Overseas Bank of Manila vs.

Cordero Facts: Private respondent opened a 1-year time deposit with petitioner bank amounting to P80,000, with interest of 6% p.a. Due to its distressed financial condition, the bank was unable to pay. Cordero instituted an action before the CFI Manila. Petitioner raised the defenses of insolvency and prejudice to other depositors. The lower court, and the Court of Appeals, ruled in favor of Cordero. Hence, the instant petition for review on certiorari. Certain supervening events rendered the issue moot and academic. Respondent’s brother and attorney -in-fact sent a letter to the Commercial Bank of Manila (petitioner’s successor-in-interest), acknowledging receipt of P10,000, and another manifestation for P73,840, with waiver of damages. Upon further examination, it was found that the respondent’s brother has no SPA. Respondent’s brother submitted the SPA, with expl anatory comment that the waiver applies only to third party claims, suits and damages, not to interest and attorney ’s fees. Issue: Whether respondent is entitled to interest and attorney’s fees Held: The obligation to pay interest on the deposit ceases the moment the operation of the bank is completely suspended by the Central Bank. Neither can respondent Cordero recover attorney’s fees. Petitioner’s refusal to pay was not due to a willful and dishonest refusal to comply with its obligation but to restrictions imposed by Central Bank. THE CONSOLIDATED BANK and TRUST CORPORATION vs. COURT OF APPEALS and L.C. DIAZ and CO MPANY, CPA’s G.R. No. 138569, Sep 11, 2003. FACT: Petitioner Solidbank is a domestic banking corporation organized and existing under Philippine laws. Private respondent L.C. Diaz and Company, CPA’s, is a professional partnership engaged in the practice of accounting. In March 1976, L.C. Diaz opened a savings account with Solidbank. On 14 August 1991, L.C. Diaz through its cashier, Mercedes Macaraya, filled up a savings (cash) deposit slip for P990 and a savings (checks) deposit slip for P50. Macaraya instructed the messenger of L.C. Diaz, Ismael Calapre, to deposit the money with Solidbank. Macaraya also gave Calapre the Solidbank passbook. Calapre went to Solidbank and presented to Teller No. 6 the two deposit slips and the passbook. The teller acknowledged the receipt of the deposit by returning to Calapre the duplicate copies of the two deposit slips. Teller No. 6 stamped the deposit slips with the words ―DUPLICATE‖ and ―SAVING TELLER 6 SOLIDBANK HEAD OFFICE.‖ Since the transaction took time and Calapre h ad to make another deposit for L.C. Diaz with Allied Bank, he left the passbook with Solidbank. Calapre then went to Allied Bank. When Calapre returned to Solidbank to retrieve the passbook, Teller No. 6 informed him that ―somebody got the passbook.‖ Calapre went back to L.C. Diaz and reported the incident to Macaraya. Macaraya immediately prepared a deposit slip in duplicate copies with a check of P200,000. Macaraya and Calapre went to Solidbank and presented to Teller No. 6 the deposit slip and check. The teller stamped the words ―DUPLICATE‖ and ―SAVING TELLER 6 SOLIDBANK HEAD OFFICE‖ on the duplicate copy of the deposit slip. When Macaraya asked for the passbook, Teller No. 6 told Macaraya that someone got the passbook but she could not remember to whom she gave the passbook. When Macaraya asked Teller No. 6 if Calapre got the passbook, Teller No. 6 answered that someone shorter than Calapre got the passbook. Calapre was then standing beside Macaraya. The following day L.C. Diaz learned of the unauthorized withdrawal the day before (14 August 1991) of P300,000 from its savings account. The withdrawal slip for the P300,000 bore the signatures of the authorized signatories of L.C. Diaz, namely Diaz and Rustico L. Murillo. The signatories, however, denied signing the withdrawal slip. A certain Noel Tamayo received the P300,000. L.C. Diaz demanded from Solidbank the return of its money. Solidbank refused. L.C. Diaz filed a Complaint for Recovery of a Sum of Money against Solidbank. The trial court absolved Solidbank. L.C. Diaz appealed to the CA. CA reversed the ecision of the trial court. CA denied the motion for reconsideration of Solidbank. But it modified its decision by deleting the award of exemplary damages and attorney’s fees. He nce this petition. ISSUE: WON petitioner Solidbank is liable. RULING: Yes. Solidbank is liable for breach of contract due to negligence, or culpa contractual. The contract between the bank and its depositor is governed by the provisions of the Civil Code on simple loan. Article 1980 of the Civil Code expressly provides that ―x x x savings x x x deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan.‖ There is a debtor-creditor relationship between the bank and its depositor. The bank is the debtor and the depositor is the creditor. The depositor lends the bank money and the bank agrees to pay the depositor on demand. The savings deposit agreement between the bank and the depositor is the contract that determines the rights and obligations of the parties. The law imposes on banks high standards in view of the fiduciary nature of banking. The bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship. This fiduciary relationship means that the bank’s obligation to observe ―high standards of integrity and performance‖ is deem ed written into every deposit agreement between a bank and its depositor. The fiduciary nature of banking requires banks to assume a degree of diligence higher than that of a good father of a family. Article 1172 of the Civil Code states that the degree of diligence required of an obligor is that prescribed by law or contract, and absent such stipulation then the diligence of a good father of a family. Section 2 of RA 8791 prescribes the statutory diligence required from banks – that banks must observe ―high standards of integrity and performance‖ in servicing their depositors. However, the fiduciary nature of a bank-depositor relationship does not convert the contract between the bank and its depositors from a simple loan to a trust agreement, whether express or implied. Failure by the bank to pay the depositor is failure to pay a simple loan, and not a breach of trust. The law simply imposes on the bank a higher standard of integrity and performance in complying with its obligations under the contract of simple loan, beyond those required of non-bank debtors under a similar contract of simple loan. The fiduciary nature of banking does not convert a simple loan into a trust agreement because banks do not accept deposits to enrich depositors but to earn money for themselves. Solidbank’s Breach of its Contractual Obligation Article 1172 of the Civil Code provides that ―responsibility arising from negligence in the performance of every kind of obligation is demandable.