List 1 Short Version

HERMOJINA ESTORES, Petitioner, - versus - SPOUSES ARTURO and LAURA
SUPANGAN, Respondents.
FACTS:
On October 3, 1993, petitioner Hermojina Estores and respondent-spouses
Arturo and Laura Supangan entered into a Conditional Deed of Sale [5] whereby
petitioner offered to sell, and respondent-spouses offered to buy, a parcel of land
covered by Transfer Certificate of Title No. TCT No. 98720 located at Naic, Cavite for
the sum of P4.7 million.
 Vendor Estores will secure approved clearance from DAR requirements.
 If the vendor fails to complete necessary documents within thirty days
without any sufficient reason, or without informing the vendee of its
status, vendee has the right to demand return of full amount of down
payment.
After almost seven years from the time of the execution of the contract and
notwithstanding payment of P3.5 million on the part of respondent-spouses,
petitioner still failed to comply with her obligation as expressly provided in
paragraphs 4, 6, 7, 9 and 10 of the contract. Hence, in a letter [7] dated September
27, 2000, respondent-spouses demanded the return of the amount of P3.5 million
within 15 days from receipt of the letter. In reply, [8] petitioner acknowledged
receipt of the P3.5 million and promised to return the same within 120 days.
Respondent-spouses were amenable to the proposal provided an interest of 12%
compounded annually shall be imposed on the P3.5 million. [9] When petitioner still
failed to return the amount despite demand, respondent-spouses were constrained to
file a Complaint[10] for sum of money before the Regional Trial Court (RTC) of
Malabon against herein petitioner as well as Roberto U. Arias (Arias) who allegedly
acted as petitioner’s agent.
 Respondent spouses prayed that petitioner and Arias be ordered to PAY
the principal amount of Php 3.5 million plus interest of 12%
compounded annually starting October 1, 1993 or an estimated amount
of Php 8.6 million.
 Plus damages and Attorney’s fees.

Trial ensued thereafter, petitioner and Arias failed to appear hence they
were deemed to have waived the presentation of their evidence. Consequently, the
case was deemed submitted for decision.
Ruling of RTC  respondent-spouses entitled to interest but only at the rate of 6% per
annum and not 12% as prayed by them. It also found respondent-spouses entitled to
attorney’s fees as they were compelled to litigate to protect their interest.
Ruling of CA  The CA noted that the only issue submitted for its resolution is
“whether it is proper to impose interest for an obligation that does not involve a loan
or forbearance of money in the absence of stipulation of the parties.”

The CA rendered the assailed Decision affirming the ruling of the RTC finding
the imposition of 6% interest proper.[25] However, the same shall start to
run only from September 27, 2000 when respondent-spouses formally
demanded the return of their money and not from October 1993 when the
contract was executed as held by the RTC. The CA also modified the RTC’s
ruling as regards the liability of Arias. It held that Arias could not be held
solidarily liable with petitioner because he merely acted as agent of the
latter.
ISSUE:
Whether the imposition of interest and attorney’s fees is proper.
Petitioner’s argument  Petitioner insists that she is not bound to pay interest on the
P3.5 million because the Conditional Deed of Sale only provided for the return of the
down payment in case of failure to comply with her obligations.
Respondent-spouses’ argument  Respondent-spouses aver that it is only fair that
interest be imposed on the amount they paid considering that petitioner failed to
return the amount upon demand and had been using theP3.5 million for her benefit.
RULING:
AFFIRMATIVE


Interest may be imposed even in the absence of stipulation in the contract.
o
We sustain the ruling of both the RTC and the CA that it is proper to
impose interest notwithstanding the absence of stipulation in the
contract.
Article 2210 of the Civil Code expressly provides that
“[i]nterest may, in the discretion of the court, be allowed upon
damages awarded for breach of contract.”
o
There is no question that petitioner is legally obligated to return the
P3.5 million because of her failure to fulfill the obligation under the
Conditional Deed of Sale, despite demand.
o
Petitioner enjoyed the use of the money from the time it was given
to her [30] until now.
Thus, she is already in default of her
obligation from the date of demand, i.e., on September 27, 2000.



The interest at the rate of 12% is applicable in the instant case.

Petitioner and Arias averred that they are willing to return the principal
amount of P3.5 million but without any interest as the same was not agreed upon.
They argued that since the Conditional Deed of Sale provided only for the return of
the down payment in case of breach, they cannot be held liable to pay legal interest
as well.
In its Pre-Trial Order [15] dated June 29, 2001, the RTC noted that “the
parties agreed that the principal amount of 3.5 million pesos should be returned to
the [respondent-spouses] by the [petitioner] and the issue remaining [is] whether x x
x [respondent-spouses] are entitled to legal interest thereon, damages and attorney’s
fees.”

CREDTRANS sjbprior | 1

o

o

o

o

o

The general rule is that the applicable rate of interest “shall be
computed in accordance with the stipulation of the parties.”[31]
Absent any stipulation, the applicable rate of interest shall be 12%
per annum “when the obligation arises out of a loan or a
forbearance of money, goods or credits. In other cases, it shall be
six percent (6%).”[32] In this case, the parties did not stipulate as
to the applicable rate of interest. The only question remaining
therefore is whether the 6% as provided under Article 2209
of the Civil Code, or 12% under Central Bank Circular No.
416, is due.
The contract involved in this case is admittedly not a loan but a
Conditional Deed of Sale. However, the contract provides that the
seller (petitioner) must return the payment made by the buyer
(respondent-spouses) if the conditions are not fulfilled. There is no
question that they have in fact, not been fulfilled as the seller
(petitioner) has admitted this. Notwithstanding demand by the
buyer (respondent-spouses), the seller (petitioner) has failed to
return the money and should be considered in default from the
time that demand was made on September 27, 2000.
Even if the transaction involved a Conditional Deed of Sale,
can the stipulation governing the return of the money be
considered as a forbearance of money which required
payment of interest at the rate of 12%? We believe so.
In Crismina Garments, Inc. v. Court of Appeals, [33] “forbearance”
was defined as a “contractual obligation of lender or creditor to
refrain during a given period of time, from requiring the borrower or
debtor to repay a loan or debt then due and payable.”
The phrase “forbearance of money, goods or credits” is meant to
have a separate meaning from a loan, otherwise there would have
been no need to add that phrase as a loan is already sufficiently
defined in the Civil Code.[34] Forbearance of money, goods or
credits should therefore refer to arrangements other than loan
agreements, where a person acquiesces to the temporary use of
his money, goods or credits pending happening of certain events or
fulfillment of certain conditions. In this case, the respondentspouses parted with their money even before the conditions were
fulfilled. They have therefore allowed or granted forbearance to
the seller (petitioner) to use their money pending fulfillment of the
conditions. They were deprived of the use of their money for the
period pending fulfillment of the conditions and when those
conditions were breached, they are entitled not only to the return
of the principal amount paid, but also to compensation for the use
of their money. And the compensation for the use of their money,
absent any stipulation, should be the same rate of legal interest
applicable to a loan since the use or deprivation of funds is similar
to a loan.

o

Petitioner’s unwarranted withholding of the money which rightfully
pertains to respondent-spouses amounts to forbearance of money
which can be considered as an involuntary loan. Thus, the
applicable rate of interest is 12% per annum.

Facts:
1.

