1. [G.R. Nos. L-50550-52. October 31, 1979.

]
CHEE KIONG YAM et. al. vs HON. NABDAR J. MALIK et. al "1. With unfaithfulness or abuse of confidence, namely:

FACTS:
In Criminal Case No. M-111, Rosalinda M. Amin charges Yam Chee Kiong and Yam Yap "b) By misappropriating or converting, to the prejudice of another, money, goods, or any other
Kieng with estafa through misappropriation of the amount of P50,000.00. But the complaint personal property received by the offender in trust or on commission, or for administration, or
states on its face that Kiong and Kieng received the amount from Amin "as a loan." In an under any other obligation involving the duty to make delivery of or to return the same, even
independent action for the collection of the same amount filed by Amin states that the though such obligation be totally or partially guaranteed by a bond; or by denying having
P50,000.00 was a "simple business loan" which earned interest and was originally demandable received such money, goods, or other property."
six (6) months.

In Criminal Case No. M-183, Tan Chu Kao charges petitioners Yam Chee Kiong, Jose Y.C. In order that a person can be convicted under the above quoted provision, it must be proven
Yam, Ampang Mah, and Anita Yam, alias Yong Tay, with estafa through misappropriation of that he has the obligation to deliver or return the same money, goods or personal property that
the amount of P30,000.00. Likewise, the complaint states on its face that the P30,000.00 was he received.
"a simple loan." So does the complaint in Civil Case No. N-8 filed by respondent Tan Chu
In this case, Petitioners had no such obligation to return the same money, i.e., the bills or
Kao.
coins, which they received from private respondents. This is so because as clearly stated in
criminal complaints, the related civil complaints and the supporting sworn statements, the
In Criminal Case No. M-208, Augusto Sajor charges petitioners Jose Y.C. Yam, Anita Yam sums of money that petitioners received were loans.
alias Yong Tai Mah, Chee Kiong Yam and Richard Yam, with estafa through
misappropriation of the amount of P20,000.00. Unlike the complaints in the other two cases, The nature of simple loan is defined in Articles 1933 and 1953 of the Civil Code.
the complaint this criminal case does not state that the amount was received as loan. However,
in a sworn statement, submitted to Judge Malik, Sajor states that the amount was a "loan." "Art. 1933. — By the contract of loan, one of the parties delivers to another, either something
not consumable so that the latter may use the same for a certain time and return it, in which
Municipal Judge Nabdar J. Malik held in the preliminary investigation of the charges of estafa case the contract is called a commodatum; or money or other consumable thing, upon the
filed by respondents Rosalinda Amin, Tan Chu Kao and Augusto Sajor against petitioners that condition that the same amount of the same kind and quality shall be paid, in which case the
there was a prima facie case against the latter. He issued warrants of arrest against petitioners contract is simply called a loan or mutuum.
after making the above determination, Furthermore, he uundertook to conduct trial on the
merits of the charges which were docketed in his court as Criminal Cases No. M-111, M-183 Commodatum is essentially gratuitous.
and M-208.
Simple loan may be gratuitous or with a stipulation to pay interest.
Petitioners filed a petition for certiorari, prohibition, and mandamus with preliminary
injunction allegeing that Judge Malik acted without jurisdiction, in excess of jurisdiction and In commodatum the bailor retains the ownership of the thing loaned, while in simple loan,
with grave abuse of discretion. ownership passes to the borrower."

ISSUE: "Art. 1953. — A person who receives a loan of money or any other fungible thing acquires the
W/N the facts alleged in the three criminal complaints constitute estafa through ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and
misappropriation. quality."

RULING: It can be readily noted from the above-quoted provisions that in simple loan (mutuum), as
No, the facts alleged in the three criminal complaints do not constitute estafa through contrasted to commodatum, the borrower acquires ownership of the money, goods or personal
misappropriation. property borrowed. Being the owner, the borrower can dispose of the thing borrowed (Article
248, Civil Code) and his act will not be considered misappropriation thereof.
Estafa through misappropriation is committed according to Article 315, paragraph 1,
subparagraph (b), of the Revised Penal Code as follows: In U.S. v. Ibañez, 19 Phil. 559, 560 (1911), this Court held that it is not estafa for a person to
refuse to pay his debt or to deny its existence.
"Art. 315. Swindling (Estafa). — Any person who shall defraud another by any of the means
mentioned herein below shall be punished by: "We are of the opinion and so decide that when the relation is purely that of debtor and
creditor, the debtor cannot be held liable for the crime of estafa, under said article, by merely
refusing to pay or by denying the indebtedness."
 Consequently, the receipt of the [crossed] check by [respondent] is not the issuance and
It appears that respondent judge failed to appreciate the distinction between the two types of delivery to the payee in contemplation of law since the latter is not the person who could
loan, mutuum and commodatum, when he performed the questioned acts. He mistook the take the checks as a holder, i.e., as a payee or indorsee thereof, with intent to transfer title
transaction between petitioners and respondents Rosalinda Amin, Tan Chu Kao and Augusto thereto. Neither could she be deemed as an agent of Marilou Santiago with respect to the
Sajor to be commodatum wherein the borrower does not acquire ownership over the thing checks because she was merely facilitating the transactions between the former and
borrowed and has the duty to return the same thing to the lender. [petitioner].
2. [G.R. NO. 154878 : March 16, 2007]
CAROLYN M. GARCIA, Petitioner, v. RICA MARIE S. THIO, Respondent. Garcia filed a Petition for Review on Certiorari under Rule 45 of the Rules of Court.
ISSUE:
FACTS: W/N there is no contracts of loan that existed between the parties.
Respondent Rica Marie S. Thio received from petitioner Carolyn M. Garcia a crossed check in
the amount of US$100,000 payable to the order of a certain Marilou Santiago. Thereafter, RULING:
petitioner Garcia received from respondent Thio every month the amount of No, there is contract of loan that existed between the parties.
US$3,0006 and P76,500 Subsequently, respondent Thio received from petitioner Garcia
another crossed check in the amount of P500,000, also payable to the order of Marilou
A loan is a real contract, not consensual, and as such is perfected only upon the delivery
Santiago. Consequently, petitioner Garcia received from respondent the amount of P20,000
of the object of the contract.25 This is evident in Art. 1934 of the Civil Code which provides:
every month.
An accepted promise to deliver something by way of commodatum or simple loan is
binding upon the parties, but the commodatum or simple loan itself shall not be perfected
Garcia filed a complaint for sum of money and damages in the RTC of Makati City against
until the delivery of the object of the contract.
respondent Thio alleging that the latter failed to pay the principal amounts of the loans,
US$100,000 with 3% interest and P500,000 with 4% interest when they fell due in which there
Upon delivery of the object of the contract of loan (in this case the money received by the
is no promissory notes executed for both loans. Garcia contended that Thio paid the stipulated
debtor when the checks were encashed) the debtor acquires ownership of such money or loan
monthly interest for both loans but on their maturity dates, she failed to pay the principal
proceeds and is bound to pay the creditor an equal amount. It is undisputed that the checks
amounts despite repeated demands.
were delivered to respondent. However, these checks were crossed and payable not to the
order of respondent but to the order of a certain Marilou Santiago.
Thio denied that she contracted the two loans with Garcia and countered that it was Marilou
Santiago to whom petitioner lent the money. She claimed she was merely asked by Garcia to
give the crossed checks to Santiago. She issued the checks for P76,000 and P20,000 not as Delivery is the act by which the res or substance thereof is placed within the actual or
payment of interest but to accommodate petitioner's request that respondent use her own constructive possession or control of another. Although respondent did not physically
checks instead of Santiago's. receive the proceeds of the checks, these instruments were placed in her control and
possession under an arrangement whereby she actually re-lent the amounts to Santiago. We
RTC: the RTC ruled in favor of petitioner. It found that respondent borrowed from petitioner hold that the CA committed reversible error when it ruled that respondent did not borrow the
the amounts of US$100,000 with monthly interest of 3% and P500,000 at a monthly interest of amounts of US$100,000 and P500,000 from petitioner. We instead agree with the ruling of
4%: the RTC making respondent liable for the principal amounts of the loans.

