1.

LIWANAG VS CA, 281 SCRA 225 (1997)

Facts:

Liwanag asked Isidora Rosales to join her and Thelma Tagbilaran in the business of buying and selling
cigarettes. Under their agreement, Rosales would give the money needed tob u y t h e c i g a r e t t e s
w h i l e L i w a n a g a n d T a b l i g a n w o u l d a c t a s h e r a g e n t s , w i t h a corresponding
40% commission to her if the goods are sold; otherwise the money would be returned to Rosales.

Rosales gave several cash advances amounting to 633,650.

Money was misappropriated. Rosales files a complaint of estafa against them.

Issue:
1. WON the parties entered into a partnership agreement; 2. if in the negative,

2. WONthe transaction is a simple loan

Held:
1. No. Even assuming that a contract of partnership was indeed entered into by andbetween the parties,
when money or property have been received by a partner for a specificpurpose and he later misappropriated
it, such partner is guilty of estafa.2. No. In a contract of loan once the money is received by the
debtor, ownership over the same is transferred. Being the owner, the borrower can dispose of it for
whatever purposehe may deem proper.
2. HERRERA VS PETROPHIL CORP, GR No. 48349, 29 Dec. 1986 #2 ANTIOJO
FACTS:
On December 5, 1969, Herrera and ESSO Standard, (later substituted by Petrophil Corp.,) entered
into a lease agreement, whereby the former leased to the latter a portion of his property for a period of 20
yrs. subject to the condition that monthly rentals should be paid and there should be an advance payment of
rentals for the first eight years of the contract, to which ESSO paid on December 31, 1969. However, ESSO
deducted the amount of 101, 010.73 as interest or discount for the eight years advance rental.
On August 20, 1970, ESSO informed Herrera that there had been a mistake in the computation of
the interest and paid an additional sum of 2,182.70; thus, it was reduced to 98, 828.03.
As such, Herrera sued ESSO for the sum of 98, 828.03, with interest, claiming that this had been
illegally deducted to him in violation of the Usury Law.
ESSO argued that amount deducted was not usurious interest but rather a discount given to it for
paying the rentals in advance. Judgment on the pleadings was rendered in favor of ESSO. Thus, the matter
was elevated to the SC for only questions of law were involve.
ISSUE: Whether the contract between the parties is one of loan or lease?
RULING:
Contract between the parties is one of lease and not of loan. It is clearly denominated a "LEASE
AGREEMENT." Nowhere in the contract is there any showing that the parties intended a loan rather than a
lease. The provision for the payment of rentals in advance cannot be construed as a repayment of a loan
because there was no grant or forbearance of money as to constitute an indebtedness on the part of the
lessor. On the contrary, the defendant-appellee was discharging its obligation in advance by paying the eight
years rental, and it was for this advance payment that it was getting a rebate or discount.
There is no usury in this case because no money was given by the defendant-appellee to the
plaintiff-appellant, nor did it allow him to use its money already in his possession. There was neither loan nor
forbearance but a mere discount which the plaintiff-appellant allowed the defendant-appellee to deduct from

the total payments because they were being made in advance for eight years. The discount was in effect a
reduction of the rentals which the lessor had the right to determine, and any reduction thereof, by any
amount, would not contravene the Usury Law.
The difference between a discount and a loan or forbearance is that the former does not have to be
repaid. The loan or forbearance is subject to repayment and is therefore governed by the laws on usury.
To constitute usury, "there must be loan or forbearance; the loan must be of money or something
circulating as money; it must be repayable absolutely and in all events; and something must be exacted for
the use of the money in excess of and in addition to interest allowed by law."
It has been held that the elements of usury are (1) a loan, express or implied; (2) an understanding
between the parties that the money lent shall or may be returned; that for such loan a greater rate or interest
that is allowed by law shall be paid, or agreed to be paid, as the case may be; and (4) a corrupt intent to
take more than the legal rate for the use of money loaned. Unless these four things concur in every
transaction, it is safe to affirm that no case of usury can be declared.
3. KIM VS PEOPLE, GR No. 84719, 25 Jan. 1991 #3 CASTRO S
FACTS:
Petitioner Kim Yong Chan (Kim) was employed as a researcher in Aquaculture Department of the
Southeast Asian Fisheries Development Center (SEAFDEC) with head office in Tigbauan, Iloilo. His work,
being the head in his unit, requires him to travel to various selected provinces in the country. On June 15
1982, Kim was issued Travel Order 2222 which covered his travels to different places in Luzon from June 16
to July 21. He received P6,438 cash advance under such TO. Within the same period, he was issued
another travel order, TO 2268, requiring him to travel from head office to Roxas City from June 30 to July 4.
He received P495 cash advance.
He presented both travel orders for liquidation. When the Travel Expense Reports were audited, it
was discovered that there was an overlap of 4 days (June 30-July 3) in the two travel orders for which Kim
collected per diems twice. The total amount charged and collected by Kim when he did not actually and
physically travel is P1,230. Kim claimed that he made make-up trips he failed to undertake under TO 2222
because he was recalled to the head office.
`
2 complaints for Estafa were filed against him. One was dismissed for failure to prosecute. The
other one convicted him. The RTC affirmed the decision of MTC. CA dismissed Kims appeal for being filed
out of time.
ISSUE: Whether Kim is criminally liable for the crime of Estafa
HELD: No.
For him to be convicted, it must be proven that he had the obligation to deliver or return the same
money, good or personal property that he had received. The Court ruled that Kim has no obligation to return
the same money (cash advance) he received.
Under EO no.10, Cash advances are to be liquidated within 30 days after projected return of the
employee, otherwise there will be a corresponding salary deduction. Liquidation means settling of
indebtedness. An employee who liquidates cash advance is in fact paying back his debt in the form of a loan
of money advanced to him by his employer, as per diems and allowances. Similarly, as stated in the assailed
decision of the lower court, "if the amount of the cash advance he received is less than the amount he spent
for actual travel . . . he has the right to demand reimbursement from his employer the amount he spent
coming from his personal funds. In other words, the money advanced by either party is actually a loan to the
other.
Under Art.1953, it is provided that the person who receives a loan acquires the ownership thereof.
Applying the foregoing in the present case, ownership of the money was transferred to Kim. Hence, he was
under no legal obligation to return the same cash or money.

