Silas vs PNB

GR No. 181045
Del Castillo, J.:

FACTS; Spouses Silos secured a credit line with PNB involving a Credit
Agreement and amortgage to secure such an agreement. The spouses also
issued severalpromissory notes to cover their payment. In all documents,
there wereescalation clauses/provisions allowing PNB to increase or reduce
interest ratesunilaterally. These were found to be violative of the principle of
the mutuality of contracts.
ISSUE: Whether or not the interest rate provision in the Credit Agreement
and theAmendment to Credit Agreement is null and void for giving
PNB the sole power to fix the rates.

HELD: The unilateral action of the PNB in increasing the interest rate on the
private respondents loan violated the mutuality of contracts ordained in
Article 1308 of the Civil Code:Art. 1308. The contract must bind both
contracting parties; its validity or compliance cannot be left to the will of one
of them.In order that obligations arising from contracts may have the force
of law between the parties, there must be mutuality between the parties
based on their essential equality. A contract containing a condition which
makes its fulfillment dependent exclusively upon the uncontrolled will of
one of the contracting parties, is void.
US vs Tan-Chua
GR No. 13708
Malcolm, J.:

FACTS; On April 29, 1911, Pedro Andres, borrowing of Francisco Constantino

Tan Quingco Chua, the instant defendant, the sum of P100, with interest of
24 cavanes of palay. In less than three months, or, to be exact, on the 9th of
July of the same year, the debt was raised to P125, with interest of 30 cavanes
of palay. Two years pass, and on June 28, 1913, it has become P226.70,
secured by a pacto de retro, with the interest at 44 cavanes of palay
annually. The day of reckoning came on October 17, 1915, when the debt was
liquidated with the result that Andres had an obligation of P474.20, which
he promised to pay on the 25th of the same month.
On October 25, 1916, Andres and Tan Quingco Chua executed a
documentary by which Andres sold to Tan Quingco Chua under pacto de
retro a certain parcel of land and a female carabao for the amount of
P684.20; the period of redemption was to be five months; Andres was to
hold the land during this time as lessee and as such lessee to pay a rent of
90 cavanes of palay, each cavan to weigh 44 kilos, in the month of February,
1917, and all charges during the existence of the lease.

ISSUE: Whether or not the accused violated the Usury Law by the
accomplishment of what purports to be a pacto de retro?

HELD: Yes. Usury laws, ordinarily, are to be construed prospectively and not
retrospectively. A corrupt intent is likewise of the essence of usurious
transactions. “To constitute usury, within the prohibition of the law, there
must be an intention knowingly to contract for or take usurious interest; for
if neither party intend it, but act bona fide and innocently, the law will not
infer a corrupt agreement. Where, indeed, the contract, upon its very face,
imports usury, as by an express reservation of more than legal interest, there
is no room fro the presumption; for the intent is apparent, res ipsa loquitur.
But where the contract on its face is for legal interest only, there it must be
proved that there was some corrupt agreement, or devise or shift, to cover
usury; and that it was in the full contemplation of the parties.”
Mambulao Lumber vs PNB
GR No. L-22973
Angeles, J.:

FACTS: Petitioner Mambulao Lumber applied for an industrial loan with

herein respondent PNB and was approved with its real estate, machinery
and equipments as collateral. PNB released the approved loan but
petitioner failed to pay and was later discovered to have already stopped in
its operation. PNB then moved for the foreclosure and sale of the
mortgaged properties. The properties were sold and petitioner sent a bank
draft to PNB to settle the balance of the obligation. PNB however alleges
that a remaining balance stands and a foreclosure sale would still be held
unless petitioner remits said amount. The foreclosure sale proceeded and
petitioner’s properties were taken out of its compound. Petitioner filed
actions before the court and claims among others, moral damages.

ISSUE: Whether or not petitioner corporation, who has already ceased its
operation, may claim for moral damages.

HELD: No. Appellant’s claim for moral damages, however, seems to have no
legal or factual basis. Obviously, an artificial person like herein appellant
corporation cannot experience physical sufferings, mental anguish, fright,
serious anxiety, wounded feelings, moral shock or social humiliation which
are basis of moral damages.
Imperial vs Jaucian
GR No. 149004
Panganiban, J.:

FACTS: Alex A. Jaucian filed a case for collection of money against Restituta
Imperial. The complaint alleges, inter alia, that Imperial obtained from him
6 separate loans as evidence in 6 separate promissory notes and several
checks issued as guarantee for payment. When the said loans became
overdue and unpaid, especially when the defendant’s checks were
dishonored, Jaucian made repeated oral and written demands for
payment. In her defense, Imperial alleged that she has fully paid her
obligations, and that charging of interest of 28% per centum per annum is
illegal, and of the penalty and attorney’s fee as iniquitous and
unconscionable.