CA: reversed the decision of the RTC and ruled that there was no contract of loan between the
We do not, however, agree that respondent is liable for the 3% and 4% monthly interest for the
parties. A perusal of the record of the case shows that [petitioner] failed to substantiate her
US$100,000 and P500,000 loans respectively. There was no written proof of the interest
claim that [respondent] indeed borrowed money from her. There is nothing in the record
payable except for the verbal agreement that the loans would earn 3% and 4% interest
that shows that [respondent] received money from [petitioner]. What is evident is the fact
per month. Article 1956 of the Civil Code provides that "[n]o interest shall be due unless
that [respondent] received a MetroBank [crossed] check in the sum of US$100,000.00,
it has been expressly stipulated in writing."
payable to the order of Marilou Santiago and a CityTrust [crossed] check in the amount
of P500,000.00, again payable to the order of Marilou Santiago, both of which were issued by
[petitioner]. The checks received by [respondent], being crossed, may not be encashed but Be that as it may, while there can be no stipulated interest, there can be legal interest
only deposited in the bank by the payee thereof, that is, by Marilou Santiago herself. pursuant to Article 2209 of the Civil Code. It is well-settled that: 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.
It must be noted that crossing a check has the following effects: (a) the check may not be
Furthermore, the interest due shall itself earn legal interest from the time it is judicially
encashed but only deposited in the bank; (b) the check may be negotiated only once to one
demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to
who has an account with the bank; (c) and the act of crossing the check serves as warning to
be computed from default, i.e., from judicial or extrajudicial demand under and subject to
the holder that the check has been issued for a definite purpose so that he must inquire if he
the provisions of Article 1169 of the Civil Code.
has received the check pursuant to that purpose, otherwise, he is not a holder in due course.
Hence, respondent is liable for the payment of legal interest per annum to be computed from Bank deposits are in the nature of irregular deposits. They are really loans because they earn
November 21, 1995, the date when she received petitioner's demand letter. From the finality of interest. All kinds of bank deposits, whether fixed, savings, or current are to be treated as loans
the decision until it is fully paid, the amount due shall earn interest at 12% per annum, the and are to be covered by the law on loans. Current and savings deposit are loans to a bank
interim period being deemed equivalent to a forbearance of credit. because it can use the same. The petitioner here in making time deposits that earn interests
with respondent Overseas Bank of Manila was in reality a creditor of the respondent Bank and
not a depositor. The respondent Bank was in turn a debtor of petitioner. Failure of the
respondent Bank to honor the time deposit is failure to pay an obligation as a debtor and not a
4. G.R. No. L-30511 February 14, 1980 breach of trust arising from depositary's failure to return the subject matter of the deposit.
MANUEL M. SERRANO, petitioner, vs. CENTRAL BANK OF THE PHILIPPINES;
OVERSEAS BANK OF MANILA et. al. 6. G.R. No. 112392           February 29, 2000
BANK OF THE PHILIPPINE ISLANDS, petitioner, vs. COURT OF APPEALS and
FACTS: BENJAMIN C. NAPIZA, respondents.
Manuel Serrano made a time deposit, for one year with 6% interest, of P150,000.00 with the
respondent Overseas Bank of Manila.  Concepcion Maneja also made a time deposit, for one FACTS:
year with 6-½% interest, of P200,000.00 with the same bank. Respondent Overseas Bank of ISSUE:
Manila. Concepcion Maneja assigned and conveyed to petitioner Manuel M. Serrano, her time RULING:
deposit of P200,000.00.

