1.

Acme v Court of Appeals

G.R. No. 103576, August 26, 1996
FACTS:
Petitioner Chua Pac, the president and general manager of co-petitioner Acme executed a chattel
mortgage in favor of private respondent Producers Bank as a security for a loan of P3,000,000. A
provision in the chattel mortgage agreement was to this effect:
"In case the MORTGAGOR executes subsequent promissory note or notes either as a renewal of
the former note, as an extension thereof, or as a new loan, or is given any other kind of
accommodations such as overdrafts, letters of credit, acceptances and bills of exchange, releases
of import shipments on Trust Receipts, etc., this mortgage shall also stand as security for the
payment of the said promissory note or notes and/or accommodations without the necessity of
executing a new contract and this mortgage shall have the same force and effect as if the said
promissory note or notes and/or accommodations were existing on the date thereof. This
mortgage shall also stand as security for said obligations and any and all other obligations of the
MORTGAGOR to the MORTGAGEE of whatever kind and nature, whether such obligations
have been contracted before, during or after the constitution of this mortgage."
In due time, the loan of P3,000,000.00 was paid. Subsequently it obtained additional loan
totalling P2,700,000.00 which was also duly paid.
Another loan was again extended (P1,000,000.00) covered by four promissory notes for
P250,000.00 each, but went unsettled prompting the bank to apply for an extrajudicial
foreclosure with the Sheriff.

ISSUE: Would it be valid and effective to have a clause in a chattel mortgage that purports to
likewise extend its coverage to obligations yet to be contracted or incurred?

HELD: NO
While a pledge, real estate mortgage, or antichresis may exceptionally secure after-incurred
obligations so long as these future debts are accurately described, a chattel mortgage, however,
can only cover obligations existing at the time the mortgage is constituted.
Although a promise expressed in a chattel mortgage to include debts that are yet to be contracted
can be a binding commitment that can be compelled upon, the security itself, however, does not
come into existence or arise until after a chattel mortgage agreement covering the newly
contracted debt is executed either by concluding a fresh chattel mortgage or by amending the old
contract conformably with the form prescribed by the Chattel Mortgage Law. Refusal on the part
of the borrower to execute the agreement so as to cover the after-incurred obligation can
constitute an act of default on the part of the borrower of the financing agreement whereon the
promise is written but, of course, the remedy of foreclosure can only cover the debts extant at the
time of constitution and during the life of the chattel mortgage sought to be foreclosed.

2. Navoa v Court of Appeals

G.R. No. 59255, December 29, 1995
FACTS:
On 17 December 1977 private respondents filed with the Regional Trial Court of Manila an
action against petitioners for collection of various sums of money based on loans obtained by the
latter. In their first cause of action private respondents Eduardo and Teresita Domdoma alleged
that petitioner Olivia Navoa obtained from the latter a ring valued at P15,000.00 and issued as
security therefor a check for the same amount dated 15 August 1977 with the condition that if the
ring was not returned within fifteen (15) days the ring would be considered sold; and, after the
lapse of the period, private respondent Teresita Domdoma asked to deposit the check but
petitioner Olivia Navoa requested the former not to deposit it in the meantime; that when
Teresita Domdoma deposited the check after holding it for sometime the same was dishonored
for lack of funds. Private respondent Teresita Domdoma sought to collect the amount of
P15,000.00 plus interest from 15 August 1977 until fully paid.
In the second to the sixth causes of action it was alleged that private respondents granted loans to
petitioners in different amounts on different dates. All these loans were secured by separate
checks intended for each amount of loan obtained and dated one month after the contracts of loan
were executed; that when these checks were deposited on their due dates they were all
dishonored by the bank. As a consequence, private respondents prayed that petitioners be
ordered to pay the amounts of the loans granted to them plus one percent interest monthly from
the dates the checks were dishonored until fully paid.
On 3 January 1978 petitioners filed a motion to dismiss the complaint on the ground that the
complaint stated no cause of action and that plaintiffs had no capacity to sue.