In Oct. 1993, Hermojina Estores and Spouses Supangan entered into a
Conditional Deed of Sale where Estores offered to sell, and Spouses offered to
buy a parcel of land in Cavite for P4.7M.
2. After almost 7 years and despite the payment of P3.5M by the Spouses, Estores
still failed to comply with her obligation to handle the peaceful transfer of
ownership as stated in 5 provisions in the contract.
3. In a letter in 2000, Spouses demanded the return of the amount within 15 days
from receipt
4. In reply, Estores promised to return the same within 120 days
5. Spouses agreed but imposed an interest of 12% annually
6. Estores still failed despite demands
7. Spouses filed a complaint with the RTC against Estores and Roberto Arias
(allegedly acted as Estores’ agent)
8. In Answer, Estores said they were willing to pay the principal amount but without
the interest as it was not agreed upon
a. That since the Conditional Deed of Sale provided only for the return of
the downpayment in case of breach, they cant be liable for legal
interest as well
9. RTC ruled saying that the Spouses are entitled to the interest but only at 6% per
annum and also entitled to atty’s fees
10. On appeal, CA said that the issue to resolve is
a. whether it is proper to impose interest for an obligation that does not
involve a loan or forbearance of money in the absence of stipulation of
the parties
11. CA affirmed RTC
a. That interest should start on date of formal demand by Spouses to
return the money not when contract was executed as stated by the RTC
b. That Arias not be solidarily liable as he acted as agent only and did not
expressly bind himself or exceeded his authority
12. Estores contends:
a. Not bound to pay interest because the deed only provided for the return
of the downpayment in case of failure to comply with her obligations
b. That atty fees not proper because both RTC and CA sustained her
contention that 12% interest was uncalled for so it showed that Spouses
did not win
13. Spouses contend:
a. It is only fair that interest be imposed because Estores failed to return
the amount upon demand and used the money for her benefit
b. Estores failed to relocate the house outside the perimeter of the subject
lot and complete the necessary documents
c. As to the fees, they claim that they were forced to litigate when Estores
unjustly held the amount
Issue:
CREDTRANS sjbprior | 2

Is the imposition of interest and attorney’s fees is proper? YES
Interest based on Art 2209 of CC (6%) or under Central Bank Circular 416 (12%)? 12%

Held:
Interest may be imposed even in the absence of stipulation in the contract.


Article 2210 of the Civil Code expressly provides that “[i]nterest may, in the discretion of
the court, be allowed upon damages awarded for breach of contract.”

Estores failed on her obligations despite demand.
o
She admitted that the conditions were not fulfilled and was willing to
return the full amount of P3.5M but hasn’t done so
o
She is now in default
The interest at the rate of 12% is applicable in the instant case.











Gen Rule: the applicable interest rate shall be computed in accordance with the
stipulation of the parties
Exc: if no stipulation, applicable rate of interest shall be 12% per annum
o
When obligation arises out of a loan or forbearance of money, goods or
credits
In other cases, it shall be 6%
In this case, no stipulation was made
Contract involved in this case is not a loan but a Conditional Deed of
Sale.
o
No question that the obligations were not met and the return of
money not made
Even if transaction was a Conditional Deed of Sale, the stipulation
governing the return of the money can be considered as a forbearance
of money which requires 12% interest
In Crismina Garments, Inc. v. Court of Appeals, Forbearance-- “contractual obligation of
lender or creditor to refrain during a given period of time, from requiring the borrower or
debtor to repay a loan or debt then due and payable.”
o
In such case, “forbearance of money, goods or credits” will have no distinct
definition from a loan.
o
however, the phrase “forbearance of money, goods or credits” is meant to have
a separate meaning from a loan, otherwise there would have been no need to
add that phrase as a loan is already sufficiently defined in the Civil Code
o
Forbearance of money, goods or credits should therefore refer to arrangements
other than loan agreements, where a person acquiesces to the temporary use
of his money, goods or credits pending happening of certain events or
fulfillment of certain conditions.
Estores’ unwarranted withholding of the money amounts to forbearance of money which
can be considered as an involuntary loan so rate is 12% starting in Sept. 2000

The award of attorney’s fees is warranted.



no doubt that the Spouses were forced to litigate to protect their interest, i.e., to recover
their money. The amount of P50,000.00 more appropriate

CHEE KIONG YAM, AMPANG MAH, ANITA YAM JOSE Y.C. YAM AND RICHARD
YAM, petitioners, vs.
HON. NABDAR J. MALIK, Municipal Judge of Jolo, Sulu (Branch I), THE
PEOPLE OF THE PHILIPPINES, ROSALINDA AMIN, TAN CHU KAO and LT. COL.
AGOSTO SAJOR respondents.
FACTS:
Private respondents filed a case of Estafa against petitioners with the MTC of
Jolo, Sulu under presiding Judge Nabdar J. Malik. He issued warrants of arrest against
petitioners after making the above determination; and he undertook to conduct trial
on the merits of the charges which were docketed in his court as Criminal Cases No.
M-111, M-183 and M-208.
Respondent judge is said to have acted without jurisdiction, in excess of
jurisdiction and with grave abuse of discretion because the facts recited in the
complaints did not constitute the crime of estafa, and assuming they did, they were
not within the jurisdiction of the respondent judge.
In a resolution dated May 23, 1979, we required respondents to comment in
the petition and issued a temporary restraining order against the respondent judge
from further proceeding with Criminal Cases Nos. M-111, M-183 and M-208 or from
enforcing the warrants of arrest he had issued in connection with said cases.
Comments by the respondent judge and the private respondents pray for
the dismissal of the petition but the Solicitor General has manifested that the People
of the Philippines have no objection to the grant of the reliefs prayed for, except the
damages.
In Criminal Case No. M-111  respondent Rosalinda M. Amin charges
petitioners Yam Chee Kiong and Yam Yap Kieng with estafa through
misappropriation of the amount of P50,000.00. But the complaint states on
its face that said petitioners received the amount from respondent Rosalinda
M. Amin "as a loan."
In Criminal Case No. M-183  respondent Tan Chu Kao charges petitioners
Yam Chee Kiong, Jose Y.C. Yam, Ampang Mah and Anita Yam, alias Yong Tay,
with estafa through misappropriation of the amount of P30,000.00. Likewise,
the complaint states on its face that the P30,000.00 was "a simple loan."
CREDTRANS sjbprior | 3


In Criminal Case No. M-208  respondent Augusto Sajor charges petitioners
Jose Y.C. Yam, Anita Yam alias Yong Tai Mah, Chee Kiong Yam and Richard
Yam, with estafa through misappropriation of the amount of P20,000.00.
Unlike the complaints in the other two cases, the complaint in Criminal Case
No. M-208 does not state that the amount was received as loan. However, in
a sworn statement dated September 29, 1976, submitted to respondent
judge to support the complaint, respondent Augusto Sajor states that the
amount was a "loan."
ISSUE:
Whether or not
misappropriation.

the

three

criminal

complaints

constitute

estafa

through

RULING:
NEGATIVE
We agree with the petitioners that the facts alleged in the three criminal complaints
do not constitute estafa through misappropriation.







In order that a person can be convicted of Article 315 paragraph 1 b of the
RPC, it must be proven that he has the obligation to deliver or return the
same money, goods or personal property that he received. Petitioners had
no such obligation to return the same money, i.e., the bills or coins, which
they received from private respondents. This is so because as clearly stated
in criminal complaints, the related civil complaints and the supporting sworn
statements, the sums of money that petitioners received were loans.
It can be readily noted from Article 1933 of NCC that in simple loan
(mutuum), as contrasted to commodatum, the borrower acquires ownership
of the money, goods or personal property borrowed. Being the owner, the
borrower can dispose of the thing borrowed (Article 248, Civil Code) and his
act will not be considered misappropriation thereof.
In U.S. vs. Ibañez, 19 Phil. 559, 560 (1911), this Court held that it is not
estafa for a person to refuse to nay his debt or to deny its existence.
It appears that respondent judge failed to appreciate the distinction
between the two types of loan, mutuum and commodatum, when he
performed the questioned acts, He mistook the transaction between
petitioners and respondents Rosalinda Amin, Tan Chu Kao and Augusto Sajor
to be commodatum wherein the borrower does not acquire ownership over
the thing borrowed and has the duty to return the same thing to the lender.

Facts:
Three separate criminal cases charging estafa through misappropriation were
filed in the sala of Municipal Judge Nabdar J. Malik in Jolo, Sulu.
 First case was against Rosalinda M. Amin for misappropriating P50,000.00
but the complaint states on its face said amount received "as a loan."



Second case was against Tan Chu Kao filed by Yam Chee Kiong et. al,for the
amount of P30,000.00. but the complaint states on its face that the
P30,000.00 was "a simple loan."
Third was against Augusto Sajor as charged by petitioners Chee Kiong Yam
et al, for misappropriation P20,000.00. Unlike the complaints in the other
two cases, but does not state that the amount was received as loan,
however, later was supported with a sworn statement that the amount was
a "loan." of the petition.

Respondent judge is said to have acted without jurisdiction, in excess of
jurisdiction and with grave abuse of discretion because the facts recited in the
complaints did not constitute the crime of estafa, and assuming they did, they were
not within the jurisdiction of the respondent judge.
Issue:
Whether the three
misappropriation.

criminal

complaints

do

not

constitute

estafa

through

Ruling:
Petition granted.
In order that a person can be convicted under the abovequoted provision, it must be
proven that he has the obligation to deliver or return the same money, goods or
personal property that he received. Petitioners had no such obligation to return the
same money, i.e., the bills or coins, which they received from private respondents.
This is so because as clearly stated in criminal complaints, the related civil
complaints and the supporting sworn statements, the sums of money that petitioners
received were loans. It can be readily noted from the above-quoted provisions that in
simple loan (mutuum), as contrasted to commodatum, the borrower acquires
ownership of the money, goods or personal property borrowed. Being the owner, the
borrower can dispose of the thing borrowed (Article 248, Civil Code) and his act will
not be considered misappropriation thereof.
TEOFISTO GUINGONA, JR., ANTONIO I. MARTIN, and TERESITA SANTOS,
petitioners, vs.
THE CITY FISCAL OF MANILA, HON. JOSE B. FLAMINIANO, ASST. CITY FISCAL
FELIZARDO N. LOTA and CLEMENT DAVID, respondents.



Petition for prohibition and injunction.
The instant petition seeks to prohibit public respondents from proceeding
with the preliminary investigation of I.S. No. 81-31938, in which petitioners
were charged by private respondent Clement David, with estafa and
violation of Central Bank Circular No. 364 and related regulations regarding
foreign exchange transactions

CREDTRANS sjbprior | 4

FACTS:
On December 23,1981, private respondent David filed I.S. No. 81-31938 in
the Office of the City Fiscal of Manila, which case was assigned to respondent Lota for
preliminary investigation.
David charged petitioners with estafa and violation of Central Bank Circular
No. 364 and related Central Bank regulations on foreign exchange transactions.
 David invested with Nation Savings and Loan Association (NSLA):
o
Php 1.1M on 9 deposits
o
Php 13K on savings account deposits
o
USD 10K on time deposit
o
USD 15K under a receipt and guarantee of payment
o
USD 50K under a receipt
That David was induced into making the aforestated investments by Robert
Marshall an Australian national who was allegedly a close associate of petitioner
Guingona Jr., then NSLA President, petitioner Martin, then NSLA Executive VicePresident of NSLA and petitioner Santos, then NSLA General Manager; that on March
21, 1981 NSLA was placed under receivership by the Central Bank, so that David filed
claims therewith for his investments and those of his sister.
On July 22, 1981 David received a report from the Central Bank that only
P305,821.92 of those investments were entered in the records of NSLA; that,
therefore, the respondents in I.S. No. 81-31938 misappropriated the balance of the
investments, at the same time violating Central Bank Circular No. 364 and related
Central Bank regulations on foreign exchange transactions; that after demands,
petitioner Guingona Jr. paid only P200,000.00, thereby reducing the amounts
misappropriated to P959,078.14 and US$75,000.00.
At the inception of the preliminary investigation before respondent Lota,
petitioners moved to dismiss the charges against them for lack of jurisdiction
because David's claims allegedly comprised a purely civil obligation which was itself
novated. Fiscal Lota denied the motion to dismiss (Petition, p. 8).
But, after the presentation of David's principal witness, petitioners filed the
instant petition because: (a) the production of the Promisory Notes, Banker's
Acceptance, Certificates of Time Deposits and Savings Account allegedly showed that
the transactions between David and NSLA were simple loans, i.e., civil obligations on
the part of NSLA which were novated when Guingona, Jr. and Martin assumed them;
and (b) David's principal witness allegedly testified that the duplicate originals of the
aforesaid instruments of indebtedness were all on file with NSLA, contrary to David's
claim that some of his investments were not record (Petition, pp. 8-9).
Petitioners alleged that they did not exhaust available administrative
remedies because to do so would be futile (Petition, p. 9) [pp. 153-157, rec.].

ISSUE:
Whether public respondents acted without jurisdiction when they investigated the
charges (estafa and violation of CB Circular No. 364 and related regulations regarding
foreign exchange transactions) subject matter of I.S. No. 81-31938.
RULING:
AFFIRMATIVE
There is merit in the contention of the petitioners that their liability is civil in nature
and therefore, public respondents have no jurisdiction over the charge of estafa.
A casual perusal of the December 23, 1981 affidavit complaint will show that
from March 20, 1979 to March, 1981, private respondent David, together with his
sister, Denise Kuhne, invested with the NSLA a sum of total of P1,159,078.14
deposits. It appears further that private respondent David, together with his sister,
made investments in the aforesaid bank in the amount of US$75,000.00.
The records reveal that when the aforesaid bank was placed under
receivership on March 21, 1981, petitioners Guingona and Martin, upon the request
of private respondent David, assumed the obligation of the bank to private
respondent David by executing on June 17, 1981 a joint promissory note in favor of
private respondent acknowledging an indebtedness of Pl,336,614.02 and
US$75,000.00.
Petitioners Guingona and Martin agreed to divide the said indebtedness, and
petitioner Guingona personally acknowledged an indebtedness of P668,307.01 (1/2 of
P1,336,614.02) and US$37,500.00 (1/2 of US$75,000.00) in favor of private
respondent. The aforesaid promissory notes were executed as a result of deposits
made by Clement David and Denise Kuhne with the Nation Savings and Loan
Association.
It must be pointed out that 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.
 Article 1980 NCC provides that fixed, savings, and current deposits ofmoney in banks and similar institutions shall be governed by the
provisions concerning simple loan.
This Court also declared in the recent case of Serrano vs. Central Bank of
the Philippines that bank deposits are in the nature of irregular deposits. They are
really 'loans because they earn interest. All kinds of bank deposits, whether fixed,
savings, or current are to be treated as loans and are to be covered by the law on
loans.
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 the amount deposited, it has, however, no
obligation to return or deliver the same money that was deposited. And, the failure of
CREDTRANS sjbprior | 5

