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PEOPLE vs. CONCEPCION, 44 Phil.

126 FACTS: Venancio Concepcion, President of the Philippine National Bank and a member of the Board thereof, authorized an extension of credit in favor of "Puno y Concepcion, S. en C. to the manager of the Aparri branch of the Philippine National Bank. "Puno y Concepcion, S. en C." was a co-partnership where Concepcion is a partner. Subsequently, Concepcion was charged and found guilty in the Court of First Instance of Cagayan with violation of section 35 of Act No. 2747. Section 35 of Act No. 2747 provides that the National Bank shall not, directly or indirectly, grant loans to any of the members of the board of directors of the bank nor to agents of the branch banks. Counsel for the defense argue that the documents of record do not prove that authority to make a loan was given, but only show the concession of a credit. They averred that the granting of a credit to the co-partnership "Puno y Concepcion, S. en C." by Venancio Concepcion, President of the Philippine National Bank, is not a "loan" within the meaning of section 35 of Act No. 2747. ISSUE: Whether or not the granting of a credit of P300,000 to the co-partnership "Puno y Concepcion, S. en C." by Venancio Concepcion, President of the Philippine National Bank, a "loan" within the meaning of section 35 of Act No. 2747. HELD: The Supreme Court ruled in the affirmative. The "credit" of an individual means his ability to borrow money by virtue of the confidence or trust reposed by a lender that he will pay what he may promise. A "loan" means the delivery by one party and the receipt by the other party of a given sum of money, upon an agreement, express or implied, to repay the sum loaned, with or without interest. The concession of a "credit" necessarily involves the granting of "loans" up to the limit of the amount fixed in the "credit,"

REPUBLIC v. BAGTAS, 116 SCRA 262 FACTS: On May 8, 1948, Jose Bagtas borrowed from the Bureau of Animal Industry three bulls for one year for breeding purposes upon payment of a breeding fee of 10% of the book value of the bulls. After one year, the contract was renewed but only for one bull. Bagtas offered to buy the bulls at book value less depreciation, but the Bureau told him that he should either return the bulls or pay for their book value. Bagtas failed to pay the book value, so the Republic filed an action with the CFI Manila to order the return of the bulls or the payment of the book value. Felicidad Bagtas, the surviving spouse and administratrix of the decedents estate, said that the two bulls have already been returned in 1952, and that the remaining one died of gunshot during a Huk raid. It was established that the two bulls were returned, thus, there is no more obligation on the part of Bagtas. With regards the bull not returned, Felicidad maintained that the obligation is extinguished since the contract is that of a commodatum and that the loss through fortuitous event should be borne by the owner. ISSUE: Whether or not the contract entered into between Bagtas and the Republic is that of commodatum making Bagtas not liable for the death of the bull. HELD: A contract of commodatum is essentially gratuitous. If the breeding fee be considered compensation, then the contract would be a lease of the bull. Under article 1671 of the Civil Code the lessee would be subject to the responsibilities of a possessor in bad faith because she had continued possession of the bull after the expiry of the contract. Even if the contract be commodatum, still Bagtas is liable because article 1942 of the Civil Code provides that a bailee in a contract of commodatum is liable for loss of the things even if it should be through a fortuitous event if he keeps it longer than the period stipulated or if the thing loaned has been delivered with appraisal of its value, unless there is a stipulation exempting the bailee from responsibility in case of a fortuitous event. The loan of one bull was renewed for another period of one year but Bagtas kept and used the bull more than one year where during a Huk raid it was killed by stray bullets. Furthermore, when lent and delivered to the deceased husband of Bagtas, the bulls had each an appraised book value. It was not stipulated that in case of loss of the bull due to fortuitous event the late husband of the appellant would be exempt from liability.

PRODUCERS BANK OF THE PHILIPPINES vs. COURT OF APPEALS, GR No. 115324 FACTS: Sometime in 1979, private respondent Franklin Vives, upon request of his friend Angeles Sanchez and relying on the assurance that he could withdraw his money within a months time, issued a check in the amount of Two Hundred Thousand Pesos in favor of Sterela Marketing and Services owned by one Col. Arturo Doronilla. Subsequently, private respondent and his wife found out that Sterela cant be found on the address previously given to then, so they went to petitioner Producers Bank of the Philippines to verify if their money was still intact. They were informed that part of the amount had been withdrawn by Doronilla and that the latter instructed the bank to debit from the savings account the amount and deposit it in his current account Private respondent filed an action for recovery of sum of money against Doronilla, Sanchez, Dumagpi and petitioner. The trial court ruled in favour of herein private respondents. On appeal of the case, the appellate court affirmed the decision of the RTC. Petitioner contends that the transaction between private respondent and Doronilla is a simple loan (mutuum) since all the elements of a mutuum are present: first, what was delivered by private respondent to Doronilla was money, a consumable thing; and second, the transaction was onerous as Doronilla was obliged to pay interest. Hence, petitioner argues that it cannot be held liable because it is not privy to the transaction between the latter and Doronilla. Private respondent, on the other hand, argues that the transaction between him and Doronilla is not a mutuum but an accommodation, since he did not actually part with the ownership of his P200,000.00 but retained some degree of control over his money through his wife who was made a signatory to the savings account and in whose possession the savings account passbook was given. ISSUE: Whether or not the contract between Sanchez and Doronilla and Vives is a contract of commodatum, thus making petitioner Bank liable. HELD: Supreme Court held that the contract is commodatum. Although in view of Article 1933 of the Civil Code, the object in commodatum is non-consumable, but Article 1936 of the Civil Code provides Consumable goods may be the subject of commodatum if the purpose of the contract is not the consumption of the object, as when it is merely for exhibition. Thus, if consumable goods are loaned only for purposes of exhibition or when the intention of the parties is to lend consumable goods and to have the very same goods returned at the end of the period agreed upon, the loan is commodatum and not a mutuum. The evidence shows that private respondent merely "accommodated" Doronilla by lending his money without consideration, as a favor to his good friend Sanchez. It was however clear to the parties to the transaction that the money would not be removed from Sterelas savings account and would be returned to private respondent after thirty (30) days.

