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Navoa vs CA

Facts:
On December 1977 Teresita Domdoma and Eduardo Domdoma filed a case with the RTC for
collection of various sums of money based on loans given by them to Olivia Navoa.
They cased was dismissed on the ground that there was no cause of action and that
the Domdoma�s do not have no capacity to sue. They appealed to the C.A. and was
granted a favourable decision.
There were 6 instances in which the Domdoma�s gave Olivia Navoa a loan. The first
instance is when Teresita gave Olivia a diamond ring valued at 15,000.00 which was
secured by a PCIB check under the condition that if the ring was not returned
within 15 days from August 15, 1977 the ring is considered sold. Teresita attempted
to deposit the check on November 1977 but the check was not honoured for lack of
funds. After this instance, there were other loans of various amounts that were
extended by Teresita to Olivia, loans which were secured by PCIB checks, which were
all dated to 1 month after the loan. All these checks were not honoured under the
same reason as the first loan.
Issue:
Was the decision of the RTC to dismiss the case due to having no cause of action
valid?
Held:
NO, A cause of action is the fact or combination of facts which affords a party a
right to judicial interference in his behalf.
- For the first loan it is a fact, that the ring was considered sold to Olivia
Navoa 15 days after August 15, 1977, and even then, Olivia Navoa failed to pay the
price for the ring when the payment was due (check issued was not honoured. Thus it
is confirmed that Teresita�s right under the agreement was violated.
- As for the other loans extended by Teresita to Olivia, they were all secured by
PCIB checks. It can be inferred that since the checks were all dated to 1 month
after the loan, it follows that the loans are then payable 1 month after they were
contracted, and also these checks were dishonoured by the bank for lack of funds.
- Olivia and Ernesto Navoa failed to make good the checks that were issued as
payment for their obligations. Art 1169 of the Civil Code is explicit: those
obliged to deliver or to do something incur in delay from the time the obligee
judicially or extra-judicially demands from them the fulfilment of the obligations,
the continuing refusal of Olivia and Ernesto Navoa to comply with the demand of
payment shows the existence of a cause of action.

The petition is DENIED and the decision of the C.A. remanding the case to the RTC
for trial on the merits is affirmed.
Obligations and Contracts terms:
Security- A means of ensuring the enforcement of an obligation or of protecting
some interest in property. It may be personal or property security.
Cause of Action- is the fact or combination of facts which affords a party a right
to judicial interference in his behalf. The requisites for a cause of action are:
(a) a right in favour of the plaintiff by whatever means and under whatever law it
arises or created, (b) an obligation on the part of the defendant to respect and
not to violate such right; and, (c) an act or omission on the part of the defendant
constituting a violation of the plaintiff�s right or breach of the obligation of
the defendant to the plaintiff.

Herrera vs Petro Phil Corp


FACTS:
On December 5, 1969, Herrera and ESSO Standard, (later substituted by Petrophil
Corp.,) entered into a lease agreement, whereby the former leased to the latter a
portion of his property for a period of 20yrs. subject to the condition that
monthly rentals should be paid and there should be an advance payment of rentals
for the first eight years of the contract, to which ESSO paid on December 31, 1969.
However, ESSO deducted the amount of 101, 010.73 as interest or discount for the
eight years advance rental.On August 20, 1970, ESSO informed Herrera that there had
been a mistake in the computation of the interest and paid an additional sum of
2,182.70; thus, it was reduced to 98, 828.03.As such, Herrera sued ESSO for the sum
of 98, 828.03, with interest, claiming that this had been illegally deducted to him
in violation of the Usury Law. ESSO argued that amount deducted was not usurious
interest but rather a discount given to it for paying the rentals in advance.
Judgment on the pleadings was rendered in favor of ESSO. Thus, the matter was
elevated to the SC for only questions of law was involve.
ISSUE: W/N the contract between the parties is one of loan or lease.
RULING:
Contract between the parties is one of lease and not of loan. It is clearly
denominated a "LEASE AGREEMENT." Nowhere in the contract is there any showing that
the parties intended a loan rather than a lease. 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 an 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 loan nor forbearance but a mere discount which the
plaintiff-appellant allowed the defendant-appellee to deduct 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."
It has been held that the elements of usury are (1) a loan, express or implied; (2)
an understanding between the parties that the money lent shall or may be returned;
that for such loan a greater rate or interest that is allowed by law shall be paid,
or agreed to be paid, as the case may be; and (4) a corrupt intent to take more
than the legal rate for the use of money loaned. Unless these four things concur in
every transaction, it is safe to affirm that no case of usury can be declared.

