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TABLE OF CONTENTS
LOAN
1. Garcia v. Theo
2. Pantaleon v. American Express, Inc.
3. Producers Bank of the Phil. v. CA
4. Pajuyo v. CA
5. Republic v. Bagtas
6. BPI Family Bank v. Franco
7. Frias v. San Diego- Sison
8. Conception v. CA
9. Sps. Castro v. TAN
10. Siga-an v. Villanueva
11. Tan v. CA
12. Carpio vs. Chua Ng
13. PRISMA Construction v. Development Corp.
14. Sps. Silos v. PNB
DEPOSIT
1. BPI v. IAC
2. DURBAN Apartment v. PoineerInsuranceandSuretyCorp.
3. TRIPLE-V FoodServices v. FilipinoMerchantInsuranceCorp.
4. Lipat v. PacificBankingCorp.
5. CA-AgroIndustrialDevelopment Corp. v. CA
6. Ortiz v. Kayanan
7. YHT Realty Corp. v. CA
GUARANTY
1. Dio v. CA
2. Escao v. Ortigas
3. Tupaz v. CA
4. Palmarez v. CA
5. Phil. Blooming Mills v. CA
6. Bitanga v. Pyramid Construction Engineering Corp.
7. JN Development Corp. v. Philippine Exports and Foreign Loan
Guaranty, Ltd.
8. Stronghold Insrance Company, Inc. v. Tokyo Construction
Company, Ltd.
9. Ong v. Philippine Commercial International Bank
10. E. Zobel, Inc. v. CA
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LOAN
CAROLYN M. GARCIA v. RICA MARIE S. THIO
GR No. 154878, 16 March 2007
FACTS:
Respondent Thio received from petitioner Garcia two crossed
checks which amount to
US $100,000 and US $500,000, respectively, payable to the order
of Marilou Santiago.
According to petitioner, respondent failed to pay the principal
amounts of the loans when
they fell due and so she filed a complaint for sum of money and
damages with the RTC.
Respondent denied that she contracted the two loans and
countered that it was MarilouSatiago
to whom petitioner lent the money. She claimed she was merely
asked the petitioner to give the
checks to Santiago. She issued the checks for P76,000 and
P20,000 not as payment of interest
but to accommodate petitioners request that respondent use her
own checks instead of
Santiagos.
RTC ruled in favor of petitioner. CA reversed RTC and ruled that
there was no contract
of loan between the parties.
ISSUES:
(1) Whether or not there was a contract of loan between
petitioner and respondent.
(2) Who borrowed money from petitioner, the respondent or
Marilou Santiago?
RULING:
(1) The Court held in the affirmative. A loan is a real
contract, not consensual, and as such is
perfected only upon the delivery of the object of the contract.
Upon delivery 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. It is undisputed that the checks were delivered to
respondent.
(2) However, the checks were crossed and payable not to the
order of the respondent but to
the order of a certain Marilou Santiago. Delivery is the act by
which the res or substance is
thereof placed within the actual or constructive possession or
control of another. Although
respondent did not physically receive the proceeds of the
checks, these instruments were
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placed in her control and possession under an arrangement
whereby she actually re-lent the
amount to Santiago.
Thus, such petition is granted.
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POLO S. PANTALEON vs. AMERICAN EXPRESS INTERNATIONAL, INC.,
(AMEX)
G.R. No. 174269 May 8, 2009
FACTS:
Petitioner, lawyer Polo Pantaleon, with his family went on an
escorted tour of Western
Europe. On the last day of the tour, the group arrived at the
Coster Diamond House in which the
group agreed that the visit should end by 9:30 a.m. to allow
enough time to take a guided city
tour of Amsterdam. While in the diamond house, Mrs.Pantaleon
decided to buy a diamond and
also a pendant and a chain which totaled U.S. $13,826.00. Around
9:15 am, Pantaleon
presented his American Express credit card together with his
passport to the Coster sales clerk.
The sales clerk took the cards imprint, and asked Pantaleon to
sign the charge slip. The charge
purchase was then referred electronically to respondents
Amsterdam office at 9:20 a.m.
At 9:40am, Pantaleon asked the store clerk to cancel the sale to
avoid further delaying
the tour group. At around 10:00a.m, Coster decided to release
the items even without AMEXs
approval of the purchase. Due to the delay, the city tour of
Amsterdam was cancelled due to
lack of time. The spouses Pantaleon offered their apologies but
were met by their tour mates
with stony silence and visible irritation. There were also two
instances similar to the incident in
Amsterdam wherein Pantaleon purchased golf equipment using his
AMEX card, but he ended
up barrowing money after more than 30 minutes of non-approval.
The other incident is when
Pantaleon used the card to purchase childrens shoes at a store
in Boston, and it took 20
minutes before it was approved.
In Manila, Pantaleon sent a letter demanding an apology for the
for AMEXs refusal to
provide credit authorization for the said purchases. AMEX
refused to apologize stating that the
delay in authorizing the purchase from Coster was attributable
to the circumstance that the
charged purchase of US $13,826.00 was out of the usual charge
purchase pattern established.
Pantaleon filed an action for damages in the RTC which he won.
In the CA the RTC decision
was reversed, hence this petition.
ISSUE: Whether or not AMEX breached its contractual
obligation
RULING:
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YES. Notwithstanding the popular notion that credit card
purchases are approved "within
seconds," there really is no strict, legally determinative point
of demarcation on how long must it
take for a credit card company to approve or disapprove a
customers purchase, much less one
specifically contracted upon by the parties. Yet this is one of
those instances when "youd know
it when youd see it," and one hour appears to be an awfully
long, patently unreasonable length
of time to approve or disapprove a credit card purchase
It is not disputed that AMEX has the right, if not the
obligation, to verify whether the
credit it is extending upon on a particular purchase was indeed
contracted by the cardholder,
and that the cardholder is within his means to make such
transaction. The culpable failure of
AMEX is not the failure to timely approve petitioners purchase,
but the more elemental failure to
timely act on the same, whether favorably or unfavorably. AMEX
should have informed
Pantaleon the reason for the delay, and duly advised him that
resolving the same could take
some time.
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PRODUCERS BANK OF THE PHILIPPINES (now FIRST INTERNATIONAL BANK)
vs. HON.
COURT OF APPEALS AND FRANKLIN VIVES
G.R. No. 115324. February 19, 2003
Callejo, Sr., J.
FACTS:
Sometime in 1979, private respondent Franklin Vives was asked by
his neighbor and
friend Angeles Sanchez to help her friend and townmate, Col.
Arturo Doronilla, in incorporating
his business, the Sterela Marketing and Services (Sterela).
