1|CREDIT Digests HW#1 VILLAR

1.] · Saura, Inc. obviously was in no position to comply with RFC’s conditions. So instead
SAURA IMPORT and EXPERT CO., INC., vs DBP  of doing so and insisting that the loan be released as agreed upon, Saura, Inc. asked
[G.R. No. L-24968, April 27, 1972] MAKALINTAL, J. that the mortgage be cancelled.The action thus taken by both parties was in the
FACTS: nature of mutual desistance which is a mode of extinguishing obligations. It is a
 In July 1952, Saura, Inc., applied to Rehabilitation Finance Corp., now DBP, concept that derives from the principle that since mutual agreement can create a
for an industrial loan of P500,000 to be used for the construction of a contract, mutual disagreement by the parties can cause its extinguishment.
factory building, to pay the balance of the jute mill machinery and ·WHEREFORE, the judgment appealed from is reversed and the complaint
equipment and as additional working capital.  In Resolution No.145, the dismissed.
loan application was approved to be secured first by mortgage on the
factory buildings, the land site, and machinery and equipment to be
installed. 2.]
 The mortgage was registered and documents for the promissory note were BPI Investment Corp V. CA (2002)
executed. But then, later on, was cancelled to make way for the 133632  February 15, 2002
registration of a mortgage contract over the same property in favor of Lessons Applicable: Simple Loan
Laws Applicable:
Prudential Bank and Trust Co., the latter having issued Saura letter of credit
for the release of the jute machinery. As security, Saura execute a trust Facts:
receipt in favor of the Prudential. For failure of Saura to pay said Frank Roa obtained a loan with interest rate of 16 1/4%/annum from Ayala Investment and
obligation, Prudential sued Saura. Development Corporation (AIDC), the predecessor of BPI Investment Corp. (BPIIC), for the
 After almost 9 years, Saura Inc, commenced an action against RFC, alleging construction of a house on his lot in New Alabang Village, Muntinlupa.
failure on the latter to comply with its obligations to release the loan  He mortgaged the house and lot to AIDC as security for the loan.
applied for and approved, thereby preventing the plaintiff from completing  1980: Roa sold the house and lot to ALS Management & Development Corp. and
or paying contractual commitments it had entered into, in connection with Antonio Litonjua for P850K who paid P350K in cash and assumed the P500K
its jute mill project. indebtness of ROA with AIDC.
 AIDC proposed to grant ALS and Litonjua a new loan for P500K with
 The trial court ruled in favor of Saura, ruling that there was a perfected
interested rate of 20%/annum and service fee of 1%/annum on the
contract between the parties and that the RFC was guilty of breach outstanding balance payable within 10 years through equal
thereof. monthly amortization of P9,996.58 and penalty interest of
ISSUE: Whether or not there was a perfected contract between the parties. YES. 21%/annum/day from the date the amortization becomes due and
There was indeed a perfected consensual contract. payable.
 March 1981: ALS and Litonjua executed a mortgage deed containing the new
HELD: stipulation with the provision that the monthly amortization will commence on
·Article 1934 provides: An accepted promise to deliver something by way of May 1, 1981
commodatum or simple loan is binding upon the parties, but the commodatum or  August 13, 1982: ALS and Litonjua paid BPIIC P190,601.35 reducing the P500K
principal loan to P457,204.90.
simple loan itself shall not be perfected until delivery of the object of the contract.
 September 13, 1982: BPIIC released to ALS and Litonjua P7,146.87, purporting to be
· There was undoubtedly offer and acceptance in the case. The application of Saura, what was left of their loan after full payment of Roa’s loan
Inc. for a loan of P500,000.00 was approved by resolution of the defendant, and the  June 1984: BPIIC instituted foreclosure proceedings against  ALS and Litonjua on
corresponding mortgage was executed and registered. The defendant failed to fulfill the ground that they failed to pay the mortgage indebtedness which from May 1,
its obligation and the plaintiff is therefore entitled to recover damages. 1981 to June 30, 1984 amounting to P475,585.31
· When an application for a loan of money was approved by resolution of the  August 13, 1984: Notice of sheriff's sale was published
respondent corporation and the responding mortgage was executed and registered,  February 28, 1985: ALS and Litonjua filed Civil Case No. 52093 against BPIIC alleging
there arises a perfected consensual contract. that they are not in arrears and instead they made an overpayment as of June 30,
· However, it should be noted that RFC imposed two conditions (availability of raw 1984 since the P500K loan was only released September 13, 1982 which marked
the start of the amortization and since only P464,351.77 was released applying
materials and increased production) when it restored the loan to the original
legal compensation the balance of P35,648.23 should be applied to the monthly
amount of P500,000.00. amortizations
2|CREDIT Digests HW#1 VILLAR
 RTC: in favor of ALS and Litonjua and against BPIIC that the loan granted by BPI to  January 26, 1971: Honesto Bonnevie filed in the CFI of Rizal against Philippine Bank
ALS and Litonjua was only in the principal sum of P464,351.77 and awarding moral of Commerce for the annulment of the Deed of Mortgage dated December 6,
damages, exemplary damages and attorneys fees for the publication 1966 as well as the extrajudicial foreclosure made on September 4, 1968.
