Introduction cases

Acme Shoe Rubber & Plastic Corp. vs. Court of Appeals, 260SCRA 714 [1996]
Navoa vs. Court of Appeals, 251 SCRA 545 [1995].)
Loan cases
Republic vs. First National City Bank of New York, 3 SCRA 851 [1961].)
People vs. Concepcion,44 Phil. 126 [1922].)
Herrera vs. Petrophil Corporation, 146 SCRA 385 [1986].)
Saura Import and Export Co., Inc. vs.Development Bank of the Phils., 44 SCRA 445 [1972];
BPI Investment Corp. vs. Court of Appeals, 377 SCRA 117 [2002].)
Bonnevie vs. Court of Appeals, 125 SCRA 122[1983].)
CentralBank of the Phils. vs. Court of Appeals, 139 SCRA 46 [1985].)
Commodatum cases
Republic vs. Bagtas, 6 SCRA 262 [1962].)
Mina vs. Pascual,25 Phil. 540 [1913].)
Mercado vs. Aguilar, [C.A.] 45 O.G. Sup. 5,p. 118.)
Catholic Vicar Apostolic of the Mt. Province vs. Court of Appeals, 165 SCRA 515 [1988].)
Pajuyo vs. Court of Appeals, 430 SCRA 492 [2004].)
Quintos and Ansaldo vs. Beck, 69 Phil. 108 [1939].)

9. Acme Shoe Rubber & Plastic Corporation v. Court of Appeals, 260 SCRA 714 (1996)
FACTS:
- Chua Pac, the president and general manager of co-petitioner "Acme Shoe, Rubber & Plastic
Corporation," executed, for and in behalf of the company, a chattel mortgage in favor of Producers
Bank of the Philippines. A provision in the chattel mortgage agreement was to this effect "In case the MORTGAGOR executes subsequent promissory note or notes either as a renewal of the
former note, as an extension thereof, or as a new loan, or is given any other kind of accommodations
such as overdrafts, letters of credit, acceptances and bills of exchange, releases of import shipments on
Trust Receipts, etc., this mortgage shall also stand as security for the payment of the said promissory
note or notes and/or accommodations without the necessity of executing a new contract and this
mortgage shall have the same force and effect as if the said promissory note or notes and/or
accommodations were existing on the date thereof. This mortgage shall also stand as security for said
obligations and any and all other obligations of the MORTGAGOR to the MORTGAGEE of whatever
kind and nature, whether such obligations have been contracted before, during or after the constitution
of this mortgage.
-In due time, the loan was paid by petitioner corporation. Subsequently, in 1981, it obtained from
Producers Bank additional financial accommodations These borrowings were on due date also fully
paid.
-The bank yet again extended to ACME a covered by four promissory notes. Due to financial
constraints, the loan was not settled at maturity.
-The bank thereupon applied for an extrajudicial foreclosure of the chattel mortgage, prompting ACME
to forthwith file an action for injunction, with damages and a prayer for a writ of preliminary
injunction.
TC and CA:
-Dismissed the complaint and ordered the foreclosure of the chattel mortgage. ACME is bound by the
stipulations, aforequoted, of the chattel mortgage.
ISSUE:
-Whether or not chattel mortgage may secure after incurred obligations.
HELD:
-Contracts of security are either personal or real. In contracts of personal security, such as a guaranty
or a suretyship, the faithful performance of the obligation by the principal debtor is secured by the
personal commitment of another (the guarantor or surety). In contracts of real security, such as a
pledge, a mortgage or an antichresis, that fulfillment is secured by an encumbrance of property - in
pledge, the placing of movable property in the possession of the creditor; in chattel mortgage, by the
execution of the corresponding deed substantially in the form prescribed by law; in real estate
mortgage, by the execution of a public instrument encumbering the real property covered thereby; and