1.

4. CATHOLIC VICAR APOSTOLIC OF THE MT. PROV. VS CA, 165 SCRA 515 (1988)
Doctrine:
The bailees' failure to return the subject matter of commodatum to the bailor does not mean
adverse possession on the part of the borrower. The bailee held in trust the property subject matter
of commodatum.
Facts:
Catholic Vicar Apostolic of the Mountain Province (VICAR for brevity) filed an application for
registration of title over Lots 1, 2, 3, and 4, said Lots being the sites of the Catholic Church building,
convents, high school building, school gymnasium, school dormitories, social hall, stonewalls, etc.
The Heirs of Juan Valdez and the Heirs of Egmidio Octaviano filed their Answer/Opposition on Lots
Nos. 2 and 3, respectively, asserting ownership and title thereto since their predecessors' house
was borrowed by petitioner Vicar after the church and the convent were destroyed.. After trial on
the merits, the land registration court promulgated its Decision confirming the registrable title of
VICAR to Lots 1, 2, 3, and 4.
The Heirs of Juan Valdez appealed the decision of the land registration court to the then Court of
Appeals, The Court of Appeals reversed the decision. Thereupon, the VICAR filed with the
Supreme Court a petition for review on certiorari of the decision of the Court of Appeals dismissing
his application for registration of Lots 2 and 3.
Issue:
Whether or not the failure to return the subject matter of commodatum constitutes an adverse
possession on the part of the owner
Held:
No. The bailees' failure to return the subject matter of commodatum to the bailor did not mean
adverse possession on the part of the borrower. The bailee held in trust the property subject matter
of commodatum.
Petitioner repudiated the trust by declaring the properties in its name for taxation purposes.

2.

Obligations of the bailee (Arts. 1941 1945) #5 DEIMRY

3.

Obligations of the bailor (arts. 1946 1952) #6 DINGLASAN

5. LAO VS CA, 275 SCRA 237 (1997) #7 GALICINAO

Facts:
Private respondent Better Homes Realty and Housing Corp. filed a complaint for unlawful detainer
with the Metc on the ground that petitioner Lao occupied its property without rent, but on its pure liberality
with the understanding that he would vacate the property upon demand. However, despite demand to
vacate, Lao refused to vacate the premises.
Lao claimed that he is the true owner of the property; that the private respondent purchased the
same from N. Domingo Realty and Development Corporation, but the agreement was actually a loan
secured by mortgage; and that plaintiff's cause of action is for accion publiciana, outside the jurisdiction of
an inferior court.
MeTC ruled in favor of private respondent, but RTC reversed its decision, saying that the real
transaction over the subject property was not a sale but a loan secured by a mortgage thereon. On appeal,
the CA reversed the decision of the RTC.

Issue:
1.
Whether or not Better Homes Realty and Housing Corp had acquired ownership over the property
in question.
2.

Whether or not petitioner should be ejected from the premises in question

Held
1.
No. the agreement between the private respondent and N. Domingo Realty & Housing Corporation
is one of equitable mortgage. First, possession of the property in the controversy remained with Petitioner
Manuel Lao who was the beneficial owner of the property, before, during and after the alleged sale. It is
settled that a "pacto de retro sale should be treated as a mortgage where the (property) sold never left the
possession of the vendors." Second, the option given to Manuel Lao to purchase the property in controversy
had been extended twice through documents executed by the President and Chairman of the Board of
Better Homes Realty & Housing Corporation. Third, unquestionably, Manuel Lao and his brother were in
such "dire need of money" that they mortgaged their townhouse units registered under the name of N.
Domingo Realty Corporation, the family corporation put up by their parents, to Private Respondent Better
Homes Realty & Housing Corporation. Since the borrower's urgent need for money places the latter at a
disadvantage vis-a-vis the lender who can thus dictate the terms of their contract, the Court, in case of an
ambiguity, deems the contract to be one which involves the lesser transmission of rights and interest over
the property in controversy.
2.
No. There was no sale of the disputed property. Hence, it still belongs to petitioner's family
corporation, N. Domingo Realty & Development Corporation. Private respondent, being a mere mortgagee,
has no right to eject petitioner.

