Cases_Republic to Lim Law (LOANS)

8/18/2019 Cases_Republic to Lim Law (LOANS)

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REPUBLIC OF THE PHILIPPINES (BUREAU OF LANDS), petitioner,vs.THE HON. COURT OF APPEALS, HEIRS OF DOMINO P. BALO!,represente" #$ RICARDO BALO!, ET AL., respon"ents..R. No. L%&'& Nove*#er +', -'

FACTS

• The Respondents, heirs of Domingo Baloy, represented by Ricardo P.Baloy, applied for registration of their land in Zambales. Their claimwas anchored on their possessory information title coupled with theircontinuous, adverse and public possession over the land in question

• The description and the area of the land stated therein substantiallycoincides with the land applied for and that said possessoryinformation title had been regularly issued having been acquired byapplicants predecessor, Domingo Baloy, under the provisions of the

!panish "ortgage #aw. $pplicants presented their ta% declaration onsaid lands on $pril &, '()*.

• Director of #ands opposed the registration alleging that this land hadbecome public land thru the operation of $ct )+ of the Philippine-ommission.

o n /ovember +), '(0+ pursuant to the e%ecutive order of thePresident of the 1.!., the area was declared within the 1.!. /avalReservation. 1nder $ct )+ as amended by $ct ''2&, a periodwas 3%ed within which persons a4ected thereby could 3le theirapplication, 5that is within ) months from 6uly &, '(0*7 otherwise8the said lands or interest therein will be conclusively ad9udgedto be public lands and all claims on the part of private individualsfor such lands or interests therein not to presented will beforever barred.8

o Petitioner argues that since Domingo Baloy failed to 3le his claimwithin the prescribed period, the land had become irrevocablypublic and could not be the sub9ect of a valid registration forprivate ownership.

RTC/S DECISION

• -ourt of :irst ;nstance of Zambales denied respondents application forregistration, concurring with the argument of the Director of #ands.

CA/S DECISION

• -$ reversed the decision appealed from and thus approving theapplication for registration on the the following grounds<



o Reason for the failure of Baloy to 3le his application was thatwarning was from the -ler= of the -ourt of #and Registration andthere has not been presented a formal order or decision of thesaid -ourt of #and Registration so declaring the land publicbecause of that failure

o ;t would be most di>cult to sustain position of Director of #andsthat it was land of no private owner? open to public disposition,and over which he has control? and since immediately after 1.!./avy had abandoned the area, applicant came in and assertedtitle once again

ISSUE

@/ private respondents rights by virtue of their possessoryinformation title was lost by prescription.

HELD

/o

• !ec. 2, $ct )+ reveals that private land could be deemed to havebecome public land only by virtue of a 9udicial declaration after duenotice and hearing.

o @ithout a 9udgment or order declaring the land to be public, itsprivate character and the possessory information title over itmust be respected. !ince no such order has been rendered bythe #and Registration -ourt it necessarily follows that it neverbecame public land thru the operation of $ct )+.

o To assume otherwise is to deprive private respondents of theirproperty without due process of law.

• The 3nding of -$ that during the interim of * years from /ovember+), '(0+ to December ', '(*( 5when the 1.!. /avy possessed thearea7 the possessory rights of Baloy or heirs were merely suspendedand not lost by prescription, is supported by A%hibit 81,8 acommunication or letter /o. ''0&)2, dated 6une +C, '()2, whichcontains an o>cial statement of the position of the Republic of thePhilippines with regard to the status of the land in question.

o !aid letter recognies the fact that Domingo Baloy andEor hisheirs have been in continuous possession of said land since '&(Cas attested by an 8;nformacion Possessoria8 Title, which wasgranted by the !panish Fovernment.

o Gence, the disputed property is private land and this possessionwas interrupted only by the occupation of the land by the 1.!./avy in '(C* for recreational purposes.



o The 1.!. /avy eventually abandoned the premises.

o The heirs of the late Domingo P. Baloy, are now in actualpossession, and this has been so since the abandonment by the1.!. /avy.

o $ new recreation area is now being used by the 1.!. /avypersonnel and this place is remote from the land in question.

