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People v Puig & Porras


 112 cases of Qualified Theft was filed against Teresita Puig & Romeo Porras.
 filed by the Iloilo provincial prosecutor – for Rural Bank of Pototan
 Puig - cashier & Porras – Bookkeeper
 Took away 15k
 RTC dismissed - insufficiency of the information : RPII – depositors & clients, not the bank – no ownership
 MR : denied

WON the bank was the owner and thus, the real party in interest?

Held & Rationale

 Art 1980 of the CC, "fixed, savings, and current deposits of money in banks shall be governed by the
provisions concerning simple loans."
 Art 1953 provides that "a person who receives a loan of money acquires the ownership thereof, and is
bound to pay to the creditor an equal amount of the same kind and quality."
 Depositors who place their money with the bank are considered creditors of the bank.
 The bank acquires ownership of the money deposited by its clients, making the money taken by
respondents as belonging to the bank.
 the employees of the Bank, who are entrusted with the possession of money of the Bank due to the
confidence reposed in them, occupy positions of confidence, hence sufficiently allege all essentials elements
of crime.


G.R. No. 123498 November 23, 2007
J. Nachura


 Tevesteco opened a savings and current account with BPI-FB

 FMIC (FIRST METRO INVESTMENT CORP) – opened time deposit acc w/ same branch 80M
 Franco – open 3 acc : current, savings, & time depo w/same branch – 2M
 2M total amount – used to open acc, thru check issued by Tevesteco (in consi of intro of Eladio Teves to
Jaime Sebastian – BPIFB manager)
 2M – debited fr 80M of FMIC TimeDep, credited to Tevesteco current acc pursuant to Authority to Debit
sgd by FMIC’S officers
 Signatures of FMIC forged
 BPI-FB – debited Franco’s savings & current acc for the amounts remaining therein
 Franco – 2 checks drawn – dishonored, stamped w/ a notation “acc under garnishment”
 Dishonored checks were issued, presented for payment at BPI prior to receipt of notice “acc under
 Franco – impleaded in Makati; filed a Motion to Discharge Attachment; he pre-terminated his TiDe acc
 BPI – debited 63,189k fr remaining balance of TD acc;
 BPI – refused to unfreeze Franco’s acc
 Franco – filed complaint

WON Respondent had better right to the deposits in the subject accounts which are part of the proceeds
of a forged Authority to Debit


 Deposited money in acc of Franco – owns by BPI-FB BUT not as legal consequence of unauthorized transfer
of FMIC to Tevesteco acc
 BPI owns the acc by virtue of CC provi on Mutuum; debtor-creditor relationship of Bank & depositor
 BPI – cannot prevent him fr honoring checks drawn by Franco against his current acc;
 Franco had every right as creditor to expect that check would be honor by BPI as debtor
 BPI – no right to freeze acc based on mere suspicion; cannot shift liability to Franco & other payees of
checks issued by Tevesteco w/o appropriate court writ or final judg


2007 / Austria-Martinez
 Dec 7, 1990 – Frias & Sison – MOA over Frias’s prop; consi = 3M
 Sison - 6 mons fr date of cont exec = to notify intention to purchase prop + impro at 6.4M
 Prior to this 6 month period, = Frias can still offer prop to others
 Provided:
o 3M shall be paid to Sison + interest based on prevailing compounded bank interest
o amount of sale in excess of 7M [should the property be sold at a price greater than 7M]
o Frias has no other buyer = no interest imposed to 3M Sison
o If Sison would decide not to purchase = Frias has 6 months to pay 3M (amount shall earn
compounded bank interest for the last 6 months only)
o 3M treated as a loan and the property = security for the mortgage
o Upon notice of intention, Sison has 6 months to pay the balance of 3.4M (6.4M less 3M MOA
 Frias = 3M (2M in cash; 1M post-dated check dated February 28, 1990, instead of 1991, = check stale).
 Frias = gave the TCT and the Deed of Absolute Sale over the property.
 Sison = not purchase; letter dated March 20, 1991 [Frias received it only on June 11, 1991]
 Frias = to pay 2M as a loan payable within 6 months; failed to pay
 Sison filed a complaint for sum of money with preliminary attachment.
 RTC found that Frias was under obligation to pay Sison 2M with compounded interest pursuant to their
 RTC ordered Frias to pay Sison:
o 2M + 32% annual interest beginning December 7, 1991 until fully paid
 CA affirmed RTC with modification—32% reduced to 25%;
o no basis for interest be charged for 6 months only.
o interest = commence on June 7, 1991 until fully paid w/ compounded bank interest prevailing
at the time [June 1991] the 2M was considered as a loan (as certified by the bank).
WON compounded bank interest should be limited to 6 months as contained in the MOA.
 CA = no error in awarding an annual 25% interest on the 2M even beyond the 6-month stipulated
 “for the last six months only” should be taken in the context of the entire agreement.
 SC notes that the agreement speaks of two (2) periods of 6 months each
 No interest = for the 1st 6-month period [while Sison was making up her mind],
 Only for the 2nd 6-month period after Sison decided not to buy the property.
 nothing in the MOA = interest will be charged for 6 months only even if it takes forever for Frias to pay
the loan.
 The payment of regular interest constitutes the price or cost of the use of money, and until the
principal sum due is returned to the creditor, regular interest continues to accrue since the
debtor continues to use such principal amount.
 For a debtor to continue in possession of the principal of the loan and to continue to use the same
after maturity of the loan without payment of the monetary interest constitutes unjust
enrichment on the part of the debtor at the expense of the creditor.
Sebastian Siga-an, vs. Alicia Villanueva

 Villanueva - complaint for sum of money: Siga-an.
 Siga-an
o approached Villanueva in PNO (Philippine Navy Office);
o offered to loan 540k;
o not reduced in writing;
o no stipulation as to interest
 Villanueva - check 500k partial payment; check 200k for balance & interest (160k)
 Not satisfied w/ interest, Siga-an = additional interest and threatened to block or disapprove her
transactions with the PNO if she would not comply with his demand.
 Paid add amounts in cash as interest, no receipt given = not necessary – mutual trust & confidence
 Total amount given = 1.2M
 RTC – overpayment of loan, order refund; no interest = no agreement made
 Overpayment of 660k thru mistake = return by principle of solution indebiti + damages

WON interest was due to petitioner?
WON the principle of solutio indebiti applies?