 CA: Affirmed reasoning that a simple loan is perfected upon delivery of the object  CFI: Dismissed the complaint with costs against the Bonnevies
of the contract which is on September 13, 1982  CA: Affirmed
ISSUE: W/N the contract of loan was perfected only on September 13, 1982 or the second ISSUE: W/N the forclosure on the mortgage is validly executed.
release of the loan?
HELD: YES. CA affirmed
HELD: YES. AFFIRMED WITH MODIFICATION as to the award of damages.  The award of moral  A contract of loan being a consensual contract is perfected at the same time the
and exemplary damages in favor of private respondents is DELETED, but the award to them contract of mortgage was executed. The promissory note executed on December
of attorney’s fees in the amount of P50,000 is UPHELD. Additionally, petitioner is ORDERED to 12, 1966 is only an evidence of indebtedness and does not indicate lack of
pay private respondents P25,000 as nominal damages. Costs against petitioner. consideration of the mortgage at the time of its execution.
 obligation to pay commenced only on October 13, 1982, a month after the  Respondent Bank had every right to rely on the certificate of title. It was not bound
perfection of the contract to go behind the same to look for flaws in the mortgagor's title, the doctrine of
 contract of loan involves a reciprocal obligation, wherein the obligation or promise innocent purchaser for value being applicable to an innocent mortgagee for value. 
of each party is the consideration for that of the other.  It is a basic principle in  Thru certificate of sale in favor of appellee was registered on September 2, 1968
reciprocal obligations that neither party incurs in delay, if the other does not and the one year redemption period expired on September 3, 1969. It was not until
comply or is not ready to comply in a proper manner with what is incumbent upon September 29, 1969 that Honesto Bonnevie first wrote respondent and offered to
him.  Consequently, petitioner could only demand for the payment of the monthly redeem the property. 
amortization after September 13, 1982 for it was only then when it complied with  loan matured on December 26, 1967 so when respondent Bank applied for
its obligation under the loan contract.   foreclosure, the loan was already six months overdue. Payment of interest on July
 BPIIC was negligent in relying merely on the entries found in the deed of mortgage, 12, 1968 does not make the earlier act of PBC inequitous nor does it ipso facto
without checking and correspondingly adjusting its records on the amount actually result in the renewal of the loan. In order that a renewal of a loan may be effected,
released and the date when it was released.  Such negligence resulted in damage not only the payment of the accrued interest is necessary but also the payment of
for which an award of nominal damages should be given  interest for the proposed period of renewal as well. Besides, whether or not a loan
 SSS where we awarded attorney’s fees because private respondents were may be renewed does not solely depend on the debtor but more so on the
compelled to litigate, we sustain the award of P50,000 in favor of private discretion of the bank. 
respondents as attorney’s fees

4.]
3.] Central Bank v Court of Appeals G.R. No. L-45710 October 3, 1985
Bonnevie V. CA (1983) The bank’s asking for advance interest for the loan is improper considering that the total
 G.R. No. L-49101 October 24, 1983 loan hasn’t been released. A person can’t be charged interest for nonexisting debt. The
Lessons Applicable: Simple Loan alleged discovery by the bank of overvaluation of the loan collateral is not an issue. Since
Island Savings Bank failed to furnish the P63,000.00 balance of the P80,000.00 loan, the
Facts: real estate mortgage of Sulpicio M. Tolentino became unenforceable to such extent.
 December 6, 1966: Spouses Jose M. Lozano and Josefa P. Lozano secured their loan
of P75K from Philippine Bank of Commerce (PBC) by mortgaging their property Facts: Island Savings Bank, upon favorable recommendation of its legal department,
 December 8, 1966: Executed Deed of Sale with Mortgage to Honesto approved the loan application for P80,000.00 of Sulpicio M. Tolentino, who, as a security for
Bonnevie where P75K is payable to PBC and P25K is payable to Spouses Lanzano. the loan, executed on the same day a real estate mortgage over his 100-hectare land located
 April 28, 1967 to July 12, 1968:   Honesto Bonnevie paid a total of P18,944.22 to in Cubo, Las Nieves, Agusan. The loan called for a lump sum of P80,000, repayable in semi-
PBC annual installments for 3 yrs, with 12% annual interest. After the agreement, a mere P17K
 May 4, 1968:  Honesto Bonnevie assigned all his rights under the Deed of Sale with partial release of the loan was made by the bank and Tolentino and his wife signed a
Assumption of Mortgage to his brother, intervenor Raoul Bonnevie promissory note for the P17,000 at 12% annual interest payable w/in 3 yrs.
