Republic v Bagtas (Credit Transactions)
But
REPUBLIC VS BAGTAS G.R. No. L-17474 October 25,
1962
FACTS:
Jose Bagtas borrowed from the Bureau of Animal
Industry three bulls for a period of one year for
breeding purposes subject to a government charge of
breeding fee of 10% of the book value of the books.
Upon the expiration of the contract, Bagtas asked for a
renewal for another one year, however, the Secretary
of Agriculture and Natural Resources approved only the
renewal for one bull and other two bulls be returned.
Bagtas then wrote a letter to the Director of Animal
Industry that he would pay the value of the three bulls
with a deduction of yearly depreciation. The Director
advised him that the value cannot be depreciated and
asked Bagtas to either return the bulls or pay their
book value. Bagtas neither paid nor returned the bulls.
The Republic then commenced an action against
Bagtas ordering him to return the bulls or pay their
book value.
DECISION OF LOWER COURTS: * Trial court: After
hearing, the trial Court ruled in favor of the Republic,
as such, the Republic moved ex parte for a writ of
execution which the court granted.
INTERVENING FACT: Felicidad Bagtas, the surviving
spouse and administrator of Bagtas' estate, returned
the two bulls and filed a motion to quash the writ of
execution since one bull cannot be returned for it was
killed by gunshot during a Huk raid. The Court denied
her motion hence, this appeal certified by the Court of
Appeals because only questions of law are raised.
ISSUES & RULING: 1. WON the contract was
commodatum; WON Bagtas should be held liable for its
loss due to force majeure.
NO, the contract is not commodatum. YES, he is liable
for the loss.
A contract of commodatum is essentially gratuitous.
Supreme Court held that Bagtas was liable for the loss
of the bull even though it was caused by a fortuitous
event. If the contract was one of lease, then the 10%
breeding charge is compensation (rent) for the use of
the bull and Bagtas, as lessee, is subject to the
responsibilities of a possessor. He is also in bad faith
because he continued to possess the bull even though
the term of the contract has already expired.
If the contract was one of commodatum, he is still
liable because: (1) he kept the bull longer than the
period stipulated; and (2) the thing loaned has been
delivered with appraisal of its value (10%). No
stipulation that in case of loss of the bull due to
fortuitous event the late husband of the appellant
would be exempt from liability.
The original period of the loan was from 8 May 1948 to
7 May 1949. The loan of one bull was renewed for
another period of one year to end on 8 May 1950.
the appellant kept and used the bull until November
1953 when during a Huk raid it was killed by stray
bullets. Furthermore, when lent and delivered to the
deceased husband of the appellant the bulls had each
an appraised book value, to with: the Sindhi, at
P1,176.46, the Bhagnari at P1,320.56 and the
Sahiniwal at P744.46. 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.
Mina v. Pascual, 25 Phil 540
Francisco is the owner of land and he allowed his
brother, Andres, to erect a warehouse in that lot. Both
Francisco and Andres died and their children became
their respective heirs: Mina for Francisco and Pascual
for Andres. Pascual sold his share of the warehouse
and lot. Mina opposed because the lot is hers because
her predecessor (Francisco) never parted with its
ownership when he let Andres construct a warehouse,
hence, it was a contract of commodatum. What is the
nature of the contract between Francisco and Andres?
The Supreme Court held that it was not a
commodatum. It is an essential feature of
commodatum that the use of the thing belonging to
another shall be for a certain period. The parties never
fixed a definite period during which Andres could use
the lot and afterwards return it.
NOTA BENE: It would seem that the Supreme Court
failed to consider the possibility of a contract of
precardium between Francisco and Andres. Precardium
is a kind of commodatum wherein the bailor may
demand the object at will if the contract does not
stipulate a period or use to which the thing is devoted.
Catholic Vicar Apostolic v. CA
Facts:
Catholic Vicar Apostolic of the Mountain Province
(VICAR for brevity) filed with the Court of First
Instance of Baguio Benguet on September 5, 1962 an
application for registration of title over Lots 1, 2, 3,
and 4 in Psu-194357, situated at Poblacion Central, La
Trinidad, Benguet, docketed as LRC N-91, said Lots
being the sites of the Catholic Church building,
convents, high school building, school gymnasium,
school dormitories, social hall, stonewalls, etc. On
March 22, 1963 the Heirs of Juan Valdez and the Heirs
of Egmidio Octaviano filed their Answer/Opposition on
Lots Nos. 2 and 3, respectively, asserting ownership
and title thereto.
Issue:
Whether or not there is an error in finding that
petitioner had been in possession of lots 2 and 3
merely as bailee borrower in commodatum, a
gratuitous loan for use
Held:
The Court of Appeals found that petitioner did not
meet the requirement of 30 years possession for
acquisitive prescription over Lots 2 and 3. Neither did
it satisfy the requirement of 10 years possession for
ordinary acquisitive prescription because of the
absence of just title. The appellate court did not
believe the findings of the trial court that Lot 2 was
acquired from Juan Valdez by purchase and Lot 3 was
acquired also by purchase from Egmidio Octaviano by
petitioner Vicar because there was absolutely no
documentary evidence to support the same and the
alleged purchases were never mentioned in the
application for registration.
There is evidence that petitioner Vicar occupied Lots 1
and 4, which are not in question, but not Lots 2 and 3,
because the buildings standing thereon were only
constructed after liberation in 1945. Petitioner Vicar
only declared Lots 2 and 3 for taxation purposes in
1951. The improvements oil Lots 1, 2, 3, 4 were paid
for by the Bishop but said Bishop was appointed only
in 1947, the church was constructed only in 1951 and
the new convent only 2 years before the trial in 1963.
When petitioner Vicar was notified of the oppositor's
claims, the parish priest offered to buy the lot from
Fructuoso Valdez. Lots 2 and 3 were surveyed by
request of petitioner Vicar only in 1962.
Private respondents were able to prove that their
predecessors' house was borrowed by petitioner Vicar
after the church and the convent were destroyed. They
never asked for the return of the house, but when they
allowed its free use, they became bailors in
commodatum and the petitioner the bailee. The
bailees' failure to return the subject matter of
commodatum to the bailor did not mean adverse
possession on the part of the borrower. The bailee held
in trust the property subject matter of commodatum.
The adverse claim of petitioner came only in 1951
when it declared the lots for taxation purposes. The
action of petitioner Vicar by such adverse claim could
not ripen into title by way of ordinary acquisitive
prescription because of the absence of just title.