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.
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.
YONG CHAN KIM, petitioner, vs.
PEOPLE OF THE PHILIPPINES, HON. EDGAR D. GUSTILO, Presiding Judge,
RTC, 6th Judicial Region, Branch 28 Iloilo City and Court of Appeals (13th
Division) respondents
FACTS:
Petitioner Yong Chan Kim was employed as a Researcher at the Aquaculture
Department of the Southeast Asian Fisheries Development Center (SEAFDEC) with

head station at Tigbauan, Province of Iloilo. As Head of the Economics Unit of the
Research Division, he conducted prawn surveys which required him to travel to
various selected provinces in the country where there are potentials for prawn
culture.
 Travel Order No.2222 for June16 to July21, 1982, received Php6,438.00
as cash advance to defray his travel expenses.
 T.O. 2268 for June30 to July4, 1982, received a cash advance of
Php495.00.
On 14 January 1983, petitioner presented both travel orders for liquidation,
submitting Travel Expense Reports to the Accounting Section. When the Travel
Expense Reports were audited, it was discovered that there was an overlap of four (4)
days (30 June to 3 July 1982) in the two (2) travel orders for which petitioner
collected per diems twice. In sum, the total amount in the form of per diems and
allowances charged and collected by petitioner under Travel Order No. 2222, when he
did not actually and physically travel as represented by his liquidation papers, was
P1,230.00.
In September 1983, two (2) complaints for Estafa were filed against the
petitioner before the Municipal Circuit Trial Court at Guimbal, Iloilo, docketed as
Criminal Case Nos. 628 and 631.
 In Criminal Case No.628 MTC rendered a decision finding Yong Chan Kim
guilty beyond reasonable doubt for the crime of Estafa penalized under
paragraph l(b) of Article 315, RPC.
 In Criminal Case No.631 was subsequently dismissed for failure to
prosecute.
Petitioner appealed from the decision of the Municipal Circuit Trial Court in
Criminal Case No. 628. On 30 July 1987, the Regional Trial Court in Iloilo City in
Criminal Case No. 20958 affirmed in toto the trial court's decision. On 30 October
1987, petitioner filed with the appellate court a petition for review. As earlier stated,
on 29 April 1988, the Court of Appeals dismissed the petition for having been filed
out of time. Petitioner's motion for reconsideration was denied for lack of merit.
Hence, the present course.
(The SC initially dismissed the case for failure of petitioner to sufficiently show that
CA had committed any reversible error in its questioned judgment which had
dismissed petitioner’s petition for review for having been filed out of time. But on
August 10, 1990, SC resolved to set aside the dismissal of the case and give due
course to the petition.)
ISSUE:
Whether or not the petitioner committed estafa?
RULING:
NEGATIVE
We find merit in the petition.


In order that a person can be convicted of estafa under the RPC, it must
be proven that he had the obligation to deliver or return the same
money, good or personal property that he had received.
CREDTRANS sjbprior | 6







Was petitioner under obligation to return the same money
(cash advance) which he had received? We belive not.
o
Liquidation simply means the settling of an indebtedness. An
employee, such as herein petitioner, who liquidates a cash advance
is in fact paying back his debt in the form of a loan of money
advanced to him by his employer, asper diems and allowances.
Similarly, as stated in the assailed decision of the lower court, "if
the amount of the cash advance he received is less than the
amount he spent for actual travel . . . he has the right to demand
reimbursement from his employer the amount he spent coming
from his personal funds. 12 In other words, the money advanced by
either party is actually a loan to the other. Hence, petitioner was
under no legal obligation to return the same cash or money, i.e.,
the bills or coins, which he received from the private respondent.
The ruling of the trial judge that ownership of the cash advanced to the
petitioner by private respondent was not transferred to the latter is
erroneous. Ownership of the money was transferred to the petitioner.
Even the prosecution witness, Virgilio Hierro, testified to this fact.
Since ownership of the money (cash advance) was transferred to
petitioner, no fiduciary relationship was created. Absent this fiduciary
relationship between petitioner and private respondent, which is an
essential element of the crime of estafa by misappropriation or
conversion, petitioner could not have committed estafa.

DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner, vs.
GUARIÑA AGRICULTURAL AND REALTY DEVELOPMENT
Respondent.

CORPORATION,

FACTS:
In July 1976, Guariña Corporation applied for a loan from DBP to finance the
development of its resort complex situated in Trapiche, Oton, Iloilo. The loan, in the
amount of P3,387,000.00, was approved on August 5, 1976. Prior to the release of
the loan, DBP required Guariña Corporation to put up a cash equity of P1,470,951.00
for the construction of the buildings and other improvements on the resort complex.
 In relation to this loan:

Respondent executed a promissory note that would be due on
November 3, 1988.

On October 5, 1976, Guariña Corporation executed a real estate
mortgage over several real properties in favor of DBP as security
for the repayment of the loan.

On May 17, 1977, Guariña Corporation executed a chattel
mortgage over the personal properties existing at the resort
complex and those yet to be acquired out of the proceeds of the
loan, also to secure the performance of the obligation.
The loan was released in several instalments, and Guariña Corporation used
the proceeds to defray the cost of additional improvements in the resort complex. In
all, the amount released totaled P3,003,617.49, from which DBP withheld
P148,102.98 as interest.

Guariña Corporation demanded the release of the balance of the loan, but
DBP refused. Instead, DBP directly paid some suppliers of Guariña Corporation over
the latter's objection. DBP found upon inspection of the resort project, its
developments and improvements that Guariña Corporation had not completed the
construction works.
In a letter dated February 27, 1978, and a telegram dated June 9, 1978, DBP
thus demanded that Guariña Corporation expedite the completion of the project, and
warned that it would initiate foreclosure proceedings should Guariña Corporation not
do so.
Unsatisfied with the non-action and objection of Guariña Corporation, DBP
initiated extrajudicial foreclosure proceedings. A notice of foreclosure sale was sent
to Guariña Corporation. The notice was eventually published, leading the clients and
patrons of Guariña Corporation to think that its business operation had slowed down,
and that its resort had already closed.
On January 6, 1979, Guariña Corporation sued DBP in the RTC to demand
specific performance of the latter's obligations under the loan agreement, and to stop
the foreclosure of the mortgages.
 DBP moved for the dismissal of the complaint, stating that the
mortgaged properties had already been sold to satisfy the obligation of
Guariña Corporation at a public auction held on January 15, 1979 at the
Costa Mario Resort Beach Resort in Oton, Iloilo.
Guariña Corporation amended the complaint on February 6, 1979 to seek
the nullification of the foreclosure proceedings and the cancellation of the certificate
of sale. DBP filed its answer on December 17, 1979, and trial followed upon the
termination of the pre-trial without any agreement being reached by the parties.
 DBP applied for the issuance of a writ of possession by the RTC. At first,
the RTC denied the application but later granted it upon DBP's motion
for reconsideration. Aggrieved, Guariña Corporation assailed the
granting of the application before the CA on certiorari. After the CA
dismissed the petition for certiorari, DBP sought the implementation of
the order for the issuance of the writ of possession over Guariña
Corporation's opposition, the RTC issued the writ of possession on June
16, 1982.
Ruling of the RTC  The court hereby resolves that the extra-judicial sales of the
mortgaged properties of the plaintiff on January 15, 1979 are null and void, so with
the consequent issuance of certificates of sale to the defendant of said properties,
the registration thereof with the Registry of Deeds and the issuance of the transfer
certificates of title involving the real property in its name.
Ruling of the CA  The Decision dated January 6, 1998, rendered by the Regional
Trial Court of Iloilo City, Branch 25 in Civil Case No. 12707 for Specific Performance
with Preliminary Injunction is hereby AFFIRMED with MODIFICATION, in that the award
for attorney's fees is deleted.
ISSUE:
CREDTRANS sjbprior | 7