 Compensatory interest = NOT chargeable: not proven Villanueva defaulted in paying the loan; no interest
due = no written agreement
 Article 1956 of the Civil Code - no interest shall be due unless it has been expressly stipulated in writing.
o payment of monetary interest is allowed only if:
 there was an express stipulation for the payment of interest;
 the agreement for the payment of interest was reduced in writing.
 Article 1960 of the Civil Code, if the borrower of loan pays interest when there has been no
stipulation therefor, solutio indebiti shall be applied.
 Article 2154 of the Civil Code
o 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.
o a creditor-debtor relationship is created under a quasi-contract whereby the payor becomes
the creditor who then has the right to demand the return of payment made by mistake, and the
person who has no right to receive such payment becomes obligated to return the same.
o The quasi-contract of solutio indebiti = NO UNJUST ENRICHMENT.
o 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. We have held that the principle of solutio indebiti applies in case of erroneous
payment of undue interest.
 Respondent - no payment = no stipulation in writing; no binding relation as regards the payment of
interest; payment clearly a mistake.


DOCTRINE : the escalation clause is void if it grants respondent the power to impose an increased rate of
interest without a written notice to petitioners and their written consent.

 Sps Ignacio F. Juico and Alice P. Juico (petitioners)
o a loan from China Banking Corporation (respondent)
o 2 PN both dated October 6, 1998 and numbered 507-001051-34and 507-001052-0,5 for the sums of
6,216,000 and P4, 139,000, respectively.
o secured by a Real Estate Mortgage (REM) over petitioners’ property
 China Bank – full payment of balance + accrued monthly interest
 Feb 2001 – 2 PN = 19,201,776.
 Auction of prop = highest b – Chinabank 10.3 M
 Sps – demand letter = payment of 8.9 M deficient amount after applying mortgage
 China prayed for
o P8,901,776.63 + interests at the legal rate fr Feb 23, 2001 until fully paid;
o an additional amount = 1/10 of 1% per day of the total amount as penalty
 Ms. Annabelle Cokai Yu (its Senior Loans Assistant) = balance P15,190,961.48.
 Yu reiterated that the interest rate changes every month based on the prevailing market rate
 notified petitioners of the prevailing rate by calling them monthly .It was increased unilaterally
 RTC: ordered Spouses to pay bank 9M plus the interest which amounted to 15M.C
 PETITIONER: They insist that the increase in interest rates were unilaterally imposed by the bank and
thus violate the principle of mutuality of contracts.

WON the increase in interest rates is void for violating the mutuality of contracts?

 Article 1308. The contract must bind both contracting parties; its validity or compliance cannot be left
to the will of one of them.
 Article 1956 of the Civil Code likewise ordains that "no interest shall be due unless it has been
expressly stipulated in writing."
 The binding effect of any agreement = there must be mutuality between the parties based on their
essential equality.
 Any contract =appears in favor of one of the parties so as to lead to an unconscionable result is void.
 Any stipulation regarding the validity or compliance of the contract which is left solely to the will of
one of the parties, is likewise, invalid
 Escalation clauses = stipulations allowing an increase in the interest rate agreed upon by the contracting
 Court = nothing inherently wrong with escalation clauses
 an escalation clause = grants the creditor an unbridled right to adjust the interest independently +
completely depriving the debtor of the right to assent = void; violates the principle of mutuality of
 In a case, SC said that petitioner’s assent to the modifications in the interest rates cannot be implied
from their lack of response to the memos sent by respondent
 valid escalation clause = required a written notice to and conformity by the borrower to the increased
interest rate.
 “detailed billing statement based on new interest + appropriate form sgd by debtor


G.R. No. 181045, 2 July 2014, SECOND DIVISION, (Del Castillo, J.)
In loan agreements, it cannot be denied that the rate of interest is a principal condition, if not the most
important component. Thus, any modification thereof must be mutually agreed upon; otherwise, it has no
binding effect.

 Sps Silos
o secured a revolving credit line with PNB
o a real estate mortgage as a security.
o After two years, their credit line increased; then signed a Credit Agreement = amended again
after 2 years; issued several PN as regard to Cr Ag
o loan = initially 19.5% interest rate per annum.
 In Cr Ag - Sps Silos bound themselves to the power of PNB to modify the interest rate depending on
whatever policy that PNB may adopt in the future, without the need of notice upon them.
 Fr 16% to 32% per annum
 Sps Silos acceded; pre-issued 26 PNs; able to pay; during Asian Financial Crisis (1997) not able to pay,
interest rates soared.
 PNB foreclosed mortgage
 Sps Silos – complaint annul = succeeding interest rates used in their loan agreements was left to the
sole will of PNB, without their prior consent and thus, void.
 RTC – stipulation valid
 CA affirmed
WON the bank, on its own, modify the interest rate in a loan agreement without violating the mutuality
of contracts?

 Any modification in contract= made with the consent of the contracting parties.
 In the case of loan agreements, the rate of interest is a principal condition or most important component.
 Loan and credit arrangements may be made enticing by, or "sweetened" with, offers of low initial interest
rates, but actually accompanied by provisions written in fine print that allow lenders to later on increase or
decrease interest rates unilaterally, without the consent of the borrower, and depending on complex and
subjective factors.
 Because they have been lured into these contracts by initially low interest rates, borrowers get caught and
stuck in the web of subsequent steep rates and penalties, surcharges and the like.
 Being ordinary individuals or entities, they naturally dread legal complications and cannot afford court
litigation; they succumb to whatever charges the lenders impose.

 Petitioners Tolomeo Ligutan and Leonidas dela Llana = loan 120k fr Security Bank
 Obligation due, extend by bank
 Failed to settle P114,416.10
 SB – complaint for recovery
 Pets – reset 2 hearing, instead of presenting evidence; 3rd hearing date = court submitted it for decision
 After 2 years, pets – MR : denied; appeal in CA : affirmed RTC except 2% surcharge deleted pursuant Central
Bank Circular No. 763.
 The two parties filed MR
 CA resolved the two motions: that the payment of interest and penalty commence on the date when the
obligation became due and a penalty of 3% per month would suffice.
 The petitioners filed an omnibus motion for reconsideration which was then denied by the Court of
 Imposed interest 15.189% on loan + 3%/mon penalty
WON, interest and penalty is exorbitant, iniquitous, and unconscionable?
Petition is DENIED.
 The question of whether a penalty is reasonable or iniquitous can be partly SUBJECTIVE AND PARTLY
 Its resolution will depend on such factors
o Type
o extent and purpose of the penalty
o nature of the obligation
o the mode of breach and its consequences
o the supervening realities
o the standing and relationship of the parties, and the like
 the application of which, by and large, is addressed to the sound discretion of the court
 CA – exercise good judg reduced penalty fr 5% to 3%
 Given the circumstances & repeated acts of breach, no cogent ground to modify ruling of CA
 15.189% not excessive
 The essence or rationale for the payment of interest, quite often referred to as cost of money, is not exactly
the same as that as a surcharge or a penalty.
 A penalty stipulation is not necessarily preclusive of interest, if there is an agreement to that effect, the
two being distinct concepts which may separately be demanded.
 The interest prescribed in loan financing arrangements is a fundamental part of the banking business and
the core of a banks existence.