Petitioner then seeks the establishment of joint and solidary liability to the amount of 8. G.R. No. 118492. August 15, 2001
P350,000 with interest, against respondent Central Bank of the Philippines and Overseas GREGORIO H. REYES and CONSUELO PUYAT-REYES, petitioners, vs. THE HON.
Bank of Manila and its stockholders, on the alleged failure of the Overseas Bank of Manila COURT OF APPEALS and FAR EAST BANK AND TRUST COMPANY, Respondents.
to return the time deposits made by petitioner and assigned to him, on the ground that
respondent Central Bank failed in its duty to exercise strict supervision over respondent FACTS:
Overseas Bank of Manila to protect depositors and the general public. Petitioner Serrano Godofredo, Casheir of the Philippine Racing Club (PCRI), went to respondent bank to apply
also seeks for the declaration of all assets assigned or mortgaged by the respondents for a demand draft in the amount AU$1,610.00 payable to the order of the 20th Asian Racing
Overseas Bank of Manila and the Ramos groups in favor of the Central Bank as trust funds Conference Secretariat of Sydney, Australia. He was attended to by respondent bank’s
for the benefit of petitioner and other depositors. Respondent Central Bank denied the assistant cashier, Mr. Yasis, who at first denied the application for the reason that respondent
following: that it is guarantor of the permanent solvency of any banking institution, that bank did not have an Australian dollar account in any bank in Sydney. Godofredo asked if
a constructive trust was created in favor of petitioner and his predecessor in interest there could be a way for respondent bank to accommodate PRCI’s urgent need to remit
Concepcion Maneja. Australian dollars to Sydney. Yasis of respondent bank then informed Godofredo of a
roundabout way of effecting the requested remittance to Sydney thus: the respondent bank
Respondent Central Bank avers no knowledge of Petitioner Serrano’s claim that the properties would draw a demand draft against Westpac Bank in Sydney, Australia (Westpac-Sydney) and
given by respondent Overseas Bank of Manila as additional collaterals to respondent Central have the latter reimburse itself from the U.S. dollar account of the respondent in Westpac
Bank of the Philippines for the former's overdrafts and emergency loans were acquired Bank in New York, U.S.A. (Westpac-New York). However, upon due presentment of the
through the use of depositors' money, including that of the petitioner and Concepcion Maneja. foreign exchange demand draft, the same was dishonored, with the notice of dishonor stating
that there is “No account held with Westpac.”
ISSUE:
W/N the time deposit is considered loan. Meanwhile, Wespac-New York sent a cable to respondent bank informing the latter that its
dollar account in the sum of AU$ 1,610.00 was debited. In response to PRCI’s complaint
RULING: about the dishonor of the said foreign exchange demand draft, respondent bank informed
Westpac-Sydney of the issuance of the said demand draft, drawn against the Wespac-Sydney
Yes, the time deposit is considered loan.
and informing the latter to be reimbursed from the respondent bank’s dollar account in
Westpac-New York. The respondent bank on the same day likewise informed Wespac-New
Both parties overlooked one fundamental principle in the nature of bank deposits when the York requesting the latter to honor the reimbursement claim of Wespac-Sydney. Upon its
petitioner claimed that there should be created a constructive trust in his favor when the second presentment for payment, the demand draft was again dishonored by Westpac-Sydney
respondent Overseas Bank of Manila increased its collaterals in favor of respondent Central for the same reason, that is, that the respondent bank has no deposit dollar account with the
Bank for the former's overdrafts and emergency loans, since these collaterals were acquired by drawee Wespac-Sydney. Gregorio Reyes and Consuelo Puyat-Reyes arrived in Sydney on a
the use of depositors' money. separate date and both were humiliated and embarrassed in the presence of international
audience after being denied registration of the conference secretariat since the foreign
exchange draft was dishonored. Petitioners were only able to attend the conference after
promising to pay in cash instead which they fulfilled.
 with Westpac-New York. That was the reason why the respondent bank had to re-confirm and
The petitioners filed in the Regional Trial Court of Makati, Metro Manila, a complaint for repeatedly notify Westpac-New York to debit its (respondent banks) deposit dollar account
damages against the respondent bank due to the dishonor of the said foreign exchange demand with it and to transfer or credit the corresponding amount to Westpac-Sydney to cover the
draft issued by the respondent bank. The petitioners claim that as a result of the dishonor of amount of the said demand draft.
the said demand draft, they were exposed to unnecessary shock, social humiliation, and deep
mental anguish in a foreign country, and in the presence of an international audience. In any event, it was established that the respondent bank acted in good faith and that it did not
cause the embarrassment of the petitioners in Sydney, Australia. Hence, the Court of Appeals
RTC: ruled in favor of the defendant (respondent bank) and against the plaintiffs (herein did not commit any reversable error in its challenged decision.
petitioners)

CA: The appellate court affirmed the decision of the trial court but in effect deleted the award 10. G.R. No. 133179               March 27, 2008
of attorney’s fees to the defendant (herein respondent bank) and the pronouncement as to the ALLIED BANKING CORPORATION, Petitioner, vs.
costs. According to the appellate court, there is no basis to hold the respondent bank liable for LIM SIO WAN, METROPOLITAN BANK AND TRUST CO., and PRODUCERS
damages for the reason that it exerted every effort for the subject foreign exchange demand BANK, Respondents.
draft to be honored.
FACTS:
ISSUE:
Whether or not respondent bank is liable for damages due to the dishonor of the foreign
exchange demand drafts. Lim Sio Wan deposited 1st money market placement to Allied Bank, who later on, pre-
terminated and withdrawn the said money market. As per instruction of a person claiming ot
RULING: be Lim Sio Wan, Allied bank issued a manager’s check and gave the check to Santos. The
No, the respondent bank is liable for damages due to the dishonor of the foreign exchange Allied check was deposited with Metrobank in the account of FCC as Producers Bank’s
demand drafts. payment of its obligation to FCC.

