CREDITS circumstances.

Fraud by its nature

is not a thing susceptible of ocular
Security Bank Corporation v
observation or readily demonstrable
Great Wall Commercial Press
physically; it must of necessity be
Company, Inc, et al. G.R. No.
proved in many cases by inferences
219345 January 30, 2017
from circumstances shown to have
SECOND DIVISION
been involved in the transaction in
Mendoza, J.: question.

Liability of surety In the case, the assurance to

pay in full the obligation is further
FACTS solidified by the warranty of
solvency provisions of the Credit
Petitioner Security Bank filed a
Agreement and defendants-sureties
Complaint for Sum of Money against
likewise executed a "Continuing
respondents Great Wall Commercial
Suretyship Agreement. The liability
Press Company, Inc. and its sureties
of the Surety is solidary, direct and
(respondents). The complaint sought
immediate and not contingent upon
to recover from respondents their
the pursuit by Security Bank of
unpaid obligations under a credit
whatever remedies it may have
facility covered by several trust
against the Borrower or the
receipts and surety agreements.
collateral/liens it may possess. If
Security Bank argued that in spite
any of the Guaranteed Obligations is
of the lapse of the maturity date of
not paid or performed on due date,
the obligations, respondents failed
the Surety shall without need for
to pay their obligations. Security
any notice, demand or any other act
Bank argued that respondents
or deed, immediately and
employed fraud in contracting their
automatically become liable therefor
obligation, as they made the bank
and the Surety shall pay and
believe that they had the capacity to
perform the same. Hence, the loan
pay. Security Bank stressed that
shall be paid in full on or before
respondents misled them on their
maturity, coupled by the warranty of
financial capacity and ability to pay
solvency embodied in the Credit
their obligations.
Agreement as well as the execution
RULING of the Continuing Suretyship
Agreement, the loan application was
While fraud cannot be eventually approved. It is thus clear
presumed, it need not be proved by that Respondents, misled SBC and
direct evidence and can well be employed fraud in contracting said
inferred from attendant obligation.
 United Alloy Philipines
Corporation, et al. v United
Coconut Planters Bank G.R. No.
175949 January 30, 2017
SECOND DIVISION
Peralta, J.:
Liability of Surety
FACTS
Petitioner Corporation, United Alloy
Philippines Corporation (UNIALLOY)
applied for and was granted a credit
accommodation by herein
respondent United Coconut Planters
Bank (UCPB). Part of UNIALLOY's
obligation under the Credit
Agreement was secured by a Surety
Agreement. Subsequently,
UNIALLOY failed to pay its loan
obligations. As a result, UCPB filed
against UNIALLOY. The RTC of
Makati rendered Judgment in the
collection case in favor of UCPB.
RULING
severally with UNIALLOY, to pay the
latter's loan obligations with UCPB.
Petitioners do not deny their
liability under the above quoted
Surety Agreement. As correctly held
by both the RTC and the CA, Article
1159 of the Civil Code expressly
provides that "obligations arising
from contracts have the force of law
between the contracting parties and
should be complied with in good
faith." The RTC as well as the CA
found nothing which would justify
or excuse petitioners from non-
compliance with their obligations
under the contract they have
entered into. Thus, it becomes
apparent that petitioners are merely
attempting to evade or, at least,
delay the inevitable performance of
their obligation to pay under the
Surety Agreement and the subject
promissory notes which were
executed in respondent's favor.