Eastern Shipping vs CA
GR No. 97412, 12 July 1994
234 SCRA 78

 Two fiber drums were shipped owned by Eastern Shipping from Japan --- shipment as insured with a
marine policy.
 Upon arrival in Manila unto the custody of Metro Port Service, which excepted to one drum, said to be in
bad order and which damage was unknown the Mercantile Insurance Company.
 Allied Brokerage Corporation received the shipment from Metro, one drum opened and without seal;
Delivered the shipment to the consignee’s warehouse.
 Metro accepted except to one drum which contained spillages while the rest of the contents was
 Consequence of the loss, the insurance company paid the consignee P19,032.95 ---- transferred all the
rights of action of consignee against the defendants Eastern Shipping, Metro Port and Allied Brokerage.
 The insurance company filed before the trial court.
 The trial court ruled in favor of plaintiff; pay with present legal interest of 12% per annum from the date of
the filing of the complaint.
 CA denied the same and affirmed in toto the decision of the trial court.

(1) Whether the applicable rate of legal interest is 12% or 6%.

(2) Whether the payment of legal interest on the award for loss or damage is to be computed from the time the
complaint is filed or from the date the decision appealed from is rendered.

(1) SIX PERCENT (6%) on the amount due computed from the decision, dated 03 February 1988, of the court a
quo (Court of Appeals)
 AND A TWELVE PERCENT (12%) interest, in lieu of SIX PERCENT (6%), shall be imposed on such
amount upon finality of the Supreme Court decision until the payment thereof.
 When the judgment awarding a sum of money becomes final and executory, the monetary award shall
earn interest at 12% per annum from the date of such finality until its satisfaction, regardless of
whether the case involves a loan or forbearance of money.
 The reason is that this interim period is deemed to be by then equivalent to a forbearance of credit.

(2) From the date the judgment is made.

 Where the demand is established with reasonable certainty, the interest shall begin to run from the
time the claim is made judicially or EJ
 when such certainty cannot be so reasonably established at the time the demand is made, the interest
shall begin to run only from the date of judgment of the court is made.

(3) The Court held that it should be computed from the decision rendered by the court a quo.


 Dario Nacar - labor case against Gallery Frames and its owner Felipe Bordey, Jr.
 alleged that he was dismissed without cause by Gallery Frames on January 24, 1997.
 Labor Arbiter (LA) -- Gallery Frames guilty of illegal dismissal
 Arbiter awarded Nacar P158,919.92 in damages consisting of backwages and separation pay.
 Gallery Frames appealed all the way to the Supreme Court (SC).
 The Supreme Court affirmed the decision of the Labor Arbiter and the decision became final on May 27,
 After the finality of the SC decision, Nacar -- a motion before the LA for recomputation as he alleged
that his backwages should be computed from the time of his illegal dismissal (January 24, 1997) until
the finality of the SC decision (May 27, 2002) with interest.
 The LA--- denied; that the reckoning point of the computation should only be from the time Nacar was
illegally dismissed (January 24, 1997) until the decision of the LA (October 15, 1998).
 The LA reasoned that the said date should be the reckoning point because Nacar did not appeal hence
as to him, that decision became final and executory.

Whether or not the Labor Arbiter is correct.

 No.
 There are two parts of a decision when it comes to illegal dismissal cases (referring to cases where the
dismissed employee wins, or loses but wins on appeal).
 The first part is the ruling that the employee was illegally dismissed. This is immediately final even if
the employer appeals – but will be reversed if employer wins on appeal.
 The second part is the ruling on the award of backwages and/or separation pay. For backwages, it
will be computed from the date of illegal dismissal until the date of the decision of the Labor
 But if the employer appeals, then the end date shall be extended until the day when the appellate
court’s decision shall become final.
 Hence, as a consequence, the liability of the employer, if he loses on appeal, will increase – this is
just but a risk that the employer cannot avoid when it continued to seek recourses against the Labor
Arbiter’s decision. This is also in accordance with Article 279 of the Labor Code.
 Anent the issue of award of interest in the form of actual or compensatory damages, the Supreme Court
ruled that the old case of Eastern Shipping Lines vs CA is already modified by the promulgation of the
Bangko Sentral ng Pilipinas Monetary Board Resolution No. 796 which lowered the legal rate of interest
from 12% to 6%. Specifically, the rules on interest are now as follows:

1. Monetary Obligations ex. Loans:

1. If stipulated in writing:
a.1. shall run from date of judicial demand (filing of the case)
a.2. rate of interest shall be that amount stipulated
2. If not stipulated in writing
b.1. shall run from date of default (either failure to pay upon extra-judicial demand or upon
judicial demand whichever is appropriate and subject to the provisions of Article 1169 of the
Civil Code)
b.2. rate of interest shall be 6% per annum

2. Non-Monetary Obligations (such as the case at bar)

 If already liquidated, rate of interest shall be 6% per annum, demandable from date of
judicial or extra-judicial demand (Art. 1169, Civil Code)
 If unliquidated, no interest
Except: When later on established with certainty. Interest shall still be 6% per annum demandable from the
date of judgment because such on such date, it is already deemed that the amount of damages is already

3. Compounded Interest
– This is applicable to both monetary and non-monetary obligations
– 6% per annum computed against award of damages (interest) granted by the court. To be
computed from the date when the court’s decision becomes final and executory until the award is
fully satisfied by the losing party.

4. The 6% per annum rate of legal interest shall be applied prospectively:

– Final and executory judgments awarding damages prior to July 1, 2013 shall apply the 12% rate;
– Final and executory judgments awarding damages on or after July 1, 2013 shall apply the 12% rate for
unpaid obligations until June 30, 2013; unpaid obligations with respect to said judgments on or after
July 1, 2013 shall still incur the 6% rate.

Estores v. Spouses Supangan , 670 SCRA 95 (2012) - Jez

Doctrine: Interest may be imposed even in the absence of stipulation in the contract.
Petitioner’s unwarranted withholding of the money which rightfully pertains to
respondent-spouses amounts to forbearance of money which can be considered as an involuntary

 Petitioner Estores entered into a Conditional Deed of sale with the respondents Arturo and Laura
 petitioner offered to sell and respondents to buy a parcel of land = 4.7 million pesos.