 June 10, 1968:  PBC applied for the foreclosure of the mortgage, and notice of sale An advance interest was deducted fr the partial release but this prededucted interest was
was published  refunded to Tolentino after being informed that there was no fund yet for the release of the
P63K balance.
3|CREDIT Digests HW#1 VILLAR
Monetary Board of Central Bank, after finding that bank was suffering liquidity problems, 21.25 hectares subsists as a security for the P17,000.00 debt. 21.25 hectares is more than
prohibited the bank fr making new loans and investments. And after the bank failed to sufficient to secure a P17,000.00 debt.
restore its solvency, the Central Bank prohibited Island Savings Bank from doing business in
the Philippines. Island Savings Bank in view of the non-payment of the P17K filed an
application for foreclosure of the real estate mortgage. Tolentino filed petition for specific
performance or rescission and damages with preliminary injunction, alleging that since the COMMADATUM
bank failed to deliver P63K, he is entitled to specific performance and if not, to rescind the 5.]
real estate mortgage. Republic V. Bagtas (1962)
  G.R. No. L-17474 October 25, 1962
Issues: 1) Whether or not Tolentino’s can collect from the bank for damages Laws Applicable: Commodatum
           2) Whether or not the mortgagor is liable to pay the amount covered by the
promissory note FACTS:
           3) Whether or not the real estate mortgage can be foreclosed May 8, 1948: Jose V. Bagtas borrowed from the Republic of the Philippines through the
Held: Bureau of Animal Industry three bulls: a Red Sindhi with a book value of P1,176.46, a
1) Whether or not Tolentino’s can collect from the bank for damages Bhagnari, of P1,320.56 and a Sahiniwal, of P744.46, for a period of 1 year for breeding
The loan agreement implied reciprocal obligations. When one party is willing and ready to purposes subject to a breeding fee of 10% of the book value of the bulls
perform, the other party not ready nor willing incurs in delay. When Tolentino executed real  May 7, 1949: Jose requested for a renewal for another year for the three bulls but
estate mortgage, he signified willingness to pay. That time, the bank’s obligation to furnish only one bull was approved while the others are to be returned
the P80K loan accrued. Now, the Central Bank resolution made it impossible for the bank to  March 25, 1950: He wrote to the Director of Animal Industry that he would pay the
furnish the P63K balance. The prohibition on the bank to make new loans is irrelevant bec it value of the 3 bulls
did not prohibit the bank fr releasing the balance of loans previously contracted. Insolvency  October 17, 1950: he reiterated his desire to buy them at a value with a deduction
of debtor is not an excuse for non-fulfillment of obligation but is a breach of contract. of yearly depreciation to be approved by the Auditor General.
 The bank’s asking for advance interest for the loan is improper considering that the total  October 19, 1950: Director of Animal Industry advised him that either the 3 bulls
loan hasn’t been released. A person can’t be charged interest for nonexisting debt. The are to be returned or their book value without deductions should be paid not later
alleged discovery by the bank of overvaluation of the loan collateral is not an issue. The bank than October 31, 1950 which he was not able to do
officials should have been more responsible and the bank bears risk in case the collateral  December 20, 1950: An action at the CFI was commenced against Jose praying that
turned out to be overvalued. Furthermore, this was not raised in the pleadings so this issue he be ordered to return the 3 bulls or to pay their book value of P3,241.45 and the
can’t be raised. The bank was in default and Tolentino may choose bet specific performance unpaid breeding fee of P199.62, both with interests, and costs
or rescission w/ damages in either case. But considering that the bank is now prohibited fr  July 5, 1951: Jose V. Bagtas, through counsel Navarro, Rosete and Manalo,
doing business, specific performance cannot be granted. Rescission is the only remedy left, answered that because of the bad peace and order situation in Cagayan Valley,
but the rescission shld only be for the P63K balance. particularly in the barrio of Baggao, and of the pending appeal he had taken to the
2) Whether or not the mortgagor is liable to pay the amount covered by the promissory note Secretary of Agriculture and Natural Resources and the President of the
The promissory note gave rise to Sulpicio M. Tolentino’s reciprocal obligation to pay the Philippines, he could not return the animals nor pay their value and prayed for the
P17,000.00 loan when it falls due. His failure to pay the overdue amortizations under the dismissal of the complaint.