6. CLARAVALL VS CA, 190 SCRA 439 (1990) #8 MOGELLO

FACTS: Appellant Loreto Claravall and Victoria H. Claravall obtained loans from the Development Bank of
the Philippines (DBP) in the amount of P52,000.00 for the construction of a commercial building on their
property situated in the Municipality of Ilagan, Isabela. To secure the loan, a mortgage was executed upon
said property in favor of the DBP. Claravall was unable to pay the amortization over said loan and the DBP
threatened to foreclose the mortgage.
However, Claravall was able to pay DBP by executing a deed of sale over the property in question
with a 5-year option to repurchase the same with a certain Juan Ang-angan.
Claravall exercised the said right to repurchase the property from Ang-angan by obtaining a loan
from spouses Francisco and Carolina Ramirez in the amount of P75,000.00. A deed of sale dated December
29, 1965 was executed over the same property by the Claravalls in favor of Ramirez.
Another instrument was entered into by Claravall and Ramirez which granted Claravall an option to
repurchase the property in question within a period of two (2) years from December 29, 1965 but not earlier
nor later than the month of December, 1967, for the sum of P10,000.00 payable at the time of repurchase.
At the expiration of the 2-year period, appellant Claravall failed to redeem the property in question
and because of this they brought suit against Francisco and Carolina Ramirez to compel the latter to sell the
property in question back to them (Claravall).
The lower court rendered judgment in favor of defendants, the Ramirez spouses, (private
respondents herein) which was affirmed in toto by respondent court.
ISSUE: WON the contract of loan with mortgage made to appear in paper as absolute sale is null and void.

HELD: Yes. A contract of loan with mortgage made to appear in paper as an absolute sale with a
companion option to buy is null and void even if no usury is involved.
Under Article 1604 a contract purporting to be an absolute sale shall be presumed to be an
equitable mortgage, should any of the conditions in Article 1602 be present. Otherwise stated, the presence
of only one circumstance defined in Article 1602 is sufficient for a contract of sale with right to repurchase to
be presumed an equitable mortgage.
ART. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:
(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument extending the period of
redemption or granting a new period is executed;
(4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation.
ART. 1604. The provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale.
Under Article 1604 a contract purporting to be an absolute sale shall be presumed to be an
equitable mortgage, should any of the conditions in Article 1602 be present. Otherwise stated, the presence
of only one circumstance defined in Article 1602 is sufficient for a contract of sale with right to repurchase to
be presumed an equitable mortgage.

7. JAVIER VS DE GUZMAN, 192 SCRA 434 (1990) #9 PALILEO

FACTS:
On 7 December 1987, Efren Javier, and his mother, Lolita Javier, borrowed P200,000.00 from
Respondent Judge with interest orally agreed upon at ten per cent (10%) monthly, They tendered to the
latter UCPB Check No. BNE 012872, dated 7 January 1988, in the amount of P220,000.00. The drawer of
the check was actually Donato Belen, a brother-in-law of Efren, as the Javiers had no personal checking
account. The following day, Respondent required them to sign a Memorandum of Agreement, which they
did. Two of the conditions imposed were interest at the rate of twenty per cent (20%) per month,
compounded monthly, and should they fail to pay the loan and its interest upon maturity on 7 January 1988
and the check is deposited and dishonored, an appropriate charge for violation of Batas Pambansa Blg. 22
may be filed at Respondent's option. When the Javiers defaulted on due date because of business reverses,
partial payments in the total amount of P177,000.00 were made to Respondent between 6 January 1988
and 16 June 1988. Meanwhile, the check, which was deposited by Respondent on 14 April 1988, was
dishonored by the drawee bank.
On 8 September 1988, Respondent instituted suit for a "Sum of Money and Damages with Prayer
for the Issuance of a Writ of Preliminary Attachment" in the Regional Trial Court of Makati, Metro Manila,
against the spouses Pedro and Lolita Javier, and their son, Efren, for the recovery of the "sum of
P220,000.00 with 20% interest/penalty a month compounded monthly from January 7, 1988 until fully paid,"
computed at P622,871.67. Judgment on the pleadings was rendered on 3 February 1989 ordering the
Javiers to pay Respondent Judge the "sum of P608,871.67 with 20% interest/penalty a month compounded
monthly beginning September 8, 1988 until fully paid" and the "sum equal to 10% of the amounts due and
recoverable as reimbursement of attorney's fees and litigation expenses". In the meantime, an Order
granting execution pending appeal was issued by the Trial Court on 14 April 1989. The Javiers appealed to
the Court of Appeals where the case still pends. Still later, Respondent filed in Manila two (2) criminal
complaints, the first, for violation of B.P. Blg. 22 against Efren, who, however, was acquitted, and the
second, for Estafa against Complainants and Lolita Javier, which complaint was dismissed.

