CASES:

General Provisions

Acme Shoe VS CA, 260 SCRA 714

FACTS:

Chua Pac, president and general manager of Acme Shoe, Rubber and Plastic
Corporation, executed a chattel mortgage in favor of Producers Bank of the
Philippines, as a security for a corporate loan in the amount of P3M. The chattel
mortgage contained a clause that provided for the mortgage to stand as security
for all other obligations contracted before, during and after the constitution of the
mortgage.

The P3M was paid. Subsequently, the corporation obtained additional financial
accommodations totalling P2.7M. This was also paid on the due date. Again, the
bank extended another loan to the corporation in the amount of P1M, covered by
four promissory notes. However, the corporation was unable to pay this at
maturity. Thereupon, the bank applied for an extra-judicial foreclosure of
mortgage.

For its part, the corporation filed an action for injunction with prayer for damages.
The lower court ultimately dismissed the case and ordered the extra-judicial
foreclosure of mortgage. Hence, this appeal.

ISSUEs: W/N extra-judicial foreclosure of the chattel mortgage is proper

HELD:

Contracts of Security
Contracts of security are either personal or real. In contracts of personal security,
such as a guaranty or suretyship, the faithful performance of the obligation by the
principal debtor is secured by the personal commitment of another (the guarantor
or surety). In contracts of real security, such as a pledge, a mortgage or an
antichresis, that fulfillment is secured by an encumbrance of property -- in pledge,
the placing of movable property in the possession of the creditor; in chattel
mortgage by the execution of the corresponding and substantially in teh form
prescribed by law; in real estate mortgage, by the execution of a public instrument
encumbering the real property covered thereby; and in antichresis, by a written
instrument granting to the creditor the right to receive the fruits of an immovable
property with the obligation to apply such fruits to the payment of interest, if
owing, and thereafter to the principal of his credit -- upon the essential condition
that if the obligation becomes due and the debtor defaults, then the property
encumbered can be alienated for the payment of the obligation, but that should
the obligation be duly paid, then the contract is automatically extinguished
proceeding from the accessory character of the agreement. As the law so puts it,
once the obligation is complied with, then the contract of security becomes, ipso
facto, null and void.

Navoa VS CA, 251 SCRA 545

FACTS:

On December 1977 Teresita Domdoma and Eduardo Domdoma filed a case with
the RTC for collection of various sums of money based on loans given by them to
Olivia Navoa. They cased was dismissed on the ground that there was no cause of
action and that the Domdoma’s do not have no capacity to sue. They appealed to
the C.A. and was granted a favorable decision.
There were 6 instances in which the Domdoma’s gave Olivia Navoa a loan. The first
instance is when Teresita gave Olivia a diamond ring valued at 15,000.00 which was
secured by a PCIB check under the condition that if the ring was not returned within
15 days from August 15, 1977 the ring is considered sold. Teresita attempted to
deposit the check on November 1977 but the check was not honored for lack of
funds. After this instance, there were other loans of various amounts that were
extended by Teresita to Olivia, loans which were secured by PCIB checks, which
were all dated to 1 month after the loan. All these checks were not honored under
the same reason as the first loan.

ISSUE:

Was the decision of the RTC to dismiss the case due to having no cause of action
valid?
- NO, A cause of action is the fact or combination of facts which affords a party a
right to judicial interference in his behalf.
- For the first loan it is a fact, that the ring was considered sold to Olivia Navoa 15
days after August 15, 1977, and even then, Olivia Navoa failed to pay the price for
the ring when the payment was due (check issued was not honoured. Thus it is
confirmed that Teresita’s right under the agreement was violated.
- As for the other loans extended by Teresita to Olivia, they were all secured by PCIB
checks. It can be inferred that since the checks were all dated to 1 month after the
loan, it follows that the loans are then payable 1 month after they were contracted,
and also these checks were dishonoured by the bank for lack of funds.
- Olivia and Ernesto Navoa failed to make good the checks that were issued as
payment for their obligations. Art 1169 of the Civil Code is explicit: those obliged to
deliver or to do something incur in delay from the time the obligee judicially or
extra-judicially demands from them the fulfilment of the obligations, the
continuing refusal of Olivia and Ernesto Navoa to comply with the demand of
payment shows the existence of a cause of action.

HELD:
The petition is DENIED and the decision of the C.A. remanding the case to the RTC
for trial on the merits is affirmed.

Obligations and Contracts terms:

Security- A means of ensuring the enforcement of an obligation or of protecting
some interest in property. It may be personal or property security.
Cause of Action- is the fact or combination of facts which affords a party a right to
judicial interference in his behalf. The requisites for a cause of action are: (a) a right
in favor of the plaintiff by whatever means and under whatever law it arises or
created, (b) an obligation on the part of the defendant to respect and not to violate
such right; and, (c) an act or omission on the part of the defendant constituting a
violation of the plaintiff’s right or breach of the obligation of the defendant to the
plaintiff.

Pp VS Concepcion 44 Phil. 126

FACTS:

Philippine National Bank President Concepcion issued a memo

limiting the discretional power of local manager at Aparri, Cagayan to grant loans
and discount negotiable documents to P5000 to P10000.

Manager asked for authorization from Concepcion about an establishment’s, Puno

y Concepcion, loan. PNB Pres. Concepcion authorized extension of credit to Puno y
Concepcion in the amount of P300,000. Security consisted of 6 demand notes. The
notes and interest were paid accordingly.

Puno y Concepcion consisted of several members including PNB President

Concepcion’s wife Rosario San Agustin.