‖ For breach of the savings deposit agreement due to negligence, or culpa contractual, the bank is liable to its depositor. Calapre left the passbook with Solidbank because the ―transaction took time‖ and he had to go to Allied Bank for another transaction. The passbook was still in the hands of the employees of Solidbank for the processing of the deposit when Calapre left Solidbank. When the passbook is in the possession of Solidbank’s tellers during withdrawals, the law imposes on Solidbank and its tellers an even higher degree of diligence in safeguarding the passbook. Solidbank’s tellers must exercise a high degree of diligence in insuring that they return the pas sbook only to the depositor or his authorized representative. For failing to return the passbook to Calapre, the authorized representative of L.C. Diaz, Solidbank and Teller No. 6 presumptively failed to observe such high degree of diligence in safeguarding the passbook, and in insuring its return to the party authorized to receive the same. In culpa contractual, once the plaintiff proves a breach of contract, there is a presumption that the defendant was at fault or negligent. The burden is on the defendant to prove that he was not at fault or negligent. In contrast, in culpa aquiliana the plaintiff has the burden of proving that the defendant was negligent. In the present case, L.C. Diaz has established that Solidbank breached its contractual obligation to return the passbook only to the authorized representative of L.C. Diaz. There is thus a presumption that Solidbank was at fault and its teller was negligent in not returning the passbook to Calapre. The burden was on Solidbank to prove that there was no negligence on its part or its employees. But Solidbank failed to discharge its burden. Solidbank did not present to the trial court Teller No. 6, the teller with whom Calapre left the passbook and who was supposed to return the passbook to him. Solidbank also failed to adduce in evidence its standard procedure in verifying the identity of the person retrieving the passbook, if there is such a procedure, and that Teller No. 6 implemented this procedure in the present case. Solidbank is bound by the negligence of its employees under the principle of respondeat superior or command responsibility. The defense of exercising the required diligence in the selection and supervision of employees is not a complete defense in culpa contractual, unlike in culpa aquiliana. The bank must not only exercise ―high standards of integrity and performance,‖ it must also insure that its employees do likewise beca use this is the only way to insure that the bank will comply with its fiduciary duty Proximate Cause of the Unauthorized Withdrawal Proximate cause is that cause which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury and without which the result would not have occurred. Proximate cause is determined by the facts of each case upon mixed considerations of logic, common sense, policy and precedent. L.C. Diaz was not at fault that the passbook landed in the hands of the impostor. Solidbank was in possession of the passbook while it was processing the deposit. After completion of the transaction, Solidbank had the contractual obligation to return the passbook only to Calapre, the authorized representative of L.C. Diaz. Solidbank failed to fulfill its contractual obligation because it gave the passbook to another person. Had the passbook not fallen into the hands of the impostor, the loss of P300,000 would not have happened. Thus, the proximate cause of the unauthorized withdrawal was Solidbank’s negligence in not returning the passbook to Calapre.

On appeal to the then Court of Appeals.00 as of June 4. The latter excepted to one drum.00 which is the value of the insurance recovered and the amount of P10.000. so that it became subrogated to all the rights of action of said consignee against defendants Defendants filed their respective answers. as amended.On June 7. goods or credits.000. Japan for delivery vessel "SS EASTERN COMET" owned by defendant Eastern Shipping Lines under Bill of Lading  shipment was insured under plaintiff's Marine Insurance Policy for P36. plaintiff was compelled to pay the consignee P19. PACITA F.000. Incorporated are hereby ordered to pay . shall be twelve (12%) per cent per annum. there being no stipulation to the contrary.00 which is the value of the boat F B Pacita Ill together with its accessories.C. ISSUE (1) Whether the applicable rate of legal interest is 12% or 6%. the judgment appealed from is modified such that defendants-appellants Shell Refining Co. the one who had the last clear opportunity to avoid the loss but failed to do so. who had the last fair chance to prevent the impending harm by the exercise of due diligence. goods or credits does not fall within the coverage of the said law for it is not within the ambit of the authority granted to the Central Bank. (Phils. Inc. it was discharged unto the custody of defendant Metro Port Service.000. the decision of the Court of Appeals is AFFIRMED with MODIFICATION. 116. in the absence of express contract as to such rate of interest. judgment was rendered by the Court of First instance of Cebu in Civil Case No.What kind of judgment is covered under USURY Law? RULING Article 2209 of the Civil Code is applicable in case at bar. should a judgment debtor pay the judgment creditor?WON legal interest meant 6% as provided for under Article 2209 of the Civil Code . 1972 with legal interest from the filing of the complaint until paid and to pay attorney's fees of P5.382.466.). 416 dated July 29. according to the circumstances. REFORMINA and HEIRS OF FRANCISCO REFORMINA. 1972.‖ This means that if the defendant exercised the proper diligence in the selection and supervision of its employee. On appeal by defendants.084. or if the plaintiff was guilty of contributory negligence. petitioners. otherwise known as the "Usury Law" the Monetary Board in its Resolution No. Any other kind of monetary judgment which has nothing to do with. Incorporated to pay jointly and severally the following persons: (g) Plaintiffs Pacita and Francisco Reformina the sum of P131.95 under the aforestated marine insurance policy. THE HONORABLE VALERIANO P. J. due to the fault and negligence of defendants. 1974. much less forbearances of any money. we hold that L. shall be the payment of interest agreed upon. TOMOL. and the debtor incurs in delay. It must be noted that the decision herein sought to be executed is one rendered in an Action for Damages for injury to persons and loss of property and does not involve any loan. said to be in bad order. where neither the contributory negligence of the plaintiff nor his last clear chance to avoid the loss.38 Upon arrival of the shipment in Manila on December 12.032.00 compensation for the value of the lost boat with legal interest from the filing of the complaint until fully paid to Pacita F. but nonetheless. the legal interest which is six percent per annum. 