LOAN CASES
The defendant failed to fulfill its obligation
SAURA IMPORT and EXPERT CO., INC., vs DBP
[G.R. No. L-24968, April 27, 1972] MAKALINTAL, J.
FACTS:
 In July 1952, Saura, Inc., applied to Rehabilitation Finance
Corp., now DBP, for an industrial loan of P500,000 to be used
for the construction of a factory building, to pay the balance
of the jute mill machinery and equipment and as additional
working capital. In Resolution No.145, the loan application
was approved to be secured first by mortgage on the factory
buildings, the land site, and machinery and equipment to be
installed.
 The mortgage was registered and documents for the
promissory note were executed. But then, later on, was
cancelled to make way for the registration of a mortgage
contract over the same property in favor of Prudential Bank
and Trust Co., the latter having issued Saura letter of credit for
the release of the jute machinery. As security, Saura execute
a trust receipt in favor of the Prudential. For failure of Saura to
pay said obligation, Prudential sued Saura.
 After almost 9 years, Saura Inc, commenced an action
against RFC, alleging failure on the latter to comply with its
obligations to release the loan applied for and approved,
thereby preventing the plaintiff from completing or paying
contractual commitments it had entered into, in connection
with its jute mill project.
 The trial court ruled in favor of Saura, ruling that there was a
perfected contract between the parties and that the RFC
was guilty of breach thereof.
ISSUE: Whether or not there was a perfected contract between the
parties. YES. There was indeed a perfected consensual contract.
HELD:
·Article 1934 provides: An accepted promise to deliver something by
way of commodatum or simple loan is binding upon the parties, but
the commodatum or simple loan itself shall not be perfected until
delivery of the object of the contract.
· There was undoubtedly offer and acceptance in the case. The
application of Saura, Inc. for a loan of P500,000.00 was approved by
resolution of the defendant, and the corresponding mortgage was
executed and registered.
and the plaintiff is therefore entitled to recover damages.
· When an application for a loan of money was approved by
resolution of the respondent corporation and the responding
mortgage was executed and registered, there arises a perfected
consensual contract.
· However, it should be noted that RFC imposed two conditions
(availability of raw materials and increased production) when it
restored the loan to the original amount of P500,000.00.
· Saura, Inc. obviously was in no position to comply with RFC’s
conditions. So instead of doing so and insisting that the loan be
released as agreed upon, Saura, Inc. asked that the mortgage be
cancelled.The action thus taken by both parties was in the nature of
mutual desistance which is a mode of extinguishing obligations. It is a
concept that derives from the principle that since mutual agreement
can create a contract, mutual disagreement by the parties can cause
its extinguishment.
·WHEREFORE, the judgment appealed from is reversed and the
complaint dismissed.
Republic V. Bagtas (1962)
G.R. No. L-17474 October 25, 1962
Laws Applicable: Commodatum
Lessons Applicable:
FACTS:
 May 8, 1948: Jose V. Bagtas borrowed from the Republic of
the Philippines through the Bureau of Animal Industry three
bulls: a Red Sindhi with a book value of P1,176.46, a Bhagnari,
of P1,320.56 and a Sahiniwal, of P744.46, for a period of 1 year
for breeding purposes subject to a breeding fee of 10% of the
book value of the bulls
 May 7, 1949: Jose requested for a renewal for another year
for the three bulls but only one bull was approved while the
others are to be returned
 March 25, 1950: He wrote to the Director of Animal Industry
that he would pay the value of the 3 bulls
  October 17, 1950: he reiterated his desire to buy them at a
value with a deduction of yearly depreciation to be
approved by the Auditor General.
 October 19, 1950: Director of Animal Industry advised him that
either the 3 bulls are to be returned or their book value
without deductions should be paid not later than October 31,
1950 which he was not able to do
 December 20, 1950: An action at the CFI was commenced
against Jose praying that he be ordered to return the 3 bulls
or to pay their book value of P3,241.45 and the unpaid
breeding fee of P199.62, both with interests, and costs
 July 5, 1951: Jose V. Bagtas, through counsel Navarro, Rosete
and Manalo, answered that because of the bad peace and
order situation in Cagayan Valley, particularly in the barrio of
Baggao, and of the pending appeal he had taken to the
Secretary of Agriculture and Natural Resources and the
President of the Philippines, he could not return the animals
nor pay their value and prayed for the dismissal of the
complaint.
 RTC: granted the action
 December 1958: granted an ex-parte motion for the
appointment of a special sheriff to serve the writ outside
Manila
 December 6, 1958: Felicidad M. Bagtas, the surviving spouse
of Jose who died on October 23, 1951 and administratrix of his
estate, was notified
 January 7, 1959: she file a motion that the 2 bulls where
returned by his son on June 26, 1952 evidenced by recipt and
the 3rd bull died from gunshot wound inflicted during a Huk
raid and prayed that the writ of execution be quashed and
that a writ of preliminary injunction be issued.
