TABLE OF CONTENTS
In the sale of animal feeds, there is an implied warranty that it is reasonably fit and
suitable to be used for the purpose which both parties contemplated. To be able to prove
liability on the basis of breach of implied warranty, three things must be established by the
respondents. The first is that they sustained injury because of the product; the second is that
the injury occurred because the product was defective or unreasonably unsafe; and finally,
the defect existed when the product left the hands of the petitioner. A manufacturer or seller
of a product cannot be held liable for any damage allegedly caused by the product in the
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ISSUE:
Whether or not petitioners who are co-owners of the parcels of land they sold, formed an
unregistered partnership
HELD:
The CIR and the CTA based their decision in the Evangelista case where the petitioners
therein borrowed a sum of money from their father, and together with their personal funds
they used the same for buying several properties. They appointed their brother to manage
their properties with full power to lease, collect, rent, issue receipts, etc. They had the real
properties rented or leased to various tenants for several years and they gained net profits
from the rental income. Thus, the Collector of Internal Revenue demanded the payment of
income tax on a corporation, among others, from them. In Evangelista case, there was a
series of transactions where petitioners purchased 24 lots showing that the purpose was not
limited to the conservation or preservation of the common fund or even the properties
acquired by them. The character of habituality peculiar to business transactions engaged in
for the purpose of gain was present.
However, in the present case, there was no evidence that petitioners entered into an
agreement to contribute money, property or industry to a common fund, and that they
intended to divide the profits among themselves. Respondent commissioner just assumed
these conditions to be present on the basis of the fact that petitioners purchased certain
parcels of land and became co-owners thereof. The transactions in the present case were
isolated. The character of habituality peculiar to business transactions for the purpose of gain
was not present.
In order to constitute a partnership inter sese there must be: (a) An intent to form the same;
(b) generally participating in both profits and losses; (c) and such a community of interest, as
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(3)
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SY JUCO V. CASTRO
GR No. 70403, July 7, 1989
FACTS:
Back in November 1964, Eugenio Lim, for and in his own behalf and as attorney-in-fact of
his mother, the widow Maria Moreno (now deceased) and of his brother Lorenzo, together
with his other brothers, Aramis, Mario and Paulino, and his sister, Nila, all hereinafter
collectively called the Lims, borrowed from petitioner Santiago Syjuco, Inc. (hereinafter,
Syjuco only) the sum of P800,000.00. The loan was given on the security of a first mortgage
on property registered in the names of said borrowers as owners in common under Transfer
Certificates of Title Numbered 75413 and 75415 of the Registry of Deeds of Manila.
Thereafter additional loans on the same security were obtained by the Lims from Syjuco, so
that as of May 8, 1967, the aggregate of the loans stood at P2,460,000.00, exclusive of interest,
and the security had been augmented by bringing into the mortgage other property, also
registered as owned pro indiviso by the Lims under two titles: TCT Nos. 75416 and 75418 of
the Manila Registry.
There is no dispute about these facts, nor about the additional circumstance that as
stipulated in the mortgage deed the obligation matured on November 8, 1967; that the Lims
failed to pay it despite demands therefor; that Syjuco consequently caused extra-judicial
proceedings for the foreclosure of the mortgage to be commenced by the Sheriff of Manila;
and that the latter scheduled the auction sale of the mortgaged property on December 27,
1968.
To prevent the execution of the judgment against them, a complaint was presented, not in
their individual names, but in the name of a partnership of which they themselves were the
only partners: "Heirs of Hugo Lim." The complaint advocated the theory that the mortgage
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RULING:
YES. The mortgage executed by the Lims is attributable to their partnership.
The court held that the legal fiction of a separate juridical personality and existence will not
shield it from the conclusion of having such knowledge which naturally and irresistibly flows
from the undenied facts. It would violate all precepts of reason, ordinary experience and
common sense to propose that a partnership, as commonly known to all the partners or of
acts in which all of the latter, without exception, have taken part, where such matters or acts
affect property claimed as its own by said partnership.