416 which provides — By virtue of the authority granted to it under Section 1 of Act 2655. it still exercised extra ordinary care and diligence in the handling/delivery of the cargo to consignee in the same condition shipment was received by it. the indemnity for damages. This Circular shall take effect immediately.00 with legal interests from the filing of the complaint until paid as compensatory and moral damages and P41. as amended. goods or credits.C. nor involving loans or forbearance of any money. 1994 | Vitug. or where it is impossible to determine whose fault or negligence caused the loss. Claims were presented against defendants who failed and refused to pay the same As a consequence of the losses sustained. 1982 defendant Allied Brokerage Corporation received the shipment from defendant Metro Port Service. 1982. 1974.00 with costs against defendants and third party plaintiffs. (Italics supplied) The judgments spoken of and referred to are Judgments in litigations involving loans or forbearance of any 'money. Eastern Shipping Lines. defendant Allied Brokerage Corporation made deliveries of the shipment to the consignee's warehouse. Petitioners' motion for the reconsideration of the questioned Resolution having been denied.00 a month as the estimated monthly loss suffered by them as a result of the fire of May 6.000. arrastre operator and broker-forwarder for damages sustained by a shipment while in defendants' custody. . We do not apply the doctrine of last clear chance to the present case. and in the absence of stipulation. As correctly argued by the private respondents. is no longer its liability Metroport averred that although subject shipment was discharged unto its custody. If the obligation consists in the payment of a sum of money. Diaz must shoulder 40% of the actual damages awarded by the appellate court.. The antecedent negligence of the plaintiff does not preclude him from recovering damages caused by the supervening negligence of the defendant. judgment is hereby rendered in favor of the plaintiffs and third party defendants and against the defendants and third party plaintiffs as follows: Ordering defendants and third party plaintiffs Shell and Michael. 1969 up to the time they are actually paid or already the total sum of P370.95. Inc V. vs. the trial court's judgment was modified to reads as follows — WHEREFORE. JR This is a a Petition for Review on certiorari of the Resolution of CFI-Cebu Judge Tomol for an action for Recovery of Damages for injury to Person and Loss of Property. the appellate court denied the same and affirmed in toto the decision of the trial court. Court Of Appeals | July 12. 2 the dispositive portion of which reads— WHEREFORE. The two (2) defendants. The liability of the two defendants for an the awards is solidary. 2655. two fiber drums of riboflavin were shipped from Yokohama.Reformina and the heirs of Francisco Reformina. This is a case of culpa contractual. Keywords: FACTS____________________________________________________________ This is an action against defendants shipping company. In this case. R-11279. goods. Applying the same ruling to this case. is chargeable with the loss. we allocated the damages between the depositor and the bank on a 40-60 ratio. one drum opened and without seal On January 8 and 14. Diaz was guilty of contributory negligence in allowing a withdrawal slip signed by its authorized signatories to fall into the hands of an impostor.. the consignee suffered losses totaling P19. Solidbank must pay the other 60% of the actual damages. 416 applicable to any case other than those specifically provided for by the Usury Law will make the same of doubtful constitutionality since the Monetary Board will be exercising legislative functions which was beyond the intendment of P. No. L. has prescribed that the rate of interest for the loan or forbearance of any money. Central Bank Circular No.032. Thus. or credits and the rate allowed in judgments.. The trial court ruled in favor of plaintiff an ordered defendants to pay the former with present legal interest of 12% per annum from the date of the filing of the complaint. 1622 dated July 29.Doctrine of Last Clear Chance The doctrine of last clear chance states that where both parties are negligent but the negligent act of one is appreciably later than that of the other. Such contributory negligence or last clear chance by the plaintiff merely serves to reduce the recovery of damages by the plaintiff but does not exculpate the defendant from his breach of contract Mitigated Damages Under Article 1172. the liability of Solidbank should be reduced. they now come before Us through the instant petition praying for the setting aside of the said Resolution and for a declaration that the judgment in their favor should bear legal interest at the rate of twelve (12%) percent per annum pursuant to Central Bank Circular No. Inc. Inc. CA where the Court held the depositor guilty of contributory negligence. fishing gear and equipment minus P80. 1981. and Michael. ―liability (for culpa contractual) may be regulated by the courts.D.000. portion of the same was already in bad order Allied Brokerage alleged that plaintiff has no cause of action against it.appellants are also directed to pay P100. The above provision remains untouched despite the grant of authority to the Central Bank by Act No. which damage was unknown to plaintiff On January 7. WHEREFORE. the law applicable to the said case is Article 2209 of the New Civil Code which reads — Art. not having negligent or at fault for the shipment was already in damage and bad order condition when received by it. by way of legal interest. The latter excepted to one drum which contained spillages. while the rest of the contents was adulterated/fake Plaintiff contended that due to the losses/damage sustained by said drum. In PBC v. 1981. ISSUE How much. then the courts may reduce the award of damages. would exonerate the defendant from liability. 2209. filed by the insurer-subrogee who paid the consignee the value of such losses/damages On December 4. traversing the material allegations of the complaint contending that: As for defendant Eastern Shipping it alleged that the shipment was discharged in good order from the vessel unto the custody of Metro Port Service so that any damage/losses incurred after the shipment was incurred after the shipment was turned over to the latter. To make Central Bank Circular No.