CAROLYN M. GARCIA vs. RICA MARIE S. THIO, GR. No. 154878, March 16, 2007 FACTS: Sometime in February 1995, respondent Rica Marie S. Thio received from petitioner Carolyn M. Garccia a crossed check in the amount of $100,000.00 payable to the order of Marilou Santiago. Thereafter, Carolyn received from Rica payments of the sum due. In June 1995, Rica received another check in the amount of P500,000.00 from Carolyn and payable to the order of Marilou. Payments were made by Rica representing interests. There was failure to pay the principal amount hence a complaint for sum of money with damages was filed by Carolyn. Rica contended that she had no obligation to petitioner as it was Marilou who was indebted as she was merely asked to deliver the checks to the latter and that the check payments she issued were merely intended to accommodate Marilou. The RTC ruled in favor of Carolyn but the CA reversed on the ground that there was no contract between Rica and Carolyn as there is nothing in the record that shows that respondent received money from petitioner and that the checks received by respondent, being crossed, may not be encashed but only deposited in the bank by the payee thereof, that is, by Marilou Santiago herself. ISSUE: Whether or not there was a contract of loan between petitioner and respondent. HELD: There Court ruled in the affirmative. A loan is a real contract, not consensual, and as such is perfected only upon the delivery of the object of the contract. Art. 1934 of the Civil Code provides that an accepted promise to deliver something by way of commodatum or simple loan is binding upon the parties, but the commodatum or simple loan itself shall not be perfected until the delivery of the object of the contract. Upon delivery of the object of the contract of loan (in this case the money received by the debtor when the checks were encashed the debtor acquires ownership of such money or loan proceeds and is bound to pay the creditor an equal amount. It is undisputed that the checks were delivered to respondent. However, these checks were crossed and payable not to the order of respondent but to the order of a certain Marilou Santiago. The Supreme Court agrees with petitioner that delivery is the act by which the res or substance thereof is placed within the actual or constructive possession or control of another. Although respondent did not physically receive the proceeds of the checks, these instruments were placed in her control and possession under an arrangement whereby she actually re-lent the amounts to Santiago. Hence, Rica is the debtor and not Marilou.

COLITO T. PAJUYO vs. COURT OF APPEALS, GR. No. 146364, June 3, 2004 FACTS: In June 1979, petitioner Colito T. Pajuyo purchased the rights over a property from Pedro Perez. Thereafter, he constructed a house therein and he and his family lived there. Later, Pajuyo agreed to let private respondent Eddie Guevarra to live in the house for free provided that the latter maintain the cleanliness and orderliness of the house. They also agreed that Guevarra should leave the premises upon demand. Subsequently, when Pajuyo told Guevarra that he needed the house, Guevarra refused, hence an ejectment case was filed. Guevarra claimed that Pajuyo had no valid title or right of possession over the lot where the house stands because the lot is within the 150 hectares set aside for socialized housing. The MTC ruled that the subject of the agreement between Pajuyo and Guevarra is the house and not the lot. Pajuyo is the owner of the house, and he allowed Guevarra to use the house only by tolerance. Thus, Guevarras refusal to vacate the house on Pajuyos demand made Guevarras continued possession of the house illegal. Aggrieved, Guevarra appealed to the Regional Trial Court which only affirmed the MTC decision. At the CA, the latter reversed the RTC decision. The Court of Appeals ruled that the Kasunduan is not a lease contract but a commodatum because the agreement is not for a price certain. Since Pajuyo admitted that he resurfaced only in 1994 to claim the property, the appellate court held that Guevarra has a better right over the property under Proclamation No. 137. At that time, Guevarra was in physical possession of the property. ISSUE: Whether or not the contract between petitioner and private respondent is one of commodatum. HELD: The Supreme Court held that the contract is not a commodatum. In a contract of commodatum, one of the parties delivers to another something not consumable so that the latter may use the same for a certain time and return it. An essential feature of commodatum is that it is gratuitous. Another feature is that the use of the thing belonging to another is for a certain period. Thus, the bailor cannot demand the return of the thing loaned until after the expiration of the period stipulated, or after accomplishment of the use for which the commodatum is constituted. If the bailor should have urgent need of the thing, he may demand its return for temporary use. If the use of the thing is merely tolerated by the bailor, he can demand the return of the thing at will, in which case the contractual relation is called a precarium. The Kasunduan reveals that the accommodation accorded by Pajuyo to Guevarra was not essentially gratuitous. While the Kasunduan did not require Guevarra to pay rent, it obligated him to maintain the property in good condition. The imposition of this obligation makes the Kasunduan a contract different from a commodatum. The effects of the Kasunduan are also different from that of a commodatum.

QUINTOS vs. BECK, 69 Phil 108 FACTS: Beck is a tenant of defendant Margarita Quintos. As such, Beck occupied Quintos house. Quintos granted Beck the use of the furniture found on the leased house, among these were three gas heaters and 4 electric lamps, subject to the condition that the defendant would return them to the plaintiff upon the latter's demand. Quintos sold the pieces of furniture to Maria Lopez and Rosario Lopez and thereafter notified Beck of the conveyance. Beck informed Quintos that the latter can get the furniture at the ground floor of the house, however, at a later date, Beck told Quintos that he will return only the other furniture but not the gas heaters and the electric lamps as he is to return them only after the expiration of the lease contract. When the lease contract expires, Beck deposited the furniture to the sheriffs warehouse. Quintos refused to get the furniture in view of the fact that the defendant had declined to make delivery of all of them. Consequently, Quintos brought an action to compel Beck to return her certain furniture which she lent him for his use. The trial court ruled in favour of Beck holding that Quintos failed to comply with her obligation to get the furniture when they were offered to her. On appeal of the case, the Court of First Instance of Manila affirmed the lower courts decision. Hence, this petition. ISSUE: Whether or not the trial court erred in ruling that Quintos failed to comply with her obligation to get the furniture when they were offered to her. HELD: The contract entered into between the parties is one of commadatum. Under it the plaintiff gratuitously granted the use of the furniture to the defendant, reserving for herself the ownership thereof. By this contract the defendant bound himself to return the furniture to the plaintiff, upon the latters demand. The obligation voluntarily assumed by the defendant to return the furniture upon the plaintiff's demand, means that he should return all of them to the plaintiff at the latter's residence or house. The defendant did not comply with this obligation when he merely placed them at the disposal of the plaintiff, retaining for his benefit the three gas heaters and the four electric lamps. The trial court, therefore, erred when it came to the legal conclusion that the plaintiff failed to comply with her obligation to get the furniture when they were offered to her.