promissory note made him a party in default, hence not entitled to rescission (Article 1191 of  RTC: granted the action
the Civil Code). If there is a right to rescind the promissory note, it shall belong to the  December 1958: granted an ex-parte motion for the appointment of a special
aggrieved party, that is, Island Savings Bank. If Tolentino had not signed a promissory note sheriff to serve the writ outside Manila
setting the date for payment of P17,000.00 within 3 years, he would be entitled to ask for  December 6, 1958: Felicidad M. Bagtas, the surviving spouse of Jose who died on
rescission of the entire loan because he cannot possibly be in default as there was no date October 23, 1951 and administratrix of his estate, was notified
for him to perform his reciprocal obligation to pay. Since both parties were in default in the  January 7, 1959: she file a motion that the 2 bulls where returned by his son on
performance of their respective reciprocal obligations, that is, Island Savings Bank failed to June 26, 1952 evidenced by recipt and the 3rd bull died from gunshot wound
comply with its obligation to furnish the entire loan and Sulpicio M. Tolentino failed to inflicted during a Huk raid and prayed that the writ of execution be quashed and
comply with his obligation to pay his P17,000.00 debt within 3 years as stipulated, they are that a writ of preliminary injunction be issued. 
both liable for damages. ISSUE: W/N the contract is commodatum and NOT a lease and the estate should be liable for
3) Whether or not the real estate mortgage can be foreclosed the loss due to force majeure due to delay.
  Since Island Savings Bank failed to furnish the P63,000.00 balance of the P80,000.00 loan,
the real estate mortgage of Sulpicio M. Tolentino became unenforceable to such extent. HELD: YES. writ of execution appealed from is set aside, without pronouncement as to costs
P63,000.00 is 78.75% of P80,000.00, hence the real estate mortgage covering 100 hectares is  If contract was commodatum then Bureau of Animal Industry retained ownership
unenforceable to the extent of 78.75 hectares. The mortgage covering the remainder of or title to the bull it should suffer its loss due to force majeure. A contract of
4|CREDIT Digests HW#1 VILLAR
commodatum is essentially gratuitous.  If the breeding fee be considered a Held: YES. 
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 Private respondents were able to prove that their predecessors' house was borrowed by
bad faith, because she had continued possession of the bull after the expiry of the petitioner Vicar after the church and the convent were destroyed. They never asked for the
contract.  And even if the contract be commodatum, still the appellant is liable if he return of the house, but when they allowed its free use, they became bailors in
keeps it longer than the period stipulated commodatum and the petitioner the bailee. 
 the estate of the late defendant is only liable for the sum of P859.63, the value of
the bull which has not been returned because it was killed while in the custody of The bailees' failure to return the subject matter of commodatum to the bailor did not mean
the administratrix of his estate adverse possession on the part of the borrower. The bailee held in trust the property subject
 Special proceedings for the administration and settlement of the estate of the matter of commodatum. The adverse claim of petitioner came only in 1951 when it declared
deceased Jose V. Bagtas having been instituted in the CFI, the money judgment the lots for taxation purposes. The action of petitioner Vicar by such adverse claim could not
rendered in favor of the appellee cannot be enforced by means of a writ of ripen into title by way of ordinary acquisitive prescription because of the absence of just title.
execution but must be presented to the probate court for payment by the
appellant, the administratrix appointed by the court. The Court of Appeals found that petitioner Vicar did not meet the requirement of 30 years
Even if this is a commodatum, Bagtas is still liable because the fortuitous event happened possession for acquisitive prescription over Lots 2 and 3. Neither did it satisfy the
when he held the bull and the period stipulated already expired and he is liable because the requirement of 10 years possession for ordinary acquisitive prescription because of the
thing loaned was delivered with appraisal of value and there was no contrary stipulation absence of just title. The appellate court did not believe the findings of the trial court that Lot
regarding his liability in case there is a fortuitous event. 2 was acquired from Juan Valdez by purchase and Lot 3 was acquired also by purchase from
Egmidio Octaviano by petitioner Vicar because there was absolutely no documentary
evidence to support the same and the alleged purchases were never mentioned in the
application for registration.

6.]
Catholic Vicar Vs. CA
Facts:
-  1962: Catholic Vicar Apostolic of the Mountain Province (Vicar), petitioner, filed with the 7.]