4. Vendee shall be informed as to the status of DAR clearance within 10 days upon signing of the
6. Regarding the house located within the perimeter of the subject [lot] owned by spouses
[Magbago], said house shall be moved outside the perimeter of this subject property to the 300 sq.
m. area allocated for [it]. Vendor hereby accepts the responsibility of seeing to it that such agreement is
carried out before full payment of the sale is made by vendee.
7. If and after the vendor has completed all necessary documents for registration of the title and
the vendee fails to complete payment as per agreement, a forfeiture fee of 25% or downpayment,
shall be applied. However, if the vendor fails to complete necessary documents within thirty days
without any sufficient reason, or without informing the vendee of its status, vendee has the right to
demand return of full amount of down payment.
9. As to the boundaries and partition of the lots (15,018 sq. m. and 300 sq. m.) Vendee shall be
informed immediately of its approval by the LRC.
10. The vendor assures the vendee of a peaceful transfer of ownership.

 3.5 million down payment initially given;

 After almost 7 yrs, petitioner = failed to comply with her obligation as expressly provided in the above
paragraphs 4, 6, 7, 9 and 10.
 Respondent – demand return of down payment w/in 10 days
 Petitioner - promised to return said amount within 120 days; failed to do so
 Respondents - complaint for sum of money before the RTC praying = principal amount of 3.5 million plus
interest 12% starting from October 1, 1993 estimated to be 8.5 million plus damages.

 Petitioners – counterclaim = willing to pay principal, not interest: not agreed upon; deed if breach, as
agreed, return Dp only
 RTC ruled in favor of respondent granting them 6% interest instead of the 12% they prayed for.
 CA affirmed the RTC's decision of imposing the 6% interest = start to run only from September 27, 2000
when respondent-spouses formally demanded the return of their money and not from October 1993
when the contract was executed as held by the RTC.

WON, petitioner is not bound to pay interest because there is no stipulation of such in the conditional
deed of sale?
WON, the 6% interest is proper

First issue:
 No, Petition lacks merit
 Interest may be imposed even in the absence of stipulation in the contract. Decision of CA to impose
interest is sustained.
 Article 2210 of the Civil Code expressly provides that “Interest may, in the discretion of the court, be
allowed upon damages awarded for breach of contract.”
 There is no question that petitioner is legally obligated to return the P3.5 million because of her
failure to fulfill the obligation under the Conditional Deed of Sale, despite demand.
 She even admitted that the conditions were not fulfilled and that she was willing to return the full
amount of P3.5 million but has not done so.
 Petitioner enjoyed the use of the money from the time it was given to her until now.
 Thus, she is already in default of her obligation from the date of demand, i.e., on September 27, 2000.

Second Issue:
 No, the 12% interest prayed for by the respondents are deemed proper for this case.
 Absent any stipulation, the applicable rate of interest shall be 12% per annum “when the obligation
arises out of a loan or a forbearance of money, goods or credits. In other cases, it shall be six
percent (6%).”
 Petitioner’s unwarranted withholding of the money which rightfully pertains to respondent-spouses
amounts to forbearance of money which can be considered as an involuntary loan. As such it is the
12% interest reserved for loans that shall apply. Since the date of demand which is September 27,
2000 was satisfactorily established during trial, then the interest rate of 12% should be reckoned from
said date of demand until the principal amount and the interest thereon is fully satisfied.
Dispositive: Petition Denied

Advocates for Truth in Lending, Inc. vs. BSP, et. al.

G.R. No. 192986 / January 15, 2013

 Advocates for Truth in Lending, Inc. and its President, Eduardo Olaguer -- filed Petition for Certiorari
under Rule 65 ROC
o seeking to declare that the Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), replacing the
Central Bank Monetary Board (CB-MB) by virtue of R.A. No. 7653, has NO AUTHORITY TO
which "suspended" the Usury Law of 1916 (Act No. 2655).
 R.A. No. 265, which created the Central Bank (CB) of the Philippines, empowered the CB-MB to,
among others, set the maximum interest rates which banks may charge for all types of loans and
other credit operations, within limits prescribed by the Usury Law.
 In its Resolution No. 2224, the CB-MB issued CB Circular No. 905, Series of 1982. Section 1 of the
Circular, under its General Provisions, removed the ceilings on interest rates on loans or
forbearance of any money, goods or credits.
 On June 14, 1993, President Fidel V. Ramos signed into law R.A. No. 7653 establishing the Bangko
Sentral ng Pilipinas (BSP) to replace the CB.

1. Whether the CB-MB exceeded its authority when it issued CB Circular No. 905, which removed all interest
ceilings and thus suspended Act No. 2655 as regards usurious interest rates. NO

2. Whether under R.A. No. 7653, the BSP-MB may continue to enforce CB Circular No. 905. YES


1. The CB-MB merely suspended the effectivity of the Usury Law when it issued CB Circular No. 905.
 The power of the CB to effectively suspend the Usury Law pursuant to P.D. No. 1684 has long been
recognized and upheld in many cases.
 As the Court explained in the landmark case of Medel v. CA, citing several cases, CB Circular No. 905
"did not repeal nor in anyway amend the Usury Law but simply suspended the latter’s effectivity;"
that "a CB Circular cannot repeal a law, [for] only a law can repeal another law;" that "by virtue of CB
Circular No. 905, the Usury Law has been rendered ineffective;" and "Usury has been legally non-
existent in our jurisdiction. Interest can now be charged as lender and borrower may agree upon."

 By lifting the interest ceiling, CB Circular No. 905 merely upheld the parties’ freedom of contract to
agree freely on the rate of interest.
 It cited Article 1306 of the New Civil Code, under which the contracting parties may establish such
stipulations, clauses, terms and conditions as they may deem convenient, provided they are not
contrary to law, morals, good customs, public order, or public policy.

2. The BSP-MB has authority to enforce CB Circular No. 905.

 Section 1 of CB Circular No. 905 provides that, "The rate of interest, including commissions,
premiums, fees and other charges, on a loan or forbearance of any money, goods, or credits, regardless
of maturity and whether secured or unsecured, that may be charged or collected by any person,
whether natural or juridical, shall not be subject to any ceiling prescribed under or pursuant to
the Usury Law, as amended."
 It does not purport to suspend the Usury Law only as it applies to banks, but to all lenders.

 Petitioners contend that, granting that the CB had power to "suspend" the Usury Law, the new BSP-MB
did not retain this power of its predecessor, in view of Section 135 of R.A. No. 7653, which expressly
repealed R.A. No. 265. The petitioners point out that R.A. No. 7653 did not reenact a provision similar to
Section 109 of R.A. No. 265.

