Madel O. BungayCredit Transactions

COMMODATUM CASESPEOPLE vs. CONCEPCION, 44 Phil. 126FACTS:Venancio Concepcion, President of the Philippine National Bank, authorized an extension of credit in favor of Puno y Concepcion, S. en C. to the manager of the Aparri branch of the Philippine National Bank. Puno y Concepcion, S. en C. was a co-partnership where Concepcion is a partner. Subsequently, Concepcion was charged and found guilty in the Court of First Instance of Cagayan with violation of section 35 of Act No.2747. Section 35 providing that 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 branch banks. Concepcion argue that the documents of record do not prove that authority to make a loan was given, but only show the concession of a credit. Further, he averred that the granting of a credit to the co-partnership Puno y Concepcion, S. en C. is not a "loan" within the meaning of section 35 of Act No. 2747.

ISSUE: Whether or not the granting of a credit to the co-partnership "Puno y Concepcion, S. en C." is a "loan".HELD:Yes. The Supreme Court held that the "credit" of an individual means his ability to borrow money by virtue of the confidence or trust reposed by a lender that he will pay what he may promise. A "loan" means the delivery by one party and the receipt by the other party of a given sum of money, upon an agreement, express or implied, to repay the sum loaned, with or without interest. The concession of a "credit" necessarily involves the granting of "loans" up to the limit of the amount fixed in the "credit."REPUBLIC V. BAGTAS, 6 SCRA 262FACTS:Bagtas borrowed three bulls from the Bureau of Animal Industry for a period of one year with breeding charge at 10% of book value. After one year, the contract was renewed only for one bull but Bagtas did not return the two. One of which died because of gunshot wound during a Huk raid. ISSUE: Whether or not Bagtas is liable for the loss of the bull.HELD: The Supreme Court held that Bagtas was liable for the loss of the bull even though it was caused by a fortuitous event. If the contract was one of lease, then the 10% breeding charge is compensation (rent) for the use of the bull. Bagtas, as lessee, is subject to the responsibilities of a possessor. If the contract was one of commodatum, he is still liable because he kept the bull longer than the period stipulated and the thing loaned has been delivered with appraisal of its value (10%).

MINA V. PASCUAL, 25 Phil. 540FACTS:Francisco is an owner of a land who allowed his brother, Andres, to build a warehouse in his lot. Both Francisco and Andres died and their children became their respective heirs. Mina is the heir of Francisco and Pascual of Andres. Pascual sold his share of the warehouse and lot. Mina opposed claiming that the lot is hers because her predecessor (Francisco) never parted with its ownership when he let Andres construct a warehouse, hence, it was a contract of commodatum.

ISSUE: Whether or not the contract between Francisco and Andres was a commodatum.

HELD:The Supreme Court held that it was not a commodatum. It is an essential feature of commodatum that the use of the thing belonging to another shall be for a certain period. The parties never fixed a definite period during which Andres could use the lot and afterwards return it.

CATHOLIC VICAR APOSTOLIC v. CA, 165 SCRA 515

FACTS:Catholic Vicar Apostolic of the Mountain Province (VICAR) filed an application for registration of title over Lots 1, 2, 3, and 4. These lots are the sites of Catholic Church building, convents, high school building, school gymnasium, school dormitories, social hall, stonewalls, etc. The Heirs of Juan Valdez and the Heirs of Egmidio Octaviano filed their Opposition on Lots Nos. 2 and 3, respectively, asserting ownership and title thereto since their predecessors' house was borrowed by petitioner VICAR after the church and the convent were destroyed. After trial on the merits, the land registration court promulgated its Decision confirming the registrable title of VICAR to Lots 1, 2, 3, and 4.The Heirs of Juan Valdez appealed the decision of the land registration court to the then Court of Appeals, The Court of Appeals reversed the decision. Thereupon, the VICAR filed with the Supreme Court a petition for review on certiorari of the decision of the Court of Appeals dismissing his application for registration of Lots 2 and 3.

