1. Quintos vs Beck
00, Philippine Currency, to the
QUINTOS VS BECK 69 PHIL 108
Facts: Quintos and Beck entered into a contract of lease,
whereby the latter occupied the former’s house. On Jan 14,
1936, the contract of lease was novated, wherein the QUintos
gratuitously granted to Beck the use of the furniture, subject
to the condition that Beck should return the furnitures to
Quintos upon demand. Thereafter, Quintos sold the property
to Maria and Rosario Lopez. Beck was notified of the
conveyance and given him 60 days to vacate the premises. IN
addition, Quintos required Beck to return all the furniture.
Beck refused to return 3 gas heaters and 4 electric lamps
since he would use them until the lease was due to expire.
Quintos refused to get the furniture since Beck had declined
to return all of them. Beck deposited all the furniture
belonging to QUintos to the sheriff.
ISSUE: WON Beck complied with his obligation of returning
the furnitures to Quintos when it deposited the furnitures to
the sheriff.
RULING: The contract entered into between the parties is one
of commadatum, because under it the plaintiff gratuitously
granted the use of the furniture to the defendant, reserving
for herself the ownership thereof; by this contract the
defendant bound himself to return the furniture to the
plaintiff, upon the latters demand (clause 7 of the contract,
Exhibit A; articles 1740, paragraph 1, and 1741 of the Civil
Code). The obligation voluntarily assumed by the defendant
to return the furniture upon the plaintiff's demand, means
that he should return all of them to the plaintiff at the latter's
residence or house. The defendant did not comply with this
obligation when he merely placed them at the disposal of the
plaintiff, retaining for his benefit the three gas heaters and
the four eletric lamps.
As the defendant had voluntarily undertaken to return all the
furniture to the plaintiff, upon the latter's demand, the Court
could not legally compel her to bear the expenses occasioned
by the deposit of the furniture at the defendant's behest. The
latter, as bailee, was nt entitled to place the furniture on
deposit; nor was the plaintiff under a duty to accept the offer
to return the furniture, because the defendant wanted to
retain the three gas heaters and the four electric lamps.
2. People vs Puig
People v. Puig & Porras
Facts:
Respondents were conspiring, confederating, and helping one
another, with grave abuse of confidence, being the Cashier
and Bookkeeper of the Rural Bank of Pototan, Inc., Pototan,
Iloilo, without the knowledge and/or consent of the
management of the Bank and with intent of gain, did then
and there willfully, unlawfully and feloniously take, steal and
carry away the sum of P15,000.
damage and prejudice of the said bank in the aforesaid
amount.
However, the trial court did not find the existence of
probable cause because (1) the element of ‘taking without
the consent of the owners’ was missing on the ground that it
is the depositors-clients, and not the Bank, which filed the
complaint in these cases, who are the owners of the money
allegedly taken by respondents and hence, are the real
parties-in-interest; and (2) the Informations are bereft of the
phrase alleging "dependence, guardianship or vigilance
between the respondents and the offended party that would
have created a high degree of confidence between them
which the respondents could have abused.".
Issue:
Whether or not the 112 informations for qualified theft
sufficiently allege the element of taking without the consent
of the owner, and the qualifying circumstance of grave abuse
of confidence.
Held:
Yes.
The dismissal by the RTC of the criminal cases was allegedly
due to insufficiency of the Informations and, therefore,
because of this defect, there is no basis for the existence of
probable cause which will justify the issuance of the warrant
of arrest. Petitioner assails the dismissal contending that the
Informations for Qualified Theft sufficiently state facts which
constitute (a) the qualifying circumstance of grave abuse of
confidence; and (b) the element of taking, with intent to gain
and without the consent of the owner, which is the Bank.
The RTC Judge based his conclusion that there was no
probable cause simply on the insufficiency of the allegations
in the Informations concerning the facts constitutive of the
elements of the offense charged.
The relationship between banks and depositors has been held
to be that of creditor and debtor. Articles 1953 and 1980 of
the New Civil Code, as appropriately pointed out by
petitioner, provide as follows:
Article 1953. A person who receives a loan of money or any
other fungible thing acquires the ownership thereof, and is
bound to pay to the creditor an equal amount of the same
kind and quality.
Article 1980. Fixed, savings, and current deposits of money in
banks and similar institutions shall be governed by the
provisions concerning loan.
In a long line of cases involving Qualified Theft, this Court has
firmly established the nature of possession by the Bank of the
money deposits therein, and the duties being performed by
its employees who have custody of the money or have come
into possession of it. The Court has consistently considered
 the allegations in the Information that such employees acted
with grave abuse of confidence, to the damage and prejudice
of the Bank, without particularly referring to it as owner of
the money deposits, as sufficient to make out a case of
Qualified Theft.
3. BPI vs Franco
BPI FAMILY BANK V. FRANCO
(Simple Loan)
· Article 1980 of the Civil Code: Fixed, savings, and current
deposits of money in banks and similar institutions shall be
governed by the provisions concerning loan.
· As there is a debtor-creditor relationship between a bank
and its depositor, BPI-FB ultimately acquired ownership of
Franco’s deposits, but such ownership is coupled with a
corresponding obligation to pay him an equal amount on
demand. Although BPI-FB owns the deposits in Franco’s
accounts, it cannot prevent him from demanding payment of
BPI-FB’s obligation by drawing checks against his current
account, or asking for the release of the funds in his savings
account. Thus, when Franco issued checks drawn against his
current account, he had every right as creditor to expect that
those checks would be honored by BPI-FB as debtor.