Specifically, Sanchez asked private
respondent to deposit in a bank a certain amount of money in the
bank account of Sterela for
purposes of its incorporation. She assured private respondent
that he could withdraw his
money from said account within a months time. With this,
Mrs.Vivies, Sanchez and a certain
EstrellaDumagpi, secretary of Doronilla, went to the bank to
open an account with Mrs.Vives
and Sanchez as signatories. A passbook was then issued to
Mrs.Vives. Subsequently, private
respondent learned that part of the money was withdrawn without
presentment of the passbook
as it was his wife got hold of such. Mrs.Vives could not also
withdraw said remaining amount
because it had to answer for some postdated checks issued by
Doronilla who opened a current
account for Sterela and authorized the bank to debit
savings.
Private respondent referred the matter to a lawyer, who made a
written demand upon
Doronilla for the return of his clients money. Doronilla issued
another check for P212,000.00 in
private respondents favor but the check was again dishonored for
insufficiency of funds.
Private respondent instituted an action for recovery of sum of
money in the Regional
Trial Court (RTC) in Pasig, Metro Manila against Doronilla,
Sanchez, Dumagpi and petitioner.
The RTC ruled in favor of the private respondent which was also
affirmed in toto by the CA.
Hence this petition.
ISSUE:
Whether or not the transaction between the Doronilla and
respondent Vives was one of
a simple loan?
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RULING:
No. A circumspect examination of the records reveals that the
transaction between them
was a commodatum. Article 1933 of the Civil Code distinguishes
between the two kinds of
loans in this wise:
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.
The foregoing provision seems to imply that if the subject of
the contract is a
consumable thing, such as money, the contract would be a mutuum.
However, there are some
instances where a commodatum may have for its object a
consumable thing. Article 1936 of the
Civil Code provides:
Consumable goods may be the subject of commodatum if the purpose
of the
contract is not the consumption of the object, as when it is
merely for exhibition.
Thus, if consumable goods are loaned only for purposes of
exhibition, or when the
intention of the parties is to lend consumable goods and to have
the very same goods returned
at the end of the period agreed upon, the loan is a commodatum
and not a mutuum.
The rule is that the intention of the parties thereto shall be
accorded primordial
consideration in determining the actual character of a contract.
In case of doubt, the
contemporaneous and subsequent acts of the parties shall be
considered in such determination.
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PAJUYO v. CA
GR No. 146364 June 3, 2004
FACTS:
Pajuyo, through a Kasunduan, entrusted a house, built on a lot
not his own, to Guevara
for the latter's use provided he should return the same upon
demand and with the condition that
Guevara should be responsible of the maintenance of the
property. Upon demand Guevara
refused to return the property to Pajuyo. The petitioner then
filed an ejectment case against
Guevara with the MTC who ruled in favor of the petitioner. On
appeal with the CA, the appellate
court reversed the judgment of the lower court ruling that the
contractual relationship of Pajuyo
and Guevara was that of a commodatum.
ISSUE: Whether the relationship of Pajuyo and Guevara that of a
commodatum.
RULING:
No. An essential feature of commodatum is that it is gratuitous.
Another feature of
commodatum is that the use of the thing belonging to another is
for a certain period. If the use
of the thing is merely tolerated by the bailor, he can demand
the return of the thing at will, in
which case the contractual relation is called a precarium.
Under the Civil Code, precarium is a kind of commodatum. The
Kasunduan reveals that
the accommodation accorded by Pajuyo to Guevarra was not
essentially gratuitous. While the
Kasunduan did not require Guevarra to pay rent, it obligated him
to maintain the property in
good condition. The imposition of this obligation makes the
Kasunduan a contract different from
a commodatum. The effects of the Kasunduan are also different
from that of a commodatum.
Case law on ejectment has treated relationship based on
tolerance as one that is akin to a
landlord-tenant relationship where the withdrawal of permission
would result in the termination
of the lease.
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REPUBLIC v. BAGTAS
G.R. No. L-17474 October 25, 1962
FACTS:
Bagtas borrowed three bulls from the Bureau of Animal Industry
for one year for
breeding purposes subject to payment of breeding fee of 10% of
book value of the bull. Upon
expiration, Bagtas asked for renewal. The renewal was granted
only to one bull.
Bagtas offered to buy the bulls at its book value less
depreciation but the Bureau
refused. The Bureau said that Bagtas should either return or buy
it at book value. Bagtas proved
that he already returned two of the bulls, and the other bull
died during a Huk raid, hence,
obligation was already extinguished. He claims that the contract
is a commodatum hence, loss
through fortuitous event should be borne by the owner.
ISSUE: WON Bagtas is liable for the death of the bull.
RULING:
Yes. Commodatum is essentially gratuitous. However, in this
case, there is a 10%
charge. If this is considered compensation, then the case at bar
is a lease. Lessee is liable as
possessor in bad faith because the period already lapsed.
Even if this is a commodatum, Bagtas is still liable because the
fortuitous event
happened when he held the bull and the period stipulated already
expired. He is liable because
the thing loaned was delivered with appraisal of value and there
was no contrary stipulation
regarding his liability in case there is a fortuitous event.
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BPI-Family Bank vs. Amado Franco and CA
GR No. 123498, November 23, 2007
FACTS:
TevestecoArrastre-Stevedoring Co., Inc. (Tevesteco) opened a
savings and current
account with BPI-FB. Soon thereafter, First Metro Investment
Corporation (FMIC) also opened a
time deposit account with the same branch of BPI-FB with a
deposit of P100,000,000.00,
Subsequently, Franco opened three accounts, namely, current,
savings, and time deposit, with
BPI-FB. The total amount of P2,000,000.00 used to open Francos
account is traceable to a
check issued by Tevesteco. In turn, the funding for the
P2,000,000.00 check was part of the
P80,000,000.00 debited by BPI-FB from FMICs time deposit account
and credited to
Tevestecos current account pursuant to an Authority to Debit
purportedly signed by FMICs
officers.
It appears, however, that the signatures of FMICs officers on
the Authority to Debit were
forged. Unfortunately, Tevesteco had already effected several
withdrawals from its current
account, including the P2,000,000.00 paid to Franco. BPI-FB in
order to protect its interest
instructed Arangorin to debit Francos savings and current
accounts for the amount remaining
therein. In the meantime, two checks drawn by Franco against his
BPI-FB current account were
dishonored upon presentment for payment, and stamped with a
notation account under
garnishment. Apparently, Francos current account was garnished
by virtue of an Order of
Attachment.