The interest due shall be 12% PA to be computed fro default. Interest can no be charged as lender and borrower may agree upon.999. FNCB's Assistant Vice President.999. to FNCB. Hence. goods or credit of 12% per annum. (3) The Court held that it should be computed from the decision rendered by the court a quo. (2) From the date the judgment is made. With regard to the second transaction..999. AUTOWORLD reluctantly paid FNCB P10.666.242.026. the rate of legal interest shall be 12% per annum from such finality until satisfaction. is a financing company doing business with private respondent Autoworld Sales Corporation (AUTOWORLD) since 1975. then signed a promissory note in favor of FNCB worth P5.999. Issue: Whether or not the interest rate stipulated upon was valid.999. and hence. AUTOWORLD and BARRETTO. AUTOWORLD's request for loan was denied. Sometime in August 1980 Anthony Que. it overpaid P2. When an obligation. Pio Barretto (BARRETTO) would execute a Contract to Sell a parcel of land in favor of AUTOWORLD for P12. CB Circular 905 did not repeal nor in any way amend the Usury Law but simply suspended the latter’s effectivity.000. situated in San Miguel. however. the interest charged by Gonzales on the loans was unconscionable.480. SC held that the stipulated rate of interest at 5.AUTOWORLD SALES CORPORATION. The mechanics of the proposed "IPP" transaction was — (1) First.000. 871 dated 21 July 1981 had effectively lifted the ceiling rates for loans having a period of more than three hundred sixty-five (365) days.736.60 payable in sixty (60) consecutive and equal monthly installments of P216. or purchase of receivables at a discount. Gonzales filed with the RTC of Bulacan a complaint for collection of the full amount of the loan.66.000 loan was excessive. (3) BARRETTO. BARRETTO would mortgage the property subject of the sale to FNCB. the Usury Law has been rendered ineffective.vs. contrary to morals. Nevertheless.5% per month on the P500. and penalty charge of 1% per month.604. According to AUTOWORLD. and (4) Lastly. AUTOWORLD began paying the installments.5% per month. Consequently.666.60 from BARRETTO at a discounted value of P6.44 to settle the first transaction and P418. applied for a direct loan with FNCB.408. Held: NO.60 worth of receivables from AUTOWORLD. since the Usury Law imposed an interest rate ceiling at that time. Manila. Anthony Que. an interest on the amount of damaes awarded may be imposed at the discretion of the court at the rate of 6% per annum. However.66 on the first transaction ("IPP" worth P6.00 to settle the second transaction. Where the demand is established with reasonable certainty. the existence of a usurious interest rate had no bearing on the P3. informed Anthony Que that although it could not grant direct loans it could extend funds to AUTOWORLD by purchasing any of its outstanding receivables at a discount.999. 129763 for the price of P12. not constituting a loan or forbearance of money. HELD (1) The Court held that the legal interest is 6% computed from the decision of the court a quo. if not against the law. On 9 February 1981 the parties signed three (3) contracts to implement the "IPP" transaction: (1) Contract to Sell whereby BARRETTO sold a parcel of land to AUTOWORLD. execute a Deed of Assignment (in favor of FNCB) obliging AUTOWORLD to pay the installments of the P12. subject to the condition that the assignee (FNCB) has the right of recourse against the assignor (BARRETTO) in the event that the payor (AUTOWORLD) defaulted in the payment of its obligations. J or EJD. this petition for review on certiorari.000. petitioner. Medel failed to pay their indebtedness. also held the same position at its affiliate corporation. whether intended as an indemnity or a penalty if they are iniquitous or unconscionable.262.999. would in turn.000.736. When the judgment of the court awarding a sum of money becomes final and executor. Hence.00 on the second transaction (loan worth P3. FNCB informed Anthony Que that it was not engaged in direct lending. mortgaged the property subject of the Contract to Sell to FNCB as security for payment of its obligation under the Deed of Assignment.026. despite its objections. On 5 January 1983 AUTOWORLD asked FNCB for a refund of its overpayments in the total amount of P3.551.082. or 66% per annum. president of AUTOWORLD. Only a law can repeal another law.66. this interim period being deemed to be by then an equivalent to a forbearance of money. The stipulation is void. stipulated upon by the parties in the promissory note was unconscionable. FACTS: Petitioner Investors Finance Corporation.408. After a series of negotiations the parties agreed to execute an Installment Paper Purchase ("IPP") transaction to enable AUTOWORLD to acquire the additional capital it needed. To secure the promissory note. By virtue of this circular. as co-makers. On 18 June 1982 AUTOWORLD transacted with FNCB for the second time obtaining a loan of P3. as assignor. BARRETTO would acquire P12.24 was the amount to settle the first transaction while P3.999.586.784. AUTOWORLD alleged that the aforementioned contracts were only perfected to facilitate a usurious loan and therefore should be annulled FNCB argued that the contracts dated 9 February 1981 were not executed to hide a usurious loan. But sometime thereafter.00). Thus. On 27 December 1982 FNCB replied that it would only be willing to reconcile its accounting records with AUTOWORLD upon payment of the amounts demanded. CA [299 SCRA 481 (Nov 27 1998)] Usury Law Facts: Medel obtained several loans from Gonzales totalling P500. covered by TCT No. which FNCB could legally engage in as a financing company. CA reversed the ruling of the RTC holding that the Usury Law had become legally inexistent. Medel vs. On maturity.84.00. On 20 December 1982 AUTOWORLD wrote FNCB that it disagreed with the latter's computation of its outstanding balances. the interest shll begin to run only from the date of judgment of the court is made.980.54 was the amount to settle the second transaction.999.5% per month with additional service charge of 2% per annum. in behalf of AUTOWORLD.