Facts:

Venancio Concepcion(manager of the Aparri branch of the Philippine National Bank) authorized the
extension of credit to Puno y Concepcion, S. en C (President of PNB). in the amount of P300,000. The
company is a copartnership wherein the wife of Concepcion is a board of director. Inconnection to this,
Concepcion was convicted of vio ating Section 35 of Act No. 2747 in relation with Section 49. The
National Bank shall not, directly or indirectly, grant loans to any of the members of the board of directors
of the bank nor to agents of the branch banks." Section 49 of the same Act provides: "Any person who shall
violate any of the provisions of this Act shall be punished by a fine not to exceed ten thousand pesos, or by
imprisonment not to exceed five years, or by both such fine and imprisonment." These two sections were in
effect in 1919 when the alleged unlawful acts took place, but were repealed by Act No. 2938, approved on
January 30, 1921.

Issue
Was the granting of a credit of P300,000 to the copartnership "Puno y Conception, S. en C.,"
by Venancio Conception, President of the Philippine National Bank, a "loan" or a "discount."
In a letter dated August 7, 1916, H. Parker Willis, then President of the National Bank,
inquired of the Insular Auditor whether section 37 of Act No. 2612 was intended to apply to discounts
as well as to loans. The ruling of the Acting Insular Auditor, dated August 11, 1916, was to placed no
restriction upon discount transactions. It be becomes material, therefore, to discover the distinction
between a "loan" and a "discount," and to ascertain if the instant transaction comes under the first or
the latter denomination.
Discounts are favored by bankers because of their liquid nature, growing, as they do, out of an
actual, live transaction. But in its last analysis, to discount a paper is only a mode of loaning money,
with, however, these distinctions: (1) In a discount, interest is deducted in advance, while in a loan,
interest is taken at the expiration of a credit; (2) a discount is always on double-name paper; a loan is
generally on single-name paper.
Conceding, without deciding, that, as ruled by the Insular Auditor, the law covers loans and
not discounts, yet the conclusion is inevitable that the demand notes signed by the firm "Puno y
Concepcion, S. en C." were not discount paper but were mere evidences of indebtedness, because (1)
interest was not deducted from the face of the notes, but was paid when the notes fell due; and (2) they
were single-name and not double-name paper.

Held: Judgment is affirmed, with the costs of this instance against the appellant. So ordered.

Central Bank v. Tolentino

WE hold, however, that the real estate mortgage of Sulpicio M. Tolentino cannot be entirely foreclosed
to satisfy his P17,000.00 debt.
The consideration of the accessory contract of real estate mortgage is the same as that of the principal
contract (Banco de Oro vs. Bayuga, 93 SCRA 443 [1979]). For the debtor, the consideration of his
obligation to pay is the existence of a debt. Thus, in the accessory contract of real estate mortgage, the
consideration of the debtor in furnishing the mortgage is the existence of a valid, voidable, or
unenforceable debt (Art. 2086, in relation to Art. 2052, of the Civil Code).
The fact that when Sulpicio M. Tolentino executed his real estate mortgage, no consideration was then in
existence, as there was no debt yet because Island Savings Bank had not made any release on the loan,
does not make the real estate mortgage void for lack of consideration. It is not necessary that any
consideration should pass at the time of the execution of the contract of real mortgage (Bonnevie vs.
C.A., 125 SCRA 122 [1983]). It may either be a prior or subsequent matter. But when the consideration
is subsequent to the mortgage, the mortgage can take effect only when the debt secured by it is created as
a binding contract to pay (Parks vs. Sherman, Vol. 176 N.W. p. 583, cited in the 8th ed., Jones on
Mortgage, Vol. 2, pp. 5-6). And, when there is partial failure of consideration, the mortgage becomes
unenforceable to the extent of such failure (Dow, et al. vs. Poore, Vol. 172 N.E. p. 82, cited in Vol. 59,
1974 ed. CJS, p. 138). Where the indebtedness actually owing to the holder of the mortgage is less than
the sum named in the mortgage, the mortgage cannot be enforced for more than the actual sum due
(Metropolitan Life Ins. Co. vs. Peterson, Vol. 19, F(2d) p. 88, cited in 6th ed., Wiltsie on Mortgage, Vol.
1, p. 180). LLpr
Since Island Savings Bank failed to furnish the P63,000.00 balance of the P80,000.00 loan, the real estate
mortgage of Sulpicio M. Tolentino became unenforceable to such extent. P63,000.00 is 78.75% of
P80,000.00, hence the real estate mortgage covering 100 hectares is unenforceable to the extent of 78.75
hectares. The mortgage covering the remainder of 21.25 hectares subsists as a security for the P17,000.00
debt. 21.25 hectares is more than sufficient to secure a P17,000.00 debt.
The rule of indivisibility of a real estate mortgage provided for by Article 2089 of the Civil Code is
inapplicable to the facts of this case.
Article 2089 provides:
"A pledge or mortgage is indivisible even though the debt may be divided among the successors in
interest of the debtor or creditor.
"Therefore, the debtor's heirs who has paid a part of the debt can not ask for the proportionate
extinguishment of the pledge or mortgage as long as the debt is not completely satisfied.
"Neither can the creditor's heir who have received his share of the debt return the pledge or cancel the
mortgage, to the prejudice of other heirs who have not been paid."
The rule of indivisibility of the mortgage as outlined by Article 2089 above-quoted presupposes several
heirs of the debtor or creditor which does not obtain in this case. Hence, the rule of indivisibility of a
mortgage cannot apply.