On 21 March 1989, Respondent further filed an administrative charge against Complainant father,
Pedro, with the Bureau of Internal Revenue where the latter was employed. Earlier, an administrative charge
against Pedro had also been filed with the Civil Service Commission on 3 March 1989 accusing Pedro in
both instances, of having committed estafa against him and his wife, of dishonesty and of conduct
unbecoming of a government official. Feeling harassed, Complainants filed this administrative charge
against Respondent Judge on four counts of "dishonorable conduct,
ISSUE: WON the respondent judge can be held liable for the usurious interest.
HELD:
No. As to the usurious rate of interest, while that issue was considered by Justice de la Fuente as
irrelevant since the Usury Law is now legally inexistent pursuant to Central Bank Circular No. 905 and the
interest now legally chargeable depends upon the agreement of lender and borrower (Liam Law v. Olympic
Sawmill Co., G.R. No. L-30771, May 28, 1984, 129 SCRA 439), she found that the interest charged on the
loan was exorbitant. While he had every right to protect his investment, and while the contract of loan
entered into between him and the Javiers was legal per se, Respondent rendered it unconscionable by
imposing a penalty of twenty per cent (20%) interest per month compounded monthly. Respondent was
equivocal as to the repayments that were made to him by the Javiers. In his Verified Complaint before the
Trial Court, he averred failure to repay. However, in the computation attached to his Motion for Judgment on
the Pleadings, he made mention of "alleged payments being accepted by (him) at face value" and included
them in the determination of the balance due.
Respondent also brought suit to collect the staggering sum of P622,871.67 despite payments by
the debtors of approximately P177,000.00 of the original P200,000.00 loan. Although not illegal under the
terms of the Memorandum of Agreement, as in fact, the Trial Court had ruled in Respondent's favor, it does
not necessarily follow that it was moral and fair. Respondent is not a hard-boiled and callous businessman.
He is a Judge.
Finding Respondent Judge, Salvador P. de Guzman, Jr. guilty on three (3) counts, of irresponsible,
improper and dishonorable conduct in disregard of the Code of Judicial Ethics, he is severely censured, with
a stern warning that a repetition of the said acts or similar acts in the future shall receive graver sanctions.

8. ALMEDA VS CA, 256 SCRA 292 #10 PAVICO

Facts:
In 1981, PNB granted herein petitioner 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. A credit
agreement embodying the terms and conditions of the loan was executed between the parties.
The agreement contains
xxx xxx xxx
The Bank reserves the right to increase the interest rate within the limits allowed by law at any time
depending on whatever policy it may adopt in the future; provided, that the interest rate on this/these
accommodations shall be correspondingly decreased in the event that the applicable maximum interest rate
is reduced by law or by the Monetary Board. In either case, the adjustment in the interest rate agreed upon
shall take effect on the effectivity date of the increase or decrease of the maximum interest rate.
Between 1981 and 1984, petitioners made several partial payments on the loan totaling.
P7,735,004.66, 2 a substantial portion of which was applied to accrued interest. Said interest rate thereupon
increased from an initial 21% to a high of 68% between March of 1984 to September, 1986. Before the loan
matures, petitioner filed a complaint in the lower court for declaratory relief and with prayer for a writ of

preliminary injunction and temporary restraining order. The lower court issued the writ of preliminary
injunction which was appealed in the CA which rendered the assailed Decision. Hence this petition.
Issue: Whether or not PNB could unilaterally raise interest rates on the loan, pursuant to the credit
agreement's escalation clause, and in relation to Central Bank Circular No. 905.
Ruling: No, PNB cannot.
Moreover, respondent bank's reliance on C.B. Circular No. 905, Series of 1982 did not authorize
the bank, or any lending institution for that matter, to progressively increase interest rates on borrowings to
an extent which would have made it virtually impossible for debtors to comply with their own obligations.
True, escalation clauses in credit agreements are perfectly valid and do not contravene public policy. Such
clauses, however, (as are stipulations in other contracts) are nonetheless still subject to laws and provisions
governing agreements between parties, which agreements while they may be the law between the
contracting parties implicitly incorporate provisions of existing law. Consequently, while the Usury Law
ceiling on interest rates was lifted by C.B. Circular 905, nothing in the said circular could possibly be read as
granting respondent bank carte blanche authority to raise interest rates to levels which would either enslave
its borrowers or lead to a hemorrhaging of their assets. Borrowing represents a transfusion of capital from
lending institutions to industries and businesses in order to stimulate growth. This would not, obviously, be
the effect of PNB's unilateral and lopsided policy regarding the interest rates of petitioners' borrowings in the
instant case.

