LOAN
Tolentino vs. Gonzalez Sy Chiam 50 Phil 558
Tolentino purchased land from Luzon Rice Mills for
Php25,000 payable in three installments.
Tolentino defaulted on the balance so the owner
sent a letter of demand to him. To pay, Tolentino
applied for loan from Gonzalez on condition that
he would execute a pacto de retro sale on the
property in favor of Gonzalez. Upon maturation of
loan, Tolentino defaulted so Gonzalez is
demanding recovery of the land. Tolentino
contends that the pacto de retro sale is a
mortgage
and
not
an
absolute
sale.
The Supreme Court held that upon its terms, the
deed of pacto de retro sale is an absolute sale
with right of repurchase and not a mortgage.
Thus, Gonzalez is the owner of the land and
Tolentino is only holding it as a tenant by virtue of
a
contract
of
lease.
**LOAN: A contract of loan signifies the giving of
a sum of money, goods or credits to another, with
a promise to repay, but not a promise to return
the same thing. It has been defined as an
advancement of money, goods, or credits upon a
contract or stipulation to repay, not to return, the
thing loaned at some future day in accordance
with the terms of the contract. The moment the
contract is completed, the money, goods or
chattels given cease to be the property of the
former owner and become the property of the
obligor to be used according to his own will,
unless the contract itself expressly provides for a
special or specific use of the same. At all events,
the money, goods or chattels, the moment the
contract is executed, cease to be the property of
the former owner and become the sole property
of the obligor.
G.R. No. L-46240
November 3, 1939
MARGARITA
QUINTOS
and
ANGEL
ANSALDO, plaintiffs-appellants,
vs.
BECK, defendant-appellee.
A.
IMPERIAL, J.:
The plaintiff brought this action to compel
the defendant to return her certain furniture
which she lent him for his use. She appealed from
the judgment of the Court of First Instance of
Manila which ordered that the defendant return to
her the three has heaters and the four electric
lamps found in the possession of the Sheriff of
said city, that she call for the other furniture from
the said sheriff of Manila at her own expense, and
that the fees which the Sheriff may charge for the
deposit of the furniture be paid pro rata by both
parties, without pronouncement as to the costs.
Respondents contentions:
A usurious loan is void due to illegality of cause or object, the
rule of pari delicto bars the action that can be brought about by
both parties based on Article 1411.
Issue: In a loan with usurious interest, may the creditor
recover the principal of the loan?
Held: Yes
Ratio:
A contract of loan with a usurious interest consists of principal
and accessory stipulations. The principal is to pay the debt and
the accessory is to pay interest.
The stipulations are divisible in the sense that the former can
still stand without the latter. In case of a divisible contract, if
the illegal terms can be separated from the legal ones, the
latter may be enforced. The illegality lies only as to the
prestation to pay the stipulated interest; hence being separable,
the latter only should be deemed void since it is the only one
that is illegal.
***
Cu Unjieng e Hijos vs Mabalacat Sugar Co.
Facts:
Cu Unjieng instituted an action for the recovery of
P163,000 with interest from the Mabalacat Sugar and
to foreclose a mortgage.
The mortgage executed by Mabalacat Sugar contains
a provision to the effect that non-compliance on their
part will cause the entire debt to become due and give
occasion for the foreclosure of the mortgage. Also,
there was a stipulation placing the interest at 12% per
annum and that it is to be computed upon the still
unpaid capital of the loan, shall be paid monthly, at
the end of each month
Issue:
1. Should the interest be compounded? Generally the
interest can be compounded but not in this case
2. Does the voluntary payment of the interest bind the
debtor? No
Ratio:
1. The provision merely requires the debtor to pay
interest monthly at the end of each month, such
interest to be computed upon the capital of the loan
already paid. It does not justify the charging of
compound interest accruing upon the capital monthly.
2. The interest is improperly charged at an unlawful
rate. The voluntary payment is not binding since it is
usurious
***
INTEREST
G.R. No. 97412 July 12, 1994
EASTERN SHIPPING LINES, INC., petitioner,
vs.
HON. COURT OF APPEALS AND MERCANTILE
INSURANCE COMPANY, INC., respondents.