Immediately, upon receipt of such notice Franco filed a Motion
to Discharge Attachment
with the trial court and pre-terminated his time deposit account
with BPI-FB. Consequently, in
light of BPI-FBs refusal to heed Francos demand, Franco filed a
complaint praying for the
following reliefs: 1) the interest on the remaining balance of
his current account, 2) the balance
on his savings account and 3) payment of damages.
The RTC rendered judgment in favour of Franco and against
BPI-FB. On appeal the
Court of Appeals affirmed the trial court decision with
modification.
ISSUE:
Whether or not Franco had a better right to the deposits in the
subject accounts which
are part of the proceeds of a forged Authority to Debit.
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RULING:
There is no doubt that BPI-FB owns the deposited monies in the
accounts of Franco, but
not as a legal consequence of its unauthorized transfer of FMICs
deposits to Tevestecos
account. BPI-FB conveniently forgets that the deposit of money
in banks is governed by the
Civil Code provisions on simple loan or mutuum. As there is a
debtor-creditor relationship
between a bank and its depositor, BPI-FB ultimately acquired
ownership of Francos deposits,
but such ownership is coupled with a corresponding obligation to
pay him an equal amount on
demand. Although BPI-FB owns the deposits in Francos accounts,
it cannot prevent him from
demanding payment of BPI-FBs obligation by drawing checks
against his current account, or
asking for the release of the funds in his savings account.
Thus, when Franco issued checks
drawn against his current account, he had every right as
creditor to expect that those checks
would be honored by BPI-FB as debtor.
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BOBIE ROSE FRIAS v. FLORA SAN DIEGO-SISON
G.R. No. 155223. April 3, 2007
FACTS:
On 7 Dec 1990, Bobie Rose Frias and Dr. Flora San-Diego Sison
entered into a MOA
over Frias property with a consideration of 3 Million pesos.
Sison has 6 months from the date of
contracts execution to notify Frias of her intention to purchase
the property with the
improvements at 6.4M. Prior to this 6 month period, Frias may
still offer the property to other
persons, provided that 3M shall be paid to Sison including
interest based on prevailing
compounded bank interest plus amount of sale in excess of 7M
[should the property be sold at a
price greater than 7M]. In case Frias has no other buyer within
6 months from the contracts
execution, no interest shall be charged by Sison on the 3M. In
the event that on the 6th month,
Sison would decide not to purchase the property, Frias has 6
months to pay 3M (amount shall
earn compounded bank interest for the last 6 months only). 3M
treated as a loan and the
property considered as the security for the mortgage.
Upon notice of intention to purchase, Sison has 6 months to pay
the balance of 3.4M
(6.4M less 3M MOA consideration). Frias received from Sison 3M
(2M in cash; 1M post-dated
check dated February 28, 1990, instead of 1991, which rendered
the check stale). Frias gave
Sison the TCT and the Deed of Absolute Sale over the property.
Sison decided not to purchase
the property, so she notified Frias through a letter dated March
20, 1991 [Frias received it only
on June 11, 1991],and Sison reminded Frias of their agreement
that the 2M Sison paid should
be considered as a loan payable within 6 months. Frias failed to
pay this amount.
Sison filed a complaint for sum of money with preliminary
attachment. Sison averred that
Frias tried to deprive her of the security for the loan by
making a false report of the loss of her
owners copy of TCT, executing an affidavit of loss and by filing
a petition [1] for the issuance of
a new owners duplicate copy. RTC issued a writ of preliminary
attachment upon the filing of a
2M bond.
RTC found that Frias was under obligation to pay Sison 2M with
compounded interest
pursuant to their MOA. RTC ordered Frias to pay Sison:
1. 2M + 32% annual interest beginning December 7, 1991 until
fully paid
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2. 70k representing premiums paid by Sison on the attachment
bond with legal interest
counted from the date of this decision until fully paid
3. 100k moral, corrective, exemplary damages [liable for moral
damages because of Frias
fraudulent scheme]
4. 100k attorneys fees + cost of litigation
The CA affirmed RTC with modification32% reduced to 25%. CA said
that there was no
basis for Frias to say that the interest should be charged for 6
months only. It said that a loan
always bears interest; otherwise, it is not a loan. The interest
should commence on June 7,
1991 until fully paid, with compounded bank interest prevailing
at the time [June 1991] the 2M
was considered as a loan (as certified by the bank).
ISSUE: WON compounded bank interest should be limited to 6
months as contained in the
MOA.
RULING:
No. CA committed no error in awarding an annual 25% interest on
the 2M even beyond
the 6-month stipulated period. In this case, the phrase for the
last six months only should be
taken in the context of the entire agreement.SC notes that the
agreement speaks of two (2)
periods of 6 months each (see FACTSwords in bold &
underline). No interest will be charged
for the 1st 6-month period while Sison was making up her mind,
but only for the 2nd 6-month
period after Sison decided not to buy the property. There is
nothing in the MOA that suggests
that interest will be charged for 6 months only even if it takes
forever for Frias to pay the loan.
The payment of regular interest constitutes the price or cost of
the use of money, and
until the principal sum due is returned to the creditor, regular
interest continues to accrue since
the debtor continues to use such principal amount. For a debtor
to continue in possession of the
principal of the loan and to continue to use the same after
maturity of the loan without payment
of the monetary interest constitutes unjust enrichment on the
part of the debtor at the expense
of the creditor.
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CONCEPTION v. COURT OF APPEALS
G.R. No. 122079. June 27, 1997
FACTS:
On 17 January 1979, the Home Savings Bank and Trust Company (now
Insular Life
Savings and Trust Company) granted to the Concepcions a loan
amounting to P1,400,000.00.
The Concepcions executed a promissory note and a real estate
mortgage over their property.
Said loan carried an interest rate of 16% per annum payable in
quarterly amortizations. The
promissory note provided that the Concepcions had
authorized:
". . . the Bank to correspondingly increase the interest rate
presently stipulated in this
transaction without advance notice to me/us
The bank unilaterally increased the interest rate from:
16% (Php 67, 830. 00); 21% (Php 77, 619. 72) on 17 February
1980; 30% (Php 104, 661. 10)
on October 17, 1984; and 38% (Php 123, 797. 05) on 17 November
1984.
Failing to pay the bank's President made a demand on the
Concepcions for the total amount of
Php 393,878.81 but no payment was received. On 14 April 1986,
the bank filed a petition for
extrajudicial foreclosure and subsequently won in a public
bidding after which a new transfer
certificate of title was issued in its name. On 29 July 1987,
the Concepcions filed an action for
the cancellation of the foreclosure sale, the declaration of
nullity of title in favor of the bank, and
the declaration of nullity of the unilateral increases of the
interest rates on their loan.
