BPI Family Bank v.

Franco
Facts:
An ostensible fraud perpetrated on the petitioner BPI Family Bank (BPI-FB) allegedly by
respondent Amado Franco in conspiracy with other individuals, some of whom opened and
maintained separate accounts with BPI-FB, San Francisco del Monte (SFDM) branch, in a series
of transactions.

On August 15, 1989, Tevesteco Arrastre-Stevedoring Co., Inc. opened a savings and current
account with BPI-FB. Soon thereafter, or on August 25, 1989, First Metro Investment
Corporation (FMIC) also opened a time deposit account with the same branch of BPI-FB with a
deposit of P100,000,000.00, to mature one year thence.

Subsequently, on August 31, 1989, Franco opened three accounts, namely, a current, savings,
and time deposit, with BPI-FB. The current and savings accounts were respectively funded with
an initial deposit of P500,000.00 each, while the time deposit account had P1,000,000.00 with a
maturity date of August 31, 1990. The total amount of P2,000,000.00 used to open these
accounts is traceable to a check issued by Tevesteco allegedly in consideration of Franco's
introduction of Eladio Teves, who was looking for a conduit bank to facilitate Tevesteco's
business transactions, to Jaime Sebastian, who was then BPI-FB SFDM's Branch Manager. In
turn, the funding for the P2,000,000.00 check was part of the P80,000,000.00 debited by BPI-FB
from FMIC's time deposit account and credited to Tevesteco's current account pursuant to an
Authority to Debit purportedly signed by FMIC's officers.

It appears, however, that the signatures of FMIC's officers on the Authority to Debit were forged.
On September 4, 1989, Antonio Ong, upon being shown the Authority to Debit, personally
declared his signature therein to be a forgery. Unfortunately, Tevesteco had already effected
several withdrawals from its current account (to which had been credited the P80,000,000.00
covered by the forged Authority to Debit) amounting to P37,455,410.54, including the
P2,000,000.00 paid to Franco.

On September 8, 1989, impelled by the need to protect its interests in light of FMIC's forgery
claim, BPI-FB, thru its Senior Vice-President, Severino Coronacion, instructed Jesus Arangorin
to debit Franco's savings and current accounts for the amounts remaining therein. However,
Franco's time deposit account could not be debited due to the capacity limitations of BPI-FB's
computer.

In the meantime, two checks drawn by Franco against his BPI-FB current account were
dishonored upon presentment for payment, and stamped with a notation "account under
garnishment." Apparently, Franco's current account was garnished by virtue of an Order of
Attachment issued by the Regional Trial Court of Makati (Makati RTC) in Civil Case No. 89-
4996 (Makati Case), which had been filed by BPI-FB against Franco et al.,[14] to recover the
P37,455,410.54 representing Tevesteco's total withdrawals from its account.

Issue: 
Whether or not Franco had a better right in the deposits in the subject accounts which are part of
the proceeds of a forged Authority to Debit

Held:
BPI-FB cannot unilaterally freeze Franco's accounts and preclude him from withdrawing his
deposits. However, contrary to the appellate court's ruling, the Court held that Franco is not
entitled to unearned interest on the time deposit as well as to moral and exemplary damages.

BPI-FB urges the Court that the legal consequence of FMIC's forgery claim is that the money
transferred by BPI-FB to Tevesteco is its own, and considering that it was able to recover
possession of the same when the money was redeposited by Franco, it had the right to set up its
ownership thereon and freeze Franco's accounts.

To bolster its position, BPI-FB cites Article 559 of the Civil Code, which provides:
Article 559. The possession of movable property acquired in good faith is equivalent to a title.
Nevertheless, one who has lost any movable or has been unlawfully deprived thereof, may
recover it from the person in possession of the same.

If the possessor of a movable lost or of which the owner has been unlawfully deprived, has
acquired it in good faith at a public sale, the owner cannot obtain its return without reimbursing
the price paid therefor.
BPI-FB's argument is unsound. To begin with, the movable property mentioned in Article 559 of
the Civil Code pertains to a specific or determinate thing. A determinate or specific thing is one
that is individualized and can be identified or distinguished from others of the same kind.

In this case, the deposit in Franco's accounts consists of money which, albeit characterized as a
movable, is generic and fungible.The quality of being fungible depends upon the possibility of
the property, because of its nature or the will of the parties, being substituted by others of the
same kind, not having a distinct individuality.

Significantly, while Article 559 permits an owner who has lost or has been unlawfully deprived
of a movable to recover the exact same thing from the current possessor, BPI-FB simply claims
ownership of the equivalent amount of money, i.e., the value thereof, which it had mistakenly
debited from FMIC's account and credited to Tevesteco's, and subsequently traced to Franco's
account. In fact, this is what BPI-FB did in filing the Makati Case against Franco, et al. It staked
its claim on the money itself which passed from one account to another, commencing with the
forged Authority to Debit.

It bears emphasizing that money bears no earmarks of peculiar ownership, and this characteristic
is all the more manifest in the instant case which involves money in a banking transaction gone
awry. Its primary function is to pass from hand to hand as a medium of exchange, without other
evidence of its title. Money, which had passed through various transactions in the general course
of banking business, even if of traceable origin, is no exception.
BOBIE ROSE FRIAS v. FLORA SAN DIEGO-SISON
2007 / Austria-Martinez
On 7 Dec 1990, Bobie Rose Frias and Dr. Flora San-Diego Sison entered into a MOA over Frias’property

 MOA consideration is 3M
 Sison has 6 months from the date of contract’s execution to notify Frias of her intention to purchase the property with
the improvements at 6.4M
 Prior to this 6 month period, Frias may still offer the property to other persons, provided that 3M shall be paid to Sison
including interest based on prevailing compounded bank interest + amount of sale in excess of 7M [should the
property be sold at a price greater than 7M]
 In case Frias has no other buyer within 6 months from the contract’s execution, no interest shall be charged by Sison on
the 3M
 In the event that on the 6th month, Sison would decide not to purchase the property, Frias has 6 months to pay 3M
(amount shall earn compounded bank interest for the last 6 months only)
 3M treated as a loan and the property considered as the security for the mortgage
 Upon notice of intention to purchase, Sison has 6 months to pay the balance of 3.4M (6.4M less 3M MOA
consideration)
Frias received from Sison 3M (2M in cash; 1M post-dated check dated February 28, 1990, instead of 1991, which rendered the
check stale). Frias gave Sison the TCT and the Deed of Absolute Sale over the property. Sison decided not to purchase the
property, so shenotified Frias through a letter dated March 20, 1991 [Frias received it only on June 11, 1991],and Sison reminded
Frias of their agreement that the 2M Sison paid should be considered as a loan payable within 6 months. Frias failed to pay this
amount.

Sison filed a complaintfor sum of money with preliminary attachment. Sison averred that Frias tried to deprive her of the security
for the loan by making a false report of the loss of her owner’s copy of TCT, executing an affidavit of loss and by filing a
petition[1] for the issuance of a new owner’s duplicate copy. RTC issued a writ of preliminary attachment upon the filing of a 2M
bond.

RTC found that Frias was under obligation to pay Sison 2M with compounded interest pursuant to their MOA. RTC ordered
Frias to pay Sison:

 2M + 32% annual interest beginning December 7, 1991 until fully paid

 70k representing premiums paid by Sison on the attachment bond with legal interest counted from the date of this
decision until fully paid
 100k moral, corrective, exemplary damages [liable for moral damages because of Frias’ fraudulent scheme]
 100k attorney’s fees + cost of litigation
CA affirmed RTC with modification—32% reduced to 25%. CA said that there was no basis for Frias to say that the interest
should be charged for 6 months only. It said that a loan always bears interest; otherwise, it is not a loan. The interest should
commence on June 7, 1991 until fully paid, with compounded bank interest prevailing at the time [June 1991] the 2M was
considered as a loan (as certified by the bank).

ISSUES & HOLDING – Ratio only discusses topic of INTEREST (as per syllabus)
 WON compounded bank interest should be limited to 6 months as contained in the MOA. NO
 WON Sison is entitled to moral damages. YES
 WON the grant of attorney’s fees is proper, even if not mentioned in the body of the decision. NO
CA committed no error in awarding an annual 25% interest on the 2M even beyond the 6-month stipulated period. In this case,
the phrase “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 (see FACTS—words in bold & underline). No interest
will be charged for the 1st 6-month period [while Sison was making up her mind], but only for the 2nd 6-month period after
Sison decided not to buy the property. There is nothing in the MOA that suggests that 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.
Eastern Shipping Lines, Inc. v CA (Credit Transactions)
G.R. No. 97412 July 12, 1994

EASTERN SHIPPING LINES, INC., petitioner, vs. HON. COURT OF APPEALS AND
MERCANTILE INSURANCE COMPANY, INC., respondents.

VITUG, J.:

FACTS:

This is an action against defendants shipping company, arrastre operator and broker-
forwarder for damages sustained by a shipment while in defendants' custody, filed by the
insurer-subrogee who paid the consignee the value of such losses/damages.

the losses/damages were sustained while in the respective and/or successive custody and
possession of defendants carrier (Eastern), arrastre operator (Metro Port) and broker (Allied
Brokerage).

As a consequence of the losses sustained, plaintiff was compelled to pay the consignee
P19,032.95 under the aforestated marine insurance policy, so that it became subrogated to
all the rights of action of said consignee against defendants.

DECISION OF LOWER COURTS: * trial court: ordered payment of damages, jointly and
severally * CA: affirmed trial court.

ISSUES AND RULING:

(a) whether or not a claim for damage sustained on a shipment of goods can be a solidary,
or joint and several, liability of the common carrier, the arrastre operator and the customs
broker;

YES, it is solidary. Since it is the duty of the ARRASTRE to take good care of the goods that
are in its custody and to deliver them in good condition to the consignee, such responsibility
also devolves upon the CARRIER. Both the ARRASTRE and the CARRIER are therefore
charged with the obligation to deliver the goods in good condition to the consignee.

The common carrier's duty to observe the requisite diligence in the shipment of goods lasts
from the time the articles are surrendered to or unconditionally placed in the possession of,
and received by, the carrier for transportation until delivered to, or until the lapse of a
reasonable time for their acceptance by, the person entitled to receive them (Arts. 1736-
1738, Civil Code; Ganzon vs. Court of Appeals, 161 SCRA 646; Kui Bai vs. Dollar Steamship
Lines, 52 Phil. 863). When the goods shipped either are lost or arrive in damaged condition,
a presumption arises against the carrier of its failure to observe that diligence, and there
need not be an express finding of negligence to hold it liable.

(b) whether the payment of legal interest on an 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; and 

FOLLOW THESE VERY IMPORTANT RULES (GUIDANCE BY THE SUPREME COURT)

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts
or quasi-delicts is breached, the contravenor can be held liable for damages. The provisions
under Title XVIII on "Damages" of the Civil Code govern in determining the measure of
recoverable damages. 

II. With regard particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as
follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e.,
a loan or forbearance of money, the interest due should be that which may have been
stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the
time it is judicially demanded. In the absence of stipulation, the rate of interest shall be
12% per annum to be computed from default, i.e., from judicial or extrajudicial demand
under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an

interest on the amount of damages awarded may be imposed at the discretion of the court
at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated
claims or damages except when or until the demand can be established with reasonable
certainty. Accordingly, where the demand is established with reasonable certainty, the
interest shall begin to run from the time the claim is made judicially or extrajudicially (Art.
1169, Civil Code) but 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 the judgment of the
court is made (at which time the quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the computation of legal interest shall, in any
case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory,
the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above,
shall be 12% per annum from such finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of credit.

(c) whether the applicable rate of interest, referred to above, is twelve percent (12%) or six
percent (6%).

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.

RATIO: 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. 

NOTES: the Central Bank Circular imposing the 12% interest per annum applies only to
loans or forbearance of money, goods or credits, as well as to judgments involving such
loan or forbearance of money, goods or credits, and that the 6% interest under the Civil
Code governs when the transaction involves the payment of indemnities in the concept of
damage arising from the breach or a delay in the performance of obligations in general.
Observe, too, that in these cases, a common time frame in the computation of the 6%
interest per annum has been applied, i.e., from the time the complaint is filed until the
adjudged amount is fully paid.

Ligutan v. CA
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. The Bank then filed a
complaint for recovery of the due amount. Petitioners instead of
presenting their evidence had the schedule reset for two consecutive
occasions. On the third hearing date, the trial court resolved to consider
the case submitted for decision.
Two years later petitioners filed a motion for reconsideration which was
denied by the trial court. Petitioners then interposed an appeal with the
Court of Appeals, the appellate court affirmed the judgement of the trial
court except the 2% service charge which was deleted pursuant to Central
Bank Circular No. 763. The two parties filed their motions for
reconsiderations and the Court of Appeals 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 Appeals.
ISSUE:
Whether or not the 15.189% interest and the penalty of 3% per month
(36% per annum) is exorbitant, iniquitous, and unconscionable.
RULING:
Petition is DENIED.
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 Court of Appeals, exercising its good judgement has reduced the
penalty interest from 5% a month to 3% a month. Given the circumstances
and the repeated acts of breach by petitioners of their contractual
obligation, the Court sees no cogent ground to modify the ruling of the
appellate 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. 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.