In Philippine Bank of Commerce v. Court of Appeals 15 upholding a long standing doctrine, we Metrobank stamped a guaranty on the check, which reads: "All prior endorsements and/or lack
ruled that the degree of diligence required of banks, is more than that of a  good father of a of endorsement guaranteed." The check was sent to Allied through the PCHC. Upon the
family where the fiduciary nature of their relationship with their depositors is concerned. In presentment of the check, Allied funded the check even without checking the authenticity of
other words banks are duty bound to treat the deposit accounts of their depositors with Lim Sio Wan’s purported indorsement. Thus, the amount on the face of the check was credited
the highest degree of care. But the said ruling applies only to cases where banks act under to the account of FCC.
their fiduciary capacity, that is, as depositary of the deposits of their depositors. But the same
higher degree of diligence is not expected to be exerted by banks in commercial transactions Lim Sio Wan deposited with Allied Banking Corporation (Allied) a second money market
that do not involve their fiduciary relationship with their depositors. placement. Upon the maturity date of the first money market placement, Lim Sio Wan went to
Allied to withdraw it. She was then informed that the placement had been pre-terminated upon
Considering the foregoing, the respondent bank was not required to exert more than the
her instructions which Lim Sio Wan denied.
diligence of a good father of a family in regard to the sale and issuance of the subject foreign
exchange demand draft. The case at bar does not involve the handling of petitioners deposit, if
any, with the respondent bank. Instead, the relationship involved was that of a buyer and Lim Sio Wan filed with the RTC a Complaint against Allied to recover the proceeds of her
seller, that is, between the respondent bank as the seller of the subject foreign exchange first money market placement. Allied filed a third party complaint against Metrobank and
demand draft, and PRCI as the buyer of the same, with the 20 th Asian Racing Conference Santos. Metrobank filed a fourth party complaint against FCC. FCC for its part filed a fifth
Secretariat in Sydney, Australia as the payee thereof. As earlier mentioned, the said foreign party complaint against Producers Bank. Summonses were duly served upon all the parties
exchange demand draft was intended for the payment of the registration fees of the petitioners except for Santos, who was no longer connected with Producers Bank.
as delegates of the PRCI to the 20 th Asian Racing Conference in Sydney.
Allied informed Metrobank that the signature on the check was forged Metrobank withheld the
The evidence shows that the respondent bank did everything within its power to prevent the amount represented by the check from FCC. Metrobank agreed to release the amount to FCC
dishonor of the subject foreign exchange demand draft. The erroneous reading of its cable after the FCC executed an undertaking, promising to indemnify Metrobank in case it was
message to Westpac-Sydney by an employee of the latter could not have been foreseen by the made to reimburse the amount Lim Sio Wan thereafter filed an amended complaint to include
respondent bank. Being unaware that its employee erroneously read the said cable message,
Metrobank as a party-defendant, along with Allied.
Westpac-Sydney merely stated that the respondent bank has no deposit account with it to
cover for the amount of One Thousand Six Hundred Ten Australian Dollar (AU$1610.00)
indicated in the foreign exchange demand draft. Thus, the respondent bank had the impression RTC : Allied Bank to pay Lim Sio Wan plus damages and atty’s fees.
that Westpac-New York had not yet made available the amount for reimbursement to
Westpac-Sydney despite the fact that respondent bank has a sufficient deposit dollar account
CA: Modified. Allied Banking Corporation to pay 60% and Metropolitan Bank and Trust debtor acted in utmost good faith and by mistake as to the person of his creditor, or through
Company 40% error induced by the fraud of a third person, the payment to one who is not in fact his creditor,
or authorized to receive such payment, is void, except as provided in Article 1241. Such
ISSUE: payment does not prejudice the creditor, and accrual of interest is not suspended by
W/N Allied should be solely liable to Lim Sio Wan. it.45 (Emphasis supplied.)
RULING:
No, Allied should not be solely liable to Lim Sio Wan. Since there was no effective payment of Lim Sio Wan’s money market placement, the bank
still has an obligation to pay her at six percent (6%) interest from March 16, 1984 until the
payment thereof.
Fundamental and familiar is the doctrine that the relationship between a bank and a client is
one of debtor-creditor.
In Bank of the Philippine Islands v. Court of Appeals, we said that the drawee bank is liable
for 60% of the amount on the face of the negotiable instrument and the collecting bank is
Articles 1953 and 1980 of the Civil Code provide:
liable for 40%. Both banks were negligent in the selection and supervision of their employees
resulting in the encashment of the forged checks by an impostor. Both banks were not able to
Art. 1953. A person who receives a loan of money or any other fungible thing acquires the overcome the presumption of negligence in the selection and supervision of their employees. It
ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and
was the gross negligence of the employees of both banks which resulted in the fraud and the
quality.
subsequent loss.

Art. 1980. Fixed, savings, and current deposits of money in banks and similar institutions shall
be governed by the provisions concerning simple loan.
It cannot be validly claimed that FCC, and not Producers Bank, should be considered as
having been unjustly enriched. It must be remembered that FCC’s money market placement
Thus, we have ruled in a line of cases that a bank deposit is in the nature of a simple loan or with Producers Bank was already due and demandable; thus, Producers Bank’s payment
mutuum.42 More succinctly, in Citibank, N.A. (Formerly First National City Bank) v. thereof was justified. FCC was entitled to such payment. As earlier stated, the fact that the
Sabeniano, this Court ruled that a money market placement is a simple loan or indorsement on the check was forged cannot be raised against FCC which was not a part in
mutuum.43 Further, we defined a money market in Cebu International Finance Corporation v. any stage of the negotiation of the check. FCC was not unjustly enriched.
Court of Appeals, as follows:
Clearly, Producers Bank must be held liable to Allied and Metrobank for the amount of the
[A] money market is a market dealing in standardized short-term credit instruments (involving check plus 12% interest per annum, moral damages, attorney’s fees, and costs of suit which
large amounts) where lenders and borrowers do not deal directly with each other but through a Allied and Metrobank are adjudged to pay Lim Sio Wan based on a proportion of 60:40.
middle man or dealer in open market. In a money market transaction, the investor is a lender
who loans his money to a borrower through a middleman or dealer.