Herrera v Petrophil

Facts:
Petrophil Corporation) entered into a "Lease Agreement" whereby the former leased to the latter a portion
of his property for a period of twenty (20) years. PROVIDED FINALLY, that the Lessor is paid 8 years
advance rental based on P2,930.70 per month discounted at 12% interest per annum or a total net amount of
P130,288.47 before registration of lease. Leased premises shall be delivered within 30 days after 1st partial
payment of financial aid."

pursuant to the said contract, the defendant-appellee paid to the plaintiff-appellant advance rentals for the
first eight years

subtracting therefrom the amount of P101,010.73, the amount it computed as constituting the interest or
discount for the first eight years, in the total sum P180,288.47. On August 20, 1970, the defendant-appellee,
explaining that there had been a mistake in computation, paid to the plaintiff-appellant the additional sum
of P2,182.70, thereby reducing the deducted amount to only P98,828.03. 3
On October 14, 1974, the plaintiff-appellant sued the defendant-appellee for the sum of P98,828.03, with
interest, claiming this had been illegally deducted from him in violation of the Usury Law

Plaintiff argues
The thrust of the plaintiff-appellant's position is set forth in paragraph 6 of his complaint, which read:
"6. The interest collected by defendant out of the rentals for the first eight years was excessive and beyond
that allowable by law, because the total interest on the said amount is only P33,755.90 at P4,219.4880 per
yearly rental; and considering that the interest should be computed excluding the first year rental because at
the time the amount of P281,199.20 was paid it was already due under the lease contract hence no interest
should be collected from the rental for the first year, the amount of P29,536.42 only as the total interest
should have been deducted by defendant from the sum of P281,299.20."
The defendant maintains that the correct amount of the discount is P98,828.03 and that the same is not
excessive and above that allowed by law.
Issue:

Held: contract between the parties is one of lease and not of loan. It is clearly denominated a "LEASE
AGREEMENT." Nowhere in the contract is there any showing that the parties intended a loan rather than a
lease. The provision for the payment of rentals in advance cannot be construed as a repayment of a loan
because there was no grant or forbearance of money as to constitute an indebtedness on the part of the
lessor

There is no usury in this case because no money was given by the defendant-appellee to the plaintiff-
appellant, nor did it allow him to use its money already in his possession. 9 There was neither loan
nor forbearance but a mere discount which the plaintiff-appellant allowed the defendant-appellee to
deduct from the total payments because they were being made in advance for eight years. The
discount was in effect a reduction of the rentals which the lessor had the right to determine, and any
reduction thereof, by any amount, would not contravene the Usury Law.

Olivia Navoa and Ernesto Navoa vs. C.A., Teresita Domdoma and Eduardo Domdoma
GR No 59255 20December1995
Facts:
On December 1977 Teresita Domdoma and Eduardo Domdoma filed a case with the RTC for collection of
various sums of money based on loans given by them to Olivia Navoa. They cased was dismissed on the
ground that there was no cause of action and that the Domdomas do not have no capacity to sue. They
appealed to the C.A. and was granted a favourable decision.
There were 6 instances in which the Domdomas gave Olivia Navoa a loan. The first instance is when
Teresita gave Olivia a diamond ring valued at 15,000.00 which was secured by a PCIB check under the
condition that if the ring was not returned within 15 days from August 15, 1977 the ring is considered sold.
Teresita attempted to deposit the check on November 1977 but the check was not honoured for lack of
funds. After this instance, there were other loans of various amounts that were extended by Teresita to
Olivia, loans which were secured by PCIB checks, which were all dated to 1 month after the loan. All these
checks were not honoured under the same reason as the first loan.
Issue:
Was the decision of the RTC to dismiss the case due to having no cause of action valid?
- NO, A cause of action is the fact or combination of facts which affords a party a right to judicial
interference in his behalf.
- For the first loan it is a fact, that the ring was considered sold to Olivia Navoa 15 days after August 15,
1977, and even then, Olivia Navoa failed to pay the price for the ring when the payment was due (check
issued was not honoured. Thus it is confirmed that Teresitas right under the agreement was violated.
- As for the other loans extended by Teresita to Olivia, they were all secured by PCIB checks. It can be
inferred that since the checks were all dated to 1 month after the loan, it follows that the loans are then
payable 1 month after they were contracted, and also these checks were dishonoured by the bank for lack of
funds.

- Olivia and Ernesto Navoa failed to make good the checks that were issued as payment for their
obligations. Art 1169 of the Civil Code is explicit: those obliged to deliver or to do something incur in
delay from the time the obligee judicially or extra-judicially demands from them the fulfilment of the
obligations, the continuing refusal of Olivia and Ernesto Navoa to comply with the demand of payment
shows the existence of a cause of action.

Held:
The petition is DENIED and the decision of the C.A. remanding the case to the RTC for trial on the merits
is affirmed.

Obligations and Contracts terms:

Security- A means of ensuring the enforcement of an obligation or of protecting some interest in property.
It may be personal or property security.

Cause of Action- is the fact or combination of facts which affords a party a right to judicial interference in
his behalf. The requisites for a cause of action are: (a) a right in favour of the plaintiff by whatever means
and under whatever law it arises or created, (b) an obligation on the part of the defendant to respect and not
to violate such right; and, (c) an act or omission on the part of the defendant constituting a violation of the
plaintiffs right or breach of the obligation of the defendant to the plaintiff.

Bonnevie v. CA

RAOUL S.V. BONNEVIE and HONESTO V. BONNEVIE, petitioners,

vs.
THE HONORABLE COURT OF APPEALS and THE PHILIPPINE BANK OF
COMMERCE, respondents.
The complaint filed on January 26, 1971 by petitioner Honesto Bonnevie with the Court of First Instance of
Rizal against respondent Philippine Bank of Commerce sought the annulment of the Deed of Mortgage
dated December 6, 1966 executed in favor of the Philippine Bank of Commerce by the spouses Jose M.
Lozano and Josefa P. Lozano as well as the extrajudicial foreclosure made on September 4, 1968.

It alleged among others that (a) the Deed of Mortgage lacks consideration and (b) the mortgage was
executed by one who was not the owner of the mortgaged property. It further alleged that the property in
question was foreclosed pursuant to Act No. 3135 as amended, without, however, complying with the
condition imposed for a valid foreclosure. Granting the validity of the mortgage and the extrajudicial
foreclosure, it finally alleged that respondent Bank should have accepted petitioner's offer to redeem the
property under the principle of equity said justice.