On 31 August 1992, the trial court found for the defendants,
that the plaintiffs have no
cause of action either against defendant. On 15 September 1995,
the appellate court affirmed
the trial court's decision.
ISSUE: Whether or not the bank is authorized to increase the
stipulated rate without advance
notice to the plaintiffs?
RULING:
NO. The validity of "escalation" or "escalator" clauses in
contracts, in general, was
upheld by the Supreme Court in Banco Filipino Savings and
Mortgage Bank vs. Hon. Navarro
and Del Valle:
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"Some contracts contain what is known as an 'escalator clause,'
which is defined as one
in which the contract fixes a base price but contains a
provision that in the event of specified
cost increases, the seller or contractor may raise the price up
to a fixed percentage of the base.
However in Philippine National Bank vs. Court of Appeals:
"It is basic that there can be no contract in the true sense in
the absence of the element
of agreement, or of mutual assent of the parties.
We cannot countenance petitioner bank's posturing that the
escalation clause at bench
gives it unbridled right to unilaterally upwardly adjust the
interest on private respondents' loan.
That would completely take away from private respondents the
right to assent to an important
modification in their agreement, and would negate the element of
mutuality in contracts.
Hence in Philippine National Bank v. Court of Appeals, et
al.:
A contract containing a condition which makes its fulfillment
dependent exclusively upon
the uncontrolled will of one of the contracting parties, is void
to increase the interest rate at
will during the term of the loan, that license would have been
null and void for being violative of
the principle of mutuality essential in contracts.
Thus private respondent Home Savings Bank and Trust Company
shall pay to
petitioners the excess the bid price it received from the
foreclosed property in question over and
above the unpaid balance of the loan computed at the original
interest rate.
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Spouses Castro v Tan
G.R. No. 168940. November 24, 2009
FACTS:
Angelina de Leon Tan, and her husband Ruben Tan owned a
residential lot. They entered into
an agreement, known as the KasulatanngSanglaanngLupa at Bahay,
with the spouses Castro
to secure a loan of P30,000.00. Under the contract, they
undertook to pay the mortgage debt
within 6 months with an interest of 5% per month, compounded
monthly. When Ruben died,
Angelina undertook the responsibility of paying the loan.
However she failed to pay the same
upon maturity. Thereafter, she offered to pay the spouses the
principal amount plus a portion of
the interest but the spouses refused and demanded the payment of
the accumulated sum. Later
on, the spouses caused the extrajudicial foreclosure of the real
estate mortgage and emerged
as the only bidder in the auction sale. Tan failed to redeem the
property, thus the title was
consolidated in favour of the spouses. A writ of possession was
then issued followed by
ejectment of Angelina from her former property.
Angelina Tan, together with the other respondents filed a
complaint for nullification of the
mortgage averring that the interest rate imposed on the
principal amount is unconscionable.
ISSUE:
Whether the 5% monthly interest rate, compounded monthly is
unconscionable, and should be
equitably reduced to the legal rate of 12% per annum
RULING:
Yes. While the Court agrees with the Sps. Castro that parties to
a loan agreement have
wide latitude to stipulate on any interest rate in view of the
Central Bank Circular which
suspended the Usury Law ceiling on interest, it is also worth
stressing that interest rates
whenever unconscionable may still be declared illegal. There is
nothing in said circular which
grants lenders carte blanche authority to raise interest rates
to levels which will either enslave
their borrowers or lead to a haemorrhaging of their assets.The
5% monthly interest rate, or 60%
per annum, compounded monthly as stipulated in the Kasulatan is
even higher than the 3%
monthly interest rate imposed in another case. Thus, the 5%
monthly interest is excessive,
iniquitous, unconscionable and exorbitant, contrary to morals,
and the law. The Kasulatan is
void ab initio for being violative of Article 1306 of the Civil
Code. The legal interest of 12% per
annum should be imposed.
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Siga-an v Villanueva
G.R. No. 173227. January 20, 2009
FACTS:
Alicia Villanueva, a businesswoman engaged in supplying office
materials and
equipments to the Philippine Navy Office (PNO), received a loan
of P 540,000.00 from
Sebastian Siga-an, a military officer and comptroller of the
PNO. The loan was not written but
merely an oral agreement. There was no written agreement of the
interest between the parties.
Villanueva issued two checks with a total worth of P700,000.00
in favor of Siga-an as payment
of the loan. These checks were encashed. The excess of
P160,000.00 was for the payment of
the interest of the loan, unaware of the law on interest. Aside
from issuing the said two checks,
Villanueva also paid the amount of P175,000.00 to Sig-an as
additional interest. Villanueva was
compelled to pay this additional interest because Siga-an
threatened to block or disapprove the
transaction of Villanueva with the PNO. Siga-an is alleging that
Villanuava issued a promissory
note that provides that Villanueva is owing Siga-an capital and
interest.
ISSUE: Whether or not there should be payment of interest?
RULING:
The promissory note was issued with intimidation from Siga-an.
The promissory note
was made because of the fear of Villanueva from the threats of
Siga-an. Furthermore, the law
expressly mandates as provided in Article 1956 of the Civil Code
that there will be no interest
shall due unless it has been expressly stipulated in writing.
Monetary interest is allowed only if:
(1) there was an express stipulation for the payment of
interest; and (2) the agreement for the
payment of interest was reduced in writing. The concurrence of
the two conditions is required for
the payment of monetary interest. However, if there was delay on
payment, and even in the
absence of express stipulation, regarding payment of interest,
the debtor is compelled to pay
compensatory interest which is different from the monetary
interest in the case at bar. Thus, the
collection of interest without any stipulation in writing is
prohibited by law. Villanueva is entitled
to reimbursement from the interest she paid to Siga-an.
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Antonio Tan vs. Court of Appeals
GR No. 116285 (2001)
FACTS:
Antonio Tan (petitioner) obtained 2 loans, each for P2, 000,000
from Cultural Center of
the Philippines (CCP) evidenced by a promissory note in amount
of P3, 411,421.32; payable in
5 installments. Petitioner defaulted but after a few partial
payments he had the loans
restructured by respondent Cultural Center of the Philippines
(CCP). Petitioner failed to pay any
installment on the said restructured loan. In a letter,
petitioner requested and proposed to
respondent CCP a mode of paying the restructured loan a) 20% of
the principal amount of the
loan upon the respondent giving its conformity to his proposal
and b) the balance on the
principal obligation payable 36 monthly installments until fully
paid. Petitioner requested for a
moratorium on his loan obligation until the following year
allegedly due to a substantial
deduction in the volume of his business and on account of the
peso devaluation. No favorable
response was made to said letters. Instead, CCP demanded full
payment, within ten (10) days
from receipt of said letter P6, 088,735.03. CCP filed complaint
for the collection of a sum of
money. Petitioner argues that there is no basis in law for the
charging of interest on the
surcharges for the reason that the New Civil Code is devoid of
any provision allowing the
imposition of interest on surcharges and there is no legal basis
for the imposition of interest on
the penalty charge for the reason that the law only allows
imposition of interest on monetary
interest but not the charging of interest on penalty, hence
penalties should not earn interest.
