1.) ACME SHOE RUBBER & PLASTIC CORPORATION and CHUA PAC vs. HON.

COURT OF APPEALS,
PRODUCERS BANK OF THE PHILIPPINES AND REGIONAL SHERIFF OF CALOOCAN CITY
GR NO. 103576 AUGUST 22, 1996

Facts:

Petitioner Chua Pac, the president and general manager of co-petitioner “Acme Shoe, Rubber &
Plastic Corporation,” executed on 27 June 1978, for and in behalf of the company, a chattel mortgage in
favor of private respondent Producers Bank of the Philippines. The mortgage stood by way of security
for petitioner’s corporate loan of three million pesos (P3,000,000.00).
A provision in the chattel mortgage agreement stated that such mortgage shall also stand as a
security for said obligation and any all other obligations of the mortgagor to the mortgagee whether
such obligations have been contracted before, during or after the constitution of this mortgage. In due
time, the loan was paid by the company.
Subsequently, the company obtained from respondent bank additional financial
accommodations. Another loan was again extended covered by promissory notes but went unsettled.
The respondent bank applied for an extrajudicial foreclosure of the chattel mortgage prompting
petitioner to file a case in court. The trial court dismissed the case and ordered the foreclosure. It held
petitioner corporation bound by the stipulations, aforequoted, of the chattel mortgage. In their appeal,
the Court of Appeals affirmed the decision of the court a quo.

Issue:

Would it be valid and effective to have a clause in a chattel mortgage that purports to likewise
extend to its coverage to obligations yet to be contracted or incurred?

Ruling:

No, it is not valid. While a pledge, real estate mortgage, or antichresis may exceptionally secure
after-incurred obligations so long as these future debts are accurately described, a chattel mortgage,
however, can only cover obligations existing at the time the mortgage is constituted. Although a promise
expressed in a chattel mortgage to include debts that are yet to be contracted can be a binding
commitment that can be compelled upon, the security itself, however, does not come into existence or
arise until after a chattel mortgage agreement covering the newly contracted debt is executed either by
concluding a fresh chattel mortgage or by amending the old contract conformably with the form
prescribed by the Chattel Mortgage Law. Refusal on the part of the borrower to execute the agreement
so as to cover the after-incurred obligation can constitute an act of default on the part of the borrower
of the financing agreement whereon the promise is written but, of course, the remedy of foreclosure
can only cover the debts extant at the time of constitution and during the life of the chattel mortgage
sought to be foreclosed.
2) Navoa VS CA, 251 SCRA 545

Facts:

Domdoma 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, totaling of 6 loans, of various amounts that
were extended by Teresita to Olivia, These loans 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.

These loans were extended upon representation of defendant Olivia that she needed
money to pay for jewelries which she can resell for a big profit; that having established her
goodwill,

Statement of the Case

On 17 December 1977 private respondents filed with the Regional Trial Court of Manila
an action against petitioners for collection of various sums of money based on loans obtained by
the latter. On 3 January 1978 petitioners filed a motion to dismiss the complaint on the ground
that the complaint stated no cause of action and that plaintiffs had no capacity to sue.

The trial court dismissed the case and the motion to reconsider the dismissal was denied.
Private respondents appealed to the Court of Appeals which modified the order of dismissal "by
returning the records of this case for trial on the merits,

Issue
Was the decision of the RTC to dismiss the case due to having no cause of action valid?
Ruling
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 because of the check issued that was not honored. Thus it is confirmed that
Teresita’s right under the agreement was violated.
The other loans extended by Teresita to Olivia 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 dishonored 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. The continuing refusal of Olivia and Ernesto Navoa to comply with the
demand of payment shows the existence of a cause of action.
All the loans granted to petitioners are secured by corresponding checks dated a month
after each loan was obtained. In this regard, the term security is defined as a means of ensuring
the enforcement of an obligation or of protecting some interest in property. It may be personal,
as when an individual becomes a surety or a guarantor; or a property security, as when a
mortgage, pledge, charge, lien, or other device is used to have property held, out of which the
person to be made secure can be compensated for loss. Security is something to answer for as a
promissory note. That is why a secured creditor is one who holds a security from his debtor for
payment of a debt. From the allegations in the complaint there is no other fair inference than
that the loans were payable one month after they were contracted and the checks issued by
petitioners were drawn to answer for their debts to private respondents.
The trial court erred in dismissing the case on the ground of lack of cause of action.
Respondent Court of Appeals therefore is correct in remanding the case to the trial court for the
filing of an answer by petitioners and to try the case on the merits.
Dispositive Portion
WHEREFORE, the petition is DENIED. The judgment of the Court of Appeals dated
11 December 1980 remanding the case to the trial court for the filing of petitioners'
answer and thereafter for trial on the merits is AFFIRMED. Costs against petitioners.
3) Rep. VS FNCB, 3 SCRA 851