ISSUE: Should the complaint filed by private respondents be dismissed for want of cause of
action
HELD: NO
A cause of action is the fact or combination of facts which affords a party a right to judicial
interference in his behalf. The requisites for a cause of action are: (a) a right in favor of the
plaintiff by whatever means and under whatever law it arises or is created, (b) an obligation on
the part of the defendant to respect and not to violate such right; and, (c) an act or omission on
the part of the defendant constituting a violation of the plaintiff's right or breach of the obligation
of the defendant to the plaintiff.
Based on the facts, the right of private respondents to recover the amounts loaned to petitioners
is clear. Moreover, the corresponding duty of petitioners to pay private respondents is
undisputed. Clearly, respondent Teresita Domdoma's right under the agreement with petitioner
Olivia Navoa was violated by the latter.
All the loans granted to petitioners are secured by corresponding checks dated a month after each
loan was obtained. In this regard, the term security is defined as a means of ensuring the
enforcement of an obligation or of protecting some interest in property. It may be personal, as
when an individual becomes a surety or a guarantor; or a property security, as when a mortgage,
pledge, charge, lien, or other device is used to have property held, out of which the person to be
made secure can be compensated for loss. Security is something to answer for as a promissory
note. That is why a secured creditor is one who holds a security from his debtor for payment of a
debt. From the allegations in the complaint there is no other fair inference than that the loans
were payable one month after they were contracted and the checks issued by petitioners were
drawn to answer for their debts to private respondents.

II. LOAN
A. GENERAL PROVISIONS

1. People v Concepcion
44 Phil 126, (1922)
FACTS:
Defendant Venancio Concepcion, President of the Philippine National Bank, between April 10,
1919, and May 7, 1919, authorized an extension of credit in favor of "Puno y Concepcion, S. en
C", a copartnership, in the amount of P300,000. This special authorization was essential in view
of the memorandum order of President Concepcion dated May 17, 1918, limiting the discretional
power of the local manager at Aparri, Cagayan, to grant loans and discount negotiable
documents to P5,000, which, in certain cases, could be increased to P10,000. Pursuant to this
authorization, credit aggregating P300,000, was granted the firm of "Puno y Concepcion, S. en
C.," the only security required consisting of six demand notes. The notes, together with the
interest, were taken up and paid by July 17, 1919.

Consequently, defendant was charged with a violation of section 35 of Act No. 2747 which
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." The defense
counsel argued that the credit granted to the partnership is not a loan within the meaning of the
law; that the law prohibits the granting of loan, not discount; and that the granting of credit was
not an indirect loan.

ISSUES: (1) WON the granting of a credit to the copartnership by defendant a "loan" within the
meaning of section 35 of Act No. 2747
(2) WON the granting of a credit to the copartnership a "loan" or a "discount"
(3) WON the granting of a credit by defendant was an “indirect loan” within the meaning of
section 35 of Act No. 2747

HELD:
(1) YES. 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 granting of "loans" up to the limit of the amount fixed in
the "credit,"
(2) LOAN. Section 35 of Act No. 2747 referred to loans alone, and placed no restriction upon
discount transactions. Discounts are favored by bankers because of their liquid nature, growing,
as they do, out of an actual, live, transaction. But in its last analysis, to discount a paper is only a
mode of loaning money, with, however, these distinctions: (1) In a discount, interest is deducted
in advance, while in a loan, interest is taken at the expiration of a credit; (2) a discount is always
on double-name paper; a loan is generally on single-name paper.

The law covers loans and not discounts, yet the conclusion is inevitable that the demand notes
signed by the firm "Puno y Concepcion, S. en C." were not discount paper but were mere
evidences of indebtedness, because (1) interest was not deducted from the face of the notes, but
was paid when the notes fell due; and (2) they were single-name and not double-name paper.
(3) YES. The purpose of the Legislature is plainly to erect a wall of safety against temptation for
a director of the bank. The prohibition against indirect loans is a recognition of the familiar
maxim that no man may serve two masters — that where personal interest clashes with fidelity to
duty the latter almost always suffers. If, therefore, it is shown that the husband is financially
interested in the success or failure of his wife's business venture, a loan to partnership of which
the wife of a director is a member, falls within the prohibition. A loan, therefore, to a partnership
of which the wife of a director of a bank is a member, is an indirect loan to such director.

The intention of the Legislature to prohibit exactly such an occurrence is shown by the
acknowledged fact that in this instance the defendant was tempted to mingle his personal and
family affairs with his official duties, and to permit the loan P300,000 to a partnership of no
established reputation and without asking for collateral security.

