G.R. No.

103576 August 22, 1996

1. ACME SHOE, RUBBER & PLASTIC CORPORATION vs. CA.

FACTS:
 27 June 1978 - Chua Pac (general manager) of Acme Shoe, Rubber & Plastic Corporation executed in
behalf of Acme, a chattel mortgage in favor of Producers Bank of the Philippines. This is to secure a
corporate loan of P3M.
 Chattel mortgage had a provision which provides that “If the MORTGAGOR, his heirs, executors or
administrators shall well and truly perform the full obligation or obligations above-stated according to
the terms thereof, then this mortgage shall be null and void. . .
In case the MORTGAGOR executes subsequent promissory note or notes either as a renewal of the
former note, as an extension thereof, or as a new loan, or is given any other kind of accommodations
such as overdrafts, letters of credit, acceptances and bills of exchange, releases of import shipments on
Trust Receipts, etc., this mortgage shall also stand as security for the payment of the said promissory
note or notes and/or accommodations without the necessity of executing a new contract and this
mortgage shall have the same force and effect as if the said promissory note or notes and/or
accommodations were existing on the date thereof. This chattel mortgage shall also stand as
security for said obligations and any and all other obligations of the MORTGAGOR to the
MORTGAGEE of whatever kind and nature, whether such obligations have been contracted
before, during or after the constitution of this mortgage.
 Loan of P3M paid. Obtained another loan in 1981 P2.7M and was also paid.
 10 and 11 January 1984, bank again obtained loan of P1M in 4 promissory notes of 250K each. Due to
financial constraints, the loan was not settled at maturity.
 Bank applied for extrajudicial foreclosure of chattel mortgage. Acme filed action for injunction
however RTC ultimately dismissed complaint and ordered foreclosure saying Acme was bound by
stipulations.
 CA dismissed appeal and affirmed RTC.

ISSUE: WON it is valid and effective to have a clause in a chattel mortgage that extends its
coverage to obligations yet to be contracted or incurred

HELD: No. RTC and CA decisions set aside.

Ratio: Chattel mortgage can cover only obligations existing at the time mortgage is constituted
[Act 1508 Chattel Mortgage Law]

 While a pledge, real estate mortgage, or antichresis may exceptionally secure after-incurred
obligations so long as these future debts are accurately described, a chattel mortgage, however, can
only cover obligations existing at the time the mortgage is constituted.
 Although a promise expressed in a chattel mortgage to include debts that are yet to be
contracted can be a binding commitment that can be compelled upon, the security itself,
however, does not come into existence or arise until after a chattel mortgage agreement
covering the newly contracted debt is executed either by concluding a fresh chattel mortgage or
by amending the old contract conformably with the form prescribed by the Chattel Mortgage
Law.
 Refusal on the part of the borrower to execute the agreement so as to cover the after-incurred
obligation can constitute an act of default on the part of the borrower of the financing agreement
whereon the promise is written but, of course, the remedy of foreclosure can only cover the debts extant
at the time of constitution and during the life of the chattel mortgage sought to be foreclosed.

Affidavit of Good Faith requirement makes it obvious that the obligation is current.

A chattel mortgage, as hereinbefore so intimated, must comply substantially with the form prescribed
by the Chattel Mortgage Law itself. Sec 5 thereof requires an affidavit of good faith. If this is not
appended to the agreement chattel mortgage would still be valid between the parties (not against third
persons acting in good faith), The fact, however, that the statute has provided that the parties to the
contract must execute an oath that
. . (the) mortgage is made for the purpose of securing the obligation specified in the conditions thereof,
and for no other purpose, and that the same is a just and valid obligation, and one not entered into for
the purpose of fraud.
makes it obvious that the debt referred to in the law is a current, not an obligation that is yet merely
contemplated. In the chattel mortgage here involved, the only obligation specified in the chattel
mortgage contract was the P3,000,000.00 loan which petitioner corporation later fully paid.
 Sec 3 of the Chattel Mortgage Law, the payment of the obligation automatically rendered the chattel
mortgage void or terminated. A mortgage that contains a stipulation in regard to future advances in the
credit will take effect only from the date the same are made and not from the date of the mortgage.
[Belgian Catholic Missionaries, Inc., vs. Magallanes Press, Inc., et al.] Payment of the P3M loan caused
the extinguishment of chattel mortgage.

Other notes:
Damages: Acme cannot claim moral damages. Artifical person. No feelings 
LegProf: Lawyers have to observe and maintain the respect due to the courts of justice and judicial
officers. Lawyer for Acme admonished by the court for calling magistrates of CA incompetent and
dishonest.
2. People v. Concepcion

FACTS:

Venancio Concepcion, President of the Philippine National Bank and a member of the board thereof,
authorized an extension of credit in favor of Puno y Concepcion, S en C, to the manager of Aparri branch of
the PNB. Puno y Concepcion was a co-partnership where Concepcion is a partner. Subsequently, defendant
was found guilty of violating Sec. 35 of Act No. 2747 which says that “The National Bank shall not, directly
or indirectly, grant loans to any of the members of the Board of Directors of the bank nor to agents of the
branch banks.” This Section was in effect in 1919 but was repealed in Act No. 2938 approved on January 30,
1921.

ISSUE:
a.) Whether or not the granting of 300k to the co-partnership “Puno y Concepcion” by Venancio
Concepcion (President of the PNB) a ‘loan’ within the meaning of Section 35 of Act No. 2747.
b.) W/N Defendant can be convicted of violating Sections of Act No. 2747, which were repealed by
Act No. 2938.

HELD:

a. YES. The granting of credit by Venancio Concepcion to Puno y Concepcion is a concession of credit.
And concession of a credit necessarily involves the granting of loans up to the limit of amount fixed
in the credit.

The ‘credit’ of an individual means his ability to borrow money by virtue of the confidence or trust
reposed by a lender that he will pay what he may promise. A ‘loan’ means the delivery by one party and the
receipt by the other party of a given sum of money, upon an agreement, express or implied,to repay the sum
loaned, with or without interest..

b. In the interpretation and construction, the primary rule is to ascertain and give effect to the intention
of the Legislature. Section 49 in relation to Sec. 25 of Act No. 2747 provides a punishment for any
person who shall violate any provisions of the Act. Defendant contends that the repeal of these Sections
by Act No. 2938 has served to take away basis for criminal prosecution. The Court holds that where
an act of the Legislature which penalizes an offense repeals a former act which penalized the same
offense, such repeal does not have the effect of thereafter depriving the Courts of jurisdiction to
try, convict and sentence offenders charged with violations of the old law.
3. Bonnevie vs. CA

Facts:

Honesto Bonnevie filed a complaint with the Court of First Instance of Rizal against respondent Philippine Bank
of Commerce seeking the annulment of the Deed of Mortgage dated December 6, 1966 executed in favor of the
Philippine Bank of Commerce by the spouses Jose M. Lozano and Josefa P. Lozano as well as the extrajudicial
foreclosure made on September 4, 1968.

It alleged among others that (a) the Deed of Mortgage lacks consideration and

(b) the mortgage was executed by one who was not the owner of the mortgaged property.

It further alleged that the property in question was foreclosed pursuant to Act No. 3135 as amended, without,
however, complying with the condition imposed for a valid foreclosure.

Granting the validity of the mortgage and the extrajudicial foreclosure, it finally alleged that respondent Bank
should have accepted petitioner's offer to redeem the property under the principle of equity said justice.

On the other hand, the answer of defendant Bank, now private respondent herein, specifically denied most of
the allegations in the complaint and raised the following affirmative defenses: (a) that the defendant has not
given its consent, much less the requisite written consent, to the sale of the mortgaged property to plaintiff and
the assumption by the latter of the loan secured thereby; (b) that the law on contracts requires defendant's
consent before Jose Lozano can be released from his bilateral agreement with the former and doubly so, before
plaintiff may be substituted for Jose Lozano and Alfonso Lim; (h) that it is not true that the mortgage, at the time
of its execution and registration, was without consideration as alleged because the execution and registration of
the securing mortgage, the signing and delivery of the promissory note and the disbursement of the proceeds of
the loan are mere implementation of the basic consensual contract of loan.

The lower court dismissed the petition and was affirmed by CA.

Issue: Whether or not the mortgage is invalid?

Ruling:

No. From the recitals of the mortgage deed itself, it is clearly seen that the mortgage deed was executed for and
on condition of the loan granted to the Lozano spouses. The fact that the latter did not collect from the
respondent Bank the consideration of the mortgage on the date it was executed is immaterial. A contract of loan
being a consensual contract, the herein contract of loan was perfected at the same time the contract of mortgage
was executed. The promissory note executed on December 12, 1966 is only an evidence of indebtedness and
does not indicate lack of consideration of the mortgage at the time of its execution.
4. REPUBLIC VS BAGTAS
[G.R. No. L-17474 October 25, 1962]

FACTS: Jose Bagtas borrowed from the Bureau of Animal Industry three bulls for a period of one year for
breeding purposes subject to a government charge of breeding fee of 10% of the book value of the books.
Upon the expiration of the contract, Bagtas asked for a renewal for another one year, however, the Secretary
of Agriculture and Natural Resources approved only the renewal for one bull and other two bulls be returned.

Bagtas then wrote a letter to the Director of Animal Industry that he would pay the value of the three bulls
with a deduction of yearly depreciation. The Director advised him that the value can not be depreciated and
asked Bagtas to either return the bulls or pay their book value. Bagtas neither paid nor returned the bulls.
The Republic then commenced an action against Bagtas ordering him to return the bulls or pay their book
value. Bagtas contends that the contract was commodatum, and that, for that reason, as Bagtas retained
ownership or title to the bull, it should suffer the loss.

After hearing, the trial Court ruled in favor of the Republic, as such, the Republic moved ex parte for a writ
of execution which the court granted. Felicidad Bagtas, the surviving spouse and administrator of Bagtas’
estate, returned the two bulls and filed a motion to quash the writ of execution since one bull cannot be
returned for it was killed by gunshot during a Huk raid. The Court denied her motion hence, this appeal
certified by the Court of Appeals because only questions of law are raised.

ISSUE: Whether or not Bagtas is relieved from the duty of paying the Bull’s book value as the bull died due
to force majeure.

HELD: NO. 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, because article 1942 of the Civil Code provides that a bailee in a contract of commodatum—

x x x is liable for loss of the things, even if it should be through a fortuitous event:
(2)If he keeps it longer than the period stipulated x x x
(3)If the thing loaned has been delivered with appraisal of its value, unless there is a stipulation
exempting the bailee from responsibility in case of a fortuitous event;
5. ALEJANDRA MINA, ET AL vs RUPERTA PASCUAL, ET AL G.R. No. L-8321 October 14, 1913
FACTS:
Francisco Fontanilla acquired a lot in the center of the town of Laoag with a frontage of 120 meters and
a depth of 15. Andres Fontanilla, with the consent of his brother Francisco, erected a warehouse on a part of the
said lot embracing 14 meters of its frontage by 11 meters of its depth. Later on both Francisco and Andres died;
they were succeeded Alejandro Mina, heir of Francisco, and Ruperta Pascual, for Andres. The fact is that the
plaintiffs and the defendants are virtually, to all appearance, the owners of the warehouse; while the plaintiffs
are undoubtedly, the owners of the part of the lot occupied by that building, as well as of the remainder thereof.
Sometime later, in a guardianship proceeding, Ruperta petitioned to the Court to sell their share in the warehouse
and lot to which Alejandro opposed claiming it was their exclusive property. However, the sale still pushed
through; thus, Cu Joco became the owner of subject property.

ISSUE: WON there exists a commodatum in this case?

HELD:
No, there is no commodatum in this case. Although both litigating parties may have agreed in their idea
of the commodatum, on account of its not being, as indeed it is not, a question of fact but of law, yet that
denomination given by them to the use of the lot granted by Francisco Fontanilla to his brother, Andres
Fontanilla, is not acceptable. Contracts are not to be interpreted in conformity with the name that the parties
thereto agree to give them, but must be construed, duly considering their constitutive elements, as they are
defined and denominated by law.

“By the contract of loan, one of the parties delivers to the other, either anything not perishable, in order
that the latter may use it during the certain period and return it to the former, in which case it is
called commodatum.”

It is, therefore, an essential feature of the commodatum that the use of the thing belonging to another
shall for a certain period. Francisco Fontanilla did not fix any definite period or time during which Andres
Fontanilla could have the use of the lot whereon the latter was to erect a stone warehouse of considerable value,
and so it is that for the past thirty years of the lot has been used by both Andres and his successors in interest.
The parties never fixed a period for Andres to use and return said property. It is only necessary to annul the sale
of the said lot which was made by Ruperta Pascual, in representation of her minor children, to Cu Joco.
6. Catholic Vicar Apostolic of the Mt. Province vs. CA, 165 SCRA 515 (1988)

 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.

1. WON Vicar had been in possession of lots 2 and 3 merely as bailee borrower in commodatum,
a gratuitous loan for use.

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.

2. Whether or not the failure to return the subject matter of commodatum constitutes an adverse
possession on the part of the owner

No. 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.
7. COLITO T. PAJUYO, petitioner, vs. COURT OF APPEALS and EDDIE GUEVARRA, respondents.

FACTS:
Petitioner Pajuyo paid P400 to a certain Pedro Perez for the rights over a lot, where Pajuyo subsequently
built a house. In 1985, Pajuyo and private respondent Guevarra executed a Kasunduan wherein Pajuyo
allowed Guevarra to live in the house for free, on the condition that Guevarra would maintain the cleanliness
and orderliness of the house. Guevarra promised that he would vacate the premises upon Pajuyo’s demand.

In 1994, Pajuyo informed Guevarra of his need of the house and demanded that the latter vacate the house.
Guevarra refused. Pajuyo filed an ejectment case against Guevarra before the MTC.

Guevarra claimed that Pajuyo had no valid title over the lot since it is within the area set aside for socialized
housing. MTC rendered its decision in favor of Pajuyo, which was affirmed by RTC. (MTC and RTC basically
ruled that the Kasunduan created a legal tie akin to that of a landlord and tenant relationship which makes
Guevarra’s possession over the land illegal)

CA reversed the RTC decision, stating that the ejectment case is without legal basis since both Pajuyo and
Guevarra illegally occupied the said lot. CA further stated that both parties are in pari delicto; thus, the court
will leave them where they are. CA ruled that the Kasunduan is not a lease contract, but a commodatum
because the agreement is not for a price certain.

ISSUE: W/N the contractual relationship between Pajuyo and Guevarra was that of a commodatum NO

HELD:
In a contract of commodatum, one of the parties delivers to another something not consumable so that
the latter may use the same for a certain time and return it. An essential feature of commodatum is that
it is gratuitous. Another feature of commodatum is that the use of the thing belonging to another is for a
certain period. Thus, the bailor cannot demand the return of the thing loaned until after expiration of the
period stipulated, or after accomplishment of the use for which the commodatum is constituted. If the bailor
should have urgent need of the thing, he may demand its return for temporary use. If the use of the thing is
merely tolerated by the bailor, he can demand the return of the thing at will, in which case the contractual
relation is called a precarium. Under the Civil Code, precarium is a kind of commodatum.

The Kasunduan reveals that the accommodation accorded by Pajuyo to Guevarra was not essentially
gratuitous. While the Kasunduan did not require Guevarra to pay rent, it obligated him to maintain the
property in good condition. The imposition of this obligation makes the Kasunduan a contract different from
a commodatum. The effects of the Kasunduan are also different from that of a commodatum. Case law on
ejectment has treated relationship based on tolerance as one that is akin to a landlord-tenant relationship
where the withdrawal of permission would result in the termination of the lease. The tenant’s withholding
of the property would then be unlawful.

Even assuming that the relationship between Pajuyo and Guevarra is one of commodatum, Guevarra as
bailee would still have the duty to turn over possession of the property to Pajuyo, the bailor. The obligation
to deliver or to return the thing received attaches to contracts for safekeeping, or contracts of commission,
administration and commodatum.70 These contracts certainly involve the obligation to deliver or return the
thing received.

Guevarra turned his back on the Kasunduan on the sole ground that like him, Pajuyo is also a squatter.
Guevarra should know that there must be honor even between squatters. Guevarra freely entered into the
Kasunduan. Guevarra cannot now impugn the Kasunduan after he had benefited from it. The Kasunduan
binds Guevarra.

The Kasunduan is not void for purposes of determining who between Pajuyo and Guevarra has a right to
physical possession of the contested property. The Kasunduan is the undeniable evidence of Guevarra’s
recognition of Pajuyo’s better right of physical possession. Guevarra is clearly a possessor in bad faith. The
absence of a contract would not yield a different result, as there would still be an implied promise to vacate.
8. Herrera vs Petrophil

Facts:
On December 5, 1969, the plaintiff-appellant and ESSO Standard Eastern. Inc., (Petrophil
Corporation) entered into a "Lease Agreement" whereby the former leased to the latter a portion of his
property for a period of twenty (20) years from said date. On December 31, 1969, pursuant to the said
contract, the PETROPHIL CORPORATION paid to the HERRERA advance rentals for the first eight years,
subtracting therefrom the amount of P101,010.73, the amount it computed as constituting the interest
or discount for the first eight years, in the total sum P180,288.47.
On August 20, 1970, the defendant-appellee, explaining that there had been a mistake in
computation, paid to the appellant the additional sum of P2,182.70, thereby reducing the deducted
amount to only P98,828.03. On October 14, 1974, the plaintiff-appellant sued the defendant-appellee
for the sum of P98,828.03, with interest, claiming this had been illegally deducted from him in violation
of the Usury Law.
Plaintiff-appellant now prays for a reversal of that judgment, insisting that the lower court
erred in the computation of the interest collected out of the rentals paid for the first eight years; that
such interest was excessive and violate of the Usury Law; and that he had neither agreed to nor accepted
the defendant-appellant's computation of the total amount to be deducted for the eight years advance
rentals. The defendant maintains that the correct amount of the discount is P98,828.03 and that the
same is not excessive and above that allowed by law
ISSUE: Whether or not the contract is a loan
RULING:
No. As its title plainly indicates, the contract between the parties is one of lease and not of loan.
It is clearly denominated a "LEASE AGREEMENT.
The provision for the payment of rentals in advance cannot be taken as a repayment of a loan because
there was no grant of money as to constitute an indebtedness on the part of the lessor. On the contrary,
Petrophil was clearing its obligation by paying the 8 years rentals, and it was for this advance payment
that it was getting a discount.
There is no usury in this case because no money was given by Petrophil to Herrera. There was neither
loan but a mere discount which Herrera allowed Petrophil to deduct. 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."
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.
9. Carolyn M. Garcia v Rica Marie S. Thio

GR No. 154878, 16 March 2007

FACTS: Respondent Thio received from petitioner Garcia two crossed checks which amount to US$100,000
and US$500,000, respectively, payable to the order of Marilou Santiago. According to petitioner,
respondent failed to pay the principal amounts of the loans when they fell due and so she filed a complaint
for sum of money and damages with the RTC. Respondent denied that she contracted the two loans and
countered that it was Marilou Satiago to whom petitioner lent the money. She claimed she was merely
asked y petitioner to give the checks to Santiago. She issued the checks for P76,000 and P20,000 not as
payment of interest but to accommodate petitioner’s request that respondent use her own checks instead
of Santiago’s.
RTC ruled in favor of petitioner. CA reversed RTC and ruled that there was no contract of loan between the
parties.

ISSUES:
(1) Whether or not there was a contract of loan between petitioner and respondent.
(2) Who borrowed money from petitioner, the respondent or Marilou Santiago?

HELD:
(1) The Court held in the affirmative. A loan is a real contract, not consensual, and as such I perfected only
upon the delivery of the object of the contract. Upon delivery of the contract of loan (in this case the
money received by the debtor when the checks were encashed) the debtor acquires ownership of such
money or loan proceeds and is bound to pay the creditor an equal amount. It is undisputed that the checks
were delivered to respondent.
(2) However, the checks were crossed and payable not to the order of the respondent but to the order of a
certain Marilou Santiago. Delivery is the act by which the res or substance is thereof placed within the
actual or constructive possession or control of another. Although respondent did not physically receive the
proceeds of the checks, these instruments were placed in her control and possession under an
arrangement whereby she actually re-lent the amount to Santiago.
Petition granted; judgment and resolution reversed and set aside.
10. NAGUIAT vs CA

Queaño applied with Naguiat for a loan (₱200,000.00), which Naguiat granted. Later, Naguiat indorsed to Queaño
a Check (₱95,000.00), which was earlier issued to Naguiat by the Corporate Resources Financing Corporation.
She also issued her own Check to the order of Queaño (₱95,000.00). The proceeds of these checks were to
constitute the loan granted by Naguiat to Queaño.

To secure the loan, Queaño executed a Deed of Real Estate Mortgage in favor of Naguiat, and surrendered to the
latter the owner’s duplicates of the titles covering the mortgaged properties. On the same day, the mortgage deed
was notarized, and Queaño issued to Naguiat a promissory note. Queaño also issued a check, postdated and
payable to the order of Naguiat.

Upon presentment on its maturity date, the check was dishonored for insufficiency of funds.
Queaño received a letter from Naguiat’s lawyer, demanding settlement of the loan. Shortly thereafter, Queaño
and one Ruby Ruebenfeldt met with Naguiat. Queaño told Naguiat that she did not receive the proceeds of the
loan, adding that the checks were retained by Ruebenfeldt, who purportedly was Naguiat’s agent.

Naguiat applied for the extrajudicial foreclosure of the mortgage. Queaño filed the case seeking the annulment of
the mortgage deed. RTC declared the Deed of Real Estate Mortgage null and void, and ordered Naguiat to return
to Queaño the owner’s duplicates of her titles to the mortgaged lots.

Issue: W/N the loan was perfected.

Ruling: No.

Absolutely no evidence was submitted by Naguiat that the checks she issued or endorsed were actually encashed
or deposited. The mere issuance of the checks did not result in the perfection of the contract of loan. For the Civil
Code provides that the delivery of bills of exchange and mercantile documents such as checks shall produce the
effect of payment only when they have been cashed. It is only after the checks have produced the effect of
payment that the contract of loan may be deemed perfected. Art. 1934 of the Civil Code 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 the delivery of the object of the contract."

A loan contract is a real contract, not consensual, and, as such, is perfected only upon the delivery of the object of
the contract. In this case, the objects of the contract are the loan proceeds which Queaño would enjoy only upon
the encashment of the checks signed or indorsed by Naguiat. If indeed the checks were encashed or deposited,
Naguiat would have certainly presented the corresponding documentary evidence, such as the returned checks
and the pertinent bank records. Since Naguiat presented no such proof, it follows that the checks were not
encashed or credited to Queaño’s account.
11. 11. Eusebio-Calderon vs People
G.R. 158495, October 21, 2004

Facts: Three separate information were filed against Elizabeth Calderon where it was alleged that in or about
the months of May to November 1994, she borrowed money from her Aunt and cousins Teresita Eusebio,
Amelia Casanova, and Manolito Eusebio respectively. Elizabeth issued checks drawn against Allied bank,
PCI Bank and Planters Bank, and deliver the checks to her aunt and cousins knowing fully well that she had
no sufficient funds in the said banks. According to private complainants, petitioner assured them that the
checks will be honored upon maturity. They gave her the money because she showed them her pieces of
jewelry which convinced them that she has the ability to pay the loans.

The RTC of Bulacan found Elizabeth guilty of the crime of three counts of Estafa and sentenced her among
others to indemnify the private complainants the principal amount borrowed from them but dismissed the
interest checks. It ruled that her liability for the interest checks was only civil. However, when it reached the
Court of appelas, the Decision of the RTC was reversed and set aside. A new judgement was issued acquitting
Elizabeth of the crimes charged. However, she is held civilly liable for payment of the principal amount loaned
from the complainants, all with interest thereon at the rate of 12% per annum effective from the date of
demand.
Issue: WON the petitioner is liable for interests.

Ruling: Yes. When petitioner appealed her conviction, the dismissal of the interest checks by the lower court
did not preclude the Court of Appeals from reviewing such decision and modifying her civil liability. An
accused who is acquitted of Estafa may nevertheless be held civilly liable where the facts established by the
evidence so warrant. Petitioner Elizabeth Calderon is clearly liable to the private respondents for the amount
borrowed. The Court of Appeals found that the former did not employ trickery or deceit in obtaining money
from the private complainants, instead, it concluded that the money obtained was undoubtedly loans for which
petitioner paid interest. The checks issued by petitioner as payment for the principal loan constitute evidence
of her civil liability which was deemed instituted with the criminal action.

The civil liability of petitioner includes only the principal amount of the loan. With respect to the interest
checks she issued, the same are void. There was no written proof of the payable interest except for the verbal
agreement that the loan shall earn 5% interest per month. Under Article 1956 of the Civil Code, an agreement
as to payment of interest must be in writing, otherwise it cannot be valid. Consequently, no interest is due and
the interest checks she issued should be eliminated from the computation of her civil liability. However, while
there can be no stipulated interest, there can be legal interest pursuant to Article 2209 of the Civil Code.
It is elementary that in the absence of a stipulation as to interest, the loan due will now earn interest at the
legal rate of 12% per annum.

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. Hence, petitioner is liable for
the payment of legal interest per annum to be computed from December 20, 1994, the date when she received
the demand letter. After the judgment becomes final and executory until the obligation is satisfied, the amount
due shall earn interest at 12% per year, the interim period being deemed equivalent to a forbearance of credit.
12. EASTERN SHIPPING LINES VS CA

FACTS:
This is an action against defendants shipping company, arrastre operator and broker-forwarder for damages sustained
by a shipment while in defendants' custody, filed by the insurer-subrogee who paid the consignee the value of such
losses/damages.

2 fiber drums of riboflavin were shipped by Eastern Shipping Lines. They werE insured under Marine Insurance Policy.

Upon arrival of the shipment, it was discharged unto the custody of Metro Port Service, Inc. The latter excepted to one
drum, said to be in bad order, which damage was unknown to plaintiff. Days later Allied Brokerage Corporation received
the shipment, 1 drum opened and without seal.

Allied Brokerage Corporation made deliveries of the shipment to the consignee's warehouse. The latter excepted to one
drum which contained spillages, while the rest of the contents was adulterated/fake.

Plaintiff contended that due to the losses/damage sustained by said drum, the consignee suffered losses, due to the
fault and negligence of defendants.

As a consequence of the losses sustained, plaintiff was compelled to pay the consignee under the aforestated marine
insurance policy, so that it became subrogated to all the rights of action of said consignee against defendants.

ISSUE:
A. whether the payment of legal interest on an award for loss or damage is to be computed from the time the complaint
is filed.
B. whether the applicable rate of interest, referred to above, is twelve percent (12%)

RULING:
A. NO
Interest upon an obligation which calls for the payment of money, absent a stipulation, is the legal rate. Such interest
normally is allowable from the date of demand, judicial or extrajudicial. The trial court opted for judicial demand as the
starting point.
But then upon the provisions of Article 2213 of the Civil Code, interest "cannot be recovered upon unliquidated claims
or damages, except when the demand can be established with reasonable certainty." And as was held by this Court
in Rivera vs. Perez, L-6998, February 29, 1956, if the suit were for damages, "unliquidated and not known until definitely
ascertained, assessed and determined by the courts after proof then, interest "should be from the date of the decision."

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 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. The
actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

B. NO
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.

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.
13. Cabrera vs. People
GR 150618, July 24,2003, 407 SCRA 247

FACTS:
Go was the sole proprietor of Davao Mindanao Pioneer Hardware & Company (DMPH co.). One of his
customers is Boni Co, a travelling salesman. They had an agreement whereby Go will sell lumber
materials to Co. Go required Co to issue post-dated checks. But since Co does not have checks at that
time, he offered to pay the purchases with post dated checks drawn and issued by the Petitioner. Then
Co failed to pay, Go deposited the checks to FEBTC, the same was dishonored on account that the
accounts were closed. Go notified Co that the checks were dishonored but the latter did not make good
the amount covered in the checks. .

As such, three informations were filed charging Cabrera with violation of BP 22 when she willfully
issued Prudential bank checks in favor of Luis Go in payment of an obligation but the
said check was dishonored on account that it was already closed upon presentment for payment.

Petitioner admitted that she was the drawer of the three postdated checks, but averred that she did not
receive any valuable consideration when she issued the same. She merely affirmed her signature on the
said checks without filling up the names of the payees, and the amounts corresponding thereto. The
RTC rendered a decision convicting her of the crime charged, and the same was affirmed by CA, hence,
this case.

ISSUE:
Whether the accused is guilty of the crime charged

RULING:
No, The elements of violation of BP 22, the prosecution has the burden to prove all the elements of the
crime beyond reasonable doubt, to wit: 1) the drawing, making and issuance of any check to apply to
account or for value ; 2) the "knowledge of the maker, drawer, or issuer that at the time of issue he does
not have sufficient funds in or credit with the drawee bank for the payment of such check in full upon
presentment and 3) subsequent dishonor of the check by the drawee bank for insufficiency of funds or
credit or dishonor for the same reason had not the drawer, without any valid cause, ordered the bank to
stop payment. The barefaced fact that the petitioner was the signatory to the checks that were
subsequently dishonored merely gave rise to a prima facie presumption that she "new of the
insufficiency of funds, it did not render her automatically liable for violating BP 22.
14. Nacar vs. Gallery Frames, 703 SCRA 439, G.R. No. 189871 August 13, 2013

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.

On October 15, 1998, the Labor Arbiter (LA) rendered a Decision 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. Respondents appealed the decision but
was denied at the NLRC. At the CA, the ruling of the NLRC was upheld. Upon relief at the SC, the respondents’
petition was denied.

An Entry of Judgment was later issued certifying that the resolution became final and executory on May 27, 2002.
The case was, thereafter, 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. Upon recomputation, the Computation and Examination Unit of the NLRC arrived at an
updated amount in the sum of ₱471,320.31.

On December 2, 2002, a Writ of Execution was issued by the Labor Arbiter ordering the Sheriff to collect from
respondents the total amount of ₱471,320.31. Respondents filed a Motion to Quash Writ of Execution, arguing,
among other things, that since the Labor Arbiter awarded separation pay of ₱62,986.56 and limited backwages
of ₱95,933.36, no more recomputation is required to be made of the said awards. They claimed that after the
decision becomes final and executory, the same cannot be altered or amended anymore. On January 13, 2003,
the Labor Arbiter issued an Order denying the motion. Thus, an Alias Writ of Execution was issued on January
14, 2003.

Respondents again appealed before the NLRC, which on June 30, 2003 issued a Resolution granting the appeal in
favor of the respondents and ordered the recomputation of the judgment award.

On August 20, 2003, an Entry of Judgment was issued declaring the Resolution of the NLRC to be final and
executory. Consequently, another pre-execution conference was held, but respondents failed to appear on time.
Meanwhile, petitioner moved that an Alias Writ of Execution be issued to enforce the earlier recomputed
judgment award in the sum of ₱471,320.31.

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 ₱147,560.19.

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 ₱147,560.19, 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.

On May 10, 2005, the Labor Arbiter issued an Order granting the motion, but only up to the amount of
₱11,459.73. The Labor Arbiter reasoned that it is the October 15, 1998 Decision that should be enforced
considering that it was the one that became final and executory. However, 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 ₱158,919.92 that should be executed. Thus, since petitioner already received
₱147,560.19, he is only entitled to the balance of ₱11,459.73.

Petitioner argues that notwithstanding the fact that there was a computation of backwages in the Labor Arbiter’s
decision, the same is not final until reinstatement is made or until finality of the decision, in case of an award of
separation pay. Petitioner maintains that considering that the October 15, 1998 decision of the Labor Arbiter did
not become final and executory until the April 17, 2002 Resolution of the Supreme Court in G.R. No. 151332 was
entered in the Book of Entries on May 27, 2002, the reckoning point for the computation of the backwages and
separation pay should be on May 27, 2002 and not when the decision of the Labor Arbiter was rendered on
October 15, 1998. Further, petitioner posits that he is also entitled to the payment of interest from the finality of
the decision until full payment by the respondents.

ISSUES:

1. WON the re-computation of the LA was proper

2. WON appropriate interests may be claimed by the petitioner

RULING:

1. YES. No essential change is made by a recomputation as this step is a necessary consequence that flows
from the nature of the illegality of dismissal declared by the Labor Arbiter in that decision. A
recomputation (or an original computation, if no previous computation has been made) is a part of the
law — specifically, Article 279 of the Labor Code and the established jurisprudence on this provision —
that is read into the decision. By the nature of an illegal dismissal case, the reliefs continue to add up until
full satisfaction, as expressed under Article 279 of the Labor Code. The recomputation of the
consequences of illegal dismissal upon execution of the decision does not constitute an alteration or
amendment of the final decision being implemented. The illegal dismissal ruling stands; only the
computation of monetary consequences of this dismissal is affected. Article 279 of the Labor Code
provides for the consequences of illegal dismissal in no uncertain terms, qualified only by jurisprudence
in its interpretation of when separation pay in lieu of reinstatement is allowed.

2. YES. 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 6% 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.
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.
15. SPOUSES SALVADOR ABELLA v. SPOUSES ROMEO ABELLA
G.R. No. 195166, July 08, 2015

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 claimed that they were
approached by petitioners, who proposed that if respondents were to "undertake the management of
whatever moneyt he 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

Issue: 1. WON the party entered into a simple loan or mutuum as agreement?
2. Whether interest accrued on respondents' loan from petitioners, If so, at what rate?

Ruling: Yes. As noted by the CA and RTC, respondents entered into a simple loan or mutuum, rather than a
joint venture, with petitioners. Art. 1933. “By the contract of loan, one of the parties delivers to another,
either something not consumable so that the latter may use the same for a certain time and return it, in
which case the contract is called a commodatum; or money or other consumable thing, upon the condition
that the same amount of the same kind and quality shall be paid, in which case the contract is simply
called a loan or mutuum.”
Commodatum is essentially gratuitous. Simple loan may be gratuitous or with a stipulation to pay interest.
In commodatum the bailor retains the ownership of the thing loaned, while in simple loan, ownership passes
to the borrower.

Art. 1953. A person who receives a loan of money or any other fungible thing acquires the ownership thereof,
and is bound to pay to the creditor an equal amount of the same kind and quality.

2. 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 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.