Republic vs CA 146 scra 15
FACTS:
The Heirs of Domingo Baloy, (private respondents),
applied fora registration of title for their land. Their
claim is based on theirpossessory information title
acquired by Domingo Baloy through theSpanish
Mortgage Law, coupled with their continuous, adverse
andpublic possession of the land in question. The
Director of Landsopposed the registration alleging that
such land became public landthrough the operation of
Act 627 of the Philippine Commission. On Nov26,
1902, pursuant to the executive order of the President
of U.S., thearea was declared within the US Naval
Reservation.The CFI denied respondents' application
for registration. CA, reversedthe decision. Petitioners
herein filed their Motion for Reconsideration,said MR
was denied, hence this petition for review on certiorari.
ISSUE:
Whether or not private respondents' rights by virtue
of theirpossessory information title was lost by
prescription.
RULING:
No. A communication which contains an official
statement ofthe position of the Republic of the
Philippines with regard to the status ofthe land in
question recognizes the fact that Domingo Baloy
and/or hisheirs have been in continuous possession of
said land since 1894 asattested by an "Informacion
Possessoria" Title, which was granted by theSpanish
Government. Hence, the disputed property is private
land andthis possession was interrupted only by the
occupation of the land by theU.S. Navy in 1945. The
heirs of the late Domingo P. Baloy, are now inactual
possession, and this has been so since the
abandonment by theU.S. Navy.
The occupancy of the U.S. Navy was not in the concept
of owner. Itholds of the character of a commodatum. It
cannot affect the title ofDomingo Baloy. One's
ownership of a thing may be lost by prescriptionby
reason of another's possession if such possession be
under claim ofownership, not where the possession is
only intended to be temporary,as in the case of the
U.S. Navy's occupation of the land concerned, inwhich
case the owner is not divested of his title, although it
cannot beexercised in the meantime.
QUINTOS vs BECK
FACTS:
Quintos and Beck entered into a contract of lease,
whereby the latter occupied the former’s house.
OnJan 14, 1936, the contract of lease was novated,
wherein the Quintos gratuitously granted to Beck
theuse of the furniture, subject to the condition
that Beck should return the furniture to Quintos
upondemand. Thereafter, Quintos sold the
property to Maria and Rosario Lopez. Beck was
notified of theconveyance and given him 60 days to
vacate the premises. IN addition, Quintos required
Beck to returnall the furniture. Beck refused to return
3 gas heaters and 4 electric lamps since he would use
them untilthe lease was due to expire. Quintos refused
to get the furniture since Beck had declined to return
all ofthem. Beck deposited all the furniture belonging to
Quintos to the sheriff.
ISSUE: he is under the obligation to indemnify the plaintiff by
paying him their value. Since the 6 carabaos were not
WON Beck complied with his obligation of the property of the deceased or of any of his
returning the furniture to Quintos when it descendants, it is the duty of the administratrix of the
deposited thefurniture to the sheriff. estate to either return them or indemnify the owner
thereof of their value.
RULING:
Chee Kiong Yam v. Malik
The contract entered into between the parties is
GR No-50550-52 October 31, 1979
one of commadatum, because under it the
plaintiffgratuitously granted the use of the
Facts: Petitioners filed a petition for certiorari,
furniture to the defendant, reserving for herself
prohibition and mandamus with preliminary injunction
the ownershipthereof; by this contract the
against the respondent Judge Malik who ruled that
defendant bound himself to return the furniture to
several cases of estafa filed against the petitioners
the plaintiff, upon thelatter’s demand (clause 7 of
should be admitted for trial in his sala. It must be
the contract, Exhibit A; articles 1740, paragraph
noted that all complainants admitted that the money
1, and 1741 of the CivilCode). The obligation
which the petitioners did not return were obtained
voluntarily assumed by the defendant to return the
from them by the latter in a form of loans.
furniture upon the plaintiff'sdemand, means that he
should return all of them to the plaintiff at the
Issue: Can there be a crime of estafa for non-payment
latter's residence or house. Thedefendant did not
of a loan?
compl y with thi s obl igation when he merely
placed them at the di sposal of theplaintiff,
Held: No. In order that a person be convicted of
retaining for his benefit the three gas heaters and the
Swindling (Estafa) under Art. 315 of the Revised Penal
four electric lamps.As the defendant had voluntarily
Code, it must be proven that he has the obligation to
undertaken to return all the furniture to the plaintiff,
deliver or return the same money, goods or personal
upon the latter'sdemand, the Court could not legally
property that he received. Petitioners had no such
compel her to bear the expenses occasioned by the
obligation to return the same money, i.e., the bills or
deposit of thefurniture at the defendant's behest.
coins, which they received from private respondents.
The latter, as bailee, was not entitled to place
This is so because as clearly stated in criminal
the furniture ondeposit; nor was the plaintiff
complaints, the related civil complaints and the
under a duty to accept the offer to return the
supporting sworn statements, the sums of money that
furniture, because thedefendant wanted to retain the
petitioners received were loans. In U.S. vs. Ibañez, 19
three gas heaters and the four electric lamps.
Phil. 559, 560 (1911), the Supreme Court held that it
is not estafa for a person to refuse to pay his debt or
to deny its existence.
Delos Santos v. Jarra Digest
It is the opinion of the Court that when the relation is
purely that of debtor and creditor, the debtor can not
G.R. No. L-4150 February 10, 1910
be held liable for the crime of estafa, under said
Facts: article, by merely refusing to pay or by denying the
The Plaintiff Felix delos Santos filed this suit against indebtedness.
Agustina Jarra. Jarra was the administratix of the
estate of Jimenea. Plaintiff alleged that he owned 10 It appeared that respondent judge failed to appreciate
1st class carabaos which he lent to his father-in-law the distinction between the two types of loan, mutuum
Jimenea to be used in the animal-power mill without
and commodatum, when he performed the questioned
compensation. This was done on the condition of their
return after the work at the latter’s mill is terminated. acts. He mistook the transaction between petitioners
When delos Santos demanded the return of the and private respondents to be commodatum wherein
animals Jimenea refused, hence this suit. the borrower does not acquire ownership over the
thing borrowed and has the duty to return the same
Issue: W/N the contracts is one of a thing to the lender.
commodatum

Ruling:
SEVERINO TOLENTINO and POTENCIANA MANIO
YES. The carabaos were given on commodatum as
vs. BENITO GONZALEZ SY CHIAM
these were delivered to be used by defendant. Upon
G.R. No. 26085 August 12, 1927
failure of defendant to return the cattle upon demand,
 DOCTRINE:
Article 1281 of the Civil Code provides: "If the terms
of a contract are clear and leave no doubt as to the
intention of the contracting parties, the literal sense of
its stipulations shall be followed." Article 1282
provides: "in order to judge as to the intention of the
contracting parties, attention must be paid principally
to their conduct at the time of making the contract and
subsequently thereto.