2. Republic v PNB
G.R. No. L-16106, December 30, 1961
FACTS:
The Republic of the Philippines filed on September 25, 1957 before the CFI of Manila a
complaint for escheat of certain unclaimed bank deposits balances under the provisions of Act
No. 3936 against several banks, among them the First National City Bank of New York (FNCB),
defendant appellee. It is alleged that pursuant to Section 2 of said Act defendant banks forwarded
to the Treasurer of the Philippines a statement under oath of their respective managing officials
of all the credits and deposits held by them in favor of persons known to be dead or who have not
made further deposits or withdrawals during the period of 10 years or more. Wherefore, it is
prayed that said credits and deposits be escheated to the Republic of the Philippines by ordering
defendant banks to deposit them to its credit with the Treasurer of the Philippines.
FNCB claims that it has inadvertently included in said report certain items which are not credits
or deposits within the contemplation of Act No. 3936. Hence, it prayed that said items be not
included in the claim of plaintiff.
Initially, the court a quo rendered judgment holding that cashier's is or manager's checks and
demand drafts as those which defendant wants excluded from the complaint come within the
purview of Act No. 3936, but not the telegraphic transfer payment which orders are of different
category. But, after a motion to reconsider was filed by defendant, the court a quo changed its
view and held that even said demand drafts do not come within the purview of said Act.

ISSUE: WON demand draft and telegraphic orders come within the meaning of the term
"credits" or "deposits" employed in the law

HELD:DEMAND DRAFT – NO. TELEGRAPHIC ORDERS – YES

Under Section 1 Act No. 3936, the term "unclaimed balances" that are subject to escheat include
credits or deposits money, or other evidence of indebtedness of any kind with banks, in favor of
any person unheard from for a period of 10 years or more. The term "credit" in its usual meaning
is a sum credited on the books of a company to a person who appears to be entitled to it. It
presupposes a creditor-debtor relationship, and may be said to imply ability, by reason of
property or estates, to make a promised payment.

A demand draft is a bill of exchange payable on demand. Considered as a bill of exchange, a

draft is said to be, like the former, an open letter of request from, and an order by, one person on
another to pay a sum of money therein mentioned to a third person, on demand or at a future time
therein specified. On the other hand, a bill of exchange within the meaning of our Negotiable
Instruments Law (Act No. 2031) does not operate as an assignment of funds in the hands of the
drawee who is not liable on the instrument until he accepts it. Since it is admitted that the
demand drafts herein involved have not been presented either for acceptance or for payment, the
inevitable consequence is that the appellee bank never had any chance of accepting or rejecting
them. Verily, appellee bank never became a debtor of the payee concerned and as such the
aforesaid drafts cannot be considered as credits subject to escheat within the meaning of the law.

The case, however, is different with regard to telegraphic payment order. This is so because the
drawer bank was already paid the value of the telegraphic transfer payment order. In the
particular cases under consideration it appears in the books of the defendant bank that the
amounts represented by the telegraphic payment orders appear in the names of the respective
payees. If the latter choose to demand payment of their telegraphic transfers at the time the same
was (were) received by the defendant bank, there could be no question that this bank would have
to pay them. Now, the question is, if the payees decide to have their money remain for sometime
in the defendant bank, can the latter maintain that the ownership of said telegraphic payment
orders is now with the drawer bank? The latter was already paid the value of the telegraphic
payment orders otherwise it would not have transmitted the same to the defendant bank. Hence,
it is absurd to say that the drawer banks are still the owners of said telegraphic payment orders."

3. Herrera v PETROPHIL
G.R. No. 48349, December 29, 1986

4. Saura Import and Export Co. Inc. v DBP

G.R. No. L-24968, April 27, 1972

5. Bonnevie v Court of Appeals

G.R. No. 49101, October 24, 1983

6. Central Bank v Court of Appeals

G.R. No. L-45710, October 3, 1985

Commodatum
1. Republic v Bagtas
G.R. No. L-17474, October 25, 1962
PADILLA, J.
Facts:
Bagtas borrowed from the Republic of the Philippines through the Bureau of Animal Industry
three bulls for breeding purposes subject to a government charge of breeding fee of 10% of the
book value of the bulls. Upon the expiration on 7 May 1949 of the contract, the borrower asked
for a renewal for another period of one year. However, the Secretary of Agriculture and Natural
Resources approved a renewal thereof of only one bull for another year. On 17 October 1950 he
reiterated his desire to buy them at a value with a deduction of yearly depreciation to be
approved by the Auditor General. On 19 October 1950 the Director of Animal Industry advised
him that the book value of the three bulls could not be reduced and that they either be returned or
their book value paid not later than 31 October 1950. Bagtas failed to pay the book value of the
three bulls or to return them. Republic of the Philippines commenced an action against him
praying that he be ordered to return the three bulls loaned to him or to pay their book value in the
total sum and the unpaid breeding fee. Bagtas, answered that the pending appeal he had taken to
the Secretary of Agriculture and Natural Resources and the President of the Philippines, he could
not return the animals nor pay their value and prayed for the dismissal of the complaint. On 7
January 1959, Felicidad, the surviving spouse of the defendant who died on 23 October 1951
filed a motion alleging that the two bull were returned and that the third bull, died from gunshot
wound inflicted during a Huk raid. The appellant contends that the contract was commodatum
and that, for that reason, as the appellee retained ownership or title to the bull it should suffer its
loss due to force majeure.
Issue:
WON the contract was commodatum