ISSUE:Whether or not the failure to return the subject matter of commodatum constitutes an adverse possession on the part of the owner

HELD:No. The bailees' failure to return the subject matter of commodatum to the bailor did not mean adverse possession on the part of the borrower. The bailee held in trust the property subject matter of commodatum.Petitioner repudiated the trust by declaring the properties in its name for taxation purposes.

QUINTOS vs. BECK, 69 Phil 108 FACTS:Beck is a tenant of defendant Margarita Quintos. As such, Beck occupied Quintos house. Quintos granted Beck the use of the furniture found on the leased house, among these were three gas heaters and 4 electric lamps, subject to the condition that the defendant would return them to the plaintiff upon the latter's demand. Quintos sold the pieces of furniture to Maria Lopez and Rosario Lopez and thereafter notified Beck of the conveyance. Beck informed Quintos that the latter can get the furniture at the ground floor of the house, however, at a later date, Beck told Quintos that he will return only the other furniture but not the gas heaters and the electric lamps as he is to return them only after the expiration of the lease contract. When the lease contract expires, Beck deposited the furniture to the sheriffs warehouse. Quintos refused to get the furniture in view of the fact that the defendant had declined to make delivery of all of them. Consequently, Quintos brought an action to compel Beck to return her certain furniture which she lent him for his use. The trial court ruled in favor of Beck holding that Quintos failed to comply with her obligation to get the furniture when they were offered to her. On appeal of the case, the Court of First Instance of Manila affirmed the lower courts decision. Hence, this petition.ISSUE:Whether or not the trial court erred in ruling that Quintos failed to comply with her obligation to get the furniture when they were offered to her.HELD:The contract entered into between the parties is one of commadatum. Under it the plaintiff gratuitously granted the use of the furniture to the defendant, reserving for herself the ownership thereof. By this contract the defendant bound himself to return the furniture to the plaintiff, upon the latters demand. The obligation voluntarily assumed by the defendant to return the furniture upon the plaintiff's demand, means that he should return all of them to the plaintiff at the latter's residence or house. The defendant did not comply with this obligation when he merely placed them at the disposal of the plaintiff, retaining for his benefit the three gas heaters and the four electric lamps. The trial court, therefore, erred when it came to the legal conclusion that the plaintiff failed to comply with her obligation to get the furniture when they were offered to her.

MUTUUM CASES

REPUBLIC OF THE PHILIPPINES vs. JOSE GRIJALDO 15 SCRA 681Facts:Jose Grijaldo obtained five loans from the Bank of Taiwan, Ltd. in the total sum of P1, 281.97with interest at the rate of 6% per annum, compounded quarterly. These loans are evidenced by five promissory notes, all notes without due dates, but because the loans were due one year after they were incurred. To secure the payment of the loans the appellant executed a chattel mortgage on the standing crops on his land. Then the assets, including the loans in question, were subsequently transferred to the Republic of the Philippines which made a written extrajudicial demand upon the appellant for the payment of the account in question, but he failed to pay. The aggregate amount due as principal of the five loans in question, computed under the Ballantyne scale of values as of the time that the loans were incurred in 1943, was P889.64; and the interest due thereon at the rate of 6% per annum compounded quarterly, computed as of December 31, 1959 wasP2,377.23.Contention of the plaintiff: It was error on the part of the lower court to apply the Ballantyne Scale of values in evaluating the Japanese war notes as of June 1943 when the loans were incurred, because what should be done is to evaluate the loans on the basis of the Ballantyne Scale as of the time the loans became due, and that was in June 1944.Contention of the defendant: The Ballantyne scale of values should be applied as of the time the obligation was incurred, and that was in June 1943. The sum total of the five loans obtained by the appellant from the Bank of Taiwan, Ltd. was P1,281.97 in Japanese war notes. Computed under the Ballantyne Scale of values as of June 1943, this sum of P1,281.97 in Japanese war notes in June1943 is equivalent to P889.64 in genuine Philippine currency which was considered the aggregate amount due as principal of the five loans, and the amount of P2,377.23 as of December 31, 1959 was arrived at after computing the interest on the principal sum of P889.64 compounded quarterly from the time the obligations were incurred in 1943.Ruling:In favor of the respondent. Hilado vs. De la Costa (G.R. No. L-150, April 30, 1949; 46 O.G.5472) states... Contracts stipulating for payments presumably in Japanese war notes may be enforced in our Courts after the liberation to the extent of the just obligation of the contracting parties and, as said notes have become worthless, in order that justice may be done and the party entitled to be paid can recover their actual value in Philippine Currency,what the debtor or defendant bank should return or pay is the value of the Japanese military notes in relation to the peso in Philippine Currency obtaining on the date when and at the place where the obligation was incurred unless the parties had agreed otherwise. ... .