• -learly, the occupancy of the 1.!. /avy was not in the concept ofowner.

o ;t parta=es of the character of a commodatum.

o ;t cannot therefore militate against the title of Domingo Baloyand his successorsininterest.

o nes ownership of a thing may be lost by prescription by reasonof anothers possession if such possession be under claim ofownership, not where the possession is only intended to betransient, as in the case of the 1.!. /avys occupation of theland concerned, in which case the owner is not divested of histitle, although it cannot be e%ercised in the meantime.

@GARA:RA, premises considered, 3nding no merit in the petition the

appealed decision is hereby $::;R"AD.





• The contract entered into between the parties is one of commadatum,because under it the plainti4 gratuitously granted the use of thefurniture to the defendant, reserving for herself the ownership thereof?by this contract the defendant bound himself to return the furniture to

the plainti4, upon the latterIs demand.• The obligation voluntarily assumed by the defendant to return the

furniture upon the plainti4s demand, means that he should return allof them to the plainti4 at the latters residence or house.

• The defendant did not comply with this obligation when he merelyplaced them at the disposal of the plainti4, retaining for his bene3t thethree gas heaters and the four electric lamps.

• $s the defendant had voluntarily underta=en to return all the furnitureto the plainti4, upon the latters demand, the -ourt could not legallycompel her to bear the e%penses occasioned by the deposit of thefurniture at the defendants behest.

• The latter, as bailee, was not entitled to place the furniture on deposit?nor was the plainti4 under a duty to accept the o4er to return thefurniture, because the defendant wanted to retain the three gasheaters and the four electric lamps.

The appealed 9udgment is modi3ed and the defendant is ordered to returnand deliver to the plainti4, in the residence to return and deliver to theplainti4, in the residence or house of the latter, all the furniture described inparagraph 2 of the stipulation of facts A%hibit $. The e%penses which may beoccasioned by the delivery to and deposit of the furniture with the !heri4shall be for the account of the defendant. the defendant shall pay the costsin both instances. !o ordered.



REPUBLIC OF THE PHILIPPINES, plainti4appellee,vs. 5OSE RI5ALDO, defendantappellant.

Oce of the Solicitor General for plainti-appellee.

Isaelo !. Samson for defendant-appellant.

.R. No. L%+3+&3 De6e*#er 4, '

FACTS

• ;n the year '(C2, 6ose Fri9aldo obtained 3ve loans from the Ban= of Taiwan, #TD., in Bacolod -ity, in the total sum of '+&'.(, with interestat )J per annum, compounded quarterly.

• The said loans were evidenced by promissory notes e%ecuted byFri9aldo in favor of Ban= of Taiwan. To secure payment of the loans,Fri9aldo e%ecuted a chattel mortgage on the standing crops on hisland, =nown as Gaciend -ampugas in Ginigiran, /egros ccidental.

• By virtue of Kesting rder PC, and under the authority providing for inthe Trading with the Anemy $ct, the assets in the Phils., of Ban= of Taiwan were vested in the Fovernment of the 1nited !tates.

• Pursuant to the Phil. Property $ct of '(C) of the 1nited !tates, theseassets, including the loans in question were subsequently transferredto the Republic of the Phils.

• The Republic of the Phils,3led a complaint in the 6ustice of the Peace tocollect the unpaid account in question.

The 6ustice of the Peace, after hearing, dismissed the case on the groundthat the action had prescribed.

n appeal, the -ourt of :irst ;nstance, ordered Fri9aldo to pay the Republicthe total amount of the loans plus interests.

ISSUE 1n" RULIN

'. @/ appellee has no privity of contract with the appellant

/.



• ;t is true that the Ban= of Taiwan, #td. was the original creditor and thetransaction between the appellant and the Ban= of Taiwan was aprivate contract of loan.

• Gowever, pursuant to the Trading with the Anemy $ct, as amended,

and A%ecutive rder /o. (0(* of the 1nited !tates? and under Kestingrder /o. PC, dated 6anuary +', '(C), the properties of the Ban= of Taiwan, #td., an entity which was declared to be under the 9urisdictionof the enemy country 56apan7, were vested in the 1nited !tatesFovernment and the Republic of the Philippines, the assets of the Ban=of Taiwan, #td. were transferred to and vested in the Republic of thePhilippines.

o The successive transfer of the rights over the loans in questionfrom the Ban= of Taiwan, #td. to the 1nited !tates Fovernment,and from the 1nited !tates Fovernment to the government of

the Republic of the Philippines, made the Republic of thePhilippines the successor of the rights, title and interest in saidloans, thereby creating a privity of contract between the appelleeand the appellant. ;n de3ning the word 8privy8 this -ourt, in acase, said<

The word 8privy8 denotes the idea of succession ... hence

an assignee of a credit, and one subrogated to it, etc. willbe privies? in short, he who by succession is placed in theposition of one of those who contracted the 9udicial relationand e%ecuted the private document and appears to be

substituting him in the personal rights and obligation is aprivy 5$lpurto vs. Pere, 2& Phil. &*, (07.