ISSUE: W/N the contract is commodatum and NOT a lease and the
estate should be liable for the loss due to force majeure due to delay.
HELD: YES. writ of execution appealed from is set aside, without
pronouncement as to costs
 If contract was commodatum then Bureau of Animal
Industry retained ownership or title to the bull it should suffer its
loss due to force majeure. A contract of commodatum is
essentially gratuitous. If the breeding fee be considered a
compensation, then the contract would be a lease of the
bull. Under article 1671 of the Civil Code the lessee would be
subject to the responsibilities of a possessor in bad faith,
because she had continued possession of the bull after the
expiry of the contract. And even if the contract be
commodatum, still the appellant is liable if he keeps it longer
than the period stipulated
 the estate of the late defendant is only liable for the sum of
P859.63, the value of the bull which has not been returned
because it was killed while in the custody of the administratrix
of his estate
 Special proceedings for the administration and settlement of
the estate of the deceased Jose V. Bagtas having been
instituted in the CFI, the money judgment rendered in favor of
the appellee cannot be enforced by means of a writ of
execution but must be presented to the probate court for
payment by the appellant, the administratrix appointed by
the court.
Catholic Vicar Vs. CA
Date: September 31, 1988
Facts:
- 1962: Catholic Vicar Apostolic of the Mountain Province (Vicar),
petitioner, filed with the court an application for the registration of title
over lots 1, 2, 3 and 4 situated in Poblacion Central, Benguet, said lots
being used as sites of the Catholic Church, building, convents, high
school building, school gymnasium, dormitories, social hall and
stonewalls.
- 1963: Heirs of Juan Valdez and Heirs of Egmidio Octaviano claimed
that they have ownership over lots 1, 2 and 3. (2 separate civil cases)
- 1965: The land registration court confirmed the registrable title of
Vicar to lots 1 , 2, 3 and 4. Upon appeal by the private respondents
(heirs), the decision of the lower court was reversed. Title for lots 2 and
3 were cancelled.
- VICAR filed with the Supreme Court a petition for review on certiorari
of the decision of the Court of Appeals dismissing his application for
registration of Lots 2 and 3.
- During trial, the Heirs of Octaviano presented one (1) witness, who
testified on the alleged ownership of the land in question (Lot 3) by
their predecessor-in-interest, Egmidio Octaviano; his written demand
to Vicar for the return of the land to them; and the reasonable rentals
for the use of the land at P10,000 per month. On the other hand, Vicar
presented the Register of Deeds for the Province of Benguet, Atty.
Sison, who testified that the land in question is not covered by any title
in the name of Egmidio Octaviano or any of the heirs. Vicar dispensed
with the testimony of Mons. Brasseur when the heirs admitted that the
witness if called to the witness stand, would testify that Vicar has been
in possession of Lot 3, for 75 years continuously and peacefully and
has constructed permanent structures thereon.
Issue: WON Vicar had been in possession of lots 2 and 3 merely as
bailee borrower in commodatum, a gratuitous loan for use.
Held: YES.
Private respondents were able to prove that their predecessors' house
was borrowed by petitioner Vicar after the church and the convent
were destroyed. They never asked for the return of the house, but
when they allowed its free use, they became bailors in commodatum
and the petitioner the bailee.
The bailees' failure to return the subject matter of commodatum to
the bailor did not mean adverse possession on the part of the
borrower. The bailee held in trust the property subject matter of
commodatum. The adverse claim of petitioner came only in 1951
when it declared the lots for taxation purposes. The action of
petitioner Vicar by such adverse claim could not ripen into title by
way of ordinary acquisitive prescription because of the absence of
just title.
The Court of Appeals found that petitioner Vicar did not meet the
requirement of 30 years possession for acquisitive prescription over
Lots 2 and 3. Neither did it satisfy the requirement of 10 years
possession for ordinary acquisitive prescription because of the
absence of just title. The appellate court did not believe the findings
of the trial court that Lot 2 was acquired from Juan Valdez by
purchase and Lot 3 was acquired also by purchase from Egmidio
Octaviano by petitioner Vicar because there was absolutely no
documentary evidence to support the same and the alleged
purchases were never mentioned in the application for registration.
DARIO NACAR, PETITIONER, VS. GALLERY FRAMES AND/OR FELIPE
BORDEY, JR., RESPONDENTS.
FACTS:
Petitioner Dario Nacar filed a complaint for constructive dismissal
before the Arbitration Branch of the National Labor Relations
Commission (NLRC) against respondents Gallery Frames (GF) and/or
Felipe Bordey, Jr..