FACTS:

The Republic of the Philippines filed on September 25, 1957 before the Court of First
Instance of Manila a complaint for escheat of certain unclaimed bank deposits balances under the
provisions of Act No. 3936 against several banks, among them the First National City Bank of
New York (First National).

It is alleged that pursuant to Section 2 of the said Act, First National forwarded to the
Treasurer of the Philippines a statement under oath of their respective managing officials all the
credits and deposits held by them in favor of persons known to be dead or who have not made
further deposits or withdrawals during the period of 10 years or more.

After the hearing, the court a quo rendered judgment holding that cashier's or manager's
checks and demand drafts as those which First National wants excluded from the complaint
come within the purview of Act No. 3936, but not the telegraphic transfer payment orders which
are of different category. Consequently, the complaint was dismissed with regard to the latter.
However, after a motion for reconsideration was filed by First National, the court a quo changed
its view and held that even said demand drafts do not come within the purview of said Act and so
amended its decision accordingly. The Republic of the Philippines has appealed.

ISSUES: (1) Whether or not demand drafts come within the meaning of the term "credits" or
"deposits" employed in the law.

(2) Whether or not telegraphic orders come within the meaning of the term "credits" or
"deposits" employed in the law.

RULING:

(1) No. A demand draft is a bill of exchange payable on demand. Considered as a bill of
exchange, a draft is said to be an open letter of request from and an order by one person on
another to pay a sum of money therein mentioned to a third person, on demand or at a future time
therein specified. The law requires that drafts or bills of exchange need to be presented either for
acceptance or for payment within a reasonable time after their issuance or after their last
negotiation thereof as the case may be. Failure to make such presentment will discharge the
drawer from liability or to the extent of the loss caused by the delay. Since it is admitted that the
demand drafts herein involved have not been presented either for acceptance or for payment,
First National never had any chance of accepting or rejecting them and thus they never became a
debtor of the payee concerned. As such, the aforesaid drafts cannot be considered as credits
subject to escheat within the meaning of the law.
 (2) Yes. A telegraphic payment order is for the establishment of a telegraphic or cable
transfer the agreement to remit creates a contractual obligation and has been termed a purchase
and sale transaction. The purchaser of a telegraphic transfer upon making payment completes the
transaction insofar as he is concerned, though insofar as the remitting bank is concerned the
contract is executory until the credit is established. Hence, telegraphic transfers should be
escheated in favor of the Republic of the Philippines.
4) Pp VS Concepcion 44 Phil. 126

Facts:Venancio Concepcion, President of the Philippine National Bank and a member of the Board
thereof, authorized an extension of credit in favor of "Puno y Concepcion, S. en C.” in the amount of
P300,000 to the manager of the Aparri branch of the Philippine National Bank. "Puno y Concepcion, S.
en C." was a co-partnership where Concepcion is a partner. Subsequently, Concepcion was charged and
found guilty in the Court of First Instance of Cagayan with violation of section 35 of Act No. 2747.
Section 35 of Act No. 2747 provides that 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. Counsel for
the defense argue that the documents of record do not prove that authority to make a loan was given,
but only show the concession of a credit. They averred that the granting of a credit to the co-partnership
"Puno y Concepcion, S. en C." by Venancio Concepcion, President of the Philippine National Bank, is not
a "loan" within the meaning of section 35 of Act No. 2747.