FRIAS vs. SAN DIEGO-SISON, GR. No. 155223, April 4, 2007 FACT: Petitioner Bobie Rose V. Frias owned a house and lot which she acquired from Island Masters Realty and Development Corporation (IMRDC) by virtue of a Deed of Sale. She entered into a MOA with respondent Flora San Diego-Sison. In the MOA, they had agreed among others that in the event that on the 6thmonth of the 6-month period to purchase land, respondent would decide not to purchase, the petitioner has a period of another 6 months to pay P3M provided that the said amount shall earn compounded bank interest for the last six months only. Respondent decided not to purchase the property so what happened was that the P3M would be considered as a loan payable within six months. Petitioner failed to pay the P2M. Consequently, respondent filed with the RTC a complaint for sum of money. RTC rules in favor of respondent and orders the payment of P2M plus compounded interest at 32% interest per annum pursuant to the MOA. Petitioner appeals to CA. The CA affirms RTC decision with modification with regard to the interest from32% to 25%. Petitioner opposed to the said decision contending that the interest is contrary to the parties Memorandum of Agreement; that the agreement provides that if respondent would decide not to purchase the property, petitioner has the period of another six months to pay the loan with compounded bank interest for the last six months only; that the CAs ruling that a loan always bears interest otherwise it is not a loan is contrary to Art. 1956 of the New Civil Code which provides that no interest shall be due unless it has been expressly stipulated in writing. ISSUE: Whether or not the compounded bank interest should be limited to six months as contained in the MOA. HELD: The agreement stipulated in the MOA that the amount given shall bear compounded bank interest for the last six months only (referring to the second six-month period), does not mean that interest will no longer be charged after the second six-month period since such stipulation was made on the logical and reasonable expectation that such amount would be paid within the date stipulated. Considering that the petitioner failed to pay the amount given which under the MOA shall be considered as a loan, the monetary interest for the last six months continued to accrue until the actual payment of the loaned amount. The payment of regular interest constitutes the price or cost of the money use and thus, until the principal sum due is returned to the creditor, regular interest continues to accrue since the debtor continues to use such principal amount.

LIGUTAN vs. COURT OF APPEALS, GR. No. 138677, February 12, 2002 FACTS: Petitioners Tolomeo Ligutan and Leonidas dela Llana obtained a loan from private respondent Security Bank and Trust Company. Petitioners executed a promissory note to pay the sum loaned with an interest of 15.189% per annum upon maturity and to pay a penalty of 5% every month on the outstanding principal and interest in case of default. On maturity of the obligation, petitioners failed to settle the debt despite several demands from the bank. Consequently, the bank filed a complaint for recovery of the due amount. After trial of the case, the Trial court ruled in favour of the Bank, ordering petitioners to pay the respondent the sum of P114,416.00 with interest thereon at the rate of 15.189% per annum and 5% per month penalty charge among others. On appeal of the case, petitioners prayed for the reduction of the 5% stipulated penalty for being unconscionable. The Court of Appeals ruled that in the interest of justice and public policy, a penalty of 3% per month or 36% per annum would suffice. But still, petitioners dispute the said decision. ISSUE: Whether or not the 15.189% interest and the penalty of three (3%) percent per month or thirty-six (36%) percent per annum imposed by private respondent bank on petitioners loan obligation are exorbitant, iniquitous and unconscionable. HELD: The question of whether a penalty is reasonable or iniquitous can be partly subjective and partly objective. Its resolution would depend on such factors as, but not necessarily confined to, the type, extent and purpose of the penalty, the nature of the obligation, the mode of breach and its consequences, the supervening realities, the standing and relationship of the parties, and the like, the application of which, by and large, is addressed to the sound discretion of the court. The essence or rationale for the payment of interest is not exactly the same as that of a surcharge or a penalty. A penalty stipulation is not necessarily preclusive of interest. What may justify a court in not allowing the creditor to impose full surcharges and penalties, despite an express stipulation therefor in a valid agreement, may not equally justify the non-payment or reduction of interest. Indeed, the interest prescribed in loan financing arrangements is a fundamental part of the banking business and the core of a bank's existence. The Court of Appeals, exercising its good judgment in the instant case, has rightly reduced the penalty interest from 5% a month to 3% a month.