court an application for the registration of title over lots 1, 2, 3 and 4 situated in Poblacion QUINTOS VS BECK 69 PHIL 108
Central, Benguet, said lots being used as sites of the Catholic Church, building, convents, high Facts: Quintos and Beck entered into a contract of lease, whereby the latter occupied the
school building, school gymnasium, dormitories, social hall and stonewalls. former’s house. On Jan 14, 1936, the contract of lease was novated, wherein the QUintos
- 1963: Heirs of Juan Valdez and Heirs of Egmidio Octaviano claimed that they have gratuitously granted to Beck the use of the furniture, subject to the condition that Beck
ownership over lots 1, 2 and 3. (2 separate civil cases) should return the furnitures to Quintos upon demand. Thereafter, Quintos sold the property
- 1965: The land registration court confirmed the registrable title of Vicar to lots 1 , 2, 3 and to Maria and Rosario Lopez. Beck was notified of the conveyance and given him 60 days to
4. Upon appeal by the private respondents (heirs), the decision of the lower court was vacate the premises. IN addition, Quintos required Beck to return all the furniture. Beck
reversed. Title for lots 2 and 3 were cancelled. refused to return 3 gas heaters and 4 electric lamps since he would use them until the lease
- VICAR filed with the Supreme Court a petition for review on certiorari of the decision of the was due to expire. Quintos refused to get the furniture since Beck had declined to return all
Court of Appeals dismissing his  application for registration of Lots 2 and 3. of them. Beck deposited all the furniture belonging to QUintos to the sheriff.
- During trial, the Heirs of Octaviano presented one (1) witness, who testified on the alleged
ownership of the land in question (Lot 3) by their predecessor-in-interest, Egmidio Octaviano; ISSUE: WON Beck complied with his obligation of returning the furnitures to Quintos when it
his written demand to Vicar for the return of the land to them; and the reasonable rentals for deposited the furnitures to the sheriff.
the use of the land at P10,000 per month. On the other hand, Vicar presented the Register of
Deeds for the Province of Benguet, Atty. Sison, who testified that the land in question is not RULING: The contract entered into between the parties is one of commadatum, because
covered by any title in the name of Egmidio Octaviano or any of the heirs. Vicar dispensed under it the plaintiff gratuitously granted the use of the furniture to the defendant, reserving
with the testimony of Mons. Brasseur when the heirs admitted that the witness if called to for herself the ownership thereof; by this contract the defendant bound himself to return the
the witness stand, would testify that Vicar has been in possession of Lot 3, for 75 years furniture to the plaintiff, upon the latters demand (clause 7 of the contract, Exhibit A; articles
continuously and peacefully and has constructed permanent structures thereon. 1740, paragraph 1, and 1741 of the Civil Code).
The obligation voluntarily assumed by the defendant to return the furniture upon the
Issue: WON Vicar had been in possession of lots 2 and 3 merely as bailee borrower in plaintiff's demand, means that he should return all of them to the plaintiff at the latter's
commodatum, a gratuitous loan for use. residence or house. The defendant did not comply with this obligation when he merely
5|CREDIT Digests HW#1 VILLAR
placed them at the disposal of the plaintiff, retaining for his benefit the three gas heaters and The Supreme Court held that petitioner failed to convince them that the transaction is really
the four eletric lamps. a trust receipt transaction instead of merely a simple loan, as found by the lower court and
the CA.
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 As held in Colinares v. Court of Appeals, which appears to be foursquare with the facts
by the deposit of the furniture at the defendant's behest. The latter, as bailee, was nt entitled obtaining in the case at bar, inasmuch as the debtor received the goods subject of the trust
to place the furniture on deposit; nor was the plaintiff under a duty to accept the offer to receipt before the trust receipt itself was entered into, the transaction in question was a
return the furniture, because the defendant wanted to retain the three gas heaters and the simple loan and not a trust receipt agreement. Prior to the date of execution of the trust
four electric lamps. receipt, ownership over the goods was already transferred to the debtor. This situation is
inconsistent with what normally obtains in a pure trust receipt transaction, wherein the
goods belong in ownership to the bank and are only released to the importer in trust after
the loan is granted.

Here, as in Colinares, the delivery to respondent Corporation of the goods subject of the
trust receipt occurred long before the trust receipt itself was executed. More specifically,
delivery of the bunker fuel oil to respondent Corporation's Bulacan plant commenced on July
MUTUUM 7, 1982 and was completed by July 19, 1982.13 Further, the oil was used up by respondent
Corporation in its normal operations by August, 1982.14 On the other hand, the subject trust
8.] receipt was only executed nearly two months after full delivery of the oil was made to
Consolidated Bank and Trust Corporation v. CA, respondent Corporation, or on September 2, 1982.
G.R. No. 114286, April 19, 2001
As explained in Colinares, the Trust Receipts Law does not seek to enforce payment of the
FACTS: loan, rather it punishes the dishonesty and abuse of confidence in the handling of money
Respondents Continental Cement Corporation (Corporation) and Gregory T. Lim obtained, or goods to the prejudice of another regardless of whether the latter is the owner. The
from petitioner Consolidated Bank and Trust Corporation, Letter of Credit No. DOM-23277 practice of banks of making borrowers sign trust receipts to facilitate collection of loans
in the amount of P 1,068,150.00. The letter of credit was used to purchase around five and place them under the threats of criminal prosecution should they be unable to pay it
hundred thousand liters of bunker fuel oil from Petrophil Corporation, which the latter may be unjust and inequitable, if not reprehensible. Such agreements are contracts of
delivered directly to respondent Corporation in its Bulacan plant. In relation to the same adhesion which borrowers have no option but to sign lest their loan be disapproved. The
transaction, a trust receipt for the amount of P 1,001,520.93 was executed by respondent resort to this scheme leaves poor and hapless borrowers at the mercy of banks, and is prone
Corporation, with respondent Lim as signatory. to misinterpretation.