(2) Whether the payment of legal interest on the award for loss or damage is to be computed from the time the complaint is filed from the date the decision appealed from is rendered. the interest shall begin to run from the time the claim is made judicially or EJ but when such certainty cannot be so reasonably established at the time the demand is made. together with the improvements thereon.78 through its UCPB account.000. consequently. title and interest to all the money and other receivables due from AUTOWORLD under the Contract to Sell. FNCB sent AUTOWORLD its computation requiring it to pay a total amount of P10. the Deed of Assignment and the Real Estate Mortgage all dated 9 February 1981. to secure the payment of the receivables under the Deed of Assignment. (2) Deed of Assignment whereby BARRETTO assigned and sold in favor of FNCB all its rights. After the three (3) contracts were concluded AUTOWORLD started paying the monthly installments to FNCB. then known also as FNCB Finance (now doing business under the name of Citytrust Finance Corporation).78. INVESTORS FINANCE CORPORATION.00 subject to the condition that such amount would be "flowed back" to AUTOWORLD. and PIO BARRETTO REALTY DEVELOPMENT CORPORATION. SC ordered that the interest of 12% per annum and additional 1% a month penalty charge as liquidated damages reasonable. Manila.respondents. it ruled that although the Usury Law had been repealed. In December 1982. . (2) FNCB would then purchase the receivables worth P12. Mr. No interest shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. SC held that the interest of 5. it could not consider the rate ―usurious‖ because CB Circular No. However. These were evidenced by several promissory notes agreeing to an interest rate of 5.999.60 payable in sixty (60) equal monthly installments of P216.00 with an effective interest rate of 28% per annum.00) and three (3) monthly installments of P93.60 purchase price directly to FNCB.000.000. The lawyers of FNCB then drafted the contracts needed and furnished Anthony Que with copies thereof. the parties entered into a legitimate Installment Paper Purchase ("IPP") transaction. It likewise prayed for the nullification of thePromissory Note dated 18 June 1982 and the Real Estate Mortgage dated 24 June 1982. In its complaint. AUTOWORLD mortgaged a parcel of land located in Sampaloc. private respondent Pio Barretto Realty Corporation (BARRETTO).035. Leoncio Araullo. RTC declared that the promissory notes were genuine. Thereafter. A CB Circular cannot repeal a law.666.980.021.165. The parties attempted to reconcile their accounting figures but the subsequent negotiations broke down prompting AUTOWORLD to file an action before the Regional Trial Court of Makati to annul the Contract to Sell. where P6. is breached. Instead.00 loan since at the time it was perfected on 18 January 1982 Central Bank Circular No.000.000. The courts shall reduce equitably liquidated damages. AUTOWORLD advised FNCB that it intended to preterminate the two (2) transactions by paying their outstanding balances in full. 905 has expressly removed the interest ceilings prescribed by the Usury Law and that said law is now legally inexistent.00 payable in sixty (60) consecutive monthly installments of P93. It then requested FNCB to provide a computation of the remaining balances. (3) Real Estate Mortgage whereby BARRETTO. RTC applied the legal rate of interest for loan of money. On 17 November 1980 FNCB informed AUTOWORLD that its Executive Committee approved the proposed "IPP" transaction. after paying nineteen (19) monthly installments of P216. Hence.

000.00 within 2 months from date of its execution plus 6% interest per month for each loan. Item Nos.921. In usurious loans.00.78 in interests. Third. It can be seen that out of the nine (9) items of appropriation stated (in the letter). Subsequently. the Usury Law recognizes the legitimate purchase of negotiable mercantile paper by innocent purchasers. defendant-appellee was able to collect P3. then BARRETTO. 2006 Facts: Petitioner Theresa Macalalag obtained loans from Grace Estrella on 2 separate occasions. under any cloak or device whatever. Art.000. Fourth.980.78 in interests from appellant.980.00 was really a usurious loan extended to AUTOWORLD.00 to petitioner to settle some of AUTOWORLD's previous debts to it.000. The pivotal issue therefore is whether the three (3) contracts all dated 9 February 1981 were executed to implement a legitimate Installment Paper Purchase ("IPP") transaction or merely to conceal a usurious loan.980.44 as excess interest payments over the 12% ceiling rate. All in all. AUTOWORLD was not entitled to any reimbursement since it was unable to prove the existence of a usurious loan. People of the Philippines December 20.00 . the promissory note evidencing the second transaction glaringly bore the 28% interest rate on its face. Also. Parol evidence is admissible to show that a written document though legal in form was in fact a device to cover usury. the whole P200. usurious or otherwise.00. appellant may recover P2. with no more ceiling rates to hinder it.Applying the 12% interest ceiling rate mandated by the Usury Law. In the instant case. it would have directly loaned the money to AUTOWORLD with an interest rate higher than 12%.921. And in its subsequent letter of 24 February 1981 petitioner also gave instructions on how BARRETTO should apply the proceeds worth P6. instead. only if the purchaser had no intention of evading the provisions of the Usury Law and that the purchase was not a part of the original usurious transaction.999. "However.217. we do not agree with the amount of reimbursement awarded to AUTOWORLD. AUTOWORLD obtained a loan of P6.00 in interests. The borrower may recover in accordance with the laws on usury. we are now tasked to determine how much reimbursement AUTOWORLD is entitled to. would have received the whole purchase price. Whether the Contract to Sell was fictitious or not would have no effect on its right to claim the receivables of BARRETTO from AUTOWORLD since the two contracts were entirely separate and distinct from each other. which was implemented through the three (3) contracts of 9 February 1981. Macalalag vs. it paid nineteen (19) consecutive installments of P216. the maker of said note shall have the right to recover from said original holder the whole interest paid by him thereon and. Second. AUTOWORLD should have only paid a total of P1. each in amount of P100. bearing an interest of 10% per month.586. Thus. the law itself made a qualification. petitioner claims that it was never a party to the Contract to Sell between AUTOWORLD and BARRETTO.980. But even the law has anticipated the potential abuse of such transactions to conceal usurious loans.000.000. If it were true that petitioner was never privy to the Contract to Sell. in any case of litigation. Otherwise.400.On 11 July 1988 the Regional Trial Court of Makati ruled in favor of FNCB declaring that the parties voluntarily and knowingly executed a legitimate "IPP" transaction or the discounting of receivables. 