+. @/ the obligation of Fri9aldo to pay the loan was e%tinguished uponthe destruction of the mortgaged crops.

/o.

• The terms of the promissory notes and the chattel mortgage that theappellant e%ecuted in favor of the Ban= of Taiwan, #td. do not supportthe claim of appellant.

o The obligation of the appellant under the 3ve promissory noteswas not to deliver a determinate thing namely, the crops to beharvested from his land, or the value of the crops that would beharvested from his land.



o Rather, his obligation was to pay a generic thing L the amountof money representing the total sum of the 3ve loans, withinterest.

o The transaction between the appellant and the Ban= of Taiwan,

#td. was a series of 3ve contracts of simple loan of sums ofmoney. 8By a contract of 5simple7 loan, one of the parties deliversto another ... money or other consumable thing upon thecondition that the same amount of the same =ind and qualityshall be paid.8 5$rticle '(22, -ivil -ode7

o The obligation of the appellant under the 3ve promissory notesevidencing the loans in questions is to pay the value thereof?that is, to deliver a sum of money L a clear case of an obligationto deliver, a generic thing. $rticle '+)2 of the -ivil -odeprovides<

;n an obligation to deliver a generic thing, the loss or

destruction of anything of the same =ind does note%tinguish the obligation.

• The chattel mortgage on the crops growing on appellants land simplystood as a security for the ful3llment of appellants obligation coveredby the 3ve promissory notes, and the loss of the crops did note%tinguish his obligation to pay, because the account could still be paidfrom other sources aside from the mortgaged crops.

;/ K;A@ : TGA :RAF;/F, the decision appealed from is a>rmed, withcosts against the appellant. ;nasmuch as the appellant 6ose Fri9aldo diedduring the pendency of this appeal, his estate must answer in the e%ecutionof the 9udgment in the present case.



FELI7 DE LOS SANTOS, plainti4appelle,vs.AUSTINA 5ARRA, 1"*inistr1tri8 o9 t:e est1te o9 M1;"1<eno 5i*ene1, "e6e1se", defendantappellant.

Matias "ilado, for appellant. Jose Feli# Martine$, for appellee.

.R. No. L%&3 Fe#r=1r$ 3, 3

FACTS

n the 'st of !eptember, '(0), :eli% de los !antos brought suit against

$gustina 6arra, the administratri% of the estate of "agdaleno 6imenea,alleging that

o in the latter part of '(0' 6imenea borrowed and obtained from

the plainti4 ten 3rstclass carabaos, to be used at the animalpower mill of his hacienda during the season of '(0'+, withoutrecompense or remuneration whatever for the use thereof, underthe sole condition that they should be returned to the owner assoon as the wor= at the mill was terminated?

o that "agdaleno 6imenea, however, did not return the carabaos,notwithstanding the fact that the plainti4 claimed their returnafter the wor= at the mill was 3nished?

o that "agdaleno 6imenea died on the +&th of ctober, '(0C, ando the defendant herein was appointed by the -ourt of :irst

;nstance of ccidental /egros administratri% of his estate and

she too= over the administration of the same and is stillperforming her duties as such administratri%?

o that the plainti4 presented his claim to the commissioners of theestate of 6imenea, within the legal term, for the return of the saidten carabaos,

but the said commissioners re9ected his claim as appears

in their report?o therefore, the plainti4 prayed that 9udgment be entered against

the defendant as administratri% of the estate of the deceased,ordering her to return the ten 3rstclass carabaos loaned to thelate 6imenea, or their present value, and to pay the costs.

RTC/S DECISIONn the '0th of 6anuary, '(0, the court below entered 9udgment

sentencing $gustina 6arra, as administratri% of the estate of "agdaleno 6imenea, to return to the plainti4, :eli% de los !antos, the remaining si%second and third class carabaos, or the value thereof at the rate of P'+0each, or a total of P+0 with the costs.