FACTS:
Prior to 28 November, 1922, the appellants purchased
of the Luzon Rice Mills, Inc., a parcel of land with the
camarin located thereon, situated in Tarlac for
P25,000, promising to pay in 3 installments. The first
installment of P2,000 was due on or before the 02 May
1921; the second installment of P8,000 was due on or
before 31 May 1921; the balance of P15,000 at 12%
interest was due and payable on or about the 30
November 1922. One of the conditions of purchase
was that failure of the purchaser (plaintiffs and
appellants) to pay the balance of said purchase price
or any of the installments on the date agreed, the
property bought would revert to the original owner.
The payments due on May 1921, aggregating P10,000.
The balance of P15,000 due on said contract of
purchase was paid on or about the 01 December 1922,
in the manner which will be explained below. On the
date when the balance of P15,000 with interest was
paid, the vendor of said property had issued to the
purchasers TCT No. 528. Said TCT (No. 528) was
transfer certificate of title from No. 40, which shows
that said land was originally registered in the name of
the vendor on the 07 November 1913. On the 07
November 1922 the representative of the vendor of
the property in question wrote a letter to the appellant
Potenciana Manio, notifying the latter that if the
balance of said indebtedness was not paid, an action
would be brought for the purpose of recovering the
property, together with damages for non compliance
with the condition of the contract of purchase. The
appellant obtained a loan amounting to P17,500 upon
condition that the plaintiffs execute and deliver to him
a pacto de retro of said property.
ISSUE:
Whether or not the contract is that of a mortgage
HELD:
No It has been the uniform theory of this court, due to
the severity of a contract of pacto de retro, to declare
the same to be a mortgage and not a sale whenever
the interpretation of such a contract justifies that
conclusion. There must be something, however, in the
language of the contract or in the conduct of the
parties which shows clearly and beyond doubt that
they intended the contract to be a "mortgage" and not
a pacto de retro. There is not a word, a phrase, a
sentence or a paragraph in the entire record, which
justifies this court in holding that the said contract of
pacto de retro is a mortgage and not a sale with the
right to repurchase. Article 1281 of the Civil Code
provides: "If the terms of a contract are clear and
leave no doubt as to the intention of the contracting
parties, the literal sense of its stipulations shall be
followed." Article 1282 provides: "in order to judge as
to the intention of the contracting parties, attention
must be paid principally to their conduct at the time of
making the contract and subsequently thereto.
LIWANAG v. CA
G.R. No. 114398; October 24, 1997
Ponente: J. Romero
FACTS:
Petitioner Carmen Liwanag and a certain
Thelma Tabligan went to the house of complainant
Isidora Rosales (Rosales) and asked her to join them in
the business of buying and selling cigarettes.
Convinced of the feasibility of the venture, Rosales
readily agreed. Under their agreement, Rosales would
give the money needed to buy the cigarettes while
Liwanag and Tabligan would act as her agents, with a
corresponding 40% commission to her if the goods are
sold; otherwise the money would be returned to
Rosales. Consequently, Rosales gave several cash
advances to Liwanag and Tabligan amounting to
P633,650.00
Alarmed that Liwanag was no longer visiting
her regarding their business and believing that the
amounts she advanced were being misappropriated,
Rosales filed a case of estafa against Liwanag.
Liwanag advances the theory that the intention
of the parties was to enter into a contract of
partnership, wherein Rosales would contribute the
funds while she would buy and sell the cigarettes, and
later divide the profits between them. She also argues
that the transaction can also be interpreted as a simple
loan, with Rosales lending to her the amount stated on
an installment basis. RTC found Liwanag guilty for
the crime of estafa. The Court of Appeals affirmed the
lower court’s decision
ISSUE:
Whether Liwanag can be acquitted from the
crime of estafa because she and Rosales formed a
partnership
HELD:
No, Liwanag could not be acquitted from the
crime of estafa.
The Supreme Court held that Estafa is a crime
committed by a person who defrauds another causing
him to suffer damages, by means of unfaithfulness or
abuse of confidence, or of false pretenses or fraudulent
acts.
In the case at hand, even assuming that a
contract of partnership was indeed entered into by and
between the parties, we have ruled that when money
or property have been received by a partner for a
specific purpose (such as that obtaining in the instant
case) and he later misappropriated it, such partner is
guilty of estafa.
Thus, even assuming that a contract of
partnership was indeed entered into by and between
the parties, we have ruled that when money or
property have been received by a partner for a specific
purpose (such as that obtaining in the instant case)
and he later misappropriated it, such partner is guilty
of estafa.[7]
LOAN
Neither can the transaction be considered a loan,
since in a contract of loan once the money is received
by the debtor, ownership over the same is
transferred.[8] Being the owner, the borrower can
dispose of it for whatever purpose he may deem
proper.
In the instant petition, however, it is evident that
Liwanag could not dispose of the money as she
pleased because it was only delivered to her for a
single purpose, namely, for the purchase of cigarettes,
and if this was not possible then to return the money
to Rosales. Since in this case there was no transfer of
ownership of the money delivered, Liwanag is liable for
conversion under Art. 315, par. 1(b) of the Revised
Penal Code.
WHEREFORE, in view of the foregoing, the
appealed decision of the Court of Appeals dated
November 29, 1993, is AFFIRMED. Costs against
petitioner.
Saura Import &Export Co., Inc v. DBP
G.R. No. L-24968 April 27, 1972
Facts: Saura Inc. applied to the Rehabilitation Finance
Corp (before its conversion to DBP) for a loan of 500k
secured by a first mortgage of the factory building to
finance for the construction of a jute mill factory and
purchase of factory implements. RFC accepted and
approved the loan application subject to some
conditions which Saura admitted it could not comply
with. Without having received the amount being
loaned, and sensing that it could not at anyway obtain
the full amount of loan, Saura Inc. then asked for
cancellation of the mortgage which RFC also approved.
Nine years after the cancellation of the mortgage,
Saura sued RFC for damages for its non-fulfillment of
obligations arguing that there was indeed a perfected
consensual contract between them.
Issue: Was there a perfected consensual contract? Was
there a real contract of loan which would warrant
recovery of damages arising out of breach of such
contract?
Held: On the first issue, yes, there was indeed a
perfected consensual contract, as recognized in Article
1934 of the Civil Code. There was undoubtedly offer
and acceptance in this case: the application of Saura,
Inc. for a loan of P500,000.00 was approved by
resolution of the defendant, and the corresponding
mortgage was executed and registered. But this fact
alone falls short of resolving the second issue and the
basic claim that the defendant failed to fulfill its
obligation and the plaintiff is therefore entitled to
recover damages. The action thus taken by both
parties—Saura's request for cancellation and RFC's
subsequent approval of such cancellation—was in the
nature of mutual desistance — what Manresa terms
"mutuo disenso"— which is a mode of extinguishing
obligations. It is a concept derived from the principle
that since mutual agreement can create a contract,
mutual disagreement by the parties can cause its
extinguishment. In view of such extinguishment, said
perfected consensual contract to deliver did not
constitute a real contract of loan.