GULLAS vs. NATIONAL BANK 62 PHIL 519Facts:Atty. Gullas has a current account with PNB.The treasury of the US issued a warrant in the amount of $361 payable to the order of Bacos. Gullas and Lopez signed as indorsers of this warrant. Thereupon it was cashed by PNB. The warrant was subsequently dishonored by the Insular treasurer. At that time, Gullas had a balance of P500 in PNB. From this balance, he also issued some checks which eventually could not be paid when it was sequestered by the Bank. When it learned of the dishonor, PNB sent notice to Gullas stating that it applied the outstanding balances from his current account as payment of the dishonored warrant. Such notice could not be delivered to him since he was out of town.Without any action from Gullas, PNB applied the dishonored warrant against his account. Because of this, Gullas was unable to pay for the checks he issued before the application. Gullas filed a complaint against PNB.

Issue: Whether or not PNB has a right to apply a deposit to the debt of a depositor to the bank?

Held: Yes, PNB has a right to apply the payment against the account of the depositor. The relation between a depositor and a bank is that if creditor and debtor. The general rule is that a bank has a right to set off of the deposit in its hands for the payment of any indebtedness to it on the part of the depositor. However, prior to the mailing of the notice of dishonor and without waiting for any action by Gullas, the bank made use of the money standing in his account to make good for the treasury warrant. At this point recall that Gullas was merely an indorser. Notice should have been given to him in order that he might protect his interest. He should be awarded with nominal damages because of the premature action of the Bank.

EASTERN SHIPPING LINES VS CA, 234 SCRA 78

FACTSTwo fiber drums were shipped owned by Eastern Shipping from Japan. The shipment asinsured with a marine policy. Upon arrival in Manila unto the custody of metro Port Service,which excepted to one drum, said to be in bad order and which damage was unknown the Mercantile Insurance Company. Allied Brokerage Corporation received the shipment from Metro, one drum opened and without seal. Allied delivered the shipment to the consignees Warehouse. The latter excepted to one drum which contained spillages while the rest of the contents was adulterated/fake. As consequence of the loss, the insurance company paid the consignee, so that it became subrogated to all the rights of action of consignee against the defendants Eastern Shipping, Metro Port and Allied Brokerage. The insurance company filed before the trial court. The trial court ruled in favor of plaintiff an ordered defendants to pay the former with present legal interest of 12% per annum from the date of the filing of the complaint. On appeal by defendants, the appellate court denied the same and affirmed in toto the decision of the trial court.

ISSUES1. Whether the applicable rate of legal interest is 12% or 6%. 2. Whether the payment of legal interest on the award for loss or damage is to be computed from the time the complaint is filed from the date the decision appealed from is rendered.HELD1. The Court held that the legal interest is 6% computed from the decision of the court a quo. 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 threat of 6% per annum. No interest shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. When the judgment of the court awarding a sum of money becomes final and executor, the rate of legal interest shall be 12% per annum from such finality until satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of money. The interest due shall be 12% PA to be computed fro default, J or EJD.2. From the date the judgment is made. Where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or EJ but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date of judgment of the court is made.The Court held that it should be computed from the decision rendered by the court a quo.