4. Frias vs San Diego-Sison
Bobie Rose V. Frias vs Flora San Diego-Sison
GR No. 155223
FACTS:
Bobie Rose Frias owns a house and lot acquired from Island
Masters Reality and Development Corporation (IMRDC)
through a Deed of Sale and covered by transfer certificate of
title (TCT) in the name of IRMDC.
Frias, as the First Party, and Dra. Flora San Diego-Sison as the
Second Party, entered into a Memorandum of Agreement
(MOA) over the property with the following terms and
conditions:
“xxx for and in consideration of the sum of P3,000,000.00
receipt of which is hereby acknowledged by the FIRST PARTY
from the SECOND PARTY, the parties have agreed as follows:
1. That the SECOND PARTY has a period of 6 months
from the date of the execution of this contract xxx to
notify the FIRST PARTY of her intention to purchase
xxx at a price of P6,400,000.00 xxx another six
months within which to pay the remaining balance of
P3.4 million.
2. xxx
3. That in case the FIRST PARTY has no other buyer
within the first six months from the six months from
the execution of this contract, no interest shall be
charged by the SECOND PARTY on the
P3million however, in the event that on the sixth
month the SECOND PARTY would decide not to
purchase the aforementioned property, the FIRST
PARTY has a period of another six months within
which to pay the sum of P3 million pesos provided
that the said amount shall earn compounded bank
interest for the last six months only. Under this
circumstance, the amount of P3 million given by the
SECOND PARTY shall be treated as a loan and the
property shall be considered as the security for the
mortgage which can be enforced in accordance with
law.”
Frias received from San Diego-Sison P2million cash and
P1million post-dated check dated February 28, 1990, instead
of 1991, which rendered the check stale. Frias then gave the
TCT in the name of IRMDC and the Deed of Absolute Sale
over the property between Frias and IRMDC.
San Diego-Sison decided not to purchase the property and
informed Frias through a letter reminding of the agreement
that the amount of P2Million be considered as a loan
payable within 6 months. However, Frias failed to pay San
Diego-Sison who later filed a complaint for sum of money
with preliminary attachment. Also, San Diego-Sison averred
that Frias tried to deprive her of the security for the loan
when Frias made a false report of the loss of her owner’s
copy of the TCT and be issued a new owner’s duplicate copy
of said title.
The trial court ordered Frias to pay San Diego-Sison the sum
of P2million plus interest at the rate of 32% per annum
beginning December 7, 1991 due to the compounded interest
stipulated in the MOA. The appellate court affirmed the trial
court’s decision but modified the rate of interest from 32% to
25% effective June 7, 1991 when the interest rate prevailing
in 1991 ranged from 25% to 32% per annum and that the
P2Million was considered as a loan in June 1991.
Frias argued that the interest rate was contrary to the MOA
because it provided that if San Diego-Sison would decide not
to purchase the property, Frias has the period of another
six months to pay the loan with compounded bank interest
for the last six months only.
ISSUES:
 Whether the compounded bank interest should be
limited to 6 months only as stipulated in the
contract.
 Whether CA committed error in awarding 25%
interest per annum on the 2million peso loan even
beyond the second 6 months stipulated period.
 Whether San Diego-Sison is entitled to moral
damages.
HELD:
 The Court said that the phrase “for the last six
months only” should be taken in the context of the
entire agreement. It agreed with CA’s interpretation
of the phrase:
“Their agreement speaks of two periods of six months each.
The first six- month period was given to plaintiff-appellee
(respondent) to make up her mind whether or not to purchase
defendant-appellant’s (petitioner’s) property. The second six-
month period was given to defendant-appellant to pay the P2
million loan in the event that plaintiff-appellee decided not to
buy the subject property in which case interest will be charged
“for the last six months only”, referring to the second six-
month period. This means that no interest will be charged for
the first six-month period while appellee was making up her
mind whether to buy the property, but only for the second
period of six months after appellee had decided not to buy
the property. This is the meaning of the phrase “for the last
six months only”. Certainly, there is nothing in their
agreement that suggests that interest will be charged for six
months only even if it takes defendant-appellant an eternity
to pay the loan.”
Having considered it as a loan, the monetary interest for the
last six months continued to accrue until actual payment of
the loaned amount.
The court further explained why interest must be paid:
“ The payment of regular interest constitutes the price or cost
of the use of money and thus, until principal sum due is
returned to the creditor, regular interest continues to accrue
since the debtor continues to use such principal amount. It
has been held that for a debtor to continue in possession of
the principal of the loan and to continue to use the same after
maturity of the loan without payment of the monetary
interest, would constitute unjust enrichment on the part of
the debtor at the expense of the creditor.”
 The Court found no error in awarding 25% interest
per annum on the P2Million loan even beyond the
six months stipulated period. “The general rule is
that if the terms of an agreement are clear and leave
no doubt as to the intention of the contracting
parties, the literal meaning of its stipulations shall
prevail. It is further required that the various
stipulations of a contract shall be interpreted
together, attributing to the doubtful ones that sense
which may result from all of them taken
jointly.” Besides, Frias and San Diego-Sison agreed
and as stipulated in the contract that the loaned
amount shall earn compounded bank interests.
Yes. The court agreed with “the findings of the trial court and
the CA that petitioner’s act of trying to deprive respondent of
the security of her loan by executing an affidavit of loss of the
title and instituting a petition for the issuance of a new
owner’s duplicate copy of TCT No. 168173 entitles respondent
to moral damages. Moral damages may be awarded in culpa
contractual or breach of contract cases when the defendant
acted fraudulently or in bad faith. Bad faith does not simply
connote bad judgment or negligence; it imports a dishonest
purpose or some moral obliquity and conscious doing of
wrong. It partakes of the nature of fraud.” Xxx “Petitioner’s
actuation would have deprived respondent of the security for
her loan were it not for respondent’s timely filing of a petition
for relief whereby the RTC set aside its previous order
granting the issuance of new title. Thus, the award of moral
damages is in order
5. Siga-an v Villanueva
G.R. No. 173227. January 20, 2009
Sebastian Siga-an, petitioner, vs. Alicia Villanueva,
respondent.