12. G.R. No. L-60033 April 4, 1984

In the case at bar, the money market transaction between the petitioner and the private TEOFISTO GUINGONA, JR., ANTONIO I. MARTIN, and TERESITA
respondent is in the nature of a loan.44 SANTOS, petitioners, vs. THE CITY FISCAL OF MANILA, HON. JOSE B.
FLAMINIANO, ASST. CITY FISCAL FELIZARDO N. LOTA and CLEMENT
Lim Sio Wan, as creditor of the bank for her money market placement, is entitled to payment DAVID, respondents.
upon her request, or upon maturity of the placement, or until the bank is released from its
obligation as debtor. Until any such event, the obligation of Allied to Lim Sio Wan remains FACTS:
unextinguished.
David invested with the Nation Savings and Loan Association,(hereinafter called NSLA) and
From the factual findings of the trial and appellate courts that Lim Sio Wan did not authorize he was induced into making the aforestated investments by Robert Marshall an Australian
the release of her money market placement to Santos and the bank had been negligent in so national who was allegedly a close associate of petitioner Guingona Jr., then NSLA President.
doing, there is no question that the obligation of Allied to pay Lim Sio Wan had not been On March 21, 1981NSLA was placed under receivership by the Central Bank, so that David
extinguished. Art. 1240 of the Code states that "payment shall be made to the person in whose filed claims therewith for his investments and those of his sister. David received a report from
favor the obligation has been constituted, or his successor in interest, or any person authorized the Central Bank that only P305,821.92 were entered in the records of NSLA out of the
to receive it." As commented by Arturo Tolentino: millions he invested. Hence, David filed a estafa case before the City Fiscal of Manila against
petitioner for misappropriated the balance of the investments, at the same time violating
Payment made by the debtor to a wrong party does not extinguish the obligation as to the Central Bank Circular No. 364 and related Central Bank regulations on foreign exchange
creditor, if there is no fault or negligence which can be imputed to the latter. Even when the transactions.
ISSUE: It can be readily noted from the above-quoted provisions that in simple
W/N the investment of David constitute a contract of Deposit in accordance to the Civil Code. loan (mutuum), as contrasted to commodatum the borrower acquires
ownership of the money, goods or personal property borrowed Being the
RULING: owner, the borrower can dispose of the thing borrowed (Article 248, Civil
No, the investment of David does not constitute a contract of Deposit in accordance to the Code) and his act will not be considered misappropriation thereof' (Yam
Civil Code. vs. Malik, 94 SCRA 30, 34 [1979]; Emphasis supplied).

Article 1980 of the New Civil Code provides that: The relationship between the private respondent and the Nation Savings and Loan Association
is that of creditor and debtor; consequently, the ownership of the amount deposited was
Article 1980. Fixed, savings, and current deposits of-money in banks and transmitted to the Bank upon the perfection of the contract and it can make use of the amount
similar institutions shall be governed by the provisions concerning simple deposited for its banking operations, such as to pay interests on deposits and to pay
loan. withdrawals. While the Bank has the obligation to return the amount deposited, it has,
however, no obligation to return or deliver the same money that was deposited. And, the
failure of the Bank to return the amount deposited will not constitute estafa through
In order that a person can be convicted under the above-quoted provision, misappropriation punishable under Article 315, par. l(b) of the Revised Penal Code, but it will
it must be proven that he has the obligation to deliver or return the some only give rise to civil liability over which the public respondents have no- jurisdiction.
money, goods or personal property that he received Petitioners had no
such obligation to return the same money, i.e., the bills or coins, which
they received from private respondents. This is so because as clearly as In the case at bar, there is no dispute that petitioners Guingona and Martin executed a
stated in criminal complaints, the related civil complaints and the promissory note assuming the obligation of the bank to private respondent David; while the
supporting sworn statements, the sums of money that petitioners received criminal complaint for estafa was filed on December 23, 1981 with the Office of the City
were loans. Fiscal. Hence, it is clear that novation occurred long before the filing of the criminal complaint
with the Office of the City Fiscal.
The nature of simple loan is defined in Articles 1933 and 1953 of the Civil
Code. Consequently, as aforestated, any incipient criminal liability would be avoided but there will
still be a civil liability on the part of petitioners Guingona and Martin to pay the assumed
obligation.
"Art. 1933. — By the contract of loan, one of the
parties delivers to another, either something not
consumable so that the latter may use the same for a
certain time- and return it, in which case the contract is
called a commodatum; or money or other consumable 14. G.R. No. L-52478 October 30, 1986
thing, upon the condition that the same amount of the THE GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner-appellant, vs.
same kind and quality shall he paid in which case the HONORABLE COURT OF APPEALS, NEMENCIO R. MEDINA and JOSEFINA G.
contract is simply called a loan or mutuum. MEDINA, respondents-appellants.

"Commodatum is essentially gratuitous. FACTS:

Sps spouses Nemencio Medina and Josefina Medina applied with GSIS for a loan of
P600,000.00. The GSIS first approved only the amount of P350,000.00 then reduced the
"Simple loan may be gratuitous or with a stipulation to amount to P295,000.00. The Medinas accepted the amount, executed a promissory note and a
pay interest. real estate mortgage in favor of GSIS. Then the amount of P350,000.00 was restored. The
Medinas then executed an Amendment of Real Estate Mortgage. In 1963, an additional loan of
"In commodatum the bailor retains the ownership of P230,000.00 was approved on the security of the same mortgaged properties and additional
the thing loaned while in simple loan, ownership properties.
passes to the borrower.
The Medinas defaulted in the payment of the monthly amortization of their loan as well as the
"Art. 1953. — A person who receives a loan of money payment of fire insurance premiums. GSIS then imposed 9%/12% interest on all installments
or any other fungible thing acquires the ownership due and unpaid and in 1975, they filed an Application of Foreclosure of Mortgage and the
thereof, and is bound to pay to the creditor an equal properties were sold at a public auction in 1976. The Sps Medina filed an Amended Complaint
amount of the same kind and quality." praying for the declaration of nullity of the 2 real estate mortgage contracts as well as of the
extra-judicial foreclosure proceedings and the refund of excess payments, damages and
attorney’s fees.
 from date of the filing of complaint). Appellants appealed to CFI - Manila, which affirmed the
RTC ruled in the favor of the Medinas and declared that the extra-judicial foreclosure decision of the Municipal Court.
conducted by the Sheriff of Manila of REM contracts executed by GSIS is null and void.
Furthermore, the Sheriff's Certificate of Sale dated January 27, 1976, in favor of the GSIS of Appellant’s defensed that the pleadings do not show that there was demand made by the
no legal force and effect appellee for the payment of accrued interest. By demanding payment from the surety, appellee
accepted unqualifiedly the amount of P5,000.00 as performance by the obligor and/or obligors
CA affirmed the trial court’s decision. of the obligation in its favor. The unqualified acceptance of payment made by the Luzon
Surety Co., Inc. of P5,000.00 or only the amount of the principal obligation, without
ISSUE: exercising its right to apply a portion of P655.89 to the payment of the alleged interest due
Whether or not the Court of Appeals erred in holding that the interest rates on the loan despite its presumed knowledge of its right to do so, the appellee showed that it waived or
accounts are usurious. condoned the interests due.