On October 15, 1998, the Labor Arbiter rendered a Decision [3] in favor
of petitioner and found that he was dismissed from employment
without a valid or just cause. Thus, petitioner was awarded
backwages and separation pay in lieu of reinstatement in the amount
of P158,919.92. The dispositive portion of the decision, reads:
As such, we are perforce constrained to grant complainant’s prayer
for the payments of separation pay in lieu of reinstatement to his
former position which is computed only up to promulgation of this
decision.
Respondents were found guilty of constructive dismissal and are
therefore, ordered to pay jointly and severally the complainant the
amount of P62,986.56 (separation pay), to pay jointly and severally
the complainant the amount of P95,933.36 (backwages) and all
other claims are hereby dismissed for lack of merit.
Upon appeal, NLRC sustained the decision of the Labor Arbiter.
Respondents filed a Petition for Review on Certiorari before the CA
but was dismissed. Respondents then sought relief before the
Supreme Court which was also denied. An Entry of Judgment was
later issued certifying that the resolution became final and executory
on May 27, 2002 and was then referred back to the Labor Arbiter.
On November 5, 2002, petitioner filed a Motion for Correct
Computation, praying that his backwages be computed from the
date of his dismissal on January 24, 1997 up to the finality of the
Resolution of the Supreme Court on May 27, 2002.[11] Upon
recomputation, the Computation and Examination Unit of the NLRC
arrived at an updated amount in the sum of P471,320.31.[12]
On December 2, 2002, a Writ of Execution[13] was issued by the Labor
Arbiter ordering the Sheriff to collect from respondents the total
amount of P471,320.31. Respondents filed a Motion to Quash Writ of
Execution, arguing, that since the Labor Arbiter awarded separation
pay of P62,986.56 and limited backwages of P95,933.36, no more
recomputation is required to be made of the said awards. The Labor
Arbiter denied the motion. Thus, an Alias Writ of Execution [16] was
issued on January 14, 2003.

Respondents again appealed before the NLRC, and was granted. On
August 20, 2003, an Entry of Judgment was issued declaring the
Resolution of the NLRC to be final and executory. Meanwhile,
petitioner moved that an Alias Writ of Execution be issued to enforce
the earlier recomputed judgment award in the sum of P471,320.31.
The records of the case were again forwarded to the Computation
and Examination Unit for recomputation, where the judgment award
of petitioner was reassessed to be in the total amount of only
P147,560.19.
Petitioner then moved that a writ of execution be issued ordering
respondents to pay him the original amount as determined by the
Labor Arbiter in his Decision dated October 15, 1998, pending the final
computation of his backwages and separation pay.
On January 14, 2003, the Labor Arbiter issued an Alias Writ of
Execution to satisfy the judgment award that was due to petitioner in
the amount of P147,560.19, which petitioner eventually received.
Petitioner then filed a Manifestation and Motion praying for the re-
computation of the monetary award to include the appropriate
interests but the Arbiter granted only up to the amount of P11,459.73.
The Labor Arbiter reasoned that since the decision states that the
separation pay and backwages are computed only up to the
promulgation of the said decision, it is the amount of P158,919.92 that
should be executed. Thus, since petitioner already received
P147,560.19, he is only entitled to the balance of P11,459.73. Petitioner
then appealed before the NLRC but was denied. Upon recourse to
the CA it was also denied.
ISSUE:
WON the Labor Arbiter is correct
WON the 6% per annum rate of legal interest shall be applied
prospectively.
HELD:
No in both cases
There are two parts of a decision when it comes to illegal dismissal
cases (referring to cases where the dismissed employee wins, or loses
but wins on appeal). The first part is the ruling that the employee was
illegally dismissed. This is immediately final even if the employer
appeals – but will be reversed if employer wins on appeal. The second
part is the ruling on the award of backwages and/or separation pay.
For backwages, it will be computed from the date of illegal dismissal
until the date of the decision of the Labor Arbiter. But if the employer
appeals, then the end date shall be extended until the day when the
appellate court’s decision shall become final. Hence, as a
consequence, the liability of the employer, if he loses on appeal, will
increase – this is just but a risk that the employer cannot avoid when it
continued to seek recourses against the Labor Arbiter’s decision. This is
also in accordance with Article 279 of the Labor Code.
Finally, anent the payment of legal interest. In the landmark case of
Eastern Shipping Lines, Inc. v. Court of Appeals,[32] the Court laid down
the guidelines regarding the manner of computing legal interest, to
wit:
II. With regard particularly to an award of interest in the concept of
actual and compensatory damages, the rate of interest, as well as
the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of
a sum of money, i.e., a loan or forbearance of money, the interest
due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the
time it is judicially demanded. In the absence of stipulation, the rate
of interest shall be 12% per annum to be computed from default, i.e.,
from judicial or extrajudicial demand under and subject to the
provisions of Article 1169 of the Civil Code.