The issues, albeit not completely novel, are: (a)
whether or not a claim for damage sustained on a
shipment of goods can be a solidary, or joint and
several, liability of the common carrier, the
3. Costs.
W
THEREFORE, PREMISES CONSIDERED, judgment is
hereby rendered:
A. Ordering defendants to pay plaintiff, jointly and
severally:
1. The amount of P19,032.95, with the present
legal interest of 12% per annum from October 1,
1982, the date of filing of this complaints, until
fully paid (the liability of defendant Eastern
Shipping, Inc. shall not exceed US$500 per case
or the CIF value of the loss, whichever is lesser,
while the liability of defendant Metro Port Service,
Inc. shall be to the extent of the actual invoice
value of each package, crate box or container in
no case to exceed P5,000.00 each, pursuant to
Section 6.01 of the Management Contract);
2. P3,000.00 as attorney's fees, and
yet been fulfilled. She also assails the award of attorney's fees
to respondent as baseless.
For his part, respondent admits that initially, they agreed
that payment of the loan shall be made upon completion of the
renovations. However, respondent claims that during their
meeting with some family members in the house of their
brother Genaro sometime in the second quarter of 1997, he
and petitioner entered into a new agreement whereby
petitioner was to start making monthly payments on her loan,
which she did from June to October of 1997. In respondent's
view, there was a novation of the original agreement, and
under the terms of their new agreement, petitioner's obligation
was already due and demandable.
Respondent also maintains that when petitioner
disappeared from the family compound without leaving
information as to where she could be found, making it
impossible to continue the renovations, petitioner thereby
prevented the fulfillment of said condition. He claims that
Article 1186 of the Civil Code, which provides that the
condition shall be deemed fulfilled when the obligor
voluntarily prevents its fulfillment, is applicable to this case.
In his Comment to the present petition, respondent raised
for the first time, the issue that the loan contract between him
and petitioner is actually one with a period, not one with a
suspensive condition. In his view, when petitioner began to
make partial payments on the loan, the latter waived the
benefit of the term, making the loan immediately demandable.
Respondent also believes that he is entitled to attorney's
fees, as petitioner allegedly showed bad faith by absconding
and compelling him to litigate.
The Court finds the petition unmeritorious.
It is undisputed that herein parties entered into a valid
loan contract. The only question is, has petitioner's obligation
become due and demandable? The Court resolves the
question in the affirmative.
The evidence on record clearly shows that after
renovation of seven out of the eight apartment units had been
completed, petitioner and respondent agreed that the former
shall already start making monthly payments on the loan even
if renovation on the last unit (Unit A) was still
pending. Genaro Tomimbang, the younger brother of herein
parties, testified that a meeting was held among petitioner,
respondent, himself and their eldest sister Maricion, sometime
during the first or second quarter of 1997, wherein respondent
demanded payment of the loan, and petitioner agreed to
pay. Indeed, petitioner began to make monthly payments from
June to October of 1997 totalling P93,500.00.[8] In fact,
petitioner even admitted in her Answer with Counterclaim that
she had started to make payments to plaintiff [herein
respondent] as the same was in accord with her
commitment to pay whenever she was able; x x x .[9]
Evidently, by virtue of the subsequent agreement, the
parties mutually dispensed with the condition that petitioner
shall only begin paying after the completion of all
renovations. There was, in effect, a modificatory or partial
novation, of petitioner's obligation. Article 1291 of the Civil
Code provides, thus:
Art. 1291. Obligations may be modified by:
(1)
Changing their object or principal conditions;
(2)
Substituting the person of the debtor;
(3)
Subrogating a third person in the rights of the creditor.
(Emphasis supplied)
In Iloilo Traders Finance, Inc. v. Heirs of Sps. Soriano,[10] the
Court expounded on the nature of novation, to wit:
Novation may either be extinctive or modificatory, much
being dependent on the nature of the change and the intention
of the parties. Extinctive novation is never presumed; there
must be an express intention to novate; x x x .
