Republic vs Grijaldo
of action, the defendants remained in the possession
Facts:
 Grijaldo obtained five loans from the Bank of Taiwan
in the total sum of P1,281.97 with interest at the
rats of 6% per annum compounded quarterly. These
were evidenced by five promissory notes.
 These loans were crop loans and was considered to
be due one year after they were incurred.
 As a security for the payment of the loans, a chattel
mortgage was executed on the standing crops of his
land.
 The assets in the Bank of Taiwan were vested in the
US Gov’t which were subsequently transferred to the
Republic of the Philippines
 RP is now demanding the payment of the account.
 Justice of Peace dismisses the case on the ground of
prescription. CA rendered a decision ordering the
appellant to pay the appellee
Defendant’s contentions:
1) The appellee has no cause of action against
appellant since the transaction was with Taiwan
Bank.
2) That if the appellee has a cause of action at all, it
had prescribed
3) The lower court erred in ordering the appellant to
pay P2,377.23
Issue:
Can RP still collect from Grijaldo?
Held: Yes
Ratio: The obligation of the contract was not to deliver a
determinate thing, it was a generic thing – the amount of
money representing the total sum of his loans. The
destruction of anything of the same kind does not extinguish
the obligation. The loss of the crops did not extinguish his
obligation to pay because the account could still be paid from
other sources aside from the mortgaged crops. Also,
prescription does not run against the State.
Tan vs Valdehueza
 Plaintiff was the highest bidder in the public auction
sale of a parcel of land which is the subject of the
first cause of action.
 Defendants Arador and Rediculo Valdehueva
executed two documents of deed of pacto de retro
sale with right to repurchase in favor of the plaintiff
of two portions of a parcel of land described in the
second cause of action. This was not registered in
the Register of Deeds.
 After the execution of the DOS in the second cause
of the land, taxes were paid by them.
 There was a civil case instituted by Tan against
Valdehuezas to enjoin them from entering the parcel
of land and gathering nuts but this was dismissed for
failure to seek immediate trial.
 TC declares Tan the absolute owner of the property
in the first cause of action and ordered defendants
to pay plaintiff the amount of P1,200 with legal
interest of 6%. With regard to the land in the second
cause of action, Valdehuezas were ordered to pay
the amount of P300 with legal interest of 6%
 Valdehuezas appealed, saying that the TC erred in
making a finding on the second cause of action that
the transactions were a simple loan instead of an
equitable mortgage.
Issues:
1. Was the first cause of action barred by the principle of res
judicata? No
2. IS the transaction regarding the land in the second cause of
action a simple loan or an equitable mortgage? It was an
equitable mortgage.
3. Should the Valdehuezas pay the interest? No
Ratio:
3. No interest shall be due unless it has been expressly
stipulated in writing.
Jardenil vs Solas
Facts:
An action for foreclosure of mortgage. Solas agreed to pay
interest only up to the date of maturity. The contract is silent
as to whether after the date of maturity, in the event of non-
payment, the debtor would continue to pay interest.
Issue:
IS Solas bound to pay the stipulated interest only up to the
date of maturity as fixed in the promissory note, or up to the
date payment is effected?
Held: It was only up to the date of maturity
Ratio:
Interest shall be due only when it has been expressly
stipulated. The court must not impose an obligation that the
parties have not chosen to agree upon. The act of the
mortgagee of granting to the mortgagor on the deed of
mortgage an extension of one year from the date of maturity
to make the payment without making any mention of any
interest which the mortgagor should pay during the additional
period indicates the true intention of the parties that not
interest should be paid during the period of grace.
Frias vs San Diego-Sison
Facts:
 Frias is the owner of a house acquired from Island
Masters Realty and Development Corp. She entered
into a MOA with respondent San Diego-Sison.
 In the MOA
o they had agreed that the petitioner would
receive from respondent P3M
o that respondent has a period of 6 months
from the date of execution of the contract
to notify petitioner of her intention to
purchase the parcel of land at the price of
6.4M Upon notice, there is another six
months to pay the remaining balance.
o Prior to the six months given to the
respondent, petitioner may still offer the
property to other persons provided that the
first P3M be returned to respondent
including interest based on prevailing
compounded bank interest plus amount of
sale in excess of P7M
o In case there are no other buyers, no