ISSUE: Whether or not petitioner Tan is correct.
RULING:
Petition was denied. There are legal bases for the imposition of
the interest on the
penalty and for charging of interest on surcharges. Art. 1226
provides In obligations with a
penal clause, the penalty shall substitute the indemnity for
damages and the payment of
interests in case of non-compliance, if there is no stipulation
to the contrary. Nevertheless,
damages shall be paid if the obligor refuses to pay the penalty
or is guilty of fraud in the
fulfillment of the obligation. In the case at bar, the
promissory note expressed the imposition of
both interest and penalties in case of default on the part of
the petitioner in the payment of
the subject restructured loan. Moreover, Article 2209 provides
If the obligation consists in the
payment of a sum of money, and the debtor incurs in delay, the
indemnity for damages, there
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18
being no stipulation to the contrary, shall be the payment of
the interest agreed upon, and in the
absence of stipulation, the legal interest, which is six per
cent per annum. In the case at bar,
the penalty charge of 2% per month began to accrue from the time
of default by the
petitioner. The reckoning point is provided under Art. 2212:
Interest due shall earn legal interest
from the time it is judicially demanded, although the obligation
may be silent upon this point. In
the case at bar, the interest began to run on the penalty
interest upon the filing of the complaint
in court by CCP. Therefore, petitioner is bound to pay the
interest on the total amount of the
principal, the monetary interest and the penalty interest.
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19
SPOUSES DAVID B. CARPO and RECHILDA S. CARPO
vs. ELEANOR CHUA and ELMA DY NG
G.R. Nos. 150773, September 30, 2005
TINGA, J.
FACTS:
On 18 July 1995, petitioners borrowed from Eleanor Chua and Elma
Dy Ng the amount
of P175,000.00, payable within six (6) months with an interest
rate of six percent (6%) per
month. To secure the payment of the loan, petitioners mortgaged
their residential house and lot
situated at San Francisco, Magarao, Camarines Sur. Petitioners
failed to pay the loan upon
demand. Consequently, the real estate mortgage was
extrajudicially foreclosed and the
mortgaged property sold at a public auction. The house and lot
was awarded to respondents,
who were the only bidders, for the amount of P367,457.80.
Upon failure of petitioners to exercise their right of
redemption, a certificate of sale was
issued. The original TCT was cancelled and TCT No. 29338 was
issued in the name of
respondents.
Despite the issuance of the TCT, petitioners continued to occupy
the said house and lot,
prompting respondents to file a petition for writ of possession
with the RTC. The court issued
an Orderfor the issuance of a writ of possession. On the other
hand, petitioners filed a complaint
for annulment of real estate mortgage and the consequent
foreclosure proceedings. Petitioners
consigned the amount of P257,197.26 with the RTC.
Meanwhile, a temporary restraining order was issued upon motion
enjoining the
enforcement of the writ of possession. The RTC suspended the
enforcement of the writ of
possession pending the final disposition of real estate mortgage
and the consequent foreclosure
proceedings. Against this Order, respondents filed a petition
for certiorari and mandamus
before the CA.
ISSUE:
1. Whether or not the agreed rate of interest of 6% per month or
72% per annum is so
excessive, iniquitous, unconscionable and exorbitant that it
should have been declared null and
void
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20
2. Whether or not the invalidity of the stipulation on interest
carries with it the invalidity of the
principal obligation
RULING:
1. Yes. It is apparent that the stipulated interest in the
subject loan is excessive, iniquitous,
unconscionable and exorbitant. Pursuant to the freedom of
contract principle embodied in
Article 1306 of the Civil Code, contracting parties may
establish such stipulations, clauses,
terms and conditions as they may deem convenient, provided they
are not contrary to law,
morals, good customs, public order, or public policy. In the
ordinary course, the codal provision
may be invoked to annul the excessive stipulated interest.
In the case at bar, the stipulated interest rate is 6% per
month, or 72% per annum. By
the standards set in the above-cited cases, this stipulation is
similarly invalid.
2. The principal obligation subsists despite the nullity of the
stipulated interest. Hence, it is
clear and settled that the principal loan obligation still
stands and remains valid. By the same
token, since the mortgage contract derives its vitality from the
validity of the principal obligation,
the invalid stipulation on interest rate is similarly
insufficient to render void the ancillary
mortgage contract.
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21
PRISMA CONSTRUCTION & DEVELOPMENT CORPORATION and ROGELIO
S.
PANTALEON vs ARTHUR F. MENCHAVEZ
G.R. No. 160545; March 9, 2010
FACTS:
December 8, 1993, Pantaleon, President and Chairman of the Board
of PRISMA,
obtained a P1M loan from the respondent, with monthly interest
of P40,000.00 payable for 6
months, or a total obligation of P1,240,000.00 payable within 6
mos. To secure the payment of
the loan, Pantaleon issued a promissory. Pantaleon signed the
promissory note in his personal
capacity and as duly authorized by the Board of Directors of
PRISMA. The petitioners failed to
completely pay the loan within the 6-month period.
As of January 4, 1997, respondent found that the petitioners
still had an outstanding
balance of P1,364,151.00, to which respondent applied a 4%
monthly interest.
On August 28, 1997, respondent filed a complaint for sum of
money to enforce the
unpaid balance, plus 4% monthly interest. In their Answer, the
petitioners admitted the loan of
P1,240,000.00, but denied the stipulation on the 4% monthly
interest, arguing that the interest
was not provided in the promissory note. Pantaleon also denied
that he made himself personally
liable and that he made representations that the loan would be
repaid within six (6) months.
RTC found that the respondent issued a check for P1M in favor of
the petitioners for a
loan that would earn an interest of 4% or P40,000.00 per month,
or a total of P240,000.00 for a
6-month period. RTC ordered the petitioners to jointly and
severally pay the respondent the
amount of P3,526,117.00 plus 4% per month interest from February
11, 1999 until fully paid.
Petitioners appealed to CA insisting that there was no express
stipulation on the 4%
monthly interest. CA favored respondent but noted that the
interest of 4% per month, or 48%
per annum, was unreasonable and should be reduced to 12% per
annum. MR denied hence
this petition.