Facts: Respondent filed a complaint for sum of money against
petitioner. Respondent claimed that petitioner approached
her inside the PNO and offered to loan her the amount
of P540,000.00 of which the loan agreement was not reduced
in writing and there was no stipulation as to the payment of
interest for the loan. Respondent issued a check
worth P500,000.00 to petitioner as partial payment of the
loan. She then issued another check in the amount
of P200,000.00 to petitioner as payment of the remaining
balance of the loan of which the excess amount
of P160,000.00 would be applied as interest for the loan. Not
satisfied with the amount applied as interest, petitioner
pestered her to pay additional interest and threatened to
block or disapprove her transactions with the PNO if she
would not comply with his demand. Thus, she paid additional
amounts in cash and checks as interests for the loan. She
asked petitioner for receipt for the payments but was told
that it was not necessary as there was mutual trust and
confidence between them. According to her computation, the
total amount she paid to petitioner for the loan and interest
accumulated to P1,200,000.00.
The RTC rendered a Decision holding that respondent made
an overpayment of her loan obligation to petitioner and that
the latter should refund the excess amount to the former. It
ratiocinated that respondent’s obligation was only to pay the
loaned amount of P540,000.00, and that the alleged interests
due should not be included in the computation of
respondent’s total monetary debt because there was no
agreement between them regarding payment of interest. It
concluded that since respondent made an excess payment to
petitioner in the amount of P660,000.00 through mistake,
petitioner should return the said amount to respondent
pursuant to the principle of solutio indebiti. Also, petitioner
should pay moral damages for the sleepless nights and
wounded feelings experienced by respondent. Further,
petitioner should pay exemplary damages by way of example
or correction for the public good, plus attorney’s fees and
costs of suit.
Issue: (1) Whether or not interest was due to petitioner; and
(2) whether the principle of solutio indebiti applies to the
case at bar.
Ruling: (1) No. Compensatory interest is not chargeable in the
instant case because it was not duly proven that respondent
defaulted in paying the loan and no interest was due on the
loan because there was no written agreement as regards
payment of interest. 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. As can be gleaned from the foregoing provision,
payment of monetary interest is allowed only if: (1) there was
an express stipulation for the payment of interest; and (2) 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, we have held
that collection of interest without any stipulation therefor in
writing is prohibited by law.
(2) Petitioner cannot be compelled to return the alleged
excess amount paid by respondent as interest. Under Article
1960 of the Civil Code, if the borrower of loan pays interest
when there has been no stipulation therefor, the provisions
of the Civil Code concerning solutio indebiti shall be
applied. Article 2154 of the Civil Code explains the principle
of solutio indebiti. Said provision provides that if something is
received when there is no right to demand it, and it was
unduly delivered through mistake, the obligation to return it
arises. In such a case, a creditor-debtor relationship is
created under a quasi-contract whereby the payor becomes
the creditor who then has the right to demand the return of
payment made by mistake, and the person who has no right
to receive such payment becomes obligated to return the
same. The quasi-contract of solutio indebiti harks back to the
ancient principle that no one shall enrich himself unjustly at
the expense of another. The principle of solutio
indebiti applies where (1) a payment is made when there
exists no binding relation between the payor, who has no
duty to pay, and the person who received the payment; and
(2) the payment is made through mistake, and not through
liberality or some other cause. We have held that the
principle of solutio indebiti applies in case of erroneous
payment of undue interest.
Article 2232 of the Civil Code states that in a quasi-contract,
such as solutio indebiti, exemplary damages may be imposed
if the defendant acted in an oppressive manner. Petitioner
acted oppressively when he pestered respondent to pay
interest and threatened to block her transactions with the
PNO if she would not pay interest. This forced respondent to
pay interest despite lack of agreement thereto. Thus, the
award of exemplary damages is appropriate so as to deter
petitioner and other lenders from committing similar and
other serious wrongdoings.
6. Ligutan v CA
Case Digest No. II-16 | GR No. 138677 | Ligutan v Court of
Appeals | Vitug
FACTS:
Petitioners Tolomeo Ligutan and Leonidas dela Llana
obtained a loan in the amount of P120,000.00 from Security
Bank and Trust Co. The obligation matured and the bank
granted an extension. Despite several demands from the
Bank, petitioners failed to settle the debt which then
amounted to P114,416.10. The Bank sent a final demand
letter however petitioners still defaulted on their obligation.
The Bank then filed a complaint for recovery of the due
amount. Petitioners instead of presenting their evidence had
the schedule reset for two consecutive occasions. On the
third hearing date, the trial court resolved to consider the
case submitted for decision.
Two years later petitioners filed a motion for reconsideration
which was denied by the trial court. Petitioners then
interposed an appeal with the Court of Appeals, the appellate
court affirmed the judgement of the trial court except the 2%
service charge which was deleted pursuant to Central Bank
Circular No. 763. The two parties filed their motions for
reconsiderations and the Court of Appeals resolved the two
motions: that the payment of interest and penalty commence
on the date when the obligation became due and a penalty of
3% per month would suffice. The petitioners filed an omnibus
motion for reconsideration which was then denied by the
Court of Appeals.
ISSUE:
Whether or not the 15.189% interest and the penalty of 3%
per month (36% per annum) is exorbitant, iniquitous, and
unconscionable.
