Republic of the Philippines v.

Jose Grijaldo
G.R. No. L-20240
December 31, 1965

FACTS:
In 1943, the defendant-appellant, Jose Grijaldo, obtained five loans totaling P1,281.97 from the
Bank of Taiwan, Ltd. in Bacolod City, with an interest rate of 6% per annum compounded
quarterly. The loans were evidenced by promissory notes without specific due dates but were
generally due one year after being incurred. To secure the loans, Grijaldo executed a chattel
mortgage on the standing crops on his land, Lot No. 1494 known as Hacienda Campugas in
Hinigiran, Negros Occidental.

By Vesting Order No. P-4, dated January 21, 1946, the assets of the Bank of Taiwan, Ltd. in the
Philippines were vested in the Government of the United States under the Trading with the
Enemy Act. Subsequently, these assets were transferred to the Republic of the Philippines. On
September 29, 1954, the Republic of the Philippines, represented by the Chairman of the Board
of Liquidators, made a written extrajudicial demand for payment from Grijaldo, who failed to
comply.

ISSUES:
1. Whether the Republic of the Philippines has a cause of action against Grijaldo.
2. Whether the action of the Republic of the Philippines has prescribed.
3. Whether the lower court erred in ordering Grijaldo to pay the specified amount.

RULING:
1. The Republic of the Philippines has a cause of action against Grijaldo. The successive
transfer of rights over the loans from the Bank of Taiwan, Ltd. to the United States
Government and finally to the Republic of the Philippines established privity of contract
between the Republic and Grijaldo.
2. The action of the Republic of the Philippines has not prescribed. The complaint, filed on
January 17, 1961, was brought in the exercise of sovereign functions and thus not subject
to prescription. Furthermore, the period of prescription was suspended by moratorium
laws during the Japanese occupation, effectively extending the prescriptive period beyond
the filing date.
3. The lower court did not err in ordering Grijaldo to pay the specified amount. The
application of the Ballantyne scale of values as of June 1943 to evaluate the loans, as
supported by precedent, was appropriate.

The decision of the lower court is affirmed, with costs against the appellant. Grijaldo's estate is
liable for the execution of the judgment.

G.R. No. L-38745 August 6, 1975

LUCIA TAN, plaintiff-appellee, vs.
ARADOR VALDEHUEZA and REDICULO VALDEHUEZA, defendants-appellants.

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FACTS:
Lucia Tan filed a complaint against Arador Valdehueza and Rediculo Valdehueza for (a)
declaration of ownership and recovery of possession of a parcel of land, and (b) consolidation of
ownership of two portions of another parcel of land purportedly sold to her in two separate deeds
of pacto de retro. The parties submitted a stipulation of facts which included the admission of
Tan's legal capacity to sue, the identity of the disputed properties, and the execution of deeds of
pacto de retro by the defendants in favor of Tan. The trial court treated one deed as an equitable
mortgage due to non-registration and the other as a simple loan secured by the property. The
defendants remained in possession of the land and paid realty taxes. The trial court rendered
judgment in favor of Tan, declaring her as the absolute owner of the property and ordering the
defendants to pay specified amounts, with legal interest, and attorney's fees.

ISSUES:
1. Whether the dismissal of a prior case for failure to prosecute operates as res judicata in a
subsequent case involving different causes of action.
2. Whether unregistered deeds of pacto de retro should be treated as equitable mortgages.
3. Whether legal interest should be imposed on the amounts stated in the unregistered deeds
of pacto de retro.
4. Whether the plaintiff is entitled to receivership.

RULING:
1. The dismissal of the prior case for failure to prosecute does not operate as res judicata in
the subsequent case because the causes of action are different. The first case involved
possession of the land and its fruits, while the second case involves ownership of the land
itself.
2. Unregistered deeds of pacto de retro should be treated as equitable mortgages, regardless
of registration status, if the parties remained in possession of the land and paid realty
taxes.
3. Legal interest should not be imposed on the amounts stated in the unregistered deeds of
pacto de retro because there was no express stipulation for such interest, and the plaintiff
did not pray for it.
4. The issue of receivership is deemed moot and unnecessary for resolution given the
definitive resolution of the parties' rights.

The judgment of the trial court is modified to specify that the amounts mentioned in the deeds of
pacto de retro shall bear interest at six percent per annum from the finality of the decision, and
both parcels of land shall be treated similarly if the defendants fail to pay the specified sums
within 90 days.

Jardenil v. Solas
G.R. No. L-47878
July 24, 1942

FACTS:
Jardenil brought an action for the foreclosure of mortgage against Solas. The mortgage deed
stipulated that Solas would pay a principal amount of P2,400 to Jardenil on or before March 31,
1934, with an annual interest rate of 12%. The contract did not specify whether interest would
continue to accrue after the maturity date if payment was not made. An extension note granted

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Solas an additional year to make payment, but it did not mention anything about interest during
the extended period.

ISSUE:
Whether defendant-appellee is bound to pay stipulated interest only up to the date of maturity as
fixed in the promissory note, or up to the date payment is effected.

RULING:
The Supreme Court held that defendant-appellee was only bound to pay interest up to the date of
maturity as fixed in the promissory note. The mortgage deed clearly stated that interest would be
paid until March 31, 1934, with no provision for interest after that date. Since the contract was
silent on whether interest would continue to accrue after the maturity date in the event of non-
payment, the Court could not presume such an obligation. According to Article 1755 of the Civil
Code, interest shall be due only when expressly stipulated. Therefore, plaintiff was entitled only
to the stipulated interest from November 8, 1932, to March 31, 1934. Any interest beyond that
date, after the expiration of the year of grace, would be legal interest upon the principal and
accrued interest until full payment. The Court affirmed the modified judgment, with costs against
appellant.

SEPARATE OPINION (DISSENTING):

Justice Paras dissented, arguing that interest at the rate of 12% per annum should be paid up to
the date of payment of the whole indebtedness. He contended that payment of such interest was
expressly stipulated, and the extension note implied the payment of interest from the nature of
the transaction, which was only a renewal of the obligation. Justice Paras believed that the
majority's ruling was anomalous and inconsistent with common business practice.

G.R. No. 155223 April 4, 2007

BOBIE ROSE V. FRIAS, represented by her Attorney-in-fact, MARIE F. FUJITA,
Petitioner,
vs. FLORA SAN DIEGO-SISON, Respondent

FACTS:
Petitioner Bobie Rose V. Frias owns a house and lot in Ayala Alabang, Muntinlupa, Metro
Manila, acquired from Island Masters Realty and Development Corporation (IMRDC) through a
Deed of Sale. Petitioner entered into a Memorandum of Agreement with respondent Dra. Flora
San Diego-Sison regarding the property, wherein respondent paid petitioner two million pesos in
cash and one million pesos through a post-dated check as consideration. The Memorandum of
Agreement stipulated that if respondent decided not to purchase the property, the amount given
by respondent to petitioner would be considered as a loan, with the property serving as security.
Respondent decided not to buy the property and notified petitioner accordingly.
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Petitioner failed to repay the two million pesos loan within the stipulated period. Respondent
filed a complaint for sum of money with preliminary attachment against petitioner. The Regional
Trial Court (RTC) ruled in favor of respondent, ordering petitioner to pay the loan amount with
interest, moral damages, attorney's fees, and costs. The Court of Appeals (CA) affirmed the RTC
decision but modified the interest rate.

Petitioner filed a Petition for Review on Certiorari before the Supreme Court, raising issues
regarding the interest rate, moral damages, and attorney's fees.

ISSUES:
1. Whether the interest rate should be limited to six months as stated in the Memorandum of
Agreement.
2. Whether respondent is entitled to moral damages.
3. Whether the grant of corrective and exemplary damages and attorney’s fees is proper
even if not mentioned in the text of the decision.

RULING:
1. The Supreme Court upheld the CA's decision, ruling that interest would continue to
accrue beyond the stipulated six-month period until the loan is fully paid, as provided in
the Memorandum of Agreement.
2. The Supreme Court affirmed the award of moral damages to respondent, as petitioner's
actions in attempting to deprive respondent of her security for the loan constituted fraud
and bad faith.
3. The Supreme Court deleted the award of attorney's fees, as the trial court failed to
sufficiently justify its basis for the award in its decision.

The Supreme Court affirmed the CA decision with modifications, upholding the interest rate and
the award of moral damages but deleting the award of attorney's fees due to insufficient
justification by the trial court.

Arwood Industries, Inc. v. D.M. Consunji, Inc.

G.R. No. 142277, December 11, 2002

FACTS:
Arwood Industries, Inc. (petitioner) and D.M. Consunji, Inc. (respondent) entered into a Civil,
Structural, and Architectural Works Agreement for the construction of a condominium project.
Despite the completion of the project, a balance of P962,434.78 remained unpaid by the
petitioner. Respondent filed a complaint for the recovery of the unpaid amount, plus interest,
attorney's fees, exemplary damages, and costs of suit.

ISSUE:
The main issue revolves around whether the trial court's imposition of a 2% monthly interest on
the unpaid amount is proper.

RULING:
The Court upheld the trial court's decision, affirming the imposition of a 2% monthly interest on
the unpaid amount. The Court reasoned that the interest was justified under the terms of the
Agreement between the parties. The Agreement allowed for the imposition of interest in case of
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delay in payments by the owner (petitioner), and since the petitioner failed to pay the balance on
time, the respondent was entitled to damages in the form of interest. Additionally, even in the
absence of a specific stipulation on interest, Article 2209 of the Civil Code provides for the
payment of legal interest in case of delay in the payment of a sum of money. Therefore, the Court
found no basis to alter the decision of the lower courts, and the petition was denied.

The Royal Shirt Factory, Inc. v. Co Bon Tic

G.R. No. L-6313 May 14, 1954

FACTS:
The plaintiff, The Royal Shirt Factory, Inc., filed an action in the Municipal Court of Manila
against the defendant, Co Bon Tic, to recover the balance of the purchase price of 350 pairs of
"Balleteenas" shoes, alleging an outright sale at P7 per pair. The defendant contended that the
sale was on consignment and claimed the right to return unsold shoes.

The Municipal Court ruled in favor of the plaintiff, holding that the transaction was a sale on
consignment. The defendant appealed to the Court of First Instance of Manila, which reversed
the decision of the Municipal Court, determining that the transaction was an outright sale.

ISSUES:
1. Whether the Court of First Instance of Manila had jurisdiction to review the issues
decided by the Municipal Court.
2. Whether the transaction between the parties was an outright sale or a sale on
consignment.

RULING:
1. The Court held that under Rule 40, section 9 of the Rules of Court, an appeal from the
Municipal Court to the Court of First Instance serves to vacate the judgment appealed

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 from, and the case is tried de novo. Therefore, the Court of First Instance had jurisdiction
to review all issues involved in the case.
2. The Court found that the transaction was an outright sale based on the conduct of the
parties, including the defendant's acceptance of the total purchase price for all 350 pairs
of shoes and his notation of partial payments against that total. The defendant's failure to
return unsold shoes within the stipulated period also indicated a sale rather than a
consignment. Therefore, the Court affirmed the decision of the Court of First Instance,
with modifications to the interest rate and attorney's fees awarded.

The Court affirmed the decision of the Court of First Instance, ruling that the transaction between
the parties was an outright sale, and modified the interest rate and attorney's fees awarded
accordingly.

G.R. No. L-33582 March 30, 1982

Petitioner: THE OVERSEAS BANK OF MANILA
Respondents: VICENTE CORDERO and COURT OF APPEALS
March 30, 1982

FACTS:
On July 20, 1967, Vicente Cordero opened a one-year time deposit with the Overseas Bank of
Manila (petitioner) amounting to P80,000.00, to mature on July 20, 1968, with an interest rate of
6% per annum. However, due to financial distress, the bank was unable to pay Cordero his time
deposit and the accrued interest. Consequently, Cordero filed a case against the bank in the Court
of First Instance of Manila to enforce payment.

The bank raised the defense of insolvency, citing resolutions by the Monetary Board authorizing
suspension of operations and eventual liquidation. The bank argued that the pending insolvency
proceedings barred Cordero's action and would prevent satisfaction of any judgment in his favor.

ISSUES:
1. Whether the bank's insolvency bars Cordero's action for recovery of his time deposit.
2. Whether a judgment in favor of Cordero would create a preference in his favor to the
prejudice of other creditors of the bank.

RULING:
The Supreme Court held that the issues regarding the bank's insolvency and potential prejudice
to other creditors were moot due to subsequent events. Cordero had received partial payments
from the Philippine Deposit Insurance Company and a final payment from the Commercial Bank
of Manila, the successor of the Overseas Bank of Manila.

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The Court ruled that interest on the time deposit during the bank's closure was not payable, as the
bank's inability to operate deprived it of the means to generate income necessary for such
payments. Moreover, Cordero was not entitled to attorney's fees since the bank's refusal to pay
was due to legal restrictions imposed by the Central Bank, not willful or dishonest conduct.

DISPOSITION:
The Court set aside the lower court's decision ordering payment of interest on Cordero's time
deposit, as the principal amount had already been fully paid. The case was dismissed, with no
costs imposed.

G.R. No. L-33205 August 31, 1987

LIRAG TEXTILE MILLS, INC., and BASILIO L. LIRAG, petitioners, vs.
SOCIAL SECURITY SYSTEM, and HON. PACIFICO DE CASTRO, respondents.

FACTS:
Social Security System (SSS) entered into a Purchase Agreement with Lirag Textile Mills, Inc.
and Basilio L. Lirag on September 4, 1961, wherein SSS agreed to purchase preferred shares of
stock worth one million pesos (P1,000,000.00). Pursuant to the Purchase Agreement, SSS paid
Lirag Textile Mills, Inc. a total of P500,000.00, for which the corporation issued preferred shares
to SSS. The Purchase Agreement stipulated the repurchase of the shares by Lirag Textile Mills,
Inc. at regular intervals, with Basilio L. Lirag acting as surety for the corporation's obligations.
Lirag Textile Mills, Inc. failed to redeem the shares as agreed upon and also failed to pay
dividends. SSS demanded payment from Lirag Textile Mills, Inc. and Basilio L. Lirag, but they
failed to comply. SSS filed a complaint for specific performance and damages against Lirag
Textile Mills, Inc. and Basilio L. Lirag.

ISSUES:
1. Whether the Purchase Agreement is a debt instrument or a mere stock purchase
agreement.
2. Whether Lirag Textile Mills, Inc. and Basilio L. Lirag are liable to redeem the preferred
shares and pay dividends.
3. Whether Basilio L. Lirag is liable as surety for Lirag Textile Mills, Inc.'s obligations
under the Purchase Agreement.

RULING:
The Supreme Court affirmed the lower court's decision, holding that:
1. The Purchase Agreement is a debt instrument, establishing a creditor-debtor relationship
between SSS and Lirag Textile Mills, Inc., not merely that of a stockholder and
corporation.
2. Lirag Textile Mills, Inc. and Basilio L. Lirag are liable to redeem the preferred shares and
pay dividends, as stipulated in the Purchase Agreement.
3. Basilio L. Lirag is liable as surety for Lirag Textile Mills, Inc.'s obligations under the
Purchase Agreement, and his liability cannot be denied.
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The Court upheld the award of damages and attorney's fees, as well as the payment of interest on
the outstanding amounts owed by Lirag Textile Mills, Inc. and Basilio L. Lirag.

Therefore, the decision of the lower court in favor of SSS was affirmed in its entirety, with costs
against the petitioners.

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