If, therefore, the respondent partnership was inescapably chargeable with knowledge of the
mortgage executed by all the partners thereof, its silence and failure to impugn said mortgage
within a reasonable time, let alone a space of more than seventeen years, brought into play
the doctrine of estoppel to preclude any attempt to avoid the mortgage as allegedly
unauthorized.
Inaction or silence may under some circumstances amount to a misrepresentation and
concealment of the facts, so as to raise an equitable estoppel. When the silence is of such a
character and under such circumstances that it would become a fraud on the other party to
permit the party who has kept silent to deny what his silence has induced the other to believe
and act on, it will operate as an estoppel. This doctrine rests on the principle that if one
maintains silence, when in conscience he ought to speak, equity will debar him from speaking
when in conscience he ought to remain silent. He who remains silent when he ought to speak
cannot be heard to speak when he should be silent.
Equally or even more preclusive of the respondent partnership's claim to the mortgaged
property is the last paragraph of Article 1819 of the Civil Code, which contemplates a
situation duplicating the circumstances that attended the execution of the mortgage in favor
of Syjuco and therefore applies foursquare thereto. "Where the title to real property is in the
names of all the partners a conveyance executed by all the partners passes all their rights in
such property"
There is thus no reason to distinguish between the Lims, as individuals, and the partnership
itself, since the former constituted the entire membership of the latter. In other words,
despite the concealment of the existence of the partnership, for all intents and purposes and
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ROJAS V. MAGLANA
GR. No. 30616; December 10, 1990
FACTS:
Maglana and Rojas executed their Articles of Co-Partnership called Eastcoast Development
Enterprises (EDE). It was a partnership with an indefinite term of existence. Maglana shall
manage the business affairs while Rojas shall be the logging superintendant and shall
manage the logging operation. They shall share in all profits and loss equally. Due to
difficulties encountered they decided to avail of the sources of Pahamatong as industrial
partners. They again executed their Articles of Co-Partnership under EDE. The term is 30
years. After sometime Pamahatong sold his interest to Maglana and Rojas including
equipment contributed. After withdrawal of Pamahatong, Maglana and Rojas continued the
partnership. After 3 months, Rojas entered into a management contract with another logging
enterprise. He left and abandoned the partnership. He even withdrew his equipment from
the partnership and was transferred to CMS. He never told Maglana that he will not be able
to comply with the promised contributions and he will not work as logging superintendent.
Maglana then told Rojas that the latter share will just be 20% of the net profits. Rojas took
funds from the partnership more than his contribution. Thus, Maglana notified Rojas that
he dissolved the partnership.
ISSUE:
What is the nature of the partnership and legal relationship of Maglana and Rojas after
Pahamatong retired from the second partnership?
RULING:
Under Article 1830, par. 2 of the Civil Code, even if there is a specified term, one partner can
cause its dissolution by expressly withdrawing even before the expiration of the period, with
or without justifiable cause. Of course, if the cause is not justified or no cause was given, the
withdrawing partner is liable for damages but in no case can he be compelled to remain in
the firm. With his withdrawal, the number of members is decreased, hence, the dissolution.
And in whatever way he may view the situation, the conclusion is inevitable that Rojas and
Maglana shall be guided in the liquidation of the partnership by the provisions of its duly
registered Articles of Co-Partnership; that is, all profits and losses of the partnership shall
be divided "share and share alike" between the partners.
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YU VS NLRC
GR. No. 97212; June 30, 1993
FACTS:
Benjamin Yu used to be the Assistant General Manager of Jade Mountain, a partnership
engaged in marble quarrying and export business. The majority of the founding partners
sold their interests in said partnership to Willy Co and Emmanuel Zapanta without Yus
knowledge. Said new partnership continued operating under the same name and continued
the businesss operations. However, it transferred its main office from Makati to
Mandaluyong. Said new partnership did not anymore availed of the services of Yu. Thus, he
filed a complaint for illegal dismissal, recovery of unpaid wages and damages.