RULING:
Petition is DENIED.
HELD:
The question of whether a penalty is reasonable or iniquitous
can be partly subjective and partly objective. Its resolution
will depend on such factors as, but not 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 Court of Appeals, exercising its good judgement has
reduced the penalty interest from 5% a month to 3% a
month. Given the circumstances and the repeated acts of
breach by petitioners of their contractual obligation, the
Court sees no cogent ground to modify the ruling of the
appellate court.
The stipulated interest of 15.189% per annum, does not
appear as being excessive. The essence or rationale for the
payment of interest, quite often referred to as cost of money,
is not exactly the same as that as a surcharge or a penalty. A
penalty stipulation is not necessarily preclusive of interest, if
there is an agreement to that effect, the two being distinct
concepts which may separately be demanded. The interest
prescribed in loan financing arrangements is a fundamental
part of the banking business and the core of a banks
existence.
7. Nacar v Gallery Frames
NACAR VS GALLERY FRAMES
FACTS
Dario Nacar filed a labor case against Gallery Frames and its
owner Felipe Bordey, Jr. Nacar alleged that he was dismissed
without cause by Gallery Frames on January 24, 1997. On
October 15, 1998, the Labor Arbiter (LA) found Gallery
Frames guilty of illegal dismissal hence the Arbiter awarded
Nacar P158,919.92 in damages consisting of backwages and
separation pay.
Gallery Frames appealed all the way to the Supreme Court
(SC). The Supreme Court affirmed the decision of the Labor
Arbiter and the decision became final on May 27, 2002.
After the finality of the SC decision, Nacar filed a motion
before the LA for recomputation as he alleged that his
backwages should be computed from the time of his illegal
dismissal (January 24, 1997) until the finality of the SC
decision (May 27, 2002) with interest. The LA denied the
motion as he ruled that the reckoning point of the
computation should only be from the time Nacar was illegally
dismissed (January 24, 1997) until the decision of the LA
(October 15, 1998). The LA reasoned that the said date
should be the reckoning point because Nacar did not appeal
hence as to him, that decision became final and executory.
ISSUE:
Whether or not the Labor Arbiter is correct.
RULING
No. There are two parts of a decision when it comes to illegal
dismissal cases (referring to cases where the dismissed
employee wins, or loses but wins on appeal). The first part is
the ruling that the employee was illegally dismissed. This is
immediately final even if the employer appeals – but will be
reversed if employer wins on appeal. The second part is the
ruling on the award of backwages and/or separation pay. For
backwages, it will be computed from the date of illegal
dismissal until the date of the decision of the Labor Arbiter.
But if the employer appeals, then the end date shall be
extended until the day when the appellate court’s decision
shall become final. Hence, as a consequence, the liability of
the employer, if he loses on appeal, will increase – this is just
but a risk that the employer cannot avoid when it continued
to seek recourses against the Labor Arbiter’s decision. This is
also in accordance with Article 279 of the Labor Code.
Anent the issue of award of interest in the form of actual or
compensatory damages, the Supreme Court ruled that the
old case of Eastern Shipping Lines vs CA is already modified
by the promulgation of the Bangko Sentral ng Pilipinas
Monetary Board Resolution No. 796 which lowered the legal
rate of interest from 12% to 6%. Specifically, the rules on
interest are now as follows:
1. Monetary Obligations ex. Loans:
2. If stipulated in writing:
a.1. shall run from date of judicial demand (filing of the case)
a.2. rate of interest shall be that amount stipulated
1. If not stipulated in writing
b.1. shall run from date of default (either failure to pay upon
extra-judicial demand or upon judicial demand whichever is
appropriate and subject to the provisions of Article 1169 of
the Civil Code)
b.2. rate of interest shall be 6% per annum
2. Non-Monetary Obligations (such as the case at bar)
3. If already liquidated, rate of interest shall be 6% per
annum, demandable from date of judicial or extra-judicial
demand (Art. 1169, Civil Code)
4. If unliquidated, no interest
Except: When later on established with certainty. Interest
shall still be 6% per annum demandable from the date of
judgment because such on such date, it is already deemed
that the amount of damages is already ascertained.
3. Compounded Interest
– This is applicable to both monetary and non-monetary
obligations
– 6% per annum computed against award of damages
(interest) granted by the court. To be computed from the
date when the court’s decision becomes final and executory
until the award is fully satisfied by the losing party.
4. The 6% per annum rate of legal interest shall be
applied prospectively:
– Final and executory judgments awarding damages prior to
July 1, 2013 shall apply the 12% rate;
– Final and executory judgments awarding damages on or
after July 1, 2013 shall apply the 12% rate for unpaid
obligations until June 30, 2013; unpaid obligations with
respect to said judgments on or after July 1, 2013 shall still
incur the 6% rate.
Notes:
NACAR V. GALLERY FRAMES AND/OR BORDEY, (2013)
(Compensatory, Penalty or Indemnity Interest)
*Amending the Eastern Shipping Doctrine
*Important: because this case discusses the amendment of
the legal interest in loan and forbearance of money, credits or
goods from 12% to 6% effective July 1, 2013.
Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), in its
Resolution No. 796, approved the amendment of Section 2 of
Circular No. 905, Series of 1982 and, accordingly, issued
Circular No. 799, Series of 2013, effective July 1, 2013, the
pertinent portion of which reads:
Section 1. 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 an express contract as to such
rate of interest, shall be six percent (6%) per annum.
Thus, from the foregoing, in the absence of an express
stipulation as to the rate of interest that would govern the
parties, the rate of legal interest for loans or forbearance of
any money, goods or credits and the rate allowed in
judgments shall no longer be 12% per annum but will now be
6% per annum effective July 1, 2013.