G.R. No. L-1927 May 31, 1949
CRISTOBAL ROÑO,
petitioner, vs.
JOSE L. GOMEZ, ET AL.,
respondents.
*Usurious Transactions #6 (round 2)STATEMENT OF
FACTS:
On October 5, 1944, Cristobal Roño received as a loan fromJose L.
Gomez P4,000.00 in Japanese fiat money (mickey mouse money).
The contractof loan is under the condition that said loan
will not earn interest
and that it will be paid
in the currency then prevailing
one year after the execution of the contract. After ayear, a collection
suit was filed by respondent Gomez against petitioner Rono to
collect
the latter’s debt. Subsequently, t
he trial court ruled in favor of Gomez. The courtordered Rono to pay
the respondent an amount of P4,000.00 in Philippine currencywhich
was then the prevailing currency at the time
of payment. Contending suchdecision, Rono insists that the contract
taken in favor of respondent is contrary to law,public order and good
morals
since his loan then of P4,000.00 “mickey mouse”
money
is equivalent only to P100.00 of the Philippine currency which is the
prevailing currencyat the time of payment.
CONTENTION OF THE PETITIONER:
Roño asserts that the decision of the trial courtruling in favor of
respondent is contrary to the Usury law, because on the basis
ofcalculations by Government experts he only received the
equivalent of P100 Philippinepesos and now he is required to give
four thousand pesos or interest greatly in excessof the lawful rates.
CONTENTION OF THE RESPONDENT:
That both parties agreed that the loanedamount of
P4,000.00 mickey mouse money be paid in “the
currency prevailing by theend of one year.” The civil
cod
e supports such agreement when it says "obligationsarising from
contracts shall have the force of law between the contracting parties
andmust be performed in accordance with their stipulations" (Article
1091).
RESOLUTION OF SC:
The SC ruled that that the contract between the parties is an
aleatoty contract.The eventual gain of Gomez is not
“ We find nothing immoral or violative of public order in
interest
” want to have their prewar credit paid with Japanese
within the meaning of the Usury law.In the first place, Rono is not
paying an interest. Such is evidenced by the fact that in
hispromissory note, he
indicated that the money loaned “will not earn any
interest.”
Furthermore, both parties clearly agreed at the time of the
execution of thecontract that the loaned money (
P4,000.00 “mickey mouse
) will
be paid in “the currency
prevailing by the end of the s
tipulated period of one year.”
The devaluation of the Mickey mouse money is due to an event
unforseable byany man; that the increased intrinsic value and
purchasing power of the current moneyis consequence of an event
(change of currency) which at the time of the contractneither party
knew would certainly happen within the period of one year.
However, bothparties subjected their rights and obligations to that
contingency. Thus, the contract inquestion is legal and obligatory
and is not subject to the operation of the Usury law
NEPOMUCENO VS. NARCISO
FACTS: On November 14, 1938, appellant Mariano
Nepomuceno executed a mortgage in favor of the
appellees on a parcel of land situated in the
municipality of Angeles, Province of Pampanga, two
years before the maturity of said mortgage (On
September 30, 1943); the parties executed a notarial
document entitled “Partial Novation of Contract” On
July 21, 1944, the mortgagor and his wife Agueda G.
de Nepomuceno filed their complaint in this case
against the mortgagees, which compplaint, as
amended on September 7, 1944, alleged the execution
of the contract of mortgage and its principal
novationAppellants contend that the stipulation in the
contract of September 30, 1943, that “while the war
goes on the mortgagor, his administrators or assigns
cannot redeem the property mortgaged,” is against
public policy and therefore null and void.
Issue: WON it is against public policy and a restraint
on the freedom of commerce to compel a debtor not to
release his property from a lien
Ruling:
Article 1127 provides: Whenever a term for the
performance of an obligation is fixed, it is presumed to
have been established for the benefit of the creditor
and that of the debtor, unless from its tenor or from
other circumstances it should appear that the term
was established for the benefit of one or the other. By
mutual agreement of the parties that term was
modified on September 30, 1943, by reducing the
interest to 6 per cent per annum from December 8,
1941, until the end of the war and by stipulating that
the mortgagor shall not pay off the mortgage while the
war went on.
that stipulation. The mortgagees apparently did not
military notes, and the mortgagor voluntarily agreed
not to do so in consideration of the reduction of the
rate of interest.
It was a perfectly equitable and valid transaction, in
conformity with the provisions of the Civil Code
hereinabove quoted.
Appellants were bound by said contract and appellees
were not obligated to receive the payment before it
was due. Hence the latter had reason not to accept the
tender of payment made to them by the former.
(EQUITABLE refer to picture)
(pan pacific full txt)
Espiritu refer to pic
JARDENIL VS. SOLAS –Art. 1956 –Calinisan
Facts:
A)Solas entered into a mortgage with Jardenil, in
connection with a loan from Nov 1932 to March 1934.
B)Solas was unable to pay his obligation. C)Jardenil
extended to another year from the date of maturity
within which to make payment, without making any
mention of any interest which the mortgagor should
pay during the additional period. D)Still, Solas was
unable to pay. E)The original mortgage show that
there was an agreement to pay interest only up to the
date of maturity (first day of maturity), May 31, 1934.
Issue:
W/N Solas is 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:
A)Pay interest only until the date of maturity.
B)Interest shall be due only when it has been expressly
stipulated. C)There is nothing in the mortgage deed to
show that the terms employed by the parties thereto
are at war with their evident intent. D)The true
intention of the parties was that no interest should be
paid during the period of grace. E)There was no mutual
mistake.
PRISMA CONSTRUCTION & DEVELOPMENT
CORPORATION and ROGELIO S. PANTALEON vs
ARTHUR F. MENCHAVEZ
G.R. No. 160545; March 9, 2010
FACTS:
December 8, 1993, Pantaleon, President and Chairman
of the Board of PRISMA, obtained a P1M loan from the
respondent, with monthly interest of P40,000.00
payable for 6 months, or a total obligation of
P1,240,000.00 payable within 6 mos. To secure the
payment of the loan, Pantaleon issued a promissory.
Pantaleon signed the promissory note in his personal
capacity and as duly authorized by the Board of
Directors of PRISMA. The petitioners failed to
completely pay the loan within the 6-month period.
As of January 4, 1997, respondent found that the
petitioners still had an outstanding balance of
P1,364,151.00, to which respondent applied a 4%
monthly interest.