 A closer perusal shows that Section 109 of R.A. No. 265 covered only loans extended by banks,
whereas under Section 1-a of the Usury Law, as amended, the BSP-MB may prescribe the maximum
rate or rates of interest for all loans or renewals thereof or the forbearance of any money, goods
or credits, including those for loans of low priority such as consumer loans, as well as such loans
made by pawnshops, finance companies and similar credit institutions.
 It even authorizes the BSP-MB to prescribe different maximum rate or rates for different types
of borrowings, including deposits and deposit substitutes, or loans of financial intermediaries.
 Act No. 2655, an earlier law, is much broader in scope, whereas R.A. No. 265, now R.A. No. 7653,
merely supplemented it as it concerns loans by banks and other financial institutions. Had R.A.
No. 7653 been intended to repeal Section 1-a of Act No. 2655, it would have so stated in unequivocal

Further, the lifting of the ceilings for interest rates does not authorize stipulations charging excessive,
unconscionable, and iniquitous interest. It is settled that nothing in CB Circular No. 905 grants lenders a carte
blanche authority to raise interest rates to levels which will either enslave their borrowers or lead to a
hemorrhaging of their assets. Stipulations authorizing iniquitous or unconscionable interests have been
invariably struck down for being contrary to morals, if not against the law.

G.R. Nos. 150773 & 153599 September 30, 2005


- versus -

DOCTRINE: Usurious loan transaction is not a complete nullity but defective only with respect to the agreed

In simple loan with stipulation of usurious interest, the prestation of the debtor to pay the principal debt, which
is the cause of the contract (Article 1350, Civil Code), is not illegal. 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.

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 the loan, petitioners mortgaged
their residential house and lot.

2. Petitioners failed to pay the loan upon demand. Consequently, the real estate mortgage was
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 was issued 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 a petition for writ of possession.Writ of
possession was then issued.

4. Petitioners filed a complaint for annulment of real estate mortgage and the consequent foreclosure

5. Petitioners claim that following the Courts ruling in Medel v. Court of Appeals the rate of interest stipulated
in the principal loan agreement is clearly null and void. Consequently, they also argue that the nullity of the
agreed interest rate affects the validity of the real estate mortgage.

ISSUE: A. Whether the interest rate is valid.---NO

B. Whether validity of said interest rate affects the Mortgage Contract.--NO


 Petitioners contend that the agreed rate of interest of 6% per month or 72% per annum is so
excessive, iniquitous, unconscionable and exorbitant that it should have been declared null and
 aver that the lower court should have declared them liable to respondents for the original amount of
the loan plus 12% interest per annum and 1% monthly penalty charge as liquidated damages, in
 view of the ruling in Medel v. Court of Appeals where the Court found that the interest stipulated at
5.5% per month or 66% per annum was so iniquitous or unconscionable as to render the
stipulation void.

 In the case at bar, the stipulated interest rate is 6% per month, or 72% per annum.

 By the standards set in the above-cited cases, this stipulation is similarly invalid.

 From that perspective, it is apparent that the stipulated interest in the subject loan is excessive,
iniquitous, unconscionable and exorbitant.


 the validity of the mortgage 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 the inequitability of
the stipulated interest, but instead reduced the rate of interest to the more reasonable rate of 12%
per annum.
 This is congruent with the rule that a usurious loan transaction is not a complete nullity but
defective only with respect to the agreed interest.

Further, Article 1273, Civil Code, provides: "The renunciation of the principal debt shall extinguish the
accessory obligations; but the waiver of the latter shall leave the former in force."
Article 1420 of the New Civil Code provides in this regard: "In case of a divisible contract, if the illegal terms can
be separated from the legal ones, the latter may be enforced."

 In simple loan with stipulation of usurious interest, the prestation of the debtor to pay the principal
debt, which is the cause of the contract (Article 1350, Civil Code), is not illegal.
 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.

The principal debt remaining without stipulation for payment of interest can thus be recovered by judicial
action. And in case of such demand, and the debtor incurs in delay, the debt earns interest from the date of the
demand (in this case from the filing of the complaint). Such interest is not due to stipulation, for there was
none, the same being void. Rather, it is due to the gen
eral provision of law that in obligations to pay money, where the debtor incurs in delay, he has to pay interest
by way of damages

Hence, it is clear and settled that the principal loan obligation still stands and remains valid. By the same token,
 since the mortgage contract derives its vitality from the validity of the principal obligation, the invalid
stipulation on interest rate is similarly insufficient to render void the ancillary mortgage contract.

BPI vs. Intermediate Appellate Court GR# L-66826, August 19, 1988


 Rizaldy T. Zshornack and his wife maintained in COMTRUST a dollar savings account and a peso current
 An application for a dollar drat was accomplished by Virgillo Garcia branch manager of COMTRUST
payable to a certain Leovigilda Dizon.
 In the app, Garcia indicated that the amount was to be charged to the dolar savings account of the
 There was no indication of the name of the purchaser of the dollar draft. Comtrust issued a check
payable to the order of Dizon.
 When Zshornack noticed the withdrawal from his account, he demanded an explainaiton from the bank.
 In its answer, Comtrust claimed that the peso value of the withdrawal was given to Atty. Ernesto
Zshornack, brother of Rizaldy.
 When he encashed with COMTRUST a cashiers check for P8450 issued by the manila banking
corporation payable to Ernesto.

Issue: Whether the contract between petitioner and respondent bank is a deposit?

 The document which embodies the contract states that the US$3,000.00 was received by the bank for
 The subsequent acts of the parties also show that the intent of the parties was really for the bank to
safely keep the dollars and to return it to Zshornack at a later time.
 Thus, Zshornack demanded the return of the money on May 10, 1976, or over five months later.
 The above arrangement is that contract defined under Article 1962, New Civil Code, which reads:

Art. 1962. A deposit is constituted from the moment a person receives a thing belonging to another, with the
obligation of safely keeping it and of returning the same. If the safekeeping of the thing delivered is not the
principal purpose of the contract, there is no deposit but some other contract.
GREGORIO DE LA PEÑA, administrator of the estate of Father Agustin de la Peña, defendant-appellant.

Lopez Vito, for appellant.

Arroyo and Horrilleno, for appellee.

 In 1898 Fr. De la Peña assigned as trustee of the sum of P6,641, collected by him for the charitable
purposes he deposited in his personal account P19,000 in the Hongkong and Shanghai Bank at Iloilo.
 During the war of the revolution, Father De la Peña was arrested by the military authorities as a
political prisoner.
 The arrest of Father De la Peña and the confiscation of the funds in the bank were the result of the claim
of the military authorities that he was an insurgent and that the funds deposited had been collected by
him is for revolutionary purposes.
 The money was taken from the bank by the military authorities by virtue of such order, was confiscated
and turned over to the Government.