1957 of the Civil Code provides — Contracts and stipulations. If it were a genuine "IPP" transaction then petitioner would not have designated the money to be released as "loan proceeds" and BARRETTO would have been the end recipient of such proceeds with no obligation to turn them over to AUTOWORLD.44.24 to settle it.00 per year. . Curiously however.058. BARRETTO had to yield P4. per instruction of petitioner in its letter to BARRETTO dated 17 November 1980 the whole purchase price of the receivables was to be "flowed back" to AUTOWORLD.784.00 to AUTOWORLD.00. However. petitioner admitted that its lawyers were the ones who drafted all the three (3) contracts involved which were executed on the same day.980. if the borrower pays P200. Thus. ISSUE: We stress at the outset that this petition concerns itself only with the first transaction involving the alleged' "IPP" worth P6.217. to becloud the crime of usury.605.000. intended to circumvent the laws on usury shall be void. not just the portion thereof in excess of the interest allowed by law. As to the second transaction.00 would be released to BARRETTO only upon submission of the documents it required. the creditor can always recover the principal debt. and free to dispose of such proceeds in any manner it wanted.468. the appellate court ruled that at the time it was executed the ceiling rates imposed by the Usury Law had already been lifted thus allowing the parties to stipulate any rate of interest. after the interest rate ceilings were lifted on 21 July 1981 petitioner extended on 18 June 1982 a direct loan of P3. And as previously mentioned.980. and further paid a balance of P6. These contracts should therefore be declared void.901.999. However.980.035. Computed at 12% the effective interest should have been P1. AUTOWORLD is entitled to recover the whole usurious interest amounting to P3. Hence. It would recognize legitimate purchase of negotiable mercantile paper. also the costs and such attorney's fees as may be allowed by the court.035. representing overpayment arising from usurious interest rate charged by appellee.78.00.00 should be "flowed back" to AUTOWORLD. It ordered the annulment of the contracts and required FNCB to reimburse AUTOWORLD P2." In that letter. We are therefore of the impression that had there been no interest rate ceilings in 1981.666.00. Macalalag executed an affirmation receipt promising to pay Estrella the value of the loans in the amount of P200. AUTOWORLD paid a total of P3. 2-8 had to be returned to petitioner. then why was it interested in appraising the lot six (6) months prior to the sale? And why did petitioner's own lawyers prepare the Contract to Sell? Obviously. While we do not dispute the appellate court's finding that the first transaction was a usurious loan. And no longer having a need to cloak the exorbitant interest rate. in its 17 November 1980 letter to BARRETTO. That nothing herein contained shall be construed to prevent the purchase by an innocent purchaser of a negotiable mercantile paper.217. the circumstances cited prove that the P6. For the 23-month period of the existence of the loan covering the period February 1981 to January 1982.921." The following circumstances show that such scheme was indeed employed: First. finally.As far as it was concerned. This is not denied by the appellee.980. Thus. It would not have been obliged to follow the "Application of Proceeds" stated in petitioner's letter.00. with regard to the second transaction. one of the required documents was a letter agreement between BARRETTO and AUTOWORLD stipulating that the P6. as seller.980. This time however.000. adopting the computation of AUTOWORLD in its plaintiff-appellant's brief. In the case at bar. The Court of Appeals.545. As security for the payment of the aforesaid loans.00 loan. we agree with the appellate court that it was executed when the ceiling rates of interest had already been removed.217. Had petitioner entered into a legitimate purchase of receivables.000. it merely purchased receivables at a discount from BARRETTO as evidenced by the Deed of Assignment dated 9 February 1981. petitioner imposed a 28% effective interest rate on the loan. the courts only need to rely on the face of written contracts to determine the intention of the parties. Indeed. Petitioner anchors its defense on Sec.54. the law will not permit a usurious loan to hide itself behind a legal form. for valuable consideration before maturity. Indeed. however ingenious. Generally.000. in compliance with the aforesaid letter. petitioner would not have resorted to the fictitious "IPP" transaction. the law would not hesitate to annul such contracts. Having declared the transaction between the parties as void. In any case however. however finding the interest rates so burdensome.000. She consistetntly paid the interest .00 was really an indirect loan extended to AUTOWORLD so that it could settle its previous debts to petitioner.586.000.000. Any remaining amount after the application of the proceeds would then be surrendered to AUTOWORLD in compliance with the letter of 17 November 1980. the courts should and will permit no scheme. it erred in awarding only the interest paid in excess of the 12% ceiling. In a loan of P1. 7 of the Usury Law which states — Provided.000. petitioner was the one who procured the services of the Asian Appraisal Company to determine the fair market value of the land to be sold way back in September of 1980 or six (6) months prior to the sale. Hence.000.666.00 would be considered usurious interest. petitioner insists that the 9 February 1981 transaction was a legitimate "IPP" transaction where it only bought the receivables of BARRETTO from AUTOWORLD amounting to P12.00. Thus. If from a construction of the whole transaction it becomes apparent that there exists a corrupt intention to violate the Usury Law.400. whether usurious or otherwise. Thereafter. HELD: The three (3) contracts were executed to conceal a usurious loan. However.47 of the P6. petitioner stated that the "loan proceeds" amounting to P6. petitioner actively participated in the sale to ensure that the appraised lot would serve as adequate collateral for the usurious loan it gave to AUTOWORLD.000. none went to BARRETTO.78 for a debt of P6. was merely a scheme employed by the parties to disguise a usurious loan. comprising of the three (3) contracts perfected on 9 February 1981. The foregoing circumstances confirm that the P6.551. which involves the P3. hence the parties were free to fix any interest rate.980. ruled — According to plaintiff-appellant. although the three (3) contracts seemingly show at face value that petitioner only entered into a legitimate discounting of receivables.000. it paid the aggregate amount of P10.000.116. petitioner itself designated the proceeds of the "IPP" transaction as a "loan.00 with interest at 20% per annum or P200. when there has been no intention on the part of said purchaser to evade the provisions of the Act and said purchase was not a part of the original usurious transaction. the stipulation on the interest is considered void thus allowing the debtor to claim the whole interest paid.66 amounting to a total of P4. the attending factors surrounding the execution of the three (3) contracts on 9 February 1981 clearly establish that the parties intended to transact a usurious loan.60 at a discounted price of P6. Macalalag requested Estrella for reduction of the same to which the latter agreed. The Court of Appeals modified the decision of the trial court and concluded that the "IPP" transaction.

000. with the interest not paid when due added to and becoming part of the principal and likewise bearing interest at the same rate. respondents filed a complaint for foreclosure of mortgage with the RTC of AC. 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). it is also settled that an existing law enters into and forms part of a valid contract without the need for the parties expressly making reference to it. While a contract is the law between the parties. The actual base for the computation of legal interest shall.000. there should be a property mortgaged by way of security for the payment of the principal obligation 2 there should be a stipulation for automatic appropriation by the creditor of the thing mortgaged in case of non-payment of the principal obligation within the stipulated period. thus Macalalag can no longer be held liable for violation of BP 22 in so far as the first check is concerned. SC held that the monthly interest rate of 3.. the interest due shall itself earn legal interest from the time it is judicially demanded. since the check he represented for payment bounced for reason ― account closed‖. not constituting a loan or forbearance of money. We are not persuaded. each amounting to P100. where the demand is established with reasonable certainty. courts may reduce interest rates. ONG vs. this interim period being deemed to be by then an equivalent to a forbearance of credit. Petitioners alleged that the loans extended to them were founded on several P/N which provided for 3.837. P200. Macalalag pleaded not guilty and stated that she already made payments over and above the value of the said checks amounting to P355.00( P156.Macalalag issued 2 PNB checks. for reason that the account to which it is drawn was already closed. the principal amount of loans subject of the real estate mortgage must earn the stipulated interest of 18% per annum.e.98.secured by a Real Estate Mortgage over a parcel of land with improvements in Cubao. and that petitioners’ refusal to settle the same entitles the respondents to foreclose the real estate mortgage. Complaint dismissed CA: upheld RTC ISSUE: WON the charges are unconscionable RULING: YES. Thus.250.00 in favor of Estrella.000. (2/12/01) The parties executed an Amendment to Amended Real Estate Mortgage consolidating their loans inclusive of charges thereon which totaled to P5. their indebtedness amounted to P6. When the judgment of the court awarding a sum of money becomes final and executory. penalty charges and attorney's fees if they are iniquitous or unconscionable. Hence Estrella filed 2 criminal complaint against Macalalag for violation of BP 22. be on the amount finally adjudged.000 from respondents. But said check were dishonored .9M.241. whether the case falls under paragraph 1 or paragraph 2. the amount of 156. there is no doubt that Macalalag is liable under BP 22. Issue: WON Macalalag had already paid her obligations to Estrella Held: In the Instant case. Accordingly. shall be 12% per annum from such finality until its satisfaction. Hence her obligation to Estrella was not fully paid.5% monthly interest rates. In the absence of stipulation.000 and P500. the total amount due shall earn interest of 12% per annum until satisfied.000 paid in 1996 and P199. (April 2002) Petitioners filed a complaint before RTC Tarlac for the declaration of mortgage contract as abandoned. the evidence shows that petitioners obtained several loans from the respondent. RTC: no pactum commissorium. computed from the date of the filing of the complaint on September 10. the rate of interest shall be 12% per annum to be computed from default. Subsequently. When an obligation.837.000 already paid by Macalalag to Estrella could very well be applied to the face value of the first loan. but failed to settle their outstanding loan obligations. that as of August 3 1.000.00 loan and the subsequent loans of P150. Applying the rules in the computation of interest.e.500. the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169.5% or 42% per annum unconscionable.700.98 paid in 1997). Clearly.00. the case falls under the rule stated in paragraph 1. the rate of legal interest. the same has no legal basis. compounded monthly – unconscionable and reduces it to 12% per annum.00. in any case. 837. petitioners obtained additional loans from the respondents in the aggregate amount of P1.000. Petitioners decried these additional charges as illegal and unconscionable" as they hardly allow any borrower any chance of survival in case of default. The penalty fee at the monthly rate of 5% or 60% per annum of the total amount due and demandable – principal + interest.500. a loan or forbearance of money. the lower courts correctly applied Article 2212 of the Civil Code as the basis for the imposition of the legal interest on the stipulated interest due. thus. Estrella sent notice of dishonor and demand to make good said checks to Macalalag. 5% penalty per month on the total amount due and demandable and 25% attorney's fees. The CA also found that the trial court properly imposed 12% legal interest on the stipulated interest from the date of filing of the complaint. respondents demanded payment from the petitioners by filing an action for foreclosure of the real estate mortgage. Inc. The parties executed a Dacion in Payment Agreement wherein petitioners assigned the properties to respondent in settlement of their total obligation. CA: 1. but the latter failed to do so. shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. inclusive of the 18% mo c. also earns legal interest of 12% per annum. the interest due should be that which may have been stipulated in writing. an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum.00. above. Upon default thereof. Such interest is not due to stipulation but due t o the mandate of the law as embodied in Article 2212 of the Civil Code. The CA modified and ruled that by express intention of the parties. Thus..000. These loans were secured by a real estate mortgage. No interest. When an obligation is breached. In the case at bar. the real estate mortgage secured the original P1. it has been established that Macalalg made a total payment of P355. Respecting the charges on the loans. Trial Court found her guilty as well as the Court of Appeals with modification that she is liable only for 1 count of BP 22. however. From such date of finality. Cuyco vs Cuyco Facts: Petitioners obtained a loan in the amount of P1. Hence. Estrella admitted such payment but claimed that the same amount was applied to the payment of the interest. is breached. The respondent maintained the legality of its transactions with petitioner stating the Dacion is lawful and valid as it is recognized under the Civil Code and that the accumulated interest and other charges computed for more than 2 years would stand reasonable and valid taking into consideration that the principal loan is P4M. from judicial or extrajudicial demand under and subject to the provisions of Article 1169 CC. the CA held that the parties never intended the same to be secured by the real estate mortgage. ROBAN LENDING CORPORATION FACTS: (7/14/99 – 3/20/00) Petitioner spouses obtained several loans from respondents in the total amount of P4M. i. 1997 until finality of the Court’s Decision. v. 3.500. 