Held:
Yes. A contract of commodatum is essentially gratuitous. If the breeding fee be considered a
compensation, then the contract would be a lease of the bull. And even if the contract be
commodatum, still the appellant is liable, because article 1942 of the Civil Code provides that a
bailee in a contract of commodatum — is liable for loss of the things, even if it should be through
a fortuitous event. As the appellant already had returned the two bulls to the appellee, the estate
of the late defendant is only liable for the sum, the value of the bull which has not been returned
to the appellee.

2. Mina v Pascual
G.R. No. 8321, October 14, 1913
ARELLANO, C.J.
Facts:
Francisco Fontanilla acquired a lot in the town of Laoag. Andres, with the consent of his brother
Francisco, erected a warehouse on a part of the said lot. Francisco, being dead, the herein
plaintiffs, Mina, were recognized as his heirs.
Andres, also having died, Pascual though it is not said how, consequently are entitled to the said
building. Pascual, petitioned for authorization to sell "the six-sevenths of the one-half of the
warehouse. Mina opposed the petition of Pascual for the reason that the latter had included
therein the lot occupied by the warehouse, which they claimed was their exclusive property.
The plaintiffs requested the court to decide the question of the ownership of the lot. But the court
before determining the matter of the ownership of the lot occupied by the warehouse, ordered the
sale of this building. So, the warehouse, was sold to Cu Joco. The plaintiffs insisted upon a
decision of the question of the ownership of the lot, and the lower court and held that the
appellants were the owners of the lot in question. It was then that the plaintiffs commenced the
present action for the purpose of having the sale of the said lot declared null and void and of no
force and effect.

Issue:
WON there exist a contract of commodatum

Held:
Although both litigating parties may have agreed in their idea of the commodatum, on account of
its not being, as indeed it is not, a question of fact but of law, yet that denomination given by
them to the use of the lot granted by Francisco Fontanilla to his brother, Andres Fontanilla, is not
acceptable. Contracts are not to be interpreted in conformity with the name that the parties
thereto agree to give them, but must be construed, duly considering their constitutive elements,
as they are defined and denominated by law. It is, therefore, an essential feature of the
commodatum that the use of the thing belonging to another shall for a certain period. Francisco
Fontanilla did not fix any definite period or time during which Andres Fontanilla could have the
use of the lot whereon the latter was to erect a stone warehouse of considerable value, and so it is
that for the past thirty years of the lot has been used by both Andres and his successors in
interest.

3. Spouses Abella v Spouses Abella

G.R. No. 195166, July 8, 2015
LEONEN, J.
Facts:
On July 31, 2002, petitioners Spouses Salvador and Alma filed a Complaint for sum of money
against respondents Spouses Romeo and Annie before the RTC. In their Complaint, petitioners
alleged that respondents obtained a loan from them in the amount of P500,000.00. The loan was
ewas payable within one year. Petitioners added that respondents were able to pay a total of
P200,000.00 with unpaid balance of P300,000.00.
Specifically, respondents claimed that they were approached by petitioners, who proposed that if
respondents were to "undertake the management of whatever money [petitioners] would give
them, [petitioners] would get 2.5% a month with a 2.5% service fee to [respondents]." The 2.5%
that each party would be receiving represented their sharing of the 5% interest that the joint
venture RTC ruled in favor of petitioners. It noted that the terms of the acknowledgment receipt
executed by respondents clearly showed that: (a) respondents were indebted to the extent of
P500,000.00; (b) this indebtedness was to be paid within one (1) year; and (c) the indebtedness
was subject to interest. Thus, the trial court concluded that respondents obtained a simple loan,
although they later invested its proceeds in a lending enterprise. The RTC adjudged respondents
solidarily liable to petitioners.
The CA ruled that while respondents had indeed entered into a simple loan with petitioners,
respondents were no longer liable to pay the outstanding amount of P300,000.00.
The CA reasoned that the acknowledgement receipt showed that interest was to be charged, no
particular interest rate was specified. Thus, at the time respondents were making interest
payments of 2.5% per month, these interest payments were invalid for not being properly
stipulated by the parties. It reasoned that since respondents received petitioners’ demand letter
only on July 12, 2002. Thus, the payments for the 2.5% monthly interest made after the
perfection of the loan in 1999 but before the demand was made in 2002 were invalid. All
payments respondents made by way of interest should be deemed payments for the principal
amount of P500,000.00. The Court of Appeals further noted that respondents made a total
payment of P648,500.00, which, as against the principal amount of P500,000.00, entailed an
overpayment of P148,500.00.

