G.R. No.

L-66653 June 19, 1986

COMMISSIONER OF INTERNAL 1. 21 Jan 1980: BIR ruling by Acting

REVENUE, petitioner, vs.BURROUGHS LIMITED AND Commissioner of Internal Revenue of NIRC
THE COURT OF TAX APPEALS, respondents. Sec 24 (b)(2) (ii)2:
 Tax Base upon which 15% branch
PARAS, J.:
profits remittance tax shall be
imposed on Branch profits actually
LEGAL DOCTRINE: Memorandum Circular No. 8- remitted and not on the total
82 cannot be given retroactive effect in light of branch profits out of which the
Section 327 of the NIRC.1 remittance is to be made.
2. Applicable Ruling is Revenue Ruling of 21 Jan
FACTS: 1980 because Burroughs paid the branch
profit remittance tax on 14 Mar 1979. MC No.
1. March 1979: The branch office of 8-82 cannot be given retroactive effect in
Burroughs Limited, a foreign light of Sec 327 of NIRC.
corporation, applied with the Central
Bank for authority to remit to its parent 3. The retroactive application of MC No. 8-82
company abroad, branch profit. would prejudice Burroughs as it would be
Amount Applied for: Php 7,647,058.00 15%deprived of theRemittance
Branch Profit substantialTax:
amount
Phpof
1,147,048.70 Amount Actuall
172T++. Burroughs also does not fall under
2. 24 December 1980: Burroughs any of the enumerated exceptions where
claims a tax refund/credit of Php retroactivity would apply.
172,058.90.
Branch Profit Remittance tax should be 15%
of Amount Actually Remitted. (based on
Ruling of Acting Commissioner of Internal
Revenue)

3. CTA: grants tax credit

4. CIR: Burroughs no longer entitled to refund
because Memorandum Circular No. 8-82
dated 17 March 1982 had revoked and/or
repealed the BIR ruling of 21 Jan 1980.

ISSUE(S)

WON Memorandum Circular No. 8-82 (MC 8-82)

dated 17 March 1982 can be given retroactive
effect? (NO)

DISPOSITION

1
Sec. 327. Non-retroactivity of rulings. Any
revocation, modification, or reversal of any of
the rules and regulations promulgated in
accordance with the preceding section or any of
the rulings or circulars promulgated by the
Commissioner shall not be given retroactive
application if the revocation, modification, or
reversal will be prejudicial to the taxpayer
except in the following cases (a) where the
taxpayer deliberately misstates or omits material
facts from his return or in any document required
of him by the Bureau of Internal Revenue; (b)
where the facts subsequently gathered by the
Bureau of Internal Revenue are materially
different from the facts on which the ruling is
based, or (c) where the taxpayer acted in bad
faith. (ABS-CBN Broadcasting Corp. v. CTA, 108
SCRA 151-152)
 granting of "loans" up to the limit of the amount
G.R. No. L-19190 November 29, 1922 fixed in the "credit,"

THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-

appellee,
vs.
VENANCIO CONCEPCION, defendant-appellant.

Recaredo Ma. Calvo for appellant.

Attorney-General Villa-Real for appellee.

FACTS: Venancio Concepcion, President of the

Philippine National Bank and a member of the Board
thereof, authorized an extension of credit in favor of
"Puno y Concepcion, S. en C.” to the manager of the
Aparri branch of the Philippine National Bank. "Puno
y Concepcion, S. en C." was a co-partnership where
Concepcion is a partner. Subsequently, Concepcion
was charged and found guilty in the Court of First
Instance of Cagayan with violation of section 35 of
Act No. 2747. Section 35 of Act No. 2747 provides
that the National Bank shall not, directly or
indirectly, grant loans to any of the members of the
board of directors of the bank nor to agents of the
branch banks. Counsel for the defense argue that
the documents of record do not prove that authority
to make a loan was given, but only show the
concession of a credit. They averred that the
granting of a credit to the co-partnership "Puno y
Concepcion, S. en C." by Venancio Concepcion,
President of the Philippine National Bank, is not a
"loan" within the meaning of section 35 of Act No.
2747.

ISSUE: Whether or not the granting of a credit of

P300,000 to the co-partnership "Puno y Concepcion,
S. en C." by Venancio Concepcion, President of the
Philippine National Bank, a "loan" within the
meaning of section 35 of Act No. 2747.

HELD: The Supreme Court ruled in the affirmative.

The "credit" of an individual means his ability to
borrow money by virtue of the confidence or trust
reposed by a lender that he will pay what he may
promise. A "loan" means the delivery by one party
and the receipt by the other party of a given sum of
money, upon an agreement, express or implied, to
repay the sum loaned, with or without interest. The
concession of a "credit" necessarily involves the
 is liable for loss of the things even if it should be
through a fortuitous event if he keeps it longer than
G.R. No. L-17474 October 25, 1962
the period stipulated or if the thing loaned has been
REPUBLIC OF THE PHILIPPINES, plaintiff-appellee, delivered with appraisal of its value, unless there is a
vs.
JOSE V. BAGTAS, defendant, stipulation exempting the bailee from responsibility
FELICIDAD M. BAGTAS, Administratrix of the in case of a fortuitous event. The loan of one bull
Intestate Estate left by the late Jose V.
Bagtas, petitioner-appellant. was renewed for another period of one year but
Bagtas kept and used the bull more than one year
where during a Huk raid it was killed by stray bullets.
FACTS: On May 8, 1948, Jose Bagtas borrowed from
Furthermore, when lent and delivered to the
the Bureau of Animal Industry three bulls for one
deceased husband of Bagtas, the bulls had each an
year for breeding purposes upon payment of a
appraised book value. It was not stipulated that in
breeding fee of 10% of the book value of the bulls.
case of loss of the bull due to fortuitous event the
After one year, the contract was renewed but only
late husband of the appellant would be exempt from
for one bull. Bagtas offered to buy the bulls at book
liability.
value less depreciation, but the Bureau told him that
he should either return the bulls or pay for their
book value. Bagtas failed to pay the book value, so
the Republic filed an action with the CFI Manila to
order the return of the bulls or the payment of the
book value. Felicidad Bagtas, the surviving spouse
and administratrix of the decedent’s estate, said that
the two bulls have already been returned in 1952,
and that the remaining one died of gunshot during a
Huk raid. It was established that the two bulls were
returned, thus, there is no more obligation on the
part of Bagtas. With regards the bull not returned,
Felicidad maintained that the obligation is
extinguished since the contract is that of a
commodatum and that the loss through fortuitous
event should be borne by the owner.

ISSUE: Whether or not the contract entered into

between Bagtas and the Republic is that of
commodatum making Bagtas not liable for the death
of the bull.

HELD: A contract of commodatum is essentially

gratuitous. If the breeding fee be considered
compensation, then the contract would be a lease of
the bull. Under article 1671 of the Civil Code the
lessee would be subject to the responsibilities of a
possessor in bad faith because she had continued
possession of the bull after the expiry of the
contract. Even if the contract be commodatum, still
Bagtas is liable because article 1942 of the Civil Code
provides that a bailee in a contract of commodatum
 G.R. No. L-46240 November 3, 1939 assumed by the defendant to return the furniture
upon the plaintiff's demand, means that he should
MARGARITA QUINTOS and ANGEL A.
ANSALDO, plaintiffs-appellants, return all of them to the plaintiff at the latter's
vs. residence or house. The defendant did not comply
BECK, defendant-appellee.
with this obligation when he merely placed them at
the disposal of the plaintiff, retaining for his benefit
QUINTOS vs. BECK, 69 Phil 108 the three gas heaters and the four electric lamps.
The trial court, therefore, erred when it came to the
FACTS: Beck is a tenant of defendant Margarita legal conclusion that the plaintiff failed to comply
Quintos. As such, Beck occupied Quintos’ house. with her obligation to get the furniture when they
Quintos granted Beck the use of the furniture found were offered to her.
on the leased house, among these were three gas
heaters and 4 electric lamps, subject to the condition
that the defendant would return them to the
plaintiff upon the latter's demand. Quintos sold the
pieces of furniture to Maria Lopez and Rosario Lopez
and thereafter notified Beck of the conveyance. Beck
informed Quintos that the latter can get the
furniture at the ground floor of the house, however,
at a later date, Beck told Quintos that he will return
only the other furniture but not the gas heaters and
the electric lamps as he is to return them only after
the expiration of the lease contract. When the lease
contract expires, Beck deposited the furniture to the
sheriff’s warehouse. Quintos refused to get the
furniture in view of the fact that the defendant had
declined to make delivery of all of them.
Consequently, Quintos brought an action to compel
Beck to return her certain furniture which she lent
him for his use. The trial court ruled in favour of Beck
holding that Quintos failed to comply with her
obligation to get the furniture when they were
offered to her. On appeal of the case, the Court of
First Instance of Manila affirmed the lower court’s
decision. Hence, this petition.