2. When an obligation, not constituting a loan or forbearance of
money, is breached, an interest on the amount of damages awarded
may be imposed at the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on unliquidated
claims or damages except when or until the demand can be
established with reasonable certainty. Accordingly, where the
demand is established with reasonable certainty, the interest shall
begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot
be so reasonably established at the time the demand is made, the
interest shall begin to run only from the date the judgment of the
court is made (at which time the quantification of damages may be
deemed to have been reasonably ascertained). The actual base for
the computation of legal interest shall, in any case, be on the amount
finally adjudged.
3. When the judgment of the court awarding a sum of money
becomes final and executory, the rate of legal interest, whether the
case falls under paragraph 1 or paragraph 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.[33]
Recently, however, the Bangko Sentral ng Pilipinas Monetary Board
(BSP-MB), in its Resolution No. 796 dated May 16, 2013, approved the
amendment of Section 2[34] of Circular No. 905, Series of 1982 and,
accordingly, issued Circular No. 799,[35] Series of 2013, effective July 1,
2013, the pertinent portion of which reads:
The Monetary Board, in its Resolution No. 796 dated 16 May 2013,
approved the following revisions governing the rate of interest in the
absence of stipulation in loan contracts, thereby amending Section 2
of Circular No. 905, Series of 1982:
Section 1. The rate of interest for the loan or forbearance of any
money, goods or credits and the rate allowed in judgments, in the
absence of an express contract as to such rate of interest, shall be six
percent (6%) per annum.
Section 2. In view of the above, Subsection X305.1 [36] of the Manual of
Regulations for Banks and Sections 4305Q.1,[37] 4305S.3[38] and
4303P.1[39] of the Manual of Regulations for Non-Bank Financial
Institutions are hereby amended accordingly.
This Circular shall take effect on 1 July 2013.
Thus, from the foregoing, 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[40] 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 its amendment 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.
Nonetheless, with regard to those judgments that have become final
and executory prior to July 1, 2013, said judgments shall not be
disturbed and shall continue to be implemented applying the rate of
interest fixed therein.
And, in addition to the above, judgments that have become final
and executory prior to July 1, 2013, shall not be disturbed and shall
continue to be implemented applying the rate of interest fixed
therein.
WHEREFORE, premises considered, the Decision dated September 23,
2008 of the Court of Appeals in CA-G.R. SP No. 98591, and the
Resolution dated October 9, 2009 are REVERSED and SET ASIDE.
Respondents are Ordered to Pay petitioner:
(1) backwages computed from the time petitioner was illegally
dismissed on January 24, 1997 up to May 27, 2002, when the
Resolution of this Court in G.R. No. 151332 became final and
executory; (2) separation pay computed from August 1990 up to May
27, 2002 at the rate of one month pay per year of service; and (3)
interest of twelve percent (12%) per annum of the total monetary
awards, computed from May 27, 2002 to June 30, 2013 and six
percent (6%) per annum from July 1, 2013 until their full satisfaction.
SPOUSES ANDAL vs PNB
FACTS:
Sept. 7, 1995, petitioners obtained a loan from respondent bank
(P21.8M) for which 12 promissory notes were executed, with varying
interest rates (17.5-27%). It was agreed that the rate of interest may be
increased or decreased with prior notice to the petitioners in the
event of changes in interest rates prescribed by law or the Monetary
Board.
Petitioners also executed a real estate mortgage in favor of the
respondent bank over 5 parcels of lands, including all improvements
thereon, covered by Transfer of Certificate Titles of the Registry of
Deeds.
Respondent bank advised petitioners to pay their loan, otherwise they
would declare it due and demandable. Petitioners paid P14.8M to
avoid foreclosure. Respondent bank executed a release of real estate
mortgage over two of the parcels of land. Despite payment,
respondent foreclosed the remaining real estate mortgage over the
remaining three parcels of land.
A public auction sale resulted in respondent bank as the winning
bidder. A Certificate of sale of the properties was issued.
Petitioners filed a complaint for annulment of mortgage, sheriff’s
certificate of sale, declaration of nullity of the increased interest rates
and penalty charges plus damages.
CONTENTION OF THE PETITIONERS:
1. They tried to pay their loan obligation but the
exorbitant rate of interest unilaterally determined and
imposed by the respondent bank.
2. They signed the promissory notes in blank, relying on
the representation that they were bank requirements
3. The exobrbitant and unilateral interest rates are a
form of unjust enrichment, giving respondent
4. bank no right to foreclose the mortgages
RTC Ruling: In favor of petitioners, ordering that the rate of interest be
reduced to 6% in accordance with Art. 2209, NCC and declaring the
foreclosure sales as void.
CA Ruling: Affirmed the RTC decision with the modification that the
interest be 12% per annum instead of 6%. Stipulations in a contract
have the force of law between the parties so long as they are not
contrary to law, morals, etc. Since parties expressly stipulated in the
promissory notes that a rate of interest would be applied, the
petitioners are bound thereby.
