Central Azucarera de Tarlac vs. Collector
Chelda
of Internal Revenue
Facts: O'phir Drug & Cosmetic
Manufacturing Co., of Northern Hills,
Malabon, Rizal purchased from the petitioner
25,508.75 gauge liters and 9,183.15 gauge
liters of denatured alcohol (overseen by
Denaturing Committee of the Bureau of
Internal Revenue). Of the one hundred-
seventy drums sold by the petitioner to O'phir
Drug & Manufacturing Co., the Government
intercepted eighty-seven and, upon
examination of their contents, it was found
that seventy-five drums contained rectified,
and not denatured alcohol. Hence, specific
tax in the amount of P19,980.00 was assessed
against the petitioner on the contents of said
seventy-five drums.
Issue: Whether petitioner should pay for the
specific tax?
Held: Yes. As a licensed manufacturer of
rectified and denatured alcohol, the petitioner
is responsible for the quality of its products.
It cannot escape responsibility by passing it
over to the Denaturing Committee concerned
primarily with the prevention of frauds on the
revenue. The petitioner should have
complied with the law and regulations
bearing on the denaturation of alcohol.
Also, the fact that the alcohol in the instant
case had been passed upon and rectified to by
the Denaturing Committee as duly denatured,
does not exempt the petitioner from paying
the specific tax. It is a cardinal principle of
law and well settled in jurisprudence that the
government is not estopped by the neglect or
omission of its officers or agents (Bachrach
Motor Co. vs. Uson, 50 Phil. 981; Pineda vs.
Court of First Instance of Tayabas, 52 Phil
803).
Angel Jose Merchandising vs.
Enterprises and D. Syjueco
Facts: Plaintiff corporation filed suit in the
Court of First Instance of Manila on May 29,
1964 against the partnership Chelda
Enterprises and David Syjueco, its capitalist
partner, for recovery of alleged unpaid loans
in the total amount of P20,880.00, with legal
interest from the filing of the complaint, plus
attorney's fees of P5,000.00. Alleging that
post dated checks issued by defendants to pay
said account were dishonored, that
defendants' industrial partner, Chellaram I.
Mohinani, had left the country, and that
defendants have removed or disposed of their
property, or are about to do so, with intent to
defraud their creditors, preliminary
attachment was also sought.
Issue: Whether the illegal terms as to
payment of interest likewise renders a nullity
the legal terms as to payments of the principal
debt?
Held: No. 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.
Note: Neither is there a conflict between the
New Civil Code and the Usury Law. Under
the latter, in Sec. 6, any person who for a loan
shall have paid a higher rate or greater sum or
value than is allowed in said law, may
recover the whole interest paid. The New
Civil Code, in Article 1413 states: "Interest
paid in excess of the interest allowed by the
usury laws may be recovered by the debtor,
with interest thereon from the date of
payment." Article 1413, in speaking of
"interest paid in excess of the interest allowed void as to principal and interest, thus, being
by the usury laws" means the whole usurious void, it should not be given any effects by the
interest; that is, in a loan of P1,000, with courts.
interest of P20% per annum P200 for one
year, if the borrower pays said P200, the
whole P200 is the usurious interest, not just
that part thereof in excess of the interest
allowed by law. It is in this case that the law
does not allow division. The whole
stipulation as to interest is void, since
payment of said interest is the cause or object
and said interest is illegal. The only change
effected, therefore, by Article 1413, New
Civil Code, is not to provide for the recovery
of the interest paid in excess of that allowed
by law, which the Usury Law already
provided for, but to add that the same can be
recovered "with interest thereon from the
date of payment."

Lopez vs. El Hogar Filipino

Facts: On 17 March 1920, El Hogar Filipino,

a building and loan association, extended a
loan of P84,000 to the Sps. Lopez who are
shareholders of the El Hogar. As a security,
the Spouses executed a real estate mortgage.
They were required to pay each year P7, 560,
or 9% as interest of the borrowed amount by
monthly installments, and that El Hogar shall
appropriate their monthly shares equivalent
to P200 per share, so they have to appropriate
420 shares to make a total of P84, 000 before
they could be released. Beginning 31 May
1921, the debtors were already in default;
hence, El Hogar sold the mortgaged property
at public extrajudicial auction without
judicial proceeding whatever.