ISSUE: Whether or not the trial court erred in ruling

that Quintos failed to comply with her obligation to
get the furniture when they were offered to her.

HELD: The contract entered into between the parties

is one of commadatum. Under it the plaintiff
gratuitously granted the use of the furniture to the
defendant, reserving for herself the ownership
thereof. By this contract the defendant bound
himself to return the furniture to the plaintiff, upon
the latter’s demand. The obligation voluntarily
 SAURA IMPORT & EXPORT CO., INC., plaintiff- But this fact alone falls short of resolving
appellee, vs. DEVELOPMENT BANK OF THE the basic claim that the defendant failed
PHILIPPINES, defendant-appellant. G.R. No. L- to fulfill its obligation and the plaintiff is
24968 | 1972-04-27 therefore entitled to recover damages.

DOCTRINE: None. Evidently Saura, Inc. realized that it could

not meet the conditions required by RFC, and so
An accepted promise to deliver something, by way wrote its letter asking that out of the loan agreed
of commodatum or simple loan is binding upon the upon the sum of P67,586.09 be released "for raw
parties, but the commodatum or simple loan itself materials and labor." This was a deviation from the
shall not be perfected until the delivery of the terms laid down in Resolution No. 145 and
object of the contract. embodied in the mortgage contract, implying as
it did a diversion of part of the proceeds of the
loan to purposes other than those agreed upon.
FACTS:
When RFC turned down the request in its letter the
negotiations which had been going on for the
Saura, Inc. applied to the RFC, for an industrial implementation of the agreement reached an
loan of P500,000.00 which approved by the latter impasse. Saura, Inc. obviously was in no position to
and to be secured by a mortgage. Loan comply with RFC's conditions. So instead of doing so
documents were executed: the promissory note and insisting that the loan be released as agreed
and the corresponding deed of mortgage, which upon, Saura, Inc. asked that the mortgage be
was duly registered. Subsequently in a meeting of cancelled. The action thus taken by both parties was
RFC board to which the President of Saura, Inc. in the nature of mutual desistance — what Manresa
was present, the loan was reduced to 300,000. terms "mutuo disenso" — which is a mode of
Saura Inc. however that the loan of 500,000 extinguishing obligations. It is a concept that
be approved. RFC accepted and approved the derives from the principle that since mutual
loan application subject to some conditions agreement can create a contract, mutual
which Saura admitted it could not comply with. disagreement by the parties can cause its
Correspondence and negotiations came to a halt extinguishment.
and Saura, Inc. did not pursue further and instead
requested the cancellation of mortgage and was
delivered to the President of Saura, Inc. Almost
nine years after the mortgage in favor of RFC was
cancelled at the request of Saura, Inc., the latter
commenced the present suit for damages,
alleging failure of RFC (DBP) to comply with its
obligation to release the proceeds of the loan
applied for and approved, thereby preventing
the plaintiff from completing or paying
contractual commitments it had entered into, in
connection with its jute mill project.

ISSUES

1. Whether there was there a perfected

consensual contract?
2. Whether there was a real contract of loan
which would warrant recovery of
damages arising out of breach of such
contract?

HELD

1. Yes. There was indeed a perfected

consensual contract, as recognized in
Article 1934 of the Civil Code, which
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. There was undoubtedly
offer and acceptance in this case: the
application of Saura, Inc. for a loan of
P500,000.00 was approved by resolution
of the defendant, and the corresponding
mortgage was executed and registered.
 SAURA IMPORT AND EXPORT CO., INC. VS.
DBP (GR No. L-24968;

April 27, 1972) - Saura Inc. applied to the

Rehabilitation Finance Corp

(before its conversion to DBP) for a loan of

500k secured by a first mortgage of the factory
building to finance for the construction of a jute
mill factory and purchase of factory implements.
RFC accepted and approved the loan application
subject to some conditions which Saura admitted
it could not comply with. Without having received
the amount being loaned, and sensing that it
could not at anyway obtain the full amount of
loan, Saura Inc. then asked for cancellation of the
mortgage which RFC also approved. Nine years
after the cancellation of the mortgage, Saura
sued RFC for damages for its non-fulfillment of
obligations arguing that there was indeed a
perfected consensual contract between them.

ISSUE: WON there is a real contract of loan which

would warrant recovery of damages arising out
of breach of such contract?

HELD: No. Yes, there was indeed a perfected

consensual contract, as recognized in Article 1934
of the Civil Code. There was undoubtedly offer and
acceptance in this case: the application of Saura,
Inc. for a loan of P500,000.00 was approved by
resolution of the defendant, and the
corresponding mortgage was executed and
registered. But this fact alone falls short of
resolving the basic claim that the defendant failed
to fulfill its obligation and the plaintiff is therefore
entitled to recover damages. The action thus
taken by both parties—Saura's request for
cancellation and RFC's subsequent approval of
such cancellation—was in the nature of mutual
desistance — what Manresa terms "mutuo
disenso"— which is a mode of extinguishing
obligations. It is a concept derived from the
principle that since mutual agreement can create a
contract, mutual disagreement by the parties can
cause its extinguishment. In view of such
extinguishment, said perfected consensual contract
to deliver did not constitute a real contract of loan.
GSIS vs. COURT OF APPEALS, GR. No. L-52478, upon a penalty apart from the interest. Should there
October 20, 1986 be such an agreement, the penalty does not include
the interest, and as such the two are different and
FACTS: In 1961, herein private respondents spouses distinct things which may be demanded separately.
Nemencio R. Medina and Josefina G. Medina applied The stipulation about payment of such additional
with the herein petitioner Government Service rate partakes of the nature of a penalty clause,
Insurance System for a loan of P600,000.00. The which is sanctioned by law.
approved loan amount was only P350,000.00 at the
rate of interest of 9% per annum compounded
monthly and the rate of 9%/12% per month for any
installment or amortization that remains due and
unpaid. The approved loan amount was further
reduced to P295,000.00. The Medinas accepted the
reduced amount and executed a promissory note
and a real estate mortgage in favor of GSIS.
Subsequently, upon application by the Medinas, the
GSIS approved an additional loan of P230,000.00 on
the security of the same mortgaged properties to
bear interest at 9% per annum compounded
monthly and repayable in ten years. However, in
1965, the Medinas defaulted in the payment of the
monthly amortization on their loan despite several
demands from petitioner. Hence, the GSIS imposed
9%/12% interest on instalments that are due and
unpaid. The Medinas opposed to this contending
that the interest rates on the loan accounts are
usurious. After trial of the case, the trial court
ordered the Medinas full payment of their obligation
to the GSIS plus interest at 9% per annum.
Aggrieved, the Medinas appealed before the Court
of Appeals but the latter affirmed the lower court’s
decision.

ISSUE: Whether or not the interest rates on the loan

accounts of respondent-appellee Medina spouses
are usurious.

HELD: It has already been settled that the Usury Law

applies only to interest by way of compensation for
the use or forbearance of money. Interest by way of
damages is governed by Article 2209 of the Civil
Code of the Philippines which provides that “if the
obligation consists in the payment of a sum of
money, and the debtor incurs in delay, the
indemnity for damages, there being no stipulation to
the contrary, shall be the payment of the interest
agreed upon.” The Civil Code permits the agreement
 TOLOMEO LIGUTAN and LEONIDAS DE LA bank, on the other hand, asked that the payment of
LLANA, petitioners, vs. HON. COURT OF APPEALS interest and penalty be commenced not from
& SECURITY BANK & TRUST COMPANY, the date of filing of complaint but from the
respondents. G.R. time of default as so stipulated in the contract of
the parties.
No. 138677 February 12, 2002

On 28 October 1998, the Court of Appeals resolved

the two motions thusly:
DOCTRINE:

A penalty clause, expressly recognized by law, is an "We find merit in plaintiff-appellee’s claim that
accessory undertaking to assume greater liability the principal sum of P114,416.00 with interest
on the part of an obligor in case of breach of an thereon must commence not on the date of filing
obligation. It functions to strengthen the coercive of the complaint as we have previously held in our
force of the obligation and to provide, in effect, for decision but on the date when the obligation
what could be the liquidated damages resulting became due. Default generally begins from the
from such a breach. The obligor would then be moment the creditor demands the
bound to pay the stipulated indemnity without the performance of the obligation. However,
necessity of proof on the existence and on the demand is not necessary to render the obligor in
measure of damages caused by the breach. default when the obligation or the law so
Although a court may not at liberty ignore the provides. In the case at bar, defendants-
freedom of the parties to agree on such terms and appellants executed a promissory note where
conditions as they see fit that contravene neither they undertook to pay the obligation on its
law nor morals, good customs, public order or maturity date 'without necessity of demand.' They
public policy, a stipulated penalty, nevertheless, also agreed to pay the interest in case of non-
may be equitably reduced by the courts if it is payment from the date of default.
iniquitous or unconscionable or if the principal
obligation has been partly or irregularly complied
with. Aggrieved by the decision and resolutions of the
Court of Appeals, petitioners elevated their case
to this Court on 9 July 1999 via a petition for
review on certiorari under Rule 45 of the Rules
FACTS: of Court, submitting thusly -

Petitioners Tolomeo Ligutan and Leonidas dela

Llana obtained a loan in the amount of "I. The respondent Court of Appeals
P120,000.00 from respondent Security Bank and seriously erred in not holding that the
Trust Company on on 11 May 1981. The loan was 15.189% interest and the penalty of
evidenced by a promissory note with interest of three (3%) percent per month or thirty-
15.189% per annum, a penalty of 5% every month six (36%) percent per annum imposed
on the outstanding principal and interest in case by private respondent bank on
of default. The obligation matured on 8 petitioners’ loan obligation are still
September 1981; the bank, however, granted an manifestly exorbitant, iniquitous and
extension but only up until 29 December 1981. unconscionable.
Despite several demands from the Security Bank,
petitioners failed to settle the debt which, as of 20
May 1982, amounted to P114,416.10. On 30 Respondent bank, which did not take an appeal,
September 1982, the bank sent a final demand would, however, have it that the penalty sought
letter to petitioners informing them that they to be deleted by petitioners was even insufficient
had five days within which to make full payment. to fully cover and compensate for the cost of
Since petitioners still defaulted on their money brought about by the radical devaluation
obligation, the bank filed on 3 November 1982, and decrease in the purchasing power of the peso,
with the Regional Trial Court of Makati, Branch particularly vis-a-vis the U.S. dollar, taking into
143, a complaint for recovery of the due amount. account the time frame of its occurrence. The Bank
RTC ruled in favor of the plaintiff and against would stress that only the amount of
the defendants, ordering the latter to pay, P5,584.00 had been remitted out of the entire
jointly and severally, to the plaintiff. Petitioners loan of P120,000.
interposed an appeal with the Court of Appeals,
assailing the imposition of the 2% service charge,
the 5% per month penalty charge and 10%
attorney's fees. In its decision of 7 March 1996, the ISSUE: Whether the penalty imposed is reasonable
appellate court affirmed the judgment of the trial
court except on the matter of the 2% service HELD: Yes
charge which was deleted pursuant to Central
Bank Circular No. 783. Not fully satisfied with the The question of whether a penalty is reasonable
decision of the appellate court, both parties filed or iniquitous can be partly subjective and partly
their respective motions for reconsideration. objective. Its resolution would depend on such
Petitioners prayed for the reduction of the 5% factors as, but not necessarily confined to, the type,
stipulated penalty for being unconscionable. The extent and purpose of the penalty, the nature
of the obligation, the mode of breach and its
consequences, the supervening realities, the
standing and relationship of the parties, and the
like, the application of which, by and large, is
addressed to the sound discretion of the court. In
any event, the interest stipulation, on its face,
does not appear as being that excessive. The
essence or rationale for the payment of interest,
quite often referred to as cost of money, is not
exactly the same as that of a surcharge or a
penalty. A penalty stipulation is not necessarily
preclusive of interest, if there is an agreement
to that effect, the two being distinct concepts
which may separately be demanded.What may
justify a court in not allowing the creditor to
impose full surcharges and penalties, despite an
express stipulation therefor in a valid
agreement, may not equally justify the non-
payment or reduction of interest. Indeed, the
interest prescribed in loan financing
arrangements is a fundamental part of the
banking business and the core of a bank's
existence.
LIGUTAN vs. COURT OF APPEALS, GR. No. 138677, core of a bank's existence. The Court of Appeals,
exercising its good judgment in the instant case,
February 12, 2002
has rightly reduced the penalty interest from 5% a
month to 3% a month
FACTS:
Petitioners Tolomeo Ligutan and Leonidas dela Llana
obtained a loan from private respondent Security
Bank and Trust Company. Petitioners executed a EASTERN SHIPPING LINES, INC. vs. CA, GR. No.
promissory note to pay the sum loaned with an 97412, July 12, 1994
interest of 15.189% per annum upon maturity and to
pay a penalty of 5% every month on the outstanding FACTS: Two fiber drums of riboflavin were shipped
principal and interest in case of default. On maturity from Yokohama, Japan on board the vessel owned
of the obligation, petitioners failed to settle the debt by herein petitioner Eastern Shipping Lines. When it
despite several demands from the bank. arrives in Manila, it was put unto the custody of
Consequently, the bank filed a complaint for Metro Port Service, Inc. The latter excepted to one
recovery of the due amount. After trial of the case, drum which is said to be in bad order and which
the Trial court ruled in favour of the Bank, ordering damage was unknown to Eastern Shipping Lines.
petitioners to pay the respondent the sum of Later, Allied Brokerage Corporation received the
P114,416.00 with interest thereon at the rate of shipment from Metro Port Service, Inc. With one
15.189% per annum and 5% per month penalty drum damaged, Allied Brokerage Corporation made
charge among others. On appeal of the case, deliveries to the consignee's warehouse. The latter
petitioners prayed for the reduction of the 5% excepted to one drum that is damaged. Eastern
stipulated penalty for being unconscionable. The Shipping Lines averred that due to the one drum
Court of Appeals ruled that in the interest of justice that is damaged and due to the fault and negligence
and public policy, a penalty of 3% per month or 36% of Metro Port Service, Inc. and Allied Brokerage
per annum would suffice. But still, petitioners Corporation, the consignee suffered losses. The two
dispute the said decision. failed and refused to pay the claims for damages.
Consequently, Eastern Shipping Lines was compelled
ISSUE: Whether or not the 15.189% interest and the to pay the consignee being subrogated to all the
penalty of three (3%) percent per month or thirty-six rights of action of said consignee against Metro Port
(36%) percent per annum imposed by private Service, Inc. and Allied Brokerage Corporation. Trial
respondent bank on petitioners’ loan obligation are ensued and on appeal of the case, the appellate
exorbitant, iniquitous and unconscionable. court affirmed the decision of the trial court
ordering Metro Port Service and Allied Brokerage to
HELD: The question of whether a penalty is pay Eastern Shipping Lines, jointly and severally, the
reasonable or iniquitous can be partly subjective
amount of P19,032.95, with the present legal
and partly objective. Its resolution would depend
on such factors as, but not necessarily confined interest of 12% per annum from the date of filing of
to, the type, extent and purpose of the penalty,
the complaints, until fully paid. Metro Port Service
the nature of the obligation, the mode of breach
and its consequences, the supervening realities, and Allied Brokerage opposed especially as to the
the standing and relationship of the parties, and
payment of interest contending that the legal
the like, the application of which, by and large, is
addressed to the sound discretion of the court. interest on an award for loss or damage should be
The essence or rationale for the payment of
6% in view of Article 2209 of the Civil Code.
interest is not exactly the same as that of a