ISSUES: Whether or not Father De la Peña is liable for the loss of the funds?

 No
 he is not liable because there is no negligent act on the part of Fr. De la Peña.
 It was so happened that during that time the money was taken from him by the U.S. military forces
which is unforeseen event.
 Although the Civil Code states that “a person obliged to give something is also bound to preserve it with
the diligence pertaining to a good father of a family”,
 it also provides, following the principle of the Roman law that “no one shall be liable for events which
could not be foreseen, or which having been foreseen were inevitable, with the exception of the cases
expressly mentioned in the law or those in which the obligation so declares.”


G.R. No. 179419
12 January 2011

FACTS: July 22, 2003, Pioneer Insurance and Surety Corp, by right of subrogation, filed with the RTC
of Makati a Complaint for Recovery of Damages against Durban Apartments Corp. (or City Garden
Hotel) and defendant before the RTC, Vicente Justimbaste. Respondent averred that it is the insurer
for loss and damage of Jeffrey S. See’s 2001 Suzuki Grand Vitara in the amount of P1,175,000.00. On
April 30, 2002, See arrived and checked in at the City Garden Hotel before midnight, and its parking
attendant, Justimbaste got the key to said Vitara from See to park it. On May 1, 2002, at about 1:00 am,
See received a phone call where the Hotel Chief Security Officer informed him that his Vitara was
carnapped while it was parked unattended at the parking area of Equitable PCI Bank See went to see
the Security Officer, thereafter reported the incident to the Operations Division of the Makati City
Police Anti-Carnapping Unit, and a flash alarm was issued. The police investigated Hotel Security
Officer, Ernesto T. Horlador, Jr. and Justimbaste. See gave his Sinumpaang Salaysay to the police
investigator, and filed a Complaint Sheet with the PNP Traffic Management Group in Camp Crame. it
paid the P1,163,250.00 money claim of See and mortgagee ABN AMRO Savings Bank, Inc. as indemnity
for the loss of the Vitara.

The Vitara was lost due to the negligence of Durban Apartments and Justimbaste because it was
discovered during the investigation that this was the second time that a similar incident of carnapping
happened in the valet parking service and no necessary precautions were taken to prevent its
repetition. Durban Apartments was wanting in due diligence in the selection and supervision of its
employees particularly defendant Justimbaste. Both failed and refused to pay its valid, just, and lawful
claim despite written demands.

ISSUE: Is petitioner liable for the loss of See’s vehicle?


Article 1962, in relation to Article 1998, of the Civil Code defines a contract of deposit and a necessary
deposit made by persons in hotels or inns:

Art. 1962. A deposit is constituted from the moment a person receives a thing belonging to another,
with the obligation of safely keeping it and returning the same. If the safekeeping of the thing
delivered is not the principal purpose of the contract, there is no deposit but some other contract.
Art. 1998. The deposit of effects made by travelers in hotels or inns shall also be regarded as
necessary. The keepers of hotels or inns shall be responsible for them as depositaries, provided that
notice was given to them, or to their employees, of the effects brought by the guests and that, on the
part of the latter, they take the precautions which said hotel-keepers or their substitutes advised
relative to the care and vigilance of their effects.

Plainly, from the facts found by the lower courts, the insured See deposited his vehicle for safekeeping
with petitioner, through the latter’s employee, Justimbaste. In turn, Justimbaste issued a claim stub to
See. Thus, the contract of deposit was perfected from See’s delivery, when he handed over to
Justimbaste the keys to his vehicle, which Justimbaste received with the obligation of safely keeping
and returning it. Ultimately, petitioner is liable for the loss of See’s vehicle.

2005 / Tinga

Foreigner rented an SDB and placed valuables there, some of which he lost. He wanted to hold the hotel liable
but it cited the Undertaking that the foreigner signed or executed, which said that the hotel shall not be held
liable for such losses. Now, the foreigner is contesting these provisions of the Undertaking. He won, since the
provisions violated NCC 2003. END!

• McLoughlin is an Australian businessman-philanthropist who usually visits PH. His contact here is
Brunhilda Tan.
• Lopez was the hotel manager, while Lainez and Payam had custody of the keys of the safety deposit
boxes [SDB].
• SDB procedure—The SDB could only be opened using two keys—one given to the registered guest, and
the other in the possession of hotel management. When the guest wants to open the SDB, only he can
personally request the management, and an employee would accompany the guest to assist in opening the SDB
with the two keys.

When McLoughlin arrived from Australia, he registered with Tropicana and rented an SDB. He allegedly had 3
envelopes (US $10k; US $5k; AUS $10k), 2 envelopes containing letters and credit cards, 2 bank books, and a
checkbook in his SDB. Before leaving for a brief trip, he opened his SDB to get some items. He found that one
envelope contained only USD $3k. He checked out of Tropicana upon returning to Manila, and he eventually
discovered that an envelope was short of $5k. Some jewelry he bought went missing. When he inquired about
this, he did not receive a favorable response.
He registered again in Tropicana, and placed in the SDB three envelopes (US $15k; AUS $10k; documents).
Twelve days later, he noticed that the USD envelope lacked $2k, while the AUSD envelope lacked AUS $4.5k.
When he confronted Lainez and Payam, they admitted that it was Tan who opened the SDB, who admitted
stealing his key.
Lopez wrote a promissory note—I promise to pay Mr. Maurice McLoughlin the amount of AUS$4k and US$2k or
its equivalent in Philippine currency on or before May 5, 1988. Lopez requested Tan to sign the promissory
note and Lopez also signed as a witness. Despite the execution of promissory note by Tan, McLoughlin insisted
that it must be the hotel who must assume responsibility for the loss he suffered. However, Lopez refused to
accept the responsibility relying on the conditions for renting the SDB (Undertaking For The Use of Safety
Deposit Box):
- To release and hold free and blameless the hotel from any liability arising from any loss in the contents
and/or use of the SDB for any cause whatsoever, including but not limited to the presentation or use thereof by
any other person should the key be lost
- To return the key and execute the release in favor of the hotel upon giving up the use of the SDB
McLoughlin consulted his lawyers in Australia, and they said that the stipulations are void for being violative of
universal hotel practices and customs. His lawyers prepared a letter, and sent it to President Corazon Aquino.
The matter was eventually referred to the Western Police District. Eventually, a complaint for damages was
filed against YHT Realty Corporation, Lopez, Lainez, Payam and Tan for the loss of money, but trial proceeded
without Lopez and Tan. During the trial, McLoughlin had been in and out of the country to attend to urgent
business in Australia, and while staying in the Philippines to attend the hearing, he incurred various expenses;
hence, the SC award.