GSIS vs. COURT OF APPEALS, GR. No. L-52478, October 20, 1986 FACTS: In 1961, herein private respondents spouses Nemencio R. Medina and Josefina G. Medina applied with the herein petitioner Government Service Insurance System for a loan of P600,000.00. The approved loan amount was only P350,000.00 at the rate of interest of 9% per annum compounded monthly and the rate of 9%/12% per month for any installment or amortization that remains due and unpaid. The approved loan amount was further reduced to P295,000.00. The Medinas accepted the reduced amount and executed a promissory note and a real estate mortgage in favor of GSIS. Subsequently, upon application by the Medinas, the GSIS approved an additional loan of P230,000.00 on the security of the same mortgaged properties to bear interest at 9% per annum compounded monthly and repayable in ten years. However, in 1965, the Medinas defaulted in the payment of the monthly amortization on their loan despite several demands from petitioner. Hence, the GSIS imposed 9%/12% interest on instalments that are due and unpaid. The Medinas opposed to this contending that the interest rates on the loan accounts are usurious. After trial of the case, the trial court ordered the Medinas full payment of their obligation to the GSIS plus interest at 9% per annum. Aggrieved, the Medinas appealed before the Court of Appeals but the latter affirmed the lower courts decision. ISSUE: Whether or not the interest rates on the loan accounts of respondent-appellee Medina spouses are usurious. HELD: It has already been settled that the Usury Law applies only to interest by way of compensation for the use or forbearance of money. Interest by way of damages is governed by Article 2209 of the Civil Code of the Philippines which provides that if the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon. The Civil Code permits the agreement upon a penalty apart from the interest. Should there be such an agreement, the penalty does not include the interest, and as such the two are different and distinct things which may be demanded separately. The stipulation about payment of such additional rate partakes of the nature of a penalty clause, which is sanctioned by law.

EASTERN SHIPPING LINES, INC. vs. CA, GR. No. 97412, July 12, 1994 FACTS: Two fiber drums of riboflavin were shipped from Yokohama, Japan on board the vessel owned by herein petitioner Eastern Shipping Lines. When it arrives in Manila, it was put unto the custody of Metro Port Service, Inc. The latter excepted to one drum which is said to be in bad order and which damage was unknown to Eastern Shipping Lines. Later, Allied Brokerage Corporation received the shipment from Metro Port Service, Inc. With one drum damaged, Allied Brokerage Corporation made deliveries to the consignee's warehouse. The latter excepted to one drum that is damaged. Eastern Shipping Lines averred that due to the one drum that is damaged and due to the fault and negligence of Metro Port Service, Inc. and Allied Brokerage Corporation, the consignee suffered losses. The two failed and refused to pay the claims for damages. Consequently, Eastern Shipping Lines was compelled to pay the consignee being subrogated to all the rights of action of said consignee against Metro Port Service, Inc. and Allied Brokerage Corporation. Trial ensued and on appeal of the case, the appellate court affirmed the decision of the trial court ordering Metro Port Service and Allied Brokerage to pay Eastern Shipping Lines, jointly and severally, the amount of P19,032.95, with the present legal interest of 12% per annum from the date of filing of the complaints, until fully paid. Metro Port Service and Allied Brokerage opposed especially as to the payment of interest contending that the legal interest on an award for loss or damage should be 6% in view of Article 2209 of the Civil Code. ISSUE: Whether or not the payment of legal interest on an award for loss or damage is twelve percent (12%) or six percent (6%). HELD: Article 2209 of the New Civil Code provides that if the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of interest agreed upon, and in the absence of stipulation, the legal interest which is six percent per annum. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows: 1. When the obligation is breached, and it consists in the payment of a sum of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default under and subject to the provisions of Article 1169 of the Civil Code. 2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court

at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. 3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.

SIGA-AN vs. VILLANUEVA, GR. No. 173227, January 20, 2009 FACTS: Herein respondent Alicia Villanueva is engaged in supplying office materials and equipments to the Philippine Navy Office (PNO) where herein Sebastian Siga-an works as a military officer and comptroller. Villanueva alleged that Siga-an offered to loan her the amount of P540,000.00. Having needed capital for her business transactions with the PNO, Villanueva accepted petitioners proposal. The loan agreement was not reduced in writing and there was no stipulation as to the payment of interest for the loan. Villanueva issued two checks worth P500,000.00 and P200,000.00. Siga-an wanted to apply the payment of P540,000.00 to the principal amount and the excess amount of P160,000.00 would be applied for the interest. He demanded from Villanueva to pay additional interest with a threat to block or disapprove her transactions with the PNO if she would not comply with his demand thus respondent paid additional amounts as interests for the loan. Villanueva asked Siga-an for receipt but petitioner refused to give as it was not necessary as there was mutual trust and confidence between them. The total amount paid by Villanueva totalled P1,200,000.00. When Villanueva was advised by her lawyer that she made an overpayment, she sent a demand letter to Siga-an asking for the return of the excess amount of P660,000.00. Siga-an just ignored Villanuevas claim for reimbursement. Hence, Villanueva instituted a complaint for sum of money against herein petitioner Sebastian Siga-an. After trial of the case, the Trial Court ordered petitioner Siga-an to refund the excess amount to Villanueva pursuant to the principle of solutio indebiti. On appeal of the case, the appellate court affirmed the decision of the RTC. Petitioner filed a motion for reconsideration but this was denied. Hence, the instant petition. ISSUE: Whether or not there was interest due to petitioner. HELD: There was no interest due to petitioner. Article 1956 of the Civil Code, which refers to monetary interest, specifically mandates that no interest shall be due unless it has been expressly stipulated in writing. Payment of monetary interest is allowed only if there was an express stipulation for the payment of interest; and the agreement for the payment of interest was reduced in writing. The concurrence of the two conditions is required for the payment of monetary interest. Thus, the collection of interest without any stipulation therefore in writing is prohibited by law. It appears that petitioner and respondent did not agree on the payment of interest for the loan. Neither was there convincing proof of written agreement between the two regarding the payment of interest. Compensatory interest is not chargeable in the instant case because it was not duly proven that respondent defaulted in paying the loan. Also, as earlier found, no interest was due on the loan because there was no written agreement as regards payment of interest.