Whether or not the foreclosure of the mortgaged properties was valid and proper.
Petitioner’s Argument  DBP submits that the loan had been granted under its
supervised credit financing scheme for the development of a beach resort, and the
releases of the proceeds would be subject to conditions that included the verification
of the progress of works in the project to forestall diversion of the loan proceeds; and
that under Stipulation No. 26 of the mortgage contract, further loan releases would
be terminated and the account would be considered due and demandable in the
event of a deviation from the purpose of the loan, including the failure to put up the
required equity and the diversion of the loan proceeds to other purposes. It assails
the declaration by the CA that Guariña Corporation had not yet been in default in its
obligations despite violations of the terms of the mortgage contract securing the
promissory note.
Respondent’s Argument  Guariña Corporation counters that it did not violate the
terms of the promissory note and the mortgage contracts because DBP had fully
collected the interest notwithstanding that the principal obligation did not yet fall due
and become demandable.
RULING:
NEGATIVE
The appeal lacks merit.
The agreement between DBP and Guariña Corporation was a loan. Under the
law, a loan requires the delivery of money or any other consumable object by one
party to another who acquires ownership thereof, on the condition that the same
amount or quality shall be paid. Loan is a reciprocal obligation, as it arises from the
same cause where one party is the creditor, and the other the debtor. The obligation
of one party in a reciprocal obligation is dependent upon the obligation of the other,
and the performance should ideally be simultaneous. This means that in a loan, the
creditor should release the full loan amount and the debtor repays it when it
becomes due and demandable.
DBP's foreclosure of the mortgage and the sale of the mortgaged properties
at its instance were premature, and, therefore, void and ineffectual.


DBP's actuations were legally unfounded. It is true that loans are often
secured by a mortgage constituted on real or personal property to
protect the creditor's interest in case of the default of the debtor. By its
nature, however, a mortgage remains an accessory contract dependent
on the principal obligation,33 such that enforcement of the mortgage
contract will depend on whether or not there has been a violation of the
principal obligation. While a creditor and a debtor could regulate the
order in which they should comply with their reciprocal obligations, it is
presupposed that in a loan the lender should perform its obligation - the
release of the full loan amount - before it could demand that the
borrower repay the loaned amount. In other words, Guariña Corporation
would not incur in delay before DBP fully performed its reciprocal
obligation.



Considering that it had yet to release the entire proceeds of the loan,
DBP could not yet make an effective demand for payment upon Guariña
Corporation to perform its obligation under the loan. According to
Development Bank of the Philippines v. Licuanan, 35 it would only be
when a demand to pay had been made and was subsequently refused
that a borrower could be considered in default, and the lender could
obtain the right to collect the debt or to foreclose the mortgage. Hence,
Guariña Corporation would not be in default without the demand.



Assuming that DBP could already exact from the latter its compliance
with the loan agreement, the letter dated February 27, 1978 that DBP
sent would still not be regarded as a demand to render Guariña
Corporation in default under the principal contract because DBP was
only thereby requesting the latter "to put up the deficiency in the value
of improvements."

Having found and pronounced that the extrajudicial foreclosure by DBP was
premature, and that the ensuing foreclosure sale was void and ineffectual, the Court
affirms the order for the restoration of possession to Guarifia Corporation and the
payment of reasonable rentals for the use of the resort. The CA properly held that the
premature and invalid foreclosure had unjustly dispossessed Guarifia Corporation of
its properties. Consequently, the restoration of possession and the payment of
reasonable rentals were in accordance with Article 561 of the Civil Code, which
expressly states that one who recovers, according to law, possession unjustly lost
shall be deemed for all purposes which may redound to his benefit to have enjoyed it
without interruption.
DARIO NACAR, vs.
GALLERY FRAMES AND/OR FELIPE BORDEY, JR.
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., docketed as NLRC NCR
Case No. 01-00519-97
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.
Respondents appealed to the NLRC, but it was dismissed for lack of merit in
the Resolution5 dated February 29, 2000. Accordingly, the NLRC sustained the
decision of the Labor Arbiter. Respondents filed a motion for reconsideration, but it
was denied.
Dissatisfied, respondents filed a Petition for Review on Certiorari before the
CA. On August 24, 2000, the CA issued a Resolution dismissing the petition.
Respondents filed a Motion for Reconsideration, but it was likewise denied in a
CREDTRANS sjbprior | 8

Resolution dated May 8, 2001. Respondents then sought relief before the Supreme
Court, docketed as G.R. No. 151332. Finding no reversible error on the part of the CA,
this Court denied the petition in the Resolution dated April 17, 2002.
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. A pre-execution conference was consequently scheduled, but
respondents failed to appear.
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 Execution13 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, among other things,
that since the Labor Arbiter awarded separation pay of P62,986.56 and limited
backwages ofP95,933.36, 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.14 On January 13, 2003, the Labor Arbiter
issued an Order15 denying the motion. Thus, an Alias Writ of Execution16 was issued
on January 14, 2003.
Respondents again appealed before the NLRC, which on June 30, 2003
issued a Resolution17 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 preexecution 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 P471,320.31.18
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 recomputation of the monetary award to include the appropriate interests.19
On May 10, 2005, the Labor Arbiter issued an Order20 granting the motion,
but only up to the amount ofP11,459.73. 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 P158,919.92 that should be
executed. Thus, since petitioner already receivedP147,560.19, he is only entitled to
the balance of P11,459.73.
Petitioner then appealed before the NLRC,21 which appeal was denied by
the NLRC in its Resolution22 dated September 27, 2006. Petitioner filed a Motion for
Reconsideration, but it was likewise denied in the Resolution23dated January 31,
2007.
Aggrieved, petitioner then sought recourse before the CA, docketed as CAG.R. SP No. 98591.
On September 23, 2008, the CA rendered a Decision24 denying the petition.
The CA opined that since petitioner no longer appealed the October 15, 1998
Decision of the Labor Arbiter, which already became final and executory, a belated
correction thereof is no longer allowed. The CA stated that there is nothing left to be
done except to enforce the said judgment. Consequently, it can no longer be
modified in any respect, except to correct clerical errors or mistakes.
ISSUE:
Whether or not petitioner is entitled to the payment of interest from finality of the
decision until full payment by the respondents.
RULING:
AFFIRMATIVE
The petition is meritorious.
Dario Nacar filed a labor case against Gallery Frames and its owner Felipe Bordey, Jr.
Nacar alleged that he was dismissed without cause by Gallery Frames on January 24,
1997. On October 15, 1998, the Labor Arbiter (LA) found Gallery Frames guilty of
illegal dismissal hence the Arbiter awarded Nacar P158,919.92 in damages consisting
of backwages and separation pay.
Gallery Frames appealed all the way to the Supreme Court (SC). The Supreme Court
affirmed the decision of the Labor Arbiter and the decision became final on May 27,
2002.
After the finality of the SC decision, Nacar filed a motion before the LA for
recomputation as he alleged that his backwages should be computed from the time
of his illegal dismissal (January 24, 1997) until the finality of the SC decision (May 27,
2002) with interest. The LA denied the motion as he ruled that the reckoning point of
thecomputation should only be from the time Nacar was illegally dismissed )January
CREDTRANS sjbprior | 9

24, 1997) until the decision of the LA (October 15, 1998). The LA reasoned that the
said date should be the reckoning point because Nacar did not appeal hence as to
him, that decision became final and executory.