ISSUE:
Whether the parties agreed to the 4% monthly interest on the
loan. If so, does the rate of
interest apply to the 6-month payment period only or until full
payment of the loan?
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22
RULING:
Obligations arising from contracts have the force of law between
the contracting parties
and should be complied with in good faith. When the terms of a
contract are clear and leave no
doubt as to the intention of the contracting parties, the
literal meaning of its stipulations governs.
Courts have no authority to alter the contract by construction
or to make a new contract for the
parties; a courts duty is confined to the interpretation of the
contract the parties made for
themselves without regard to its wisdom or folly, as the court
cannot supply material stipulations
or read into the contract words the contract does not contain.
It is only when the contract is
vague and ambiguous that courts are permitted to resort to the
interpretation of its terms to
determine the parties intent.
Article 1956 of the Civil Code specifically mandates that no
interest shall be due unless
it has been expressly stipulated in writing. The payment of
interest in loans or forbearance of
money is allowed only if: (1) there was an express stipulation
for the payment of interest; and (2)
the agreement for the payment of interest was reduced in
writing. The concurrence of the two
conditions is required for the payment of interest at a
stipulated rate. The collection of interest
without any stipulation in writing is prohibited by law.
The interest of P40,000.00 per month corresponds only to the
six-month period of the
loan, or from January 8, 1994 to June 8, 1994, as agreed upon by
the parties in the promissory
note. Thereafter, the interest on the loan should be at the
legal interest rate of 12% per annum.
The facts show that the parties agreed to the payment of a
specific sum of money of
P40,000.00 per month for six months, not to a 4% rate of
interest payable within a 6-month
period.
No issue on the excessiveness of the stipulated amount of
P40,000.00 per month was
ever put in issue by the petitioners; they only assailed the
application of a 4% interest rate, since
it was not agreed upon.
Therefore, as agreed by the parties, the loan of P1M shall earn
P40,000.00 per month
for a period of 6 months, for a total principal and interest
amount of P1,240,000.00. Thereafter,
interest at the rate of 12% per annum shall apply. The amounts
already paid by the petitioners
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23
during the pendency of the suit, amounting toP1,228,772.00 as of
February 12, 1999, should be
deducted from the total amount due, computed as indicated
above.
The case was remanded to the trial court for the actual
computation of the total amount
due.
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24
SPOUSES EDUARDO and LYDIA SILOS vs. PHILIPPINE NATIONAL BANK
G.R. No. 181045, July 2, 2014
Facts:
Spouses Eduardo and Lydia Silos (petitioners) have been in
business for about two
decades of operating a department store and buying and selling
of ready-to-wear apparel.
Respondent Philippine National Bank (PNB) is a banking
corporation organized and existing
under Philippine laws.
To secure a one-year revolving credit line of P150, 000.00
obtained from PNB,
petitioners constituted in August 1987 a Real Estate Mortgage
over a 370-square meter lot in
Kalibo, Aklan covered by Transfer Certificate of Title No. (TCT)
T-14250. In July 1988, the credit
line was increased to P1.8 million and the mortgage was
correspondingly increased to P1.8
million. In July 1989, a Supplement to the Existing Real Estate
Mortgage was executed to cover
the same credit line, which was increased to P2.5 million, and
additional security was given in
the form of a 134-square meter lot covered by TCT T-16208. In
addition, petitioners issued eight
Promissory Notes and signed a Credit Agreement. The eight
Promissory Notes, on the other
hand, contained a stipulation granting PNB the right to increase
or reduce interest rates "within
the limits allowed by law or by the Monetary Board. The Real
Estate Mortgage agreement
provided the same right to increase or reduce interest rates "at
any time depending on whatever
policy PNB may adopt in the future."
Petitioners religiously paid interest on the notes. In August
1991, an Amendment to
Credit Agreement was executed by the parties
Respondent regularly renewed the line from 1990 up to 1997, and
petitioners made
good on the promissory notes, religiously paying the interests
without objection or fail. But in
1997, petitioners faltered when the interest rates soared due to
the Asian financial crisis.
Petitioners sole outstanding promissory note for P2.5 million
executed in July 1997 and due
120 days later or on October 28, 1997 became past due, and
despite repeated demands,
petitioners failed to make good on the note. Thus, PNB
foreclosed on the mortgage, and on
January 14, 1999, TCTs T-14250 and T-16208 were sold to it at
auction for the amount of
P4,324,172.96.21 The sheriffs certificate of sale was registered
on March 11, 1999.
On March 24, 2000, petitioners filed a civil case seeking
annulment of the foreclosure
sale and an accounting of the PNB credit. Petitioners theorized
that after the first promissory
note where they agreed to pay 19.5% interest, the succeeding
stipulations for the payment of
interest in their loan agreements with PNB which allegedly left
to the latter the sole will to
determine the interest rate became null and void. Petitioners
added that because the interest
rates were fixed by respondent without their prior consent or
agreement, these rates are void,
and as a result, petitioners should only be made liable for
interest at the legal rate of 12%. They
claimed further that they overpaid interests on the credit, and
concluded that due to this
overpayment of steep interest charges, their debt should now be
deemed paid, and the
foreclosure and sale of TCTs T-14250 and T-16208 became
unnecessary and wrongful. As for
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25
the imposed penalty of P581,666.66, petitioners alleged that
since the Real Estate Mortgage
and the Supplement thereto did not include penalties as part of
the secured amount, the same
should be excluded from the foreclosure amount or bid price,
even if such penalties are
provided for in the final Promissory Note.
On February 28, 2003, the trial court rendered judgment
dismissing the Civil Case.
Petitioners appealed to the CA. The appeal was partly granted.
Therefore decision of the
Regional Trial Court per Order dated June 4, 2003 was affirmed
with modification.
Hence, this petition.
Issue: Whether or not the unilateral action of PNB in increasing
rate violated the mutuality of
contracts under Article 1308 of the Civil Code.
Ruling:
Yes. The court held that the unilateral action of the PNB in
increasing the interest rate on
the private respondents loan violated the mutuality of contracts
ordained in Article 1308 of the
Civil Code:
Art. 1308. The contract must bind both contracting parties; its
validity or compliance
cannot be left to the will of one of them.