CARPO vs. CHUA & DY NG, GR. Nos. 150773 & 153599, September 30, 2005 FACTS: Herein petitioner spouses David Carpo and Rechilda Carpo contracted a loan from Eleanor Chua and Elma Dy Ng for a certain sum of money payable within six (6) months with an interest rate of six percent (6%) per month secured by a mortgaged of the spouses Carpo of their residential house and lot. Petitioners failed to pay the loan upon demand. Consequently, the real estate mortgage was extrajudicially foreclosed, mortgaged property sold at a public auction, and the house and lot was awarded to respondents, who were the only bidders. Unable to exercise their right of redemption by petitioners, a certificate of sale was issued in the name of respondents. However, petitioners continued to occupy the said house and lot, thus respondents file a petition for writ of possession which was granted by the Trial Court. Petitioners filed a complaint for annulment of real estate mortgage and the consequent foreclosure proceedings claiming that the rate of interest stipulated in the principal loan agreement is clearly null and void for being excessive, iniquitous, unconscionable and exorbitant. Consequently, they also argue that the nullity of the agreed interest rate affects the validity of the real estate mortgage. ISSUE: Whether or not the agreed rate of interest of 6% per month or 72% per annum is so excessive, iniquitous, unconscionable and exorbitant that it should have been declared null and void. HELD: In a long line of cases, the Supreme Court has invalidated similar stipulations on interest rates for being excessive, iniquitous, unconscionable and exorbitant. Pursuant to the freedom of contract principle embodied in Article 1306 of the Civil Code, contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. In the ordinary course, the codal provision may be invoked to annul the excessive stipulated interest. In the case at bar, the stipulated interest rate is 6% per month, or 72% per annum. By the standards set by jurisprudence, this stipulation is similarly invalid.

MACALINAO V. BPI, 600 SCRA 67 FACTS: Petitioner Ileana Macalinao defaulted on the payment of her BPI credit card dues. There was a stipulation in a contract that the charges and/or balance shall earn 3% per month and additional penalty fee of another 3% per month. The Regional Trial Court reduced the 3% monthly interest to 2%. On appeal of the case, the Court of Appeals reversed the decision of the RTC holding that petitioner Macalinao freely availed herself of the credit card facility offered by respondent Bank of the Philippine Islands to general public; contracts of adhesion are not invalid per se. Petitioner assailed the appellate courts decision alleging that the interest rate and penalty charges are unconscionable and iniquitous at 36% per annum. ISSUE: Whether or not the interest rate and penalty charges are unconscionable and iniquitous at 36% per annum. HELD: The interest rate and penalty charges are unconscionable and iniquitous at 36% per annum. The Supreme Court held that the interest rate and penalty charge of 3% per month or the 36% per annum should be reduced to 2% per month or 24% per annum. In a long line of cased decided by the Supreme Court, it considered the 36% per annum to be excessive and unconscionable. Citing Article1229, in exercising this power to determine what is iniquitous and unconscionable; courts must consider the circumstances of each case since what may be iniquitous and unconscionable in one maybe totally just and equitable in another. In the instant case, Macalinao made partial payments to BPI .Therefore, the interest rate and penalty charge of 3% per month or 36% per annum should be reduced to 2% per month or 24% per annum.

BANK OF THE PHILIPPINE ISLANDS VS IAC, 164 SCRA 630 FACTS: Arthur and Vivienne Canlas opened a joint current account in CBTC now Bank of the Philippine Islands. However, the bank teller erroneously placed the old account number of Mr. Canlas on the new account. Consequently, the subsequent deposits made by the spouses Canlas were not reflected in the new account. It was found out only when a check issued by Viviene was dishonored due to insufficiency of funds. Thus, the spouses Canlas instituted a suit for damages. The bank on the other hand alleged that it should not be held liable merely on account of the inadvertence of its employees. ISSUE: Whether or not the Bank of the Philippine Islands is liable. HELD: The Supreme Court ruled in the affirmative. There is no merit in petitioner's argument that it should not be considered negligent, much less held liable for damages on account of the inadvertence of its bank employee for Article 1173 of the Civil Code only requires it to exercise the diligence of a good father of family. The bank is not expected to be infallible but it must bear the blame for not discovering the mistake of its teller despite the established procedure requiring the papers and bank books to pass through a battery of bank personnel whose duty it is to check and countercheck them for possible errors. Apparently, the officials and employees tasked to do that did not perform their duties with due care.

BISHOP OF JARO VS DELA PENA, 26 Phil 144 FACTS: In 1898, Fr. Agustin Dela Pena deposited in his personal account a sum of money entrusted to him for the construction of a leper hospital. Thereafter, Father De la Pea was arrested by the military authorities as a political prisoner. While under detention, Fr. Dela Pea made an order on said bank in favor of the United States Army officer under whose charge he was then for the sum thus deposited in said bank. The arrest of Father De la Pea and the confiscation of the funds in the bank were the result of the claim of the military authorities that he was an insurgent and that the funds thus deposited had been collected by him for revolutionary purposes. The money was taken from the bank by the military authorities by virtue of such order and was turned over to the Government. ISSUE: Whether or not Father de la Pea is liable for the loss of the money under his trust. HELD: The Supreme Court ruled in the negative. Father De la Pea's liability is determined by those portions of the Civil Code which relate to obligations. Although the Civil Code states that "a person obliged to give something is also bound to preserve it with the diligence pertaining to a good father of a family". It also provides, following the principle of the Roman law, major casus est, cui humana infirmitas resistere non potest, that "no one shall be liable for events which could not be foreseen, or which having been foreseen were inevitable, with the exception of the cases expressly mentioned in the law or those in which the obligation so declares."