The factual findings of respondent Court of Appeals being conclusive upon this Court, We hereby adopt the
facts found the trial court and found by the Court of Appeals to be consistent with the evidence adduced
during trial, to wit:
It is not disputed that spouses Jose M. Lozano and Josefa P. Lozano were the owners of the property which
they mortgaged on December 6, 1966, to secure the payment of the loan in the principal amount of
P75,000.00 they were about to obtain from defendant-appellee Philippine Bank of Commerce; that on
December 8, 1966, executed in favor of plaintiff-appellant the Deed of Sale with Mortgage ,, for and in
consideration of the sum of P100,000.00, P25,000.00 of which amount being payable to the Lozano
spouses upon the execution of the document, and the balance of P75,000.00 being payable to defendant-
appellee; that on December 6, 1966, when the mortgage was executed by the Lozano spouses in favor of
defendant-appellee, the loan of P75,000.00 was not yet received them, as it was on December 12, 1966
when they and their co-maker Alfonso Lim signed the promissory note for that amount; that from April 28,
1967 to July 12, 1968, plaintiff-appellant made payments to defendant-appellee on the mortgage in the total
amount of P18,944.22; that on May 4, 1968, plaintiff-appellant assigned all his rights under the Deed of
Sale with Assumption of Mortgage to his brother, intervenor Raoul Bonnevie; that on June 10, 1968,
defendant-appellee applied for the foreclosure of the mortgage, and notice of sale was published in the
Luzon Weekly Courier on June 30, July 7, and July 14, 1968; that auction sale was conducted on August
19, 1968, and the property was sold to defendant-appellee for P84,387.00; and that offers from plaintiff-
appellant to repurchase the property failed, and on October 9, 1969, he caused an adverse claim to be
annotated on the title of the property. (Decision of the Court of Appeals, p. 5).

Petitioners admit that they did not secure the consent of respondent Bank to the sale with assumption of
mortgage. Coupled with the fact that the sale/assignment was not registered so that the title remained in the
name of the Lozano spouses, insofar as respondent Bank was concerned, the Lozano spouses could
rightfully and validly mortgage the property. Respondent Bank had every right to rely on the certificate of
title. It was not bound to go behind the same to look for flaws in the mortgagor's title, the doctrine of
innocent purchaser for value being applicable to an innocent mortgagee for value. (Roxas vs. Dinglasan, 28
SCRA 430; Mallorca vs. De Ocampo, 32 SCRA 48). Another argument for the respondent Bank is that a
mortgage follows the property whoever the possessor may be and subjects the fulfillment of the obligation
for whose security it was constituted.

(6) The receipt by the creditor of interest payment up to a certain date on a loan that has already
matured does not ipso facto result in the renewal or extension of maturity period of the loan up to
said date. Whether or not a loan may be renewed does not solely depend on the debtor but more so
on the discretion of the creditor. (Bonnevie vs. Court of Appeals, 125 SCRA 122 [1983].)

MUTUUM CASES
State Investment House v. CA

Tio Khe Chio v. CA GR No. 76101-02 September 30, 1991

Facts: Petitioner shipped bags of imported fishmeals and insured the same with respondent insurance
company Eastern Assurance & Surety Corp (EASCO). During transit, the bags were found out to be
damaged thus rendering the fishmeals useless. Petitioner filed a claim before the EASCO which denied the
same, prompting the former to sue the latter at CFI Cebu who ordered EASCO to pay the petitioner's claim
for insurance with damages. Upon execution, respondent filed a petition for certiorari with the CA who set
aside the lower court's decision arguing that the latter has erred in fixing the legal interest on 12% per
annum rather than the mandated 6%.

Issue: What should the legal interest be for damages arising from loss of property?
Held: We rule for respondent EASCO. The legal rate of interest in the case at bar is six (6%) per
annum
The applicable law is Article 2209 of the Civil Code which reads that if the obligation consists in the
payment of a sum of money and the debtor incurs in delay, the indemnity for damages, there being no
stipulation to the contrary, shall be the payment of interest agreed upon, and in the absence of stipulation,
the legal interest which is 6% per annum. The adjusted rate mentioned in the Circular No. 416, from
which the CFI based its decision, refers only to loans or forbearances of money, goods or credits and
court judgments thereon but not to court judgments for damages arising from injury to persons and
loss of property which does not involve a loan. Tio Khe Chio vs. Court of Appeals (202 SCRA
119)Circular No. 416 of the Central Bank which took effect on July 29, 1974 pursuant to Presidential
Decree No. 116 (Usury Law) raised the legal rate of interest from six (6%) percent to twelve (12%)
percent. The adjusted rate mentioned in the circular refers only to loans or forbearances of money, goods or
credits and court judgments thereon but not to court judgments for damages arising from injury to persons
and loss of property which does not involve a loan. In the case of Philippine Rabbit Bus Lines, Inc. vs.
Cruz ,G.R. No. 71017, July 28, 1986, 143 SCRA 158, the Court declared that the legal rate of interest is six
(6%) percent per annum and not twelve (12%) percent, where a judgment award is based on an action for
damages for personal injury, not use or forbearance of money, goods or credit. In the same vein, the Court
held in GSIS vs. Court of Appeals G.R. No. 52478, October30, 1986, 145 SCRA 311, that the rates under
the Usury Law(amended by P. D. 116) are applicable only to interest by way of compensation for the use or
forbearance of money; interest by way of damages is governed by Article 2209 of the Civil Code.

GSIS v CA

Facts: Several years back, the Queen's Row Subdivision, Inc. (QRSI) entered into a construction project
agreement with the Government Service Insurance System (GSIS) by virtue of which the latter agreed to
extend a financing loan to the former for the construction and development of a residential subdivision,
comprising some four hundred ninety-three (4,493) housing units, situated at Molino, Bacoor, Cavite; these
units were to be sold to GSIS members in accordance with the System's housing program.