An extinctive novation would thus have the twin effects of,
first, extinguishing an existing obligation and, second, creating
a new one in its stead. This kind of novation presupposes a
confluence of four essential requisites: (1) a previous valid
obligation; (2) an agreement of all parties concerned to a new
contract; (3) the extinguishment of the old obligation; and (4)
the birth of a new valid obligation. Novation is merely
modificatory where the change brought about by any
subsequent agreement is merely incidental to the main
obligation (e.g., a change in interest rates or an extension
of time to pay); in this instance, the new agreement will not
have the effect of extinguishing the first but would merely
supplement it or supplant some but not all of its
provisions.[11]
In Ong v. Bogalbal,[12] the Court also stated, thus:
x x x the effect of novation may be partial or
total. There is partial novation when there is only a
modification or change in some principal conditions of the
obligation. It is total, when the obligation is completely
extinguished. Also, the term principal conditions in Article
1291 should be construed to include a change in the period to
comply with the obligation. Such a change in the period
would only be a partial novation since the period merely
affects the performance, not the creation of the obligation.[13]
As can be gleaned from the foregoing, the aforementioned
four essential elements and the requirement that there be total
incompatibility between the old and new obligation, apply
only to extinctive novation. In partial novation, only the terms
and conditions of the obligation are altered, thus, the main
obligation is not changed and it remains in force.
Petitioner stated in her Answer with
Counterclaim[14] that she agreed and complied with
respondent's demand for her to begin paying her loan, since
she believed this was in accordance with her commitment to
pay whenever she was able. Her partial performance of her
obligation is unmistakable proof that indeed the original
agreement between her and respondent had been novated by
the deletion of the condition that payments shall be made only
after completion of renovations. Hence, by her very own
admission and partial performance of her obligation, there can
be no other conclusion but that under the novated agreement,
petitioner's obligation is already due and demandable.
With the foregoing finding that petitioner's obligation is
due and demandable, there is no longer any need to discuss
whether petitioner's disappearance from the family compound
prevented the fulfillment of the original condition,
necessitating application of Article 1186 of the Civil Code, or
whether the obligation is one with a condition or a period.
As to attorney's fees, however, the award therefor
cannot be allowed by the Court. It is an oft-repeated rule that
the trial court is required to state the factual, legal or equitable
justification for awarding attorney's fees.[15] The Court
explained in Buing v. Santos,[16] to wit:
x x x While Article 2208 of the Civil Code allows attorney's
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.
The foregoing rule on legal interest was explained in SungaChan v. Court of Appeals,[19] in this wise:
Eastern Shipping Lines, Inc. synthesized the rules on
the imposition of interest, if proper, and the applicable rate, as
follows: The 12% per annum rate under CB Circular No.
416 shall apply only to loans or forbearance of money,
goods, or credits, as well as to judgments involving such
loan or forbearance of money, goods, or credit, while the
6% per annum under Art. 2209 of the Civil Code applies
when the transaction involves the payment of indemnities in
the concept of damage arising from the breach or a delay in
the performance of obligations in general, with the
application of both rates reckoned from the time the
complaint was filed until the [adjudged] amount is fully
paid. In either instance, the reckoning period for the
commencement of the running of the legal interest shall be
subject to the condition that the courts are vested with
discretion, depending on the equities of each case, on the
award of interest.[20]
In accordance with the above ruling, since the obligation in
this case involves a loan and there is no stipulation in writing
as to interest due, the rate of interest shall be 12% per annum
computed from the date of extrajudicial demand.
IN VIEW OF THE FOREGOING, the petition
is AFFIRMED with the MODIFICATION that the award for
attorney's fees is DELETED.
___
G.R. No. 126890
November 28, 2006
UNITED PLANTERS SUGAR MILLING COMPANY,
INC. (UPSUMCO), Petitioner,
vs.
THE HONORABLE COURT OF APPEALS,
PHILIPPINE NATIONAL BANK (PNB), and ASSET
PRIVATIZATION TRUST (APT), as TRUSTEE OF THE
REPUBLIC OF THE PHILIPPINES, Respondents.
The Case
This is a petition for review1 of the Decision2 dated 29
February 1996 and the Resolution dated 29 October 1996 of
the Court of Appeals remanding to the Regional Trial Court of
Bais City, Negros Oriental a suit for collection of sum of
money and damages for further proceedings.
The Facts
Petitioner United Planters Sugar Milling Company, Inc.
("UPSUMCO") is a domestic sugar miller based in Manjuyod,
Negros Oriental. To finance the construction of its milling
plant, UPSUMCO obtained loans from respondent Philippine
National Bank ("PNB"), evidenced by, among others, a Credit
Agreement dated 5 November 1974, subsequently restructured
on 24 June 1982, 10 December 1982, and 9 May 1984 ("takeoff loans"). These loans were secured by a real estate
mortgage over two parcels of land3 where UPSUMCOs
milling plant stands and by chattel mortgages over
machineries and equipment on the parcels of land. The loan
agreements also required UPSUMCO to open bank accounts
with PNB the funds of which PNB could apply to pay any due
obligations of UPSUMCO. As of 1987, UPSUMCO
maintained five savings accounts4 and one current
account5 with PNBs Dumaguete City Branch ("PNB
Dumaguete") and an account6 at PNBs Escolta, Manila
Issue:
Whether or not the 6% monthly interest is unconscionable?