in antichresis, by a written instrument granting to the creditor the right to receive the fruits of an
immovable property with the obligation to apply such fruits to the payment of interest, if owing, and
thereafter to the principal of his credit - upon the essential condition that if the principal obligation
becomes due and the debtor defaults, then the property encumbered can be alienated for the payment of
the obligation, but that should the obligation be duly paid, then the contract is automatically
extinguished proceeding from the accessory character of the agreement. As the law so puts it, once the
obligation is complied with, then the contract of security becomes, ipso facto, null and void.
-While a pledge, real estate mortgage, or antichresis may exceptionally secure after-incurred
obligations so long as these future debts are accurately described, a chattel mortgage, however, can
only cover obligations existing at the time the mortgage is constituted. Although a promise expressed
in a chattel mortgage to include debts that are yet to be contracted can be a binding commitment that
can be compelled upon, the security itself, however, does not come into existence or arise until after a
chattel mortgage agreement covering the newly contracted debt is executed either by concluding a fresh
chattel mortgage or by amending the old contract conformably with the form prescribed by the Chattel
Mortgage Law. Refusal on the part of the borrower to execute the agreement so as to cover the afterincurred obligation can constitute an act of default on the part of the borrower of the financing
agreement whereon the promise is written but, of course, the remedy of foreclosure can only cover the
debts extant at the time of constitution and during the life of the chattel mortgage sought to be
foreclosed.
REPUBLIC V PHIL. NATL BANK
L-No. 16106, Dec. 30, 1961; 3 SCRA 851
~kiyo~
FACTS
-RP filed a complaint for escheat of certain unclaimed bank deposit balances against several banks under Act. 3936 which provides that unclaimed balances (w/c includes
credits or deposits of money, bullion, security and other evidence of indebtedness of any kind + interest) in favor of persons not heard from for 10 years or more, with the
increase and proceeds thereof, shall be deposited with the Insular Treasurer to the credit of the Phil. Government. Among these banks was the First National City Bank of
New York who argued that some of its credits didnt fall within the purview of the Act. The court held that cashiers checks and demand drafts fall under the Act but upon
MFR changed its view and excluded drafts, hence this appeal.
ISSUE
WON demand drafts create a creditor-debtor relationship between drawee and payee, thus falling within the meaning of credits in Act. 3969
HELD: NO
-A demand draft is not of the same category as a cashiers check which should fall under the Act.
In banking terminology, the term bank draft is used interchangeably with a bill of exchange. A bill of exchange under the NIL (sec. 127) does not operate as an assignment
of funds in the hands of the drawee who is not liable on the instrument until he accepts. In fact, the law requires presentment w/in a reasonable time or else the drawer is
discharged from liability. Since it is admitted in this case that the drafts in question were never presented either for acceptance or payment, appellee bank never became a
debtor of the payees, hence the drafts never became credits under the Act.
-Drafts must however be distinguished from cashiers checks, which is simply a bill of exchange drawn by the bank on itself; it is equivalent to a certified check and its
deposit passes to the credit of the holder who then becomes a depositor of that amount.
Disposition TC decision modified; telegraphic transfer payment orders should be escheated to RP (see case for telegraphic orders)

PEOPLE vs. CONCEPCION, 44 Phil. 126FACTS:

Venancio Concepcion, President of the Philippine National Bank and a member of
the Board thereof, 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.2 7 4 7 . S e c t i o n 3 5 o f A c t N o . 2 7 4 7 p r o v i d e s t h a t t h e
N a t i o n a l B a n k s h a l l n o t , d i r e c t l y o r indirectly, grant loans to any of
the members of the board of directors of the bank nor to agents of the branch

banks. Counsel for the defense 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. They averred that the granting of a credit to the co-partnership
"Puno y Concepcion, S. en C." by Venancio Concepcion, President of the
Philippine National Bank, is not a "loan" within the meaning of section 35
of Act No. 2747.
ISSUE:
W h e t h e r o r n o t t h e g r a n t i n g o f a c re d i t o f P 3 0 0 , 0 0 0 t o t h e c o p a r t n e r s h i p " P u n o y Concepcion, S. en C." by Venancio Concepcion,
President of the Philippine National Bank, a "loan" within the meaning of
section 35 of Act No. 2747.
HELD:
The Supreme Court ruled in the affi rmative. 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,