Issue:
WON Court of Appeals erred in completely striking off interest despite the parties’ written
agreement stipulating it, as well as in ordering them to reimburse and pay interest to respondents.

Held:
No. Art. 1933. By the contract of loan, one of the parties delivers to another, either something
not consumable so that the latter may use the same for a certain time and return it, in which case
the contract is called a commodatum; or money or other consumable thing, upon the condition
that the same amount of the same kind and quality shall be paid, in which case the contract is
simply called a loan or mutuum.
Commodatum is essentially gratuitous.
Simple loan may be gratuitous or with a stipulation to pay interest. In commodatum the bailor
retains the ownership of the thing loaned, while in simple loan, ownership passes to the
borrower.
Art. 1953. A person who receives a loan of money or any other fungible thing acquires the
ownership thereof, and is bound to pay to the creditor an equal amount of the same kind and
quality.
Consistent with what typifies a simple loan, petitioners delivered to respondents with the
corresponding condition that respondents shall pay the same amount to petitioners within one (1)
year.

4. Catholic Vicar Apostolic v Court of Appeals

G.R. No. 80294-95, September 21, 1988

Facts:
VICAR filed an application for registration of title over Lots 1, 2, 3, and 4 in Benguet, being the
sites of the Catholic Church building. The Heirs of Valdez and Heirs Octaviano filed their
Answer/Opposition on Lots Nos. 2 and 3, respectively, asserting ownership and title thereto.
After trial on the merits, the land registration court confirming the registrable title of VICAR.
The Heirs of Valdez and Heirs of Octaviano appealed then Court of Appeals. The CA reversing
the decision and dismissing the VICAR's application as to Lots 2 and 3.
Thereupon, the VICAR filed with the Supreme Court a petition for review on certiorari of the
decision dismissing his (its) application for registration of Lots 2 and 3.
On January 13, 1978, the Supreme Court denied in a minute resolution both petitions (of VICAR
on the one hand and the Heirs of Juan Valdez and Pacita Valdez on the other) for lack of merit.
It was at that stage that the instant cases were filed. The Heirs of Egmidio Octaviano filed Civil
Case No. 3607 (419) on July 24, 1979, for recovery of possession of Lot 3; and the Heirs of Juan
Valdez filed Civil Case No. 3655 (429) on September 24, 1979, likewise for recovery of
possession of Lot 2 (Decision, pp. 199-201, Orig. Rec.).

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

Held:
Yes. CA held that the predecessors of private respondents were possessors of Lots 2 and 3, with
claim of ownership in good faith from 1906 to 1951. Petitioner was in possession as borrower in
commodatum up to 1951, when it repudiated the trust by declaring the properties in its name for
taxation purposes. When petitioner applied for registration of Lots 2 and 3 in 1962, it had been in
possession in concept of owner only for eleven years. Ordinary acquisitive prescription requires
possession for ten years, but always with just title. Extraordinary acquisitive prescription requires
30 years. We see no error in respondent appellate court's ruling that said findings are res
judicatabetween the parties. They can no longer be altered by presentation of evidence because
those issues were resolved with finality a long time ago. To ignore the principle of res judicata
would be to open the door to endless litigations by continuous determination of issues without
end.
Private respondents were able to prove that their predecessors' house was borrowed by petitioner
Vicar after the church and the convent were destroyed. They never asked for the return of the
house, but when they allowed its free use, they became bailors in commodatum and the petitioner
the bailee. The bailees' failure to return the subject matter of commodatum to the bailor did not
mean adverse possession on the part of the borrower. The bailee held in trust the property subject
matter of commodatum. The adverse claim of petitioner came only in 1951 when it declared the
lots for taxation purposes. The action of petitioner Vicar by such adverse claim could not ripen
into title by way of ordinary acquisitive prescription because of the absence of just title.