interest shall be charged by the respondent
on the P3M, but in the event that on the 6th
month, 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.
 Petitioner received P2M in cash and P1M in a post-
dated check dated February 28, 1990 instead of 1991
which rendered the check stale.
 Defendant 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
 Defendant filed with the RTC a complaint for sum of
money.
 RTC rules in favor or defendant. Orders the payment
of P2M plus interest at 32% interest per annum
 Petitioner appeals to CA, CA affirms RTC decision
with modification with regard to the interest from
32% to 25% starting from June 7, 1991
Issue: Was the CA correct in awarding a 25% per annum on
the P2M loan even beyond the second six months stipulated
period? Yes
Ratio:
The phrase “for the last six months only” should be taken in
the context of the entire agreement. In the agreement, there
were two periods of 6 months each. The first six months was
for the respondent to make up her mind WON she would
purchase the property. The second 6 months was for the
petitioner to pay the P2M in the event that respondent
decide not to buy the property, in which case interest will be
charged for the “last six months only” So that means, no
interest shall be charged for the first six month period while
appellee was making up her mind whether to buy the
property.
Arwood Industries vs DM Consunji, Inc
 Petitioner and respondent entered into an
agreement for the construction of petitioner’s
condominium. The contract price was P20,800,000
 After the condo was completed, there was still an
unpaid amount.
 Respondent files a complaint for the recovery of the
balance with interest of 2% per month or a fraction
from November 1990 up to the time of payment and
other costs
 TC orders petitioner to pay respondent.
 Petitioner opposes the payment of 2% per month
interest.
 CA affirms
Issue: Was the imposition of the 2% interest correct? Yes
Ratio:
The agreement is the formal expression of the parties’ rights,
duties and obligation. IT was provided in the agreement that
in case of delay in monthly payments, the respondent may
either suspend work until payment is remitted or continue
the work but the owner shall pay the interest of 2% per
month. The project was already completed, the 2% interest
cannot be disregarded. Also in the case of State Investment
House Inc vs CA, the court explained that “the appropriate
measure for damages in case of delay in discharging an
obligation consisting of the payment of a sum of money is the
payment of penalty interest at the rate agreed upon.
Royal Shirt Factory vs Co
Facts:
An action for the recovery of money by Royal Shirt Factory
from Co Bon Tic the sum of P1,422 to represent the balance
of the price of 350 pairs of “Balleteenas” shoes at P7 a pair
with interest at 12% per annum
Issue: Whether it was an outright sale or a sale merely on
consignment ?
Municipal court held that it was a sale on consignment while
CFI held that it was an outright sale.
Held: It was an outright sale.
Ratio:
In Exhibit A, an order slip contained a condition in the sale.
According to the testimony of Mr. Chebat it means that Co
could either consider the sale as 1) one on consignment, sell
as many shoes as he could for any price and pay for it at P8 a
pair and at the end of 9 days, return the shoes unsold; or 2)
an absolute sale at P7 a pair. Since he was not able to return
any of the shoes at the end of nine days, he must have
chosen the second alternative. But since this was a self
serving evidence, it was not admitted.
The court looked at the conduct of the parties. Exhibit B was
an invoice of the same 350 shoes including sales tax listed as
P2,450. It was noted down in his own handwriting the
different partial payments of P500, P528 and lastly the P420
by check. It was obvious that he accepted the outright sale
since in making the partial payments, he made no mention of
the number of shoes sold by him and the number of shoes
remaining unsold which he should have done if the sale was
on consignment.
Issue: Should the interest rate be at 12% or 6% per annum?
Held: It should only be at 6% per annum.
Ratio: There was an absence of stipulation as to the rate of
interest so he would be paying only 6% per annum. Exhibit A
does not have any stipulation as to the rate of interest.
Exhibit B was not signed by him. If the court would hold Co
bound by Exhibit B, it was only because of his tacit
acceptance of the total value of 350 pairs of shoes.
The Overseas Bank of Manila vs Cordero
Facts:
 Cordero opened a one-year time deposit with
Overseas Bank of Manila in the amount of P80K with
interest at the rate of 6% per annum.
 Due to the distressed financial condition of the bank,
it was unable to pay Cordero his said time deposit
and its interest
 Cordero instituted an action at the CFI