Cagayan CFI found PNB Pres. Concepcion guilty of violating Sec. 35 of Act No. 2747
which reads: “The National Bank shall not, directly or indirectly, grant loans to any
of the members of the board of directors of the bank nor to agents of the branch
banks.” Sec. 49 of same act prescribes punishments. But these were later repealed
by Act. No. 2938 on Jan. 1921, after CFI decision.

ISSUES:

(1) Was the credit grant a “loan”? –Yes

(2) Was it a “loan” or “discount”? -Loan

(3) Was it an “indirect loan”? -Yes

(4) Can he be convicted when relevant provisions have been repealed? -Yes

(5) Was it in violation of Sec. 35 of Act. No. 2747? –Yes

(6) Can good faith be his defense? -No

Ratio. (1) Concession of credit necessary involves granting of a loan.

(2) Because interest was not deducted from the face of the notes, but was paid
when the notes fell due and they were single-name and not double-name paper.

(3) They are man and wife.

(4) “Where an Act of the Legislature which penalizes an offense, such repeal does
not have the effect of thereafter depriving the courts of jurisdiction to try,
convict, and sentence offenders charged with violations of the old law.”

(5) Defense contend that 35 refers to bank. 49 refers to punishment not on bank
but person. Therefore, they argue that there is no penalty for person. This is
misconstrued. If corporation is forbidden to do an act, same extends to directors.

(6) Under this statute, criminal intent is immaterial.

Doctrine: The principles can be found in ratio 3. “Directly or indirectly” could be

problematic to understand. But looking at the legislative intent would clear things
out. In the inclusion of this phrase, the Legislature intended to prohibit
temptation for bank director. Personal interest and duty at times conflict and the
provision saw this coming. In this case, it is apparent that Concepcion is interested
to see his wife succeed which overcame his duty to PNB. Therefore, he is
“indirectly” a participant.
BPI Investments VS CA, 377 SCRA 117

FACTS:

Frank Roa obtained a loan at 16 1/4% interest rate per annum from Ayala
Investment and Development Corporation. For security, Roa's house and lot were
mortgaged. Later, Roa sold the house and lot to ALS and Antonio Litonjua, who
assumed Roa's debt to Ayala Investment. Ayala Investment, however, granted a
new loan to be applied to Roa's debt, secured by the same property at a different
interest rate of 20% per annum.

When ALS and Litonjua failed to pay, BPIIC, successor to Ayala Investment, filed for
foreclosure of mortgage.

ISSUE:

W/N a contract of loan is a consensual contract

HELD:

A loan contract is not a consensual contract but a real contract. It is perfected upon
delivery of the object of the contract. Although a perfected consensual contract can
give rise to an action for damages, it does not constitute a real contract which
requires delivery for perfection. A perfected real contract gives rise only to
obligations on the part of the borrower.

In the present case, the loan contract was only perfected on the date of the second
release of the loan.

A contract of loan involves a reciprocal obligation, wherein the obligation or

promise of each party is the consideration for that of the other. It is a basic principle
in reciprocal obligations that neither party incurs in delay, if the other does not
comply or is not ready to comply in a proper manner with what is incumbent upon
him. Only when a party has performed his part of the contract can he demand that
the other party also fulfills his own obligation and if the latter fails, default sets in.

Bonnevie VS CA, 125 SCRA 122

FACTS:

December 6, 1966: Spouses Jose M. Lozano and Josefa P. Lozano secured their loan
of P75K from Philippine Bank of Commerce (PBC) by mortgaging their property

December 8, 1966: Executed Deed of Sale with Mortgage to Honesto

Bonnevie where P75K is payable to PBC and P25K is payable to Spouses Lanzano.

April 28, 1967 to July 12, 1968: Honesto Bonnevie paid a total of P18,944.22 to
PBC

May 4, 1968: Honesto Bonnevie assigned all his rights under the Deed of Sale with
Assumption of Mortgage to his brother, intervenor Raoul Bonnevie

June 10, 1968: PBC applied for the foreclosure of the mortgage, and notice of sale
was published

January 26, 1971: Honesto Bonnevie filed in the CFI of Rizal against Philippine Bank
of Commerce for the annulment of the Deed of Mortgage dated December 6,
1966 as well as the extrajudicial foreclosure made on September 4, 1968.

CFI: Dismissed the complaint with costs against the Bonnevies

CA: Affirmed

ISSUE: W/N the forclosure on the mortgage is validly executed.

HELD:

YES. CA affirmed
A contract of loan being a consensual contract is perfected at the same time the
contract of mortgage was executed. The promissory note executed on December
12, 1966 is only an evidence of indebtedness and does not indicate lack of
consideration of the mortgage at the time of its execution.

Respondent Bank had every right to rely on the certificate of title. It was not bound
to go behind the same to look for flaws in the mortgagor's title, the doctrine of
innocent purchaser for value being applicable to an innocent mortgagee for value.

Thru certificate of sale in favor of appellee was registered on September 2, 1968

and the one year redemption period expired on September 3, 1969. It was not until
September 29, 1969 that Honesto Bonnevie first wrote respondent and offered to
redeem the property.

loan matured on December 26, 1967 so when respondent Bank applied for
foreclosure, the loan was already six months overdue. Payment of interest on July
12, 1968 does not make the earlier act of PBC inequitous nor does it ipso facto
result in the renewal of the loan. In order that a renewal of a loan may be effected,
not only the payment of the accrued interest is necessary but also the payment of
interest for the proposed period of renewal as well. Besides, whether or not a loan
may be renewed does not solely depend on the debtor but more so on the
discretion of the bank.