5. Quintos v Beck
G.R. No. 46240, November 3, 1939

Facts:
The defendant was a tenant of the plaintiff and as such occupied the latter's house on M. H. del
Pilar street, No. 1175. On January 14, 1936, upon the novation of the contract of lease between
the plaintiff and the defendant, the former gratuitously granted to the latter the use of the
furniture described in the third paragraph of the stipulation of facts, subject to the condition that
the defendant would return them to the plaintiff upon the latter's demand. The plaintiff sold the
property to Maria Lopez and Rosario Lopez and on September 14, 1936, these three notified
the defendant of the conveyance, giving him sixty days to vacate the premises under one of the
clauses of the contract of lease. There after the plaintiff required the defendant to return all the
furniture transferred to him for them in the house where they were found. On November 5,
1936, the defendant, through another person, wrote to the plaintiff reiterating that she may call
for the furniture in the ground floor of the house. On the 7th of the same month, the defendant
wrote another letter to the plaintiff informing her that he could not give up the three gas heaters
and the four electric lamps because he would use them until the 15th of the same month when
the lease in due to expire. The plaintiff refused to get the furniture in view of the fact that the
defendant had declined to make delivery of all of them. On November 15th, before
vacating the house, the defendant deposited with the Sheriff all the furniture belonging to the
plaintiff and they are now on deposit in the warehouse situated at No. 1521, Rizal Avenue, in
the custody of the said sheriff.

Issue: Whether or not the defendant complied with his obligation to return the furniture upon the
plaintiff’s demand.

Held:
No. The contract entered into between the parties is one of commodatum, because 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 assumed by the defendant to return
the furniture upon the plaintiff's demand, means that he should return all of them to the plaintiff
at the latter's residence or house. The defendant did not comply with this obligation when he
merely placed them at the disposal of the plaintiff, retaining for his benefit the three gas heaters
and the four electric lamps.

Mutuum

1. Cebu International vs. CA

Facts:
Cebu International Finance Corporation (CIFC), a quasi-banking institution, is engaged in
money market operations. Private respondent, Vicente Alegre, invested with CIFC, five hundred
thousand (P500,000.00) pesos, in cash. Petitioner issued a promissory note. The note for five
hundred sixteen thousand, two hundred thirty-eight pesos and sixty-seven centavos
(P516,238.67) covered private respondents placement plus interest at twenty and a half (20.5%)
percent for thirty-two (32) days. CIFC issued BPI Check No. 513397 for five hundred fourteen
thousand, three hundred ninety pesos and ninety-four centavos (P514,390.94) in favor of the
private respondent as proceeds of his matured investment plus interest. The CHECK was drawn
from petitioners current account number, maintained with the Bank of the Philippine Islands
(BPI), main branch at Makati City. Then, private respondents wife deposited the CHECK with
Rizal Commercial Banking Corp. (RCBC), in Puerto Princesa, Palawan. BPI dishonored the
CHECK with the annotation, that the Check (is) Subject of an Investigation. BPI took custody of
the CHECK pending an investigation of several counterfeit checks drawn against CIFCs
aforestated checking account. BPI used the check to trace the perpetrators of the
forgery.Immediately, private respondent notified CIFC of the dishonored CHECK and
demanded, on several occasions, that he be paid in cash. CIFC refused the request, and
instead instructed private respondent to wait for its ongoing bank reconciliation with BPI.
Eventually, , private respondent Alegre filed a complaint for recovery of a sum of money against
the petitioner with the Regional Trial Court of Makati.

Issue: Whether or not the money market transaction between petitioner and privante respondent
is in the nature of a loan.

Held:
Yes. a money market is a market dealing in standardized short-term credit instruments
(involving large amounts) where lenders and borrowers do not deal directly with each
other but through a middle man or dealer in open market. In a money market
transaction, the investor is a lender who loans his money to a borrower through a
middleman or dealer.In the case at bar, the money market transaction between the
petitioner and the private respondent is in the nature of a loan. The private respondent
accepted the CHECK, instead of requiring payment in money. Yet, when he presented it
to RCBC for encashment,the same was dishonored by non-acceptance, with BPIs
annotation: Check (is) subject of an investigation. These facts were testified to by BPIs
manager. Under these circumstances, and after the notice of dishonor, the holder has
an immediate right of recourse against the drawer,and consequently could immediately
file an action for the recovery of the value of the check. In a loan transaction, the
obligation to pay a sum certain in money may be paid in money, which is the legal
tender or, by the use of a check. A check is not a legal tender, and therefore cannot
constitute valid tender of payment.