In order that obligations arising from contracts may have the
force of law
between the parties, there must be mutuality between the parties
based on their
essential equality. A contract containing a condition which
makes its fulfillment
dependent exclusively upon the uncontrolled will of one of the
contracting parties, is void
. . . . Hence, even assuming that the . . . loan agreement
between the PNB and the
private respondent gave the PNB a license (although in fact
there was none) to increase
the interest rate at will during the term of the loan, that
license would have been null and
void for being violative of the principle of mutuality essential
in contracts. It would have
invested the loan agreement with the character of a contract of
adhesion, where the
parties do not bargain on equal footing, the weaker partys (the
debtor) participation
being reduced to the alternative "to take it or leave it" . . .
. Such a contract is a veritable
trap for the weaker party whom the courts of justice must
protect against abuse and
imposition.
The Court ruled on Spouses Almeda v. Court of Appeals, that the
binding effect of any
agreement between parties to a contract is premised on two
settled principles: (1) that any
obligation arising from contract has the force of law between
the parties; and (2) that there must
be mutuality between the parties based on their essential
equality. Any contract which appears
to be heavily weighed in favor of one of the parties so as to
lead to an unconscionable result is
void. Any stipulation regarding the validity or compliance of
the contract which is left solely to
the will of one of the parties, is likewise, invalid.
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26
It is plainly obvious, therefore, from the undisputed facts of
the case that respondent
bank unilaterally altered the terms of its contract with
petitioners by increasing the interest rates
on the loan without the prior assent of the latter. In fact, the
manner of agreement is itself
explicitly stipulated by the Civil Code when it provides, in
Article 1956 that "No interest shall be
due unless it has been expressly stipulated in writing." What
has been "stipulated in writing"
from a perusal of interest rate provision of the credit
agreement signed between the parties is
that petitioners were bound merely to pay 21% interest, subject
to a possible escalation or de-
escalation, when 1) the circumstances warrant such escalation or
de-escalation; 2) within the
limits allowed by law; and 3) upon agreement.
Indeed, the interest rate which appears to have been agreed upon
by the parties to the
contract in this case was the 21% rate stipulated in the
interest provision. Any doubt about this
is in fact readily resolved by a careful reading of the credit
agreement because the same plainly
uses the phrase "interest rate agreed upon," in reference to the
original 21% interest rate.
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27
DEPOSIT
Bank of the Philippine Island vs. Intermediate Appellate
Court
G.R. No. L-66826, August 19, 1988
FACTS:
RizaldyZshornack and his wife, Shirley Gorospe, maintained in
Commercial Bank and
Trust Company of the Philippines (COMTRUST), which was later on
absorbed by the the Bank
of the Philippine Islands, a dollar savings account and a peso
current account.
On December 8, 1975, Zshornack entrusted to COMTRUST, thru
Virgilio Garcia,
assistant Branch Manager of COMTRUST , US $3,000.00 cash
(greenbacks)
for safekeeping, and that the agreement was embodied in a
document stating that COMTRUST
already received the said amount in his dollar account for
safekeeping. However, when
Zshornack demanded the return of the amount, the bank refused to
do so. COMTRUST averred
that the sum was disposed of in this manner: US$2,000.00 was
sold and the peso proceeds
amounting to P14,920.00 were deposited to Zshornack's current
account per deposit slip
accomplished by Garcia; the remaining US$1,000.00 was also sold
later and the peso proceeds
amounting to P8,350.00 were deposited to his current account per
deposit slip also
accomplished by Garcia. Thus, the US$3,000.00 was properly
credited to Zshornack's current
account at prevailing conversion rates.
ISSUE:
Whether or not the contract between the parties is one of a
deposit
RULING:
It is a contract of deposit defined under Article 1962, New
Civil Code, which reads:
Art. 1962. A deposit is constituted from the moment a person
receives a thing
belonging to another, with the obligation of safely keeping it
and of returning the
same. If the safekeeping of the thing delivered is not the
principal purpose of the
contract, there is no deposit but some other contract.
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28
The document acknowledging the receipt of the money (greenbacks)
by the bank for
safekeeping show that the intent of the parties was really for
the bank to safely keep the dollars
and to return it to Zshornack at a later time, Thus, Zshornack
demanded the return of the money
on May 10, 1976, or over five months later.
Nothing in the document states that the parties intend to sell
the US dollars to the
Central Bank within one business day from receipt. Otherwise,
the contract of depositum would
never have been entered into at all.
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29
DURBAN APARTMENTS CORPORATION/CITY GARDEN HOTEL
vs. PIONEER INSURANCE AND SURETY CORPORATION
G.R. NO. 179419, January 12, 2011
NACHURA, J.:
FACTS:
On April 30, 2002, Jeffrey See arrived in a Suzuki Grand Vitara,
and checked in at the
City Garden Hotel before midnight, and its parking attendant
Vicente Justimbaste got the key to
said Vitara to park it, issuing See a valet parking customers
claim stub. See was awakened by
a telephone call from the Hotel Chief Security Officer, Ernesto
Horlador, Jr., informing him that
his Vitara was carnapped while it was parked unattended at the
parking area of Equitable PCI
Bank, near City Garden Hotel. Forthwith, the incident was
reported to the Makati City Police
Anti-Carnapping Unit, which conducted an investigation and found
that a prior similar incident
happened in the Hotels valet parking service and that no
necessary precautions were taken to
prevent its repetition. Thereafter, See recovered the amount of
P1,163,250.00 from the car
insurer, Pioneer Insurance and Surety Corporation. Despite
written demands by the latter to
Durban Apartments, no payment or reimbursement was made to the
insurer. Hence, on July 22,
2003, Pioneer Insurance, by right of subrogation, filed a
Complaint for Recovery of Damages
against Durban Apartments and Justimbaste, alleging that the
latter was negligent in the
selection and supervision of its employee Justimbaste. During
the pre-trial conference, both
Durban Apartments and Justimbaste, represented by Atty. Nestor
Mejia, failed to file their pre-
trial brief, thus, they were declared in default and Pioneer
Insurance was allowed to present its
evidence ex parte. The RTC of Makati City ruled in favor of
Prioneer Insurance, ordering Durban
Apartments to pay the money claim with legal interest from July
22, 2003, plus attorneys fees
and costs of suit amounting to P120,000. This was affirmed by
the CA, hence, this present
petition.
ISSUE: Whether or not Durban Apartments is liable to Pioneer
Insurance for the loss of Sees
vehicle?
RULING:
The Court ruled in the affirmative. It is a rule that factual
findings of the trial court,
especially when affirmed by the appellate court are accorded the
highest degree of respect and
are considered conclusive between the parties. And that the
petitioner was in default, thus,
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30
correctly allowing the respondent to present evidence ex parte.
On the merits of the case,
respondent Pioneer Insurance substantiated the allegations in
its complaint, i.e., a contract of
necessary deposit existed between the insured Jeffrey See and
petitioner Durban Apartments.