Issue: Whether or not the rate, penalty and attorney’s fee must be equitably
reduced for being iniquitous, unconscionable and exorbitant.

Held: Yes, the Court finds the stipulated interest rate even more iniquitous
and unconscionable, as it amounts to 192% per annum, as well as the penalty
and attorney’s fee. Thus, they can be equitably reduced. The provisions of
Article 1229 of the Civil Code empowers the judge to reduce the civil penalty
equitably, when the principal obligation has been partly or irregularly
complied with, and when it is iniquitous and unconscionable.
In the present case, iniquitous and unconscionable was the parties’
stipulated penalty charge of 5% per month or 60% per annum, in addition
to regular interests and attorney’s fees. Also, there was partial performance
by petitioner when she remitted ₱116,540 as partial payment of her principal
obligation of ₱320,000. Under the circumstances, the trial court was justified
in reducing the stipulated penalty charge to the more equitable rate of 14%
per annum.
Frias vs San Diego Sison

GR No. 155223

Austria-Martinez J.:

FACTS: Bobie Rose Frias owns a house and lot acquired from Island Masters
Reality and Development Corporation (IMRDC) through a Deed of Sale and
covered by transfer certificate of title (TCT) in the name of IRMDC. Frias
received from San Diego-Sison P2million cash and P1million post-dated
check dated February 28, 1990, instead of 1991, which rendered the check
stale. Frias then gave the TCT in the name of IRMDC and the Deed of
Absolute Sale over the property between Frias and IRMDC. San Diego-Sison
decided not to purchase the property and informed Frias through a letter
reminding of the agreement that the amount of P2Million be considered
as a loan payable within 6 months. However, Frias failed to pay San Diego-
Sison who later filed a complaint for sum of money with preliminary
attachment. Also, San Diego-Sison averred that Frias tried to deprive her of
the security for the loan when Frias made a false report of the loss of her
owner’s copy of the TCT and be issued a new owner’s duplicate copy of said
title. Frias argued that the interest rate was contrary to the MOA because it
provided that if San Diego-Sison would decide not to purchase the property,
Frias has the period of another six months to pay the loan with
compounded bank interest for the last six months only.

ISSUE: Whether or not the 25% interest per annum even beyond the second
6 months stipulated period is valid.

HELD: Yes, it is. Having considered it as a loan, the monetary interest for the
last six months continued to accrue until actual payment of the loaned
amount. The payment of regular interest constitutes the price or cost of the
use of money and thus, until principal sum due is returned to the creditor,
regular interest continues to accrue since the debtor continues to use such
principal amount.
Ligutan vs CA
GR No. 136677
Vitug, J.:

FACTS: Petitioners Tolomeo Ligutan and Leonidas dela Llana obtained a

loan in the amount of P120,000.00 from Security Bank and Trust Co. The
obligation matured and the bank granted an extension. Despite several
demands from the Bank, petitioners failed to settle the debt which then
amounted to P114,416.10. The Bank sent a final demand letter however
petitioners still defaulted on their obligation.

ISSUE: Whether or not the 15.189% interest and the penalty of 3% per month
(36% per annum) is exorbitant, iniquitous, and unconscionable.

HELD: The question of whether a penalty is reasonable or iniquitous can be

partly subjective and partly objective. Its resolution will depend on such
factors as, but not confined to, the type, extent and purpose of the penalty,
the nature of the obligation, the mode of breach and its consequences, the
supervening realities, 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.

The stipulated interest of 15.189% per annum, does not appear as being
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.
GSIS vs CA

GR No. L-52478

Paras, J.:

FACTS: In 1961, private respondents spouses Nemencio Medina and Josefina

Medina applied with GSIS for a loan of P600,000.00. The GSIS first approved
only the amount of P350,000.00 then reduced the amount to P295,000.00.
The Medinas accepted the amount, executed a promissory note and a real
estate mortgage in favor of GSIS. Then the amount of P350,000.00 was
restored.

Beginning 1965, the Medinas defaulted in the payment of the monthly

amortization of their loan. And in 1967, they began defaulting in the
payment of fire insurance premiums. GSIS then imposed 9%/12% interest on
all installments due and unpaid and in 1975, they filed an Application of
Foreclosure of Mortgage and the properties were sold at a public auction in
1976. Also in 1976, the Medinas filed an Amended Complaint praying for the
declaration of nullity of the 2 real estate mortgage contracts as well as of the
extra-judicial foreclosure proceedings and the refund of excess payments,
damages and attorney’s fees.