ISSUE:
(1) Whether the partnership which had hired petitioner Yu as Assistant General Manager
had been extinguished and replaced by a new partnerships composed of Willy Co and
Emmanuel Zapanta; and (2) if indeed a new partnership had come into existence, whether
petitioner Yu could nonetheless assert his rights under his employment contract as against
the new partnership.
RULING :
we agree with the result reached by the NLRC, that is, that the legal effect of the changes in
the membership of the partnership was the dissolution of the old partnership which had hired
petitioner in 1984 and the emergence of a new firm composed of Willy Co and Emmanuel
Zapanta in 1987.
The applicable law in this connection of which the NLRC seemed quite unaware is found
in the Civil Code provisions relating to partnerships. Article 1828 of the Civil Code provides
as follows:
Art. 1828.
The dissolution of a partnership is the change in the relation of the partners
caused by any partner ceasing to be associated in the carrying on as distinguished from the
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Dissolution is caused:
(1)
xxx
xxx
xxx
(b)
by the express will of any partner, who must act in good faith, when no definite term
or particular undertaking is specified;
xxx
xxx
xxx
(2)
in contravention of the agreement between the partners, where the circumstances do
not permit a dissolution under any other provision of this article, by the express will of any
partner at any time;
xxx
xxx
xxx
(Emphasis supplied)
In the case at bar, just about all of the partners had sold their partnership interests
(amounting to 82% of the total partnership interest) to Mr. Willy Co and Emmanuel Zapanta.
The record does not show what happened to the remaining 18% of the original partnership
interest. The acquisition of 82% of the partnership interest by new partners, coupled with
the retirement or withdrawal of the partners who had originally owned such 82% interest,
was enough to constitute a new partnership.
The occurrence of events which precipitate the legal consequence of dissolution of a
partnership do not, however, automatically result in the termination of the legal personality
of the old partnership. Article 1829 of the Civil Code states that:
[o]n dissolution the partnership is not terminated, but continues until the winding up of
partnership affairs is completed.
In the ordinary course of events, the legal personality of the expiring partnership persists for
the limited purpose of winding up and closing of the affairs of the partnership. In the case at
bar, it is important to underscore the fact that the business of the old partnership was simply
continued by the new partners, without the old partnership undergoing the procedures
relating to dissolution and winding up of its business affairs. In other words, the new
partnership simply took over the business enterprise owned by the preceeding partnership,
and continued using the old name of Jade Mountain Products Company Limited, without
winding up the business affairs of the old partnership, paying off its debts, liquidating and
distributing its net assets, and then re-assembling the said assets or most of them and
opening a new business enterprise. There were, no doubt, powerful tax considerations which
underlay such an informal approach to business on the part of the retiring and the incoming
partners. It is not, however, necessary to inquire into such matters.
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SUNGA-CHAN V. CHUA
GR. No. 143340; August 15, 2001
FACTS:
Lamberto Chua alleged that in 1977, he verbally entered into a partnership with Jacinto in
the distribution of Shellane LPG. For business convenience, Lamberto and Jacinto allegedly
agreed to register the business name of their partnership, SHELLITE GAS APPLIANCE
CENTER, under the name of Jacinto as a sole proprietorship. Both Lamberto and Jacinto
contributed P100,000.00 to the partnership, with the intention that the profits would be
equally divided between them.
The partnership allegedly had Jacinto as manager, assisted by Josephine Sy, sister-in-law of
Lamberto. Upon Jacintos death in the later part of 1989, his daughter, Lilibeth took over
the operations of Shellite without Lambertos consent. Despite Lambertos repeated
demands for accounting, she failed to comply.
On June 22m 1992, Lamberto filed a complaint against Lilibeth with the RTC. RTC decided
in favor of Lamberto.
Lilibeth questions the correctness of the finding that a partnership existed between Lamberto
and Jacinto. In the absence of any written document to show such partnership between
Lamberto and Jacinto, Lilibeth argues that these courts were proscribed from hearing the
testimonies of Lamberto and his witness, Josephine, to prove the alleged partnership three
(3) years after Jacintos death.
To support the argument, Lilibeth invokes the DEAD MANS STATUTE OR
SURVIVORSHIP RULE under Sec. 23, Rule 130. Lilibeth thus implores this Court to rule
that the testimonies of Lamberto and his alter ego, Josephine, should not have been admitted
to prove certain claims against a deceased person (Jacinto).
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the new contract signifies his agreement thereto and serves as a form of ratification
for the acts of Florencia which were outside the authority given her. As such, the SC
ruled that the principal cannot be held liable for actions of agents outside the scope
of their authority when such acts are ratified by the principal himself. On the part of
MMPI, they did not ratify Florencias acts, nor did they know of such actions.
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47
2. Yes, Even as SCHMID was merely an indentor, there was nothing to prevent it from
voluntarily warranting that twelve (12)generators subject of the second transaction are free
from any hidden defects. In other words, SCHMID may be held answerable for some other
contractual obligation, if indeed it had so bound itself. As stated above, an indentor is to some
extent an agent of both the vendor and the vendee. As such agent, therefore, he may
expressly obligate himself to undertake the obligations of his principal.
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FACTS:
Maxima Caballero owned a land. She partitioned the said land and executed a deed selling
1/3 of the land to Pacencia Sabellona. Subsequently, Pacencia took possession of the parted
1/3 portion. Dalmacio Secuya bought the land from Pacencia by means of a private document
which was lost. Such sale was confirmed by Ramon Sabellona, the only heir of Pacienca.
Pursuant to Pacencia's will, Ramos inherited all of the latter's property.
After Secuya bought the land, he took possession of the such and cultivated it. A certain
Edilberto Superales married Secuya's neice. With The latter's tolerance, Superales was able
to build a house on the land and continuously lived there. Eventually, Secuya died. Being
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FACTS:
The subject property is a 65 sq.m. lot located in the San Pedro Tunasan Homesite. This
Homesite was acquired by the Republic of the Philippines in 1931. Apolinario Hermosilla
(Apolinario) was occupying a lot in such homesite until his death in 1964. He caused the
subdivision of the lots into two, Lot 12 and Lot 19, with the same area. The land subject of
this controversy forms part of Lot 19.
In 1962, Apolinario made a deed of assignment transferring possession of Lot 19 in favor of
his grandson, Jaime Remoquillo. The Land Tenure Administration later found that Lot 19 is
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CREDIT TRANSACTIONS
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FACTS:
The Republic of the Philippines filed before the Court of First Instance of Manila a complaint
for escheat of certain unclaimed bank deposits balances under the provisions of Act No. 3936
against several banks, among them the First National City Bank of New York. It is alleged
that pursuant to Section 2 of said Act defendant banks forwarded to the Treasurer of the
Philippines a statement under oath of their respective managing officials of all the credits
and deposits held by them in favor of persons known to be dead or who have not made further
deposits or withdrawals during the period of 10 years or more. Wherefore, it is prayed that
said credits and deposits be escheated to the Republic of the Philippines by ordering
defendant banks to deposit them to its credit with the Treasurer of the Philippines. In its
answer the First National City Bank of New York claims that, while it admits that various
savings deposits, pre-war inactive accounts, and sundry accounts contained in its report
submitted to the Treasurer of the Philippines pursuant to Act No. 3936, totaling more than
P100,000.00, which remained dormant for 10 years or more, are subject to escheat however,
it has inadvertently included in said report certain items amounting to P18,589.89 which,
properly speaking, are not credits or deposits within the contemplation of Act No. 3936.
Hence, it prayed that said items be not included in the claim of plaintiff.
ISSUE:
Whether demand drafts and telegraphic transfer payments do not come within the meaning
of the term "credits" or "deposits" employed in the law as ruled by the lower court?
RULING:
1. DEMAND DRAFT YES, it is not credit nor deposit.
To begin with, we may say that a demand draft is a bill of exchange payable on
demand. On the other hand, a bill of exchange within the meaning of our Negotiable
Instruments Law (Act No. 2031) does not operate as an assignment of funds in the hands of
the drawee who is not liable on the instrument until he accepts it. In other words, in order
that a drawee may be liable on the draft and then become obligated to the payee it is
necessary that he first accepts the same. Since it is admitted that the demand drafts herein
involved have not been presented either for acceptance or for payment, the inevitable
consequence is that the appellee bank never had any chance of accepting or rejecting them.
Verily, appellee bank never became a debtor of the payee concerned and as such the aforesaid
drafts cannot be considered as credits subject to escheat within the meaning of the law.
NOTE: But a demand draft is very different from a cashier's or manager's cheek, contrary to
appellant's pretense, for it has been held that the latter is a primary obligation of the bank
which issues it and constitutes its written promise to pay upon demand. A cashier's check,
being merely a bill of exchange drawn by a bank on itself, and accepted in advance by the act
of issuance, is not subject to countermand by the payee after indorsement, and has the same
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FACTS:
By telegrams and a letter of confirmation to the manager of the Aparri branch of the
Philippine National Bank, Venancio Concepcion, President of the Philippine National Bank,
between April 10, 1919, and May 7, 1919, authorized an extension of credit in favor of "Puno
y Concepcion, S. en C." in the amount of P300,000. . Pursuant to this authorization, credit
aggregating P300,000, was granted the firm of "Puno y Concepcion, S. en C.," the only
security required consisting of six demand notes. The notes, together with the interest, were
taken up and paid by July 17, 1919. "Puno y Concepcion, S. en C." was a co-partnership
capitalized by several persons, one of whom is the wife of Venancio Concepcion. On the facts
recounted, Venancio Concepcion, as President of the Philippine National Bank and as
member of the board of directors of this bank, was charged in the Court of First Instance of
Cagayan with a violation of section 35 of Act No. 2747. He was found guilty by the Honorable
Enrique V. Filamor, Judge of First Instance. Section 35 of Act No. 2747, effective on February
20, 1918, reads as follows: "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."
ISSUE:
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BONNEVIE V. CA
G.R. No. L-49101 October 24, 1983
FACTS:
Petitioner Honesto Bonnevie filed a complaint seeking the annulment of the Deed of
Mortgage 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. It alleged that the
Deed of Mortgage lacks consideration and the mortgage was executed by one who was not
the owner of the mortgaged property. Likewise, the property was foreclosed pursuant to Act
No. 3135 as amended, without, however, complying with the condition imposed for a valid
foreclosure. It finally alleged that respondent Bank should have accepted petitioner's offer to
redeem the property under the principle of equity said justice.
Respondent bank in its answer raised that that it was with consideration because the
execution and registration of the securing mortgage, the signing and delivery of the
promissory note and the disbursement of the proceeds of the loan were mere implementation
of the basic consensual contract of loan. Likewise it raised that defendant was informed of
the alleged sale only after the foreclosure. The defendant has not given its written consent to
the sale of the mortgaged property to Bonnevie and the assumption by the latter of the loan
secured thereby as the law on contracts requires defendant's consent before Jose Lozano can
be released from his bilateral agreement with the former and before Honesto Bonnavie be
substituted for Jose Lozano and Alfonso Lim. Moreover, that demand letters and notice of
foreclosure were sent to Jose Lozano at his address, but was remain unpaid.
After petitioner Honesto V. Bonnevie had rested his case, petitioner Raoul SV Bonnevie filed
a motion for intervention as Honesto executed a Deed of Assignment covering the rights and
interests of Honesto over the subject property in favor of Raoul SV Bonnevie.
The trial court dismissed the complaint, which was affirmed by the appellate court. Hence,
this petition for review.
ISSUES:
1. Whether or not the mortgage was validly executed.
2. Whether or not the extrajudicial sale was validly and legally effected.
3. Whether or not the petitioners had the right to redeem the property.
RULING:
1. Yes. From the recitals of the mortgage deed itself, it is clearly seen that the mortgage deed
was executed for and on condition of the loan granted to the Lozano spouses. The fact that
the latter did not collect from the respondent Bank the consideration of the mortgage on the
date it was executed is immaterial. A contract of loan being a consensual contract, the herein
contract of loan was perfected at the same time the contract of mortgage was executed. The
promissory note executed on December 12, 1966 is only an evidence of indebtedness and does
not indicate lack of consideration of the mortgage at the time of its execution.
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ISSUE:
Whether or not under a lease contract, the interest collected out of the rentals paid by the
defendant for the first eight years, which amounted to Php98,828.03 out of the total sum of
Php180,288.47, was excessive and violative of the Usury Law.
HELD:
No. The contract between the parties is one of lease and not of a loan. 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 indebtedness on the part of the
lessor. On the contrary, the defendant-appellee was discharging its obligation in advance by
paying the eight years rentals, and it was for this advance payment that it was getting a
rebate or discount.
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.
There was neither a loan nor forbearance but a mere discount which was allowed to be
deducted 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.
The difference between a discount and a loan or forbearance is that the former does
not have to be repaid. The loan or forbearance is subject to repayment and is therefore
governed by the laws on usury.
To constitute usury, "there must be loan or forbearance; the loan must be of money or
something circulating as money; it must be repayable absolutely and in all events; and
something must be exacted for the use of the money in excess of and in addition to interest
allowed by law."
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Later, the Monetary Board of the Central Bank, after finding Island Savings Bank was
suffering liquidity problems, issued Resolution No. 1049, which prohibited the bank from
making new loans and investments. About 3 years after, the Monetary Board, after finding
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While plaintiffs were found to be the owners of the lot, the Court recognized the
existence of a commodatum under which the defendants held the lot. Nothing could
be more inexact. Possibly, also, the meaning of that clause is that, notwithstanding
the finding made by the Supreme Court that the plaintiffs were the owners, these
former and the defendants agree that there existed, and still exists, a commodatum.
What is essentially pertinent to the case is the fact that the defendant agree that
the plaintiffs have the ownership, and they themselves only the use, of the said lot.
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FACTS:
The appellants purchased from the Luzon Rice Mills, Inc., a piece or parcel of land with
the for the price of P25,000, promising to pay therefor in three installments. The two
installments were paid as agreed. With regard to the last installment of P15,000, they
realized that they would be unable to pay the balance due so they began to make an effort to
borrow money with which to pay the balance of their indebtedness. An application was made
to the defendant Chiam. After some negotiations the defendants agreed to loan the plaintiffs
the sum of P17,500 upon condition that the plaintiffs execute and deliver to him a pacto de
retro of said property. Thus, the appellants were able to pay the balance and the vendor of
said property had issued to them transfer certificate of title to said property, No. 528.
ISSUE:
Whether the transaction between the parties is a pacto de retro sale or a loan secured the
mortgage as when respondent Chiam agreed to loan the plaintiffs the sum of P17,500 upon
the condition that the plaintiffs execute and deliver to him a pacto de retro of said property.
HELD:
An examination of said contract of sale shows clearly that it is a pacto de retro and not a
mortgage. There is no pretension on the part of the appellant that said contract, standing
alone, is a mortgage. The intention to sell with the right to repurchase cannot be more clearly
expressed. In the present case the plaintiffs allege in their complaint that the contract in
question is a pacto de retro. They admit that they signed it. They admit they sold the property
in question with the right to repurchase it. The terms of the contract quoted by the plaintiffs
to the defendant was a "sale" with pacto de retro, and the plaintiffs have shown no
circumstance whatever which would justify the Court in construing said contract to be a mere
"loan" with guaranty.
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97
FACTS:
On July 13, 1982, respondents and Gregory T. Lim obtained from petitioner Consolidated
Bank and Trust Corporation Letter of Credit No. DOM-23277 in the amount of P
1,068,150.00. Such was used used to purchase around five hundred thousand liters of bunker
fuel oil from Petrophil Corporation, which was delivered directly to Continental Cement
Corporation in its Bulacan plant. In relation to the same transaction, a trust receipt for the
amount of P 1,001,520.93 was executed by respondent Corporation, with respondent Lim as
signatory. Claiming that respondents failed to turn over the goods covered by the trust receipt
or the proceeds thereof, petitioner filed a complaint for sum of money with application for
preliminary attachment3 before the Regional Trial Court of Manila. In answer to the
complaint, respondents averred that the transaction between them was a simple loan and
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101
Property Act of 1946 of the United States, these assets, including the loans in question, were
subsequently transferred to the Republic of the Philippines by the Government of the United States
under Transfer Agreement dated July 20, 1954. These assets were among the properties that were
placed under the administration of the Board of Liquidators created under Executive Order No.
372, dated November 24, 1950, and in accordance with Republic Acts Nos. 8 and 477 and other
pertinent laws.
On September 29, 1954 the appellee, Republic of the Philippines, represented by the Chairman of
the Board of Liquidators, made a written extrajudicial demand upon the appellant for the payment
of the account in question. The record shows that the appellant had actually received the written
demand for payment, but he failed to pay.
On January 17, 1961 the appellee filed a complaint in the Justice of the Peace Court of Hinigaran,
Negros Occidental, to collect from the appellant the unpaid account in question. The Justice of the
Peace Of Hinigaran, after hearing, dismissed the case on the ground that the action had prescribed.
The appellee appealed to the Court of First Instance of Negros Occidental and on March 26, 1962
the court a quo rendered a decision ordering the appellant to pay the appellee the sum of P2,377.23
as of December 31, 1959, plus interest at the rate of 6% per annum compounded quarterly from
the date of the filing of the complaint until full payment was made.
The appellant appealed directly to this Court. During the pendency of this appeal the appellant
Jose Grijaldo died. Upon motion by the Solicitor General this Court, in a resolution of May 13,
1963, required Manuel Lagtapon, Jacinto Lagtapon, Ruben Lagtapon and Anita L. Aguilar, who
are the legal heirs of Jose Grijaldo to appear and be substituted as appellants.
ISSUE:
Is an obligation to pay the loan extinguished by the loss or destruction of the object of the chattel
mortgage securing it?
RULING:
The appellant likewise maintains, in support of his contention that the appellee has no cause of
action, that because the loans were secured by a chattel mortgage on the standing crops on a land
owned by him and these crops were lost or destroyed through enemy action his obligation to pay
the loans was thereby extinguished. This argument is untenable. The terms of the promissory
notes and the chattel mortgage that the appellant executed in favor of the Bank of Taiwan, Ltd.
do not support the claim of appellant. The obligation of the appellant under the five promissory
notes was not to deliver a determinate thing namely, the crops to be harvested from his land, or
the value of the crops that would be harvested from his land. Rather, his obligation was to pay a
generic thing the amount of money representing the total sum of the five loans, with interest.
The transaction between the appellant and the Bank of Taiwan, Ltd. was a series of five contracts
of simple loan of sums of money. "By a contract of (simple) loan, one of the parties delivers to
another ... money or other consumable thing upon the condition that the same amount of the
same kind and quality shall be paid." (Article 1933, Civil Code) The obligation of the appellant
under the five promissory notes evidencing the loans in questions is to pay the value thereof; that
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is, to deliver a sum of money a clear case of an obligation to deliver, a generic thing. Article
1263 of the Civil Code provides:
In an obligation to deliver a generic thing, the loss or destruction of anything of the same
kind does not extinguish the obligation.
The chattel mortgage on the crops growing on appellant's land simply stood as a security for the
fulfillment of appellant's obligation covered by the five promissory notes, and the loss of the
crops did not extinguish his obligation to pay, because the account could still be paid from other
sources aside from the mortgaged crops.