Claiming that respondents failed to turn over the goods covered by the trust receipt or the Similarly, respondent Corporation cannot be said to have been dishonest in its dealings
proceeds thereof, petitioner filed a complaint for sum of money with application for with petitioner. Neither has it been shown that it has evaded payment of its obligations, as
preliminary attachment. In answer to the complaint, respondents averred that the shown by the various receipts issued by petitioner acknowledging payment on the loan.
transaction between them was a simple loan and not a trust receipt transaction, and that Certainly, the payment of the sum of P1,832,158.38 on a loan with a principal amount of only
the amount claimed by petitioner did not take into account payments already made by them. P681,075.93 negates any badge of dishonesty , abuse of confidence or mishandling of funds
Respondent Lim also denied any personal liability in the subject transactions. on the part of respondent Corporation, which are the gravamen of a trust receipt violation.

The trial court dismissed the Complaint. Both parties appealed to the Court of Appeals, which
partially modified the Decision by deleting the award of attorney's fees in favor of
respondents and, instead, ordering respondent Corporation to pay petitioner P37,469.22 as
and for attorney's fees and litigation expenses.

ISSUE: WON the transaction was a trust receipt transaction?

RULING:
NO. 9.]
REPUBLIC V GRIJALDO
6|CREDIT Digests HW#1 VILLAR
Facts:  The obligation of the appellant under the five promissory notes was not to deliver a
 appellant Jose Grijaldo obtained five loans from the branch office of the Bank of determinate thing namely, the crops to be harvested from his land, or the value of
Taiwan the crops that would be harvested from his land. Rather, his obligation was to pay a
 These loans are evidenced by five promissory notes executed by the appellant in generic thing — the amount of money representing the total sum of the five loans,
favor of the Bank of Taiwan with interest.
 To secure the payment of the loans the appellant executed a chattel mortgage on  of simple loan of sums of money. "By a contract of (simple) loan, one of the parties
the standing crops on his land delivers to another ... money or other consumable thing upon the condition that
 the assets in the Philippines of the Bank of Taiwan, Ltd. were vested in the the same amount of the same kind and quality shall be paid."
Government of the United States  In an obligation to deliver a generic thing, the loss or destruction of anything of the
 Pursuant to the Philippine Property Act of 1946 of the United States, these assets, same kind does not extinguish the obligation.
including the loans in question, were subsequently transferred to the Republic of  The chattel mortgage on the crops growing on appellant's land simply stood as a
the Philippines by the Government of the United States under Transfer Agreement security for the fulfillment of appellant's obligation covered by the five promissory
dated July 20, 1954 notes, and the loss of the crops did not extinguish his obligation to pay, because
 the appellee, Republic of the Philippines, represented by the Chairman of the the account could still be paid from other sources aside from the mortgaged crops.
Board of Liquidators, made a written extrajudicial demand upon the appellant for  This contention of the appellant is also without merit.
the payment of the account in question.  The decision of the court a quo ordered the appellant to pay the sum of P2,377.23
 the appellee filed a complaint in the Justice of the Peace Court of Hinigaran, Negros as of December 31, 1959, plus interest rate of 6% per annum compounded
Occidental, to collect from the appellant the unpaid account in question quarterly from the date of the filing of the complaint.
 the court a quo rendered a decision ordering the appellant to pay the appellee the  the decision appealed from is affirmed, with costs against the appellant.
sum of P2,377.23 as of December 31, 1959, plus interest at the rate of 6% per  his estate must answer in the execution of the judgment in the present case.
annum compounded quarterly
Issue:
 In the present appeal the appellant contends: (1) that the appellee has no cause of
action against the appellant; (2) that if the appellee has a cause of action at all, that
action had prescribed; and (3) that the lower court erred in ordering the appellant 10]
to pay the amount of P2,377.23.
Held: CASA FILIPINA DEVELOPMENT CORPORATION, PETITIONER, VS. THE DEPUTY EXECUTIVE
 This contention has no merit. It is true that the Bank of Taiwan, Ltd. was the SECRETARY, OFFICE OF THE PRESIDENT, MALACAÑANG, MANILA, AND JOSE VALENZUELA,
original creditor and the transaction between the appellant and the Bank of Taiwan JR., RESPONDENTS.
was a private contract of loan.