2. Tolentino vs. Gonzales

Facts:
The appellants purchased of the Luzon Rice Mills, Inc., a piece or parcel of land with the
camarin located thereon, situated in the municipality of Tarlac of the Province of Tarlac for the
price of P25,000, promising to pay therefor in three installments.One of the conditions of that
contract of purchase was that on failure of the purchaser (plaintiffs and appellants) to pay the
balance of said purchase price or any of the installments on the date agreed upon, the property
bought would revert to the original owner. Later, the representative of the vendor of the property
in question wrote a letter to the appellant Potenciana Manio, notifying the latter that if the
balance of said indebtedness was not paid, an action would be brought for the purpose of
recovering the property, together with damages for non compliance with the condition of the
contract of purchase.

Issue: Whether or not the contract is in the nature of pacto de retro.

Held:
Yes. The contract of pacto de retro is an absolute sale of the property with the right to
repurchase and not a mortgage.In the present case the plaintiffs allege in their complaint that
the contract in question is a pacto de retro. They admit that they signed it. They admit they sold
the property in question with the right to repurchase it. The terms of the contract quoted by the
plaintiffs to the defendant was a "sale" with pacto de retro, and the plaintiffs have shown no
circumstance whatever which would justify us in construing said contract to be a mere "loan"
with guaranty. In every case in which this court has construed a contract to be a mortgage or a
loan instead of a sale with pacto de retro, it has done so, either because the terms of such
contract were incompatible or inconsistent with the theory that said contract was one of
purchase and sale.

3. Colinares vs. CA

Facts:
Melvin Colinares and Lordino Veloso (hereafter Petitioners) were contracted for a by the
Carmelite Sisters of Cagayan de Oro City to renovate the latter’s convent at Camaman-
an, Cagayan de Oro City.Petitioners obtained 5,376 SF Solatone acoustical board 2x4x,
300 SF tanguile wood tiles 12x12, 260 SF Marcelo economy tiles and 2 gallons
UMYLIN cement adhesive from CM Builders Centre for the construction project.
Petitioners then applied for a commercial letter of credit with the Philippine Banking
Corporation, Cagayan de Oro City branch (hereafter PBC) in favor of CM Builders
Centre. PBC approved the letter of credit for P22,389.80 to cover the full invoice value
of the goods.Petitioners signed a pro-forma trust receiptas security. Upon due date, PBC
wrote to Petitioners demanding that the amount be paid within seven days from notice.
Instead of complying with PBC's demand, Veloso confessed that they lost P19,195.83 in
the Carmelite Monastery Project and requested for a grace period. Still unable to pay,
petitioners were charged with the violation of P.D. No. 115 (Trust Receipts Law) in
relation to Article 315 of the Revised Penal Code.

Issue: Whether the contract is in the nature of trust receipt, instead of an ordinary loan as
alleged by petitioners.

Held:
No. The antecedent acts in a trust receipt transaction consist of the application and
approval of the letter of credit, the making of the marginal deposit and the effective
importation of goods through the efforts of the importer.
4. Republic vs. Grijaldo (G.R. No. L-20240; December 31, 1965)

Facts:
Grijaldo obtained five loans from the Bank of Taiwan in the total sum of P1,281.97 with interest
at the rate of 6% per annum compounded quarterly. These were evidenced by five promissory
notes. These loans were crop loans and was considered to be due one year after they were
incurred. As a security for the payment of the loans, a chattel mortgage was executed on the
standing crops of his land. The assets in the Bank of Taiwan were vested in the US Gov’t which
were subsequently transferred to the Republic of the Philippines. RP is now demanding the
payment of the account. Justice of Peace dismisses the case on the ground of prescription. CA
rendered a decision ordering the appellant to pay the appellee

Defendant’s contentions: 1)The appellee has no cause of action against appellant since the
transaction was with Taiwan Bank. 2)That if the appellee has a cause of action at all, it had
prescribed and 3)The lower court erred in ordering thea ppellant to pay P2,377.23

Issue:
Whether RP can still collect from Grijaldo.