Ø It should be noted, nonetheless, that the new rate could
only be applied prospectively and not retroactively.
Consequently, the 12% per annum legal interest shall apply
only until June 30, 2013. Come July 1, 2013 the new rate of
6% per annum shall be the prevailing rate of interest when
applicable.
To recapitulate and for future guidance, the guidelines laid
down in the case of Eastern Shipping Lines are
accordingly modified to embody BSP-MB Circular No. 799, as
follows:
I. When an obligation, regardless of its source, i.e.,
law, contracts, quasi-contracts, delicts or quasi-delicts is
breached, the contravenor can be held liable for damages.
The provisions under Title XVIII on "Damages" of the Civil
Code govern in determining the measure of recoverable
damages.
II. With regard particularly to an award of interest in
the concept of actual and compensatory damages, the rate of
interest, as well as the accrual thereof, is imposed, as follows:
New guidelines in the award of interest:
1.) When the obligation is breached, and it consists in the
payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself
earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 6% per
annum to be computed from default, i.e., from judicial or
extrajudicial demand under and subject to the provisions of
Article 1169 of the Civil Code.
2.) When an obligation, not constituting a loan or
forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the
discretion of the court at the rate of 6% per annum. No
interest, however, shall be adjudged on unliquidated claims
or damages, except when or until the demand can be
established with reasonable certainty. Accordingly, where the
demand is established with reasonable certainty, the interest
shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code), but when such certainty
cannot be so reasonably established at the time the demand
is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the
quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the computation
of legal interest shall, in any case, be on the amount finally
adjudged.
3.) When the judgment of the court awarding a sum of
money becomes final and executory, the rate of legal
interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be6% per annum from such finality
until its satisfaction, this interim period being deemed to be
by then an equivalent to a forbearance of credit.
Application in this case: The interest of 12% per annum of the
total monetary awards, computed from May 27, 2002 to June
30, 2013 and 6% per annum from July 1, 2013 until their full
satisfaction, is awarded.
8. Eastern Shipping Lines vs CA
Eastern Shipping Lines, Inc. v CA (Credit Transactions)
G.R. No. 97412 July 12, 1994
EASTERN SHIPPING LINES, INC., petitioner, vs. HON. COURT
OF APPEALS AND MERCANTILE INSURANCE COMPANY, INC.,
respondents.
VITUG, J.:
FACTS:
This is an action against defendants shipping company,
arrastre operator and broker-forwarder for damages
sustained by a shipment while in defendants' custody, filed by
the insurer-subrogee who paid the consignee the value of
such losses/damages.
the losses/damages were sustained while in the respective
and/or successive custody and possession of defendants
carrier (Eastern), arrastre operator (Metro Port) and broker
(Allied Brokerage).
As a consequence of the losses sustained, plaintiff was
compelled to pay the consignee P19,032.95 under the
aforestated marine insurance policy, so that it became
subrogated to all the rights of action of said consignee against
defendants.
DECISION OF LOWER COURTS: * trial court: ordered payment
of damages, jointly and severally * CA: affirmed trial court.
ISSUES AND RULING:
(a) whether or not a claim for damage sustained on a
shipment of goods can be a solidary, or joint and several,
liability of the common carrier, the arrastre operator and the
customs broker;
YES, it is solidary. Since it is the duty of the ARRASTRE to take
good care of the goods that are in its custody and to deliver
them in good condition to the consignee, such responsibility
also devolves upon the CARRIER. Both the ARRASTRE and the
CARRIER are therefore charged with the obligation to deliver
the goods in good condition to the consignee.
The common carrier's duty to observe the requisite diligence
in the shipment of goods lasts from the time the articles are
surrendered to or unconditionally placed in the possession of,
and received by, the carrier for transportation until delivered
to, or until the lapse of a reasonable time for their acceptance
by, the person entitled to receive them (Arts. 1736-1738, Civil
Code; Ganzon vs. Court of Appeals, 161 SCRA 646; Kui Bai vs.
Dollar Steamship Lines, 52 Phil. 863). When the goods
shipped either are lost or arrive in damaged condition, a
presumption arises against the carrier of its failure to observe
that diligence, and there need not be an express finding of
negligence to hold it liable.
(b) whether the payment of legal interest on an award for
loss or damage is to be computed from the time the
complaint is filed or from the date the decision appealed
from is rendered; and
FOLLOW THESE VERY IMPORTANT RULES (GUIDANCE BY THE
SUPREME COURT)
I. When an obligation, regardless of its source, i.e., law,
contracts, quasi-contracts, delicts or quasi-delicts is breached,
the contravenor can be held liable for damages. The
provisions under Title XVIII on "Damages" of the Civil Code
govern in determining the measure of recoverable damages.
II. With regard particularly to an award of interest in the
concept of actual and compensatory damages, the rate of
interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the
payment of a sum of money, i.e., a loan or forbearance of
money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself
earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12%
per annum to be computed from default, i.e., from judicial or
extrajudicial demand under and subject to the provisions of
Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance
of money, is breached, an interest on the amount of damages
awarded may be imposed at the discretion of the court at the
rate of 6% per annum. No interest, however, shall be
adjudged on unliquidated claims or damages except when or
until the demand can be established with reasonable
certainty. Accordingly, where the demand is established with
reasonable certainty, the interest shall begin to run from the
time the claim is made judicially or extrajudicially (Art. 1169, 6% interest per annum has been applied, i.e., from the time
Civil Code) but when such certainty cannot be so reasonably the complaint is filed until the adjudged amount is fully paid.
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
9. United Coconut Planters Bank v Samuel and Beluso
deemed to have been reasonably ascertained). The actual
base for the computation of legal interest shall, in any case, UCPB vs Beluso
be on the amount finally adjudged.
FACTS: On April 1997, spouses Beluso constituted other than
promissory notes, a real estate mortgage over parcels of land.
3 of their promissory notes were renewed several times.
3. When the judgment of the court awarding a sum of money
Subsequently, spouses failed to deliver payment upon UPCB’s
becomes final and executory, the rate of legal interest,
demand. As a result, their mortgage was foreclosed. Spouses
whether the case falls under paragraph 1 or paragraph 2,
filed Petition for Annulment, Accounting and Damages
above, shall be 12% per annum from such finality until its
against UCPB. Trial court ruled in favor of the spouses. CA
satisfaction, this interim period being deemed to be by then
affirmed the same decision.
an equivalent to a forbearance of credit.

ISSUE: Whether the contract between the spouses Beluso and

(c) whether the applicable rate of interest, referred to above,
UPCB is valid.
is twelve percent (12%) or six percent (6%).

HELD: No. Article 1308 of the Civil Code provides:

SIX PERCENT (6%) on the amount due computed from the
decision, dated 03 February 1988, of the court a quo (Court of
Appeals) AND A TWELVE PERCENT (12%) interest, in lieu of
SIX PERCENT (6%), shall be imposed on such amount upon
finality of the Supreme Court decision until the payment
thereof.
RATIO: when the judgment awarding a sum of money
becomes final and executory, the monetary award shall earn
interest at 12% per annum from the date of such finality until
its satisfaction, regardless of whether the case involves a loan
or forbearance of money. The reason is that this interim
period is deemed to be by then equivalent to a forbearance
of credit.
Art. 1308. The contract must bind both contracting parties;
its validity or compliance cannot be left to the will of one of
them.
The provision stating that the interest shall be at the “rate
indicative of DBD retail rate or as determined by the Branch
Head” is indeed dependent solely on the will of petitioner
UCPB. Under such provision, petitioner UCPB has two
choices on what the interest rate shall be: (1) a rate indicative
of the DBD retail rate; or (2) a rate as determined by the
Branch Head. As UCPB is given this choice, the rate should be
categorically determinable in both choices. If either of these
two choices presents an opportunity for UCPB to fix the rate
at will, the bank can easily choose such an option, thus
making the entire interest rate provision violative of the
principle of mutuality of contracts.

NOTES: the Central Bank Circular imposing the 12% interest Notes:
per annum applies only to loans or forbearance of money,
UCPB V. SAMUEL AND BELUSO
goods or credits, as well as to judgments involving such loan
or forbearance of money, goods or credits, and that the 6% (Finance Charges, R.A. No. 3765, Sec. 4. Sec. 6)
interest under the Civil Code governs when the transaction
involves the payment of indemnities in the concept of *better read the full text
damage arising from the breach or a delay in the
Validity of the interest rates
performance of obligations in general. Observe, too, that in
these cases, a common time frame in the computation of the · The provision stating that the interest shall be at the
“rate indicative of DBD retail rate or as determined by the
Branch Head” is indeed dependent solely on the will of
petitioner UCPB. Clearly, a rate “as determined by the Branch
Head” gives the latter unfettered discretion on what the rate
may be. The Branch Head may choose any rate he or she
desires. As regards the rate “indicative of the DBD retail
rate,” the same cannot be considered as valid for being akin
to a “prevailing rate” or “prime rate” allowed by this Court
in Polotan. The interest rate in Polotan reads:
The Cardholder agrees to pay interest per annum at 3% plus
the prime rate of Security Bank and Trust Company. x x x.
· In this provision in Polotan, there is a fixed margin over
the reference rate: 3%. Thus, the parties can easily
determine the interest rate by applying simple arithmetic. On
the other hand, the provision in the case at bar does not
specify any margin above or below the DBD retail rate. UCPB
can peg the interest at any percentage above or below the
DBD retail rate, again giving it unfettered discretion in
determining the interest rate.
Liability for Violation of Truth in Lending Act
RA 3765, otherwise known as the “Truth in Lending Act.”
Section 6(a) of the Truth in Lending Act which mandates the
filing of an action to recover such penalty must be made
under the following circumstances:
Section 6. (a) Any creditor who in connection with any credit
transaction fails to disclose to any person any information in
violation of this Act or any regulation issued thereunder shall
be liable to such person in the amount of P100 or in an
amount equal to twice the finance charge required by such
creditor in connection with such transaction, whichever is
greater, except that such liability shall not exceed P2,000 on
any credit transaction. Action to recover such penalty may
be brought by such person within one year from the date of
the occurrence of the violation, in any court of competent
jurisdiction.
Rationale: to protect the public from hidden or undisclosed
charges on their loan obligations, requiring a full disclosure
thereof by the lender.
Section 4 of the Truth in Lending Act clearly provides that the
disclosure statement must be furnished prior to the
consummation of the transaction:
SEC. 4. Any creditor shall furnish to each person to whom
credit is extended, prior to the consummation of the
transaction, a clear statement in writing setting forth, to the
extent applicable and in accordance with rules and
regulations prescribed by the Board, the following
information:
1) the cash price or delivered price of the property or
service to be acquired;
2) the amounts, if any, to be credited as down payment
and/or trade-in;
3) the difference between the amounts set forth under
clauses (1) and (2)
4) the charges, individually itemized, which are paid or to
be paid by such person in connection with the transaction but
which are not incident to the extension of credit;
5) the total amount to be financed;
6) the finance charge expressed in terms of pesos and
centavos; and
7) the percentage that the finance bears to the total
amount to be financed expressed as a simple annual rate on
the outstanding unpaid balance of the obligation.