 The successive transfer of the rights over the loans in question from the Bank of Facts:
Taiwan, Ltd. to the United States Government, and from the United States Grijaldo borrowed money from the bank evidenced by 5 promissory notes and secured by
Government to the government of the Republic of the Philippines, made the chattel mortgage on standing crops.
Republic of the Philippines the successor of the rights, title and interest in said During the war, the crops were destroyed as a result of enemy action.
loans, thereby creating a privity of contract between the appellee and the
appellant. Issue: Must still the borrower pay?
 The word "privy" denotes the idea of succession ... hence an assignee of a credit,
and one subrogated to it, etc. will be privies Held:
 The United States of America acting as a belligerent sovereign power seized the Yes. Generic thing – Money
assets of the Bank of Taiwan, Ltd. which belonged to an enemy country.
 the Republic of the Philippines had thereby become a privy to the original contracts
of loan between the Bank of Taiwan, Ltd. and the appellant.
 the loans were secured by a chattel mortgage on the standing crops on a land
owned by him and these crops were lost or destroyed through enemy action his
obligation to pay the loans was thereby extinguished. This argument is untenable.
The terms of the promissory notes and the chattel mortgage that the appellant
executed in favor of the Bank of Taiwan, Ltd. do not support the claim of appellant 11.]
7|CREDIT Digests HW#1 VILLAR
PHILIPPINE NATIONAL BANK petitioner, vs, THE HON. COURT OF "PEALS and AMBROSIO
PADILLA, respondents.
GR# 88880.  April 30, 1991. GRIRO-AQUINO, J.:

FACTS: Private respondent (PR) Ambrosio Padilla, applied for and was granted a credit line of
321.8 million, by petitioner PNB. This was for a term of 2 years at 18% interest per annum
and was secured by real estate mortgage and 2 promissory notes executed in favor of
Petitioner by PR. The credit agreement and the promissory notes, in effect, provide that PR
agrees to be bound by “increases to the interest rate stipulated, provided it is within the
limits provided for by law”.
Conflict in this case arose when Petitioner unilaterally increased the interest rate from 18%
to: (1) 32% [July 1984]; (2) 41% [October 1984]; and (3) 48% [November 1984], or 3 times
within the span of a single year. This was done despite the numerous letters of request made
by PR that the interest rate be increased only to 21% or 24%.
PR filed a complaint against Petitioner with the RTC. The latter dismissed the case for lack of
merit. Appeal by PR to CA resulted in his favor. Hence the petition for certiorari under Rule
45 of ROC filed by PNB with SC.
ISSUE: Despite the removal of the Usury Law ceiling on interest, may the bank validly
increase the stipulated interest rate on loans contracted with third persons as often as
necessary and against the protest of such persons.
HELD: NO

RATIO: Although under Sec. 2 of PD 116, the Monetary Board is authorized to prescribe the
maximum rate of interest for loans and to change such rates whenever warranted by
prevailing economic and social conditions, by express provision, it may not do so “oftener
than once every 12 months”. If the Monetary Board cannot, much less can PNB, effect
increases on the interest rates more than once a year.
Based on the credit agreement and promissory notes executed between the parties,
although PR did agree to increase on the interest rates allowed by law, no law was passed
warranting Petitioner to effect increase on the interest rates on the existing loan of PR for
the months of July to November of 1984. Neither there being any document executed and
delivered by PR to effect such increase.
For escalation clauses to be valid and warrant the increase of the interest rates on loans,
there must be: (1) increase was made by law or by the Monetary Board; (2) stipulation must
include a clause for the reduction of the stipulated interest rate in the event that the
maximum interest is lowered by law or by the Monetary board. In this case, PNB merely
relied on its own Board Resolutions, which are not laws nor resolutions of the Monetary
Board.
Despite the suspension of the Usury Law, imposing a ceiling on interest rates, this does not
authorize banks to unilaterally and successively increase interest rates in violation of Sec. 2
PD 116.
Increases unilaterally effected by PNB was in violation of the Mutuality of Contracts under
Art. 1308. This provides that the validity and compliance of the parties to the contract cannot
be left to the will of one of the contracting parties. Increases made are therefore void.
Increase on the stipulated interest rates made by PNB also contravenes Art. 1956. It provides
that, “no interest shall be due unless it has been expressly stipulated in writing”. PR never
agreed in writing to pay interest imposed by PNB in excess of 24% per annum. Interest rate
imposed by PNB, as correctly found by CA, is indubitably excessive.
12.]
8|CREDIT Digests HW#1 VILLAR
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;
13.] and 
G.R. No. 97412 July 12, 1994
FOLLOW THESE VERY IMPORTANT RULES (GUIDANCE BY THE SUPREME COURT)
EASTERN SHIPPING LINES, INC., petitioner, vs. HON. COURT OF APPEALS AND MERCANTILE
INSURANCE COMPANY, INC., respondents. 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
VITUG, J.: under Title XVIII on "Damages" of the Civil Code govern in determining the measure of
recoverable damages. 