ISSUE

@/ the carabaos are merely loaned to the est1te o9 M1;"1<eno 5i*ene1

HELD

Mes. ;t may be logically inferred that

o the carabaos loaned or given on commodatum to the nowdeceased "agdaleno 6imenea were ten in number?

o that they, or at any rate the si% surviving ones, have not beenreturned to the owner thereof, :eli% de los !antos, and

o that it is not true that the latter sold to the former three carabaosthat the purchaser was already using?

therefore, as the said si% carabaos were not the property of the

deceased nor of any of his descendants, it is the duty of theadministratri% of the estate to return them or indemnify the owner fortheir value.

The -ivil -ode, in dealing with loans in general, from which genericdenomination the speci3c one of commodatum is derived, establishes

prescriptions in relation to the lastmentioned contract by the followingarticles<

o $RT. 'C0. By the contract of loan, one of the parties delivers tothe other, either anything not perishable, in order that the lattermay use it during a certain period and return it to the former, inwhich case it is called commodatum, or money or any otherperishable thing, under the condition to return an equal amountof the same =ind and quality, in which case it is merely called aloan.

-ommodatum is essentially gratuitous. $ simple loan may be

gratuitous, or made under a stipulation to pay interest.

$RT. 'C'. The bailee acquires retains the ownership of the thingloaned. The bailee acquires the use thereof, but not its fruits? if anycompensation is involved, to be paid by the person requiring the use,the agreement ceases to be a commodatum.



$RT. 'C+. The obligations and rights which arise from thecommodatum pass to the heirs of both contracting parties, unless theloan has been in consideration for the person of the bailee, in whichcase his heirs shall not have the right to continue using the thingloaned.

The carabaos delivered to be used not being returned by the defendant

upon demand, there is no doubt that she is under obligation toindemnify the owner thereof by paying him their value.

$rticle ''0' of said code reads<

Those who in ful3lling their obligations are guilty of fraud, negligence,or delay, and those who in any manner whatsoever act incontravention of the stipulations of the same, shall be sub9ected toindemnify for the losses and damages caused thereby.

The obligation of the bailee or of his successors to return either the

thing loaned or its value, is sustained by the supreme tribunal of !apin.;n its decision of "arch +', '&(*, it sets out with precision the legaldoctrine touching commodatum as follows<

$lthough it is true that in a contract of commodatum the bailor retains

the ownership of the thing loaned, and at the e%piration of the period,or after the use for which it was loaned has been accomplished, it isthe imperative duty of the bailee to return the thing itself to its owner,or to pay him damages if through the fault of the bailee the thing

should have been lost or in9ured, it is clear that where public securitiesare involved, the trial court, in deferring to the claim of the bailor thatthe amount loaned be returned him by the bailee in bonds of the sameclass as those which constituted the contract.





Iss=e<

@/ the defendants hold a lawful possession of the lot in question

He<"<

/o.

• $lthough both litigating parties may have agreed in their idea of thecommodatum, on account of its not being, as indeed it is not, aquestion of fact but of law, yet that denomination given by them tothe use of the lot granted by :rancisco :ontanilla to his brother,$ndres :ontanilla, is not acceptable.

o -ontracts are not to be interpreted in conformity with thename that the parties thereto agree to give them, but must beconstrued, duly considering their constitutive elements, as

they are de3ned and denominated by law.o By the contract of loan, one of the parties delivers to the

other, either anything not perishable, in order that the lattermay use it during the certain period and return it to theformer, in which case it is called commodatum . . . 5art. 'C0,-ivil -ode7.

• ;t is, therefore, an essential feature of the commodatum that theuse of the thing belonging to another shall for a certain period.:rancisco :ontanilla did not 3% any de3nite period or time duringwhich $ndres :ontanilla could have the use of the lot whereon thelatter 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$ndres and his successors in interest.

o The present contention of the plainti4s that -u 6oco, now inpossession of the lot, should pay rent for it at the rate of P* amonth, would destroy the theory of the commodatumsustained by them, since, according to the second paragraphof the aforecited article 'C0, 8commodatum is essentiallygratuitous,8 and, if what the plainti4s themselves aver onpage of their brief is to be believed, it never entered:ranciscos mind to limit the period during which his brother$ndres was to have the use of the lot, because he e%pectedthat the warehouse would eventually fall into the hands of hisson, :ructuoso :ontanilla, called the adopted son of $ndres,which did not come to pass for the reason that :ructuoso diedbefore his uncle $ndres.