Pursuant to said project agreement, QRSI entered into a construction contract with private respondent
Valencia involving various phases of land development in the said subdivision. Upon accomplishing and
completing his undertaking under the contract, Valencia demanded payment from QRSI. Despite repeated
demands, however, QRSI refused to pay. Valencia then filed the complaint in the aforementioned Civil
Case No. BCV-78-33, an action for a sum of money with prayer for the issuance of a writ of preliminary
attachment. During the trial of the case, Valencia, after manifesting that he was not seeking any relief
against the personal funds of petitioner GSIS, proceeded to present his evidence. No evidence was offered
by both the petitioner and QRSI.

On March 1982, the trial court rendered its decision, the dispositive portion of which reads:

Sentencing defendant Queen's Row to pay attorney's fees in favor of

the plaintiff in the sum equal to twenty (20%) percent of the said amounts
ordered recovered and payable to said plaintiff;

Issue: RES JUDICATA/ whether or not the trial court acted without or in excess of jurisdiction, or with
grave abuse of discretion when it ordered the petitioner to pay interests at various rates ranging from twelve
percent (12%) to twenty-one percent (21%), pursuant to various circulars of the Central Bank, and
attorney's fees.

HELD: Central Bank Circular No. 416, which prescribes interest at twelve percent (12%) per annum, does
not apply in this case. We have held in a number of cases 29 that the said circular applies only to interest
for loans or forbearances of any money, goods or credits or judgments in cases involving loans or
forbearances of any money, goods or credits. Any other monetary judgment which does not involve or
which has nothing to do with loans or forbearances of any money, goods or credit does not fall within its
coverage for such imposition is not within the ambit of the authority granted to the Central Bank. The
instant case does not involve loans or forbearances of money, goods or credits.

Neither are Central Bank Circulars Nos. 494, 586, 705 and 783 applicable. The first prescribed ceilings on
the rates of interest on loans and yields on purchases of instruments by banks and non-bank financial
intermediaries. The second superseded the first while the third amended the latter by increasing the ceiling
to a maximum of twenty-one percent (21%) per annum; the fourth fixed the effective rate of interest,
including commissions, premiums, fees and other charges on loans or forbearances of money, goods or
credit with a maturity of 730 days or less not exceeding sixteen percent (16%) per annum, for secured
loans, and not exceeding eighteen percent (18%) per annum for unsecured loans. Beyond 730 days, the
interest rate is not subject to any ceiling.

A.C. ENTERPRISES, INC., petitioner, vs. CONSTRUCTION INDUSTRY ARBITRATION

COMMISSION and DEE CONSTRUCTION CORPORATION
private respondent insists that it is entitled to interests at the rate of 12% per annum on the
monetary award given them by the Construction Industry Arbitration Commission (CIAC). It contends
that under Executive Order No. 1008 dated February 4, 1985 and the Rules of Procedure Governing
Construction Arbitration, arbitral awards are final and "inappealable (sic)" and pursuant to our ruling in
Eastern Shipping Lines, Inc. v. Court of Appeals, 234 SCRA 78 (1994), monetary awards in all
judgments that became final and executory, regardless of the nature of the obligation, shall bear legal
interest of 12% per annum.
The obligation that was breached in the arbitration case at bench was not based on a loan or
forbearance of money, and therefore was not covered by Central Bank Circular No. 416.
Issue:WON EO applies of Central Bank Circular

Held: The obligation that was breached in the arbitration case at bench was not based on a loan or
forbearance of money, and therefore was not covered by Central Bank Circular No. 416.
In Reformina v. Tomol, Jr., 139 SCRA 260 (1985), we made clear that the award of legal interest at 12%
per annum under said Central Bank Circular shall be adjudged only in cases involving the loan or
forbearance of money (See also Pilipinas Bank v. Court of Appeals, 225 SCRA 268 [1993]). However, in
Eastern Shipping Lines, Inc., we held that 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.

Eastern Shipping Lines case:

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

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

It appears that private respondent equated, and wrongly at that, the term "final and
inappealable (sic)" as used in E.O. No. 1008 and the Rules of Procedure Governing Construction
Arbitration with the term "final and executory" as used in Eastern Shipping Lines, Inc.
Section 19 of E.O. No. 1008 dated February 4, 1985 provides as follows:

"Finality of Awards The arbitral award shall be binding upon the parties. It shall be
final and inappealable (sic) except on questions of law which shall be appealable to the
Supreme Court" (Italics Supplied).

Section 2 of Article XVI of the Rules of Procedure Governing Construction Arbitration

provides as follows:

"Appeals Pursuant to Section 19 of Executive Order No. 1008 dated 4 February

1985, arbitral awards are final and inappealable (sic) except on questions of law which
shall be appealable to the Supreme Court before the award becomes final. An appeal
shall not stay the award unless the Supreme Court shall direct otherwise upon such
terms as it may deem just. An appeal from an arbitral award or an order/decision of the
CIAC shall be perfected by filing with the CIAC a notice of appeal with the Supreme
Court twelve (12) copies of a petition for review of the award, order, or decision"
(Emphasis supplied).

A "final and inappealable (sic)" judgment is not the same as a "final and executory" one. The former
becomes executory only as in the case of an award by the CIAC after the lapse of 30 days from receipt of
notice thereof and no petition for review to the Supreme Court is made

The CIAC award did not come "final and executory" until after service of a copy of the
Resolution dated April 8, 1992 of this Court, denying the motion for reconsideration. The award
 was fully paid to private respondent on May 6, 1992 (Rollo, p. 456). We consider the interest that
accrued from April 8 to May 6, 1992, a period of less than a month, as de minimis as to warrant
its charging against the award.