surcharge or a penalty. A penalty stipulation is
not necessarily preclusive of interest. What may
ISSUE: Whether or not the payment of legal interest
justify a court in not allowing the creditor to
impose full surcharges and penalties, despite an on an award for loss or damage is twelve percent
express stipulation therefor in a valid agreement,
(12%) or six percent (6%).
may not equally justify the non-payment or
reduction of interest. Indeed, the interest
prescribed in loan financing arrangements is a
fundamental part of the banking business and the
HELD: Article 2209 of the New Civil Code provides
that if the obligation consists in the payment of a 3. When the judgment of the court awarding a
sum of money, and the debtor incurs in delay, the sum of money becomes final and executory,
indemnity for damages, there being no stipulation to the rate of legal interest, whether the case
the contrary, shall be the payment of interest agreed falls under paragraph 1 or paragraph 2,
upon, and in the absence of stipulation, the legal above, shall be 12% per annum from such
interest which is six percent per annum. With regard finality until its satisfaction, this interim
particularly to an award of interest in the concept of period being deemed to be by then an
actual and compensatory damages, the rate of equivalent to a forbearance of credit.
interest, as well as the accrual thereof, is imposed,
as follows:
Producers Bank Of The Philippines (Now First
1. When the obligation is breached, and it International Bank), Petitioner, Vs. Hon. Court Of
Appeals And Franklin Vives, Respondents. G.R.
consists in the payment of a sum of
No. 115324 | 2003-02-19
money, the interest due should be that
which may have been stipulated in
DOCTRINE:
writing. Furthermore, the interest due shall
itself earn legal interest from the time it is Consumable goods may be the subject of
commodatum if the purpose of the contract is
judicially demanded. In the absence of
not the consumption of the object, as when it is
stipulation, the rate of interest shall be merely for exhibition.
12% per annum to be computed from
default under and subject to the provisions FACTS:
of Article 1169 of the Civil Code.
Sanchez asked Franklin Vives to deposit in a bank a
certain amount of money in the bank account of
2. When an obligation, not constituting a loan Sterela Marketing and Services for purposes of
its incorporation, the corporation was owned by
or forbearance of money, is breached, an
Doronilla. Sanchez assured Vives that he could
interest on the amount of damages withdraw the money from the account of Sterela a
month’s time. Thereafter, relying on the
awarded may be imposed at the discretion
assurances and representations of Sanchez
of the court at the rate of 6% per and Doronilla, Vives issued a check in favor of
Sterela. The check was deposited to the newly
annum. No interest, however, shall be
opened savings account of Sterela Marketing
adjudged on unliquidated claims or and Services in the Producers Bank of the
Philippines (Producers). The passbook, given to
damages except when or until the demand
the wife of Vives, had an instruction that no
can be established with reasonable withdrawals/deposits will be allowed unless the
passbook is presented. The authorized signatories
certainty. Accordingly, where the demand is
of said account were Mrs. Vives and/or Sanchez.
established with reasonable certainty, the Subsequently, Vives learned that Sterela was no
longer holding office in the address previously
interest shall begin to run from the time the
given to him. Alarmed, he and his wife went to the
claim is made judicially or extrajudicially Producers to verify if their money was still intact.
They were informed that part of the money in
(Art. 1169, Civil Code) but when such
account had been withdrawn by Doronilla and
certainty cannot be so reasonably could not withdraw said remaining amount
because it had to answer for some postdated
established at the time the demand is
checks issued by Doronilla. Vives tried to get in
made, the interest shall begin to run only touch with Doronilla through Sanchez. He
received a letter from Doronilla, assuring him that
from the date the judgment of the court is
his money was intact and would be returned to
made (at which time the quantification of him. Doronilla issued a postdated check in favor
Vives. However, upon presentment thereof to the
damages may be deemed to have been
drawee bank, the check was dishonored. Vives
reasonably ascertained). The actual base for filed an action for recovery of sum of money in
the RTC against Doronilla, Sanchez, Dumagpi and
the computation of legal interest shall, in
Producers. RTC ruled in favor of Vives holding
any case, be on the amount finally Doronila, Dumagpi and Producers jointly and
severally liable and ordered the payment thereof.
adjudged.
ISSUE: FACTS: Sometime in 1979, private respondent
Franklin Vives, upon request of his friend Angeles
Whether the transaction between Vives and
Sanchez and relying on the assurance that he could
Doronilla is a simple loan (mutuum)
withdraw his money within a month’s time, issued a
check in the amount of Two Hundred Thousand
HELD: No
Pesos in favor of Sterela Marketing and Services
A circumspect examination of the records owned by one Col. Arturo Doronilla. Subsequently,
reveals that the transaction between them
private respondent and his wife found out that
was a commodatum. Article 1933 of the Civil
Code distinguishes between the two kinds of loans Sterela can’t be found on the address previously
in this wise: “By the contract of loan, one of
given to then, so they went to petitioner Producer’s
the parties delivers to another, either
something not consumable so that the latter may Bank of the Philippines to verify if their money was
use the same for a certain time and return it, in
still intact. They were informed that part of the
which case the contract is called a commodatum;
or money or other consumable thing, upon the amount had been withdrawn by Doronilla and that
condition that the same amount of the same kind
the latter instructed the bank to debit from the
and quality shall be paid, in which case the
contract is simply called a loan or mutuum. savings account the amount and deposit it in his
Commodatum is essentially gratuitous. Simple
current account Private respondent filed an action
loan may be gratuitous or with a stipulation to pay
interest.In commodatum, the bailor retains the for recovery of sum of money against Doronilla,
ownership of the thing loaned, while in simple
Sanchez, Dumagpi and petitioner. The trial court
loan, ownership passes to the borrower.” The
rule is that the intention of the parties thereto ruled in favour of herein private respondents. On
shall be accorded primordial consideration in
appeal of the case, the appellate court affirmed the
determining the actual character of a contract. In
case of doubt, the contemporaneous and decision of the RTC. Petitioner contends that the
subsequent acts of the parties shall be
transaction between private respondent and
considered in such determination. As correctly
pointed out by both the Court of Appeals and the Doronilla is a simple loan (mutuum) since all the
trial court, the evidence shows that private
elements of a mutuum are present: first, what was
respondent agreed to deposit his money in the
savings account of Sterela specifically for the delivered by private respondent to Doronilla was
purpose of making it appear "that said firm had
money, a consumable thing; and second, the
sufficient capitalization for incorporation, with
the promise that the amount shall be returned transaction was onerous as Doronilla was obliged to
within 30 days. Vives merely "accommodated"
pay interest. Hence, petitioner argues that it cannot
Doronilla by lending his money without
consideration, as a favor to his good friend be held liable because it is not privy to the
Sanchez. It was however clear to the parties to
transaction between the latter and Doronilla. Private
the transaction that the money would not be
removed from Sterela’s savings account and respondent, on the other hand, argues that the
would be returned to private respondent after
transaction between him and Doronilla is not a
thirty (30) days. Doronilla’s attempts to return to
private respondent the amount of P200,000.00 mutuum but an accommodation, since he did not
which the latter deposited in Sterela’s
actually part with the ownership of his P200,000.00
account together with an additional
P12,000.00, allegedly representing interest on the but retained some degree of control over his money
mutuum, did not convert the transaction from a
through his wife who was made a signatory to the
commodatum into a mutuum because such was
not the intent of the parties and because the savings account and in whose possession the savings
additional P12,000.00 corresponds to the fruits of
account passbook was given.
the lending of the P200,000.00. Article 1935 of the
Civil Code expressly states that "[t]he bailee in
commodatum acquires the use of the thing
ISSUE: Whether or not the contract between
loaned but not its fruits." Hence, it was only
proper for Doronilla to remit to private Sanchez and Doronilla and Vives is a contract of
respondent the interest accruing to the latter’s
commodatum, thus making petitioner Bank liable.
money deposited with petitioner.

HELD: Supreme Court held that the contract is

PRODUCERS BANK OF THE PHILIPPINES vs. COURT
commodatum. Although in view of Article 1933 of
OF APPEALS, GR No. 115324
the Civil Code, the object in commodatum is non-
consumable, but Article 1936 of the Civil Code
provides “Consumable goods may be the subject of ISSUE: Whether or not there was a contract of loan
commodatum if the purpose of the contract is not between petitioner and respondent.
the consumption of the object, as when it is merely
for exhibition.” Thus, if consumable goods are HELD: There Court ruled in the affirmative. A loan
is a real contract, not consensual, and as such is
loaned only for purposes of exhibition or when the
perfected only upon the delivery of the object of
intention of the parties is to lend consumable goods the contract. Art. 1934 of the Civil Code provides
that “an accepted promise to deliver something
and to have the very same goods returned at the
by way of commodatum or simple loan is binding
end of the period agreed upon, the loan is upon the parties, but the commodatum or
simple loan itself shall not be perfected until the
commodatum and not a mutuum. The evidence
delivery of the object of the contract.” Upon
shows that private respondent merely delivery of the object of the contract of loan (in
this case the money received by the debtor when
"accommodated" Doronilla by lending his money
the checks were encashed the debtor acquires
without consideration, as a favor to his good friend ownership of such money or loan proceeds and is
bound to pay the creditor an equal amount. It is
Sanchez. It was however clear to the parties to the
undisputed that the checks were delivered to
transaction that the money would not be removed respondent. However, these checks were crossed
and payable not to the order of respondent but to
from Sterela’s savings account and would be
the order of a certain Marilou Santiago. The
returned to private respondent after thirty (30) days. Supreme Court agrees with petitioner that
delivery is the act by which the res or substance
thereof is placed within the actual or constructive
possession or control of another. Although
respondent did not physically receive the
CAROLYN M. GARCIA vs. RICA MARIE S. THIO, GR.
proceeds of the checks, these instruments were
No. 154878, March 16, 2007 placed in her control and possession under an
arrangement whereby she actually re-lent the
amounts to Santiago. Hence, Rica is the debtor
FACTS: Sometime in February 1995, respondent Rica and not Marilou.
Marie S. Thio received from petitioner Carolyn M.
Garccia a crossed check in the amount of COLITO T. PAJUYO vs. COURT OF APPEALS, GR. No.
$100,000.00 payable to the order of Marilou 146364, June 3, 2004
Santiago. Thereafter, Carolyn received from Rica
payments of the sum due. In June 1995, Rica FACTS: In June 1979, petitioner Colito T. Pajuyo
received another check in the amount of purchased the rights over a property from Pedro
P500,000.00 from Carolyn and payable to the order Perez. Thereafter, he constructed a house therein
of Marilou. Payments were made by Rica and he and his family lived there. Later, Pajuyo
representing interests. There was failure to pay the agreed to let private respondent Eddie Guevarra to
principal amount hence a complaint for sum of live in the house for free provided that the latter
money with damages was filed by Carolyn. Rica maintain the cleanliness and orderliness of the
contended that she had no obligation to petitioner house. They also agreed that Guevarra should leave
as it was Marilou who was indebted as she was the premises upon demand. Subsequently, when
merely asked to deliver the checks to the latter and Pajuyo told Guevarra that he needed the house,
that the check payments she issued were merely Guevarra refused, hence an ejectment case was
intended to accommodate Marilou. The RTC ruled in filed. Guevarra claimed that Pajuyo had no valid title
favor of Carolyn but the CA reversed on the ground or right of possession over the lot where the house
that there was no contract between Rica and stands because the lot is within the 150 hectares set
Carolyn as there is nothing in the record that shows aside for socialized housing. The MTC ruled that the
that respondent received money from petitioner and subject of the agreement between Pajuyo and
that the checks received by respondent, being Guevarra is the house and not the lot. Pajuyo is the
crossed, may not be encashed but only deposited in owner of the house, and he allowed Guevarra to use
the bank by the payee thereof, that is, by Marilou the house only by tolerance. Thus, Guevarra’s refusal
Santiago herself. to vacate the house on Pajuyo’s demand made
Guevarra’s continued possession of the house illegal.
 Aggrieved, Guevarra appealed to the Regional Trial right as creditor to expect that those checks would
be honored by BPI-FB as debtor.
Court which only affirmed the MTC decision. At the
CA, the latter reversed the RTC decision. The Court
of Appeals ruled that the Kasunduan is not a lease
BPI FAMILY BANK VS. FRANCO
contract but a commodatum because the agreement G.R. No. 123498 November 23, 2007
is not for a price certain. Since Pajuyo admitted that J. Nachura

he resurfaced only in 1994 to claim the property, the FACTS:

appellate court held that Guevarra has a better right On August 15, 1989, Tevesteco opened a
savings and current account with BPI-FB. Soon
over the property under Proclamation No. 137. At thereafter, FMIC also opened a time deposit account
that time, Guevarra was in physical possession of the with the same branch of BPI-FB

property. 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
ISSUE: Whether or not the contract between open these accounts is traceable to a check issued
petitioner and private respondent is one of by Tevesteco allegedly in consideration of Franco’s
introduction of Eladio Teves, to Jaime Sebastian,
commodatum. 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
HELD: The Supreme Court held that the contract FMIC’s time deposit account and credited to
is not a commodatum. “In a contract of Tevesteco’s current account pursuant to an
commodatum, one of the parties delivers to Authority to Debit purportedly signed by FMIC’s
another something not consumable so that the officers.
latter may use the same for a certain time and
return it. An essential feature of commodatum is It appears, however, that the signatures of
that it is gratuitous. Another feature is that the FMIC’s officers on the Authority to Debit were
use of the thing belonging to another is for a forged. BPI-FB, debited Franco’s savings and current
certain period. Thus, the bailor cannot demand accounts for the amounts remaining therein. In the
the return of the thing loaned until after the meantime, two checks drawn by Franco against his
expiration of the period stipulated, or after BPI-FB current account were dishonored and
accomplishment of the use for which the stamped with a notation “account under
commodatum is constituted. If the bailor should garnishment.” Apparently, Franco’s current account
have urgent need of the thing, he may demand its was garnished by virtue of an Order of
return for temporary use. If the use of the thing is
merely tolerated by the bailor, he can demand the Notably, the dishonored checks were issued
return of the thing at will, in which case the by Franco and presented for payment at BPI-FB prior
contractual relation is called a precarium. to Franco’s receipt of notice that his accounts were
The Kasunduan reveals that the accommodation under garnishment. It was only on May 15, 1990,
accorded by Pajuyo to Guevarra was not that Franco was impleaded in the Makati case.
essentially gratuitous. While the Kasunduan did Immediately, upon receipt of such copy, Franco filed
not require Guevarra to pay rent, it obligated him a Motion to Discharge Attachment. On May 17,
to maintain the property in good condition. The 1990, Franco pre-terminated his time deposit
imposition of this obligation makes account.
the Kasunduan a contract different from
a commodatum. The effects of the Kasunduan are BPI-FB deducted the amount of P63,189.00
also different from that of a commodatum. 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
BPI FAMILY BANK V. FRANCO Franco’s demands to unfreeze his accounts and
(Simple Loan) release his deposits therein, Franco filed on June 4,
· Article 1980 of the Civil Code: Fixed, savings, and 1990 with the Manila RTC the subject suit.
current deposits of money in banks and similar
institutions shall be governed by the provisions ISSUE: WON Respondent had better right to the
concerning loan. deposits in the subject accounts which are part of
· As there is a debtor-creditor relationship between a the proceeds of a forged Authority to Debit
bank and its depositor, BPI-FB ultimately acquired
ownership of Franco’s deposits, but such ownership HELD: NO
is coupled with a corresponding obligation to pay There is no doubt that BPI-FB owns the
him an equal amount on demand. Although BPI-FB deposited monies in the accounts of Franco, but not
owns the deposits in Franco’s accounts, it cannot as a legal consequence of its unauthorized transfer
prevent him from demanding payment of BPI-FB’s of FMIC’s deposits to Tevesteco’s account. BPI-FB
obligation by drawing checks against his current conveniently forgets that the deposit of money in
account, or asking for the release of the funds in his banks is governed by the Civil Code provisions on
savings account. Thus, when Franco issued checks simple loan or mutuum. As there is a debtor-creditor
drawn against his current account, he had every relationship between a bank and its depositor, BPI-
 FB ultimately acquired ownership of Franco’s Prosecutor's Office filed before RTC in Dumangas,
deposits, but such ownership is coupled with a Iloilo, 112 cases of Qualified Theft against
corresponding obligation to pay him an equal respondents Teresita Puig (Puig) and Romeo Porras
amount on demand. Although BPI-FB owns the
(Porras) who were the Cashier and Bookkeeper,
deposits in Franco’s accounts, it cannot prevent him
from demanding payment of BPI-FB’s obligation by respectively, of private complainant Rural Bank of
drawing checks against his current account, or asking Pototan, Inc. It was alleged in the information that
for the release of the funds in his savings Teresita Puig and Romeo Porras took away P15,000
account. Thus, when Franco issued checks drawn without the consent of the owner Bank to the
against his current account, he had every right as prejudice and damage of the bank. The RTC
creditor to expect that those checks would be dismissed the case for insufficiency of the
honored by BPI-FB as debtor.
information ruling that the real parties in interest
More importantly, BPI-FB does not have a are the depositors-clients and not the bank because
unilateral right to freeze the accounts of Franco the bank does not acquire ownership of the money
based on its mere suspicion that the funds therein deposited in it. Hence petitioner Rural Bank went
were proceeds of the multi-million peso scam Franco directly to the court via petition for certiorari.
was allegedly involved in. To grant BPI-FB, or any Petitioner explains that under Article 1980 of the
bank for that matter, the right to take whatever New Civil Code, "fixed, savings, and current deposits
action it pleases on deposits which it supposes are
of money in banks and similar institutions shall be
derived from shady transactions, would open the
floodgates of public distrust in the banking industry. governed by the provisions concerning simple
loans." Corollary thereto, Article 1953 of the same
Ineluctably, BPI-FB, as the trustee in the Code provides that "a person who receives a loan of
fiduciary relationship, is duty bound to know the money or any other fungible thing acquires the
signatures of its customers. Having failed to detect ownership thereof, and is bound to pay to the
the forgery in the Authority to Debit and in the
creditor an equal amount of the same kind and
process inadvertently facilitate the FMIC-Tevesteco
transfer, BPI-FB cannot now shift liability thereon to quality." Thus, it posits that the depositors who
Franco and the other payees of checks issued by place their money with the bank are considered
Tevesteco, or prevent withdrawals from their creditors of the bank. The bank acquires ownership
respective accounts without the appropriate court of the money deposited by its clients, making the
writ or a favorable final judgment. money taken by respondents as belonging to the
bank.