Rationale: to protect users of credit from a lack of awareness
of the true cost thereof, proceeding from the experience that
banks are able to conceal such true cost by hidden charges,
uncertainty of interest rates, deduction of interests from the
loaned amount, and the like. The law thereby seeks to
protect debtors by permitting them to fully appreciate the
true cost of their loan, to enable them to give full consent to
the contract, and to properly evaluate their options in
arriving at business decisions.
The promissory notes, the copies of which were presented to
the spouses Beluso after execution, are not sufficient
notification from UCPB. As earlier discussed, the interest rate
provision therein does not sufficiently indicate with
particularity the interest rate to be applied to the loan
covered by said promissory notes.
10. Advocates for Truth in Lending vs BSP
Advocates for Truth in Lending, Inc. vs. BSP, et. al.
G.R. No. 192986 / January 15, 2013
FACTS:
Advocates for Truth in Lending, Inc. and its President,
Eduardo Olaguer claim that they are raising issues of
transcendental importance to the public and so they filed
Petition for Certiorari under Rule 65 ROC seeking to declare
that the Bangko Sentral ng Pilipinas Monetary Board (BSP-
MB), replacing the Central Bank Monetary Board (CB-MB) by
virtue of R.A. No. 7653, has no authority to continue
enforcing Central Bank Circular No. 905, issued by the CB-MB
in 1982, which "suspended" the Usury Law of 1916 (Act No.
2655).
R.A. No. 265, which created the Central Bank (CB) of the
Philippines, 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.
In its Resolution No. 2224, the CB-MB issued CB Circular No.
905, Series of 1982. 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.
On June 14, 1993, President Fidel V. Ramos signed into law
R.A. No. 7653 establishing the Bangko Sentral ng Pilipinas
(BSP) to replace the CB.
ISSUE/S:
1. Whether the CB-MB exceeded its authority when it
issued CB Circular No. 905, which removed all interest ceilings
and thus suspended Act No. 2655 as regards usurious interest
rates. NO
2. Whether under R.A. No. 7653, the BSP-MB may continue
to enforce CB Circular No. 905. YES
RULING:
1. The CB-MB merely suspended the effectivity of the Usury
Law when it issued CB Circular No. 905.
The power of the CB to effectively suspend the Usury Law
pursuant to P.D. No. 1684 has long been recognized and
upheld in many cases. As the Court explained in the landmark
case of Medel v. CA, citing several cases, CB Circular No. 905
"did not repeal nor in anyway amend the Usury Law but
simply suspended the latter’s effectivity;" that "a CB Circular
cannot repeal a law, [for] only a law can repeal another law;"
that "by virtue of CB Circular No. 905, the Usury Law has been
rendered ineffective;" and "Usury has been legally non-
existent in our jurisdiction. Interest can now be charged as
lender and borrower may agree upon."
By lifting the interest ceiling, CB Circular No. 905 merely
upheld the parties’ freedom of contract to agree freely on the
rate of interest. It cited Article 1306 of the New Civil Code,
under which the 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.
2. The BSP-MB has authority to enforce CB Circular No. 905.
Section 1 of CB Circular No. 905 provides that, "The rate of
interest, including commissions, premiums, fees and other
charges, on a loan or forbearance of any money, goods, or
credits, regardless of maturity and whether secured or
unsecured, that may be charged or collected by any person,
whether natural or juridical, shall not be subject to any
ceiling prescribed under or pursuant to the Usury Law, as
amended." It does not purport to suspend the Usury Law only
as it applies to banks, but to all lenders.
Petitioners contend that, granting that the CB had power to
"suspend" the Usury Law, the new BSP-MB did not retain this
power of its predecessor, in view of Section 135 of R.A. No.
7653, which expressly repealed R.A. No. 265. The petitioners
point out that R.A. No. 7653 did not reenact a provision
similar to Section 109 of R.A. No. 265.
A closer perusal shows that Section 109 of R.A. No. 265
covered only loans extended by banks, whereas under
Section 1-a of the Usury Law, as amended, the BSP-MB may
prescribe the maximum rate or rates of interest for all loans
or renewals thereof or the forbearance of any money, goods
or credits, including those for loans of low priority such as
consumer loans, as well as such loans made by pawnshops,
finance companies and similar credit institutions. It even
authorizes the BSP-MB to prescribe different maximum rate
or rates for different types of borrowings, including deposits
and deposit substitutes, or loans of financial intermediaries.
Act No. 2655, an earlier law, is much broader in scope,
whereas R.A. No. 265, now R.A. No. 7653, merely
supplemented it as it concerns loans by banks and other
financial institutions. Had R.A. No. 7653 been intended to
repeal Section 1-a of Act No. 2655, it would have so stated in
unequivocal terms.
Further, the lifting of the ceilings for interest rates does not
authorize stipulations charging excessive, unconscionable,
and iniquitous interest. 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.
Stipulations authorizing iniquitous or unconscionable
interests have been invariably struck down for being contrary
to morals, if not against the law.
11. Carpo vs Chua and Dy Ng
G.R. Nos. 150773 & 153599 September 30, 2005
SPOUSES DAVID B. CARPO and RECHILDA S. CARPO,
Petitioners,
- versus -
ELEANOR CHUA and TINGA, and ELMA DY NG, CHICO-
NAZARIO, JJ. Respondents.
DOCTRINE: Usurious loan transaction is not a complete
nullity but defective only with respect to the agreed interest.