TRIPLE-V FOOD SERVICES INC. vs. FILIPINO MERCHANTS INSURANCE COMPANY, GR. No. 160554, February 21, 2005 FACTS: Mary Jo-Anne De Asis dined at petitioner's Kamayan Restaurant. De Asis was using a Mitsubishi Galant Super Saloon Model 1995 issued by her employer Crispa Textile Inc.. On said date, De Asis availed of the valet parking service of petitioner and entrusted her car key to petitioner's valet counter. Afterwards, a certain Madridano, valet attendant, noticed that the car was not in its parking slot and its key no longer in the box where valet attendants usually keep the keys of cars entrusted to them. The car was never recovered. Thereafter, Crispa filed a claim against its insurer, herein respondent Filipino Merchants Insurance Company, Inc. Having indemnified Crispa for the loss of the subject vehicle, FMICI, as subrogee to Crispa's rights, filed with the RTC at Makati City an action for damages against petitioner Triple-V Food Services, Inc. Petitioner claimed that the complaint failed to adduce facts to support the allegations of recklessness and negligence committed in the safekeeping and custody of the subject vehicle. Besides, when De Asis availed the free parking stab which contained a waiver of petitioners liability in case of loss, she had thereby waived her rights. ISSUE: Whether or not petitioner Triple-V Food Services, Inc. is liable for the loss. HELD: The Supreme Court ruled in the affirmative. In a contract of deposit, a person receives an object belonging to another with the obligation of safely keeping it and returning the same. A deposit may be constituted even without any consideration. It is not necessary that the depositary receives a fee before it becomes obligated to keep the item entrusted for safekeeping and to return it later to the depositor. Petitioner cannot evade liability by arguing that neither a contract of deposit nor that of insurance, guaranty or surety for the loss of the car was constituted when De Asis availed of its free valet parking service.

CA AGRO-INDUSTRIAL DEVELOPMENT CORP. VS CA, 291 SCRA 426 FACTS: Petitioner CA Agro-Industrial Development Corp. and the spouses Ramon and Paula Pugao rented a Safety Deposit Box Security Bank and Trust Company. Certificates of title of parcels of land were then stored therein. Thereafter, a certain Mrs. Margarita Ramos offered to buy two lots from petitioner. Mrs. Ramos demanded the execution of a deed of sale which necessarily entailed the production of the certificates of title. In view thereof, Aguirre, accompanied by the Pugaos, then proceeded to the Bank to open the safety deposit box and get the certificates of title. However, when opened in the presence of the Bank's representative, the box yielded no such certificates. By virtue of which, petitioner filed an action against the bank for the loss. The bank, however, contended that they are not liable for the loss because, aside from the waiver signed by the petitioner, what transpired between them is a contract of lease and not deposit. ISSUE: Whether or not the contractual relation between a commercial bank and another party in a contract of rent of a safety deposit box with respect to its contents placed by the latter one of bailor and bailee or one of lessor and lessee. HELD: The contract for the rent of the safety deposit box is not an ordinary contract of lease as defined in Article 1643 of the Civil Code. However, the Court do not fully subscribe to its view that the same is a contract of deposit that is to be strictly governed by the provisions in the Civil Code on deposit; the contract in the case at bar is a special kind of deposit. It cannot be characterized as an ordinary contract of lease under Article 1643 because the full and absolute possession and control of the safety deposit box was not given to the joint renters the petitioner and the Pugaos. The guard key of the box remained with the respondent Bank; without this key, neither of the renters could open the box. On the other hand, the respondent Bank could not likewise open the box without the renter's key. In this case, the said key had a duplicate which was made so that both renters could have access to the box.

YHT REALTY CORPORATION VS. CA, GR. No. 126780, February 17, 2005 FACTS: Maurice Mcloughlin is an Australian philanthropist, businessman, and a tourist. In his various trips from Australia going to different countries, one of which is the Philippines, he would stay in Tropicana Inn which is owned by YHT Realty Corp. After series of transactions with the inn as depositary of his belongings, he noticed that his money and several jewelries would be either reduced or lost. He then decided to file an action against Tropicana and its innkeepers. However, the latter argued that they have no liability with regard to the loss by virtue of the undertaking signed by Mcloughlin. Such undertaking is a waiver of the inns liability in case of any loss. The RTC and CA both decided that such undertaking is null and void as contrary to the express provisions of the law. Hence, the petition. ISSUE: Whether or not the subject undertaking is null and void HELD: The court ruled in the affirmative. Art. 2003 of the Civil Code provides that, the hotelkeeper cannot free himself from responsibility by posting notices to the effect that he is not liable for the articles brought by the guest. Any stipulation between the hotel-keeper and the guest whereby the responsibility of the former as set forth in Articles 1998 to 2001 is suppressed or diminished shall be void.

E.ZOBEL INC. vs. COURT OF APPEALS, GR. No. 113931, May 6, 1998 FACT: Private respondent spouses Raul and Elea Claveria, doing business under the name "Agro Brokers," applied for a loan with respondent Consolidated Bank and Trust Corporation (now SOLIDBANK) to finance the purchase of two maritime barges and one tugboat which would be used in their molasses business. The loan was granted subject to the condition that respondent spouses will execute a chattel mortgage over the three vessels to be acquired and that a continuing guarantee be executed by Ayala International Philippines, Inc., now petitioner E. Zobel, Inc. in favor of SOLIDBANK. Respondent spouses defaulted in the payment of the entire obligation upon maturity. Hence, SOLIDBANK filed a complaint for sum of money with a prayer for a writ of preliminary attachment against respondent spouses and petitioner. Petitioner moved for dismissal. The trial court denied the motion to dismiss and required petitioner to file an answer. Petitioner assailed the trial courts order. The appellate court dismissed the petition. ISSUE: Whether or not petitioner E. Zobel Inc., under the continuing guaranty obligated itself to SOLIDBANK as a guarantor or a surety. Held: Petitioner under the continuing guaranty obligated itself to SOLIDBANK as a surety. A surety is distinguished from a guaranty in that a guarantor is the insurer of the solvency of the debtor and thus binds himself to pay if the principal is unable to pay, it is the guarantor's own separate undertaking, in which the principal does not join while a surety is the insurer of the debt, and he obligates himself to pay if the principal does not pay and is usually bound with his principal by the same instrument, executed at the same time, and on the same consideration. The contract clearly discloses that petitioner assumed liability to SOLIDBANK, as a regular party to the undertaking and obligated itself as an original promissor. It bound itself jointly and severally to the obligation with the respondent spouses. The use of the term "guarantee" does not ipso facto mean that the contract is one of guaranty. Authorities recognize that the word "guarantee" is frequently employed in business transactions to describe not the security of the debt but an intention to be bound by a primary or independent obligation. The trial court has observed that the interpretation of a contract is not limited to the title alone but to the contents and intention of the parties.