Ruling:
Yes. The SC ruled that this is unconscionable.
Solangon vs Salazar
G.R. No. 125944
Facts:
They alleged that they obtained only one loan from the
Respondent which was the P60 K secured by the first
mortgage. Also, Petitioner-spouses opined that the 6%
monthly interest was unconscionable.
***
AUTOWORLD SALES CORPORATION, and PIO
BARRETTO REALTY DEVELOPMENT
CORPORATION,respondents.
FACTS:
Petitioner Investors Finance Corporation, then
known also as FNCB Finance (now doing business
under the name of Citytrust Finance Corporation),
is a financing company doing business with
private respondent Autoworld Sales Corporation
(AUTOWORLD) since 1975. Anthony Que,
president of AUTOWORLD, also held the same
position at its affiliate corporation, private
respondent Pio Barretto Realty Corporation
(BARRETTO).
Sometime in August 1980 Anthony Que, in behalf
of AUTOWORLD, applied for a direct loan with
AUTOWORLD
reluctantly
paid
P10,026,736.78 through its UCPB account.
FNCB
October 8, 1927
SILVESTRA BARON, plaintiff-appellant,
vs.PABLO DAVID, defendant-appellant. And
GUILLERMO BARON, plaintiff-appellant,
vs.PABLO DAVID, defendant-appellant.
FACTS:
-
***
MANUEL M. SERRANO, petitioner,
vs.
CENTRAL BANK OF THE PHILIPPINES; OVERSEAS
BANK OF MANILA; EMERITO M. RAMOS, SUSANA
B. RAMOS, EMERITO B. RAMOS, JR., JOSEFA
RAMOS DELA RAMA, HORACIO DELA RAMA,
ANTONIO B. RAMOS, FILOMENA RAMOS
LEDESMA, RODOLFO LEDESMA, VICTORIA RAMOS
TANJUATCO, and TEOFILO TANJUATCO, respondents.
>On October 13, 1966 and December 12, 1966, Manuel
Serrano and Concepcion Maneja made time deposits with the
Overseas Bank of Manila.
Manuel Serrano = 150k for 1 year with 6% interest.
Concepcion MAneja = 200k for 1 year with 6.5%
interest.
>On August 31, 1968, Maneja assigned and conveyed her time
deposit of 200k to Serrano.
>Overseas Bank of Manila did not honor a single demand for
encashment of the above time deposits made from December
6, 1967 up to March 4, 1968.
1.
2.
3.
Issue: Whether the hotel owner should be held liable for the
loss of the effects of the guest?
Rulng:
The Court ruled that the hotel owner should be liable
for the loss of the revolver, pants and bag of the guest.
Deposit
While the law speaks of deposit of effects by
travellers in hotels or inns, personal receipt by the innkeeper
for safe keeping of effects is not necessaily meant thereby. The
reason therefor is the fact that it is the nature of business of an
innkeeper to provide not only lodging for travellers but also to
security to their persons and effects. The secuity mentioned is
not confined to the effects actually delivered to the innkeeper
but also to all effects placed within the premises of the hotel.
This is because innkeepers by the neture of their business,
have supervision and controlof their inns and the premises
threof.
It is not necessary that the effect was actually
delivered but it is enough that they are within the inn. If a
guest and goods are within the inn, that is sufficient to charge
him.
The owner of a hotel may exonerate himself from
liability by showing that the guest has taken exclusive control
of his own goods, but this must be exclusive custody and
control of a guest, and must not be held under the supervision
and care of the innkeeper,ey are kept in a room assigned to a
guest or the other proper depository in the house.
In this case, the guest deposited his effects in the
hotel because they are in his room and within the premises of
the hotel, and therefore, within the supervision and control of
the hotel owner.
Notice
The Court ruled that there was no doubt that the
person in charge had knowledge of his revolver, the bag, and
pants of the guest, De los Santos.
The requirement of notice being evidently for the
purpose of closing the door to fraudulent claims for nonexistent articles, the lack thereof was fatal to De los Santos
claim for reparation for the loss of his eyeglass, ring, and cash.
Precautions
While an innkeeper cannot free himself from
responsibility by posting notices, there can be no doubt of the
innkeepers right to make such regulations in the management
of his inn as will more effectually secure the property of his
guest and operate as protection to himself, and that it is
incumbent upon the guest, if he means to hold the inkeeper ho
his responsibility, to comply with any regulation that is just
and reasonable, when he is requested to do so.
However, in this case, the notice requiring actual
deposit of the effects with the manager was an unreasonable
regulation. It was unreasonable to require the guest to deposit
his bag ,pants and revolver to the manager. De los Santos had
exercised the necessary diligence with respect to the care and
vigilance of his effects.
***
G.R. No. L-60033 April 4, 1984
TEOFISTO GUINGONA, JR., ANTONIO I.
MARTIN, and TERESITA SANTOS, petitioners,
vs.
THE CITY FISCAL OF MANILA, HON. JOSE B.
FLAMINIANO, ASST. CITY FISCAL FELIZARDO
N. LOTA and CLEMENT DAVID, respondents.
FACTS: This is a petition for prohibition and injunction with a
prayer for the immediate issuance of restraining order and/or
writ of preliminary injunction filed by petitioners, the instant
petition seeks to prohibit public respondents from proceeding
with the preliminary investigation, in which petitioners were
charged by private respondent Clement David, with estafa and
violation of Central Bank Circular No. 364 and related
regulations regarding foreign exchange transactions
principally, on the ground of lack of jurisdiction in that the
allegations of the charged, as well as the testimony of private
respondent's principal witness and the evidence through said
witness, showed that petitioners' obligation is civil in nature.
Private respondent David filed a complaint with the Office of
the City Fiscal of Manila charging petitioners with estafa and
violation of Central Bank Circular No. 364 and related Central
Bank regulations on foreign exchange transactions. Private
respondent David, together with his sister, Denise Kuhne,
invested with the Nation Savings and Loan Association the
sum of P1,145,546.20 on time deposits covered by Bankers
Acceptances and Certificates of Time Deposits and the sum of
P13,531.94 on savings account deposits covered by passbook
nos. 6-632 and 29-742, or a total of P1,159,078.14 (pp. 15-16,
roc.). It appears further that private respondent David, together
with his sister, made investments in the aforesaid bank in the
amount of US$75,000.00. When the bank was placed under
receivership, petitioners Guingona and Martin, upon the
request of private respondent David, assumed the obligation of
the bank to private respondent David by executing on June 17,
***
DURBAN APARTMENTS CORPORATION, doing
***
Piczon vs Piczon 61 SCRA 67
G.R. No. L-29139 November 15, 1974
CONSUELO P. PICZON, RUBEN O. PICZON and AIDA P.
ALCANTARA, plaintiffs-appellants,
vs.
ESTEBAN PICZON and SOSING-LOBOS & CO., INC.,
defendants-appellees.
Appeal from the decision of the Court of First Instance of
Samar in its Civil Case No. 5156, entitled Consuelo P. Piczon,
et al. vs. Esteban Piczon, et al., sentencing defendantsappellees, Sosing Lobos and Co., Inc., as principal, and
Esteban Piczon, as guarantor, to pay plaintiffs-appellants "the
sum of P12,500.00 with 12% interest from August 6, 1964
until said principal amount of P12,500.00 shall have been duly
paid, and the costs."
After issues were joined and at the end of the pre-trial held on
August 22, 1967, the trial court issued the following order:
"When this case was called for pre-trial, plaintiffs and
Negros Occidental.
Facts: Sometime before November 27, 1951, Augusto
Villarosa applied for a crop loan with PNB, which was
approved on March 6, 1951 in the amount of P32,400. To
guarantee the crop loan, Villarosa executed a Chattel
Mortgage on standing crops. In consideration of the periodical
sum received, he issued promissory notes.
Due to non-payment, PNB filed a complained on June 8, 1960.
The amount had reached a much higher sum because of the
accrued interest. PNB sought relief not only against the
planter but also against the three (3) bondsman namely, Luzon
Surety, Central Surety and Associated Surety.
CFI of Negros Occidental ordered defendant Augusto
Villarosa to pay PNB P81,200.00 plus accrued interest of 5%
p.a., attorneys fees and the cost. Each bonding company was
ordered to pay saintly and severally with the defendant certain
bonds, with the understanding that such payments shall be
deducted from the total outstanding obligation of defendant
Villarosa in favour of the plaintiff. The CFI modified its
decision granting PNB to recover 5% interest from the
bonding companies from December 24, 1953.