RULING: ISSUE:
Yes, the CA erred in holding that the interest rates on the loan accounts are usurious. W/N Magdalena, in accepting the payment of Luzon Surety, waived or condoned the interest
due.
It has already been settled that the Usury Law applies only to interest by way of compensation
for the use or forbearance of money (Lopez v. Hernaez, 32 Phil. 631; Bachrach Motor Co. v. RULING;
Espiritu, 52 Phil. 346; Equitable Banking Corporation v. Liwanag, 32 SCRA 293, March 30, No, Magdalena, in accepting the payment of Luzon Surety, did not waived or condoned the
1970). Interest by way of damages is governed by Article 2209 of the Civil Code of the interest due.
Philippines which provides:
It is very clear in the promissory note that the principal obligation is the balance of the
Art. 2209. If the obligation consists in the payment of a sum of money, purchase price of the parcel of land known as Lot 7-K-2-G, Psd-26193, which is the sum of
and the debtor incurs in delay, the indemnity for damages, there being no P5,000.00, and in the surety bond, the Luzon Surety Co., Inc. undertook "to pay the amount of
stipulation to the contrary, shall be the payment of the interest agreed P5,000.00 representing balance of the purchase price of a parcel of land known as Lot 7-K-2-
upon,... G, Psd-26193, . . . ." The appellee did not protest nor object when it accepted the payment of
P5,000.00 because it knew that that was the complete amount undertaken by the surety as
appearing in the contract. The liability of a surety is not extended, by implication, beyond the
In the Bachrach case (supra) the Supreme Court ruled that the Civil Code permits the terms of his contract. It is for the same reason that the appellee cannot apply a part of the
agreement upon a penalty apart from the interest. Should there be such an agreement, the P5,000.00 as payment for the accrued interest. Appellants are relying on Article 1253 of the
penalty does not include the interest, and as such the two are different and distinct things Civil Code, but the rules contained in Articles 1252 to 1254 of the Civil Code apply to a
which may be demanded separately. Reiterating the same principle in the later case of person owing several debts of the same kind of a single creditor. They cannot be made
Equitable Banking Corp. (supra), where this Court held that the stipulation about payment of applicable to a person whose obligation as a mere surety is both contingent and singular; his
such additional rate partakes of the nature of a penalty clause, which is sanctioned by law. liability is confined to such obligation, and he is entitled to have all payments made applied
exclusively to said application and to no other. Besides, Article 1253 of the Civil Code is
merely directory, and not mandatory. Inasmuch as the appellee cannot protest for non-payment
of the interest when it accepted the amount of P5,000.00 from the Luzon Surety Co., Inc., nor
15. G.R. No. L-18411      December 17, 1966 apply a part of that amount as payment for the interest, we cannot now say that there was a
MAGDALENA ESTATES, INC., plaintiff-appellee, vs. ANTONIO A. RODRIGUEZ and waiver or condonation on the interest due.
HERMINIA C. RODRIGUEZ, defendants-appellants.

FACTS: 18. G.R. No. 125944      June 29, 2001

Sps Rodriquez bought from the appellee a parcel of land in QC. In view of an unpaid balance SPOUSES DANILO SOLANGON and URSULA SOLANGON, petitioners, vs. JOSE
of P5,000, the Sps executed a promissory note. Furthermore, the Sps and the Luzon Surety Co, AVELINO SALAZAR, respondents
Inc. executed a bond in favor of the appellee. When the obligation of the appellants became
due and demandable, Luzon Surety Co. paid to appellee P5,000. Subsequently the Magdalena FACTS:
Estates demanded from the appellants the payment of P655.89 corresponding to the alleged The Sps Solanganon executed a REM to secure the payment of their 3 loans: 1) P60,000.00
accumulated interests on the principal of P5,000.00. Sps Rodriquez refused to pay interest.
payable within a period of four (4) months, with interest thereon at the rate of 6% per month;
Consequently, Magdalena Estates filed a suit in the Municipal Court of Manila to enforce the
collection. The Municipal Court rendered judgment in favor of the Magadalena Estates and 2) P136,512.00, payable within a period of one (1) year, with interest thereon at the legal rate;
ordered the Sps Rodriguez to pay the former an amount of P655.89 with interest at legal rate and 3) P230,000.00 payable within a period of four (4) months, with interest thereon at the
legal rate.
 recent case of Florendo v. Court of Appeals, the Court reiterated the ruling that ‘by
This action was initiated by the plaintiffs-appellants to prevent the foreclosure of the virtue of CB Circular 905, the Usury Law has been rendered ineffective.’ ‘Usury
mortgaged property. They alleged that they obtained only one loan form the defendant- Law has been legally non-existent in our jurisdiction. Interest can now be charged as
appellee, and that was for the amount of P60,000.00, the payment of which was secured by the lender and borrower may agree upon.’
first of the above-mentioned mortgages. The subsequent mortgages were merely continuations
of the first one, which is null and void because it provided for unconscionable rate of interest. Nevertheless, we find the interest at 5.5 % per month, or 66% per annum,
stipulated upon by the parties in the promissory note iniquitous or
Moreover, the defendant-appellee assured them that he will not foreclose the mortgage as long
unconscionable, and hence, contrary to morals (‘contra bonos mores’), if not
as they pay the stipulated interest upon maturity or within a reasonable time thereafter.
against the law. The stipulation is void. The courts shall reduce equitably
liquidated damages, whether intended as an indemnity or a penalty if they are
On the other hand, the defendant-appellee Jose Avelino Salazar claimed that the above- iniquitous or unconscionable." (Emphasis supplied)
described mortgages were executed to secure three separate loans of P60,000.00 P136,512.00
and P230,000.00, and that the first two loans were paid, but the last one was not. He denied In the case at bench, petitioners stand on a worse situation. They are required to pay the
having represented that he will not foreclose the mortgage as long as the plaintiffs-appellants stipulated interest rate of 6% per month or 72% per annum which is definitely outrageous and
pay interest." inordinate. Surely, it is more consonant with justice that the said interest rate be reduced
equitably. An interest of 12% per annum is deemed fair and reasonable.
RTC: ruled in favor of Salazar
WHEREFORE, the appealed decision of the Court of Appeals is AFFIRMED subject to
CA: ruled that the stipulated interest rate of 72% per annum or 6% per month is  not the MODIFICATION that the interest rate of 72% per annum is ordered reduced to 12 % per
unconscionable. annum.