INTERNATIONAL FINANCE CORP. vs. IMPERIAL TEXTILE MILLS INC. GR. No. 160324, Nov. 15, 2005 FACTS: Petitioner International Finance Corporation (IFC) and respondent Philippine Polyamide Industrial Corporation (PPIC) entered into a loan agreement wherein IFC extended to PPIC a loan payable in 16 semi-annual installments with interest at the rate of 10% per annum on the principal amount of the loan advanced and outstanding from time to time. A guarantee agreement was executed with Imperial Textile Mills, Inc. (ITM), Grand Textile Manufacturing Corporation (Grandtex) and IFC as parties. ITM and Grandtex agreed to guarantee PPICs obligations under the loan agreement. There was a reschedule of payments as requested by PPIC. Despite the rescheduling of the installment payments, however, PPIC defaulted. Hence, IFC served a written notice of default to PPIC demanding the latter to pay the outstanding principal loan and all its accrued interests. Despite such notice, PPIC failed to pay the loan and its interests. IFC, together with DBP, applied for the extrajudicial foreclosure of mortgages on the real estate, buildings, machinery, equipment plant and all improvements owned by PPIC. IFC and DBP were the only bidders during the auction sale. PPIC failed to pay the remaining balance, thus, IFC demanded ITM and Grandtex, as guarantors of PPIC, to pay the outstanding balance. However, despite the demand made by IFC, the outstanding balance remained unpaid. Consequently, IFC filed a complaint against PPIC and ITM for the payment of the outstanding balance plus interests and attorneys fees. The trial court held PPIC liable for the payment of the outstanding loan plus interests and attorneys fees. However, the trial court relieved ITM of its obligation as guarantor. On appeal of the case, the Court of Appeals reversed the decision of the trial court. The CA, however, held that ITMs liability as a guarantor would arise only if and when PPIC could not pay. Since PPICs inability to comply with its obligation was not sufficiently established, ITM could not immediately be made to assume the liability. Hence, this petition. Issue: Whether or not ITM is a surety, and thus solidarily liable with PPIC for the payment of the loan. Held: ITM is a surety, and thus solidarily liable with PPIC for the payment of the loan. As Article 2047 provides, a suretyship is created when a guarantor binds itself solidarily with the principal obligor. While referring to ITM as a guarantor, the agreement specifically stated that the corporation was jointly and severally liable. It further stated that ITM was a primary obligor, not a mere surety. ITM thereby brought itself to the level of PPIC and could not be deemed merely secondarily liable. Those words emphasize the nature of their liability, which the law characterizes as a suretyship. Therefore, ITM bound itself to be solidarily liable with PPIC for the latters obligations under the loan agreement with IFC.

PHIL. BLOOMING MILLS INC. vs. CA., GR. No. 142381, Oct. 15, 2003 FACTS: Petitioner Philippine Blooming Mills, Inc. (PBM) obtained a loan from Traders Royal Bank (TRB). Ching, the Senior Vice-President of PBM, signed Deed of Suretyship in his personal capacity and not as mere guarantors but as primary obligors. PBM and Ching filed a petition for suspension of payments with the SEC, and eventually placed under rehabilitation receivership. Consequently, TRB dismissed complaint as to PBM. Ching then alleged that the Deed of Suretyship executed in 1977 could not answer for obligations not yet in existence at the time of its execution. It could not answer for debts contracted by petitioner PBM in 1980 and 1981. No accessory contract of suretyship could arise without an existing principal contract of loan. Issue: Whether or not Ching is liable for credit obligations contracted by Philippine Blooming Mills Inc. against Traders Royal Bank before and after the execution of the Deed of Suretyship. Held: Ching is liable for credit obligations contracted by Philippine Blooming Mills Inc. against Traders Royal Bank before and after the execution of the Deed of Suretyship. This is evident from the tenor of the deed itself, referring to amounts to PBM may now be indebted or may hereafter become indebted to Traders Royal Bank. The law expressly allows a suretyship for future debts. Article 2053 provides that a guaranty may also be given as security for future debts, the amount of which is not yet known, there can be no claim against the guarantor until the debt is liquidated.