3. Compounded Interest

This is applicable to both monetary and non-monetary
obligations
 6% per annum computed against award of damages
(interest) granted by
the court. To be computed from
the date when the court’s decision becomes
final
and executory until the award is fully satisfied by the
losing party.

ISSUE:
Whether or not the Labor Arbiter is correct.
HELD:
No. 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).

4. The 6% per annum rate of legal interest shall be applied prospectively:

Final and executory judgments awarding damages prior to
July 1, 2013
shall apply the 12% rate;

Final and executory judgments awarding damages on or
after July 1, 2013 shall apply the 12% rate for unpaid
obligations until June 30, 2013; unpaid
obligations
with respect to said judgments on or after July 1, 2013
shall still
incur the 6% rate.

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.
Anent the issue of award interest in the form of actual or compensatory damages, the
Supreme Court ruled that the old case of Eastern Shipping Lines vs CA is already
modified by the promulgation of the Bangko Sentral ng Pilipinas Monetary Board
Resolution No. 796 which lowered the legal rate of interest from 12% to 6%.
Specifically, the rules on interest are now as follows:
1. Monetary Obligations ex. Loans:
a. If stipulated in writing:
a.1. shall run from date of judicial demand (filing of the
case)
a.2. rate of interest shall be that amount stipulated
b. If not stipulated in writing
b.1. shall run from date of default (either failure to pay
upon
extra-judicial demand or upon judicial demand whichever
is
appropriate and subject to the provisions of Article 1169 of
the
Civil Code)
b.2. rate of interest shall be 6% per annum
2.

Non-Monetary Obligations (such as the case at bar)
a. If already liquidated, rate of interest shall be 6% per annum,
demandable
from date of judicial or extra-judicial demand (Art. 1169,
Civil Code)
b. If unliquidated, no interest
Except: When later on established with certainty. Interest
shall still
be 6% per annum demandable from the date of
judgment
because such on such date, it is already deemed
that the amount of damages is already ascertained.

CELESTINA T. NAGUIAT, petitioner, vs.
COURT OF APPEALS and AURORA QUEAÑO, respondents
FACTS:
Queaño applied with Naguiat for a loan in the amount of Two Hundred
Thousand Pesos (P200,000.00), which Naguiat granted. On 11 August 1980, Naguiat
indorsed to Queaño Associated Bank Check No. 090990 (dated 11 August 1980) for
the amount of Ninety Five Thousand Pesos (P95,000.00), which was earlier issued to
Naguiat by the Corporate Resources Financing Corporation. She also issued her own
Filmanbank Check No. 065314, to the order of Queaño, also dated 11 August 1980
and for the amount of Ninety Five Thousand Pesos (P95,000.00). The proceeds of
these checks were to constitute the loan granted by Naguiat to Queaño.3
To secure the loan, Queaño executed a Deed of Real Estate Mortgage dated
11 August 1980 in favor of Naguiat, and surrendered to the latter the owner’s
duplicates of the titles covering the mortgaged properties.4 On the same day, the
mortgage deed was notarized, and Queaño issued to Naguiat a promissory note for
the amount of TWO HUNDRED THOUSAND PESOS (P200,000.00), with interest at 12%
per annum, payable on 11 September 1980.5 Queaño also issued a Security Bank
and Trust Company check, postdated 11 September 1980, for the amount of TWO
HUNDRED THOUSAND PESOS (P200,000.00) and payable to the order of Naguiat.
CREDTRANS sjbprior | 10

Upon presentment on its maturity date, the Security Bank check was
dishonored for insufficiency of funds. On the following day, 12 September 1980,
Queaño requested Security Bank to stop payment of her postdated check, but the
bank rejected the request pursuant to its policy not to honor such requests if the
check is drawn against insufficient funds.6
On 16 October 1980, Queaño received a letter from Naguiat’s lawyer,
demanding settlement of the loan. Shortly thereafter, Queaño and one Ruby
Ruebenfeldt (Ruebenfeldt) met with Naguiat. At the meeting, 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.7
Naguiat applied for the extrajudicial foreclosure of the mortgage with the
Sheriff of Rizal Province, who then scheduled the foreclosure sale on 14 August 1981.
Three days before the scheduled sale, Queaño filed the case before the Pasay City
RTC,8 seeking the annulment of the mortgage deed. The trial court eventually
stopped the auction sale.

presented no such proof, it follows that the checks were not encashed or credited to
Queaño’s account.

CATHOLIC VICAR APOSTOLIC OF THE MOUNTAIN PROVINCE, petitioner,
vs.
COURT OF APPEALS, HEIRS OF EGMIDIO OCTAVIANO AND JUAN
VALDEZ, respondents.
The principal issue in this case is whether or not a decision of the Court of Appeals
promulgated a long time ago can properly be considered res judicata by respondent
Court of Appeals in the present two cases between petitioner and two private
respondents.
FACTS:

Ruling of the RTC  rendered judgment, declaring the Deed of Real Estate Mortgage
null and void, and ordering Naguiat to return to Queaño the owner’s duplicates of her
titles to the mortgaged lots.



Ruling of the CA  affirmed in toto the RTC decision.



ISSUE:
Whether private respondent received the loan proceeds which were supposed to be
covered by the two checks petitioner had issued.



RULING:
NEGATIVE



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.20 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.21 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















Petitioner Vicar applied for registration of title over Lots 1,2,3 and 4 situated
in La Trinidad, Benguet with the Land Registration Court.
The Land Registration Court confirmed to the registrable title of Vicar to the
lots.
Heirs of Valdez and Heirs of Octaviano, herein private respondents appealed
the decision of the Land Registration Court to the Court of Appeals.
CA reversed the LRC’s decision and dismissed the Vicar’s application as to
Lots 2 and 3. (CA GR 38830-R)
Heirs of Octaviano file a Motion For Recon with CA to order the registration
of Lot 3 in their names.
Heirs of Valdez files a Motion for Recon with CA to have Lots 2 and 3
registered in their names.
CA denied the 2 MFRs.
Vicar filed with the Supreme Court a petition for review on certiorari of the
CA’s decision to dismiss its application for registration on Lots 2 and 3.
Heirs of Valdez filed with SC a petition for review.
SC denied both petitions for lack of merit.
Heirs of Octaviano filed with CFI Baguio a Motion for Execution of Judgment
praying that they will be placed in possession of Lot 3.
o
The CFI denied the motion on the ground that the CA’s decision did
not grant the Heirs of Octaviano any affirmative relief.
Heirs of Octaviano filed with CA a petition for certiorari and mandamus, that
was subsequently dismissed.
Heirs of Octaviano filed a civil case for recovery of possession of Lot 3.
Heirs of Octaviano likewise filed a civil case for recovery of possession of Lot
2.
o
The plaintiffs argue that the defendant Vicar is barred from setting
up the defense of ownership and/or long and continuous possession
of the two lots in question since this is barred by prior judgment of
the Court of Appeals in CA-G.R. No. 038830-R under the principle of
res judicata. Plaintiffs contend that the question of possession and
CREDTRANS sjbprior | 11

o

ownership have already been determined by the Court of Appeals
and affirmed by the Supreme Court
Defendant Vicar maintains that the principle of res judicata would
not prevent them from litigating the issues of long possession and
ownership because the dispositive portion of the prior judgment in
CA-G.R. No. 038830-R merely dismissed their application for
registration and titling of lots 2 and 3. Defendant Vicar contends
that only the dispositive portion of the decision, and not its body, is
the controlling pronouncement of the Court of Appeals.