FACTS:
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:
9|CREDIT Digests HW#1 VILLAR
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 14.]
stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the Philippine American Accident Insurance Company Inc. v. Hon. Jose Flores and Concordia G.
time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% Navalta
per annum to be computed from default, i.e., from judicial or extrajudicial demand under GR No. L-47180 May 18 1980 97 SCRA 811
and subject to the provisions of Article 1169 of the Civil Code.
FACTS: Respondent Judge Flores rendered a judgment in favor of the Respondent Navalta
2. When an obligation, not constituting a loan or forbearance of money, is breached, an asking Petitioner Phil-Am Accident Incurance Company Inc. to pay the former the amount of
interest on the amount of damages awarded may be imposed at the discretion of the court P75,000.00 with legal interest from Oct. 1968, as attorney’s fees and the cost of the suit.
at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims Petitioner paid respondent the principal amount with legal interest at 6% per annum from
or damages except when or until the demand can be established with reasonable certainty. Oct 1968 to Apr. 30 1978 (in accordance with Art. 2209 of the CC which provides: “If the
Accordingly, where the demand is established with reasonable certainty, the interest shall obligation consists in the payment of a sum of money, and the debtor incurs in delay, the
begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil indemnity for damages, there being no stipulation to the contrary, shall be the payment of
Code) but when such certainty cannot be so reasonably established at the time the demand the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per
is made, the interest shall begin to run only from the date the judgment of the court is made cent per annum." – This appears to be the basis for the awarding interest at the legal rate
(at which time the quantification of damages may be deemed to have been reasonably from Oct. 1968, although the debt was judicially demanded only on July 6 1970) and
ascertained). The actual base for the computation of legal interest shall, in any case, be on attorney’s fees and the cost of the suit. Later on, Respondent advised the petitioner that
the amount finally adjudged. payment was not in fun satisfaction of the judgment because he has to pay compound
interest or additional sum of P10, 375.77. The respondent secured a writ if execution upon
3. When the judgment of the court awarding a sum of money becomes final and executory, the refusal of the petitioner to pay the additional sum claimed; which was affirmed by the
the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, Judge. Hence this review.
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. ISSUE: Whether or not the petitioner is obligated to pay compound interest under the
judgment.
(c) whether the applicable rate of interest, referred to above, is twelve percent (12%) or six
percent (6%). HELD: The questioned Order cannot be sustained. The judgment which was sought to be
executed ordered the payment of simple "legal interest" only. It said nothing about the
SIX PERCENT (6%) on the amount due computed from the decision, dated 03 February 1988, payment of compound interest. Accordingly, when the respondent judge ordered the
of the court a quo (Court of Appeals) AND A TWELVE PERCENT (12%) interest, in lieu of SIX payment of compound interest he went beyond the confines of his own judgment which had
PERCENT (6%), shall be imposed on such amount upon finality of the Supreme Court decision been affirmed by the Court of Appeals and which had become final.
until the payment thereof.
Private Respondent invokes Sec. 5 of the Usury Law which reads in part as follows: “In
RATIO: when the judgment awarding a sum of money becomes final and executory, the computing the interest on any obligation, promissory note or other instrument or contract,
monetary award shall earn interest at 12% per annum from the date of such finality until its compound interest shall not be reckoned, except by agreement, or in default thereof,
satisfaction, regardless of whether the case involves a loan or forbearance of money. The whenever the debt is judicially claimed in which case it shall draw sic per centum per annum
reason is that this interim period is deemed to be by then equivalent to a forbearance of interest xxx as well as Art. 2212 of the Civil Code which stipulates: “Interest due shall earn
credit.  legal interest from the time it is judicially demanded, although the obligation may be silent
upon this point.” Both legal provisions are inapplicable for they contemplate the presence of
NOTES: the Central Bank Circular imposing the 12% interest per annum applies only to loans stipulated or conventional interest which had accrued when demand was judicially made.
or forbearance of money, goods or credits, as well as to judgments involving such loan or In this case, no interest had been stipulated by the parties. In other words, there was no
forbearance of money, goods or credits, and that the 6% interest under the Civil Code accrued conventional interest which could further earn interest upon judicial demand.
governs when the transaction involves the payment of indemnities in the concept of damage Wherefore, decision was set aside.
arising from the breach or a delay in the performance of obligations in general. Observe, too,
that in these cases, a common time frame in the computation of the 6% interest per annum Doctrine: Both Art. 2212 of the Civil code and Section 5 of the Usury Law refer to stipulated
has been applied, i.e., from the time the complaint is filed until the adjudged amount is fully or conventional interest and does not apply where no interest was stipulated by the
paid. parties.