Issue: Whether or not the Bank acquired ownership

PEOPLE V. PUIG AND PORRAS
(Simple Loan) of the money deposited in it to be able to hold the
· Depositors who place their money with the bank respondents liable for qualified theft which requires
are considered creditors of the bank. The bank that there must be taking of the money without the
acquires ownership of the money deposited by its consent of the owners.
clients, making the money taken by respondents as
belonging to the bank. Held: The petition is meritorious. Banks where
· The relationship between banks and depositors has
monies are deposited, are considered the owners
been held to be that of creditor and debtor. Articles
1953 and 1980 of the New Civil Code, as thereof. This is very clear not only from the express
appropriately pointed out by petitioner, provide as provisions of the law, but from established
follows: jurisprudence. The relationship between banks and
· Article 1953. A person who receives a loan of depositors has been held to be that of creditor and
money or any other fungible thing acquires the debtor. Articles 1953 and 1980 of the New Civil
ownership thereof, and is bound to pay to the
Code, as appropriately pointed out by petitioner,
creditor an equal amount of the same kind and
quality. provide as follows:
· Article 1980. (supra)  Article 1953.A person who receives
· In summary, the Bank acquires ownership of the a loan of money or any other
money deposited by its clients; and the employees fungible thing acquires the
of the Bank, who are entrusted with the possession ownership thereof, and is bound to
of money of the Bank due to the confidence reposed pay to the creditor an equal
in them, occupy positions of confidence. The amount of the same kind and
Informations, therefore, sufficiently allege all the quality.
essential elements constituting the crime of  Article 1980. Fixed, savings, and
Qualified Theft. current deposits of money in banks
and similar institutions shall be
governed by the provisions
G.R. Nos. 173654-765 August 28, 2008 concerning loan.
PEOPLE OF THE PHILIPPINES vs. TERESITA PUIG and In a long line of cases involving Qualified
ROMEO PORRAS Theft, the Court has firmly established the nature of
possession by the Bank of the money deposits
Facts: On 7 November 2005, the Iloilo Provincial therein, and the duties being performed by its
employees who have custody of the money or have
come into possession of it. The Court has and when those conditions were breached, they are
consistently considered the allegations in the entitled not only to the return of the principal amount
Information that such employees acted with grave paid, but also to compensation for the use of their
money. And the compensation for the use of their
abuse of confidence, to the damage and prejudice of
money, absent any stipulation, should be the same rate of
the Bank, without particularly referring to it as legal interest applicable to a loan since the use or
owner of the money deposits, as sufficient to make deprivation of funds is similar to a loan.
out a case of Qualified Theft. In summary, the Bank
acquires ownership of the money deposited by its Hermojina Estores vs. Spouses Arturo and Laura
clients; and the employees of the Bank, who are Supangan
entrusted with the possession of money of the Bank
due to the confidence reposed in them, occupy G.R. No. 175139 April 18, 2012
positions of confidence. The Informations, therefore,
sufficiently allege all the essential elements DEL CASTILLO, J.:
constituting the crime of Qualified Theft.
WHEREFORE, premises considered, the
Petition for Review on Certiorari is hereby GRANTED. Facts:
The Orders dated 30 January 2006 and 9 June 2006
of the RTC dismissing Criminal cases No. 05-3054 to 1. In Oct. 1993, Hermojina Estores and Spouses
05-3165 are REVERSED and SET ASIDE. 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.
ESTORES V. SPOUSES SUPANGAN, (2012)
2. After almost 7 years and despite the payment of
(Compensatory, Penalty or Indemnity Interest)
P3.5M by the Spouses, Estores still failed to
*Forbearance of money
comply with her obligation to handle the
ISSUE: Whether it is proper to impose interest for an
peaceful transfer of ownership as stated in 5
obligation that does not involve a loan or forbearance of
provisions in the contract.
money in the absence of stipulation of the parties.
3. In a letter in 2000, Spouses demanded the
return of the amount within 15 days from
HELD:
receipt
YES. Interest may be imposed even in the absence of
4. In reply, Estores promised to return the same
stipulation in the contract.
within 120 days
Article 2210 of the Civil Code expressly provides that
5. Spouses agreed but imposed an interest of 12%
“[i]nterest may, in the discretion of the court, be allowed
annually
upon damages awarded for breach of contract.” In this
6. Estores still failed despite demands
case, there is no question that petitioner is legally
7. Spouses filed a complaint with the RTC against
obligated to return the P3.5 million because of her failure
Estores and Roberto Arias (allegedly acted as
to fulfill the obligation under the Conditional Deed of Sale,
Estores’ agent)
despite demand. Petitioner enjoyed the use of the money
8. In Answer, Estores said they were willing to pay
from the time it was given to her until now. Thus, she is
the principal amount but without the interest as
already in default of her obligation from the date of
it was not agreed upon
demand.
a. That since the Conditional Deed of Sale
provided only for the return of the
Forbearance is defined as a “contractual obligation of
downpayment in case of breach, they
lender or creditor to refrain during a given period of time,
cant be liable for legal interest as well
from requiring the borrower or debtor to repay a loan or
9. RTC ruled saying that the Spouses are entitled to
debt then due and payable.” This definition describes a
the interest but only at 6% per annum and also
loan where a debtor is given a period within which to pay
entitled to atty’s fees
a loan or debt. In such case, “forbearance of money,
10. On appeal, CA said that the issue to resolve is
goods or credits” will have no distinct definition from a
a. whether it is proper to impose interest
loan. We believe however, that the phrase “forbearance
for an obligation that does not involve
of money, goods or credits” is meant to have a separate
a loan or forbearance of money in the
meaning from a loan, otherwise there would have been
absence of stipulation of the parties
no need to add that phrase as a loan is already sufficiently
11. CA affirmed RTC
defined in the Civil Code.
a. That interest should start on date of
formal demand by Spouses to return
Forbearance of money, goods or credits should therefore
the money not when contract was
refer to arrangements other than loan agreements, where
executed as stated by the RTC
a person acquiesces to the temporary use of his money,
b. That Arias not be solidarily liable as he
goods or credits pending happening of certain events or
acted as agent only and did not
fulfillment of certain conditions.
expressly bind himself or exceeded his
authority
In this case, the respondent-spouses parted with their
12. Estores contends:
money even before the conditions were fulfilled. They
a. Not bound to pay interest because the
have therefore allowed or granted forbearance to the
deed only provided for the return of
seller (petitioner) to use their money pending fulfillment of
the downpayment in case of failure to
the conditions. They were deprived of the use of their
comply with her obligations
money for the period pending fulfillment of the conditions
 b.That atty fees not proper because both requiring the borrower or debtor to repay a loan or
RTC and CA sustained her contention debt then due and payable.”
that 12% interest was uncalled for so it o In such case, “forbearance of money, goods
showed that Spouses did not win or credits” will have no distinct definition
13. Spouses contend: from a loan.
a. It is only fair that interest be imposed o however, the phrase “forbearance of
because Estores failed to return the money, goods or credits” is meant to have a
amount upon demand and used the separate meaning from a loan, otherwise
money for her benefit there would have been no need to add that
b. Estores failed to relocate the house phrase as a loan is already sufficiently
outside the perimeter of the subject lot defined in the Civil Code
and complete the necessary documents o Forbearance of money, goods or credits
c. As to the fees, they claim that they should therefore refer to arrangements
were forced to litigate when Estores other than loan agreements, where a
unjustly held the amount person acquiesces to the temporary use of
his money, goods or credits pending
happening of certain events or fulfillment of
certain conditions.
Issue:
 Estores’ unwarranted withholding of the money
amounts to forbearance of money which can be
Is the imposition of interest and attorney’s fees is proper? considered as an involuntary loan so rate is 12%
YES starting in Sept. 2000
The award of attorney’s fees is warranted.
Interest based on Art 2209 of CC (6%) or under Central
 no doubt that the Spouses were forced to litigate to
Bank Circular 416 (12%)? 12% protect their interest, i.e., to recover their
money. The amount of P50,000.00 more appropriate