Villarosa, Central Surety and Assocuated Surety did not appeal
the decision of the CFI, unlike Luzon Surety. Luzon Surety
argued that plaintiffs evidence did not establish a cause of
action and that there had been material alteration in the
principal obligation which Luzon Surety guaranteed.
The Court of Appeals absolved Luzon Surety of its liability
and reversed the decision of the CFI.
Issues:
1. W/N the alleged material alteration of the terms and
conditions release Luzon Surety from its obligations.
-- No
2. W/N the charging of interest would increase Luzon
Surety liability to more than the amount of its bond
of P10,000. Yes
Ratio:
1. As a surety, the bonding company is charged as an
original promissory and is an insurer of the debt.
While it is an accepted rule in our jurisdiction that an
alteration of the contract is a ground for release, this
alteration must be material. A cursory examination
of the record shows that the alterations in the form of
increases were made with the full consent of Luzon
Surety Co., Inc. Paragraph 4 of the Chattel Mortgage
explicitly provided for this increase(s), viz:
... the Mortgagee may increase or decrease the amount of the
loan as well as the installment as it may deem convenient ...
and this contract, Exhibit "B", was precisely referred to and
mentioned in the Surety Bond itself. In the case of Lim Julian
vs. Tiburcio Lutero, et al No. 25235, 49 Phil. 703, 717, 718,
this Court held:
It has been decided in many cases that the consideration
named in a mortgage for future advancements does not limit
the amount for which such contract may stand as security, if
from the four corners of the document, the intent to secure
future indebtedness is apparent. Where, by the plain terms of
the contract, such an intent is evident, it will control. ...
2. In previous SC rulings, it was held: If a surety upon
demand fails to pay, he can be held liable for interest,
even if in thus paying, the liability becomes more
than that in the principal obligation. The increased
liability is not because of the contract but because of
2
Notice of the release merchandise to a buyer from a bank, with the bank
retaining the ownership title to the released assets.
petition.
Issue:
1. Whether petitioners are liable as sureties for
the 1979 obligations of Uy Tiam to METROBANK
by virtue of the Continuing Suretyship
Agreements they separately signed in 1977; and
2. On the assumption that they are, what is the
extent of their liabilities for said 1979 obligations.
Defenses: 1. The Continuing Suretyship
Agreements were automatically extinguished
upon payment of the principal obligation secured;
2. they were not advised by either METROBANK
or Uy Tiam that the Continuing Suretyship
Agreements would stand as security for the 1979
obligation; 3. to extend the application of such
agreements to the 1979 obligation would amount
to a violation of Article 2052 of the Civil Code
which expressly provides that a guaranty cannot
exist without a valid obligation; 4. for the sake of
argument, that the Continuing Suretyship
Agreements still subsisted, they cannot be held
liable for more than what they guaranteed to pay
because it s axiomatic that the obligations of a
surety cannot extend beyond what is stipulated in
the agreement.
Ruling:
Under the Civil Code, a guaranty may be given to
secure even future debts, the amount of which
may not known at the time the guaranty is
executed. This is the basis for contracts
denominated as continuing guaranty or
suretyship. A continuing guaranty is one
which is not limited to a single transaction,
but which contemplates a future course of
dealing, covering a series of transactions,
generally for an indefinite time or until
revoked. It is prospective in its operation and is
generally intended to provide security with
respect to future transactions within certain
limits, and contemplates a succession of
liabilities, for which, as they accrue, the
guarantor becomes liable. A guaranty shall be
construed as continuing when by the terms
thereof it is evident that the object is to give a
standing credit to the principal debtor to be used
from time to time either indefinitely or until a
certain period, especially if the right to recall the
guaranty is expressly reserved. Hence, where the
contract of guaranty states that the same is to
secure advances to be made "from time to time"
the guaranty will be construed to be a continuing
one.
The stipulations in the agreement unequivocally reveal
that the suretyship agreement in the case at bar are
continuing in nature. Petitioners do not deny this; in fact,
they candidly admitted it. Neither have they denied the fact
that they had not revoked the suretyship agreements.