The RTC rendered judgment in favor of McLoughlin. It found that defendants acted with gross negligence in the
performance and exercise of their duties and obligations as innkeepers and were therefore liable to answer for
the losses incurred by McLoughlin. It ruled that the aforementioned provisions of the Undertaking are not valid
for being contrary to the express mandate of NCC 2003 and against public policy. Thus, there being fraud or
wanton conduct on the part of defendants, they should be responsible for all damages which may be attributed
to the non-performance of their contractual obligations. CA affirmed RTC, except as to the amount of damages
awarded (see last part of digest; SC affirmed CA award)


WON the Undertaking for the Use of Safety Deposit Box executed by McLoughlin is null and void. YES

RATIO [I placed the provisions here, as this is the only hotel case.]
NCC 1998. The deposit of effects made by the travellers in hotels or inns shall also be regarded as necessary.
The keepers of hotels or inns shall be responsible for them as depositaries, provided that notice was given to
them, or to their employees, of the effects brought by the guests and that, on the part of the latter, they take the
precautions which said hotel-keepers or their substitutes advised relative to the care and vigilance of their
effects. (1783)

NCC 1999. The hotel-keeper is liable for the vehicles, animals and articles which have been introduced or
placed in the annexes of the hotel. (n)

NCC 2000. The responsibility referred to in the two preceding articles shall include the loss of, or injury to the
personal property of the guests caused by the servants or employees of the keepers of hotels or inns as well as
strangers; but not that which may proceed from any force majeure. The fact that travellers are constrained to
rely on the vigilance of the keeper of the hotels or inns shall be considered in determining the degree of care
required of him. (1784a)

NCC 2001. The act of a thief or robber, who has entered the hotel is not deemed force majeure, unless it is done
with the use of arms or through an irresistible force. (n)

NCC 2002. The hotel-keeper is not liable for compensation if the loss is due to the acts of the guest, his family,
servants or visitors, or if the loss arises from the character of the things brought into the hotel. (n)

NCC 2003. The hotel-keeper cannot free himself from responsibility by posting notices to the effect that he is
not liable for the articles brought by the guest. Any stipulation between the hotel-keeper and the guest whereby
the responsibility of the former as set forth in articles 1998 to 2001 is suppressed or diminished shall be void.

NCC 2003 was incorporated as an expression of public policy. The hotel business like the common carrier’s
business is imbued with public interest. The twin duty constitutes the essence of the business: hotelkeepers
are bound to provide not only lodging for hotel guests and security to their persons and belongings. The law
does not allow such duty to the public to be negated or diluted by any contrary stipulation in so-called
“undertakings” that ordinarily appear in prepared forms imposed by hotel keepers on guests for their
In an early case, it was held that it is not necessary that the guests’ effects be actually delivered to the
innkeepers or their employees, as it is enough that such effects are within the hotel. With greater reason should
the liability of the hotelkeeper be enforced when the items are taken without the guest’s knowledge and
consent from an SDB provided by the hotel itself.
Paragraphs (2) and (4) of the “undertaking” manifestly contravene NCC 2003. The undertaking was intended to
bar any claim against Tropicana for any loss of the contents of the SDB, WON negligence was incurred by
Tropicana or its employees. The NCC is explicit that the responsibility of the hotelkeeper shall extend to loss of,
or injury to, the personal property of the guests even if caused by servants or employees of the keepers of
hotels or inns as well as by strangers, except as it may proceed from any force majeure. In this case, the thief
(Tan) employed no use of arms or an irresistible force to qualify as force majeure, so the hotel is not exempted
from liability.

Petitioners likewise anchor their defense on NCC 2002, to which SC says NO WAY!
The justification would render nugatory the public interest sought to be protected. What if the negligence of the
employer or its employees facilitated the consummation of a crime committed by the registered guest’s
relatives or visitor? Should the law exculpate the hotel from liability since the loss was due to the act of the
visitor of the registered guest of the hotel? Hence, this provision presupposes that the hotelkeeper is not guilty
of concurrent negligence or has not contributed in any degree to the occurrence of the loss. A depositary is not
responsible for the loss of goods by theft, unless his actionable negligence contributes to the loss.
Tropicana was guilty of concurrent negligence. To rule otherwise would result in undermining the safety of the
SDBs in hotels, for the management will be given imprimatur to allow any person, under the pretense of being a
family member or a visitor of the guest, to have access without fear of any liability that will attach in case such
person turns out to be a complete stranger.

Torts part of the case

Given the established SDB procedure, is inevitable to conclude that the management had at least a hand in the
consummation of the taking. The employees even admitted that they assisted Tan on three (!) separate
occasions in opening McLoughlin’s SDB. The management failed to notify McLoughlin of the incident and
waited for him to discover the taking before it disclosed the matter to him. Therefore, Tropicana should be held
responsible for the damage suffered by McLoughlin by reason of the negligence of its employees.

FAIL DEFENSE OF HOTEL: We thought Ms. Tan was your wife, Mr. McLoughlin!
To which SC says: Mere close companionship and intimacy are not enough to warrant such conclusion
considering that what is involved in the instant case is the very safety of McLoughlin’s deposit. (haha) If only
petitioners exercised due diligence, they should have confronted him as to his relationship with Tan
considering that the latter had been observed opening McLoughlin’s SDB a number of times at the early hours
of the morning.

• NCC 1170 ~ Those who, in the performance of their obligations, are guilty of negligence, are liable for
• NCC 2180 (4) provides that the owners and managers of an establishment or enterprise are likewise
responsible for damages caused by their employees in the service of the branches in which the latter are
employed or on the occasion of their functions.
• If an employee is found negligent, it is presumed that the employer was negligent in selecting and/or
supervising him. Thus, given the fact that the loss of McLoughlin’s money was consummated through the
negligence of Tropicana’s employees in allowing Tan to open the SDB without the guest’s consent, both the
assisting employees and YHT Realty Corporation itself, as owner and operator of Tropicana, should be held
solidarily liable pursuant to NCC 2194.