ISSUE:
W/N the interest rate of 6% per month or 72% per annum is valid. 19. G.R. No. 146942             April 22, 2003
CORAZON G. RUIZ, petitioner, vs. COURT OF APPEALS and CONSUELO
RULING: TORRES, respondents.
No, the interest rate of 6% per month or 72% per annum is not valid.
FACTS:
The Court of Appeals, in sustaining the stipulated interest rate, ratiocinated that since the Corazon G. Ruiz obtained loans from Consuelo Torres for her jewelry business, which were
consolidated under one promissory note with interest rate of 3% per month, secured by REM.
Usury Law had been repealed by Central Bank Circular No. 905 there is no more maximum
Later, Ruiz obtained three more loans from Torres secured by jewelry, which she pledged as
rate of interest and the rate will just depend on the mutual agreement of the parties.
collateral. After paying the stipulated 3% monthly interest on the P750,000 loan for a year,
Ruiz was unable to make interest payments as she had difficulties collecting from her clients.
The Usury Law ceiling on interest rates was lifted by C.B. Circular No. 905, nothing in the
said circular grants lenders carte blanche authority to raise interest rates to levels which will Due to her failure to pay the principal loan of P750,000 and the interest payment Torres
either enslave their borrowers or lead to a hemorrhaging of their assets. 5 In Medel v. Court of demanded payment not only of the P750,000 loan, but also of the P300,000 loan. When Ruiz
Appeals,6 this court had the occasion to rule on this question - whether or not the stipulated failed to pay, Torres sought the extra-judicial foreclosure of the real estate mortgage.
rate of interest at 5.5% per month on a loan amounting to P500,000.00 is usurious. While However, Ruiz filed a complaint with the RTC of Quezon City, seeking a Temporary
decreeing that the aforementioned interest was not usurious, this Court held that the same must Restraining Order to enjoin the sheriff from proceeding with the foreclosure sale and to fix her
be equitably reduced for being iniquitous, unconscionable and exorbitant, thus: indebtedness to Torres to P706,000.
"We agree with petitioners that the stipulated rate of interest at 5.5% per RTC: granted the prayer for the issuance of a TRO and issued a writ of preliminary injunction.
month on the P500,000.00 loan is excessive, iniquitous, unconscionable and Petitioner was thus ordered to pay the amount of P750,000.00 plus three percent (3%) interest
exorbitant. However, we cannot consider the rate ‘usurious’ because this Court has per month, or a total of P885,000.00, plus legal interest from date of [receipt of] the decision
consistently held that Circular No. 905 of the Central Bank, adopted on December until the total amount of P885,000.00 is paid.
22, 1982, has expressly removed the interest ceilings prescribed by the Usury Law
and that the Usury Law is now ‘legally inexistent.’ CA: The appellate court declared as invalid the 10% compounded monthly interest and the
10% surcharge per month stipulated in the promissory notes and the 1% compounded monthly
In Security Bank and Trust Company vs. Regional Trial Court of Makati, Branch 61 interest stipulated in the promissory note for being excessive, iniquitous, unconscionable, and
the Court held that CB Circular No. 905 did not repeal nor in any way amend the contrary to morals. It held that the legal rate of interest of 12% per annum shall apply after the
Usury Law but simply suspended the latter’s effectivity. Indeed, we have held that ‘a maturity dates of the notes until full payment of the entire amount due, and that the only
Central Bank Circular cannot repeal a law. Only a law can repeal another law. In the permissible rate of surcharge is 1% per month, without compounding.32 The appellate court
also granted attorney’s fees in the amount of P50,000.00, and not the stipulated 25% of the
amount due, following the ruling in the case of Medel v. Court of Appeals.

ISSUE;
W/N the rates of interests and surcharges on the obligation of petitioner to private respondent
are valid.

RULING:
No, the rates of interests and surcharges on the obligation of petitioner to private respondent
are not valid. 21. G.R. No. 131622 November 27, 1998
LETICIA Y. MEDEL, DR. RAFAEL MEDEL and SERVANDO FRANCO, petitioners,
The foregoing rates of interests and surcharges are in accord with Medel vs. Court of vs. COURT OF APPEALS, SPOUSES VERONICA R. GONZALES and DANILO G.
Appeals,47 Garcia vs. Court of Appeals,48 Bautista vs. Pilar Development Corporation,49 and GONZALES, JR. doing lending business under the trade name and style "GONZALES
the recent case of Spouses Solangon vs. Salazar.50 This Court invalidated a stipulated 5.5% CREDIT ENTERPRISES", respondents.
per month or 66% per annum interest on a P500,000.00 loan in Medel51 and a 6% per month
or 72% per annum interest on a P60,000.00 loan in Solangon52 for being excessive, FACTS:
iniquitous, unconscionable and exorbitant. In both cases, we reduced the interest rate to 12% Spouses Leticia Medel and Dr. Rafael Medel, and Servando Franco, herein petitioners
per annum. We held that while the Usury Law has been suspended by Central Bank Circular borrowed from Gonzales Credit Enterprises, a lending business owned by Spouses Veronica
No. 905, s. 1982, effective on January 1, 1983, and parties to a loan agreement have been and Danilo Gonzales, Jr. the amounts of Php 50,000.00, Php 90,000.00 and Php 300,000.00
given wide latitude to agree on any interest rate, still stipulated interest rates are illegal if they executed by promissory note and real estate mortgage at three different dates which matures
are unconscionable. Nothing in the said circular grants lenders carte blanche authority to raise after 2 months at a monthly rate of 6% per month. Upon maturity, they failed to pay the
interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging of indebtedness. Thereafter, they consolidated their previous unpaid loans which amounted to
their assets.53 On the other hand, in Bautista vs. Pilar Development Corp.,54 this Court upheld Php440,000.00 and added Php60,000.00 bringing the loan to Php500,000.00. The new debt
the validity of a 21% per annum interest on a P142,326.43 loan, and in Garcia vs. Court of was stipulated to be paid at an interest rate of 5.5% per month, 2% service charge per annum
Appeals, sustained the agreement of the parties to a 24% per annum interest on an and 1% penalty charge per annum. On maturity, they again failed to pay.
P8,649,250.00 loan. It is on the basis of these cases that we reduce the 36% per annum interest
to 12%. An interest of 12% per annum is deemed fair and reasonable. While it is true that this The spouses Gonzales filed a complaint for collection at the RTC Bulacan. The RTC ruled that
Court invalidated a much higher interest rate of 66% per annum in Medel55 and 72% although the Usury Law has been repealed, the interest charged was unconscionable and
in Solangon56 it has sustained the validity of a much lower interest rate of 21% revolting to the conscience, and ordered the payment of the first three loans with 12% interest
in Bautista57 and 24% in Garcia.58 We still find the 36% per annum interest rate in the case at per annum and 1% per month penalty.
bar to be substantially greater than those upheld by this Court in the two (2) aforecited cases.
Both appealed in the Court of Appeals where the court ruled in favor of the spouses Gonzales
on the contention that the Usury Law became legally inexistent with the promulgation of
The 1% surcharge on the principal loan for every month of default is valid. This surcharge or
Central Bank Circular No. 905-82, hence the lender and the borrower could agree on any
penalty stipulated in a loan agreement in case of default partakes of the nature of liquidated
interest that may be charged on the loan.
damages under Art. 2227 of the New Civil Code, and is separate and distinct from interest
payment.59 Also referred to as a penalty clause, it is expressly recognized by law. It is an
Hence, this petition for review on certiorari.
accessory undertaking to assume greater liability on the part of an obligor in case of breach of
an obligation.60 The obligor would then be bound to pay the stipulated amount of indemnity
ISSUE:
without the necessity of proof on the existence and on the measure of damages caused by the
W/N the stipulated rate of interest of 5.5% is usurious.
breach.61 Although the courts may not at liberty ignore the freedom of the parties to agree on
such terms and conditions as they see fit that contravene neither law nor morals, good
RULING:
customs, public order or public policy, a stipulated penalty, nevertheless, may be equitably
No, the the stipulated rate of interest of 5.5% is not usurious but unconscionable.
reduced if it is iniquitous or unconscionable.62 In the instant case, the 10% surcharge per
month stipulated in the promissory notes dated May 23, 1995 and December 1, 1995 was
properly reduced by the appellate court.
The Usury Law still effective, or has it been repealed by Central Bank Circular No. 905,
adopted on December 22, 1982, pursuant to its powers under P.D. No. 116, as amended by
IN VIEW WHEREOF, the appealed Decision of the Court of Appeals is AFFIRMED, subject
P.D. No. 1684?
to the MODIFICATION that the interest rate of 36% per annum is ordered reduced to 12 %
per annum.
We agree with petitioners that the stipulated rate of interest at 5.5% per month on the
P500,000.00 loan is excessive, iniquitous, unconscionable and exorbitant. 13 However, we
cannot consider the rate "usurious" because this Court has consistently held that Circular No.
905 of the Central Bank, adopted on December 22, 1982, has expressly removed the interest
ceilings prescribed by the Usury Law 14 and that the Usury Law is now "legally inexistent". 15

In Security Bank and Trust Company vs. Regional Trial Court of Makati, Branch 61 16 the
Court held that CB Circular No. 905 "did not repeal nor in anyway amend the Usury Law but
simply suspended the latter's effectivity." Indeed, we have held that "a Central Bank Circular
cannot repeal a law. Only a law can repeal another law." 17 In the recent case of Florendo vs.
Court of Appeals 18, the Court reiterated the ruling that "by virtue of CB Circular 905, the
Usury Law has been rendered ineffective". "Usury has been legally non-existent in our
jurisdiction. Interest can now be charged as lender and borrower may agree upon." 19

Nevertheless, we find the interest at 5.5% per month, or 66% per annum, stipulated upon by
the parties in the promissory note iniquitous or unconscionable, and, hence, contrary to morals
("contra bonos mores"), if not against the law. 20 The stipulation is void. 21 The courts shall
reduce equitably liquidated damages, whether intended as an indemnity or a penalty if they are
iniquitous or unconscionable. 22

Consequently, the Court of Appeals erred in upholding the stipulation of the parties. Rather,
we agree with the trial court that, under the circumstances, interest at 12% per annum, and an
additional 1% a month penalty charge as liquidated damages may be more reasonable.

DEPOSIT
1. G.R. No. 90027 March 3, 1993
CA AGRO-INDUSTRIAL DEVELOPMENT CORP., petitioner, vs. THE HONORABLE
COURT OF APPEALS and SECURITY BANK AND TRUST COMPANY, respondents.

FACTS:

ISSUE:
RULING:

The contract in the case at bar is a special kind of deposit. It cannot be characterized as an
ordinary contract of lease under Article 1643 because the full and absolute possession and
control of the safety deposit box was not given to the joint renters — the petitioner and the
Pugaos. The guard key of the box remained with the respondent Bank; without this key,
neither of the renters could open the box. On the other hand, the respondent Bank could not
likewise open the box without the renter's key. In this case, the said key had a duplicate which
was made so that both renters could have access to the box.

Neither could Article 1975, also relied upon by the respondent Court, be invoked as an
argument against the deposit theory. Obviously, the first paragraph of such provision cannot
apply to a depositary of certificates, bonds, securities or instruments which earn interest if
such documents are kept in a rented safety deposit box. It is clear that the depositary cannot
open the box without the renter being present.