The Court ruled that

petitioner together with their co-
defendants Van Der Sluis and Yang,
are liable to pay respondent the
amounts awarded by the RTC. As
ruled upon by both the RTC and the
CA, UNIALLOY failed to pay its
obligations under the above
promissory notes and that herein
petitioner Spouses Chua, together
with their co-defendants Van Der
Sluis and Yang freely executed a
Surety Agreement whereby they
bound themselves jointly and
Prudential Bank (Now Bank of the
Philippine Islands) v Ronald
Rapanot And Housing & Land Use
Regulatory Board G.R. No. 191636
January 16, 2017 FIRST DIVISION
Caguioa, J.:
Mortgagee in Good Faith
FACTS
Golden Dragon is the
developer of Wack-Wack Twin
Towers Condominium. Rapanot paid
Golden Dragon a reservation fee in a
particular unit (Unit 2308-B2). The
Bank extended a loan to Golden
Dragon to be utilized by the latter as
additional working capital. Hence,
Golden Dragon executed a Mortgage
Agreement over the condominium
units to secure the loan.
Subsequently, Rapanot completed
the full payment of the said Unit
2308-B2. Thereafter, Rapanot made
several verbal demands for the
delivery of the unit. Prompted by
Rapanot's verbal demands, Golden
Dragon sent a letter to the Bank,
requesting for a substitution of
collateral for the purpose of
replacing Unit 2308-B2 with
another unit with the same area.
However, the Bank denied Golden
Dragon's request due to the latter's
unpaid accounts. Because of this,
Golden Dragon failed to comply with
Rapanot's verbal demands.
Thereafter, Rapanot, through his
counsel, sent several demand letters
to Golden Dragon and the Bank,
formally demanding the delivery of
Unit 2308-B2. Neither Golden
Dragon nor the Bank complied with
Rapanot's written demands.
Petitioner argues that, as a
mortgagee in good faith and for
value, it must be accorded
protection and should not be held
jointly and severally liable with
Golden Dragon.
RULING
Under Presidential Decree No.
957 (PD 957), no mortgage on any
condominium unit may be
constituted by a developer without
prior written approval of the
National Housing Authority, now
HLURB. PD 957 further requires
developers to notify buyers of the
loan value of their corresponding
mortgaged properties before the
proceeds of the secured loan are
released.
Contrary to petitioner Bank's
assertions, it cannot be considered a
mortgagee in good faith. The Bank
failed to ascertain whether Golden
Dragon secured HLURB's prior
written approval as required by PD
957 before it accepted Golden
Dragon's properties as collateral. It
also failed to ascertain whether any
of the properties offered as collateral
already had corresponding buyers at
the time the Mortgage Agreement
was executed. It bears stressing that
banks are required to exercise the
highest degree of diligence in the
conduct of their affairs. When the
purchaser or the mortgagee is a
bank, the rule on innocent
purchasers or mortgagees for value
is applied more strictly. Being in the
business of extending loans secured BP Oil And Chemicals
by real estate mortgage, banks are International Philippines, Inc.
presumed to be familiar with the v Total Distribution & Logistic
rules on land registration. Since the Systems, Inc G.R. No. 214406
banking business is impressed with February 6, 2017 SECOND
public interest, they are expected to DIVISION
be more cautious, to exercise a
higher degree of diligence, care and Peralta, J.:
prudence, than private individuals
in their dealings, even those Computation of Interest
involving registered lands. Banks
may not simply rely on the face of FACTS
the certificate of title. Hence, they
cannot assume that, the title offered The defendant Total
as security is on its face free of any Distributions and Logisitics
encumbrances or lien, they are Systems, Inc. (TDLSI) entered into
relieved of the responsibility of
an Agency Agreement with BP
taking further steps to verify the title
and inspect the properties to be Singapore, whereby it serve as
mortgaged. In granting the loan, exclusive agent of the latter for the
petitioner bank should not have sales and distribution of its
been content merely with a clean industrial lubricants in the
title, considering the presence of Philippines. The agency was for a
circumstances indicating the need period of five years from 1997 to
for a thorough investigation of the
2002. As per agreement, the
existence of buyers like respondent.
Having been wanting in care and defendant was supposed to deposit
prudence, the latter cannot be the proceeds of the sales it made to
deemed to be an innocent a depositary account of the
mortgagee. Hence, The Bank's defendant. subsequently, BP
failure to exercise the diligence Singapore assigned its rights under
required of it constitutes negligence, the Agreement to the plaintiff, BP
and negates its assertion that it is a
Oil and Chemicals International
mortgagee in good faith
Philippines Inc. (BP Oil) effective
March 1, 1998.

The plaintiff sent notice

containing the termination of the
Agency Agreement unless the
defendant rectified the breaches it
committed within a period of 30
days. On July 9, 2001, a formal
demand was sent to the defendant
letter for the payment of the total
amount of ₱36,440,351.79
representing the total amount of the
collections, receivables and stocks
that defendant should have
returned to the plaintiff as of May
31, 2001. The demand went
unheeded
Subsequently, a Complaint for
Sum of Money was filed by
petitioner BP Oil against TDLSI
seeking to recover the sum of
₱36,440,351.79 representing the
total value of the moneys, stock and
accounts receivables that TDLSI has
allegedly refused to return to BP Oil.
The RTC ordered for the value
of the stocks and the moneys
received and retained by the
defendant in its possession
pursuant to the Agreement with
legal interest computed at 6% per
annum from July 19, 2001 up to the
finality of this decision and at
12% per annum from finality of this
decision up to the date of payment.
Ruling
As discussed in the case
of Secretary of the Department of
Public Works and Highways, et al. v.
Spouses Heracleo and Ramona
Tecson, the court summarizes that
the interest rates applicable to loans
and forbearance of money, in the
absence of an express contract as to
such rate of interest, for the period
of 1940 to present are as follows:
1. Pursuant to Act No. 2655, the
interest rate is at 6%, effective
May 1, 1916
2. Pursuant to CB Circular No.
416, the interest rate is at
12%, effective July 29, 1974
3. As per CB Circular No. 905,
interest rate is still at 12%,
effective December 22, 1982
4. By virtue of CB Circular No.
799, effective July 1, 2013,
the interest rate is at 6%
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 6% per annum to be
computed from default.