On August 28, 1997, respondent filed a complaint for
sum of money to enforce the unpaid balance, plus 4%
monthly interest. In their Answer, the petitioners
admitted the loan of P1,240,000.00, but denied the
stipulation on the 4% monthly interest, arguing that
the interest was not provided in the promissory note.
Pantaleon also denied that he made himself personally
liable and that he made representations that the loan
would be repaid within six (6) months.
RTC found that the respondent issued a check for P1M
in favor of the petitioners for a loan that would earn an
interest of 4% or P40,000.00 per month, or a total of
P240,000.00 for a 6-month period. RTC ordered the
petitioners to jointly and severally pay the respondent
the amount of P3,526,117.00 plus 4% per month
interest from February 11, 1999 until fully paid.
Petitioners appealed to CA insisting that there was no
express stipulation on the 4% monthly interest. CA
favored respondent but noted that the interest of 4%
per month, or 48% per annum, was unreasonable and
should be reduced to 12% per annum. MR denied
hence this petition.
ISSUE:
Whether the parties agreed to the 4% monthly interest
on the loan. If so, does the rate of interest apply to the
6-month payment period only or until full payment of
the loan?
RULING:
Petition is meritorious. Interest due should be
stipulated in writing; otherwise, 12% per annum
Obligations arising from contracts have the force of law
between the contracting parties and should be
complied with in good faith. When the terms of a
contract are clear and leave no doubt as to the
intention of the contracting parties, the literal meaning
of its stipulations governs. Courts have no authority to
alter the contract by construction or to make a new
contract for the parties; a court’s duty is confined to
the interpretation of the contract the parties made for
themselves without regard to its wisdom or folly, as
the court cannot supply material stipulations or read
into the contract words the contract does not contain.
It is only when the contract is vague and ambiguous
that courts are permitted to resort to the interpretation
of its terms to determine the parties’ intent.
In the present case, the respondent issued a check for
P1M. In turn, Pantaleon, in his personal capacity and
as authorized by the Board, executed the promissory
note. Thus, the P1M loan shall be payable within 6
months. The loan shall earn an interest of P40,000.00
per month, for a total obligation of P1,240,000.00 for
the six-month period. We note that this agreed sum
can be computed at 4% interest per month, but no
such rate of interest was stipulated in the promissory
note; rather a fixed sum equivalent to this rate was
agreed upon.
Article 1956 of the Civil Code specifically mandates
that “no interest shall be due unless it has been
expressly stipulated in writing.” The payment of
interest in loans or forbearance of money is allowed
only if: (1) there was an express stipulation for the
payment of interest; and (2) the agreement for the
payment of interest was reduced in writing. The
concurrence of the two conditions is required for the
payment of interest at a stipulated rate. The collection
of interest without any stipulation in writing is
prohibited by law.
The interest of P40,000.00 per month corresponds only
to the six-month period of the loan, or from January 8,
1994 to June 8, 1994, as agreed upon by the parties in
the promissory note. Thereafter, the interest on the
loan should be at the legal interest rate of 12% per
annum.
When the obligation is breached, and it consists in the
payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that
which may have been stipulated in writing.
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, i.e.,
from judicial or extrajudicial demand under and subject
to the provisions of Article 1169 of the Civil Code.
The facts show that the parties agreed to the payment
of a specific sum of money of P40,000.00 per month
for six months, not to a 4% rate of interest payable
within a 6-month period.
No issue on the excessiveness of the stipulated
amount of P40,000.00 per month was ever put in issue
by the petitioners; they only assailed the application of
a 4% interest rate, since it was not agreed upon.
It is a familiar doctrine in obligations and contracts
that the parties are bound by the stipulations, clauses,
terms and conditions they have agreed to, which is the
law between them, the only limitation being that these
stipulations, clauses, terms and conditions are not
contrary to law, morals, public order or public policy.
The payment of the specific sum of money of
P40,000.00 per month was voluntarily agreed upon by
the petitioners and the respondent. There is nothing
from the records and, in fact, there is no allegation
showing that petitioners were victims of fraud when
they entered into the agreement with the respondent.
Therefore, as agreed by the parties, the loan of P1M
shall earn P40,000.00 per month for a period of 6
months, for a total principal and interest amount of
P1,240,000.00. Thereafter, interest at the rate of 12%
per annum shall apply. The amounts already paid by
the petitioners during the pendency of the suit,
amounting toP1,228,772.00 as of February 12, 1999,
should be deducted from the total amount due,
computed as indicated above. We remand the case to
the trial court for the actual computation of the total
amount due.WHEREFORE, in light of all the foregoing,
we hereby REVERSE and SET ASIDE the Decision CA
SEBASTIAN SIGA-AN vs ALICIA VILLANUEVA
Choco Lomondot
Facts:
 On March 3, 1998, respondent Alicia Villanueva
filed a complaint for a sum of money against
petitioner Sebastian Siga-an. Respondent
alleged that she was a businesswoman
engaged in supplying office materials and
equipments to the PNO; while petitioner was a
military officer and comptroller of the PNO
from 1991-1996.
 Sometime in 1992, respondent claimed that
the petitioner approached her inside the PNO
office and offered to loan her the amount of
P540,000. She accepted the offer since she
needed capital for her business. The loan
agreement was not reduced in writing and
there was no stipulation as to the payment of
interest for the loan.
 On August 31, 1993, respondent issued a
check worth P500,000 to petitioner as partial
payment of the loan. Two months later she
issued another check in the amount of
P200,000 as payment of the remaining
balance. Petitioner told her that she since she
paid a total amount of P700,000 for the
P540,000 worth of loan, the excess amount of
P160,000 would be applied as interest for the
loan. Not satisfied with the amount applied as
interest, the petitioner pestered her to pay
additional interest. He threatened to block her
transactions with the PNO if she won't comply.
The respondent conceded since all her
transactions with the PNO need the approval of
the petitioner. Thus, she paid addt'l amounts in
cash and checks as interest for the loan. She
asked the petitioner to give her receipts but
he told her that there's no need for a receipt
because there's mutual trust and
understanding between them.
 Thereafter, the respondent consulted a lawyer
regarding propriety of paying interest on the
loan despite the absence of agreement to that
effect. Her lawyer told her that petitioner could
not validly collect interest on the loan because
there was no agreement between her and
petitioner. Upon being advised by her lawyer
that she made an overpayment, she sent a
demand letter to petitioner asking for the
return of the excess amount. But the petitioner
just ignored the demand letter.
 Respondent prayed that the RTC render
judgment ordering petitioner to pay
respondent (1) P660,000.00 plus legal interest
from the time of demand; (2) P300,000.00 as
moral damages; (3) P50,000.00 as exemplary
damages; and (4) an amount equivalent to
25% of P660,000.00 as attorney’s fees.