The spouses then filed a complaint for

the annulment of the contract on the ground
of being usurious as well as the annulment of
the extrajudicial sale of the mortgaged
properties. They Invoke Act no.2655 or the
Usury Law stating that all usurious loan is
void. They contend further that the contract is
Castrillo vs. Court of Appeals (10 SCRA
249 [1964])

Facts: Isabel Miranda sold her share to

Doroteo Dimaranan (respondent). In 1934
Crispina Miranda executed a document
entitled "escritura de venta absoluta", stating
that she was the owner of lot No. 188 and
selling two portions thereof: one, containing
252 square meters, to Isabel Miranda for
P600.00; and another, containing 86 square
meters, to the spouses Almoro and Alzona for
P200.00. The spouses in turn sold the land
bought to Jose V. Garcia. Respondent filed a
petition in the Register of Deeds to cancel the
original title and issue a new one but was
denied.

Issue: Whether Art. 1434 (Art. 1431 – 1432

NCC) cannot be given effect retroactively?

Held: No.
1. The principle of estoppel expressed in
statutory form for the first time in the
new Civil Code is not really an
innovation. It has its origin in equity
and, being based on moral right and
natural justice, finds applicability
wherever and whenever the special
circumstances of a case so demand.
(Mirasol v. Municipality of Tarlac, 43
Phil. 601.) In fact it has been applied
by this Court in the case of Llacer v.
Muñoz, et al. (12 Phil. 328), as long
ago as 1908.
2. if anybody at all may be heard to
challenge the application of the
doctrine of estoppel in favor of
respondents, it is only the party
against whom it may be invoked - in
this case the vendor, Isabel Miranda,
from whom they acquired the
disputed property Crispina Miranda
having conveyed the same to Isabel
neither she nor her successors may
raise the point to the own advantage.
 For them to do so would in effect be
to deny the lights of Isabel Miranda
herself, acquired by virtue of two
documents executed by Crispina in
her favor, one in 1929 and the other in
1934. This, obviously, petitioners
cannot be permitted to do.
Phil. Bank of Communications vs. Court
of Appeals, 289 SCRA 178 [1998]
Facts: Chee Puen told his wife Olympia Puen
(respondent) that they needed P300,000 for
their company’s operational expenses. He
asked her to sign a blank document of Real
Estate Mortgage (REM) with the figure
“300”. However, it turned out that the latter
wanted to loan 3M which his wife believed to
be 300,000. The bank, without any
investigation, approved the loan right away.
When the wife found out the loan, she wants
to nullify the mortgage.
Issue: Whether the equitable principle or
estoppel can against the respondent?
Held: No. Respondent did not deliberately or
intentionally lead the petitioner bank to
believe that she was putting up her
paraphernal property to secure a P3 M loan of
Global, Inc. It was Chee Puen who made the
misrepresentation thus defrauding
respondent herself. Furthermore, petitioner's
reliance on the mortgage application signed
in blank by respondent is not a reasonable
reliance. As a banking institution, petitioner
bank was grossly negligent when (a) it took
no step to verify whether the respondent was
really offering her paraphernal property as
collateral; (b) made no credit check on
respondent and Global, Inc.; and (c)
conducted no investigation on the
authenticity of the "Secretary's Certificate of
Board Resolution" dated April 27, 1978. The
business of a bank is affected with public
interest and it should observe a higher
standard of diligence when dealing with the
public. Neither will it matter that petitioner
bank itself was misled by Chee Puen, a third
person to the contract. Under Article 1342 of
the Civil Code, the misrepresentation of a
third person will vitiate consent if it has
resulted in substantial mistake and the same
is mutual.
Elements of Estoppel
1. The actor who usually must have
knowledge, notice or suspicion of the
true facts, communicates something
to another in a misleading way, either
by words, conduct or silence;
2. The other in fact relies, and relies
reasonably or justifiably, upon that
communication;
3. The other would be harmed
materially if the actor is later
permitted to assert any claim
inconsistent with his earlier conduct;
and
4. The actor knows, expects or foresees
that the other would act upon the
information given or that a reasonable
person in the actor's position would
expect or foresee such action.
Republic vs. Go Bon Lee
Facts: On August 15, 1951 the Solicitor
General filed a petition for the cancellation of
Go's certificate of naturalization on the
following grounds:(1) that the same was
obtain illegally or contrary to law because Go
did not then ha all the necessary
qualifications to become a citizen of the
Philippines; (2) that at the time he was
granted Philippine citizenship, he had not
enrolled all his minor children of school age
in any public or private school recognized by
the Office of Private Education where
Philippine history, government and civics are
taught or prescribe as part of the school
curriculum; (3) that he did not reside
continuously in the Philippines for ten years;
(4) and finally, that he filed his petition for
naturalization on April 18, 1941 in violation
of Section 5 of the Revised Natural nation
Law, because at that time one year had not
yet elapsed since he filed with the Bureau of
Justice a sworn declaration of his intention to
become a citizen of the Philippines.
Issue: Whether the he Government was in
estoppel to question his status as a citizen
upon any ground which would have been
raised before or during the hearing of the
petition for naturalization?
Held: No. It is settled that the doctrine of
estoppel or of laches does not apply against
the Government suing in its capacity as
Sovereign or asserting governmental rights.
It has been held that the Government is never
estopped by mistakes or errors on the part of
its agents (Pineda vs. Court of First Instance
of Tayabas, 52 Phil. 803, 807), and that
estoppel cannot give validity to an act that is
prohibited by law or is against public policy
(Benguet Consolidate etc. vs. Pineda etc., 52
O. No. 4, p. 1961; Eugenio v. Perdido, G.R.
No. L-7083, May 19, 1955).
As a matter of fact, it is settled in this
jurisdiction that a certificate of naturalization
may be cancelled upon grounds or conditions
subsequent to the granting of the certificate o
naturalization. Thus in Bell vs. Attorney
General, 56 Phil 667, it was held that a
certificate of naturalization may be cancelled
if it is found subsequently that the applicant
for citizenship secured the same by
misleading the courts on any material fact.
Manila Lodge No. 761 Benevolent and
Protective Order of the Elks v. CA
Facts: The Philippine Commission enacted
Act No. 1360 which authorized the City of
Manila to reclaim a portion of Manila Bay.
Subsequently Act No. 1657 amended the
former act which states that the City of
Manila was authorized to sell or lease the set
aside for hotel site. The City of Manila sells
the land to Manila Lodge No. 761 then the
latter sold the land to Tarlac Development
Corporation. The City of Manila filed a
petition for re-annotation of its right to
repurchased. The TDC then filed a complaint
that the City of Manila was estopped from
repurchasing the property.
Issue: Whether or not the City of Manila was
estopped from questioning the validity of the
sale?
Ruling: The Government is never estopped
by mistakes or errors on the pan of its agents,
and estoppel does not apply to a municipal
corporation to validate a contract that is
prohibited by law or is against Republic
policy, and the sale executed by the City of
Manila to Manila Lodge was certainly a
contract prohibited by law. Moreover,
estoppel cannot be urged even if the City of
Manila accepted the benefits of such contract
of sale and the Manila Lodge No. 761 had
performed its part of the agreement, for to
apply the doctrine of estoppel against the City
of Manila in this case would be tantamount to
enabling it to do indirectly what it could not
do directly.
The sale of the subject property
executed by the City of Manila to the Manila
Lodge No. 761, BPOE, was void and
inexistent for lack of subject matter. It
suffered from an incurable defect that could
not be ratified either by lapse of time or by
express ratification. The Manila Lodge No.
761 therefore acquired no right by virtue of
the said sale. Hence to consider now the
contract inexistent as it always has seen,
cannot be, as claimed by the Manila Lodge
No. 761, an impairment of the obligations of
contracts, for there was it, contemplation of
law, no contract at all.

Prudential Bank vs. Panis

Facts: On November 19, 1971, plaintiffs-

spouses Fernando A. Magcale and Teodula
Baluyut Magcale secured a loan in the sum of
P70,000.00 from the defendant Prudential
Bank. To secure payment of this loan,
plaintiffs executed in favor of defendant on
the aforesaid date a deed of Real Estate
Mortgage over some properties. For failure of
plaintiffs to pay their obligation to defendant
Bank after it became due, and upon
application of said defendant, the deeds of
Real Estate Mortgage were extrajudicially
foreclosed.

Issue: Whether or not a real estate mortgage

can be instituted on the building of a land
belonging to another?

Held: While it is true that a mortgage of land

necessarily includes in the absence of
stipulation of the improvements thereon,
buildings, still a building in itself may be
mortgaged by itself apart from the land on
which it is built. Such a mortgage would still
be considered as a REM for the building
would still be considered as immovable
property even if dealt with separately and
apart from the land.

The original mortgage on the building and

right to occupancy of the land was executed
before the issuance of the sales patent and
before the government was divested of title
to the land. Under the foregoing, it is
evident that the mortgage executed by
private respondent on his own building
was a valid mortgage.