Issue: Whether or not the granting of a credit of P300,000 to the co-partnership "Puno y Concepcion, S.
en C." by Venancio Concepcion, President of the Philippine National Bank, a "loan" within the meaning
of section 35 of Act No. 2747.

Held: The Supreme Court ruled in the affirmative. The "credit" of an individual means his ability to
borrow money by virtue of the confidence or trust reposed by a lender that he will pay what he may
promise. A "loan" means the delivery by one party and the receipt by the other party of a given sum of
money, upon an agreement, express or implied, to repay the sum loaned, with or without interest. The
concession of a "credit" necessarily involves the granting of "loans" up to the limit of the amount fixed in
the "credit,"
5) BPI Investments VS CA, 377 SCRA 117

Facts:
Frank Roa obtained a loan from Ayala Investment and Development Corporation (AIDC), the predecessor
of petitioner BPI Investment Corporation (BPIIC), for the construction of his house and lot. The said
house and lot were mortgaged to AIDC to secure the loan. In 1908, Roa sold the house and lot to
respondents ALS and Antonio Litonjua for P850,000.00. The P350,000.00 was paid in cash and the
balance P500,000.00 was assumed to Roa’s indebtedness with AIDC. AIDC was not willing to extend the
old interest rate to respondents and proposed to grant the latter a new loan of P500,000.00 to be
applied to Roa’s debt. In March 1981, respondents executed a mortgage deed which provided that the
monthly amortization shall commence on May 1, 1981, the supposed release date of respondents’ loan.
On August 13, 1982, respondents paid BPIIC the amount of P190,601.35 which reduced Roa’s principal
balance to P457,204.90. On September 13, 1982, BPIIC released to respondents P7,146.87 purporting to
be what was left of their loan after full payment of Roa’s loan. In June 1984, foreclosure proceedings
were instituted by BPIIC against respondents on the ground that they failed to pay the mortgage
indebtedness from May 1,1981 to June 30, 1984.

On February 28, 985, respondents filed a civil case against BPIIC and alleged that they should not be
made to pay amortization before the actual release of their loan. The trial court ruled that respondents
were not in default in the payment of their monthly amortization and that the extrajudicial foreclosure
was premature. The Court of Appeals (CA) affirmed the lower court’s decision and held that a simple
loan is perfected only upon the delivery of the object of the contract.

Issue: Whether or not a contract of loan is a consensual contract.

Ruling: A loan contract is not a consensual contract but a real contract and is perfected only upon the
delivery of the object of the contract. In this case, the loan contract between BPIIC and respondents was
perfected on September 13, 1982, when BPIIC released to respondents the remaining amount of their
P500,000.00 loan after the deduction to Roa’s loan was made. Hence, respondents’ obligation to pay the
monthly amortization commenced on October 13, 1982. Further, a contract of loan involves a reciprocal
obligation, wherein the obligation of each party is the consideration for that of the other. Neither party
incurs delay if the other does not comply with what is incumbent upon him and it is only when the party
has performed his part of the contract that he can demand the other party to fulfill his own obligation. If
the other party fails to fulfill his own obligation, default sets in. In this case, BPIIC can only demand for
respondents’ payment of the monthly amortization on October 13, 1982, a month after it complied with
its obligation under the loan contract, and not on May 1, 1981.

Issue. (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.
6) Bonnevie VS CA, 125 SCRA 122

Facts:

Ÿ 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

Ÿ 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.

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

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

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

Ÿ 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.

Ÿ CFI: Dismissed the complaint with costs against the Bonnevies

Ÿ CA: Affirmed

Issue: WON the foreclosure 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.

Mortgages; Contracts; A mortgage contract does not become invalid by mere failure of debtor to get the
mortgage consideration on the date the mortgage was executed. A loan is a consensual contract.—This
contention is patently devoid of merit. From the recitals of the mortgage deed itself, it is clearly seen
that the mortgage deed was executed for and on condition of the loan granted to the Lozano spouses.
The fact that the latter did not collect from the respondent Bank the consideration of the mortgage on
the date it was executed is immaterial. A contract of loan being a consensual contract, the herein
contract of loan was 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.