9. GARCIA VS THIO, 518 SCRA 433 (2007) #11 RIEGO

FACTS:
Two crossed check payable to certain Mariou Santiago were given to the respondent by the
petitioner the first check covers one-hundred thousand US dollar and the second check covers fivehundred thousand pesos.
Petitioner alleged that on February 24, 1995, respondent borrowed from her the amount of
US$100,000 with interest thereon at the rate of 3% per month, which loan would mature on October 26,
1995. The amount of this loan was covered by the first check. On June 29, 1995, respondent again
borrowed the amount of P500,000 at an agreed monthly interest of 4%, the maturity date of which was on
November 5, 1995. The amount of this loan was covered by the second check. For both loans, no
promissory note was executed since petitioner and respondent were close friends at the time. Respondent
paid the stipulated monthly interest for both loans but on their maturity dates, she failed to pay the principal
amounts despite repeated demands.
Respondent denied that she contracted the two loans with petitioner and countered that it was
Marilou Santiago to whom petitioner lent the money. She claimed she was merely asked by petitioner to give
the crossed checks to Santiago. She issued the checks not as payment of interest but to accommodate
petitioners request that respondent use her own checks instead of Santiagos.
The lower court decided in favor of the petitioner stating that there is a contract of load between the
two but the appellate court reversed the decision finding that there is nothing in the record that shows that
respondent received money from petitioner.
ISSUE: Whether or not there is a contract of loan between the petitioner and the respondent.
HELD:
Yes, there is a contract of loan between the petitioner and the respondent. A loan is a real contract,
not consensual, and as such is perfected only upon the delivery of the object of the contract. This is evident
in Art. 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.
Upon delivery of the object of the contract of loan (in this case the money received by the debtor
when the checks were encashed) the debtor acquires ownership of such money or loan proceeds and is
bound to pay the creditor an equal amount.
In the case at bar, it is undisputed that the checks were delivered to respondent. The decision of
the Court of Appeals was reversed and set-aside.
NOTE: The held is supposedly short, but for further clarification, I included the reasons why did the Court
believe that there is contract between the respondent and petitioner.
This is supported by the following reasons:
1.
First, respondent admitted that petitioner did not personally know Santiago. It was highly
improbable that petitioner would grant two loans to a complete stranger without requiring as much as
promissory notes or any written acknowledgment of the debt considering that the amounts involved were
quite big. Respondent, on the other hand, already had transactions with Santiago at that time.
2.
Second, Leticia Ruiz, a friend of both petitioner and respondent (and whose name appeared in both
parties list of witnesses) testified that respondents plan was for petitioner to lend her money at a monthly
interest rate of 3%, after which respondent would lend the same amount to Santiago at a higher rate of 5%
and realize a profit of 2%.33 This explained why respondent instructed petitioner to make the checks
payable to Santiago. Respondent has not shown any reason why Ruiz testimony should not be believed.
3.
Third, for the US$100,000 loan, respondent admitted issuing her own checks in the amount of
P76,000 each (peso equivalent of US$3,000) for eight months to cover the monthly interest. For the
P500,000 loan, she also issued her own checks in the amount of P20,000 each for four months.34
According to respondent, she merely accommodated petitioners request for her to issue her own checks to
cover the interest payments since petitioner was not personally acquainted with Santiago.35 She claimed,
however, that Santiago would replace the checks with cash.36 Her explanation is simply incredible. It is
difficult to believe that respondent would put herself in a position where she would be compelled to pay
interest, from her own funds, for loans she allegedly did not contract. We declared in one case that:
In the assessment of the testimonies of witnesses, this Court is guided by the rule that for
evidence to be believed, it must not only proceed from the mouth of a credible witness, but
must be credible in itself such as the common experience of mankind can approve as
probable under the circumstances. We have no test of the truth of human testimony except its
conformity to our knowledge, observation, and experience. Whatever is repugnant to these
belongs to the miraculous, and is outside of juridical cognizance.
4.
Fourth, in the petition for insolvency sworn to and filed by Santiago, it was respondent, not
petitioner, who was listed as one of her (Santiagos) creditors.
5.
Last, respondent inexplicably never presented Santiago as a witness to corroborate her story. The
presumption is that "evidence willfully suppressed would be adverse if produced." Respondent was not able
to overturn this presumption.

4.

RA 8183 (11 July 1996) Republic Act No. 8183 June 11, 1996
Repealing RA 529
AN ACT REPEALING REPUBLIC ACT NUMBERED FIVE HUNDRED TWENTY-NINE AS AMENDED,
ENTITLED "AN ACT TO ASSURE THE UNIFORM VALUE OF PHILIPPINE COIN AND CURRENCY."
Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled::

Section 1. All monetary obligations shall be settled in the Philippine currency which is legal tender in the
Philippines. However, the parties may agree that the obligation or transaction shall be settled in any other
currency at the time of payment.
Sec. 2. Republic Act Numbered Five Hundred Twenty-Nine (R.A. No. 529), as amended entitled "An Act
to Assume the Uniform Value of Philippine Coin and Currency," is hereby repealed.
Sec. 3. This Act shall take effect fifteen (15) days after its publication in the Official Gazette or in two (2)
national newspapers of general circulation. The Bangko Sentral ng Pilipinas and the Department of
Finance shall conduct an intensive information campaign on the effect of this Act.
Approved: June 11, 1996
10. CF SHARP & CO. VS NORTHWEST AIRLINES,
Facts:
On May 9, 1974, CF Sharp was authorized to sell tickets of Northwest Airlines-Japan by entering an
International Passenger Sales Agency Agreement, however, CF Sharp failed to remit the
proceeds of the ticket sales. This prompted Northwest Airlinesto file a collection suit against the CF
Sharp before the Toko Distirct Court. Judgment w a s r e n d e r e d i n i t s f a v o r , o r d e r i n g C F
S h a r p t o p a y N o r t h w e s t A i r l i n e s i n c l u d i n g damages for the delay. Unable to execute
the decision in Japan, the respondent filed acase to enforce said judgment with the RTC.
Thereafter, the RTC issued a writ of execution for foreign courts decision. The petitioner filed for
certiorari, assertingit has already made partial payments. The CA lowered the amount to be paid
andincluded in its decision that the amount may be paid in local currency at rate prevailingat time of
payment. partly affirmed by the Supreme Court. CF Sharp was then ordered to pay Northwest sothat the
RTC issued a writ of execution of decision ruling that Sharp is to pay Northwestt h e s u m o f
83,158,195 yen at the exchange rate prevailing on the date of the
f o r e i g n judgment plus 6% per annum until fully paid, 6% damages and 6% interest. An appeal,the Court of
Appeals reduced the interest and it ruled that the basis of the conversion of Petitioner s liability in its
peso equivalent should be the prevailing rate at the time of payment and not the rate on the date
of the foreign judgment.
Issue: W hether or not the basis for the payment of the amount due is the value of
thecurrency at the time of the establishment of the obligation.
Ruling: NO, the rule that the value of currency at the time of the establishment of
theobligation shall be the basis of payment finds application only when there is an
official pronouncement or declaration of the existence of an extraordinary inflation or deflation.Hence,
petitioners contention that Article 1250 of the Civil Code which provides that inc a s e o f a n e x t r a
ordinary inflation or deflation of the currency stipulated
s h o u l d supervene, the value of the currency at the time of establishment of the obligation shall bethe
basis of payment, unless there is an agreement to the contrary shall apply in this caseis untenable.Under
RA 529, stipulations on the satisfaction of obligations in foreign currencyare void. Payments of
monetary obligations, subject to certain exceptions, shall be discharged in the currency which is
the legal tender of the Philippines. But since the lawdoesn't provide for the rate of exchange for the
payment of foreign currency obligations incurred after its enactment, jurisprudence held that the
exchange rates h o u l d b e t h e p r e v a i l i n g r a t e a t t i m e o f p a y m e n t . T h i s l a w h a s b e e n
a m e n d e d , i n payments for obligations to be made in currency other than Philippine currency but then
again, it failed to state what the exchange rate that should be used. This being the case the jurisprudence
regarding the use of the exchange rate at time of payment shall be used

