPIC) entered
into a loan agreement wherein IFC extended to
PPIC a loan payable in 16 semi-annual installments
with interest at the rate of 10% per annum on the
principal amount of the loan advanced and
outstanding from time to time. A guarantee
agreement was executed with Imperial Textile
Mills, Inc. (ITM), Grand Textile Manufacturing
Corporation (Grandtex) and IFC as parties. ITM
and Grandtex agreed to guarantee PPIC’s
obligations under the loan agreement. There was a
reschedule of payments as requested by PPIC.
Despite the rescheduling of the installment
payments, however, PPIC defaulted. Hence, IFC
served a written notice of default to PPIC
demanding the latter to pay the outstanding
principal loan and all its accrued interests. Despite
such notice, PPIC failed to pay the loan and its
interests. IFC, together with DBP, applied for the
extrajudicial foreclosure of mortgages on the real
estate, buildings, machinery, equipment plant and
all improvements owned by PPIC. IFC and DBP
were the only bidders during the auction sale. PPIC
failed to pay the remaining balance, thus, IFC
demanded ITM and Grandtex, as guarantors of
PPIC, to pay the outstanding balance. However,
despite the demand made by IFC, the outstanding
balance remained unpaid. Consequently, IFC filed a
complaint against PPIC and ITM for the payment of
the outstanding balance plus interests and attorney’s
fees. The trial court held PPIC liable for the
payment of the outstanding loan plus interests and
attorney’s fees. However, the trial court relieved
ITM of its obligation as guarantor. On appeal of the
case, the Court of Appeals reversed the decision of
the trial court. The CA, however, held that ITM’s
liability as a guarantor would arise only if and when
PPIC could not pay. Since PPIC’s inability to
comply with its obligation was not sufficiently
established, ITM could not immediately be made to
assume the liability. Hence, this petition.
Issue: Whether or not ITM is a surety, and thus
solidarily liable with PPIC for the payment of the
loan.
Held: ITM is a surety, and thus solidarily liable
with PPIC for the payment of the loan. As Article
2047 provides, a suretyship is created when a
guarantor binds itself solidarily with the principal
obligor. While referring to ITM as a guarantor, the
agreement specifically stated that the corporation
was “jointly and severally” liable. It further stated
that ITM was a primary obligor, not a mere surety.
ITM thereby brought itself to the level of PPIC and
could not be deemed merely secondarily liable.
Those words emphasize the nature of their liability,
which the law characterizes as a suretyship.
Therefore, ITM bound itself to be solidarily liable
with PPIC for the latter’s obligations under the loan
agreement with IFC.
PHIL. BLOOMING MILLS INC. vs. CA., GR.
No. 142381, Oct. 15, 2003
FACTS: Petitioner Philippine Blooming Mills, Inc.
(PBM) obtained a loan from Traders Royal Bank
(TRB). Ching, the Senior Vice-President of PBM,
signed Deed of Suretyship in his personal capacity
and not as mere guarantors but as primary obligors.
PBM and Ching filed a petition for suspension
of payments with the SEC, and eventually placed
under rehabilitation receivership. Consequently,
TRB dismissed complaint as to PBM. Ching then
alleged that the Deed of Suretyship executed in
1977 could not answer for obligations not yet in
existence at the time of its execution. It could not
answer for debts contracted by petitioner PBM in
1980 and 1981. No accessory contract of suretyship
could arise without an existing principal contract of
loan.
Issue: Whether or not Ching is liable for credit
obligations contracted by Philippine Blooming
Mills Inc. against Traders Royal Bank before and
after the execution of the Deed of Suretyship.
Held: Ching is liable for credit obligations
contracted by Philippine Blooming Mills Inc.
against Traders Royal Bank before and after the
execution of the Deed of Suretyship. This is evident
from the tenor of the deed itself, referring to
amounts to PBM may now be indebted or may
hereafter become indebted to Traders Royal Bank.
The law expressly allows a suretyship for future
debts. Article 2053 provides that
a guaranty may also be given as security for future
debts, the amount of which is not yet known, there
can be no claim against the guarantor until the debt
is liquidated.
ESCANO and SILOS vs. ORTIGAS, Jr., GR.
No. 151953, June 29, 2007
FACTS: Private Development Corporation of the
Philippines (PDCP) entered into a loan agreement
with Falcon Minerals, Inc. whereby PDCP agreed to
make available and lend to Falcon a sum certain.
Respondent Rafael Ortigas, Jr., et al., stockholder
officers of Falcon, executed an Assumption of
Solidary Liability whereby they agreed to assume in
their individual capacity, solidary liability with
Falcon for the due and punctual payment of the loan
contracted by Falcon with PDCP. Two separate
guaranties were executed to guarantee the payment
of the same loan by other stockholders and officers
of Falcon, acting in their personal and individual
capacities. One Guaranty was executed by
petitioner Salvador Escaño, while the other by
petitioners Mario M. Silos, Ricardo C. Silverio, et
al. Two years later, an agreement developed to cede
control of Falcon to Escaño, Silos and Joseph M.
Matti. Thus, contracts were executed whereby
Ortigas, George A. Scholey, Inductivo and the heirs
of then already deceased George T. Scholey
assigned their shares of stock in Falcon to Escaño,
Silos and Matti. Part of the consideration that
induced the sale of stock was a desire by Ortigas, et
al., to relieve themselves of all liability arising from
their previous joint and several undertakings with
Falcon, including those related to the loan with
PDCP. Thus, an Undertaking was executed by the
concerned parties with Escaño, Silos and Matti
identified in the document as “sureties,” on one
hand, and Ortigas, Inductivo and the Scholeys as
“obligors,” on the other. However, Falcon
subsequently defaulted in its payments. After PDCP
foreclosed on the chattel mortgage, there remained a
subsisting deficiency of P5,000,000, which Falcon
did not satisfy despite demand. In order to recover
the indebtedness, PDCP filed a complaint for sum
of money against Falcon, Ortigas, Escaño, Silos,
Silverio and Inductivo. Ortigas filed together with
his answer a cross-claim against his co-defendants
Falcon, Escaño and Silos, and also manifested his
intent to file a third-party complaint against the
Scholeys and Matti. The cross-claim lodged against
Escaño and Silos was predicated on the 1982
Undertaking, wherein they agreed to assume the
liabilities of Ortigas with respect to the PDCP loan.
Escaño, Ortigas and Silos each sought to seek a
settlement with PDCP. The first to come to terms
with PDCP was Escaño, who entered into a
compromise agreement. In exchange, PDCP waived
or assigned in favor of Escaño 1/3 of its entire claim
in the complaint against all of the other defendants
in the case. Then Ortigas entered into his own
compromise agreement with PDCP, allegedly
without the knowledge of Escaño, Matti and Silos.
Thereby, Ortigas agreed to pay PDCP P1.3M as full
satisfaction of the PDCP’s claim against Ortigas.
Silos and PDCP entered into a Partial Compromise
Agreement whereby he agreed to pay P500k in
exchange for PDCP’s waiver of its claims against
him. In the meantime, after having settled with
PDCP, Ortigas pursued his claims against Escaño,
Silos and Matti, on the basis of the 1982
Undertaking. He initiated a third-party complaint
against Matti and Silos, while he maintained his
cross-claim against Escaño. RTC issued the
Summary Judgment, ordering Escaño, Silos and
Matti to pay Ortigas, jointly and severally, the
amount of P1.3M, as well as P20K in attorney’s
fees. The trial court ratiocinated that none of the
third-party defendants disputed the 1982
Undertaking.
ISSUE: Whether or not petitioners are solidarily
liable to respondent Ortigas.
Held: Petitioners are not solidarily liable to
respondent Ortigas. In case there is a concurrence of
two or more creditors or of two or more debtors in
one and the same obligation, Article 1207 of the
Civil Code states that among them, there is a
solidary liability only when the obligation expressly
so states, or when the law or the nature of the
obligation requires solidarity.” Article 1210 supplies
further that the indivisibility of an obligation does
not necessarily give rise to solidarity. Nor does
solidarity of itself imply indivisibility. Thus, the
presumption is that the obligation is only joint. It
thus becomes incumbent upon the party alleging
that the obligation is indeed solidary in character to
prove such fact with a preponderance of evidence.