Example of stipulations in their contract: SURETY is now
obligated to the BANK, either as guarantor or
otherwise, and/or in order to induce the BANK, in its
discretion, at any time or from time to time hereafter, to make
loans or advances or to extend credit in any other manner to,
or at the request, or for the account of the Borrowe; This
is a continuing guaranty and shall remain in full force and
effect until written notice shall have been received by the
BANK that it has been revoked by the SURETY, but any such
notice shall not release the SURETY, from any liability as to
any instruments, loans, advances or other obligations hereby
guaranteed.
No violation of Art 2052. Article 2052 speaks
about a valid obligation, as distinguished from
a void obligation, and not an existing or current
obligation. This distinction is made clearer in the
second paragraph of Article 2052 which reads:
Nevertheless, a guaranty may be constituted to guarantee the
performance of a voidable or an unenforceable contract. It
may also guarantee a natural obligation.
Continuing Suretyship Agreements signed by
petitioner Dio and petitioner Uy fix the
aggregate amount of their liability, at any given
time, at P800,000.00 and P300,000.00,
respectively. The law is clear that a guarantor
may bond himself for less, but not for more than
the principal debtor, both as regards the amount
and the onerous nature of the conditions.
Petitioners would, nevertheless, be liable for the
interest and judicial costs. Article 2055 of the Civil
Code provides:
Art. 2055. A guaranty is not presumed; it
must be express and cannot extend to
more than what is stipulated therein.
If it be simple or indefinite, it shall comprise
not only the principal obligation, but also
all its accessories, including the judicial
costs, provided with respect to the latter,
that the guarantor shall only be liable for
those costs incurred after he has been
judicially required to pay.
Interest and damages are included in the
term accessories.Also, it is stipulated in the agreement that:
In the event of judicial proceedings, SURETY further agrees
to pay the BANK a reasonable compensation for and as
attorney's fees and costs of collection, which shall not in any
event be less than ten per cent (10%) of the amount due.
SC Decision: The petition is partly GRANTED insofar as the
challenged decision has to be modified with respect to the
extend of petitioners' liability. Petitioners JACINTO UY
DIO and NORBERTO UY are hereby declared liable for and
are ordered to pay, up to the maximum limit only of their
respective Continuing Suretyship Agreement, the remaining
unpaid balance of the principal obligation of UY TIAM or UY
TIAM ENTERPRISES & FREIGHT SERVICES under
Ponente: Bidin
Fact: Defendants, together with Anastacio
Teodoro, Sr., jointly and severally, executed in
favor of plaintiff a promissory note for the sum of
P10,420. Defendants failed to pay the said
amount inspite of repeated demands and the
obligation as of September 30, 1969 stood at P
15,137.11. The defendants executed in favor of
plaintiff two PNS for P8,000 and P1,000. They
made partial payments but none were paid,
leaving an unpaid balance of P8,934.74 as of
September 30, 1969 including.
It appears that the Son executed in favor
of plaintiff a Deed of Assignment of Receivables
from the Emergency Employment Administration
in the sum of P44,635.00. The Deed of
Assignment provided that it was for and in
consideration of certain credits, loans, overdrafts
and other credit accommodations extended to
defendants as security for the payment of said
sum and the interest thereon, and that
defendants do hereby remise, release and
quitclaim all its rights, title, and interest in and to
the accounts receivables. Further, title to the AR
is to remain in the assignee.
Plaintiff extended loans to defendants on
the basis and by reason of certain contracts
entered into by the defunct Emergency
Employment Administration (EEA) with
defendants for the fabrication of fishing boats,
and that the Philippine Fisheries Commission
succeeded the EEA after its abolition; that nonpayment of the notes was due to the failure of
the Commission to pay defendants after the latter
had complied with their contractual obligations;
and that the President of the Bank took steps to
collect from the Commission, but no collection
was effected.
The action was instituted against the
defendants for the collection of sum on the PNs.
The trial court rendered judgment adverse to the
defendants.
Issue: WON the assignment of receivables has
the effect of payment of all the loans
Held: No
Ratio: Assignment of credit is an agreement by
virtue of which the owner of a credit, known as
the assignor, by a legal cause, such as sale,
dation in payment, exchange or donation, and
without the need of the consent of the debtor,
transfers his credit and its accessory rights to
another, known as the assignee, who acquires the
power to enforce it to the same extent as the
assignor could have enforced it against the
debtor. ... It may be in the form of a sale, but at
times it may constitute a dation in payment, such
as when a debtor, in order to obtain a release