 The bank raised as special defense its state of
insolvency
 CFI rules in favor of Cordero. CA affirms.
 There were certain supervening events regarding the
principal amount. It turns out that Cordero’s brother
and atty-in-fact, already received P10K from PDIC.
Also, the brother already received the sum of
P73,840. So the principal claim of respondent was
already satisfied. The only issue remaining was the
interest
Issue: Is the respondent entitled to the interest on his time
deposit during the period that petitioner was closed? No
Ratio:
A bank should pay stipulated interest on money deposited if it
was able to generate funds to cover the payment of such
interest. But this obligation to pay interest on the deposit
ceases from the moment the operation of the bank is
completely suspended by the Central Bank.
Ramos vs Central Bank
Facts:
This is a resolution only so the facts are limited.
There was a MR filed by Central Bank regarding the Court’s
Resolution applying the Tapia ruling reaffirmed by the court
in cases such as OBM vs Cordero (previous case) that the bank
is not liable for interest on the Central Bank loans and
advances during the period of its closure.
Issue: Payment of interest
The payment of interest should not be made.
Lirag vs SSS
 Lirag and SSS entered into a purchase agreement
wherein SSS would purchase from Lirag preferred
shares of stock worth P1M
 SSS paid Lirag 2 amounts of P500K for which Lirag
issued to SSS 5,000 preferred shares evidenced by
stock certificate no. 128 and 139 respectively
 The stocks were to be repurchased at regular
intervals of one year beginning with the 4th year
following the date of issue.
 To guarantee the redemption of the stocks, Lirag
signed the purchase agreement not only as president
of the corporation but also as a surety.
 Lirag failed to redeem stock certificates
 There were letters of demand but Lirag was not able
to make the redemption.
 Pursuant to the purchase agreement, if Lirag fail to
effect any of the redemptions stipulated, the entire
obligation shall immediately become due and
demandable and shall furthermore be liable to the
SSS in the amount equivalent to 12% of outstanding
liquidated damages.
 Lirag moved for the dismissal of the complaint but
was denied.
 Lirag files for counterclaim, denying the existence of
any obligation on their part to redeem the preferred
stocks on the ground that SSS became and still is a
preferred stockholder of the corporation so that
redemption of the shares purchased depended on
the financial ability of said corporation. This was
dismissed
 The lower court ruled in favor of SSS and sentenced
Lirag to pay SSS. Hence this petition
Issue: WON the purchase agreement a debt instrument?
Held: Yes
Ratio:
The terms and conditions show that the parties intended the
repurchase of the preferred shares on the respective
scheduled dates to be an absolute obligation which does not
depend upon the financial ability of petitioner corporation.
This obligation was manifested by the fact that a surety was
required to see to it that the obligation is fulfilled in the
event of the principal debtor’s inability to do so.
With regard to the payment of interest, such was also
stipulated on the instrument that in case the petitioner fails
to repurchase the shares on scheduled due dates, it renders
the entire obligation due and demandable with petitioner to
pay 12% of the then outstanding obligation as liquidated
damages.
Angel Jose Warehousing vs Chelda Enterprises
 Plaintiff filed a case in the CFI against partnership
Chelda and David Syjueco for the recovery of unpaid
loans in the total amount of P20,880 with legal
interest from the filing of the complaint.
 Defendants averred that they obtained four loans
totaling P26,500. Out of this 5,620 had been paid
leaving a balance of P20,880 and that plaintiff
charged and deducted from the loan usurious
interest at rates of 2% and 2.5% per month, hence
the plaintiff had no cause of action and should not
be permitted to recover.
 Plaintiff denies the usury.
 CFI finds that the unpaid principal amount was
P20,287.50 and that P1,048.15 had been deducted in
advance by plaintiff. Thus it should be deducted
from the principal leaving a balance of P19,247.35
still payable to the plaintiff. It also ruled that
notwithstanding the usurious interest rate, such does
not bar the payment of the principal amount.
Respondents’ contentions:
A usurious loan is void due to illegality of cause or object, the
rule of pari delicto bars the action that can be brought about
by both parties based on Article 1411.
Issue: In a loan with usurious interest, may the creditor
recover the principal of the loan?
Held: Yes
Ratio:
A contract of loan with a usurious interest consists of
principal and accessory stipulations. The principal is to pay
the debt and the accessory is to pay interest.