The Undertaking does not contain any express
stipulation that the petitioners agreed “to bind
themselves jointly and severally” in their
obligations to the Ortigas group, or any such terms
to that effect. Hence, such obligation established in
the Undertaking is presumed only to be joint.
Ortigas, as the party alleging that the obligation is in
fact solidary, bears the burden to overcome the
presumption of jointness of obligations. He has
failed to discharge such burden. The term “surety”
has a specific meaning under our Civil Code. As
provided in Article 2047 in a surety agreement the
surety undertakes to be bound solidarily with the
principal debtor. Thus, a surety agreement is an
ancillary contract as it presupposes the existence of
a principal contract. It appears that Ortigas’
argument rests solely on the solidary nature of the
obligation of the surety under Article2047. In
tandem with the nomenclature “sureties” accorded
to petitioners and Matti in the Undertaking,
however, this argument can only be viable if the
obligations established in the Undertaking do
partake of the nature of a suretyship as defined
under Article 2047 in the first place. That clearly is
not the case here, notwithstanding the use of the
nomenclature “sureties” in the Undertaking.
TUPAZ IV and TUPAZ v. CA and BPI, GR. No.
145578, Nov. 18, 2005
FACTS: Petitioners Jose Tupaz IV and Petronila
Tupaz were Vice-President for Operations and Vice-
President/Treasurer, respectively, of El Oro
Engraver Corporation. El Oro Corporation had a
contract with the Philippine Army to supply the
latter with survival bolos. Petitioners, on behalf of
El Oro Corporation, applied with respondent Bank liable for El Oro Corporation’s obligation. For the
of the Philippine Island for two commercial letters trust receipt dated 30 September 1981, petitioner
of credit to finance the purchase of the raw Jose Tupaz signed alone in his personal capacity, he
materials for the survival bolos. The letters of credit did not indicate that he was signing as El Oro
were in favor of El Oro Corporation’s suppliers, Corporation’s Vice-President for Operations. Hence,
Tanchaoco Manufacturing Incorporated and petitioner Jose Tupaz bound himself personally
Maresco Rubber and Retreading Corporation. liable for El Oro Corporation’s debts. Not being a
Respondent bank granted petitioners’ application party to the trust receipt dated 30 September 1981,
and issued two letters of credit. Simultaneously, petitioner Petronila Tupaz is not liable under such
petitioners signed trust receipts in favor of trust receipt.
respondent bank. On September 30, 1981, petitioner
Jose Tupaz signed, in his personal capacity, a trust
receipt corresponding to one letter of credit while
on October 9, 1981, both petitioners signed, in their
capacities as officers of El Oro Corporation, a trust
receipt corresponding to the other. After Tanchaoco
Incorporated and Maresco Corporation delivered
the raw materials to El Oro Corporation, respondent
bank paid the former. When petitioners did not
comply with their undertaking under the trust
receipts after respondent bank’s several demands,
the latter charged petitioners with estafa under the
Trust Receipts Law. The trial court acquitted
petitioners of estafa on reasonable doubt however it
found petitioners solidarily liable with El Oro
Corporation for the balance of El Oro Corporation’s
principal debt under the trust receipts. Petitioners
appealed to the Court of Appeals contending that
their acquittal operates to extinguish their civil
liability and so they are not personally liable for El
Oro Corporation’s debts. The Court of Appeals
affirmed the trial court’s ruling. Hence, this petition.

ISSUE: Whether or not petitioners are solidarily

liable with El Oro Corporation.

HELD: In the trust receipt dated 9 October 1981,

petitioners signed as officers of El Oro Corporation.
By so signing that trust receipt, petitioners did not
bind themselves personally liable for El Oro
Corporation’s obligation. Hence, for the trust receipt
dated 9 October 1981, petitioners are not personally