The CA finds it more credible that the petitioners had signed blank
promissory notes which respondent bank had filled with high interest
rates. This violates the principle of mutuality of contracts. Since the
interest rates in the promissory notes are void, the rate of interest
should be 12% (since what is involved is a loan or forebearance of
money).
Petitioners-spouses insist that "if the application of the doctrine of
operative facts is upheld, as applied in Caraig vs. Alday, interest in the
instant case would be computed only from the finality of judgment
declaring the foreclosure sale null and void. If Mercado vs. China
Banking Corporation, applying by analogy the rule on void usurious
interest to void potestative interest rate, is further sustained, no interest
is due when the potestative interest rate stipulation is declared null
and void, as in the instant case.
ISSUES: Whether interest should be imposed on the loan.
RULING: Yes. The petitioners had agreed to payment of interest on
their loan obligation. The subsequent declaration that the rate of
interest was illegal does not entitle them to stop payment of interest.
Only the rate was declared void, but the stipulation requiring them to
pay interest remains valid and binding. They are liable to pay interest
from the time they defaulted until the obligation is fully paid.
Petition is DENIED and the CA decision is AFFIRMED with the
MODIFICATION that the 12% interest per annum shall be applied from
the date of default until June 30, 2013, after which date and until fully
paid, the obligation shall earn interest at 6% per annum.
RESTITUTA IMPERIAL V. ALEX A. JAUCIAN (April 14, 2004)
FACTS:
Petitioner obtained six (6) separate loans amounting to P
320,000.00 from the respondent. In the written agreement, they
agreed upon the 16% interest per month plus penalty charge of 5%
per month and the 25% attorney’s fee, failure to pay the said loans on
the stipulated date.
Petitioner executed six (6) separate promissory notes and
issued several checks as guarantee for payment. When the said loans
become overdue and unpaid, especially when the petitioner’s
checks issued were dishonored, respondent made repeated oral and
written demands for payment.
The petitioner was able to pay only P 116,540.00 as found by
the RTC. Although she alleged that she had already paid the amount
of P 441,780.00 and the excess of P 121,780.00 is more than the interest
that could be legally charged, the Court affirms the findings of RTC
that petitioner is still indebted to the respondent.
ISSUE:
Whether or not the stipulated interest of 16% per month, 5% per
month for penalty charge and 25% attorney’s fee are usurious.
HELD:
YES. The rate must be equitably reduced for being iniquitous,
unconscionable and exorbitant. While the Usury Law ceiling on
interest rates was lifted by C.B. Circular No. 905, nothing in the said
circular grants lenders carte blanche authority to raise interests rates
to levels which will either enslave their borrowers or lead to a
hemorrhaging of their assets.
When the agreed rate is iniquitous or unconscionable, it
considered contrary to morals, if not against the law. Such stipulation
is void. Since the stipulation is void, it is as if there was no express
contract thereon. Hence, courts may reduce the interest rate as
reason and equity demand.
The interest rate of 16% per month was reduced to 1.167% per
month or 14% per annum and the penalty charge of 5% per month
was also reduced to 1.167% per month or 14% per annum.
The attorney’s fees here are in the nature of liquidated
damages and the stipulation therefor is aptly called a penal clause.
So long as the stipulation does not contravene the law, morals, public
order or public policy, it is binding upon the obligor. Nevertheless, in
the case at bar, petitioner’s failure to comply fully with her obligation
was not motivated by ill will or malice. The partial payments she made
were manifestations of her good faith. Hence the attorney’s fees were
reduced to 10% of the total due and payable.
DEPOSIT CASES with the respondent Bank; without this key, neither of the renters could
open the box. On the other hand, the respondent Bank could not
CA Agro Industrial Development Corp., vs Court of Appeals GR# 90027 likewise open the box without the renter's key. In this case, the said
March 3, 193 key had a duplicate which was made so that both renters could have
DAVIDE, JR., J: access to the box.
THE METROPOLITAN BANK AND TRUST COMPANY, Petitioner, vs
Facts:
ANA GRACE ROSALES AND YO YUK TO, Respondents.
Petitioner and the spouses Ramon and Paula Pugao entered into an
G.R. No. 183204 January 13, 2014
agreement whereby the former purchased from the latter two (2)
parcels of land. Among the terms and conditions of the agreement
PONENTE: Del Castillo
were that the titles to the lots shall be transferred to the petitioner
upon full payment of the purchase price and that the owner's copies
FACTS:
of the certificates of titles thereto, and that title shall be deposited
Petitioner Metrobank is a domestic banking corporation duly
shall be deposited in a safety deposit box of any bank. Petitioner and
organized and existing under the laws of the Philippines. Respondent
the Pugaos then rented Safety Deposit Box of private respondent
Rosales is the owner of a travel agency while Yo Yuk To is her mother.
Security Bank and Trust Company.
In 2000, respondents opened a Joint Peso Account10 with
petitioner’s Pritil-Tondo Branch.
Thereafter, a certain Mrs. Margarita Ramos offered to buy from the
In May 2002, respondent Rosales accompanied her client Liu
petitioner the two (2) lots. Mrs. Ramos demanded the execution of a
Chiu Fang, a Taiwanese National applying for a retiree’s visa from the
deed of sale which necessarily entailed the production of the
Philippine Leisure and Retirement Authority (PLRA), to petitioner’s
certificates of title. In view thereof, Aguirre, accompanied by the
branch in Escolta to open a savings account. Since Liu Chiu Fang
Pugaos, then proceeded to the respondent Bank to open the safety
could speak only in Mandarin, respondent Rosales acted as an
deposit box and get the certificates of title. However, when opened
interpreter for her.
in the presence of the Bank's representative, the box yielded no such
On March 3, 2003, respondents opened with petitioner’s Pritil-
certificates.
Tondo Branch a Joint Dollar Account with an initial deposit of
US$14,000.00.
Issue:
On July 31, 2003, petitioner issued a “Hold Out” order against
Is the contractual relation between a commercial bank and another
respondents’ accounts.
party in a contract of rent of a safety deposit box with respect to its
On September 3, 2003, petitioner, through its Special Audit
contents placed by the latter one of bailor and bailee or one of lessor
Department Head Antonio Ivan Aguirre, filed before the Office of the
and lessee?
Prosecutor of Manila a criminal case for Estafa through False
Pretences, Misrepresentation, Deceit, and Use of Falsified Documents.
Held:
Respondent Rosales, however, denied taking part in the
The contract for the rent of the safety deposit box is not an ordinary
fraudulent and unauthorized withdrawal from the dollar account of
contract of lease as defined in Article 1643 of the Civil Code.
Liu Chiu Fang.
However, We do not fully subscribe to its view that the same is a
On December 15, 2003, the Office of the City Prosecutor of
contract of deposit that is to be strictly governed by the provisions in
Manila issued a Resolution dismissing the criminal case for lack of
the Civil Code on deposit; the contract in the case at bar is a special
probable cause. On September 10, 2004, respondents filed before the
kind of deposit. It cannot be characterized as an ordinary contract of
RTC of Manila a complaint for Breach of Obligation and Contract with
lease under Article 1643 because the full and absolute possession and
Damages.
control of the safety deposit box was not given to the joint renters —
the petitioner and the Pugaos. The guard key of the box remained
ISSUE:
 Whether Metrobank breached its contract with respondents.
HELD:
YES. The Court held that Metrobank’s reliance on the “Hold
Out” clause in the Application and Agreement for Deposit Account is
misplaced.
Bank deposits, which are in the nature of a simple loan or
mutuum, must be paid upon demand by the depositor.
The “Hold Out” clause applies only if there is a valid and
existing obligation arising from any of the sources of obligation
enumerated in Article 1157 of the Civil Code, to wit: law, contracts,
quasi-contracts, delict, and quasi-delict. In this case, petitioner failed
to show that respondents have an obligation to it under any law,
contract, quasi-contract, delict, or quasi-delict. And although a
criminal case was filed by petitioner against respondent Rosales, this is
not enough reason for petitioner to issue a “Hold Out” order as the
case is still pending and no final judgment of conviction has been
rendered against respondent Rosales.
In fact, it is significant to note that at the time petitioner
issued the “Hold Out” order, the criminal complaint had not yet been
filed. Thus, considering that respondent Rosales is not liable under any
of the five sources of obligation, there was no legal basis for petitioner
to issue the “Hold Out” order. Accordingly, we agree with the findings
of the RTC and the CA that the “Hold Out” clause does not apply in
the instant case.
In view of the foregoing, the Court found that petitioner is
guilty of breach of contract when it unjustifiably refused to release
respondents’ deposit despite demand. Having breached its contract
with respondents, petitioner is liable for damages.
FALLO:
WHEREFORE, the Petition is hereby DENIED. The assailed April
2, 2008 Decision and the May 30, 2008 Resolution of the Court
of Appeals in CA-G.R. CV No. 89086 are hereby AFFIRMED.
Teofisto Guingona, Jr., Antonio Martin, and Teresita Santos vs. The City
Fiscal of Manila, Hon. Jose Flaminiano, Asst. City Fiscal Felizardo Lota
and
Facts:
From March 1979 to March 1981, Clement David made several
investments with the National Savings and Loan Association. On
March 21, 1981, the bank was placed under receivership by the
Bangko Sentral. Upon David’s request, petitioners Guingona and
Martin issued a joint promissory note, absorbing the obligations of the
bank. On July 17, 1981, they divided the indebtedness. David filed a
complaint for estafa and violation of Central Bank Circular No. 364
and related regulations regarding foreign exchange transactions
before the Office of the City Fiscal of Manila. Petitioners filed the
herein petition for prohibition and injunction with a prayer for
immediate issuance of restraining order and/or writ of preliminary
injunction to enjoin the public respondents to proceed with the
preliminary investigation on the ground that the petitioners’ obligation
is civil in nature.
Issue:
(1) Whether the contract between NSLA and David is a contract of
depositor a contract of loan, which answer determines whether the
City Fiscal has the jurisdiction to file a case for estafa
(2) Whether there was a violation of Central Bank Circular No. 364
Held:
(1) When private respondent David invested his money on nine. and
savings deposits with the aforesaid bank, the contract that was
perfected was a contract of simple loan or mutuum and not a
contract of deposit. Hence, the relationship between the private
respondent and the Nation Savings and Loan Association is that of
creditor and debtor; consequently, the ownership of the amount
deposited was transmitted to the Bank upon the perfection of the
contract and it can make use of the amount deposited for its banking
operations, such as to pay interests on deposits and to pay
withdrawals. While the Bank has the obligation to return theamount
deposited, it has, however, no obligation to return or deliver the same
money that was deposited. And, the failure of the Bank to return the
amount deposited will not constitute estafa through misappropriation
punishable under Article 315, par. l(b) of the Revised Penal Code, but
it will only give rise to civil liability over which the public respondents
have no jurisdiction.
But even granting that the failure of the bank to pay the time and
savings deposits of private respondent David would constitute a
violation of paragraph 1(b) of Article 315 of the Revised Penal Code,
nevertheless any incipient criminal liability was deemed avoided,
because when the aforesaid bank was placed under receivership by
the Central Bank, petitioners Guingona and Martin assumed the
obligation of the bank to private respondent David, thereby resulting
in the novation of the original contractual obligation arising from
deposit into a contract of loan and converting the original trust
relation between the bank and private respondent David into an
ordinary debtor-creditor relation between the petitioners and private
respondent. Consequently, the failure of the bank or petitioners
Guingona and Martin to pay the deposits of private respondent
would not constitute a breach of trust but would merely be a failure to
pay the obligation as a debtor. Moreover, while it is true that novation
does not extinguish criminal liability, it may however, prevent the rise
of criminal liability as long as it occurs prior to the filing of the criminal
information in court. In the case at bar, there is no dispute that
petitioners Guingona and Martin executed a promissory note on June
17, 1981 assuming the obligation of the bank to private respondent
David; while the criminal complaint for estafa was filed on December
23, 1981 with the Office of the City Fiscal. Hence, it is clear that
novation occurred long before the filing of the criminal complaint with
the Office of the City Fiscal. Consequently, as aforestated, any
incipient criminal liability would be avoided but there will still be a civil
liability on the part of petitioners Guingona and Martin to pay the
assumed obligation.
(2) Petitioner Guingona merely accommodated the request of the
Nation Savings and loan Association in order to clear the bank draft
through his dollar account because the bank did not have a dollar
account. Immediately after the bank draft was cleared, petitioner
Guingona authorized Nation Savings and Loan Association to
withdraw the same in order to be utilized by the bank for its
operations. It is safe to assume that the U.S. dollars were converted
first into Philippine pesos before they were accepted and deposited in
Nation Savings and Loan Association, because the bank is presumed
to have followed the ordinary course of the business which is to
accept deposits in Philippine currency only, and that the transaction
was regular and fair, in the absence of a clear and convincing
evidence to the contrary.
In conclusion, considering that the liability of the petitioners is purely
civil in nature and that there is no clear showing that they engaged in
foreign exchange transactions, We hold that the public respondents
acted without jurisdiction when they investigated the charges against
the petitioners. Consequently, public respondents should be
restrained from further proceeding with the criminal case for to allow
the case to continue, even if the petitioners could have appealed to
the Ministry of Justice, would work great injustice to petitioners and
would render meaningless the proper administration of justice.
PAULINO GULLAS V. PNB (G.R. NO. L-43191)
Facts:
Petitioner Gullas maintains a current account with herein
respondent PNB. He together with one Pedro Lopez signed as
endorsers of a Warrant issued by the US Veterans Bureau
payable to the order of one Francisco Bacos. PNB cashed the
check but was subsequently dishonored by the Insular
Treasurer. PNB then sent notices to petitioner which could not
be delivered to him at the time because he was in Manila. PNB
in the letter informed the petitioner the outstanding balance
on his account was applied to the part payment of the
dishonored check. Upon petitioner’s return, he received the
notice of dishonor and immediately paid the unpaid balance
of the warrant. As a consequence of these, petitioner was
inconvenienced when his insurance was not paid due to lack
of funds and was publicized widely at his area to his
mortification.
Issue:
Whether or not PNB has the right to apply petitioner’s deposit
to his debt to the bank.
Ruling: NO.
As a general rule, a bank has a right of set off of the deposits in
its hands for the payment of any indebtedness to it on the part
of a depositor. The Civil Code contains provisions regarding
compensation (set off) and deposit. The portions of Philippine
law provide that compensation shall take place when two
persons are reciprocally creditor and debtor of each other. In
this connection, it has been held that the relation existing
between a depositor and a bank is that of creditor and
debtor. [General Rule]
Starting, therefore, from the premise that the Philippine
National Bank had with respect to the deposit of Gullas a right
of set off, we next consider if that remedy was enforced
properly. The fact we believe is undeniable that prior to the
mailing of notice of dishonor, and without waiting for any
action by Gullas, the bank made use of the money standing in
his account to make good for the treasury warrant.
Gullas was merely an indorser and had issued in good faith. As
to an indorser, the situation is different and notice should
actually have been given him in order that he might protect
his interests. We accordingly are of the opinion that the action
of the bank was prejudicial to Gullas.
DE LOS SANTOS vs TAN KHEY
O.G.No.26695-R, July 30, 1962
Facts:
Tan Khey was the owner of International Hotel located
in Iloilo city. Romeo de los Santos lodged in Tna Khey’s hotel.
After arrival, he left the hotel, depositing his revolver and his
bag with the person in charge in the hotel. When he returned
to the hotel, he took his revolver and his bag from the person in
charge in the hotel and proceeded to his room. He locked the
door before sleeping.
When he woke up, he discovered that the door in his
room was opened and his bag and pants, wherein he placed
his revolver , was missing. He reported the matter to the
Assistant Manager of the hotel, who in turn informed Tan Khey.
A secret service agent was sent to investigate and it
was found that the wall of the room occupied by De los Santos
was only seven feet high with an open space above through
which one could enter from outside. De los Santos told the
detective that he lost his revolver.
Tan Khey disclaimed liability because De los Santos did
not deposit his properties with the manager despite a notice to
that effect was posted in the hotel.
Tan Khey contended that to be liable under Article
1998 of the Civil Code, the following conditions must concur:
1. Deposit of effects by travellers in hotel or inn
2. Notice given to hotel keepers or employees of the
effects brought by guests
3. Guest or travellers take the precautions which said
hotel keepers or their substitutes advised relative to
the care and vigilance of their effects.
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 non-existent 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
innkeeper’s 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.
CASE TITLE: PDIC vs CA
GR NO.: 126911
DATE: April 30, 2003
PETITIONER: Philippine Development Insurance Corporation
RESPONDENT: CA and Jose Abad
FACTS:
Respondents had 71 Golden Time Deposits(GTDs) in Manila
Banking Corporation(MBC). HOWEVER, Bangko Sentral of the
Philippines issued a memorandum prohibiting MBC to do
business in the Philippines and placed its assets under
receivership. On the next banking day, respondent Jose Abad
pre-terminated his 71 GTDs and redposited the fund into 28
GTDs in larger denominations. Thereafter, respondent filed their
claims for the payment of the insured GTDs.
Petitioner PDIC argued that the insured GTDs should not be
recognized since they were mere derivatives of respondents
previous account balances pre-terminated at the time the
MBC was aslready in serious financial distress. Under its charter,
they contend that they are only liable for deposits received in
the usual course of business.
Consequently, Petitioner filed a petition for declaratory relief
against respondents for a judicial determination of the
insurability of respondents. In turn, Jose Abad SET UP A
COUNTER-CLAIM against PDIC whereby they asked for
payment of the insured deposits.
The SC later on ruled in favor of the respondents due to
petitioner having failed to overcome the presumption that it
was issued in the ordinary course of business. The trial court
then ordered petitioner to pay the balance of the deposit
insurance to respondents.
MAIN ISSUE:
WON the trial court erred in ordering the payment of the
deposit insurance since a petition for declaratory relief does
not essentially entail an executory process- the only relief being
granted is a declaration of the rights and duties.
HELD:
NO, the RTC’s action was proper. Without doubt, a petition for
declaratory relief does not essentially entail an executory
process. HOWEVER, there is nothing in its nature that prohibits a
counterclaim from being set-up in the same action.
A special civil action is not essentially different from an ordinary
civil action, which is generally governed by Rules 1 to 56 of the
Rules of Court, except that the former deals with a special
subject matter which makes necessary some special
regulation. But the identity between their fundamental nature
is such that the same rules governing ordinary civil suits may
and do apply to special civil actions if not inconsistent with or if
they may serve to supplement the provisions of the peculiar
rules governing special civil actions.
Petitioner additionally submits that the issue of determining the
amount of deposit insurance due respondents was never tried
on the merits since the trial dwelt only on the determination of
the viability or validity of the deposits and no evidence on
record sustains the holding that the amount of deposit due
respondents had been finally determined. This issue was not
raised in the court a quo, however, hence, it cannot be raised
for the first time in the petition at bar.