Same; Same; A mortgage is not rendered null and void by the use thereof as security in the renewal of
the original loan after the property mortgaged had already been sold to another without the sale being
registered.—This argument failed to consider the provision of the contract of mortgage which prohibits
the sale, disposition of, mortgage and encumbrance of the mortgaged properties, without the written
consent of the mortgagee, as well as the additional proviso that if in spite of said stipulation, the
mortgaged property is sold, the vendee shall assume the mortgage in the terms and conditions under
which it is constituted. These provisions are expressly made part and parcel of the Deed of Sale with
Assumption of Mortgage.

Same; Same; Loan; Contracts; Receipt by bank of interest payment on long matured loan does not result
in renewal or extension of maturity period of the loan.—The claim of appellants that the collection of
interests on the loan up to July 12, 1968 extends the maturity of said loan up to said date and
accordingly on June 10, 1968 when defendant applied for the foreclosure of the mortgage, the loan was
not yet due and demandable, is totally incorrect and misleading. The undeniable fact is that the loan
matured on December 26, 1967. On June 10, 1968, when respondent Bank applied for foreclosure, the
loan was already six months overdue. Petitioners’ payment of interest on July 12, 1968 does not thereby
make the earlier act of respondent Bank iniquitous 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. Respondent Bank may not be, therefore, charged of bad faith.
7) CB VS CA, 139 SCRA 46

FACTS:

On April 28, 1965, Island Savings Bank, approved the loan application for ₱80,000.00 of
Sulpicio M. Tolentino, who, as a security for the loan, executed on the same day a real estate
mortgage over his 100-hectare land located in Cubo, Las Nieves, Agusan. The loan called for a
lump sum of ₱80,000, repayable in semi-annual installments for 3 years, with 12% annual
interest. On May 22, 1965, a mere ₱17,000 partial release of the loan was made by Island
Savings and Sulpicio and his wife signed a promissory note for P17,000 at 12% annual interest
payable w/in 3 yrs. An advance interest was deducted from the partial release but the said
interest was also refunded to Tolentino after being informed that there was no fund yet for the
release of the ₱63,000 balance.

On August 13, 1965, the Monetary Board of Central Bank, after finding out that Island
Savings Bank was suffering from liquidity problems, issued Board Resolution No. 1049. The
said resolution prohibited Island Savings from making new loans and investments. And after the
said bank failed to restore its solvency, the Central Bank prohibited Island Savings Bank from
doing business in the Philippines. Island Savings Bank, in view of the non-payment by Mr.
Tolentino in the amount of ₱17,000, filed an application for foreclosure of the real estate
mortgage. Mr. Tolentino, on the other hand, filed a petition for specific performance or
rescission and damages with preliminary injunction, claiming that since Island Savings failed to
deliver the remaining balance of ₱63,000, he is now entitled to specific performance or to
rescission of the real estate mortgage.

ISSUE: Whether or not Tolentino can demand for specific performance.

RULING:

No. The loan agreement implied reciprocal obligations. In reciprocal obligations, the
obligation or promise of each other is the consideration for that of the other, and when one party
is willing and ready to perform, the other party who is not ready nor willing, incurs in delay.
When Mr. Tolentino executed the real estate mortgage, he signified his willingness to pay. The
prohibition on the bank to make new loans is irrelevant since it did not prohibit the bank from
releasing the balance of loans from previous contracts. The mere fact of insolvency by the debtor
is never an excuse for the non-fulfillment of obligation and is taken as a breach of contract.

When Island Savings Bank and Mr. Sulpicio M. Tolentino undertook reciprocal
obligations by entering an ₱80,000 loan agreement, with Mr. Tolentino executing a real estate
mortgage and Island Savings was only able to release ₱17,000, the said bank was held in default
for the remaining balance of ₱63,000. Since Island Savings Bank was in default, Mr. Tolentino
may choose bet specific performance or rescission with damages in either case. But considering
that Island Savings is now prohibited by the Central Bank Board Resolution from doing
business, specific performance cannot be granted. Thus, rescission for the ₱63,000 balance is the
rightful remedy.