ESCANO and SILOS vs. ORTIGAS, Jr., GR. No. 151953, June 29, 2007 FACTS: Private Development Corporation of the Philippines (PDCP) entered into a loan agreement with Falcon Minerals, Inc. whereby PDCP agreed to make available and lend to Falcon a sum certain. Respondent Rafael Ortigas, Jr., et al., stockholder officers of Falcon, executed an Assumption of Solidary Liability whereby they agreed to assume in their individual capacity, solidary liability with Falcon for the due and punctual payment of the loan contracted by Falcon with PDCP. Two separate guaranties were executed to guarantee the payment of the same loan by other stockholders and officers of Falcon, acting in their personal and individual capacities. One Guaranty was executed by petitioner Salvador Escao, while the other by petitioners Mario M. Silos, Ricardo C. Silverio, et al. Two years later, an agreement developed to cede control of Falcon to Escao, Silos and Joseph M. Matti. Thus, contracts were executed whereby Ortigas, George A. Scholey, Inductivo and the heirs of then already deceased George T. Scholey assigned their shares of stock in Falcon to Escao, Silos and Matti. Part of the consideration that induced the sale of stock was a desire by Ortigas, et al., to relieve themselves of all liability arising from their previous joint and several undertakings with Falcon, including those related to the loan with PDCP. Thus, an Undertaking was executed by the concerned parties with Escao, Silos and Matti identified in the document as sureties, on one hand, and Ortigas, Inductivo and the Scholeys as obligors, on the other. However, Falcon subsequently defaulted in its payments. After PDCP foreclosed on the chattel mortgage, there remained a subsisting deficiency of P5,000,000, which Falcon did not satisfy despite demand. In order to recover the indebtedness, PDCP filed a complaint for sum of money against Falcon, Ortigas, Escao, Silos, Silverio and Inductivo. Ortigas filed together with his answer a cross-claim against his co-defendants Falcon, Escao and Silos, and also manifested his intent to file a thirdparty complaint against the Scholeys and Matti. The cross-claim lodged against Escao and Silos was predicated on the 1982 Undertaking, wherein they agreed to assume the liabilities of Ortigas with respect to the PDCP loan. Escao, Ortigas and Silos each sought to seek a settlement with PDCP. The first to come to terms with PDCP was Escao, who entered into a compromise agreement. In exchange, PDCP waived or assigned in favor of Escao 1/3 of its entire claim in the complaint against all of the other defendants in the case. Then Ortigas entered into his own compromise agreement with PDCP, allegedly without the knowledge of Escao, Matti and Silos. Thereby, Ortigas agreed to pay PDCP P1.3M as full satisfaction of the PDCPs claim against Ortigas. Silos and PDCP entered into a Partial Compromise Agreement whereby he agreed to pay P500k in exchange for PDCPs waiver of its claims against him. In the meantime, after having settled with PDCP, Ortigas pursued his claims against Escao, Silos and Matti, on the basis of the 1982 Undertaking. He initiated a third-party complaint against Matti and Silos, while he maintained his cross-claim against Escao. RTC issued the Summary Judgment, ordering Escao, Silos and Matti to pay Ortigas, jointly and severally, the amount of P1.3M, as well as

P20K in attorneys fees. The trial court ratiocinated that none of the third-party defendants disputed the 1982 Undertaking. ISSUE: Whether or not petitioners are solidarily liable to respondent Ortigas. Held: Petitioners are not solidarily liable to respondent Ortigas. In case there is a concurrence of two or more creditors or of two or more debtors in one and the same obligation, Article 1207 of the Civil Code states that among them, there is a solidary liability only when the obligation expressly so states, or when the law or the nature of the obligation requires solidarity. Article 1210 supplies further that the indivisibility of an obligation does not necessarily give rise to solidarity. Nor does solidarity of itself imply indivisibility. Thus, the presumption is that the obligation is only joint. It thus becomes incumbent upon the party alleging that the obligation is indeed solidary in character to prove such fact with a preponderance of evidence. The Undertaking does not contain any express stipulation that the petitioners agreed to bind themselves jointly and severally in their obligations to the Ortigas group, or any such terms to that effect. Hence, such obligation established in the Undertaking is presumed only to be joint. Ortigas, as the party alleging that the obligation is in fact solidary, bears the burden to overcome the presumption of jointness of obligations. He has failed to discharge such burden. The term surety has a specific meaning under our Civil Code. As provided in Article 2047 in a surety agreement the surety undertakes to be bound solidarily with the principal debtor. Thus, a surety agreement is an ancillary contract as it presupposes the existence of a principal contract. It appears that Ortigas argument rests solely on the solidary nature of the obligation of the surety under Article2047. In tandem with the nomenclature sureties accorded to petitioners and Matti in the Undertaking, however, this argument can only be viable if the obligations established in the Undertaking do partake of the nature of a suretyship as defined under Article 2047 in the first place. That clearly is not the case here, notwithstanding the use of the nomenclature sureties in the Undertaking.

TUPAZ IV and TUPAZ v. CA and BPI, GR. No. 145578, Nov. 18, 2005 FACTS: Petitioners Jose Tupaz IV and Petronila Tupaz were Vice-President for Operations and Vice-President/Treasurer, respectively, of El Oro Engraver Corporation. El Oro Corporation had a contract with the Philippine Army to supply the latter with survival bolos. Petitioners, on behalf of El Oro Corporation, applied with respondent Bank of the Philippine Island for two commercial letters of credit to finance the purchase of the raw materials for the survival bolos. The letters of credit were in favor of El Oro Corporations suppliers, Tanchaoco Manufacturing Incorporated and Maresco Rubber and Retreading Corporation. Respondent bank granted petitioners application and issued two letters of credit. Simultaneously, petitioners signed trust receipts in favor of respondent bank. On September 30, 1981, petitioner Jose Tupaz signed, in his personal capacity, a trust receipt corresponding to one letter of credit while on October 9, 1981, both petitioners signed, in their capacities as officers of El Oro Corporation, a trust receipt corresponding to the other. After Tanchaoco Incorporated and Maresco Corporation delivered the raw materials to El Oro Corporation, respondent bank paid the former. When petitioners did not comply with their undertaking under the trust receipts after respondent banks several demands, the latter charged petitioners with estafa under the Trust Receipts Law. The trial court acquitted petitioners of estafa on reasonable doubt however it found petitioners solidarily liable with El Oro Corporation for the balance of El Oro Corporations principal debt under the trust receipts. Petitioners appealed to the Court of Appeals contending that their acquittal operates to extinguish their civil liability and so they are not personally liable for El Oro Corporations debts. The Court of Appeals affirmed the trial courts ruling. Hence, this petition. ISSUE: Whether or not petitioners are solidarily liable with El Oro Corporation. HELD: In the trust receipt dated 9 October 1981, petitioners signed as officers of El Oro Corporation. By so signing that trust receipt, petitioners did not bind themselves personally liable for El Oro Corporations obligation. Hence, for the trust receipt dated 9 October 1981, petitioners are not personally liable for El Oro Corporations obligation. For the trust receipt dated 30 September 1981, petitioner Jose Tupaz signed alone in his personal capacity, he did not indicate that he was signing as El Oro Corporations Vice-President for Operations. Hence, petitioner Jose Tupaz bound himself personally liable for El Oro Corporations debts. Not being a party to the trust receipt dated 30 September 1981, petitioner Petronila Tupaz is not liable under such trust receipt.