NACAR V. GALLERY FRAMES AND/OR BORDEY,

Held:
(2013)
Interest may be imposed even in the absence of (Compensatory, Penalty or Indemnity Interest)
*Amending the Eastern Shipping Doctrine
stipulation in the contract.
*Important: because this case discusses the
amendment of the legal interest in loan and
 Article 2210 of the Civil Code expressly provides that
forbearance of money, credits or goods from 12% to
“[i]nterest may, in the discretion of the court, be
6% effective July 1, 2013.
allowed upon damages awarded for breach of
contract.”
Bangko Sentral ng Pilipinas Monetary Board (BSP-
 Estores failed on her obligations despite demand.
MB), in its Resolution No. 796, approved the
o She admitted that the conditions were
amendment of Section 2 of Circular No. 905, Series
not fulfilled and was willing to return
of 1982 and, accordingly, issued Circular No.
the full amount of P3.5M but hasn’t
799, Series of 2013, effective July 1, 2013, the
done so
pertinent portion of which reads:
o She is now in default
Section 1. The rate of interest for the loan or
The interest at the rate of 12% is applicable in the
forbearance of any money, goods or credits and the
instant case. rate allowed in judgments, in the absence of an
express contract as to such rate of interest, shall be
 Gen Rule: the applicable interest rate shall be six percent (6%) per annum.
computed in accordance with the stipulation of
the parties Thus, from the foregoing, in the absence of an
 Exc: if no stipulation, applicable rate of interest express stipulation as to the rate of interest that
shall be 12% per annum would govern the parties, the rate of legal interest
o When obligation arises out of a loan or for loans or forbearance of any money, goods or
forbearance of money, goods or credits credits and the rate allowed in judgments shall no
 In other cases, it shall be 6% longer be 12% per annum but will now be 6% per
 In this case, no stipulation was made annum effective July 1, 2013.
 Contract involved in this case is not a loan but a Ø It should be noted, nonetheless, that the new rate
Conditional Deed of Sale. could only be applied prospectively and not
o No question that the obligations were retroactively. Consequently, the 12% per annum
not met and the return of money not legal interest shall apply only until June 30, 2013.
made Come July 1, 2013 the new rate of 6% per annum
 Even if transaction was a Conditional Deed of shall be the prevailing rate of interest when
Sale, the stipulation governing the return of applicable.
the money can be considered as a forbearance
of money which requires 12% interest To recapitulate and for future guidance, the
 In Crismina Garments, Inc. v. Court of Appeals, guidelines laid down in the case of Eastern Shipping
Forbearance-- “contractual obligation of lender or Lines are accordingly modified to embody BSP-MB
creditor to refrain during a given period of time, from Circular No. 799, as follows:
I. When an obligation, regardless of its source, i.e.,
law, contracts, quasi-contracts, delicts or quasi-
delicts is breached, the contravenor can be held
liable for damages. The provisions under Title XVIII
on "Damages" of the Civil Code govern in
determining the measure of recoverable damages.
II. With regard particularly to an award of interest in
the concept of actual and compensatory damages,
the rate of interest, as well as the accrual thereof, is
imposed, as follows:

New guidelines in the award of interest:

1.) When the obligation is breached, and it consists in
the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be
that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal
interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall
be 6% per annum to be computed from default, i.e.,
from judicial or extrajudicial demand under and
subject to the provisions of Article 1169 of the Civil
Code.
2.) When an obligation, not constituting a loan or
forbearance of money, is breached, an interest on
the amount of damages awarded may be imposed at
the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on
unliquidated claims or damages, except when or
until the demand can be established with reasonable
certainty. Accordingly, where the demand is
established with reasonable certainty, the interest
shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code), but
when such certainty cannot be so reasonably
established at the time the demand is made, the
interest shall begin to run only from the date the
judgment of the court is made (at which time the
quantification of damages may be deemed to have
been reasonably ascertained). The actual base for
the computation of legal interest shall, in any case,
be on the amount finally adjudged.
3.) When the judgment of the court awarding a sum of
money becomes final and executory, the rate of
legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be6% per
annum from such finality until its satisfaction, this
interim period being deemed to be by then an
equivalent to a forbearance of credit.

Application in this case: The interest of 12% per

annum of the total monetary awards, computed
from May 27, 2002 to June 30, 2013 and 6% per
annum from July 1, 2013 until their full satisfaction,
is awarded.
 interest from 12% to 6%. Specifically, the rules on
G.R. No. 189871 August 13, 2013 interest are now as follows:
1. Monetary Obligations ex. Loans:
DARIO NACAR, PETITIONER,
vs. a. If stipulated in writing:
GALLERY FRAMES AND/OR FELIPE BORDEY, a.1. shall run from date of judicial demand (filing of
JR., RESPONDENTS. the case)
a.2. rate of interest shall be that amount stipulated
b. If not stipulated in writing
703 SCRA 439 – Civil Law – Torts and Damages –
Actual and Compensatory Damages – Legal Rate of b.1. shall run from date of default (either failure to
Interest is now 6% pay upon extra-judicial demand or upon judicial
Labor Law – Labor Relations – Illegal Dismissal – demand whichever is appropriate and subject to the
Computation of Monetary Benefits provisions of Article 1169 of the Civil Code)

Dario Nacar filed a labor case against Gallery Frames b.2. rate of interest shall be 6% per annum
and its owner Felipe Bordey, Jr. Nacar alleged that 2. Non-Monetary Obligations (such as the case at
he was dismissed without cause by Gallery Frames bar)
on January 24, 1997. On October 15, 1998, the Labor
Arbiter (LA) found Gallery Frames guilty of illegal a. If already liquidated, rate of interest shall be 6%
dismissal hence the Arbiter awarded Nacar per annum, demandable from date of judicial or
P158,919.92 in damages consisting of backwages extra-judicial demand (Art. 1169, Civil Code)
and separation pay. b. If unliquidated, no interest
Gallery Frames appealed all the way to the Supreme Except: When later on established with certainty.
Court (SC). The Supreme Court affirmed the decision Interest shall still be 6% per annum demandable
of the Labor Arbiter and the decision became final from the date of judgment because such on such
on May 27, 2002. date, it is already deemed that the amount of
After the finality of the SC decision, Nacar filed a damages is already ascertained.
motion before the LA for recomputation as he 3. Compounded Interest
alleged that his backwages should be computed
from the time of his illegal dismissal (January 24, – This is applicable to both monetary and non-
1997) until the finality of the SC decision (May 27, monetary obligations
2002) with interest. The LA denied the motion as he – 6% per annum computed against award of
ruled that the reckoning point of the computation damages (interest) granted by the court. To be
should only be from the time Nacar was illegally computed from the date when the court’s decision
dismissed (January 24, 1997) until the decision of the becomes final and executory until the award is fully
LA (October 15, 1998). The LA reasoned that the said satisfied by the losing party.
date should be the reckoning point because Nacar
did not appeal hence as to him, that decision 4. The 6% per annum rate of legal interest shall be
became final and executory. applied prospectively:

ISSUE: Whether or not the Labor Arbiter is correct. – Final and executory judgments awarding damages
prior to July 1, 2013 shall apply the 12% rate;
HELD: No. There are two parts of a decision when it
comes to illegal dismissal cases (referring to cases – Final and executory judgments awarding damages
where the dismissed employee wins, or loses but on or after July 1, 2013 shall apply the 12% rate for
wins on appeal). The first part is the ruling that the unpaid obligations until June 30, 2013; unpaid
employee was illegally dismissed. This is immediately obligations with respect to said judgments on or
final even if the employer appeals – but will be after July 1, 2013 shall still incur the 6% rate.
reversed if employer wins on appeal. The second Case Digest: G.R. No. 173227. January 20, 2009
part is the ruling on the award of backwages and/or Sebastian Siga-an, petitioner, vs. Alicia Villanueva,
separation pay. For backwages, it will be computed
respondent.
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 Facts: Respondent filed a complaint for sum of
of the employer, if he loses on appeal, will increase – money against petitioner. Respondent claimed that
this is just but a risk that the employer cannot avoid petitioner approached her inside the PNO and
when it continued to seek recourses against the offered to loan her the amount of P540,000.00 of
Labor Arbiter’s decision. This is also in accordance which the loan agreement was not reduced in
with Article 279 of the Labor Code.
writing and there was no stipulation as to the
Anent the issue of award of interest in the form of payment of interest for the loan. Respondent issued
actual or compensatory damages, the Supreme a check worth P500,000.00 to petitioner as partial
Court ruled that the old case of Eastern Shipping
payment of the loan. She then issued another check
Lines vs CA is already modified by the promulgation
in the amount of P200,000.00 to petitioner as
of the Bangko Sentral ng Pilipinas Monetary Board
Resolution No. 796 which lowered the legal rate of payment of the remaining balance of the loan of
which the excess amount of P160,000.00 would be
applied as interest for the loan. Not satisfied with no stipulation therefor, the provisions of the Civil
the amount applied as interest, petitioner pestered Code concerning solutio indebiti shall be
her to pay additional interest and threatened to applied. Article 2154 of the Civil Code explains the
block or disapprove her transactions with the PNO if principle of solutio indebiti. Said provision provides
she would not comply with his demand. Thus, she that if something is received when there is no right
paid additional amounts in cash and checks as to demand it, and it was unduly delivered through
interests for the loan. She asked petitioner for mistake, the obligation to return it arises. In such a
receipt for the payments but was told that it was not case, a creditor-debtor relationship is created under
necessary as there was mutual trust and confidence a quasi-contract whereby the payor becomes the
between them. According to her computation, the creditor who then has the right to demand the
total amount she paid to petitioner for the loan and return of payment made by mistake, and the person
interest accumulated to P1,200,000.00. who has no right to receive such payment becomes
obligated to return the same. The quasi-contract
The RTC rendered a Decision holding that of solutio indebiti harks back to the ancient principle
respondent made an overpayment of her loan that no one shall enrich himself unjustly at the
obligation to petitioner and that the latter should expense of another. The principle of solutio
refund the excess amount to the former. It indebiti applies where (1) a payment is made when
ratiocinated that respondent’s obligation was only to there exists no binding relation between the payor,
pay the loaned amount of P540,000.00, and that the who has no duty to pay, and the person who
alleged interests due should not be included in the received the payment; and (2) the payment is made
computation of respondent’s total monetary debt through mistake, and not through liberality or some
because there was no agreement between them other cause. We have held that the principle
regarding payment of interest. It concluded that of solutio indebiti applies in case of erroneous
since respondent made an excess payment to payment of undue interest.
petitioner in the amount of P660,000.00 through
mistake, petitioner should return the said amount to Article 2232 of the Civil Code states that in a quasi-
respondent pursuant to the principle of solutio contract, such as solutio indebiti, exemplary
indebiti. Also, petitioner should pay moral damages damages may be imposed if the defendant acted in
for the sleepless nights and wounded feelings an oppressive manner. Petitioner acted oppressively
experienced by respondent. Further, petitioner when he pestered respondent to pay interest and
should pay exemplary damages by way of example threatened to block her transactions with the PNO if
or correction for the public good, plus attorney’s she would not pay interest. This forced respondent
fees and costs of suit. to pay interest despite lack of agreement
thereto. Thus, the award of exemplary damages is
Issue: (1) Whether or not interest was due to appropriate so as to deter petitioner and other
petitioner; and (2) whether the principle of solutio lenders from committing similar and other serious
indebiti applies to the case at bar. wrongdoings.

Ruling: (1) No. Compensatory interest is not

chargeable in the instant case because it was not Abella v. Abella (GR 195166)
duly proven that respondent defaulted in paying the
loan and no interest was due on the loan because In a loan or forbearance of money, according to the
Civil Code, the interest due should be that stipulated
there was no written agreement as regards payment
in writing, and in the absence thereof, the
of interest. Article 1956 of the Civil Code, which
rate shall be 12% per annum.
refers to monetary interest, specifically mandates Recently, however, the Bangko Sentral ng Pilipinas
that no interest shall be due unless it has been amending Section 2 of Circular No. 905, Series of
expressly stipulated in writing. As can be gleaned 1982:
from the foregoing provision, payment of monetary Section 1. The rate of interest for the loan or
interest is allowed only if: (1) there was an express forbearance of any money, goods or credits and the
rate allowed in judgments, in the absence of an
stipulation for the payment of interest; and (2) the
express contract as to such rate of interest, shall be
agreement for the payment of interest was reduced six percent (6%) per annum.
in writing. The concurrence of the two conditions is This Circular shall take effect on 1 July 2013.
required for the payment of monetary
interest. Thus, we have held that collection of FACTS: Petitioners alleged that respondents
interest without any stipulation therefor in writing is obtained a loan from them in the amount of
prohibited by law. P500,000.00. The loan was evidenced by an
acknowledgment receipt dated March 22, 1999 and
was payable within one (1) year. Petitioners added
(2) Petitioner cannot be compelled to return the that respondents were able to pay a total of
alleged excess amount paid by respondent as P200,000.00—P100,000.00 paid on two separate
interest. Under Article 1960 of the Civil Code, if the occasions—leaving an unpaid balance of
borrower of loan pays interest when there has been P300,000.00.
On March 22, 1999, respondents executed an RULING:
acknowledgment receipt to petitioners, which 1. As noted by the CA and RTC, respondents entered
states: into a simple loan or mutuum, rather than a joint
venture, with petitioners.
This is to acknowledge receipt of the Amount of Five
Hundred Thousand (P500,000.00) Pesos from Mrs. Art. 1933. By the contract of loan, one of the parties
Alma R. Abella, payable within one (1) year from delivers to another, either something not
date hereof with interest. consumable so that the latter may use the same for
Annie C. Abella (sgd.) Romeo M. Abella (sgd. a certain time and return it, in which case the
contract is called a commodatum; or money or other
In their Answer, respondents alleged that the consumable thing, upon the condition that the same
amount involved did not pertain to a loan they amount of the same kind and quality shall be paid, in
obtained from petitioners but was part of the capital which case the contract is simply called a loan or
for a joint venture involving the lending of money. mutuum.

Specifically, respondents claimed that they were Commodatum is essentially gratuitous.

approached by petitioners, who proposed that if
respondents were to "undertake the management of Simple loan may be gratuitous or with a stipulation
whatever money [petitioners] would give them, to pay interest.
[petitioners] would get 2.5% a month with a 2.5%
service fee to [respondents]." The 2.5% that each In commodatum the bailor retains the ownership of
party would be receiving represented their sharing the thing loaned, while in simple loan, ownership
of the 5% interest that the joint venture was passes to the borrower.
supposedly going to charge against its debtors.
Respondents further alleged that the one year Art. 1953. A person who receives a loan of money or
averred by petitioners was not a deadline for any other fungible thing acquires the ownership
payment but the term within which they were to thereof, and is bound to pay to the creditor an equal
return the money placed by petitioners should the amount of the same kind and quality.
joint venture prove to be not lucrative. Moreover,
they claimed that the entire amount of P500,000.00 2. 12% per annum. In a loan or forbearance of
was disposed of in accordance with their agreed money, according to the Civil Code, the interest due
terms and conditions and that petitioners should be that stipulated in writing, and in the
terminated the joint venture, prompting them to absence thereof, the rate shall be 12% per annum.
collect from the joint venture's borrowers. They
were, however, able to collect only to the extent of Recently, however, the Bangko Sentral ng Pilipinas
P200,000.00; hence, the P300,000.00 balance Monetary Board, approved the following revisions
remained unpaid. governing the rate of interest in the absence of
stipulation in loan contracts, thereby amending
Trial Court ruled in favor of petitioners. Ordering Section 2 of Circular No. 905, Series of
respondents to pay the petitioner the sum of 1982:LawlibraryofCRAlaw
P300,000 with interest of 30% per annum. ChanRoblesVirtualawlibrary
The CA ruled that while respondents had indeed Section 1. The rate of interest for the loan or
entered into a simple loan with petitioners, forbearance of any money, goods or credits and the
respondents were no longer liable to pay the rate allowed in judgments, in the absence of an
outstanding amount of P300,000.00. CA noted that express contract as to such rate of interest, shall be
while the acknowledgement receipt showed that six percent (6%) per annum.
interest was to be charged, no particular interest This Circular shall take effect on 1 July 2013.
rate was specified. Thus, at the time respondents
were making interest payments of 2.5% per month, Applying this, the loan obtained by respondents
these interest payments were invalid for not being from petitioners is the conventional interest at the
properly stipulated by the parties. Since petitioners' rate of 12% per annum, the legal rate at the time the
charging of interest was invalid, the Court of Appeals parties executed their agreement. Proceeding from
reasoned that all payments respondents made by these premises, we find that respondents made an
way of interest should be deemed payments for the overpayment in the amount of P3,379.17.
principal amount of P500,000.00.aThe Court of
Appeals further noted that respondents made a total Petitioners Spouses Salvador and Alma Abella
payment of P648,500.00, which, as against the are DIRECTED to jointly and severally reimburse
principal amount of P500,000.00, entailed an respondents Spouses Romeo and Annie Abella the
overpayment of P148,500.00. Applying the principle amount of P3,379.17, which respondents have
of solutio indebiti, the Court of Appeals concluded overpaid.
that petitioners were liable to reimburse
respondents for the overpaid amount of P148,500.

ISSUE 1. WON the party entered into a simple

loan or mutuum as agreement?
2. Whether interest accrued on
respondents' loan from petitioners, If so, at what
rate?