Central Bank vs CA
The bank�s asking for advance interest for the loan is improper considering that
the total loan hasn�t been released. A person can�t be charged interest for
nonexisting debt. The alleged discovery by the bank of overvaluation of the loan
collateral is not an issue. Since Island Savings Bank failed to furnish the
P63,000.00 balance of the P80,000.00 loan, the real estate mortgage of Sulpicio M.
Tolentino became unenforceable to such extent.
Facts: Island Savings Bank, upon favorable recommendation of its legal department,
approved the loan application for P80,000.00 of Sulpicio M. Tolentino, who, as a
security for the loan, executed on the same day a real estate mortgage over his
100-hectare land located in Cubo, Las Nieves, Agusan. The loan called for a lump
sum of P80,000, repayable in semi-annual installments for 3 yrs, with 12% annual
interest. After the agreement, a mere P17K partial release of the loan was made by
the bank and Tolentino and his wife signed a promissory note for the P17,000 at 12%
annual interest payable w/in 3 yrs. An advance interest was deducted fr the partial
release but this prededucted interest was refunded to Tolentino after being
informed that there was no fund yet for the release of the P63K balance.
Monetary Board of Central Bank, after finding that bank was suffering liquidity
problems, prohibited the bank fr making new loans and investments. And after the
bank failed to restore its solvency, the Central Bank prohibited Island Savings
Bank from doing business in the Philippines. Island Savings Bank in view of the
non-payment of the P17K filed an application for foreclosure of the real estate
mortgage. Tolentino filed petition for specific performance or rescission and
damages with preliminary injunction, alleging that since the bank failed to deliver
P63K, he is entitled to specific performance and if not, to rescind the real estate
mortgage.

Issues:
1) Whether or not Tolentino�s can collect from the bank for damages
2) Whether or not the mortgagor is liable to pay the amount covered by the
promissory note
Held:
1) Whether or not Tolentino�s can collect from the bank for damages
The loan agreement implied reciprocal obligations. When one party is willing and
ready to perform, the other party not ready nor willing incurs in delay. When
Tolentino executed real estate mortgage, he signified willingness to pay. That
time, the bank�s obligation to furnish the P80K loan accrued. Now, the Central Bank
resolution made it impossible for the bank to furnish the P63K balance. The
prohibition on the bank to make new loans is irrelevant bec it did not prohibit the
bank fr releasing the balance of loans previously contracted. Insolvency of debtor
is not an excuse for non-fulfillment of obligation but is a breach of contract.
The bank�s asking for advance interest for the loan is improper considering that
the total loan hasn�t been released. A person can�t be charged interest for
nonexisting debt. The alleged discovery by the bank of overvaluation of the loan
collateral is not an issue. The bank officials should have been more responsible
and the bank bears risk in case the collateral turned out to be overvalued.
Furthermore, this was not raised in the pleadings so this issue can�t be raised.
The bank was in default and Tolentino may choose bet specific performance or
rescission w/ damages in either case. But considering that the bank is now
prohibited fr doing business, specific performance cannot be granted. Rescission is
the only remedy left, but the rescission shld only be for the P63K balance.
2) Whether or not the mortgagor is liable to pay the amount covered by the
promissory note
The promissory note gave rise to Sulpicio M. Tolentino�s reciprocal obligation to
pay the P17,000.00 loan when it falls due. His failure to pay the overdue
amortizations under the promissory note made him a party in default, hence not
entitled to rescission (Article 1191 of the Civil Code). If there is a right to
rescind the promissory note, it shall belong to the aggrieved party, that is,
Island Savings Bank. If Tolentino had not signed a promissory note setting the date
for payment of P17,000.00 within 3 years, he would be entitled to ask for
rescission of the entire loan because he cannot possibly be in default as there was
no date for him to perform his reciprocal obligation to pay. Since both parties
were in default in the performance of their respective reciprocal obligations, that
is, Island Savings Bank failed to comply with its obligation to furnish the entire
loan and Sulpicio M. Tolentino failed to comply with his obligation to pay his
P17,000.00 debt within 3 years as stipulated, they are both liable for damages.

Abella vs Abella
FACTS: Petitioners Spouses Salvador and Alma Abella filed a Complaint for sum of
money and damages against respondents Spouses Romeo and Annie Abella wherein it was
alleged that respondents obtained a loan from them in the amount of P500K. The loan
was evidenced by an acknowledgment receipt dated March 22, 1999 and was payable
within one (1) year. Petitioners added that respondents were able to pay a total of
P200K�P100K paid on two separate occasions�leaving an unpaid balance of P300K.
In their Answer, respondents alleged that the amount involved did not pertain to a
loan but was part of the capital for a joint venture involving the lending of money
when respondents that they were approached by petitioners, who proposed that if
respondents were to "undertake the management of whatever money [petitioners] would
give them, [petitioners] would get 2.5% a month with a 2.5% service fee to
[respondents]." Moreover, they claimed that the entire amount of P500,000.00 was
disposed of in accordance with their agreed terms and conditions and that
petitioners terminated the joint venture, prompting them to collect from the joint
venture's borrowers. They were, however, able to collect only to the extent of
P200,000.00; hence, the P300,000.00 balance remained unpaid.The RTC ruled in favor
of petitioners. On respondents' appeal, the Court of Appeals ruled that while
respondents had indeed entered into a simple loan with petitioners, respondents
were no longer liable to pay the outstanding amount of P300,000.00.

ISSUE1: What contract was entered into by the parties?