ISSUE: Whether or not the interest rates are usurious.

HELD: No, it is not. The Usury Law applies only to interest by way of
compensation for the use of forbearance of money. Interest by way of
damages is governed by Art 2209 of the Civil Code. The Civil Code permits
the agreement upon a penalty apart from the interest. The penalty does not
include the interest, and as such the two are different and distinct things
that may be demanded separately.
Siga-an vs Villanueva

GR No. 173227

Chico-Nazario, J.:

FACTS: Respondent filed a complaint for sum of money against petitioner.

Respondent claimed that petitioner approached her inside the PNO and
offered to loan her the amount of P540,000.00 of which the loan agreement
was not reduced in writing and there was no stipulation as to the payment
of interest for the loan. Respondent issued a check worth P500,000.00 to
petitioner as partial payment of the loan. She then issued another check in
the amount of P200,000.00 to petitioner as payment of the remaining
balance of the loan of which the excess amount of P160,000.00 would be
applied as interest for the loan. Not satisfied with the amount applied as
interest, petitioner pestered her to pay additional interest and threatened
to block or disapprove her transactions with the PNO if she would not
comply with his demand. Thus, she paid additional amounts in cash and
checks as interests for the loan. She asked petitioner for receipt for the
payments but was told that it was not necessary as there was mutual trust
and confidence between them. According to her computation, the total
amount she paid to petitioner for the loan and interest accumulated to
P1,200,000.00.

ISSUE: Whether or not interest was due to petitioner.

HELD: No. Compensatory interest is not chargeable in the instant case

because it was not duly proven that respondent defaulted in paying the loan
and no interest was due on the loan because there was no written
agreement as regards payment of interest. Article 1956 of the Civil Code,
which refers to monetary interest, specifically mandates that no interest
shall be due unless it has been expressly stipulated in writing. As can be
gleaned from the foregoing provision, payment of monetary interest is
allowed only if: (1) there was an express stipulation for the payment of
interest; and (2) the agreement for the payment of interest was reduced in
writing. The concurrence of the two conditions is required for the payment
of monetary interest. Thus, we have held that collection of interest without
any stipulation therefor in writing is prohibited by law.
CA Agro Industrial vs CA

GR No. 90027

Davide, Jr. J:

FACTS: CA Agro (through its President, Aguirre) and spouses Pugao entered
into an agreement whereby the former purchased two parcels of land for
P350, 525 with a P75, 725 down payment while the balance was covered by
three (3) postdated checks. Among the terms embodied in a Memorandum
of True and Actual Agreement of Sale of Land were that titles to the lots shall
be transferred to the petitioner upon full payment of the purchase price and
that the owner’s copies of the certificates of titles thereto shall be deposited
in a safety deposit box of any bank. The same could be withdrawn only upon
the joint signatures of a representative of the petitioner upon full payment
of the purchase price. They then rented Safety Deposit box of private
respondent Security Bank and Trust Company (SBTC).

ISSUE: Whether or not the contractual relation between a commercial bank

and another party in the contract of rent of a safety deposit box is one of
bailor and bailee.

HELD: Yes. The contract in the case is a special kind of deposit. It cannot be
characterized as an ordinary contract of lease under Article 1643 because
the full and absolute possession and control of the safety deposit box was
not given to the joint renters – the petitioner and Pugaos.
Eastern Shipping Lines vs CA

GR No. 97412

Vitug, J.:

FACTS: Two fiber drums were shipped owned by Eastern Shipping from
Japan. The 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. Allied delivered the
shipment to the consignee’s warehouse. The latter excepted to one drum
which contained spillages while the rest of the contents was
adulterated/fake. As consequence of the loss, the insurance company paid
the consignee, so that it became subrogated to 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 an ordered defendants to pay the former with
present legal interest of 12% per annum from the date of the filing of the
complaint. On appeal by defendants, the appellate court denied the same
and affirmed in toto the decision of the trial court.

ISSUE: Whether the applicable rate of legal interest is 12% or 6%.

HELD: The Court held that the legal interest is 6% computed from the
decision of the court a quo. When an obligation, not constituting a loan or
forbearance of money, is breached, an interest on the amount of damaes
awarded may be imposed at the discretion of the court at the rate of 6% per
annum. No interest shall be adjudged on unliquidated claims or damages
except when or until the demand can be established with reasonable
certainty.

When the judgment of the court awarding a sum of money becomes final
and executor, the rate of legal interest shall be 12% per annum from such
finality until satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of money.

The interest due shall be 12% PA to be computed fro default, J or EJD