In simple loan with stipulation of usurious interest, the
prestation of the debtor to pay the principal debt, which is
the cause of the contract (Article 1350, Civil Code), is not
illegal. The illegality lies only as to the prestation to pay the
stipulated interest; hence, being separable, the latter only
should be deemed void, since it is the only one that is illegal.
FACTS:
1. Petitioners borrowed from respondents the amount of
P175,000.00, payable within six (6) months with an interest
rate of six percent (6%) per month. To secure the payment of
the loan, petitioners mortgaged their residential house and
lot.
2. Petitioners failed to pay the loan upon demand.
Consequently, the real estate mortgage was extrajudicially
foreclosed where the respondents emerged winners in the
public auction.
3. Petitioners failed to exercise their right of redemption,
thus a certificate of sale was issued and new TCT was issued
in the name of respondents. Despite the issuance of the TCT,
petitioners continued to occupy the said house and lot,
prompting respondents to file a petition for writ of
possession.Writ of possession was then issued.
4. Petitioners filed a complaint for annulment of real estate
mortgage and the consequent foreclosure proceedings.
5. Petitioners claim that following the Courts ruling in Medel
v. Court of Appeals the rate of interest stipulated in the
principal loan agreement is clearly null and void.
Consequently, they also argue that the nullity of the agreed
interest rate affects the validity of the real estate mortgage.
ISSUE: A. Whether the interest rate is valid.---NO
B. Whether validity of said interest rate affects the Mortgage
Contract.--NO
HELD: A. INTEREST RATE
Petitioners contend that 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. Instead of dismissing their complaint,
they aver that the lower court should have declared them
liable to respondents for the original amount of the loan plus
12% interest per annum and 1% monthly penalty charge as
liquidated damages, in view of the ruling in Medel v. Court of
Appeals where the Court found that the interest stipulated at
5.5% per month or 66% per annum was so iniquitous or
unconscionable as to render the stipulation void.
In a long line of cases, this Court has invalidated similar
stipulations on interest rates for being excessive, iniquitous,
unconscionable and exorbitant.
In the case at bar, the stipulated interest rate is 6% per
month, or 72% per annum. By the standards set in the above-
cited cases, this stipulation is similarly invalid.From that
perspective, it is apparent that the stipulated interest in the
subject loan is 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.
B. INTEREST RATE INVALIDITY &MORTGAGE CONTRACT
The question as to whether the invalidity of the stipulation on
interest carries with it the invalidity of the principal obligation
is crucial . The consideration of the mortgage contract is the
same as that of the principal contract from which it receives
life, and without which it cannot exist as an independent
contract. Being a mere accessory contract, the validity of the
mortgage contract would depend on the validity of the loan
secured by it.
Notably in Medel, the Court did not invalidate the entire loan
obligation despite the inequitability of the stipulated interest,
but instead reduced the rate of interest to the more
reasonable rate of 12% per annum. This is congruent with
the rule that a usurious loan transaction is not a complete
nullity but defective only with respect to the agreed interest.
Further, Article 1273, Civil Code, provides: "The renunciation
of the principal debt shall extinguish the accessory
obligations; but the waiver of the latter shall leave the former
in force."
Article 1420 of the New Civil Code provides in this regard: "In
case of a divisible contract, if the illegal terms can be
separated from the legal ones, the latter may be enforced."
In simple loan with stipulation of usurious interest, the
prestation of the debtor to pay the principal debt, which is
the cause of the contract (Article 1350, Civil Code), is not
illegal. The illegality lies only as to the prestation to pay the
stipulated interest; hence, being separable, the latter only
should be deemed void, since it is the only one that is illegal.
The principal debt remaining without stipulation for payment
of interest can thus 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 (in this case from
the filing of the complaint). 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
Hence, it is clear and settled that the principal loan obligation
still stands and remains valid. By the same token, since the
mortgage contract derives its vitality from the validity of the
principal obligation, the invalid stipulation on interest rate is
similarly insufficient to render void the ancillary mortgage
contract.
(Note: I included the below in case it is deemed relevant in
Credit Trans)
C. UNDUE INFLUENCE
RTC pronounced that the complaint was barred by the four-
year prescriptive period because of vitiated consent through
undue influence.
SC: Disagrees. Article 1391, in relation to Article 1390 of the
Civil Code, grants the aggrieved party the right to obtain the
annulment of contract on account of factors which vitiate
consent. Article 1337 defines the concept of undue influence,
as follows:
There is undue influence when a person takes improper
advantage of his power over the will of another, depriving the
latter of a reasonable freedom of choice. The following
circumstances shall be considered: the confidential, family,
spiritual and other relations between the parties or the fact
that the person alleged to have been unduly influenced was
suffering from mental weakness, or was ignorant or in
financial distress.
While petitioners were allegedly financially distressed, it must
be proven that there is deprivation of their free agency. In
other words, for undue influence to be present, the influence
exerted must have so overpowered or subjugated the mind
of a contracting party as to destroy his free agency, making
him express the will of another rather than his own.
The RTC had likewise concluded that petitioners were barred
by laches from assailing the validity of the real estate
mortgage.
SC: Agrees. If indeed petitioners unwillingly gave their
consent to the agreement, they should have raised this issue
as early as in the foreclosure proceedings. It was only when
the writ of possession was issued did petitioners challenge
the stipulations in the loan contract in their action for
annulment of mortgage. Evidently, petitioners slept on their
rights.
Clearly then, with the absence of undue influence, petitioners
have no cause of action. Even assuming undue influence
vitiated their consent to the loan contract, their action would
already be barred by prescription when they filed it.
Moreover, petitioners had clearly slept on their rights as they
failed to timely assail the validity of the mortgage agreement.