Ruiz v. Caneba

There is no dispute that the following payments were made by Ruiz: P65,000.00 to Sangalang as down
payment and P21,119.62 to the Bank on the assumed mortgage. There is disagreement however as to the
amount paid to Sangalang on the balance of P78,500.00. Sangalang maintains that she received only
P33,793.00 while Ruiz insists that they paid P53,073.00.

the trial court found that the Ruiz spouses failed to pay in full the balance of P78,500.00 on or before
December 31, 1983 as stipulated and even on the extended period of March 22, 1984. Hence, the Ruiz
spouses are not entitled to their prayer for specific performance with damages. In the same breath, the trial
court decided that it is only fair that Zenaida Sangalang return/refund to the Ruiz spouses the payment
made by the latter. Further, it ruled that the Ruiz spouses shall continue to pay the agreed amount of rental
in the amount of P650.00 until the property is surrendered to Sangalang (RTC decision, May 15, 1986, p. 7;
Rollo, p. 48). LLphil

Issue: principal issue to be resolved in the instant petition is: whether or not there is an ambiguity in the
dispositive portion of the May 15, 1986 decision sufficient to warrant the questioned order of the
respondent court amending subject final and executory judgment.

Held: There is no question that the Ruizes failed to comply with the agreement and rescission of the
contract is in order. The parties are also agreed that the Ruizes must return the physical possession of the
property to Sangalang while the latter is obliged to return all partial payments made on the property to the
Ruizes in accordance with the agreement. But the bone of contention in this case is the exact amount to be
returned by Sangalang to the Ruiz spouses which was not spelled out by the trial court. The Ruizes claim
that they are entitled to a refund of P124,192.62 plus 24% interest compounded annually, the alleged legal
rate under Central Bank Circular, or a total amount of P169,414.95.

Sangalang, on the other hand, countered that she received only the amount of P120,092.62 or a difference
of P4,100.00 from that claimed by the Ruizes, let alone the computation of interest. Furthermore,
Sangalang insists that she is entitled to a P1,500.00 a month rental for Door No. 2 of said house which the
Ruizes occupied after the execution of the agreement (Rollo, p. 166) instead of confining themselves to
Door No. 1 which they used to occupy and for which they have originally been paying rentals.

Anent the Ruizes' claim of interest as aforementioned, it has been held in the case of Santulan v. Fule, 133
SCRA 762 (1984) that where the court judgment which did not provide for interest is already final, there is
no reason to add interest in the judgment. Interest was not demanded by the Ruizes when the case was
pending before the lower court, hence, there is no reason for this Court to grant such claim. As ruled by this
Court, such claim is groundless since the decision and orders sought to be enforced do not direct the
payment of interest and have long become final (Canonizado v. Ordoez-Benitez, 149 SCRA 555 [1987]).

Finally, as to Sangalang's claim for P1,500.00 as monthly rental for Door No. 2, the records show that such
claim was never raised in the trial court. The issue of additional rentals was brought up by Sangalang only
when the motion for execution of par. 3 of the dispositive portion of the decision was filed by the Ruiz
spouses (Rollo, p. 189). It is a basic rule that an issue which was not raised in the court below cannot be
raised for the first time on appeal as it would be offensive to the basic rules of fair play, justice and due
process (Matienzo v. Servidad, 107 SCRA 276 [1981]; De la Santa v. CA, 140 SCRA 44, [1985];
Dihiansan v. CA, 157 SCRA 434 [1987]; Auchuelo v. CA, 147 SCRA 434 [1987]; Dulos Realty and Dev't.
Corp. v. CA, 157 SCRA 425 [1988]; Ramos v. IAC, GR No. 78282, July 5, 1989; Filipino Merchants vs.
CA, GR No. 85141, Nov. 28, 1989). Consequently, Sangalang's claim cannot be granted. prLL

Hence, since the May 15, 1986 decision has long become final and executory and in fact has been partly
executed, the respondent judge had lost its jurisdiction thereon (Marcopper Mining Corp. vs. Briones, G.R.
77210, Sept. 19, 1988; Baclayon et al. v. CA, G.R. No. 89132, Feb. 26, 1990). He has exceeded his
authority, considering that the trial court has no authority to modify or vary the terms and conditions of a
final and executory judgment

Order of the respondent judge dated July 27, 1988 is hereby DECLARED null and void ab initio; (c)
respondent Sangalang is hereby required to PAY petitioners-spouses Ruizes the amount of P124,192.62;
(d) petitioners Ruizes are hereby required to VACATE the property in question and PAY P650.00 monthly
as rental as agreed upon and as required by the May 15, 1986 decision until they vacate the premises and
(e) the Register of Deeds of Caloocan City is hereby required to CANCEL the lis pendens annotated on the
title of subject property.

Sangrador v. Valderrama

INSULAR BANK OF ASIA AND AMERICA, plaintiff-appellant, vs. SPOUSES EPIFANIA

SALAZAR and RICARDO SALAZAR, defendants-appellants.s

appellees Epifania Salazar and Ricardo Salazar obtained a loan from the plaintiff-appellant in the amount
of Forty Two Thousand and Fifty Pesos (P42,050.00) payable on or before December 12, 1980. This loan
transaction was evidenced by a promissory note where the defendants-appellees bound themselves jointly
and severally to pay the amount with interest at 19% per annum and with the express authority to
increase without notice the ratesa of interest up to the maximum allowed by law and subject further to
penalty charges or liquidated damages upon default equivalent to 2% per month on any amount due and
unpaid.

In accordance with the agreement, the plaintiff-appellant increased the rate of interest to 21% pursuant to
Central Bank Circular No. 705 dated December 1, 1979.

The promissory note matured but the defendants-appellees failed to pay their account. It was only after
several demands that the defendants-appellees were able to make partial payment

plaintiff-appellant filed a complaint with the Regional Trial Court alleging that the defendants-appellees
were indebted to IBAA in the amount of P87,647.19 as of September 15, 1984, including interest at 21%
per annum,

Issue: WON THE LOWER COURT ERRED IN NOT AWARDING INTEREST ON

THE LOAN AT 21% PER ANNUM;

Held: interest rate may not be increased by the plaintiff-appellant in the instant case. It is the rule that
escalation clauses are valid stipulations in commercial contracts to maintain fiscal stability and to retain the
value of money in long term contracts. However, the enforceability of such stipulations are subject to
certain conditions.