REFORMINA VS TUMOL JR. 139 SCRA 260FACTS: A fire occurred burning the boat FB Pacita III and fishing gear of the Reforminas.Consequently, they filed an action for recovery of damages for injury to persons and loss of property.Judge Tomol, Jr awarded the Reforminas damages with legal interest from the filing of thecomplaint until paid. He further rendered that by legal interest meant 6% as provided for by Art 2209 CC.Reforminas contend that it should be 12% by virtue of Central Bank Circular No. 416.ISSUE: WON the legal interest is 6%HELD: YES. C.B. Circular 416 which took effect July 29, 1974 pursuant to PD 116 which amended Act 2655 (Usury Law) which raised the legal interest from 6% to 12% applies only to forbearances of money, goods or credit and court judgments. Such court judgment refers only to judgments in litigations involving loans or forbearance of any money, goods or credit. Any other kind of monetary judgment does not fall under the coverage of said law for it is not within the ambit of authority granted to the central Bank. Only the legislature can change the laws. In this case, the decision of the judge is one rendered in an action for damages arising from injury to persons and loss of property and does not involve a loan much less forbearance of any money, goods or credit. The law applicable is thus ART 2209 CC which states 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. Plana Concurring and Dissenting: Under Sec 1 a of Act 2655 as amended by PD 116, the authority of CB is to fix a maximum rate of interest on loans and not to prescribe a fixed interest rate. Such authority given to CB is absolute and unqualified and therefore the delegation of power to it is void.

FIRST METRO INVESTMENT CORP VS ESTE DEL SOL MOUNTAIN RESERVES, INC 369 SCRA 99 FACTSFMIC granted Este del Sol a loan to finance a sports/resort complex in Montalban, Rizal. Under the agreement, the interest was 16% pa based on the diminishing balance. In case of default, an acceleration clause was provided and the amount due is subject to 20% one-time penalty on the amount due and such amount shall bear interest at the highest rate permitted by law. Respondent executed a REM, individual continuing suretyship and an underwriting agreement whereby FMIC shall underwrite the public offering of one P120,000 common shares of respondents capital stock for one-time underwriting fee of P200,000. For failure to pay its obligation, FMIC caused the foreclosure of the REM. At the public auction, FIC was the highest bidder. Petitioner filed to collect for alleged deficiency balance against respondents since it failed to collect from the sureties, plus interest at 21% pa. the trial court ruled in favor of FMIC. Respondents appealed before the CA which held that the fees provided for in the Underwriting and Consultancy Agreements were mere subterfuges to camouflage the excessively usurious interest charged. The CA ordered FMIC to reimburse petitioner representing what is due to petitioner and what is due to respondent.ISSUE: Whether or not the interests are lawfulHELD No. an apparently lawful loan is usurious when it is intended that additional compensation for the loan be disguised by an ostensibly unrelated contract for the payment by the borrower for the lenders services which re of little value or which are not in fact to be rendered. Article 1957 clearly provides: contracts and stipulations, under any cloak or device whatever, intended to circumvent the law against usury shall be void. The borrower may recover in accordance with the laws on usury.

PRISMA CONSTRUCTION & DEVELOPMENT CORPORATION and ROGELIO S. PANTALEON vs ARTHUR F. MENCHAVEZG.R. No. 160545; March 9, 2010

FACTS:December 8, 1993, Pantaleon, President and Chairman of the Board of PRISMA, obtained a P1M loan from the respondent, with monthly interest of P40,000.00 payable for 6 months, or a total obligation of P1,240,000.00 payable within 6 mos. To secure the payment of the loan, Pantaleon issued a promissory. Pantaleon signed the promissory note in his personal capacity and as duly authorized by the Board of Directors of PRISMA. The petitioners failed to completely pay the loan within the 6-month period.As of January 4, 1997, respondent found that the petitioners still had an outstanding balance of P1,364,151.00, to which respondent applied a 4% monthly interest.On August 28, 1997, respondent filed a complaint for sum of money to enforce the unpaid balance, plus 4% monthly interest. In their Answer, the petitioners admitted the loan of P1,240,000.00, but denied the stipulation on the 4% monthly interest, arguing that the interest was not provided in the promissory note. Pantaleon also denied that he made himself personally liable and that he made representations that the loan would be repaid within six (6) months.RTC found that the respondent issued a check for P1M in favor of the petitioners for a loan that would earn an interest of 4% or P40,000.00 per month, or a total of P240,000.00 for a 6-month period. RTC ordered the petitioners to jointly and severally pay the respondent the amount of P3,526,117.00 plus 4% per month interest from February 11, 1999 until fully paid.Petitioners appealed to CA insisting that there was no express stipulation on the 4% monthly interest. CA favored respondent but noted that the interest of 4% per month, or 48% per annum, was unreasonable and should be reduced to 12% per annum. MR denied hence this petition.

