8.) Delta Motors vs.

Genuino
G.R. No. 55665, February 8, 1989
Cortes, J.
Facts:
Private Respondents are owners of an iceplant and cold storage who ordered black iron pipes to Delta
Motors (herein petitioner) for which the latter provided two letter quotations indicating the selling price and
delivery of said pipes. The terms of payment are also included in the letter quotations which must be
complied with by the respondents. Private respondents made initial payments on both contracts but
delivery of the pipes was not made by Delta Motors so that the Genuinos are not willing to give
subsequent payments notwithstanding the agreed terms of payment requiring them of such. In July 1972
Delta offered to deliver the iron pipes but the Genuinos did not accept the offer because the construction
of the ice plant building where the pipes were to be installed was not yet finished. Three years later, on
April 15, 1975, Hector Genuino, in behalf of Espaa Extension Ice Plant and Cold Storage, asked Delta to
deliver the iron pipes within thirty (30) days from its receipt of the request. But petitioner Delta is unwilling
to deliver said iron pipes unless the Genuinos agree to a new quotation price set by the former. Private
Respondents rejected the new quoted prices and instead filed a complaint for specific performance with
damages seeking to compel Delta to deliver the pipes. Meanwhile, Delta, in its answer prayed for
rescission of the contracts pursuant to Art. 1191 of the New Civil Code.
Issue: Whether or not Delta is entitled for rescission of contract as the latter is subject to suspensive
conditions and only upon their performance or compliance would its obligation to deliver the pipes arise?

Held: No. While there is merit in Delta's claim that the sale is subject to suspensive conditions,
the Court finds that it has, nevertheless, waived performance of these conditions and opted to
go on with the contracts although at a much higher price. Art. 1545 of the Civil Code provides:
Art. 1545. Where the obligation of either party to a contract of sale is subject to any condition
which is not performed, such party may refuse to proceed with the contract or he may waived
performance of the condition. . .
it would be highly inequitable for petitioner Delta to rescind the two (2) contracts considering the fact that
not only does it have in its possession and ownership the black iron pipes, but also the down payments
private respondents have paid. Delta cannot ask for increased prices based on the price offer stipulation
in the contracts and in the increase in the cost of goods. Reliance by Delta on the price offer stipulation is
misplaced. The moment private respondents accepted the offer of Delta, the contract of sale between
them was perfected and neither party could change the terms thereof. Neither could petitioner Delta rely
on the fluctuation in the market price of goods to support its claim for rescission.

34.) KENG HUA PAPER PRODUCTS CO. INC. v. COURT OF APPEALS

(Remedies for Breach Performance To deliver all its accessions)
February 12, 1998
Ponente: J. Panganiban

FACTS:
- Characters:
a) Keng Hua Paper Products consignee, receiver of shipment
b) Sea-Land Service Inc. shipping company, transporter of waste paper
c) Ho Kee Waste Paper shipper
- Definitions:
a) Bill of lading - document issued by a carrier to a shipper, acknowledging that
specified goods
have been received on board as cargo for conveyance to a named
place for delivery to the
consignee who is usually identified.
b) Demurrage an allowance or compensation for the delay or detention of a
ship/vessel; has
reference to the ships expenses, wear and tear, and common
employment.

- Keng Hua purchased from Ho Kee fifty tons of waste paper, with partial shipment permitted.
- On June 29, 1982, Sea-Land received at its Hong Kong terminal a sealed container containing
67 bales of unsorted waste paper for shipment to Keng Hua in Manila. A bill of lading to cover
the shipment was issued by Sea-Land.
- However, the June 29 shipment was 10 tons more than the remaining balance of the
purchase/order, as manifested under the letter of credit. (Keng Hua ordered 50 tons. 10 tons
na lang dapat yung kulang/balance. Pero yung June 29 shipment, 20 tons of waste paper.)
- On July 9, 1982, the shipment was discharged at the Manila International Container Port.
Notices of arrival were transmitted to Keng Hua but it failed to discharge the shipment from the
container during the free time or grace period. The waste paper remained inside Sea-Lands
container from the expiration of the free time period (July 29) until the shipment was unloaded
on November 22, 1983 (481 days).
- During the 481-day period, demurrage charges accrued. Numerous demands for Keng Hua
to pay but it refused to settle its obligation.