18 April 1996 G.R. No. 119231 Hermosisima, Jr., J. TOPIC: Special Laws - Warehouse Receipts Law
SUMMARY: PNB, as endorsee of 5 Warehouse Receipts (quedans), demanded delivery of sugar stocks covered
thereby. Noah's Ark Sugar Refinery refused to comply, alleging that the original purchasers of the stocks never
acquired ownership because of failure to pay. PNB obtained favorable judgment, but the defendants asserted
their warehouseman's lien. SC upheld the warehouseman's lien in favor of the defendants. While the PNB is
entitled to the stocks of sugar as the endorsee of the quedans, delivery to it shall be effected only upon payment
of the storage fees.
NATURE: Petition to nullify the orders of the respondent Judge Se
• 1989 - In accordance with the Warehouse Receipts Law, Noah's Ark Sugar Refinary issued the following
Warehouse Receipts (Quedans):
o Receipt No. 18062 - sugar deposited by Rosa Sy;
o Receipt No. 18080, - sugar deposited by RNS Merchandising (Rosa Ng Sy);
o Receipt No. 18081, - sugar deposited by St. Therese Merchandising (STM);
o Receipt No. 18086, - sugar deposited by STM; and
o Receipt No. 18087- sugar deposited by RNS Merchandising.
• Warehouse Receipts Nos. 18080 and 18081 were negotiated and endorsed to Luis Ramos. The other
receipts were negotiated and endorsed to Cresencia Zoleta.
• Ramos and Zoleta endorsed the quedans to PNB as security for 2 loans (P15.6M, P23.5M).
• They failed to pay the loan. PNB wrote to the Sugar Refinery and demanded delivery of the sugar stocks,
but the latter refused to comply.
• PNB filed a verified complaint for "Specific Performance with Damages and Application for Writ of
Attachment" against Noah's Ark Sugar Refinery, Alberto T. Looyuko (sole proprietor), Jimmy T. Go (managing
partner) and Wilson T. Go (Executive VP).
o RTC Judge Se denied the Application for Preliminary Attachment.
o Sugar Refinery and co-defendants filed an answer with counterclaim and third-party complaint. They
claimed to own the quedans and the sugar represented therein. Allegedly, RNS and STM purchased the sugar
covered by the quedans but the checks they gave as payment were dishonored. Considering that the buyers
never acquired ownership, their subsequent endorsers and PNB could not acquire a better right.
o Sy (of RNS) and Ng (of STM) alleged that the transaction was merely simulated.
• PNB filed a Motion for Summary Judgment.
o RTC - Denied. PNB filed a Petition for Certiorari with the CA.
o CA - Reversed; ordered RTC to render summary judgment in favor of PNB.
Effect of ruling: Declared that defendants were not owners but were only warehousemen with respect
to the sugar stocks.
• RTC - Did not follow the CA; still dismissed PNB's complaint; also dismissed the counterclaim and third-
party complaint. PNB filed a Petition for Review on Certiorari at the SC.
• SC - Reversed; ordered a new judgment conforming to the CA's decision (in favor of PNB)
• Defendants filed a Motion for Clarification. SC held that the relief granted was precisely the relief set out
in the final and executory decision of the CA.
• Defendants filed an Omnibus Motion seeking deferment of the proceedings until they were heard on
their claim for warehouseman's lien.
o Meanwhile, PNB filed a Motion for the Issuance of Writ of Execution
o RTC granted the Omnibus Motion; PNB's motion was deferred.
• PNB filed a Manifestation with Urgent Motion to Nullify Court Proceedings.
o RTC held that there exists in favor of the defendants a valid warehouseman's lien under Sec. 27 of R.A.
2137. Accordingly, execution of the judgment was ordered stayed and/or precluded until the full amount of
defendants' lien shall have been satisfied.


• Defendants have lost their right to recover their warehouseman’s lien because they failed to set up said
claim in their Answer before the RTC, and they did not appeal from the decision.
• Denial by the SC of the Motion for Clarification has foreclosed private respondents’ right to enforce
their warehouseman’s lien under the Warehouse Receipts Act.

PRIVATE RESPONDENTS ARGUE: They could not have claimed the right to a warehouseman’ s lien in their
Answer to the complaint before the RTC as it would have been inconsistent with their original stand (claiming
ownership of the stocks covered by the quedans).

W/N the defendants have lost their right to recover their warehouseman's lien ⇒NO.
• In disposing of the private respondents’ motion for clarification, SC could not contemplate the matter of
warehouseman’s lien because the issue to be resolved then was the claim of private respondents for retaining
ownership of the stocks of sugar covered by the endorsed quedans.
• (In other words: It was only in the SC's ruling on the Motion for Clarification that it was finally resolved
that defendants were not the owners of the sugar stocks. Hence, it was only after such ruling that defendants
could assert a different claim: their warehouseman's lien. -B)
W/N Noah's Ark Sugar Refinery has the right to impose and collect warehouseman's lien ⇒YES.
• Stipulation in the Warehouse Receipts provides for such right:
"Storage of the refined sugar quantities mentioned herein shall be free up to one (1) week from the date of the
quedans covering said sugar and thereafter, storage fees shall be charged in accordance with the Refining
Contract under which the refined sugar covered by this Quedan was produced."
• Even in the absence of such a provision, law and equity dictate the payment of the warehouseman’ s
lien pursuant to Secs. 27 and 31 of the Warehouse Receipts Law (R.A. 2137):
SECTION 27. What claims are included in the warehouseman’s lien. ­ Subject to the provisions of section thirty,
a warehouseman shall have lien on goods deposited or on the proceeds thereof in his hands, for all lawful
charges for storage and preservation of the goods; also for all lawful claims for money advanced, interest,
insurance, transportation, labor, weighing coopering and other charges and expenses in relation to such goods;
also for all reasonable charges and expenses for notice, and advertisement of sale, and for sale of the goods
where default has been made in satisfying the warehouseman’s lien.
SECTION 31. Warehouseman need not deliver until lien is satisfied. - A warehouseman having a lien valid
against the person demanding the goods may refuse to deliver the goods to him until the lien is satisfied.
• As warehousemen, private respondents cannot legally be deprived of their right to enforce their claim
for warehouseman’s lien for reasonable storage fees and preservation expenses. Pursuant to Sec. 31, they may
refuse to deliver the goods until the lien is satisfied.
• PNB cannot disclaim liability for the payment of the storage fees stipulated in the Warehouse Receipts,
which it also uses as basis for its claim for delivery of the sugar stocks (estopped). Its unconditional
presentment of the receipts carried with it the admission of the existence and validity of the terms, conditions
and stipulations written on the face of the Warehouse Receipts, including the unqualified recognition of the
payment of warehouseman’s lien for storage fees and preservation expenses. PNB may not now retrieve the
sugar stocks without paying the lien due private respondents as warehouseman.
• While the PNB is entitled to the stocks of sugar as the endorsee of the quedans, delivery to it shall be
effected only upon payment of the storage fees.
Note: In accordance with Sec. 29 of the Warehouse Receipts Law, the warehouseman loses his lien upon goods
by surrendering possession thereof. In other words, the lien may be lost where the warehouseman surrenders
the possession of the goods without requiring payment of his lien, because a warehouseman’s lien is
possessory in nature.