ISSUE:Whether the parties agreed to the 4% monthly interest on the loan. If so, does the rate of interest apply to the 6-month payment period only or until full payment of the loan?

RULING:NO. Article 1956 of the Civil Code specifically mandates that no interest shall be due unless it has been expressly stipulated in writing. The payment of interest in loans or forbearance of money is allowed only if: (1) there was an express stipulation for the payment of interest; and (2) the agreement for the payment of interest was reduced in writing. The concurrence of the two conditions is required for the payment of interest at a stipulated rate. The collection of interest without any stipulation in writing is prohibited by law.

The interest of P40,000.00 per month corresponds only to the six-month period of the loan, or from January 8, 1994 to June 8, 1994, as agreed upon by the parties in the promissory note. Thereafter, the interest on the loan should be at the legal interest rate of 12% per annum.

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.

The facts show that the parties agreed to the payment of a specific sum of money of P40,000.00 per month for six months, not to a 4% rate of interest payable within a 6-month period. Therefore, as agreed by the parties, the loan of P1M shall earn P40,000.00 per month for a period of 6 months, for a total principal and interest amount of P1,240,000.00. Thereafter, interest at the rate of 12% per annum shall apply. The amounts already paid by the petitioners during the pendency of the suit, amounting toP1,228,772.00 as of February 12, 1999, should be deducted from the total amount due.

SIGA-AN vs. VILLANUEVA, GR. No. 173227, January 20, 2009FACTS:Herein respondent Alicia Villanueva is engaged in supplying office materials and equipment to the Philippine Navy Office (PNO) where herein Sebastian Siga-an works as a military officer and comptroller. Villanueva alleged that Siga-an offered to loan her the amount of P540,000.00. Having needed capital for her business transactions with the PNO, Villanueva accepted petitioners proposal. The loan agreement was not reduced in writing and there was no stipulation as to the payment of interest for the loan. Villanueva issued two checks worthP500,000.00 and P200,000.00. Siga-an wanted to apply the payment of P540,000.00 to the principal amount and the excess amount of P160,000.00 would be applied for the interest. He demanded from Villanueva to pay additional interest with a threat to block or disapprove her transactions with the PNO if she would not comply with his demand thus respondent paid additional amounts as interests for the loan. Villanueva asked Siga-an for receipt but petitioner refused to give as it was not necessary as there was mutual trust and confidence between them. The total amount paid by Villanueva totaled P1,200,000.00. When Villanueva was advised by her lawyer that she made an overpayment, she sent a demand letter to Siga-an asking for the return of the excess amount of P660,000.00. Siga-an just ignored Villanuevas claim for reimbursement. Hence, Villanueva instituted a complaint for sum of money against herein petitioner Sebastian Siga-an. After trial of the case, the Trial Court ordered petitioner Siga-an to refund the excess amount to Villanueva pursuant to the principle of solutio indebiti. On appeal of the case, the appellate court affirmed the decision of the RTC. Petitioner filed a motion for reconsideration but this was denied. Hence, the instant petition.

ISSUE:Whether or not there was interest due to petitioner.

HELD:There was no interest due to petitioner. Article 1956 of the Civil Code, which refers to monetary interest, specifically mandates that no interest shall be due unless it has been expressly stipulated in writing. Payment of monetary interest is allowed only if there was an express stipulation for the payment of interest; and the agreement for the payment of interest was reduced in writing. The concurrence of the two conditions is required for the payment of monetary interest. Thus, the collection of interest without any stipulation therefore in writing is prohibited by law. It appears that petitioner and respondent did not agree on the payment of interest for the loan. Neither was there convincing proof of written agreement between the two regarding the payment of interest. Compensatory interest is not chargeable in the instant case because it was not duly proven that respondent defaulted in paying the loan. Also, as earlier found, no interest was due on the loan because there was no written agreement as regards payment of interest.