11. PREMIER DEVELOPMENT BANK VS FLORES, 574 SCRA 66, 16 DEC 2008 #14 ANTIOJO
FACTS:
ISSUE: Whether PDB has a claim or a debt to the other corporations?
RULING:
A distinction must be made between a debt and a mere claim. A debt is an amount actually
ascertained. It is a claim which has been formally passed upon by the courts or quasi-judicial bodies to
which it can in law be submitted and has been declared to be a debt. A claim, on the other hand, is a debt in
embryo. It is mere evidence of a debt and must pass thru the process prescribed by law before it develops
into what is properly called a debt. Absent, however, any such categorical admission by an obligor or final
adjudication, no legal compensation or off-set can take place. Unless admitted by a debtor himself, the
conclusion that he is in truth indebted to another cannot be definitely and finally pronounced, no matter how
convinced he may be from the examination of the pertinent records of the validity of that conclusion the
indebtedness must be one that is admitted by the alleged debtor or pronounced by final judgment of a
competent court. At best, what Premiere Development Bank has against respondent corporations is just a
claim, not a debt. At worst, it is a speculative claim.

12. Maybank Philippines Inc. (formerly PNB-Republic Bank) vs. Tarrosa #15 CASTRO S
FACTS:
Sps. Tarrosa obtained from petitioner-bank Maybank a loan in the amount of P91,000 secured by a
Real Estate Mortgage (parcel of land in San Carlos City, Negros Occidental). After paying the said loan, Sps.
Tarrosa obtained a second loan in the amount of P60,000 payable on March 11, 1984. The spouses failed to
pay upon maturity. The spouses received their final demand letter sometime in April 1998. They offered to
pay a lesser amount, which Maybank refused. Thereafter, Maybank commenced extrajudicial foreclosure.
The subject property was eventually sold to Philmay Property Inc. after a public auction sale proceeding.
The spouses filed a complaint for declaration of nullity and invalidity of the foreclosure and of the
public auction sale proceedings. They averred, among others, that Maybanks right to foreclosure had
prescribed or is barred by laches. The RTC ruled that Maybanks right to foreclosure, reckoned from the time
the mortgage indebtedness became due and demandable on March 11, 1984, had already prescribed. It
ruled in favor of the spouses. The CA affirmed the RTC ruling that the prescriptive period should be
reckoned from March 11, 1984.
ISSUE: Whether CA erred in finding that Maybanks right to foreclose over the subject property was barred
by prescription.
HELD: No.
An action to enforce a right arising from a mortgage should be enforced within 10 years from the
time the right of action accrues when the mortgagor defaults in payment of his obligation to the mortgagee.
Mere delinquency in payment does not necessarily mean delay in legal concept.
In order that the debtor may be in default, it is necessary that: (a) the obligation be demandable
and already liquidated; (b) the debtor delays performance; and (c) the creditor requires the performance
judicially or extrajudicially, unless demand is not necessary - i.e., when there is an express stipulation to that
effect; where the law so provides; when the period is the controlling motive or the principal inducement for
the creation of the obligation; and where demand would be useless.

In the present case, both the CA and the RTC reckoned the accrual of Maybank's cause of action
to foreclose the real estate mortgage over the subject property from the maturity of the second loan on May
11, 1984. The CA reckoned the accrual after construing the par.5 of the REM.
In no way did the mentioned paragraph affect the general parameters of default, particularly the
need of prior demand under Article 1169 of the Civil Code, considering that it did not expressly declare: (a)
that demand shall not be necessary in order that the mortgagor may be in default; or (b) that default shall
commence upon mere failure to pay on the maturity date of the loan. Hence, the CA erred in construing the
above provision as one through which the parties had dispensed with demand as a condition sine qua non
for the accrual of Maybank's right to foreclose the real estate mortgage over the subject property, and
thereby, mistakenly reckoned such right from the maturity date of the loan on March 11, 1984.

13. Pan Pacific Service Contractors Inc., vs. Equitable PCI Bank #16 CASTRO
14. Pua vs. Lo Bun Tioing #17 DEIMRY
15. Advocates for Truth in Lending Inc. vs. Bangko Sentral Monetary Board #18 DINGLASAN
16. Andal vs. PNB #19 GALICINAO
Facts:
Petitioners-spouses obtained a loan from, for which they executed (12) promissory notes
undertaking to pay the bank the principal loan with varying interest rates per interest period. It was agreed
upon by the parties that the rate of interest may be increased or decreased for the subsequent interest
periods, with prior notice to petitioners-spouses. To secure payment for the loan, petitioners-spouses
executed in favor of the bank a real estate mortgage using as collateral 5 parcels of land including all
improvements therein.
When the bank advised petitioners-spouses to pay their loan obligation, the latter complied to avoid
foreclosure of the properties subject of the real estate mortgage. However, despite payment PNB
proceeded to foreclose the real estate mortgage so petitioners-spouses filed a case with the RTC
Petitioners-spouses alleged that the exorbitant rate of interest unilaterally determined and imposed
by PNB prevented them from paying their obligation. They also alleged that they signed the promissory
notes in blank, relying on the representation of PNB that they were merely proforma bank requirements.
PNB contended that the penalty charges imposed on the loan was expressly stipulated under the credit
agreements and in the promissory notes.
RTC rendered judgment in favor of petitioners-spouses. The CA affirmed the decision, but it also
denied petitioners-spouses contention that no interest is due on their principal loan obligation from the time
of foreclosure until finality of the judgment annulling the foreclosure sale.
Issue:

Whether no interest is due on the petitioners-spouses loan obligation

Held:
No. That the rate of interest was subsequently declared illegal and unconscionable does not entitle
petitioners-spouses to stop payment of interest.1wphi1 It should be emphasized that only the rate of
interest was declared void. The stipulation requiring petitioners-spouses to pay interest on their loan remains
valid and binding. They are, therefore, liable to pay interest from the time they defaulted in payment until
their loan is fully paid.

17. Land Bank of the Philippines vs. Ong #20 MOGELLO

FACTS: On March 18, 1996, spouses Johnson and Evangeline Sy secured a loan from Land Bank Legazpi
City in the amount of PhP 16 million. The loan was secured by three (3) residential lots, five (5) cargo trucks,
and a warehouse. Under the loan agreement, PhP 6 million of the loan would be short-term and would
mature on February 28, 1997, while the balance of PhP 10 million would be payable in seven (7) years. The
Notice of Loan Approval dated February 22, 1996 contained an acceleration clause wherein any default in
payment of amortizations or other charges would accelerate the maturity of the loan.1
Subsequently, however, the Spouses Sy found they could no longer pay their loan. On December
9, 1996, they sold three (3) of their mortgaged parcels of land for PhP 150,000 to Angelina Gloria Ong,
Evangelines mother, under a Deed of Sale with Assumption of Mortgage.
That as soon as our obligation has been duly settled, the bank is authorized to release the
mortgage in favor of the vendees and for this purpose VENDEES can register this instrument with the
Register of Deeds for the issuance of the titles already in their names.
Evangelines father, petitioner Alfredo Ong, later went to Land Bank to inform it about the sale and
assumption of mortgage.3 Atty. Edna Hingco, the Legazpi City Land Bank Branch Head, told Alfredo and his
counsel Atty. Ireneo de Lumen that there was nothing wrong with the agreement with the Spouses Sy but
provided them with requirements for the assumption of mortgage. They were also told that Alfredo should
pay part of the principal which was computed at PhP 750,000 and to update due or accrued interests on the
promissory notes so that Atty. Hingco could easily approve the assumption of mortgage. Two weeks later,
Alfredo issued a check for PhP 750,000 and personally gave it to Atty. Hingco. A receipt was issued for his
payment. He also submitted the other documents required by Land Bank, such as financial statements for
1994 and 1995. Atty. Hingco then informed Alfredo that the certificate of title of the Spouses Sy would be
transferred in his name but this never materialized. No notice of transfer was sent to him.
Alfredo later found out that his application for assumption of mortgage was not approved by Land
Bank. The bank learned from its credit investigation report that the Ongs had a real estate mortgage in the
amount of PhP 18,300,000 with another bank that was past due. Alfredo claimed that this was fully paid later
on. Nonetheless, Land Bank foreclosed the mortgage of the Spouses Sy after several months. Alfredo only
learned of the foreclosure when he saw the subject mortgage properties included in a Notice of Foreclosure
of Mortgage and Auction Sale at the RTC in Tabaco, Albay. Alfredos other counsel, Atty. Madrilejos,
subsequently talked to Land Banks lawyer and was told that the PhP 750,000 he paid would be returned to
him.
ISSUE: WON Alfredos conditional payment constitutes forbearance of money.
HELD: No. Forbearance of money refers to the contractual obligation of the lender or creditor to desist for
a fixed period from requiring the borrower or debtor to repay the loan or debt then due and for which 12%
per annum is imposed as interest in the absence of a stipulated rate.
In the instant case, Alfredos conditional payment to Land Bank does not constitute forbearance of
money, since there was no agreement or obligation for Alfredo to pay Land Bank the amount of PhP
750,000, and the obligation of Land Bank to return what Alfredo has conditionally paid is still in dispute and
has not yet been determined. Thus, it cannot be said that Land Banks alleged obligation has become a
forbearance of money.

18. Estores vs. Supangan #21 PALILEO

19. Phil. Export and Foreign Loan Guarantee Corp. vs. Amalgamated Management and Devt.
Corp #22 PAVICO
Facts:
The petitioner, is a government-owned and controlled-corporation created by virtue of Presidential
Decree No. 1080, as amended by Republic Act No. 8497. Its primary purpose is to guarantee the foreign

loans, in whole or in part, granted to any domestic entity, enterprise, or corporation, majority of the capital of
which is owned by Filipino citizens.
Respondent Amalgamated Management and Development Corporation (AMDC), a domestic
corporation, had as its main business the hauling of different commodities within the Middle East countries.
Its co-respondents Felimon R. Cuevas (Cuevas) and Jose A. Saddul, Jr. (Saddul) were, respectively, its
President and Vice-President.
AMDC obtained from the National Commercial Bank of Saudi Arabia (NCBSA) a loan amounting to
SR3.3 million (equivalent to P9,000,000.00). As the security for the guaranty, Amalgamated Motors
Philippines Incorporated (AMPI), a sister company of AMDC, acted as an accommodation mortgagor, and
executed in favor of the petitioner a real estate mortgage over two parcels of land located in Dasmarias.
AMDC also executed in favor of the petitioner a deed of undertaking dated April 21, 1982,[6] with Cuevas
and Saddul as its co-obligors. In the deed of undertaking, AMDC, Cuevas, and Saddul jointly and severally
bound themselves to pay to the petitioner, as obligee, whatever damages or liabilities that the petitioner
would incur by reason of the guaranty.
AMDC defaulted on the obligation. Upon demand, the petitioner paid the obligation to NCBSA. By
subrogation and pursuant to the Deed of Undertaking, the petitioner then demanded that AMDC, Cuevas
and Saddul should pay the obligation, but its demand was not complied with. Hence, it extra-judicially
foreclosed the real estate mortgage.
Petitioner sued AMDC, Cuevas and Saddul on the premise that the procees were insufficient to
cover balance.
RTC, ruled in favor of Petitioner, however, Cuevas and Saddul were absolved and the lower court
fixed the interest rate from 16% to 6% per annum(accruing interest until deficiency claim is fully paid)
On appeal, the CA affirmed in toto the decision.
Issue: Whether the CA erred in declaring that AMDC was liable to pay interest and penalty charge at the
rate of only 6% per annum instead of 16% per annum
Ruling: No, the CA did not err.
We do not subscribe to the petitioners submission.
In contracts, the law empowers the courts to reduce interest rates and penalty charges that are
iniquitous, unconscionable and exorbitant.[33] Whether an interest rate or penalty charge is reasonable or
excessive is addressed to the sound discretion of the courts. In determining what is iniquitous and
unconscionable, courts must consider the circumstances of the case.

20. Albos vs. Embisan #23 RIEGO

FACTS:
On October 17, 1984, petitioners entered into an agreement, denominated as "Loan with Real
Estate Mortgage," with respondent spouses Nestor and Iluminada Embisan (spouses Embisan) in the
amount of P84,000.00 payable within 90 days with a monthly interest rate of 5%. To secure the
indebtedness, petitioners mortgaged to the spouses Embisan a parcel of land in Project 3, Quezon City,
measuring around 207.6 square meters and registered under their name, as evidenced by Transfer
Certificate Title No. 257697. Payments are made but there are times that the petitioners fails to pay which
led to the the request of extension of the loan obligation which are also granted. Along with the grant of
extensions, a stipulation was made which would make the 5% interest compounded. Unfortunately, such
change in the contract was not deduced to writing. The subject parcel land was extra-judicially foreclose and
was auctioned. The herein respondents became the highest bidder. The petitioners are forced to sign an

agreement that would make them lease to the parcel of land which was now owned by the respondents. The
petitioners filed a suit to declare the extra-judicial foreclosure void on the ground that they already paid the
principal amount. The lower court dismissed the case as well as the Court of Appeals. Thus, this petition.
ISSUE: Whether or not the stipulation compounding the interest charged should specifically be indicated in a
written agreement.

HELD:
Yes, the stipulation compounding the interest charged should specifically be indicated in a written
agreement. In accordance with Article 1956 No interest shall be due unless it has been expressly
stipulated in writing.
As mandated by the foregoing provision, payment of monetary interest shall be due only if: (1)
there was an express stipulation for the payment of interest; and (2) the agreement for such payment was
reduced in writing. Thus, the Court has held that collection of interest without any stipulation thereof in
writing is prohibited by law.
In the case at bar, it is undisputed that the parties have agreed for the loan to earn 5% monthly
interest, the stipulation to that effect put in writing. When the petitioners defaulted, the period for payment
was extended, carrying over the terms of the original loan agreement, including the 5% simple interest.
However, by the third extension of the loan, respondent spouses decided to alter the agreement by changing
the manner of earning interest rate, compounding it beginning June 1986.
Given the circumstances, the Court rule that the first requirementthat there be an express
stipulation for the payment of interestis not sufficiently complied with, for purposes of imposing
compounded interest on the loan. The requirement does not only entail reducing in writing the interest rate
to be earned but also the manner of earning the same, if it is to be compounded.
Also, imposing 5% monthly interest, whether compounded or simple, is unconscionable.
Thus, the stipulation in the Loan with Real Estate Mortgage imposing an interest of 5% monthly is
declared void and in view of the nullity of the interest imposed on the loan which affected the total
arrearages upon which foreclosure was based, the foreclosure of mortgage, Certificate of Sale, Affidavit of
Consolidation, Deed of Final Sale, and Contract of Lease are declared void.
21. Albos vs. Embisan #24 TITO