The stipulations are divisible in the sense that the former can
still stand without the latter. In case of a divisible contract,
if the illegal terms can be separated from the legal ones, the
latter may be enforced. The illegality lies only as to the
prestation to pay the stipulated interest; hence being
separable, the latter only should be deemed void since it is
the only one that is illegal.
Cu Unjieng e Hijos vs Mabalacat Sugar Co.
Facts:
 Cu Unjieng instituted an action for the recovery of
P163,000 with interest from the Mabalacat Sugar and
to foreclose a mortgage.
 The mortgage executed by Mabalacat Sugar contains
a provision to the effect that non-compliance on
their part will cause the entire debt to become due
and give occasion for the foreclosure of the
mortgage. Also, there was a stipulation placing the
interest at 12% per annum and that it is “to be
computed upon the still unpaid capital of the loan,
shall be paid monthly, at the end of each month”
Issue:
1. Should the interest be compounded? Generally the
interest can be compounded but not in this case
2. Does the voluntary payment of the interest bind the
debtor? No
Ratio:
1. The provision merely requires the debtor to pay
interest monthly at the end of each month, such
interest to be computed upon the capital of the loan
already paid. It does not justify the charging of
compound interest accruing upon the capital
monthly.
2. The interest is improperly charged at an unlawful
rate. The voluntary payment is not binding since it is
usurious
David vs CA
Facts:
 RTC Judge Diaz issued a writ of attachment over real
properties of private respondents.
 Judge Diaz ordered respondent Afable to pay
petitioner P66,000 plus interest from July 24,1975.
After some time, the interest was amended and
should be computed from January 4, 1966.
 Afable appealed to CA and SC. Both instances, the
decision of the RTC was affirmed
 The record of the case was remanded to Branch 27,
presided by respondent Judge Cruz for the final
execution of the decision by the RTC
  Upon petitioner’s motion, Judge Cruz issued an Alias  Exhibits A and D purports to be a sale of four and
Writ of Execution, respondent Sheriff Pena three parcels of land respectively.
conducted a public auction.  Exhibits B, C, and E are contracts of loan from Neri
 Sheriff Pena informed the petitioner that the total to defendants.
amount of the judgment is P270,940.52. It included  Exhibits A to E were secured by the mortgage of the
a computation of interest. Petitioner claimed that seven parcels of land.
the judgment award should be P3,027,238.50
 Although the properties were sold to the petitioner, Issue: WON the payment should be intended as rents or for
Sheriff Pena did not issue the Certificate of Sale the payment of the principal.
because there was an excess in the bid price in the
amount of P2,941,524.47. The excess was computed Held: It must be intended as payment of the principal.
by the Sheriff based on the petitioner’s bid price of
The payments could not have been intended as rents since
P3,027,238.50 less P270,940.62 computed in the
Neri took possession of the lands and collected the fruits.
judgment award.
None of the contracts were offered in evidence to say that
 Petitioner files motion for Judge Cruz to issue an
there is any promise made by defendants to pay rents.
order directing respondent Sheriff to prepare and
execute a certificate of sale in favor of the
petitioner the amount of judgment as P3,027,238.50
the reason is the compound interest. This was hehe
denied.
 MR – denied
 CA dismissed

Issue: Whether respondent appellate court erred in affirming

respondent judge’s order for the payment of simple interest
only rather than compounded interest

Held: No

Ratio: In cases where no interest had been stipulated by the

parties, no accrued conventional interest could further earn
interest upon judicial demand.

Velez vs Balzarza and Mabilin

Facts:

 Plaintiff, in a complaint, prayed for the return of

certain parcels of land which she alleged had been
sold by defendants to plaintiff’s deceased husband
with right to repurchase.
 Plaintiff further alleged that defendants had
remained in possession of said land under a contract
of lease but the defendants had not paid their
rentals for two years
 On the other hand, the defendants alleged that the
actual contract was a loan secured by a mortgage of
those lands in which the amount borrowed was
P2,400 and that they had already paid P4,420.88. So
they are demanding for the return of the excess.
 TC found that the total amount loaned by the
deceased Neri to the defendants was P3,067 and
that defendants already paid P4,429.88 and that
defendants overpaid the amount of P1,362.88. The
court thus exonerated the defendants and ordered
plaintiff to return to defendants the sum of P432.63
which the plaintiff received from defendants
although the amount was not due.