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

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.

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.
The Court of Appeals found that the predecessors-in-interest and private
respondents were possessors under claim of ownership in good faith from 1906; that

petitioner Vicar was only a bailee in commodatum; and that the adverse claim and
repudiation of trust came only in 1951.
BPI FAMILY BANK,Petitioner, - versus AMADO FRANCO and COURT OF APPEALS, Respondents.
FACTS:

On August 15, 1989, Tevesteco opened a savings and current account with
BPI-FB. Soon thereafter, FMIC also opened a time deposit account with the same
branch of BPI-FB.
On August 31, 1989, Franco opened three accounts, namely, a current,
savings, and time deposit, with BPI-FB. The total amount of P2,000,000.00 used to
open these accounts is traceable to a check issued by Tevesteco allegedly in
consideration of Franco’s introduction of Eladio Teves, to Jaime Sebastian, who was
then BPI-FB SFDM’s Branch Manager. In turn, the funding for the P2,000,000.00 check
was part of the P80,000,000.00 debited by BPI-FB from FMIC’s time deposit account
and credited to Tevesteco’s current account pursuant to an Authority to Debit
purportedly signed by FMIC’s officers.
It appears, however, that the signatures of FMIC’s officers on the Authority
to Debit were forged. BPI-FB, debited Franco’s savings and current accounts for the
amounts remaining therein. In the meantime, two checks drawn by Franco against his
BPI-FB current account were dishonored and stamped with a notation “account under
garnishment.” Apparently, Franco’s current account was garnished by virtue of an
Order of
Notably, the dishonored checks were issued by Franco and presented for
payment at BPI-FB prior to Franco’s receipt of notice that his accounts were under
garnishment. It was only on May 15, 1990, that Franco was impleaded in the Makati
case. Immediately, upon receipt of such copy, Franco filed a Motion to Discharge
Attachment. On May 17, 1990, Franco pre-terminated his time deposit account.
BPI-FB deducted the amount of P63,189.00 from the remaining balance of
the time deposit account representing advance interest paid to him. Consequently, in
light of BPI-FB’s refusal to heed Franco’s demands to unfreeze his accounts and
release his deposits therein, Franco filed on June 4, 1990 with the Manila RTC the
subject suit.
ISSUE:
WON Respondent had better right to the deposits in the subject accounts which are
part of the proceeds of a forged Authority to Debit
RULING:
NO
There is no doubt that BPI-FB owns the deposited monies in the accounts of
Franco, but not as a legal consequence of its unauthorized transfer of FMIC’s deposits
to Tevesteco’s account. BPI-FB conveniently forgets that the deposit of money in
banks is governed by the Civil Code provisions on simple loan or mutuum. As there is
CREDTRANS sjbprior | 12

a debtor-creditor relationship between a bank and its depositor, BPI-FB ultimately
acquired ownership of Franco’s deposits, but such ownership is coupled with a
corresponding obligation to pay him an equal amount on demand. Although BPI-FB
owns the deposits in Franco’s accounts, it cannot prevent him from demanding
payment of BPI-FB’s obligation by drawing checks against his current account, or
asking for the release of the funds in his savings account. Thus, when Franco issued
checks drawn against his current account, he had every right as creditor to expect
that those checks would be honored by BPI-FB as debtor.
More importantly, BPI-FB does not have a unilateral right to freeze the
accounts of Franco based on its mere suspicion that the funds therein were proceeds
of the multi-million peso scam Franco was allegedly involved in. To grant BPI-FB, or
any bank for that matter, the right to take whatever action it pleases on deposits
which it supposes are derived from shady transactions, would open the floodgates of
public distrust in the banking industry.
Ineluctably, BPI-FB, as the trustee in the fiduciary relationship, is duty bound
to know the signatures of its customers. Having failed to detect the forgery in the
Authority to Debit and in the process inadvertently facilitate the FMIC-Tevesteco
transfer, BPI-FB cannot now shift liability thereon to Franco and the other payees of
checks issued by Tevesteco, or prevent withdrawals from their respective accounts
without the appropriate court writ or a favorable final judgment.

On August 28, 1997, respondent filed a complaint for sum of money to enforce the
unpaid balance, plus 4% monthly interest. In their Answer, the petitioners admitted
the loan of P1,240,000.00, but denied the stipulation on the 4% monthly interest,
arguing that the interest was not provided in the promissory note. Pantaleon also
denied that he made himself personally liable and that he made representations that
the loan would be repaid within six (6) months.
RTC found that the respondent issued a check for P1M in favor of the petitioners for a
loan that would earn an interest of 4% or P40,000.00 per month, or a total of
P240,000.00 for a 6-month period. RTC ordered the petitioners to jointly and severally
pay the respondent the amount of P3,526,117.00 plus 4% per month interest from
February 11, 1999 until fully paid.
Petitioners appealed to CA insisting that there was no express stipulation on the 4%
monthly interest. CA favored respondent but noted that the interest of 4% per month,
or 48% per annum, was unreasonable and should be reduced to 12% per annum. MR
denied hence this petition.
ISSUE:
Whether the parties agreed to the 4% monthly interest on the loan. If so, does the
rate of interest apply to the 6-month payment period only or until full payment of the
loan?
RULING:
Petition is meritorious. Interest due should be stipulated in writing; otherwise, 12%
per annum

PRISMA CONSTRUCTION & DEVELOPMENT CORPORATION and ROGELIO S.
PANTALEON, Petitioners, versus
ARTHUR F. MENCHAVEZ , Respondent.
FACTS:
December 8, 1993, Pantaleon, President and Chairman of the Board of PRISMA,
obtained a P1M loan from the respondent, with monthly interest of P40,000.00
payable for 6 months, or a total obligation of P1,240,000.00 payable within 6 mos. To
secure the payment of the loan, Pantaleon issued a promissory. Pantaleon signed the
promissory note in his personal capacity and as duly authorized by the Board of
Directors of PRISMA. The petitioners failed to completely pay the loan within the 6month period.
As of January 4, 1997, respondent found that the petitioners still had an outstanding
balance of P1,364,151.00, to which respondent applied a 4% monthly interest.

Obligations arising from contracts have the force of law between the contracting
parties and should be complied with in good faith. When the terms of a contract are
clear and leave no doubt as to the intention of the contracting parties, the literal
meaning of its stipulations governs. Courts have no authority to alter the contract by
construction or to make a new contract for the parties; a court’s duty is confined to
the interpretation of the contract the parties made for themselves without regard to
its wisdom or folly, as the court cannot supply material stipulations or read into the
contract words the contract does not contain. It is only when the contract is vague
and ambiguous that courts are permitted to resort to the interpretation of its terms to
determine the parties’ intent.
In the present case, the respondent issued a check for P1M. In turn, Pantaleon, in his
personal capacity and as authorized by the Board, executed the promissory note.
Thus, the P1M loan shall be payable within 6 months. The loan shall earn an interest
of P40,000.00 per month, for a total obligation of P1,240,000.00 for the six-month
period. We note that this agreed sum can be computed at 4% interest per month, but
no such rate of interest was stipulated in the promissory note; rather a fixed sum
equivalent to this rate was agreed upon.

CREDTRANS sjbprior | 13

Article 1956 of the Civil Code specifically mandates that “no interest shall be due
unless it has been expressly stipulated in writing.” The payment of interest in loans
or forbearance of money is allowed only if: (1) there was an express stipulation for
the payment of interest; and (2) the agreement for the payment of interest was
reduced in writing. The concurrence of the two conditions is required for the payment
of interest at a stipulated rate. The collection of interest without any stipulation in
writing is prohibited by law.
The interest of P40,000.00 per month corresponds only to the six-month period of the
loan, or from January 8, 1994 to June 8, 1994, as agreed upon by the parties in the
promissory note. Thereafter, the interest on the loan should be at the legal interest
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.

WHEREFORE, in light of all the foregoing, we hereby REVERSE and SET ASIDE the
Decision CA
SEBASTIAN SIGA-AN vs ALICIA VILLANUEVA
Facts:






The facts show that the parties agreed to the payment of a specific sum of money of
P40,000.00 per month for six months, not to a 4% rate of interest payable within a 6month period.
No issue on the excessiveness of the stipulated amount of P40,000.00 per month was
ever put in issue by the petitioners; they only assailed the application of a 4%
interest rate, since it was not agreed upon.
It is a familiar doctrine in obligations and contracts that the parties are bound by the
stipulations, clauses, terms and conditions they have agreed to, which is the law
between them, the only limitation being that these stipulations, clauses, terms and
conditions are not contrary to law, morals, public order or public policy. The payment
of the specific sum of money of P40,000.00 per month was voluntarily agreed upon
by the petitioners and the respondent. There is nothing from the records and, in fact,
there is no allegation showing that petitioners were victims of fraud when they
entered into the agreement with the respondent.




Therefore, as agreed by the parties, the loan of P1M shall earn P40,000.00 per month
for a period of 6 months, for a total principal and interest amount of P1,240,000.00.
Thereafter, interest at the rate of 12% per annum shall apply. The amounts already
paid by the petitioners during the pendency of the suit, amounting toP1,228,772.00
as of February 12, 1999, should be deducted from the total amount due, computed
as indicated above. We remand the case to the trial court for the actual computation
of the total amount due.





On March 3, 1998, respondent Alicia Villanueva filed a complaint for a sum
of money against petitioner Sebastian Siga-an. Respondent alleged that she
was a businesswoman engaged in supplying office materials and
equipments to the PNO; while petitioner was a military officer and
comptroller of the PNO from 1991-1996.
Sometime in 1992, respondent claimed that the petitioner approached her
inside the PNO office and offered to loan her the amount of P540,000. She
accepted the offer since she needed capital for her business. The loan
agreement was not reduced in writing and there was no stipulation as to the
payment of interest for the loan.
On August 31, 1993, respondent issued a check worth P500,000 to
petitioner as partial payment of the loan. Two months later she issued
another check in the amount of P200,000 as payment of the remaining
balance. Petitioner told her that she since she paid a total amount of
P700,000 for the P540,000 worth of loan, the excess amount of P160,000
would be applied as interest for the loan. Not satisfied with the amount
applied as interest, the petitioner pestered her to pay additional interest. He
threatened to block her transactions with the PNO if she won't comply. The
respondent conceded since all her transactions with the PNO need the
approval of the petitioner. Thus, she paid addt'l amounts in cash and checks
as interest for the loan. She asked the petitioner to give her receipts but he
told her that there's no need for a receipt because there's mutual trust and
understanding between them.
Thereafter, the respondent consulted a lawyer regarding propriety of paying
interest on the loan despite the absence of agreement to that effect. Her
lawyer told her that petitioner could not validly collect interest on the loan
because there was no agreement between her and petitioner. Upon being
advised by her lawyer that she made an overpayment, she sent a demand
letter to petitioner asking for the return of the excess amount. But the
petitioner just ignored the demand letter.
Respondent prayed that the RTC render judgment ordering petitioner to pay
respondent (1) P660,000.00 plus legal interest from the time of demand; (2)
P300,000.00 as moral damages; (3) P50,000.00 as exemplary damages; and
(4) an amount equivalent to 25% of P660,000.00 as attorney’s fees.
In his answer to the complaint, the petitioner denied that he offered a loan
to respondent and mentioned the mistakes committed by the respondent
regarding the payment of the loan and that there was no overpayment.
After the trial, the RTC rendered a decision holding that respondent made an
overpayment of her loan obligation to petitioner and that the latter should
CREDTRANS sjbprior | 14



refund the excess amount to the former. The alleged interest should not be
included because there was no agreement between them regarding the
payment of interest. It concluded that since respondent made an excess
payment to petitioner in the amount of P660,000.00 through mistake,
petitioner should return the said amount to respondent pursuant to the
principle of solutio indebiti.
Petitioner appealed to the CA but the CA affirmed the ruling of the RTC.
Petitioner filed a motion for reconsideration to the appellate court, hence
this petition.

ISSUES:
1.
2.

WON no interest was due to petitioner.
WON applying the principle of solution indebiti is proper.





something is received when there is no right to demand it, and it was unduly
delivered through mistake, the obligation to return it arises.
The principle of solutio indebiti applies where (1) a payment is made when
there exists no binding relation between the payor, who has no duty to pay,
and the person who received the payment; and (2) the payment is made
through mistake, and not through liberality or some other cause.
In the present case, petitioner’s obligation arose from a quasi-contract of
solutio indebiti and not from a loan or forbearance of money. Thus, an
interest of 6% per annum should be imposed on the amount to be refunded
as well as on the damages awarded and on the attorney’s fees, to be
computed from the time of the extra-judicial demand on 3 March 1998, up
to the finality of this Decision. In addition, the interest shall become 12% per
annum from the finality of this Decision up to its satisfaction.

DECISION:
Decision of the Court of Appeals in CA-G.R. CV No. 71814, dated 16
December 2005, is hereby AFFIRMED with the following MODIFICATIONS: (1) the
amount of P660,000.00 as refundable amount of interest is reduced to THREE
HUNDRED THIRTY FIVE THOUSAND PESOS (P335,000.00); (2) the amount of
P300,000.00 imposed as moral damages is reduced to ONE HUNDRED FIFTY
THOUSAND PESOS (P150,000.00); (3) an interest of 6% per annum is imposed on the
P335,000.00, on the damages awarded and on the attorney’s fees to be computed
from the time of the extra-judicial demand on 3 March 1998 up to the finality of this
Decision; and (4) an interest of 12% per annum is also imposed from the finality of
this Decision up to its satisfaction. Costs against petitioner.
RULING:




Article 1956 of the Civil Code, which refers to monetary interest, specifically
mandates that no interest shall be due unless it has been expressly
stipulated in writing. As can be gleaned from the foregoing provision,
payment of monetary interest is allowed only if: (1) there was an express
stipulation for the payment of interest; and (2) the agreement for the
payment of interest was reduced in writing. The concurrence of the two
conditions is required for the payment of monetary interest. Thus, we have
held that collection of interest without any stipulation therefor in writing is
prohibited by law.
Article 1960 of the Civil Code, if the borrower of loan pays interest when
there has been no stipulation therefor, the provisions of the Civil Code
concerning solutio indebiti shall be applied. Article 2154 of the Civil Code
explains the principle of solutio indebiti. Said provision provides that if
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