Moreover, in its comment and supplemental comment submitted upon orders of this Court, the Central
Bank took the position that the issuance of its circulars is a valid exercise of its authority to prescribe
maximum rates of interest and based on the general principles of contract, the Escalation Clause is a valid
provision in the loan agreement provided that (1) the increased rate imposed or charged by petitioner
does not exceed the ceiling fixed by law or the Monetary Board; (2) the increase is made effective not
earlier than the effectivity of the law or regulation authorizing such an increase and (3) the remaining
maturities of the loans are more than 730 days as of the effectivity or the law or regulation authorizing
such an increase. (Emphasis supplied)

In the case at bar, the loan was obtained on November 21, 1978 and was payable on or before November
12, 1980. Central Bank Circular No. 705, authorizing the increase from 19% to 21% was issued on
December 1, 1979. Obviously, as of this date, December 1, 1979, the remaining maturity of the loan was
less than 730 days. Hence, the plaintiff-appellant's second assignment of error is without merit. LexLib

we order interest at the legal rate of 12% per annum on the unpaid amount.

BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioner, vs. HON. MIGUEL
NAVARRO

Facts: Florante del Valle (the BORROWER) obtained a loan secured by a real estate mortgage (the LOAN,
for short) from petitioner BANCO FILIPINO 1 in the sum of Forty-one Thousand Three Hundred
(P41,300.00) Pesos, payable and to be amortized within fifteen (15) years at twelve (12%) per cent interest
annually. Hence, the LOAN still had more than 730 days to run by January 2, 1976, the date when
CIRCULAR No. 494 was issued by the Central Bank.

Stamped on the promissory note evidencing the loan is an Escalation Clause, reading as follows:

"I/We hereby authorize Banco Filipino to correspondingly increase the interest rate
stipulated in this contract without advance notice to me/us in the event a law should be
enacted increasing the lawful rates of interest that may be charged on this particular
kind of loan."

The Escalation Clause is based upon Central Bank CIRCULAR No. 494 issued on January 2, 1976, the
pertinent portion of which reads:

"3. The maximum rate of interest, including commissions, premiums, fees and other charges on loans with
maturity of more than seven hundred thirty (730) days, by banking institutions, including thrift banks and
rural banks, or by financial intermediaries authorized to engage in quasi-banking functions shall be
nineteen per cent (19%) per annum

On the strength of CIRCULAR No. 494 BANCO FILIPINO gave notice to the BORROWER on June 30,
1976 of the increase of interest rate on the LOAN from 12% to 17% per annum effective on March 1, 1976.

Issue: whether BANCO FILIPINO can increase the interest rate on the LOAN from 12% to 17% per annum
under the Escalation Clause.

Held: It is our considered opinion that it may not.

It is clear from the stipulation between the parties that the interest rate may be increased "in the event a law
should be enacted increasing the lawful rate of interest that may be charged on this particular kind of loan."
The Escalation Clause was dependent on an increase of rate made by "law" alone.

CIRCULAR No. 494, although it has the effect of law, is not a law. "Although a circular duly issued is not
strictly a statute or a law, it has, however, the force and effect of law." 6 (Emphasis supplied). "An
administrative regulation adopted pursuant to law has the force and effect of law." 7 "That administrative
rules and regulations have the force of law can no longer be questioned." 8

1. CIVIL LAW; CONTRACTS; SALE ON INSTALLMENT BASIS; ESCALATION CLAUSE BASED

ON CIRCULAR NO. 494; CANNOT BE THE BASIS FOR AN INCREASE IN INTEREST RATE ON
LOAN. What should be resolved is whether BANCO FILIPINO can increase the interest rate on the
LOAN from 12% to 17% per annum under the Escalation Clause. It is our considered opinion that it may
not. It is clear from the stipulation between the parties that the interest rate may be increased "in the event a
law should be enacted increasing the lawful rate of interest that may be charged on this particular kind of
loan." The Escalation Clause was dependent on an increase of rate made by "law" alone. CIRCULAR No.
494, although it has the effect of law, is not a law. "Although a circular duly issued is not strictly a statute
or a law, it has, however, the force and effect of law." (Emphasis supplied). "An administrative regulation
adopted pursuant to law has the force and effect of law." "That administrative rules and regulations have
the force of law can no longer be questioned."

2. STATUTORY CONSTRUCTION; LAW DISTINGUISHED FROM ADMINISTRATIVE

REGULATIONS. The distinction between a law and an administrative regulation is recognized in the
Monetary Board guidelines quoted in the letter to the BORROWER of Ms. Paderes of September 24, 1976.
According to the guidelines, for a loan's interest to be subject to the increases provided in CIRCULAR No.
494, there must be an Escalation Clause allowing the increase "in the event that any law or Central Bank
regulation is promulgated increasing the maximum interest rate for loans." The guidelines thus presuppose
that a Central Bank regulation is not within the term "any law." The distinction is again recognized by P.D.
No. 1684, promulgated on March 17, 1980, adding section 7-a to the Usury Law, providing that parties to
an agreement pertaining to a loan could stipulate that the rate of interest agreed upon may be increased in
the event that the applicable maximum rate of interest is increased "by law or by the Monetary Board."

3. CIVIL LAW; CONTRACTS; SALE ON INSTALLMENT BASIS; ESCALATION CLAUSE;

REQUISITE FOR VALIDITY. It is now clear that from March 17, 1980, escalation clauses to be valid
should specifically provide: (1) that there can be an increase in interest if increased by law or by the
Monetary Board; and (2) in order for such stipulation to be valid, it must include a provision for reduction
of the stipulated interest "in the event that the applicable maximum rate of interest is reduced by law or by
the Monetary Board."