 In his answer to the complaint, the petitioner
denied that he offered a loan to respondent
and mentioned the mistakes committed by the
respondent regarding the payment of the loan
and that there was no overpayment.
 After the trial, the RTC rendered a decision
holding that respondent made an overpayment
of her loan obligation to petitioner and that the
latter should refund the excess amount to the
former. The alleged interest should not be
included because there was no agreement
between them regarding the payment of
interest. It concluded that since respondent
made an excess payment to petitioner in the
amount of P660,000.00 through mistake,
petitioner should return the said amount to
respondent pursuant to the principle of solutio
indebiti.
 Petitioner appealed to the CA but the CA
affirmed the ruling of the RTC. Petitioner filed a
 motion for reconsideration to the appellate
court, hence this petition.
ISSUES:
1. WON no interest was due to petitioner.
2. WON applying the principle of solution indebiti
is proper.
DECISION:
Decision of the Court of Appeals in CA-G.R. CV
No. 71814, dated 16 December 2005, is hereby
AFFIRMED with the following MODIFICATIONS: (1)
the amount of P660,000.00 as refundable amount of
interest is reduced to THREE HUNDRED THIRTY FIVE
THOUSAND PESOS (P335,000.00); (2) the amount of
P300,000.00 imposed as moral damages is reduced to
ONE HUNDRED FIFTY THOUSAND PESOS
(P150,000.00); (3) an interest of 6% per annum is
imposed on the P335,000.00, on the damages
awarded and on the attorney’s fees to be computed
from the time of the extra-judicial demand on 3 March
1998 up to the finality of this Decision; and (4) an
interest of 12% per annum is also imposed from the
finality of this Decision up to its satisfaction. Costs
against petitioner.
RULING:
 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. As can be
gleaned from the foregoing provision, payment
of monetary interest is allowed only if: (1)
there was an express stipulation for the
payment of interest; and (2) 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, we have held that collection of interest
without any stipulation therefor in writing is
prohibited by law.
 Article 1960 of the Civil Code, if the borrower
of loan pays interest when there has been no
stipulation therefor, the provisions of the Civil
Code concerning solutio indebiti shall be
applied. Article 2154 of the Civil Code explains
the principle of solutio indebiti. Said provision
provides that if something is received when
there is no right to demand it, and it was
unduly delivered through mistake, the
obligation to return it arises.
 The principle of solutio indebiti applies where
(1) a payment is made when there exists no
binding relation between the payor, who has
no duty to pay, and the person who received
the payment; and (2) the payment is made
through mistake, and not through liberality or
some other cause.
 In the present case, petitioner’s obligation
arose from a quasi-contract of solutio indebiti
and not from a loan or forbearance of money.
Thus, an interest of 6% per annum should be
imposed on the amount to be refunded as well
as on the damages awarded and on the
attorney’s fees, to be computed from the time
of the extra-judicial demand on 3 March 1998,
up to the finality of this Decision. In addition,
the interest shall become 12% per annum from
the finality of this Decision up to its
satisfaction.
SPOUSES DAVID B. CARPO and RECHILDA S.
CARPO,
Petitioners
,- versus -
ELEANOR CHUA and TINGA, and ELMA DY NG,
CHICO-NAZARIO,
JJ.
Respondents
.
DOCTRINE:
Usurious loan transaction is not a complete nullity but
defective only withrespect to the agreed interest.In
simple loan with stipulation of usurious interest, the
prestation of thedebtor to pay the principal debt, which
is the cause of the contract (Article1350, Civil Code), is
not illegal. The illegality lies only as to the prestation
topay the stipulated interest; hence, being separable,
the latter only should bedeemed void, since it is the
only one that is illegal.
FACTS:
1.
Petitioners borrowed from respondents the amount of
P175,000.00, payable within six (6)months with an
interest rate of six percent (6%) per month. To secure
the payment of theloan, petitioners mortgaged their
residential house and lot.2.
Petitioners failed to pay the loan upon demand.
Consequently, the real estate mortgagewas
extrajudicially foreclosed where the respondents
emerged winners in the public auction.3.
Petitioners failed to exercise their right of redemption,
thus a certificate of sale wasissued and new TCT was
issued in the name of respondents. Despite the
issuance of the TCT,petitioners continued to occupy
the said house and lot, prompting respondents to file
apetition for writ of possession.Writ of possession was
then issued.4.
Petitioners filed a complaint for annulment of real
estate mortgage and the consequentforeclosure
proceedings.5.
Petitioners claim that following the Courts ruling in
Medel v. Court of Appeals
the rate ofinterest stipulated in the principal loan
agreement is clearly null and void. Consequently,
theyalso argue that the nullity of the agreed interest
rate affects the validity of the real estatemortgage.
ISSUE:
A.Whether the interest rate is valid.---NO
B. Whether validity of said interest rate affects the
Mortgage Contract.--NO
HELD:
A.
INTEREST RATEPetitioners contend that the agreed
rate of interest of 6% per month or 72% per annum is
soexcessive, iniquitous, unconscionable and exorbitant
that it should have been declared nulland void. Instead
of dismissing their complaint, they aver that the lower
court should havedeclared them liable to respondents
for the original amount of the loan plus 12% interest
perannum and 1% monthly penalty charge
as liquidated damages, in view of the ruling in
Medelv. Court of Appeals
where the Court found that the interest stipulated at
5.5% per month or66% per annum was so
iniquitous or unconscionable as to render the
stipulation void.In a long line of cases, this Court has
invalidated similar stipulations on interest
rates forbeing excessive, iniquitous, unconscionable
and exorbitant.In the case at bar, the stipulated
interest rate is 6% per month, or 72% per annum.
By thestandards set in the above-cited cases,
this stipulation is similarly invalid.From
thatperspective, it is apparent that the stipulated
interest in the subject loan is excessive,iniquitous,
unconscionable and exorbitant. Pursuant to the
freedom of contract principleembodied in Article 1306
of the Civil Code, contracting parties may establish
suchstipulations, clauses, terms and conditions as they
may deem convenient, provided they arenot contrary
to law, morals, good customs, public order, or public
policy. In the ordinarycourse, the codal provision may
be invoked to annul the excessive stipulated interest.