@ith that e%pectation in view, it appears more li=elythat :rancisco intended to allow his brother $ndres asurface right? but this right supposes the payment of an







o ;t should not, however, be interpreted to mean forfeiture even ofthe principal, for this would un9ustly enrich the borrower at thee%pense of the lender.

o :urthermore, penal sanctions are available against a usuriouslender, as a further deterrence to usury.

• ;n simple loan with stipulation of usurious interest, the prestation of thedebtor to pay the principal debt, which is the cause of the contract5$rticle '2*0, -ivil -ode7, is not illegal.

o The illegality lies only as to the prestation to pay the stipulatedinterest? hence, being separable, the latter only should bedeemed void, since it is the only one that is illegal.

Barrredo, J., concurring The 1sury law is clear that he may recover only all interests, including

of course, the legal part thereof, with legal interests from the date of 9udicialdemand, without maintaining that he can also recover the principal he has

already paid to the lender.

Castro Fernando, and Conception, JJ., dissenting;n a contract which is tainted with usury, that is, with a stipulation

5whether written or unwritten7 to pay usurious interest, the prestation to paysuch interest is an integral part of the cause of the contract. ;t is also thecontrolling cause, for a usurer lends his money not 9ust to have it returnedbut indeed, to acquire in coordinate gain. $rticle '(*, which declares thecontract itself O not merely the stipulation to pay usurious interest void,necessarily regards the prestation to pay usurious interest as an integral partof the cause, ma=ing it illegal.



FROILAN LOPE@, plainti4appellant,vs.SAL>ADOR >. DEL ROSARIO 1n" BENITA 0UIOUE DE >. DELROSARIO, defendantsappellants.

&raneta and 'ara(o$a for plainti-appellant. Jose )spiritu and Gis, Mc*onou(h and Johnson for defendants-appellants.

.R. No. L%- Nove*#er +?, ++

FACTS

• Benita Huiogue de K. del Rosario 5"rs. del Rosario7, owner of a bondedwarehouse where :roilan #ope, holder or 'C warehouse receipts andAlias Zamora had their copra deposited

• The warehouse receipts states an insurance of 'J their declared valuewhich can be increase or decrease by giving ' month notice in writing

• #ope paid the insurance to "ay '&, '(+0, but not to subsequentpayments

• n 6une ), '(+0, the warehouse was destroyed by 3re.

o nly copra worth PC(,(&* was salvaged.

o $t that time #ope was still liable for the storage and insuranceof P2'*.(0

• "rs. Del Rosario submitted the insurance with the arbitrators andseems to have satis3ed all of the persons who had copra stored in herwarehouse, including the stoc=holders in the -ompaia -oprera de Tayabas 5whose stoc= she too= over7, with the e%ception of :roilan#ope

• ;ne4ectual attempts by "rs. Del Rosario to e4ect a compromise with#ope 3rst for P',((C, later raised to P+,+C, and 3nally reduced to

P',000, were made. But #ope stubbornly contended, or, at least, hisattorney contended for him, that he should receive not a centavo lessthan P&&,*(*.C2 5from originally P'0,((0.C07

ISSUE

@/ the plainti4 should recover interest at the rate of '+ per cent perannum.



HELD

Mes.

• The defendant has not sought to elude her moral and legal obligations.

o The controversy is merely one which unfortunately all too oftenarises between litigious persons.

o Plainti4 has e%actly the rights of any litigant, equally situated,and no more.

• ;t has been the constant practice of the court to ma=e article ''0& of the -ivil -ode the basis for the calculation of interest.

o Damages in the form of interest at the rate of '+ per cent, asclaimed by the plainti4, are too remote and speculative to beallowed.

o The deprivation of an opportunity for ma=ing money which mighthave proved bene3cial or might have been ruinous is of too

uncertain character to be weighed in the even balances of thelaw. 5-ivil -ode, art. ''0&7



5ACOBO @OBEL, ET AL., plainti4sappellants,vs.THE CIT! OF MANILA, defendantappellant.

Fisher, *e+itt, !erins and Brad% for plaintis-appellants.

Cit% Fiscal Gueara and &raneta and 'ara(o$a for defendant-appellant.

.R. No. L%+++3 51n=1r$ +, +

FACTS

"inors 6acobo Zobel, $lfonso Zobel, and "ercedes Zobel, under theguardianship of :ernando Zobel, to recover of the -ity of "anila theamount of the 3rst two installments of the purchase price of a tract of land located in the Province of Rial near the corporate limits of the-ity of "anila, which has been conveyed by the guardian of the minorplainti4s by deed dated +'st of :ebruary, '(++, said installments

amounting respectively to PC',))).)) and with interest upon the 3rstinstallment from "ay +', '(++, and upon the second from the date of the ma=ing of the contract.

The -ity of "anila have appreciated the necessity for theestablishment of a cemetery near the city and on the south side of thePasig River. $dmittedly the only tract of land available for this purposeconsists of a part of the "acienda San !edro Macati, belonging to theplainti4s, who are minors.

o This estate lies in the Province of Rial, beyond the corporatelimits of the city, but one of its corners 9uts into the southern, orsoutheastern suburbs of the city, in such manner as to bring the

desired tract close to populous centres.o The hacienda, it may be stated, has never been built upon

improved for city purposes and forms a solid bloc=, practicallyuntraversed by public streets or roads.

o wing to the character of the subsoil the land has little value foragricultural purposes, which is the only use to which it hasheretofore been put? and it is ta%ed in the Province of Rial onthe low basis of agricultural land.

;n :ebruary, '(+0, the "unicipal Board of the -ity of "anila passed anordinance 5/o. +)7 appropriating the sum of P02,*0 to be used for8the establishment of a cemetery in the south district of "anila and theacquisition of the land necessary therefor.8

Gonorable Ramon 6. :ernande, at that time the "ayor of the -ity,entered into negotiations with the guardian of the appellees, the resultof which was a letter, written 6uly ', '(+0, in which the appelleeso4ered to sell to the city upon the terms therein set forth twenty3vehectares of the !an Pedro "acati Astate for cemetery purposes 5A%hibit$7



• By the 3nal deed of sale, dated :ebruary +', '(++, the city undertoo=to pay the total purchase price of P+*0,000 in si% installments. The 3rstwas in the amount of PC',))).0 payable on "ay +', '(++. The other3ve were in the amount of PC',))).)) each, successively falling dueon "ay +', '(+2, and on the same date in each succeeding year until

all should be paid.

• The following stipulation with respect to interest is found in clause ;;; of this contract<

o f the installments above stipulated, the 3rst 5which will fall duethree months after the e%ecution of this writing7 shall draw nointerest? but the 3ve later installments shall draw interest at therate of 3ve per centum 5*J7 per annum, payable to the creditorsupon the date when they shall respectively fall due.

• :rom this it will be seen that the agreement as to interest di4ers incase of the two installments here sued on? and the situation withrespect to each will therefore be dealt with separately.

RTC R=<in;

1pon hearing the cause the trial 9udge gave 9udgment in favor of theplainti4s to recover both the principal sums claimed, amounting toP&2,222.2+, with interest upon only one installment at the rate of 3veper centum per annum.

ISSUE

@/ the rules on the computation of interest is proper

HELD

No.

• $s to the 3rst installment, which was to fall due at three months, it wasstipulated that it should bear no interest.

o The trial 9udge appears to have considered that this stipulationdeprived the plainti4s of the right to interest after default, and nointerest whatever was allowed by him upon this installment. Thiswas error.



o The stipulation that this installment should draw no interest wasmade in the e%pectation that the obligation would be paid uponthe date stipulated.

o $fter default occurred the defendant became liable for interest as

damages regardless of the absence of any e%press stipulation forinterest and regardless of the statement that this installmentshould draw no interest.

o This statement in the contract was evidently intended merely togovern the rights of the parties with respect to interest for thethreemonth period between the ma=ing of the contract and thedate when the installment was to become due. @ith respect tothe plainti4s right to interest after default the situation is to betreated precisely as if nothing had been said about interest at all.

• $s already stated, the 3rst installment fell due on "ay +', '(++, ande%tra9udicial demand for payment appears to have been made in aletter dated 6une , '(++, from the guardian of the plainti4s addressedto the "ayor.

o 1nder the 3rst paragraph of article ''00 of the -ivil -ode andunder article ''0& of the same -ode, interest should be allowedupon this installment at the rate of si% per centum per annum.

o 1nder section *'0 of the -ode of -ivil Procedure, the interestthus accruing must be consolidated with the principal as of the

date of the 9udgment of the lower court? after which interestupon the whole shall be computed at the same rate.

• @ith respect to the second installment interest must be allowed at thecontract rate of 3ve per centum per annum from the date of thee%ecution of the 3nal deed of sale, or :ebruary +', '(++?

o and under article ''0( of the -ivil -ode the interest that hadaccrued up to the date of the 3ling of the complaint 5"ay +C,'(+27 must be consolidated as of that date with the capital, after

which the whole shall bear interest at the contract rate of 3veper centum per annum until paid.

o @here interest is contracted for at a given rate the contractobligation to pay interest is not merged in the 9udgment butremains in full force until the debt is paid.



o The circumstance that the rate here stipulated was less than thelawful rate does not alter the case.

• ;n connection with liability for interest it may be well to point out thatsection *'0 of the -ode of -ivil Procedure is applicable only to debts

and claims with respect to which no stipulation for interest has beenmade, and article ''0( of the -ivil -ode, providing for interest uponinterest, is applicable only to obligations containing a stipulation forinterest.

o :urthermore, it will be noted that, though section *'0 of the-ode of -ivil Procedure provides that interest shall be added8until the date of the 3nal 9udgment,8 this is not to be understoodas inhibiting the collection of interest thereafter accruing untilthe 9udgment is paid.

o $ demand established by 9udgment must be understood asbearing interest whether e%pressly so stated or not.

o :inally, it hardly needs be said, a municipal corporation does noten9oy immunity from liability for interest, when assessed asdamages for the nonpayment of a debt, to the same e%tent asthe general government.

The plainti4s shall recover of the defendant, upon the 3rst cause of action,the sum of PC*,)*+.&C, as of the date of 6anuary '', '(+C, with interest

thereafter at the rate of si% per centum per annum until the 9udgment shallbe paid? and upon the second cause of action the sum of PCC,+&2.0C, as of the date of "ay +C, '(+2, with interest thereafter at the rate of 3ve percentum per annum until the 9udgment shall be paid. The plainti4s will alsorecover costs of both instances. $s thus modi3ed, the 9udgment is a>rmed.!o ordered.



PACITA F. REFORMINA 1n" HEIRS OF FRANCISCOREFORMINA, petitioners,vs.THE HONORABLE >ALERIANO P. TOMOL, 5R., 1s 5=";e o9 t:e Co=rt o9First Inst1n6e, Br1n6: 7I, CEBU CIT!, SHELL REFININ COMPAN!

(PHILS.), INC., 1n" MICHAEL, INCORPORATED, respondents.

Mateo Canono% for petitioners.

e%naldo &. !ineda, e%es, Santa%ana, /a%ao and !icaso 0a1 Oce forrespondent Shell.

Marcelo Fernan 2 &ssociates for respondent Michael, Inc.

.R. No. L%3' O6to#er , -

FACTS<

• $ 3re occurred burning the boat :B Pacita ;;; and 3shing gear of theReforminas. -onsequently, they 3led an action for recovery of damages for in9ury to persons and loss of property.

• 6udge Tomol, 6r awarded the Reforminas damages with legal interestfrom the 3ling of the complaint until paid.

• Ge further rendered that by legal interest meant )J as provided for by$rt ++0( --. Reforminas contend that it should be '+J by virtue of -entral Ban= -ircular /o. C')

ISSUE<

@/ the appropriate legal interest is )J

HELD<

• -.B. -ircular C') which too= e4ect 6uly +(, '(C pursuant to PD '')which amended $ct +)** 51sury #aw7 which raised the legal interestfrom )J to '+J applies only to forbearances of money, goods or creditand court 9udgments.

• !uch court 9udgment refers only to 9udgments in litigations involvingloans or forbearance of any money, goods or credit.

• $ny other =ind of monetary 9udgment does not fall under the coverageof said law for it is not within the ambit of authority granted to thecentral Ban=.

• nly the legislature can change the laws.



• ;n this case, the decision of the 9udge is one rendered in an action fordamages arising from in9ury to persons and loss of property and doesnot involve a loan much less forbearance of any money, goods orcredit.

• The law applicable is thus $RT ++0( -- which states that<

o Q;f the obligation consists in the payment of a sum of money andthe debtor incurs in delay, the indemnity for damages therebeing no stipulation to the contrary shall be the payment of interest agreed upon, and in the absence of stipulation, the legalinterest which is )J per annum.

• Plana -oncurring and Dissenting< 1nder !ec 'a of $ct +)** asamended by PD ''), the authority of -B is to 3% a ma%imum rate of interest on loans and not to prescribe a 3%ed interest rate. !uchauthority given to -B is absolute and unquali3ed and therefore thedelegation of power to itis void.

/ K;A@ : TGA :RAF;/F -/!;DAR$T;/!, and 3nding the instantpetition to be without merit, the same is hereby D;!";!!AD with costsagainst petitioners.

! RDARAD.



LIAM LA, plainti4appellee,vs.OL!MPIC SAMILL CO. 1n" ELINO LEE CHI, defendantsappellants.

Feli$ardo S.M. de Gu$man for plainti-appellee.

Mariano M. de Jo%a for defendants-appellants.

.R. No. L%43?? M1$ +-, -&

FACTS

• on or about !eptember , '(*, plainti4 loaned P'0,000.00, withoutinterest, to defendant partnership and defendant Alino #ee -hi, as themanaging partner.

o The loan became ultimately due on 6anuary 2', '()0, but was

not paid on that date, with the debtors as=ing for an e%tension of three months, or up to $pril 20, '()0.

• Payment of the P'0,000.00 was e%tended to $pril 20, '()0, but theobligation was increased by P),000.00 which formed part of theprincipal obligation to answer for attorneyIs fees, legal interest, andother cost incident thereto to be paid unto the creditor and hissuccessors in interest upon the termination of this agreement.

o The defendants again failed to pay their obligation.

• n +2 !eptember '()0, the plainti4 instituted the collection casebefore the -ourt of :irst ;nstance of Bulacan.

o The defendants admitted the P'0,000.00 principal obligation, butclaimed that the additional P),000.00 constituted usuriousinterest.

o 1pon the plainti4Is application, the Trial -ourt issued a writ of $ttachment on real and personal properties of defendants.

o $fter the @rit of $ttachment was implemented, proceedingsbefore the Trial -ourt versed principally in regards to theattachment.

o n '& 6anuary '()', an rder was issued by the Trial -ourtallowing both parties to simultaneously submit a "otion for!ummary 6udgment.

o

n +) 6une '()', the Trial -ourt rendered decision orderingdefendants to pay the plainti4 the amount of P'0,000.00 plus thefurther sum of P),000.00.

o The defendants appealed before the then court of $ppeals, whichendorsed it to the !upreme -ourt stating that the issue involvedwas one of law.

RTC R=<in;



n 6une +), '()', the Trial -ourt rendered decision ordering defendants topay plainti4 8the amount of P'0,000.00 plus the further sum of P),000.00 byway of liquidated damages . . . with legal rate of interest on both amountsfrom $pril 20, '()0.8 ;t is from this 9udgment that defendants have appealed.

ISSUE

@/ the P),000.00 constituted usurious interest

HELD

/o.

• !ection ( of the 1sury #aw 5$ct +)**7 provided<

o !A-. (. /he person or corporation sued shall 3le its answer inwriting under oath to any complaint brought or 3led against said

person or corporation before a competent court to recover themoney or other personal or real property, seeds or agriculturalproducts, charged or received in violation of the provisions of this$ct. The lac= of ta=ing an oath to an answer to a complaint willmean the admission of the facts contained in the latter.

• The foregoing provision envisages a complaint 3led against an entitywhich has committed usury, for the recovery of the usurious interestpaid.

o ;n that case, if the entity sued shall not 3le its answer under oath

denying the allegation of usury, the defendant shall be deemedto have admitted the usury.

o The provision does not apply to a case, as in the present, whereit is the defendant, not the plainti4, who is alleging usury.

• "oreover, for sometime now, usury has been legally none%istent.

o ;nterest can now be charged as lender and borrower may agreeupon.

o The Rules of -ourt in regards to allegations of usury, proceduralin nature, should be considered repealed with retroactive e4ect.

• !tatutes regulating the procedure of the courts will be construed asapplicable to actions pending and undetermined at the time of theirpassage.



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