LLORIN v. CA

PEOPLE OF THE PHILIPPINES, petitioner,

vs.
TERESITA PUIG and ROMEO PORRAS, respondents.
On 7 November 2005, the Iloilo Provincial Prosecutors Office filed before Branch 68 of the RTC in
Dumangas, Iloilo, 112 cases of Qualified Theft against respondents Teresita Puig (Puig) and Romeo Porras
(Porras) who were the Cashier and Bookkeeper, respectively, of private complainant Rural Bank of
Pototan, Inc.
INFORMATION
That on or about the 1st day of August, 2002, in the Municipality of Pototan, Province of Iloilo, Philippines,
and within the jurisdiction of this Honorable Court, above-named [respondents], conspiring, confederating,
and helping one another, with grave abuse of confidence, being the Cashier and Bookkeeper of the Rural
Bank of Pototan, Inc., Pototan, Iloilo, without the knowledge and/or consent of the management of the
Bank and with intent of gain, did then and there willfully, unlawfully and feloniously take, steal and carry
away the sum of FIFTEEN THOUSAND PESOS (P15,000.00), Philippine Currency, to the damage and
prejudice of the said bank in the aforesaid amount.
After perusing the Informations in these cases, the trial court did not find the existence of probable cause
that would have necessitated the issuance of a warrant of arrest based on the following grounds:
(1) the element of taking without the consent of the owners was missing on the ground that it is the
depositors-clients, and not the Bank, which filed the complaint in these cases, who are the owners of the
money allegedly taken by respondents and hence, are the real parties-in-interest; and
(2) the Informations are bereft of the phrase alleging "dependence, guardianship or vigilance between
the respondents and the offended party that would have created a high degree of confidence between
them which the respondents could have abused."
It added that allowing the 112 cases for Qualified Theft filed against the respondents to push through would
be violative of the right of the respondents under Section 14(2), Article III of the 1987 Constitution which
states that in all criminal prosecutions, the accused shall enjoy the right to be informed of the nature and
cause of the accusation against him. Following Section 6, Rule 112 of the Revised Rules of Criminal
Procedure, the RTC dismissed the cases on 30 January 2006 and refused to issue a warrant of arrest against
Puig and Porras.
We find merit in the petition.
The dismissal by the RTC of the criminal cases was allegedly due to insufficiency of the Informations and,
therefore, because of this defect, there is no basis for the existence of probable cause which will justify the
issuance of the warrant of arrest. Petitioner assails the dismissal contending that the Informations for
Qualified Theft sufficiently state facts which constitute (a) the qualifying circumstance of grave abuse of
confidence; and (b) the element of taking, with intent to gain and without the consent of the owner, which is
the Bank.
In determining the existence of probable cause to issue a warrant of arrest, the RTC judge found the
allegations in the Information inadequate. He ruled that the Information failed to state facts constituting the
qualifying circumstance of grave abuse of confidence and the element of taking without the consent of the
owner, since the owner of the money is not the Bank, but the depositors therein.
At this point, it needs stressing that the RTC Judge based his conclusion that there was no probable cause
simply on the insufficiency of the allegations in the Informations concerning the facts constitutive of the
elements of the offense charged. This, therefore, makes the issue of sufficiency of the allegations in the
Informations the focal point of discussion.
Qualified Theft, as defined and punished under Article 310 of the Revised Penal Code, is committed as
follows, viz:
ART. 310. Qualified Theft. The crime of theft shall be punished by the penalties next higher by two
degrees than those respectively specified in the next preceding article, if committed by a domestic servant,
or with grave abuse of confidence, or if the property stolen is motor vehicle, mail matter or large cattle or
consists of coconuts taken from the premises of a plantation, fish taken from a fishpond or fishery or if
property is taken on the occasion of fire, earthquake, typhoon, volcanic eruption, or any other calamity,
vehicular accident or civil disturbance. (Emphasis supplied.)
Theft, as defined in Article 308 of the Revised Penal Code, requires the physical taking of anothers
property without violence or intimidation against persons or force upon things. The elements of the crime
under this Article are:
1. Intent to gain;
2. Unlawful taking;
3. Personal property belonging to another;
4. Absence of violence or intimidation against persons or force upon things.
To fall under the crime of Qualified Theft, the following elements must concur:
1. Taking of personal property;
2. That the said property belongs to another;
3. That the said taking be done with intent to gain;
4. That it be done without the owners consent;
5. That it be accomplished without the use of violence or intimidation against persons, nor of force upon
things;
6. That it be done with grave abuse of confidence.
On the sufficiency of the Information, Section 6, Rule 110 of the Rules of Court requires, inter alia, that the
information must state the acts or omissions complained of as constitutive of the offense.
It is evident that the Information need not use the exact language of the statute in alleging the acts or
omissions complained of as constituting the offense. The test is whether it enables a person of common
understanding to know the charge against him, and the court to render judgment properly.5
The portion of the Information relevant to this discussion reads:
A]bove-named [respondents], conspiring, confederating, and helping one another, with grave abuse of
confidence, being the Cashier and Bookkeeper of the Rural Bank of Pototan, Inc., Pototan, Iloilo, without
the knowledge and/or consent of the management of the Bank x x x.
It is beyond doubt that tellers, Cashiers, Bookkeepers and other employees of a Bank who come into
possession of the monies deposited therein enjoy the confidence reposed in them by their employer. Banks,
on the other hand, where monies are deposited, are considered the owners thereof. This is very clear not
only from the express provisions of the law, but from established jurisprudence. The relationship between
banks and depositors has been held to be that of creditor and debtor.
In a long line of cases involving Qualified Theft, this Court has firmly established the nature of possession
by the Bank of the money deposits therein, and the duties being performed by its employees who have
custody of the money or have come into possession of it. The Court has consistently considered the
allegations in the Information that such employees acted with grave abuse of confidence, to the damage and
prejudice of the Bank, without particularly referring to it as owner of the money deposits, as sufficient to
make out a case of Qualified Theft.