Held:
YES. The obligation oF the contract was not to deliver a determinate thing, it was a generic thing
–the amount oF money representing the total sum oF his loans. The destruction oF anything oF
the same kind does not extinguish the obligation. The loss oF the crops did not extinguish his
obligation to pay because the account could still be paid From other source saside From the
mortgaged crops. Also, prescription does not run against the State.

5. Soncuya vs. Azarraga (G.R. No. L-43579; June 14, 1938)

Facts:
Atty. Azzaraga served as counsel for the defendant Azzaragas in a case for which the latter owed
the lawyer P2700 for his services. Defendants mortgaged to him a parcel of land which the
lawyer assigned to Petitioner Soncuya thru a”sale and cession” of his rights. Soncuya possessed
the land, brought in cattle that allegedly destroyed the crops and coconut trees planted by one of
the defendants (but was actually destroyed by drought) The relevant facts: petitioner became the
creditor of the defendants. When the debt matured he allowed them extension to Feb. 16, 1926
with condition (12% annual interest); he later agreed to an extension to April 26, 1926 with same
condition. These were made in writing (Exhibit A). The plaintiff granted another extension to
expire on October 31, 1928, but subject to the condition that instead of seven thousand and odd
pesos, which undoubtedly referred to the interest of 12 per cent per annum charged.
Issue:
WON Soncuya is the rightful owner of the land

Held:
NO. It is only in contracts of loan, with or without guaranty, that interest may be demanded.
The contention of the defendants that the plaintiff did not and could never receive the lands in
question as an assignment in payment of a debt, and much less did he acquire them by purchase
with pacto de retro, is well taken. The plaintiff alone has the right (1) to recover from the
defendants Azarraga, by virtue of the assignment and sale made to him by Attorney Leodegario
Azarraga of the latters' credit of P2,700 against the said defendants, the aforesaid sum plus
interest at the rate of 12 per cent per annum from August 30, 1924; (2) to recover from the
defendant Joaquin Azarraga, in particular, the sum of P4,000 plus interest at the rate of 12 per
cent per annum from April 26, 1926. the defendants, they should pay him P12,000 (Exhibit 2). In
said two amounts of P7,000 and P12,000 the sum of P4,000 which the plaintiff had given to the
defendant Joaquin Azarraga. The defendants was able to register the land in their name, no
objection from plaintiff.

6. State Investment vs. CA (G.R. No. 90676; June 19, 1991)

Facts:
Private respondents Spouses Rafael & Refugia Aquino pledged certain shares of stock to
petitioner to secure a loan. Prior to the execution of such pledge, respondents, agreed with the
petitioner for the latter's purchase of receivables from Spouses Jose and Marcelina Aquino.
Respondent spouses paid their loan partly from their own money and from the proceeds of a new
loan secured by the same pledge. Upon maturity of the new loan, petitioner demanded payment.
Respondents expressed willingness to pay requesting that upon payment the shares of stocks
pledged be released. Petitioner denied the request on the ground that the loan extended to Jose &
Marcelina had remained. Respondent sued the petitioner. The trial judge ruled in their favor.
During execution, the petitioner refused to accept payment demanding that interests be paid.

Issue:
Are the respondents liable for payment of interest even without mora? If they are liable, on what
rate should the interests be?

Held:
On the first issue, YES. The respondents may not be in default in view of their expressed
willingness to pay the same upon demand and the refusal of the petitioner to accept. However,
their tender of payment should have been properly consigned with the court. On the second
issue, since respondent spouses were held not to have been in delay, they were properly liable
only for the principal of the loan and the stipulated regular or monetary interest of 17% per
annum. They were not liable for penalty or compensatory interest, fixed by the promissory note
in Account No. IF-82-0904-AA at two percent (2%) per month or twenty-four (24%) per annum.
It must be stressed that the appropriate measure for damages in case of delay in discharging an
obligation consisting of the payment of a sum or money, is the payment of penalty interest at the
rate agreed upon; and in the absence of a stipulation of a particular rate of penalty interest, then
the payment of additional interest at a rate equal to the regular monetary interest; and if no
regular interest had been agreed upon, then payment of legal interest or six percent (6%)per
annum, or in the case of loans or forbearances of money, 12 % per annum as provided for in
Central Bank Circular No. 416.

7. Osmena-Jalandoni vs. Encomienda (G.R. No. 205578 ; March 1, 2017)

Facts:
Issue:
Held:

8. Spouses Sy vs. Westmont Bank (G.R. No. 201074; October 19, 2016)
Facts:
Issue:
Held: