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CREDITS circumstances.

Fraud by its nature


is not a thing susceptible of ocular
Security Bank Corporation v
observation or readily demonstrable
Great Wall Commercial Press
physically; it must of necessity be
Company, Inc, et al. G.R. No.
proved in many cases by inferences
219345 January 30, 2017
from circumstances shown to have
SECOND DIVISION
been involved in the transaction in
Mendoza, J.: question.

Liability of surety In the case, the assurance to


pay in full the obligation is further
FACTS solidified by the warranty of
solvency provisions of the Credit
Petitioner Security Bank filed a
Agreement and defendants-sureties
Complaint for Sum of Money against
likewise executed a "Continuing
respondents Great Wall Commercial
Suretyship Agreement. The liability
Press Company, Inc. and its sureties
of the Surety is solidary, direct and
(respondents). The complaint sought
immediate and not contingent upon
to recover from respondents their
the pursuit by Security Bank of
unpaid obligations under a credit
whatever remedies it may have
facility covered by several trust
against the Borrower or the
receipts and surety agreements.
collateral/liens it may possess. If
Security Bank argued that in spite
any of the Guaranteed Obligations is
of the lapse of the maturity date of
not paid or performed on due date,
the obligations, respondents failed
the Surety shall without need for
to pay their obligations. Security
any notice, demand or any other act
Bank argued that respondents
or deed, immediately and
employed fraud in contracting their
automatically become liable therefor
obligation, as they made the bank
and the Surety shall pay and
believe that they had the capacity to
perform the same. Hence, the loan
pay. Security Bank stressed that
shall be paid in full on or before
respondents misled them on their
maturity, coupled by the warranty of
financial capacity and ability to pay
solvency embodied in the Credit
their obligations.
Agreement as well as the execution
RULING of the Continuing Suretyship
Agreement, the loan application was
While fraud cannot be eventually approved. It is thus clear
presumed, it need not be proved by that Respondents, misled SBC and
direct evidence and can well be employed fraud in contracting said
inferred from attendant obligation.
United Alloy Philipines severally with UNIALLOY, to pay the
Corporation, et al. v United latter's loan obligations with UCPB.
Coconut Planters Bank G.R. No.
Petitioners do not deny their
175949 January 30, 2017
liability under the above quoted
SECOND DIVISION
Surety Agreement. As correctly held
Peralta, J.: by both the RTC and the CA, Article
1159 of the Civil Code expressly
Liability of Surety provides that "obligations arising
FACTS from contracts have the force of law
between the contracting parties and
Petitioner Corporation, United Alloy should be complied with in good
Philippines Corporation (UNIALLOY) faith." The RTC as well as the CA
applied for and was granted a credit found nothing which would justify
accommodation by herein or excuse petitioners from non-
respondent United Coconut Planters
compliance with their obligations
Bank (UCPB). Part of UNIALLOY's
obligation under the Credit under the contract they have
Agreement was secured by a Surety entered into. Thus, it becomes
Agreement. Subsequently, apparent that petitioners are merely
UNIALLOY failed to pay its loan attempting to evade or, at least,
obligations. As a result, UCPB filed delay the inevitable performance of
against UNIALLOY. The RTC of their obligation to pay under the
Makati rendered Judgment in the
Surety Agreement and the subject
collection case in favor of UCPB.
promissory notes which were
RULING executed in respondent's favor.

The Court ruled that


petitioner together with their co-
defendants Van Der Sluis and Yang,
are liable to pay respondent the
amounts awarded by the RTC. As
ruled upon by both the RTC and the
CA, UNIALLOY failed to pay its
obligations under the above
promissory notes and that herein
petitioner Spouses Chua, together
with their co-defendants Van Der
Sluis and Yang freely executed a
Surety Agreement whereby they
bound themselves jointly and
Prudential Bank (Now Bank of the Dragon nor the Bank complied with
Philippine Islands) v Ronald Rapanot's written demands.
Rapanot And Housing & Land Use
Regulatory Board G.R. No. 191636 Petitioner argues that, as a
January 16, 2017 FIRST DIVISION mortgagee in good faith and for
value, it must be accorded
Caguioa, J.: protection and should not be held
jointly and severally liable with
Mortgagee in Good Faith Golden Dragon.

RULING

FACTS Under Presidential Decree No.


957 (PD 957), no mortgage on any
Golden Dragon is the condominium unit may be
developer of Wack-Wack Twin constituted by a developer without
Towers Condominium. Rapanot paid prior written approval of the
Golden Dragon a reservation fee in a National Housing Authority, now
particular unit (Unit 2308-B2). The HLURB. PD 957 further requires
Bank extended a loan to Golden developers to notify buyers of the
Dragon to be utilized by the latter as loan value of their corresponding
additional working capital. Hence, mortgaged properties before the
Golden Dragon executed a Mortgage proceeds of the secured loan are
Agreement over the condominium released.
units to secure the loan.
Subsequently, Rapanot completed Contrary to petitioner Bank's
the full payment of the said Unit assertions, it cannot be considered a
2308-B2. Thereafter, Rapanot made mortgagee in good faith. The Bank
several verbal demands for the failed to ascertain whether Golden
delivery of the unit. Prompted by Dragon secured HLURB's prior
Rapanot's verbal demands, Golden written approval as required by PD
Dragon sent a letter to the Bank, 957 before it accepted Golden
requesting for a substitution of Dragon's properties as collateral. It
collateral for the purpose of also failed to ascertain whether any
replacing Unit 2308-B2 with of the properties offered as collateral
another unit with the same area. already had corresponding buyers at
However, the Bank denied Golden the time the Mortgage Agreement
Dragon's request due to the latter's was executed. It bears stressing that
unpaid accounts. Because of this, banks are required to exercise the
Golden Dragon failed to comply with highest degree of diligence in the
Rapanot's verbal demands. conduct of their affairs. When the
Thereafter, Rapanot, through his purchaser or the mortgagee is a
counsel, sent several demand letters bank, the rule on innocent
to Golden Dragon and the Bank, purchasers or mortgagees for value
formally demanding the delivery of is applied more strictly. Being in the
Unit 2308-B2. Neither Golden
business of extending loans secured BP Oil And Chemicals
by real estate mortgage, banks are International Philippines, Inc.
presumed to be familiar with the v Total Distribution & Logistic
rules on land registration. Since the Systems, Inc G.R. No. 214406
banking business is impressed with February 6, 2017 SECOND
public interest, they are expected to DIVISION
be more cautious, to exercise a
higher degree of diligence, care and Peralta, J.:
prudence, than private individuals
in their dealings, even those Computation of Interest
involving registered lands. Banks
may not simply rely on the face of FACTS
the certificate of title. Hence, they
cannot assume that, the title offered The defendant Total
as security is on its face free of any Distributions and Logisitics
encumbrances or lien, they are Systems, Inc. (TDLSI) entered into
relieved of the responsibility of
an Agency Agreement with BP
taking further steps to verify the title
and inspect the properties to be Singapore, whereby it serve as
mortgaged. In granting the loan, exclusive agent of the latter for the
petitioner bank should not have sales and distribution of its
been content merely with a clean industrial lubricants in the
title, considering the presence of Philippines. The agency was for a
circumstances indicating the need period of five years from 1997 to
for a thorough investigation of the
2002. As per agreement, the
existence of buyers like respondent.
Having been wanting in care and defendant was supposed to deposit
prudence, the latter cannot be the proceeds of the sales it made to
deemed to be an innocent a depositary account of the
mortgagee. Hence, The Bank's defendant. subsequently, BP
failure to exercise the diligence Singapore assigned its rights under
required of it constitutes negligence, the Agreement to the plaintiff, BP
and negates its assertion that it is a
Oil and Chemicals International
mortgagee in good faith
Philippines Inc. (BP Oil) effective
March 1, 1998.

The plaintiff sent notice


containing the termination of the
Agency Agreement unless the
defendant rectified the breaches it
committed within a period of 30
days. On July 9, 2001, a formal
demand was sent to the defendant
letter for the payment of the total
amount of ₱36,440,351.79 1. Pursuant to Act No. 2655, the
representing the total amount of the interest rate is at 6%, effective
collections, receivables and stocks May 1, 1916
that defendant should have
returned to the plaintiff as of May 2. Pursuant to CB Circular No.
31, 2001. The demand went 416, the interest rate is at
unheeded 12%, effective July 29, 1974

Subsequently, a Complaint for


Sum of Money was filed by 3. As per CB Circular No. 905,
petitioner BP Oil against TDLSI interest rate is still at 12%,
effective December 22, 1982
seeking to recover the sum of
₱36,440,351.79 representing the
total value of the moneys, stock and 4. By virtue of CB Circular No.
accounts receivables that TDLSI has 799, effective July 1, 2013,
allegedly refused to return to BP Oil. the interest rate is at 6%

The RTC ordered for the value


of the stocks and the moneys When the obligation is breached,
received and retained by the and it consists in the payment of a
defendant in its possession sum of money, i.e., a loan or
pursuant to the Agreement with forbearance of money, the interest
legal interest computed at 6% per due should be that which may have
annum from July 19, 2001 up to the been stipulated in writing.
finality of this decision and at Furthermore, the interest due shall
12% per annum from finality of this itself earn legal interest from the
decision up to the date of payment. time it is judicially demanded. In the
absence of stipulation, the rate of
Ruling interest shall be 6% per annum to be
computed from default.
As discussed in the case
of Secretary of the Department of
Public Works and Highways, et al. v.
Spouses Heracleo and Ramona
Tecson, the court summarizes that
the interest rates applicable to loans
and forbearance of money, in the
absence of an express contract as to
such rate of interest, for the period
of 1940 to present are as follows: