Part One: Loan

General Provisions: NCC, Article 1933 – 1934

Cases:
People v. Concepcion, 44 Phil 126 (1922)
De los Santos v. Jarra. 15 Phil 147 (1910)
Saura Import v. DBP, 44 SCRA 445 (1972)
Naguiat v. CA, 412 SCRA 591 (2003)
Garcia v. Thio, 518 SCRA 433 (2007)
Catholic Vicar Apostolic v. CA, 165 SCRA 515 (1988)
Republic v. Bagtas, 6 SCRA 262 (1962)
Herrera v. Petrophil Corp., 146 SCRA 385 (1986)
Integrated Realty Corp v. PNB, 174 SCRA 295 (1989)
Republic v. CA, 146 SCRA 15 (1986)
Quintos v. Beck, 69 Phil 108 (1939)
Republic v. Grijaldo, G.R. No. L-20240 (1965)
People v. Concepcion, 44 Phil 126 (1922) G.R. No. L-19190
**Facts:**
Between April 10, 1919, and May 7, 1919, Venancio Concepcion, the President of the
Philippine National Bank, authorized an extension of credit to the copartnership "Puno y
Concepcion, S. en C." in the amount of P300,000. This extension of credit was vital due to a
memorandum order limiting the discretion of the local manager at Aparri, Cagayan, to
grant loans. The credit was granted with six demand notes as the only security, and the
notes, along with interest, were repaid by July 17, 1919. Venancio Concepcion was charged
with violating Section 35 of Act No. 2747, which prohibited the National Bank from
granting loans directly or indirectly to any members of the board of directors.

**Issues:**

1. **Nature of the Transaction:**

- Whether the authorization by Venancio Concepcion constituted a "loan" within the
meaning of Section 35 of Act No. 2747.

2. **Loan vs. Discount:**

- Whether the transaction was a "loan" or a "discount" as Section 35 specifically
prohibited loans.

3. **Indirect Loan:**
- Whether the loan to the copartnership constituted an "indirect loan" as Venancio
Concepcion's wife held a significant portion of the partnership's capital.

4. **Effect of Repeal:**
- Whether the repeal of Section 35 and Section 49 of Act No. 2747 by Act No. 2938
affected the prosecution and jurisdiction of the courts.

5. **Corporate Liability:**
- Whether the penal sanction in Section 49 applied to individuals or the bank as a
corporate entity.

6. **Good Faith as a Defense:**

- Whether Venancio Concepcion's alleged good faith, based on misleading rulings and the
repayment of loans, constituted a legal defense.

**Decisions:**
The Court concluded that:

1. The extension of credit was considered a "loan" within the scope of Section 35.
2. The transaction was deemed a "loan" rather than a "discount" based on the nature of the
demand notes.
3. The loan to the copartnership was regarded as an "indirect loan" due to the financial
interest of Venancio Concepcion's wife in the partnership.
4. The repeal of relevant sections did not affect the court's jurisdiction to prosecute
violations that occurred before the repeal.
5. The prohibition extended to both individuals and the corporate entity, aligning with the
intention to prevent conflicts of interest.
6. Venancio Concepcion's alleged good faith was not considered a legal defense, as the focus
was on the act itself, inhibited for public policy reasons.

The Court affirmed the trial judge's decision, finding Venancio Concepcion guilty beyond a
reasonable doubt. The imposed penalty was deemed within the limits of the law.
De los Santos v. Jarra. 15 Phil 147 (1910) G.R. No. L-4150
**Facts:**
On September 1, 1906, Felix de los Santos filed a lawsuit against Agustina Jarra, the
administratrix of the estate of Magdaleno Jimenea. Santos claimed that in late 1901,
Jimenea borrowed ten carabaos from him to be used at the animal-power mill of his
hacienda during the 1901-1902 season. The loan was made without compensation, with
the condition that the carabaos would be returned to Santos after the mill work was
completed. Magdaleno Jimenea passed away on October 28, 1904, and Agustina Jarra
became the administratrix of his estate. Santos asserted that he demanded the return of the
carabaos, but they were not returned.

**Issues:**
The key issues in the case were:
1. Whether Magdaleno Jimenea borrowed ten carabaos from Felix de los Santos, as claimed
by Santos.
2. Whether the alleged purchase of three carabaos by Jimenea from Santos was supported
by trustworthy documents or witness declarations.
3. Whether Agustina Jarra, as the administratrix of Jimenea's estate, was obligated to return
the carabaos or indemnify Santos for their value.

**Decisions:**
The court, after considering the evidence, made the following decisions:
1. Found that Felix de los Santos had indeed loaned ten carabaos to Magdaleno Jimenea,
based on the testimony of witnesses.
2. Dismissed the claim by Agustina Jarra that Jimenea only obtained three carabaos and
that they were purchased from Santos. The court found the evidence for this claim to be
lacking and not supported by trustworthy documents.
3. Ordered Agustina Jarra, as the administratrix of Magdaleno Jimenea's estate, to return
the remaining six second and third-class carabaos or pay their value to Felix de los Santos.
The court based this decision on the principles of commodatum as outlined in the Civil
Code, emphasizing the bailee's obligation to return the loaned property. The court also
referred to Article 1101, holding those guilty of fraud, negligence, or delay in fulfilling
obligations liable for indemnification of losses and damages.

In summary, the court ruled in favor of Felix de los Santos, affirming the judgment that
Agustina Jarra must return the carabaos or pay their value, and costs were ordered against
the appellant.
Saura Import v. DBP, 44 SCRA 445 (1972) G.R. No. L-24968
This case involves Saura, Inc.'s application for a loan from the Rehabilitation Finance
Corporation (RFC) to finance the construction of a jute mill. Here are the key facts, issues,
and decisions:

**Facts:**
1. In July 1953, Saura, Inc. applied for an industrial loan of P500,000.00 from RFC for the
construction of a factory building, payment of machinery, and additional working capital.
2. RFC approved the loan application through Resolution No. 145 on January 7, 1954, with
specified purposes for fund utilization.
3. Saura, Inc. requested modifications in terms, and RFC approved Resolution No. 736 on
February 4, 1954, reexamining the loan.
4. Loan documents, including a promissory note and mortgage, were executed on April 13,
1954.
5. RFC, in a meeting on June 10, 1954, decided to reduce the loan from P500,000.00 to
P300,000.00 through Resolution No. 3989.
6. On June 19, 1954, F.R. Halling, a co-signer, expressed China Engineers Ltd.'s withdrawal
from the loan.
7. Saura, Inc. requested the loan's reinstatement, but RFC denied it, considering the loan as
canceled.

**Issues:**
1. Whether there was a perfected consensual contract between Saura, Inc. and RFC.
2. Whether RFC fulfilled its obligation and if Saura, Inc. is entitled to damages.
3. Whether the plaintiff's cause of action had prescribed, or if its claim had been waived or
abandoned.

**Decisions:**
1. The court held that there was a perfected consensual contract under Article 1934 of the
Civil Code, as there was an offer, acceptance, and execution of loan documents.
2. RFC entertained the loan application on the assumption that the factory would use
locally grown raw materials. Conditions imposed by RFC in Resolution No. 9083 were in
line with the original agreement.
3. The court found mutual desistance between the parties, leading to the extinguishment of
the contract. Saura, Inc. initiated the cancellation of the mortgage, and subsequent conduct
confirmed their agreement to terminate the contract.

**Conclusion:**
The court reversed the judgment in favor of Saura, Inc., dismissing the complaint and
holding the plaintiff responsible for costs. The court found that the loan agreement had
been extinguished by mutual desistance, initiated by Saura, Inc., and there was no breach of
contract by RFC.
Naguiat v. CA, 412 SCRA 591 (2003) G.R. No. 118375
The case involves a Petition for Review on Certiorari under Rule 45, challenging the
decision of the Court of Appeals affirming the Regional Trial Court's (RTC) declaration of a
Real Estate Mortgage between Celestina Naguiat and Aurora Queañ o as null and void.

**Case Facts:**
1. Queañ o applied for a loan of ₱200,000 from Naguiat, who granted the loan.
2. Naguiat issued checks totaling ₱190,000 to Queañ o as loan proceeds.
3. To secure the loan, Queañ o executed a Real Estate Mortgage on 11 August 1980,
surrendering the owner's duplicates of the titles covering the mortgaged properties.
4. Queañ o's postdated check for ₱200,000, issued to Naguiat, was dishonored for
insufficient funds.
5. Naguiat applied for extrajudicial foreclosure of the mortgage, prompting Queañ o to file a
case seeking annulment of the mortgage.

**Issues:**
1. Naguiat questions the findings regarding whether Queañ o received the loan proceeds
covered by the checks issued or endorsed by Naguiat.
2. Naguiat disputes the admissibility of representations made by Ruebenfeldt, claiming they
do not bind her.

**Decisions:**
1. The Court of Appeals affirmed the RTC decision declaring the Real Estate Mortgage null
and void.
2. Naguiat's appeal raised questions of fact, which are not within the scope of an appeal by
certiorari under Rule 45. The court emphasized that it does not act as a trier of facts.
3. Naguiat argued the mortgage deed's validity based on the presumption of truthfulness of
notarized documents. However, the court held that this presumption can be rebutted by
clear and convincing evidence, which, in this case, indicated the absence of consideration.
4. Naguiat failed to provide evidence that the checks were encashed or deposited,
necessary for the perfection of the loan contract.
5. The court rejected Naguiat's challenge to the admissibility of Ruebenfeldt's
representations, stating that Ruebenfeldt acted as Naguiat's agent, and an "agency by
estoppel" existed.

**Conclusion:**
The Supreme Court denied Naguiat's petition, affirming the Court of Appeals' decision. The
case underscores the importance of clear and convincing evidence in challenging the
validity of notarized documents and emphasizes the need for the lender to establish the
encashment or deposit of checks to perfect a loan contract. The court also upheld the
principle of agency by estoppel in considering Ruebenfeldt as Naguiat's authorized
representative.
Garcia v. Thio, 518 SCRA 433 (2007) G.R. No. 154878
This legal case involves a dispute between petitioner Carolyn M. Garcia and respondent
Rica Marie S. Thio over two loans. Here are the key case facts, issues, and decisions:

**Case Facts:**
1. In February 1995, respondent received a crossed check of US$100,000 from petitioner,
payable to Marilou Santiago.
2. Subsequently, respondent made monthly payments to petitioner: US$3,000 and ₱76,500
in 1995.
3. In June 1995, respondent received another crossed check of ₱500,000 from petitioner,
also payable to Marilou Santiago.
4. Respondent made additional monthly payments to petitioner for the ₱500,000 loan.
5. Petitioner filed a complaint for sum of money and damages in February 1996, alleging
that respondent failed to repay the principal amounts of the loans.
6. The RTC ruled in favor of petitioner in 1997, ordering respondent to pay the principal
amounts, interest, attorney's fees, and damages.
7. On appeal, the CA reversed the RTC decision, stating that there was no contract of loan
between the parties.

**Issues:**
1. The main issue revolves around whether there was a valid contract of loan between
petitioner and respondent.
2. The validity of the loans is questioned based on the crossed checks made payable to
Marilou Santiago.
3. The credibility of the testimonies and the absence of a written contract or promissory
note are also significant issues.

**Decisions:**
1. The RTC initially ruled in favor of petitioner, finding that respondent borrowed
US$100,000 and ₱500,000 with specified interest rates, ordering repayment and additional
damages.
2. The CA reversed the RTC decision, stating that the crossed checks made payable to
Marilou Santiago indicated that there was no contract of loan between petitioner and
respondent.
3. The Supreme Court, in this petition for review on certiorari, disagreed with the CA's
decision, reinstating the RTC's ruling.
4. The Supreme Court held that while there was no stipulated interest in writing, legal
interest of 12% per annum would apply from the date of judicial demand.
5. The award of actual damages and attorney’s fees was deleted due to the lack of factual
bases in the RTC decision.

In summary, the Supreme Court reversed the CA decision, affirming the validity of the loans
and ordering respondent to pay the principal amounts with legal interest.
Catholic Vicar Apostolic v. CA, 165 SCRA 515 (1988) G.R. No. 80294-95
**Facts:**
The dispute revolves around Lots 2 and 3, located in Poblacion Central, La Trinidad,
Benguet. The Catholic Vicar Apostolic of the Mountain Province (VICAR) filed an
application for the registration of title over Lots 1, 2, 3, and 4 in Psu-194357 in 1962. The
Heirs of Juan Valdez and the Heirs of Egmidio Octaviano contested the application, claiming
ownership of Lots 2 and 3. After various legal proceedings, the Court of Appeals, in CA-G.R.
No. 38830-R, reversed the land registration court's decision, stating that the predecessors
of private respondents were in possession of Lots 2 and 3 with a claim of ownership in
good faith from 1906 to 1951.

**Issues:**
1. **Application of Res Judicata:**
- Whether the principle of res judicata applies, as the Court of Appeals held that its
decision in CA-G.R. No. 38830-R conclusively determined the ownership and possession of
Lots 2 and 3.

2. **Possession and Ownership Claims:**

- Whether the VICAR's claim of possession as a borrower in commodatum up to 1951,
followed by its adverse possession from 1951, is valid against the claim of ownership by
the heirs of Juan Valdez and Egmidio Octaviano.

3. **Validity of Previous Findings:**

- Whether the Court of Appeals committed errors in finding that the predecessors of
private respondents were in possession of Lots 2 and 3 in good faith from 1906 to 1951,
and that the VICAR's possession was that of a bailee.

4. **Prescriptive Periods:**
- Whether the VICAR's possession met the requirements for acquisitive prescription,
considering the absence of just title and the duration of possession.

**Decisions:**
The Court of Appeals affirmed the trial court's decision, ordering VICAR to return Lots 2
and 3 to the Heirs of Juan Valdez and the Heirs of Egmidio Octaviano. The court upheld the
principle of res judicata, citing the findings in CA-G.R. No. 38830-R as conclusive on the
ownership and possession issues. It rejected VICAR's claims of possession as a borrower
and adverse possession, emphasizing the lack of just title and the duration of possession.
The court concluded that the predecessors of private respondents were possessors in good
faith from 1906 to 1951, and VICAR's adverse claim only arose in 1951 when it declared
the lots for taxation. The Court of Appeals affirmed that the findings in CA-G.R. No. 38830-R
were final and executory, precluding any alteration of the established facts. The petition
was denied for lack of merit, and the decision of the Court of Appeals was affirmed with
costs against VICAR.
Republic v. Bagtas, 6 SCRA 262 (1962) G.R. No. L-17474

**Case Facts:**
1. In 1948, Jose V. Bagtas borrowed three bulls from the Republic of the Philippines
through the Bureau of Animal Industry for breeding purposes.
2. The bulls had an appraised book value: Red Sindhi (₱1,176.46), Bhagnari (₱1,320.56),
and Sahiniwal (₱744.46).
3. The loan agreement included a breeding fee of 10% of the bulls' book value.
4. After the initial one-year loan period, the contract was renewed for one bull for an
additional year, and the borrower requested the renewal for the other two bulls.
5. The Secretary of Agriculture and Natural Resources approved the renewal for one bull
only and requested the return of the other two.
6. Bagtas failed to return the bulls or pay their book value, prompting the Republic to file a
case against him in December 1950.

**Issues:**
1. Bagtas argued that due to a peace and order situation and an appeal regarding
depreciation, he could not return the bulls or pay their value.
2. After a court judgment in 1956, Bagtas failed to comply, leading to a motion for a writ of
execution by the Republic.
3. Bagtas's surviving spouse, Felicidad M. Bagtas, moved to quash the writ, claiming that
two bulls were returned, and the Sahiniwal died during a Huk raid.

**Decisions:**
1. The trial court ruled in favor of the Republic, ordering Bagtas to pay the total value of the
three bulls plus breeding fees, with interest.
2. A writ of execution was issued in 1958, but Bagtas's estate was held liable only for the
value of the Sahiniwal bull that was not returned or died during the raid.
3. The Court rejected the argument that the Sahiniwal's death was due to force majeure,
stating that Bagtas remained responsible for the bull, regardless of the contract's nature.
4. The court emphasized that Bagtas, or his estate, was liable for the bull's loss, considering
the breeding fee and appraised book value.
5. Bagtas's claim that the Republic's demand should be presented in the intestate
proceedings was noted but deemed untenable. The court stated that the claim could be
presented to the probate court for payment.

**Conclusion:**
The Court set aside the writ of execution, indicating that the estate of Jose V. Bagtas was
liable only for the value of the Sahiniwal bull that was not returned or died during the Huk
raid. The court clarified that the money judgment should be presented to the probate court
for enforcement against the estate.
Herrera v. Petrophil Corp., 146 SCRA 385 (1986)

Integrated Realty Corp v. PNB, 174 SCRA 295 (1989)

Republic v. CA, 146 SCRA 15 (1986)
Quintos v. Beck, 69 Phil 108 (1939)
Republic v. Grijaldo, G.R. No. L-20240 (1965)

Commodatum: NCC, Articles 1935 to 1952

Cases:
Republic v. Bagtas, 6 SCRA 262 (1962)
Producers Bank v. CA, 397 SCRA 651 (2003)
Quintos v. Beck, 69 Phil 108 (1939)
Pajuyo v. CA, 430 SCRA 492 (2004)
De los Santos v. Jarra, 15 Phil 147 (1910)
Mina v. Pascual, 25 Phil 540 (1913)
Briones v. Cammayo, 41 SCRA 404 (1971)
Lopez v. del Rosario, 44 Phil 98 (1922)
Zobel v. City of Manila, 47 Phil 169 (1925)
Reformina v. Tomol, 139 SCRA 260 (1985)
Liam Law v. Olympic Sawmill Co., 129 SCRA 439 (1984)
Banco Filipino v. Navarro, 152 SCRA 346 (1987)
PNB v. IAC and Maglasang, 183 SCRA 133 (1990)
PNB v. CA and Padilla, 196 SCRA 536 (1991)
PNB v. CA and Fernandez, 238 SCRA 80 (1994)
Florendo v. CA, 265 SCRA 678 (1996)
Mutuum or Simple Loan: NCC, Articles 1953 to 1961
Cases:
Republic v. Grijaldo, 122 Phil 1020; 15 SCRA 681 (1965)
Tan v. Valdehueza, 66 SCRA 61 (1975)
Jardenil v. Solas, 73 Phil 626 (1942)
Frias v. San Diego-Sison, 520 SCRA 244 (2007)
Arwood Industries v. DM Consunji 394 SCRA 11 (2002)
Overseas v. Cordero, 113 SCRA 303
Ramos v. Central Bank, 137 SCRA 685
Lirag v. SSS, 153 SCRA 338
Angel Jose Warehousing v. Chelda Enterprises. 23 SCRA 119 (1968)
Cu-Unjieng v. Mabalacat, 54 Phil. 976 (1929)
David v. CA, 316 SCRA 710 (1999)
Republic v. Grijaldo, 122 Phil 1020; 15 SCRA 681 (1965)

**Facts:**
- In 1943, Jose Grijaldo obtained five loans from the Bank of Taiwan, Ltd. in Bacolod City,
totaling P1,281.97 with a 6% per annum interest rate compounded quarterly.
- Grijaldo executed promissory notes for these loans, with no specified due dates but were
due one year after they were incurred.
- To secure the loans, Grijaldo executed a chattel mortgage on the standing crops on his
land, Hacienda Campugas.
- Due to the Trading with the Enemy Act, the assets of the Bank of Taiwan, Ltd. were vested
in the United States, then transferred to the Republic of the Philippines under the
Philippine Property Act of 1946.
- The Republic of the Philippines, represented by the Chairman of the Board of Liquidators,
demanded payment from Grijaldo in 1954, which he failed to fulfill.
- The principal amount due was P889.64, with interest totaling P2,377.23 as of December
31, 1959.
- In 1961, the Republic of the Philippines filed a complaint against Grijaldo to collect the
unpaid amount.
- The Justice of the Peace Court initially dismissed the case, but the Court of First Instance
ordered Grijaldo to pay the outstanding amount plus interest and attorney's fees.
- Grijaldo appealed directly to the Supreme Court, which required his legal heirs to be
substituted as appellants due to his death during the appeal process.

**Issues:**

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

**Decisions:**

1. **Cause of Action:** The Republic of the Philippines has a cause of action against
Grijaldo. While the original contract was with the Bank of Taiwan, Ltd., the subsequent
transfer of assets to the United States and then to the Philippines established privity of
contract between the Republic and Grijaldo.
2. **Prescription:** The action has not prescribed. The prescriptive period was interrupted
by moratorium laws, and even without considering the interruption, the action was filed
within the prescribed period.
3. **Order to Pay:** 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 was appropriate,
and the decision is supported by relevant legal precedent.
**Conclusion:**

The Supreme Court affirmed the decision of the lower court, ordering Grijaldo's estate to
pay the outstanding amount plus interest and attorney's fees.
Tan v. Valdehueza, 66 SCRA 61 (1975)
**Facts:**
1. Lucia Tan filed a case against Arador Valdehueza and Rediculo Valdehueza regarding the
ownership and possession of a parcel of land and the consolidation of ownership of two
portions of another parcel of land sold to her through deeds of pacto de retro.
2. The parties submitted a stipulation of facts, admitting certain aspects of the case,
including the identity of the land, the execution of deeds, and previous legal actions.
3. Civil Case No. 2002 was previously filed by Tan against the Valdehuezas for injunction,
which was later dismissed.
4. Two deeds of pacto de retro were executed, with one being registered and the other not.

**Issues:**
1. Whether the dismissal of Civil Case No. 2002 constitutes res judicata on the first cause of
action in Civil Case No. 2574.
2. Whether the transactions between the parties constitute equitable mortgages or simple
loans.
3. Whether legal interest should be imposed on the amounts stated in the deeds of pacto de
retro.
4. Whether evidence regarding the harvest from the land is necessary.

**Decisions:**
1. The dismissal of Civil Case No. 2002 does not constitute res judicata on the first cause of
action in Civil Case No. 2574, as the causes of action in the two cases are not identical.
2. The unregistered deed of pacto de retro is considered an equitable mortgage, as
registration is no longer necessary for the validity of a mortgage under the new Civil Code.
3. Legal interest on the amounts stated in the deeds of pacto de retro is not imposed, as
there was no express stipulation for interest and the contracts are deemed equitable
mortgages.
4. Evidence regarding the harvest from the land is not necessary, as it was not alleged in the
complaints and was not part of the stipulation of facts.

**Modification of Judgment:**
The judgment is modified to include the imposition of six percent interest per annum on
the amounts stated in the deeds of pacto de retro from the finality of the decision.
Additionally, the parcel of land covered by the unregistered deed of pacto de retro shall be
treated similarly to the registered one if the defendants fail to pay the specified sum within
90 days from the finality of the decision. The rest of the judgment is affirmed with no costs.
Jardenil v. Solas, 73 Phil 626 (1942)
**Facts:**

1. The case involves an action for the foreclosure of a mortgage.

2. The mortgage deed contains a provision stating that the borrower (defendant-appellee)
is obligated to pay the stipulated interest only up to the date of maturity, which is March
31, 1934.
3. The contract does not specify whether the borrower is required to pay interest beyond
the maturity date in the event of non-payment.
4. The mortgage deed grants the borrower an extension of one year from the date of
maturity to make payment, without mentioning any interest to be paid during this
additional period.

**Issues:**

1. Is the defendant-appellee obligated to pay interest only up to the date of maturity as

fixed in the promissory note, or up to the date payment is effected?
2. Is there any provision in the contract indicating that interest should be paid beyond the
maturity date in the event of non-payment?
3. Has either party shown that the mortgage deed fails to express their agreement due to
mutual mistake, warranting its reformation?

**Decisions:**

1. The court held that the defendant-appellee is bound to pay interest only up to the date of
maturity as specified in the mortgage deed.
2. Since the contract is silent on whether interest should be paid beyond the maturity date
in the event of non-payment, the court cannot presume such interest.
3. The mortgage deed is clear and unmistakable, and neither party has shown that it fails to
express their true intention or that there was a mutual mistake requiring its reformation.
4. The plaintiff is entitled only to the stipulated interest of 12 percent on the loan from
November 8, 1932, to March 31, 1934.
5. Legal interest on the principal and accrued interest is awarded from April 1, 1935, until
full payment.
6. The judgment is affirmed with costs against the appellant.

In summary, the court interpreted the mortgage deed according to its language and held
that the defendant-appellee is only obligated to pay interest up to the date of maturity as
specified in the contract.
Frias v. San Diego-Sison, 520 SCRA 244 (2007)
**Facts:**

1. Bobie Rose V. Frias (petitioner) is the owner of a property acquired from Island Masters
Realty and Development Corporation (IMRDC) through a Deed of Sale.
2. On December 7, 1990, petitioner entered into a Memorandum of Agreement with Dra.
Flora San Diego-Sison (respondent) regarding the property.
3. The agreement gave respondent six months to decide whether to purchase the property
for ₱6.4 million.
4. Petitioner received ₱2 million in cash and a ₱1 million post-dated check from
respondent.
5. Respondent decided not to purchase the property and notified petitioner.
6. Petitioner failed to return the ₱2 million to respondent within the stipulated period.
7. Respondent filed a complaint for sum of money against petitioner.
8. The trial court issued a decision ordering petitioner to pay ₱2 million plus interest, moral
damages, attachment bond premiums, and attorney's fees.
9. The Court of Appeals (CA) affirmed the decision with modification, reducing the interest
rate to 25% per annum.

**Issues:**
1. Whether the compounded bank interest 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.

**Decisions:**
1. **Compounded Bank Interest:** The Court held that the compounded bank interest
should continue to accrue until the loaned amount is fully paid, even beyond the six-month
period specified in the agreement. The interest rate was reduced to 25% per annum, as
determined by the CA.
2. **Moral Damages:** Petitioner's attempt to deprive respondent of her security for the
loan warranted the award of moral damages. The Court affirmed the award.
3. **Corrective and Exemplary Damages:** The Court upheld the award of corrective and
exemplary damages.
4. **Attorney’s Fees:** The Court deleted the award of attorney’s fees because the trial
court failed to sufficiently explain and justify the basis for the award.

**Conclusion:**
The Court affirmed the decision of the CA with modifications, including the reduction of the
interest rate and the deletion of the award of attorney’s fees. The other awards, including
moral damages, corrective and exemplary damages, and attachment bond premiums, were
upheld.
Arwood Industries v. DM Consunji 394 SCRA 11 (2002)
**Facts:**
1. Arwood Industries, Inc. (petitioner) and D.M. Consunji, Inc. (respondent) entered into a
Civil, Structural and Architectural Works Agreement for the construction of Westwood
Condominium.
2. Despite completion of the project, a balance of P962,434.78 remained unpaid by Arwood
Industries, Inc.
3. D.M. Consunji, Inc. filed a complaint for the recovery of the balance and damages against
Arwood Industries, Inc.
4. The trial court ruled in favor of D.M. Consunji, Inc., ordering Arwood Industries, Inc. to
pay the balance with a 2% per month interest, among other awards.
5. Arwood Industries, Inc. appealed, contesting the imposition of 2% interest.
6. The Court of Appeals affirmed the trial court's decision but modified it by deleting the
award of attorney's fees.
7. Arwood Industries, Inc. petitioned for review, arguing against the imposition of 2%
interest.

**Issues:**
1. Whether the trial court erred in imposing a 2% per month interest on the adjudicated
amount.
2. Whether the provision in the Agreement regarding interest applies to the claim of D.M.
Consunji, Inc.
3. Whether the amount claimed by D.M. Consunji, Inc. represents "monthly progress
billings" subject to interest.

**Decisions:**
1. The Court held that the imposition of 2% interest per month was justified based on the
terms of the Agreement and the delay in payment by Arwood Industries, Inc.
2. The provision in the Agreement regarding interest applied to the claim of D.M. Consunji,
Inc. as it was a consequence of Arwood Industries, Inc.'s failure to fulfill its obligation under
the contract.
3. The Court rejected Arwood Industries, Inc.'s argument that the claimed amount did not
represent "monthly progress billings," affirming that it was part of the contract price
subject to interest.

**Conclusion:**
The petition was denied, and the decision of the Court of Appeals affirming the trial court's
ruling was upheld. Arwood Industries, Inc. was ordered to pay the balance with a 2% per
month interest, consistent with the terms of the Agreement and the legal principles
governing obligations for the payment of a sum of money.
Overseas v. Cordero, 113 SCRA 303
**Facts:**
- Vicente Cordero opened a one-year time deposit with the Overseas Bank of Manila on July
20, 1967, amounting to P80,000. The deposit was to mature on July 20, 1968, with an
interest rate of 6% per annum.
- Due to financial distress, the bank was unable to pay Cordero's time deposit and interest.
- Cordero filed a case in the Court of First Instance of Manila to enforce payment.
- The bank raised defenses citing its state of insolvency as found by the Monetary Board of
the Central Bank of the Philippines.

**Issues:**
1. Whether the suit filed by Cordero for recovery of his time deposit is barred or abated by
the bank's state of insolvency.
2. Whether the judgment in favor of Cordero would create a preference in his favor to the
prejudice of other creditors of the bank.

**Decisions:**
- The Court ruled that certain events had rendered the issues moot and academic.
- Cordero received P10,000 from the Philippine Deposit Insurance Company and later
acknowledged receipt of P73,840 from the Commercial Bank of Manila, the successor of
Overseas Bank of Manila.
- Cordero, through his attorney-in-fact, waived any further damages and agreed to accept
the amount received.
- The Court noted that the interest on the time deposit during the period the bank was
closed and attorney's fees were not recoverable.
- The Court referenced a previous case involving the same bank, where it was held that the
obligation to pay interest on deposits ceases when the bank's operations are suspended by
the central bank.
- The Court concluded that the bank's inability to pay was not due to willful refusal but to
restrictions imposed by the Central Bank.
- As Cordero did not appeal the trial court's decision regarding attorney's fees, he was
barred from contesting it.
- The portion of the lower court's decision ordering the bank to pay interest on Cordero's
time deposit was set aside, and the case was dismissed since the deposit had been fully
paid.

**Conclusion:**
The court dismissed the case, ruling that the bank's inability to pay was due to
circumstances beyond its control, and the deposit had already been fully paid.
Ramos v. Central Bank, 137 SCRA 685
Facts:
1. **Financial Distress of Overseas Bank of Manila (OBM):** OBM, in which the petitioners
held majority stock, encountered financial difficulties.

2. **Central Bank's (CB) Promises:** The petitioners sought support from the CB, which
made commitments to assist and rehabilitate OBM. This included the execution of a Voting
Trust Agreement and mortgage agreements with the petitioners.

3. **Failure to Provide Support:** Despite the agreements, the CB did not adequately
support OBM. This lack of support led to further deterioration of OBM's financial condition.

4. **CB's Actions:** Subsequently, the CB took actions against OBM, such as excluding it
from clearing, suspending its operations, and ordering its liquidation, citing insolvency.

Issues:
1. **CB's Obligations:** Whether the CB is legally obligated to fulfill its commitments made
to support and rehabilitate OBM, considering that the petitioners relied on these promises
and provided additional security based on them.

2. **Legality of CB's Actions:** Whether the actions taken by the CB, including excluding
OBM from clearing, suspending its operations, and ordering its liquidation, were lawful and
justified under the circumstances.

Decisions:
1. **CB's Legal Obligations:** The court ruled that the CB is duty-bound to fulfill its
commitments to support and rehabilitate OBM. It emphasized that the CB induced the
petitioners to provide additional security based on these promises, and therefore, the CB
must comply with them in good faith.

2. **Legality of CB's Actions:** The court annulled the CB's resolutions that excluded OBM
from clearing, suspended its operations, and ordered its liquidation. These actions were
deemed an abuse of discretion and contrary to the CB's commitments. The CB was directed
to comply with its obligations under the Voting Trust Agreement and refrain from taking
actions that violated it.

**Conclusion:** The court upheld the petitioners' claims, ruling in favor of their argument
that the CB was obligated to support OBM and that its actions were unlawful. Costs were
awarded against the CB.
Lirag v. SSS, 153 SCRA 338
**Facts:**
1. On September 4, 1961, the Social Security System (SSS) entered into a Purchase
Agreement with Lirag Textile Mills, Inc. and Basilio L. Lirag.
2. The Purchase Agreement involved the purchase of preferred shares of stock worth one
million pesos.
3. SSS paid Lirag Textile Mills, Inc. a total of one million pesos for 10,000 preferred shares.
4. The Purchase Agreement stipulated the redemption of the shares at regular intervals.
5. Basilio L. Lirag, as president of Lirag Textile Mills, Inc., also signed the Purchase
Agreement as a surety.
6. Lirag Textile Mills, Inc. failed to redeem the shares as stipulated in the agreement and did
not pay dividends.
7. SSS sent letters of demand for redemption and dividend payments, but Lirag Textile
Mills, Inc. did not comply.
8. The failure to redeem the shares and pay dividends was attributed to financial
difficulties faced by Lirag Textile Mills, Inc., including smuggling, labor issues, and a fire.
9. The Purchase Agreement allowed SSS to have a representative on Lirag Textile Mills,
Inc.'s board of directors.
10. SSS representatives attended board meetings and received per diems.
11. SSS filed a case against Lirag Textile Mills, Inc. and Basilio L. Lirag for specific
performance and damages. 12. The lower court ruled in favor of SSS, considering the
Purchase Agreement as a debt instrument. 13. Lirag Textile Mills, Inc. and Basilio L.
Lirag appealed, disputing the characterization of the Purchase Agreement and their
liability.

**Issues:**
1. Whether the Purchase Agreement is a debt instrument.
2. Whether Lirag Textile Mills, Inc. is liable to redeem the preferred shares and pay
dividends. 3. Whether Basilio L. Lirag, as surety, is liable for Lirag Textile Mills, Inc.'s
obligations. 4. Whether the liquidated damages, attorney's fees, and interest awarded by
the lower court are justified. 5. Whether the counterclaim of Lirag Textile Mills, Inc.
and Basilio L. Lirag should be dismissed.

**Decisions:**
1. The Purchase Agreement is deemed a debt instrument based on its terms and conditions,
imposing an absolute obligation on Lirag Textile Mills, Inc. to redeem the shares regardless
of its financial situation.
2. Lirag Textile Mills, Inc. is liable to redeem the shares and pay dividends as stipulated in
the Purchase Agreement, irrespective of its financial condition.
3. Basilio L. Lirag, as surety, is bound to pay SSS if Lirag Textile Mills, Inc. fails to fulfill its
obligations under the Purchase Agreement.
4. The awards for liquidated damages, attorney's fees, and interest are upheld, as they are
provided for in the Purchase Agreement and justified by Lirag Textile Mills, Inc.'s failure to
comply.
5. The counterclaim of Lirag Textile Mills, Inc. and Basilio L. Lirag is dismissed.
The decision of the lower court is affirmed in its entirety, with costs against the petitioners.
Angel Jose Warehousing v. Chelda Enterprises. 23 SCRA 119 (1968)
**Facts:**

- Plaintiff corporation filed a lawsuit against the partnership Chelda Enterprises and David
Syjueco, seeking to recover alleged unpaid loans totaling P20,880.00, with interest and
attorney's fees.
- Defendants argued that they obtained loans totaling P26,500.00, of which P5,620.00 had
been paid, leaving a balance of P20,880.00. They claimed that the plaintiff charged usurious
interest rates, rendering the loans invalid.
- The trial court found that there was an unpaid principal amount of P20,287.50, with
usurious interest deducted in advance by the plaintiff. The court held that despite the
usurious interest, the plaintiff could still collect the principal amount.
- Defendants appealed, questioning whether a creditor could recover the principal of a loan
with usurious interest and whether attorney's fees should be awarded.

**Issues:**

1. Whether a creditor can recover the principal of a loan with usurious interest.
2. Whether attorney's fees should be awarded to the plaintiff.

**Decisions:**

1. The Court ruled that the creditor could recover the principal of the loan even if usurious
interest was charged. It emphasized that while the interest portion might be void due to
illegality, the principal debt remains valid and enforceable.
2. The Court determined that attorney's fees should not be awarded to the plaintiff unless
there was a stipulation or a legal basis for such an award. Since no such basis was provided,
the award of attorney's fees was deleted.

**Rationale:**

- The Court clarified that while a contract with usurious interest may render the interest
portion void, the principal debt remains valid and enforceable. This is based on the
principle that the illegal terms (i.e., usurious interest) can be separated from the legal ones
(i.e., principal debt), allowing the latter to be enforced.
- The Court noted that the New Civil Code provisions do not conflict with the Usury Law.
The New Civil Code allows recovery of interest paid in excess of what is allowed by law, but
it does not invalidate the entire loan contract.
- Regarding attorney's fees, the Court stated that unless there is a stipulation or a legal
basis for such an award, it should not be granted. In this case, since no such basis was
provided, the award of attorney's fees was deleted.

In summary, the Court affirmed the decision of the trial court with modifications, allowing
the plaintiff to recover the principal amount of the loan but deleting the award of attorney's
fees.
Cu-Unjieng v. Mabalacat, 54 Phil. 976 (1929)
**Facts:**
- Cu Unjieng e Hijos filed a case against the Mabalacat Sugar Company to recover a debt
amounting to over P163,000, with interest, and to foreclose a mortgage given by the
debtor. Siuliong & Co., Inc. was joined as a defendant as a surety of the Mabalacat Sugar
Company, and the Philippine National Bank was also joined due to its interest as the second
mortgagee of the property.
- After the trial, the court rendered a judgment ordering the Mabalacat Sugar Company to
pay the debt, interest, attorney's fees, and other costs. The judgment also included
provisions for the payment of debts owed to Siuliong & Co., Inc. and the Philippine National
Bank.
- The Mabalacat Sugar Company appealed the decision, raising several points of error.

**Issues:**
1. Whether the action was prematurely stated due to an alleged agreement to extend the
time for payment of the mortgage indebtedness.
2. Whether the interest charges made by the plaintiff were proper.
3. Whether the attorney's fees allowed by the court were excessive.
4. Whether the trial court erred in denying the debtor's request to file an amendment to its
answer.

**Decisions:**
1. The court found that the alleged agreement to extend the time for payment did not
abrogate the stipulation of the original contract regarding the acceleration of the debt. The
creditor was justified in treating the entire mortgage debt as due, as the debtor failed to
comply with the terms of the extension.
2. The court determined that the plaintiff's charging of compound interest was improper.
While interest could be compounded if stipulated, the language of the contract did not
justify charging interest upon interest. The court ordered the elimination of compound
interest from the judgment.
3. The court found no just cause for complaint regarding the attorney's fees allowed by the
court.
4. The court held that the denial of the debtor's request to file an amendment to its answer
was within the discretion of the trial court, and no abuse of discretion was shown.

**Outcome:**

The court modified the appealed judgment by deducting the sum of P1,136.12 from the
principal debt, resulting in an adjusted debt of P162,398.61, with interest at 12 percent per
annum from May 1, 1929. The judgment was affirmed in all other respects, with costs
against the appellant.
David v. CA, 316 SCRA 710 (1999)
**Facts:**
1. The case involves a petition for review under Rule 45 of the Rules of Court, aiming to reverse
the Decision dated May 30, 1994, of the Court of Appeals in CA-G.R. SP No. 32782.
2. The dispute revolves around the execution of the Decision of the Regional Trial Court (RTC)
of Manila, Branch 27, in Civil Case No. 94781, dated October 31, 1979, as amended by an Order
dated June 20, 1980.
3. The RTC issued a writ of attachment over real properties of private respondents, covered by
TCT Nos. 80718 and 10289. The judgment ordered private respondent Afable to pay the
petitioner P66,500.00 plus interest and other fees.
4. However, an amendment was made to the decision on June 20, 1980, altering the computation
of interest from July 24, 1974, to January 4, 1966.
5. The case went through appeals, with the decision of the lower court being affirmed by higher
courts.
6. Petitioner moved for execution, leading to an auction conducted by respondent Sheriff Peña,
resulting in an excess bid price.
7. Petitioner sought an order for the sheriff to prepare and execute a certificate of sale, claiming
compound interest based on Article 2212 of the Civil Code.
8. The trial court denied petitioner's motion, citing legal interest and principles from previous
cases.
9. Petitioner filed a motion for reconsideration, which was also denied by the trial court.
10. Petitioner then appealed to the Court of Appeals, but the petition was dismissed, affirming
the trial court's decision.

**Issues:**
1. Whether the Court of Appeals erred in ruling that Article 2212 of the Civil Code applies only
when parties stipulate or agree to pay compounded interest.
2. Whether there was confusion between legal interest and simple interest in the appellate court's
decision.
3. Whether the Court of Appeals erred in refusing to apply Article 2212 of the Civil Code to the
case.
4. Whether the decision of the Court of Appeals is contrary to law.

**Decisions:**
1. The Court held that Article 2212 applies only when there is a stipulation or agreement for
compounded interest, which was not present in this case. Therefore, only simple legal interest
applies.
2. The Court affirmed that the appellate court correctly distinguished between legal interest and
simple interest, following precedents and legal principles.
3. The Court ruled that the appellate court did not err in refusing to apply Article 2212, as there
was no stipulated or conventional interest to justify compounded interest.
4. The Court upheld the decision of the Court of Appeals, finding no grave abuse of discretion or
error in the application of the law.

In conclusion, the petition was denied, and the decision of the Court of Appeals was affirmed,
with costs against the petitioner.