PROCEDURAL HISTORY:
- Sea-Land sued Keng Hua for collection and damages.
- The Regional Trial Court of Manila rendered judgment in favor of Sea-Land, and ordered Keng
Hua to pay P67,340 as demurrage charges with interest at the legal rate from the date of the
extrajudicial demand. Also, Keng Hua must pay 10% of the total amount due as attorneys
fees/litigation expenses.
- Court of Appeals affirmed in toto the RTC.
ISSUES:
1) WoN Keng Hua accepted the bill of lading.
2) WoN the award of P67,340 to Sea-Land was proper
3) WoN Keng Hua was correct in not accepting the overshipment
4) WoN the award of legal interest from the date of Sea-Lands extrajudicial demand was proper
PETITIONERS ARGUMENTS:
- If Keng Hua accepted the shipment, it would be violating Central Bank rules and regulations
and custom and tariff laws. It would be tantamount to smuggling. It would make Keng Hua
vulnerable to legal sanctions.
- Sea-Land has no cause of action against Keng Hua because Keng Hua did not hire Sea-Land.
The cause of action should be against the shipper, Ho Kee. The demurrage was a consequence
of the shippers mistake of shipping more than wahat was bought.
- Keng Hua duly notified Sea-Land about the wrong shipment through a letter dated January 24,
1983.
- Keng Hua is not bound by the bill of lading because it never gave its consent. It admits
physical acceptance of the bill of lading, but argues that its subsequent actions belie the
finding that it accepted the terms.
- Notice of Refused or On Hand Freight: proof that Keng Hua declined to accept the shipment.
RESPONDENTS ARGUMENTS:
- None really, just that Keng Hua should pay demurrage charges since it delayed Sea-Lands
vessel by failing to unload the shipment during the free time period.

RATIO:
1) YES, Keng Hua accepted and is thus bound by the bill of lading.
- A bill of lading has two functions:
a) receipt for the goods shipped,
b) a contract by which three parties (shipper, carrier, and consignee) undertake
specific
responsibilities and assume stipulated obligations.
- A bill of lading delivered and accepted constitutes the contract of carriage even though not
signed because the acceptance of a paper containing the terms of a proposed contract
generally constitutes an acceptance of the contract and of all its terms and conditions of which
the acceptor has actual or constructive notice.
- Acceptance = perfect and binding contract
- The bill of lading between Ho Kee, Keng Hua, and Sea-Land was a valid and PERFECTED
contract. Section 17 of the bill of lading provides that the shipper and consignee were liable for
demurrage charges for the failure to discharge the shipment within the grace period.
- SC not persuaded by Keng Huas arguments. Keng Hua did not immediately object to or
dissent from any term or stipulated in the bill of lading. It waited for SIX MONTHS to send a
letter to Sea-Land saying that it would not accept the shipment.
- The inaction for such a long period conveys the clear inference that it accepted the
terms and conditions of the bill of lading.
- Re: Notice of Refused or On Hand Freight: said notice was not written by Keng Hua; it was
sent by Sea-Land to Keng Hua four months after it received the bill of lading. Its only
significance is to highlight Keng Huas prolonged failure to object to the bill of lading.
- Issue of WoN Keng Hua accepted the bill of lading is raised for the first time in the SC (not
raised in the lower courts). Hence, it is barred by estoppel.
- Prolonged failure to receive and discharge cargo -> violation of terms of bill of lading -> liability
for demurrage

2) YES, it is proper
- Keng Hua argued that Sea-Land made no demand for the sum of P67,340. Also, Sea-Lands
loss and prevention manager (P50,260) and its counsel (P37,800) asked for different amounts.
- The amount fo P67,340 was a factual conclusion of the trial court, affirmed by the Court of
Appeals, and is therefore binding on the SC. Such finding is supported by extant evidence.
- Re: discrepancy in amounts demanded: result of the variance of dates when the demands

were made. The longer the cargo remained unclaimed, the higher the demurrage. Thus when
counsel demanded on April 24, 1983 P37,800, it already ballooned to P67,340 by November 22.

3) NO.
- Re: violation of laws: mere apprehension of violating said laws, without a clear demonstration
that taking delivery of the shipment has become legally impossible, cannot defeat Keng Huas
obligations under the bill of lading.

4) NO.
- Based on NCC 2209: interest rate is six percent per annum.
- Bill of lading did not specify the amount of demurrage; this was only established during the trial
court decision. Hence, the rate is 6% to be computed from the trial court decision (Sept. 28,
1990), plus 12% on the total then outstanding from the time judgment becomes final and
executory until its satisfaction.

* In a letter of credit, there are three distinct and independent contracts:

a) contract of sale between buyer and seller
b) contract of buyer with issuing bank
c) letter of credit proper where bank promises to pay seller
- These three are to be maintained in perpetual separation.
- The contract of carriage in the bill of lading must be TREATED INDEPENDENTLY of the
contract of sale and contract with issuing bank. Any discrepancy between the contract of sale
and letter of credit will NOT AFFECT the validity of the contract of carriage in the bill of lading.
- The carrier cannot be expected to go beyond the representation of the shipper in the bill of
lading and to verify their accuracy vis--vis the contract of sale and the letter of credit.
- Carrier had no knowledge of the contents of the container.
DISPOSITIVE:
- CA decision is AFFIRMED, legal interest MODIFIED to 6% to be computed from the trial court
decision (Sept. 28, 1990), plus 12% on the total then outstanding from the time judgment
becomes final and executory until its satisfaction

38.) RODZSSEN SUPPLY CO, INC. VS. FAR EAST BANK & TRUST CO.
GR No. 109087

May 9, 2001

FACTS:
Defendant Rodzssen Supply, Inc. opened with plaintiff Far East Bank and Trust
Co. a 30-day domestic letter of credit in the amount of P190,000.00 in favor of
Ekman and Company, Inc. (Ekman) for the purchase from the latter of five units of
hydraulic loaders, to expire on February 15, 1979. Defendant refused to pay without
any valid reason. Plaintiff prays for judgment ordering defendant to pay the
abovementioned P76,000.00 plus due interest thereon, plus 25% of the amount of
the award as attorneys fees. Knowing that the two units of hydraulic loaders had
been delivered to defendant after the expiry date of subject LC; and that in view of
the breach of contract, defendant offered to return to plaintiff the two units of
hydraulic loaders, presently still with the defendant but plaintiff refused to take
possession thereof.
Under the contract of sale of the five loaders between Ekman and defendant,
upon Ekmans delivery to, and acceptance by, defendant of the two remaining units
of the five loaders, defendant became liable to Ekman for the payment of said two
units. However, as defendant did not pay Ekman, the latter pressed plaintiff for the
payment of said two loaders in the amount of P76,000.00. In the honest belief that
it was still under obligation to Ekman for said amount, considering that Ekman had
presented all the necessary documents, plaintiff voluntarily paid the said amount to
Ekman.
The CA rejected petitioners imputation of bad faith and negligence to
respondent bank for paying for the two hydraulic loaders, which had been delivered
after the expiration of the subject letter of credit. To absolve defendant from liability
for the price of the same," the CA explained, "is to allow it to get away with its
unjust enrichment at the expense of the plaintiff."
ISSUE:
Whether petitioner is liable to respondent.
RULING:

Petitioner claims that it accepted the late delivery of the equipment, only
because it was bound to accept it under the companys trust receipt arrangement
with respondent bank.

Granting that petitioner was bound under such arrangement to accept the
late delivery of the equipment, we note its unexplained inaction for almost four
years with regard to the status of the ownership or possession of the loaders.
Bewildering was its lack of action to validate the ownership and possession of the
loaders, as well as its stolidity over the purported failed sales transaction.
Significant too is the fact that it formalized its offer to return the two pieces of
equipment only after respondents demand for payment, which came more than
three years after it accepted delivery.

When both parties to a transaction are mutually negligent in the performance

of their obligations, the fault of one cancels the negligence of the other and, as in
this case, their rights and obligations may be determined equitably under the law
proscribing unjust enrichment.

Petitioner Rodzssen Supply Co., Inc. is orderd to reimburse Respondent Far

East Bank and Trust Co., Inc. P76,000 plus interest thereon at the rate of 6 percent
per annum computed from April 7, 1983. After this judgment becomes final, the
interest shall be 12 percent per annum.

G.R. No. 113412

40.) Spouses PONCIANO ALMEDA and EUFEMIA P. ALMEDA, petitioner, vs.
THE COURT OF APPEALS and PHILIPPINE NATIONAL BANK, respondents
April 17, 1996
. . . increases in interest rates are not subject to any ceiling prescribed by the Usury Law, but it did not
authorize the PNB, or any bank for that matter, to unilaterally and successively increase the agreed
interest rates from 18% to 48% within a span of four (4) months, in violation of P.D. 116 which limits
such changes to once every twelve months. Besides violating P.D. 116, the unilateral action of the PNB
in increasing the interest rate on the private respondent's loan, violated the mutuality of contracts
ordained in Article 1308 of the Civil Code: Art. 308. The contract must bind both contracting parties; its
validity or compliance cannot be left to the will of one of them. In order that obligations arising from
contracts may have the force of law between the parties, there must be mutuality between the parties
based on their essential equality.

FACTS:
On various dates in 1981, the Philippine National Bank granted to herein petitioners, the
spouses Ponciano L. Almeda and Eufemia P. Almeda several loan/credit accommodations
totaling P18.0 Million pesos payable in a period of six years at an interest rate of 21% per
annum. To secure the loan, the spouses Almeda executed a Real Estate Mortgage Contract
covering a 3,500 square meter parcel of land, together with the building erected thereon
(the Marvin Plaza) located at Pasong Tamo, Makati, Metro Manila.
Between 1981 and 1984, petitioners made several partial payments on the loan totaling
P7,735,004.66, a substantial portion of which was applied to accrued interest. On March 31,
1984, respondent bank, over petitioners' protestations, raised the interest rate to 28%,
allegedly pursuant to Section III-c (1) of its credit agreement. Said interest rate thereupon
increased from an initial 21% to a high of 68% between March of 1984 to September, 1986.
Petitioner protested the increase in interest rates, to no avail. Before the loan was to mature
in March, 1988, the spouses filed on February 6, 1988 a petition for declaratory relief with
prayer for a writ of preliminary injunction and temporary restraining order with the Regional
Trial Court of Makati.
ISSUES:
1

Whether or not respondent bank was authorized to raise its interest rates from 21%
to as high as 68% under the credit agreement; and

Whether or not respondent bank is granted the authority to foreclose the Marvin
Plaza under the mandatory foreclosure provisions of P.D. 385.

HELD:
1

No. Petitioners never agreed in writing to pay the increased interest rates demanded
by respondent bank in contravention to the tenor of their credit agreement.

In fact, the manner of agreement is itself explicitly stipulated by the Civil Code when
it provides,
in Article 1956 that "No interest shall be due unless it has been expressly
stipulated in writing."
What has been "stipulated in writing" from a perusal of interest
rate provision of the credit agreement signed between the parties is that petitioners were
bound merely to pay 21% interest, subject to a possible escalation or de-escalation, when 1)
the circumstances warrant such
escalation or de-escalation; 2) within the limits allowed
by law; and 3) upon agreement. The
interest rate which appears to have been agreed
upon by the parties to the contract in this case was
the 21% rate stipulated in the
interest provision.

No. In the first place, because of the dispute regarding the interest rate increases, an
issue which was never settled on merit in the courts below, the exact amount of
petitioner's obligations could not be determined. Thus, the foreclosure provisions of
P.D. 385 could be validly invoked by respondent only after settlement of the question
involving the interest rate on the loan, and only after the spouses refused to meet
their obligations following such determination.

41.)

FIRST METRO INVESTMENTS VS. ESTE DEL SOL MOUNTAIN RESERVE,

INC.
G.R. No. 141811, November 15, 2001
369 SCRA 99

FACTS:
Petitioner First Metro granted respondent Este Del Sol a loan of P7,385,500.00
to finance the construction and development of respondents Mountain Reserve.
The loan was payable on 36 consecutive monthly amortizations and the interest on
the loan was egged at 16% per annum based on the diminishing balance. In case of
deposit, a 20% one time penalty on the amount due and such mount shall bear
interest at the highest rate permitted by law plus liquidated damages at the rate of
2% per month and attorneys fees equivalent to 25% of the sum sought to be
received. In accordance with the terms of the loan agreement, respondents Este
Del Sol executed several documents as security for payment. Moreover, it executed
as provided for by the loan agreement, an Underwriting Agreement whereby Forts
Metro shall underwrite on a best efforts basis the public offering of one hundred
twenty thousand common shares of Este Del Sol. In addition, the Underwriting
Agreement provided that for supervising the public offering of the shares, Este Del
Sol shall pay First Metro an annual supervision fee of P 200,000.00 per annum and a
consultancy fee of P 332,500.00 per annum for a period of four (4) consecutive
years. Simultaneous with the execution of and in accordance with the terms of the
Underwriting Agreement, a consultancy Agreement was also executed whereby Este
Del Sol engaged the services of petitioner First Metro for a fee as consultant to
render general consultancy services.
Since Este Del Sol failed to meet the schedule of repayment it appeared to
have incurred a total obligation of P 12,679,630.98. Thus First Metro caused the
extra judicial foreclosure of the real estate mortgage where First Metro was the
highest bidder. However, there remained a balance of P 6,863,297.73 Hence, First
Metro instituted an instant collection suit against respondent, including those other

respondents who have securities of the loan of respondent Este Del Sol by virtue of
their continuing surety agreements.
ISSUE:
Whether or not Underwriting and Consultancy Agreements are mere
subterfuges to camouflage the usurious interest charged by First Metro.
RULING:
The form of the contra ct enters into between the petitioner and respondent
is not conclusive for the law will not permit a usurious loan to hide itself behind a
legal form. An apparently legal loan is usurious when it is intended that additional
compensation for the loan providing for payment bye the borrower for the leaders
services which of little value or which are not in fact to be rendered. Here, the loan
Underwriting and Consultancy Agreement are not separate and independent
transactions rather they were executed and delivered contemporaneous by and
executed by First Metro as essential conditions for the grant of the loan. However,
in usurious loans, the entire obligation does not become void because the unpaid
principal debt still stands and remains.