1997. The RTC ruled in favor of respondents. some of which as held by the CA were secured by real estate mortgage and earned an interest of 18% per annum.14. Issue: As to the interest rates Ratio: Petitioners contend that the imposition of the 12% legal interest per annum on the stipulated interest of 18% per annum computed from the filing of the complaint until fully paid was not provided in the real estate mortgage contract. They alleged that petitioners’ loans were secured by the real estate mortgage. With respect to the second check.967. The foregoing provision has been incorporated in the comprehensive summary of existing rules on the computation of legal interest enunciated by the Court in Eastern Shipping Lines. As regards the loans obtained in the amounts of P150. Petitioners made payments amounting to P291. and it consists in the payment of a sum of money. Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made.000. accounting and damages alleging that the MOA and the Dacion in Payment executed are void for being pactum commissorium. i. Elements of Pactum Commissorum which enables the mortgagee to acquire ownership of the mortgaged property without the need of any foreclosure proceedings are: 1. Furthermore. 2. .00 was secured by the real estate mortgage at 18% pa and that there was no agreement that the same will be compounded monthly.000. as long as unpaid. which interest. Petitioners admitted their loan obligations but argued that only the original loan of P1.00 and P250.

000. Macalinao made partial payments to BPI .24.RTC rendered a decision in Lotto’s favor. the statement of applicable interest rate bears an asterisk sign. In a long line of cased decided by the Supreme Court. validly adjusted the rate of interest on Lotto’s loan from 11. The Regional Trial Court reduced the 3% monthly interest to 2%. 600 SCRA 67 FACTS: Petitioner Ileana Macalinao defaulted on the payment of her BPI credit card dues. As to BPI’s right to foreclose. 2000. Further. the RTC held that the mortgage on the condominium unit was void since the Lotto Board of Directors did not authorize Go to sign the document. Additionally. finding that DBS breached the stipulations in the promissory note when it unilaterally increased the interest rate on its loan from 11.5% was only up to December 24. 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. having authorized Go to take out a loan from the bank. various stipulations in a contract must be read together and given effect as their meanings warrant. They form but one statement of the stipulated interest rate and the period to which such interest rate applied.69 for 180 months. contracts of adhesion are not invalid per se. The loan would have been paid after 180 months and. In the instant case. Taken together.Therefore. ISSUE: Whether or not 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. The RTC issued a TRO. Consequently. Issue: Whether or not DBS.MACALINAO V. its General Manager.24. HELD: The interest rate and penalty charges are unconscionable and iniquitous at 36% per annum. The promissory note it executed provided that Lotto would pay DBS a monthly amortization of€ P35.5% to 19% per annum beginning on December 24. Citing Article1229. paragraphs 7 and 8intended the 11.Lotto claims that the asterisk sign after the figure "180" means that the interest would be adjusted to the prevailing market rate at the end of 180 months. To secure payment of the loan.5% per annum. After respondent BPI acquired DBS. the records show that Lotto defaulted in its obligation when it unjustifiably stopped paying its amortizations after the first year. Petitioner assailed the appellate court’s decision alleging that the interest rate and penalty charges are unconscionable and iniquitous at 36% per annum. in exercising this power to determine what is iniquitous and unconscionable. and that the increase to 19% was valid based on the prevailing market rate.99-12. it followed that it also authorized her to provide the security that the loan required. 1999 to December 24. But Lotto's interpretation would have a ridiculous implication since that "180 months" is the statement of the payout period for the loan. now BPI. Lotto vs BpI Facts: Lotto Restaurant Corporation got a loan of€ P3. it considered the 36% per annum to be excessive 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.5% per annum interest was to apply to the period December 24.5% to 19% per annum. Judge Gingoyon. 2000.045. 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. which was still unacceptable to Lotto. Lotto tried to negotiate with BPI for reduction of interest but the latter agreed to reduce it to only 14. which footnoted the information that "[t]hereafter interest to be based on prevailing market rate.00 from the DBS Bank at an interest rate of 11.7% per annum.00").5% per annum interest was to apply only to the period December 24. As held in Manila International Airport Authority v.BPI foreclosed the mortgage on Lotto’s condominium unit to satisfy its unpaid claim To stop the foreclosure. 2000? Held: It is plainly clear from paragraph 7 above that the 11.DBS increased the interest to 19% per annum. 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. therefore.CA held that Lotto was estopped from questioning the validity of the promissory note and the real estate mortgage since. BPI. Lotto filed against BPI with the Regional Trial Court (RTC) of Manila in Civil Case 02-105415 an action for reformation or annulment of real estate mortgage with prayer for a temporary restraining order (TRO) and preliminary injunction. 2000 ("12. Besides such interpretation would directly contravene the clear provision of paragraph 7 that the 11. . 1999 to December 24. Lotto contested the increase and stopped paying the loan." This means that the rate of interest would be adjusted to the prevailing market rate after December 24. It also declared that the 11. mortgaged to DBS a condominium unit that belonged to it.000.5% interest rate to apply only to the first year of the loan. there is no question that BPI (which succeeded DBS) had a clear right to foreclose on Lotto’s collateral. 2000. there would be no occasion for charging Lotto a new rate of interest on a past loan.

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