B under liquidation oncurrent account.To resolve these claims,
. INTEREST RATE INVALIDITY &MORTGAGE
CONTRACTThe question as to whether the invalidity of
the stipulation on interest carries with it theinvalidity
of the principal obligation is crucial . The consideration
of the mortgage contract isthe same as that of the
principal contract from which it receives life, and
without which itcannot exist as an independent
contract. Being a mere accessory contract, the validity
of themortgage contract would depend on the validity
of the loan secured by it.Notably in
Medel
, the Court did not invalidate the entire loan obligation
despite theinequitability of the stipulated interest, but
instead reduced the rate of interest to the
morereasonable rate of 12% per annum. This is
congruent with the rule that a usurious loantransaction
is not a complete nullity but defective only with respect
to the agreed interest.Further,
Article 1273
, Civil Code, provides:
"The renunciation of the principaldebt shall extinguish
the accessory obligations; but the waiver of the
lattershall leave the former in force."
Article 1420
of the New Civil Code provides in this regard: "In case
of a divisiblecontract, if the illegal terms can
be separated from the legal ones, the lattermay be
enforced."
In simple loan with stipulation of usurious interest, the
prestation of thedebtor to pay the principal debt, which
is the cause of the contract (Article1350, Civil Code), is
not illegal. The illegality lies only as to the
prestation topay the stipulated interest; hence, being
separable, the latter only should bedeemed void, since
it is the only one that is illegal.The principal debt
remaining without stipulation for payment of interest
canthus be recovered by judicial action. And in case of
such demand, and thedebtor incurs in delay, the
debt earns interest from the date of the demand
(inthis case from the filing of the complaint). Such
interest is not due tostipulation, for there was none,
the same being void. Rather, it is due to thegeneral
provision of law that in obligations to pay money,
where the debtorincurs in delay, he has to pay interest
by way of damages.
Sentinel refer to full txt
Gopoco Grocery v. Pacific Coast Biscuit Co.
G.R. Nos. L-43697 and L-442200, March 31, 1938
FACTS:
Mercantile Bank of China was declared in liquidation
as it could not continue operating as suchwithout running
the risk of suffering losses and prejudice its depositors and
customers.
CreditorsGopoco Grocery, et. al.
alleged that they
deposited sum of money in the bank
Fulgencio Borromeo was appointed by the lower court as
commissionerand referee to receive the evidence which the
interested parties may desire to present.
Borromeo
resolved the claims by
recommending that the same be considered as an
ordinary credit only
,and notas a preferred credit as Gopoco Grocery, Et Al wanted,
because they were at the same time debtors ofthe bank make it assume the character of a general warrant, in
. The lower court upheld Borromeo’s recommendations. another context it may be considered perfectly alright.
Gopoco Grocery, et. al. contended that their claims are preferred
credits because they aredeposits in contemplation of law, and as
such, should be returned with the corresponding interestthereon. – SW only for one offense, if issued for more
than two, it is void. Scatter shot warrant.
ISSUE:
WON the lower court erred in not holding petitioners’ claims as
preferred credits? – In illegal possession of shabu, marijuana,
paraphernalia- one SW ok!
RULING:
NO, deposits on current account in the bank now under liquidation
are considered
– SW may be partially void
ordinarycredits only
.Gopoco Grocery, et. al., themselves, admit that the bank owes
them interest which should havebeen paid to them before it was
declared in a state of liquidation. This fact undoubtedly destroys – Undetermined amount of marijuana ok!
thecharacter which they nullifies their contention that the same be
considered as irregular deposits,because the
payment of interest only takes place in the case – Purpose of Particularity of Description:
of loans
.The
so-called current account and savings deposits have 1. Readily identify the items to be seized, thus prevent
lost their character of deposits andare convertible into them from seizing the wrong items
simple commercial loans 2. Leave officers with no discretion regarding articles to
be seized and thus prevent unreasonable searches and
because seizure
, in cases of such deposits, the
bank has madeuse thereof in the ordinary course of its
– Not required that technical precision of
transactions as an institution engaged in the
description be required
bankingbusiness
, not because it so wishes, but precisely
because of the authority deemed to have beengranted
to it by Gopoco Grocery, Et Al to enable them to collect – “narcotics paraphernalia”, “any and all
the interest which they had been andthey are now narcotics”, and “a quantity of loose heroin”- ok!
collecting
, and by virtue further of the authority granted to it by Corporation
Law andBanking Law. – “and the like”- not necessarily general warrant

– Where should the requisite description appear-

in the caption or body of the warrant? Body sufficient.
CENTRAL BANK v. MORFE

– What if there’s discrepancy between the

FACTS: First Mutual Savings and Loan Organization
encourage savings among its members and extend
financial assistance thru loans. Central bank said that
the Organization and others with similar nature are
banking institutions and that the Org have never been
authorized. CB applied for SW because of the Org’s
illegal receipt of deposits of money for deposit,
disbursements…without compliance with RA 337. The
SW includes articles such as book of original
entry…and others. They said that the SW is general in
its terms and that the use of the word “and others”
permits the unreasonable search and seizure of
documents which have no relation to any specific
criminal act.
HELD: SW is upheld.
– Depending on the circumstances, while in one
instance the particular wording of the warrant may
address in the caption and in the body? Not sufficient
to invalidate. It is sufficient as long as you can identify
the place intended and distinguish it from other places
in the community.
MANUEL M. SERRANO, petitioner, vs. CENTRAL
BANK OF THE PHILIPPINES
FACTS:
Serrano made a time deposit, of P150,000.00 with the
respondent Overseas Bank of Manila. Concepcion
Maneja also made a time deposit, for of P200,000.00
with the same respondent. Concepcion Maneja,
married to Felixberto M. Serrano, assigned and
conveyed to petitioner Manuel M. Serrano, her time
deposit of P200,000.00 with respondent Overseas
Bank of Manila. Notwithstanding series of demands for
encashment of the aforementioned time deposits from
the respondent Overseas Bank of Manila, not a single
one of the time deposit certificates was honored by
respondent Overseas Bank of Manila. Respondent
Central Bank admits that it is charged with the duty of
administering the banking system of the Republic and
it exercises supervision over all doing business in the
Philippines, but denies the petitioner's allegation that
the Central Bank has the duty to exercise a most rigid
and stringent supervision of banks, implying that
respondent Central Bank has to watch every move or
activity of all banks, including respondent Overseas
Bank of Manila. Respondent Central Bank denied that it
is guarantor of the permanent solvency of any banking
institution as claimed by petitioner. Respondent
Central Bank likewise denied that a constructive trust
was created in favor of petitioner and his predecessor
in interest Concepcion Maneja when their time deposits
were made with the respondent Overseas Bank of
Manila as during that time the latter was not an
insolvent bank and its operation as a banking
institution was being salvaged by the respondent
Central Bank.
ISSUE:
Whether respondent Central Bank is jointly and
severally liable.
HELD:
No Bank deposits are in the nature of irregular
deposits. They are really loans because they earn
interest. All kinds of bank deposits, whether fixed,
savings, or current are to be treated as loans and are
to be covered by the law on loans. Current and savings
deposit are loans to a bank because it can use the
same. The petitioner here in making time deposits that
earn interests with respondent Overseas Bank of
Manila was in reality a creditor of the respondent Bank
and not a depositor. The respondent Bank was in turn
a debtor of petitioner. Failure of the respondent Bank
to honor the time deposit is failure to pay its obligation
as a debtor and not a breach of trust arising from
depositary's failure to return the subject matter of the
deposit.
GUINGONA VS CITY FISCAL
G.R. No. L-60033 April 4, 1984
TEOFISTO GUINGONA, JR., ANTONIO I. MARTIN,
and TERESITA SANTOS, petitioners,
THE CITY FISCAL OF MANILA, HON. JOSE B.
FLAMINIANO, ASST. CITY FISCAL FELIZARDO N.
LOTA and CLEMENT DAVID, respondents.
Nature: Petition for prohibition and injunction with a
prayer for the immediate issuance of restraining order
and/or writ of preliminary injunction seeking to
prohibit the public respondent which is the City Fiscal
of Manila from proceeding with the preliminary
investigation, in which they were charged by private
respondent Clement David
Keywords: Bank deposits are loans, mutuum, estafa,
criminal charge, civil case, thrift bank, NSLA
Summary: From March 1979 to March 1981, Clement
David made several investments with the National
Savings and Loan Association (NSLA). On March 21,
1981, the Bangko Sentral placed the bank under
receivership. Upon David’s request, petitioners
Guingona and Martin issued a joint promissory note,
absorbing the obligations of the bank. On July 17,
1981, they divided the indebtedness. David filed a
complaint for estafa and violation of Central Bank
Circular No. 364 and related regulations regarding
foreign exchange transactions before the Office of the
City Fiscal of Manila. Petitioners filed the herein
petition for prohibition and injunction with a prayer for
immediate issuance of restraining order and/or writ of
preliminary injunction to enjoin the public respondents
to proceed with the preliminary
investigation on the ground that the petitioners’
obligation is civil in nature.
MAKASIAR, Actg. C.J.
Facts: David invested several deposits with the Nation
Savings and Loan Association [NSLA]. He said that he
was induced into making said investments by an
Australian national who was a close associate of the
petitioners [NSLA officials]. On March 1981, NSLA
was placed under receivership by the Central
Bank, so David filed claims for his and his sister’s
investments.
On June 1981, Guingona and Martin, upon
David’s request, assumed the bank’s obligation to
David by executing a joint promissory note. On July
1981, David received a report that only a portion of his
investments was entered in the NSLA records.
On December 1981, David filed I.S. No. 81-
31938 in the Office of the City Fiscal, which case was
assigned to Asst. City Fiscal Lota for preliminary
investigation. David charged petitioners with estafa
and violation of Central Bank Circular No. 364 and
related regulations on foreign exchange transactions.
Petitioners moved to dismiss the charges
against them for lack of jurisdiction because David's
claims allegedly comprised a purely civil obligation, but
the motion was denied. After the presentation of
David's principal witness, petitioners filed this petition
for prohibition and injunction because:
a. The production of various documents showed that
the transactions between David and NSLA were simple
loans (civil obligations which were novated when
Guingona and Martin assumed them)
b. David's principal witness testified that the duplicate
originals of the instruments of indebtedness were all
on file with NSLA.
A TRO was issued ordering the respondents to refrain order to clear the bank draft through his dollar account
from proceeding with the preliminary investigation in because the bank did not have a dollar account.
I.S. No. 81-31938. Immediately after the bank draft was cleared,
petitioner Guingona authorized Nation Savings and
Petitioners’ liability is civil in nature, so respondents Loan Association to withdraw the same in order to be
have no jurisdiction over the estafa charge. TRO utilized by the bank for its operations. It is safe to
CORRECTLY ISSUED. assume that the U.S. dollars were converted first into
Philippine pesos before they were accepted and
Issue: deposited in Nation Savings and Loan Association,
1. Whether the contract between NSLA and David is a because the bank is presumed to have followed the
contract of depositor or a contract of loan, which ordinary course of the business which is to accept
answer determines whether the City Fiscal has the deposits in Philippine currency only, and that the
jurisdiction to file a case for estafa transaction was regular and fair, in the absence of a
clear and convincing evidence to the contrary.
2. Whether there was a violation of Central Bank In conclusion, considering that the liability of
Circular No. 364 the petitioners is purely civil in nature and that there is
no clear showing that they engaged in foreign
Held: exchange transactions, We hold that the public
1. When David invested his money on time and respondents acted without jurisdiction when they
savings deposits with NSLA, the contract that was investigated the charges against the petitioners.
perfected was a contract of simple loan or Consequently, public respondents should be restrained
mutuum and not a contract of deposit. Hence, the from further proceeding with the criminal case for to
relationship between David and NSLA is that of allow the case to continue, even if the petitioners could
creditor and debtor, consequently, the ownership of have appealed to the Ministry of Justice, would work
the amount deposited was transmitted to the Bank great injustice to petitioners and would render
upon the perfection of the contract and it can make meaningless the proper administration of justice
use of the amount deposited for its banking
operations, such as to pay interests on deposits and to Ruling: WHEREFORE, THE PETITION IS
pay withdrawals.. HEREBY GRANTED; THE TEMPORARY RESTRAINING
While the Bank has the obligation to return the ORDER PREVIOUSLY ISSUED IS MADE PERMANENT.
amount deposited, it has no obligation to return or
deliver the same money that was
deposited. NSLA’s failure to return the amount
deposited will not constitute estafa through
misappropriation punishable under Article 315,
par. L (b) of the Revised Penal Code, but it will
only give rise to civil liability over which the
public respondents have no jurisdiction.
Considering that petitioners’ liability is purely
civil in nature and that there is no clear showing that
they engaged in foreign exchange transactions, public
respondents acted without jurisdiction when they
investigated the charges against the petitioners. Public
respondents should be restrained from further
proceeding with the criminal case for to allow the case
to continue would work great injustice to petitioners
and would render meaningless the proper
administration of justice.
Even granting that NSLA’s failure to pay the
time and savings deposits would constitute a violation
of RPC 315, paragraph 1(b), any incipient criminal
liability was deemed avoided. When NSLA was
placed under receivership, Guingona and Martin
assumed the obligation to David, thereby
resulting in the novation of the original
contractual obligation. The original trust relation
between NSLA and David was converted into an
ordinary debtor-creditor relation between the
petitioners and David. While it is true that novation
does not extinguish criminal liability, it may prevent
the rise of criminal liability as long as it occurs prior to
the filing of the criminal information in court.

2. Petitioner Guingona merely accommodated the

request of the Nation Savings and loan Association in