In summary, the Bank acquires ownership of the money deposited by its clients; and the employees of the
Bank, who are entrusted with the possession of money of the Bank due to the confidence reposed in them,
occupy positions of confidence. The Informations, therefore, sufficiently allege all the essential elements
constituting the crime of Qualified Theft

IAM LAW, plaintiff-appellee,

vs.
OLYMPIC SAWMILL CO. and ELINO LEE CHI, defendants-appellants.
Felizardo S.M. de Guzman for plaintiff-appellee.
Mariano M. de Joya for defendants-appellants.
MELENCIO-HERRERA, J.:
This is an appeal by defendants from a Decision rendered by the then Court of First Instance of Bulacan.
The appeal was originally taken to the then Court of Appeals, which endorsed it to this instance stating that
the issue involved was one of law.
It appears that on or about September 7, 1957, plaintiff loaned P10,000.00, without interest, to defendant
partnership and defendant Elino Lee Chi, as the managing partner. The loan became ultimately due on
January 31, 1960, but was not paid on that date, with the debtors asking for an extension of three months,
or up to April 30, 1960.
On March 17, 1960, the parties executed another loan document. Payment of the P10,000.00 was extended
to April 30, 1960, but the obligation was increased by P6,000.00 as follows:
That the sum of SIX THOUSAND PESOS (P6,000.00), Philippine currency shall form part of the principal
obligation to answer for attorney's fees, legal interest, and other cost incident thereto to be paid unto the
creditor and his successors in interest upon the termination of this agreement.
Defendants again failed to pay their obligation by April 30, 1960 and, on September 23, 1960, plaintiff
instituted this collection case. Defendants admitted the P10,000.00 principal obligation, but claimed that the
additional P6,000.00 constituted usurious interest.
Upon application of plaintiff, the Trial Court issued, on the same date of September 23, 1960, a writ of
Attachment on real and personal properties of defendants located at Karanglan, Nueva Ecija. After the Writ
of Attachment was implemented, proceedings before the Trial Court versed principally in regards to the
attachment.
On January 18, 1961, an Order was issued by the Trial Court stating that "after considering the
manifestation of both counsel in Chambers, the Court hereby allows both parties to simultaneously submit
a Motion for Summary Judgment. 1 The plaintiff filed his Motion for Summary Judgment on January 31,
1961, while defendants filed theirs on February 2, 196l. 2
On June 26, 1961, the Trial Court rendered decision ordering defendants to pay plaintiff "the amount of
P10,000.00 plus the further sum of P6,000.00 by way of liquidated damages . . . with legal rate of interest
on both amounts from April 30, 1960." It is from this judgment that defendants have appealed.
We have decided to affirm.
Under Article 1354 of the Civil Code, in regards to the agreement of the parties relative to the P6,000.00
obligation, "it is presumed that it exists and is lawful, unless the debtor proves the contrary". No evidentiary
hearing having been held, it has to be concluded that defendants had not proven that the P6,000.00
obligation was illegal. Confirming the Trial Court's finding, we view the P6,000.00 obligation as liquidated
damages suffered by plaintiff, as of March 17, 1960, representing loss of interest income, attorney's fees
and incidentals.
The main thrust of defendants' appeal is the allegation in their Answer that the P6,000.00 constituted
usurious interest. They insist the claim of usury should have been deemed admitted by plaintiff as it was
"not denied specifically and under oath". 3
Section 9 of the Usury Law (Act 2655) provided:
SEC. 9. The person or corporation sued shall file its answer in writing under oath to any complaint brought
or filed against said person or corporation before a competent court to recover the money or other personal
or real property, seeds or agricultural products, charged or received in violation of the provisions of this
Act. The lack of taking an oath to an answer to a complaint will mean the admission of the facts contained
in the latter.
The foregoing provision envisages a complaint filed against an entity which has committed usury, for the
recovery of the usurious interest paid. In that case, if the entity sued shall not file its answer under oath
denying the allegation of usury, the defendant shall be deemed to have admitted the usury. The provision
does not apply to a case, as in the present, where it is the defendant, not the plaintiff, who is alleging usury.
Moreover, for sometime now, usury has been legally non-existent. Interest can now be charged as lender
and borrower may agree upon. 4 The Rules of Court in regards to allegations of usury, procedural in nature,
should be considered repealed with retroactive effect.
Statutes regulating the procedure of the courts will be construed as applicable to actions pending and
undetermined at the time of their passage. Procedural laws are retrospective in that sense and to that extent.
5

... Section 24(d), Republic Act No. 876, known as the Arbitration Law, which took effect on 19 December
1953, and may be retroactively applied to the case at bar because it is procedural in nature. ... 6
WHEREFORE, the appealed judgment is hereby affirmed, without pronouncement as to costs.
SO ORDERED.

Overseas Bank of Manila vs. Cordero

Facts:

Private respondent opened a 1-year time deposit with petitioner bank amounting to P80,000, with interest
of 6% p.a. Due to its distressed financial condition, the bank was unable to pay. Cordero instituted an
action before the CFI Manila. Petitioner raised the defenses of insolvency and prejudice to other depositors.
The lower court, and the Court of Appeals, ruled in favor of Cordero. Hence, the instant petition for review
on certiorari.

Certain supervening events rendered the issue moot and academic. Respondents brother and attorney-in-
fact sent a letter to the Commercial Bank of Manila (petitioners successor-in-interest), acknowledging
receipt of P10,000, and another manifestation for P73,840, with waiver of damages. Upon further
examination, it was found that the respondents brother has no SPA. Respondents brother submitted the
SPA, with explanatory comment that the waiver applies only to third party claims, suits and damages, not
to interest and attorneys fees.

Issue:
Whether respondent is entitled to interest and attorneys fees

Held:

The obligation to pay interest on the deposit ceases the moment the operation of the bank is completely
suspended by the Central Bank. Neither can respondent Cordero recover attorneys fees. Petitioners refusal
to pay was not due to a willful and dishonest refusal to comply with its obligation but to restrictions
imposed by Central Bank.