HELD1: Respondents entered into a simple loan or mutuum, rather than a joint
venture, with petitioners.Respondents' claims, as articulated in their testimonies
before the trial court, cannot prevail over the clear terms of the document
attesting to the relation of the parties. "If the terms of a contract are clear and
leave no doubt upon the intention of the contracting parties, the literal meaning
of its stipulations shall control.�
ISSUE2: Whether interest accrued on respondents' loan from petitioner and if in the
affirmative, at what rate?
HELD2: First issue - Guided by the decision in Nacar v. Gallery Frames: In the
absence of an express stipulation as to the rate of interest that would govern the
parties, the rate of legal interest for loans or forbearance of any money, goods or
credits and the rate allowed in judgments shall no longer be twelve percent (12%)
per annum � as reflected in the case of Eastern Shipping Lines and Subsection
X305.1 of the Manual of Regulations for Banks and Sections 4305Q.1, 4305S.3 and
4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions, before
itsamendment by BSP-MB Circular No. 799 � but will now be six percent (6%) per
annum effective July 1, 2013.
It should be noted, nonetheless, that the new rate could only be applied
prospectively and not retroactively. Consequently, the twelve percent (12%) per
annum legal interest shall apply only until June 30, 2013. Come July 1, 2013 the
new rate of six percent (6%) per annum shall be the prevailing rate of interest
when applicable

Osmena-Jalandoni vs Encomienda
Facts: Encomienda narrated that she met petitioner Georgia Osme�a-Jalandoni in Cebu
on October 24, 1995, when the former was purchasing a condominium unit and the
latter was the real estate broker. Thereafter, Encomienda and Jalandoni became
close friends. On March 2, 1997, Jalandoni called Encomienda to ask if she could
borrow money for the search and rescue operation of her children in Manila, who
were allegedly taken by their father, Luis Jalandoni. All in all, Encomienda spent
around ?3,245,836.02 and $6,638.20 for Jalandoni.
When Jalandoni came back to Cebu on July 14, 1997, she never informed Encomienda.
Encomienda then later gave Jalandoni six (6) weeks to settle her debts. Despite
several demands, no payment was made. Jalandoni insisted that the amounts given
were not in the form of loans. When they had to appear before the Barangay for
conciliation, no settlement was reached. Hence, Encomienda filed a complaint. She
impleaded Luis as a necessary party, being Georgia�s husband.
For her defense, Jalandoni claimed that there was never a discussion or even just
an allusion about a loan. She confirmed that Encomienda would indeed deposit money
in her bank account and pay her bills in Cebu. But when asked, Encomienda would
tell her that she just wanted to extend some help and that it was not a loan. When
Jalandoni returned to Cebu, Encomienda wanted to fetch her at the airport but the
former refused. This allegedly made Encomienda upset, causing her to eventually
demand payment for the amounts originally intended to be gratuitous.
Issue: Whether or not Encomienda is entitled to be reimbursed for the amounts she
defrayed for Jalandoni considering that she claimed they were given without her
knowledge.
Rulings: It must be stressed, however, that the trial court merely found that no
documentary evidence was offered showing Jalandoni�s authorization or undertaking
to pay the expenses. But the second paragraph of Article 1236 of the Civil Code
provides:
Whoever pays for another may demand from the debtor what he has paid, except that
if he paid without the knowledge or against the will of the debtor, he can recover
only insofar as the payment has been beneficial to the debtor.
Clearly, Jalandoni greatly benefited from the purportedly unauthorized payments.
Thus, even if she asseverates that Encomienda�s payment of her household bills was
without her knowledge or against her will, she cannot deny the fact that the same
still inured to her benefit and Encomienda must therefore be consequently
reimbursed for it.
The RTC likewise harped on the fact that if Encomienda really intended the amounts
to be a loan, normal human behavior would have prompted at least a handwritten
acknowledgment or a promissory note the moment she parted with her money for the
purpose of granting a loan. This would be particularly true if the loan obtained
was part of a business dealing and not one extended to a close friend who suddenly
needed monetary aid. In fact, in case of loans between friends and relatives, the
absence of acknowledgment receipts or promissory notes is more natural and real.
Contracts are binding between the parties, whether oral or written. The law is
explicit that contracts shall be obligatory in whatever form they may have been
entered into, provided all the essential requisites for their validity are present.
The principle of unjust enrichment finds application in this case. Unjust
enrichment exists when a person unfairly retains a benefit to the loss of another,
or when a person retains money or property of another against the fundamental
principles of justice, equity, and good conscience. There is unjust enrichment
under Article 22 of the Civil Code when (1) a person is unjustly benefited, and (2)
such benefit is derived at the expense of or with damages to another. The principle
of unjust enrichment essentially contemplates payment when there is no duty to pay,
and the person who receives the payment has no right to receive it. The CA is then
correct when it ruled that allowing Jalandoni to keep the amounts received from
Encomienda will certainly cause an unjust enrichment on Jalandoni� s part and to
Encomienda�s damage and prejudice.

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