Article 1962, in relation to Article 1998 of the Civil Code
defines a contract of deposit and a
necessary deposit made by persons in hotels or inns. Plainly,
from the facts found by the lower
courts, the insured See depoisted his vehicle for safekeeping
with petitioner through the latters
employee Justimbaste who in turn issued a claim stub to See.
Thus, the contract of deposit was
perfected from Sees delivery, when he handed over to Justimbaste
the keys to his vehicle,
which Justimbaste received with the obligation of safely keeping
and returning it. Therefore,
ultimately, petitioner is liable for the loss of Sees
vehicle.
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TRIPLE-V vs. FILIPINO MERCHANTS
G.R. No. 160544. February 21, 2005
FACTS:
On March 2, 1997 a certain Mary Jo-Anne De Asis dined at
petitioner's Kamayan
Restaurant at 15 West Avenue, Quezon City. De Asis was using a
Mitsubishi Galant Super
Saloon Model 1995, assigned to her by her employer Crispa
Textile Inc. On said date, De Asis
availed of the valet parking service of petitioner and entrusted
her car key to petitioner's valet
counter. A corresponding parking ticket was issued as receipt
for the car. Few minutes later,
Madridano noticed that the car was not in its parking slot and
its key no longer in the box where
valet attendants usually keep the keys of cars entrusted to
them. The car was never recovered.
Thereafter, Crispa filed a claim against its insurer, herein
respondent Filipino Merchants
Insurance Company, Inc. (FMICI). Having indemnified Crispa in
the amount of P669.500 for the
loss of the subject vehicle, FMICI, as subrogee to Crispa's
rights, filed with the RTC at Makati
City an action for damages against petitioner Triple-V Food
Services, Inc.
ISSUE: Whether or not there is a Depositary contract when the De
asis entrusted the car to the
petitioner.
RULING:
In a contract of deposit, a person receives an object belonging
to another with the
obligation of safely keeping it and returning the same.rA
deposit may be constituted even
without any consideration. It is not necessary that the
depositary receives a fee before it
becomes obligated to keep the item entrusted for safekeeping and
to return it later to the
depositor. Specious is petitioner's insistence that the valet
parking claim stub it issued to De
Asis contains a clear exclusion of its liability and operates as
an explicit waiver by the customer
of any right to claim indemnity for any loss of or damage to the
vehicle. The parking claim stub
embodying the terms and conditions of the parking, including
that of relieving petitioner from any
loss or damage to the car, is essentially a contract of
adhesion, drafted and prepared as it is by
the petitioner alone with no participation whatsoever on the
part of the customers, like De Asis,
who merely adheres to the printed stipulations therein
appearing. Petitioner must not be
allowed to use its parking claim stub's exclusionary stipulation
as a shield from any
responsibility for any loss or damage to vehicles or to the
valuables contained therein. Here, it is
evident that De Asis deposited the car in question with the
petitioner as part of the latter's
enticement for customers by providing them a safe parking space
within the vicinity of its
restaurant. In a very real sense, a safe parking space is an
added attraction to petitioner's
restaurant business because customers are thereby somehow
assured that their vehicle are
safely kept, rather than parking them elsewhere at their own
risk. Having entrusted the subject
car to petitioner's valet attendant, customer De Asis, like all
of petitioner's customers, fully
expects the security of her car while at petitioner's
premises/designated parking areas and its
safe return at the end of her visit at petitioner's
restaurant.
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32
Spouses Alfredo and EstelitaLipat vs. Pacific Banking
Corporation
GR No. 142435, April 30, 2003
Justice Quisumbing
FACTS:
The spouses Alfredo Lipat and Estelita Burgos Lipat, owned
"Bela's Export Trading"
(BET), a single proprietorship with principal office at No. 814
Aurora Boulevard, Cubao, Quezon
City. BET was engaged in the manufacture of garments for
domestic and foreign consumption.
The Lipats also owned the "Mystical Fashions" in the United
States, which sells goods imported
from the Philippines through BET. Mrs.Lipat designated her
daughter, Teresita B. Lipat, to
manage BET in the Philippines while she was managing "Mystical
Fashions" in the United
States. In order to facilitate the convenient operation of BET,
EstelitaLipat executed on 14
December 1978, a special power of attorney appointing
TeresitaLipat as her attorney-in-fact to
obtain loans and other credit accommodations from Pacific
Banking Corporation (Pacific Bank).
She likewise authorized Teresita to execute mortgage contracts
on properties owned or co-
owned by her as security for the obligations to be extended by
Pacific Bank including any
extension or renewal thereof.
Sometime in April 1979, Teresita, by virtue of the special power
of attorney, was able to
secure for and in behalf of her mother, Mrs.Lipat and BET, a
loan from Pacific Bank amounting
to P583,854.00 to buy fabrics to be manufactured by BET and
exported to "Mystical Fashions"
in the United States. As security therefor, the Lipat spouses,
as represented by Teresita,
executed a Real Estate Mortgage over their property located at
No. 814 Aurora Blvd., Cubao,
Quezon City. Said property was likewise made to secure other
additional or new loans, etc. On
5 September 1979, BET was incorporated into a family corporation
named Bela's Export
Corporation (BEC) in order to facilitate the management of the
business. BEC was engaged in
the business of manufacturing and exportation of all kinds of
garments of whatever kind and
description and utilized the same machineries and equipment
previously used by BET. Its
incorporators and directors included the Lipat spouses who owned
a combined 300 shares out
of the 420 shares subscribed, TeresitaLipat who owned 20 shares,
and other close relatives and
friends of the Lipats. EstelitaLipat was named president of BEC,
while Teresita became the
vice-president and general manager. Eventually, the loan was
later restructured in the name of
BEC and subsequent loans were obtained by BEC with the
corresponding promissory notes
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33
duly executed by Teresita on behalf of the corporation. A letter
of credit was also opened by
Pacific Bank in favor of A. O. Knitting Manufacturing Co., Inc.,
upon the request of BEC after
BEC executed the corresponding trust receipt therefor. Export
bills were also executed in favor
of Pacific Bank for additional finances. These transactions were
all secured by the real estate
mortgage over the Lipats' property. The promissory notes, export
bills, and trust receipt
eventually became due and demandable. Unfortunately, BEC
defaulted in its payments. After
receipt of Pacific Bank's demand letters, EstelitaLipat went to
the office of the bank's liquidator
and asked for additional time to enable her to personally settle
BEC's obligations. The bank
acceded to her request but Estelita failed to fulfill her
promise. Consequently, the real estate
mortgage was foreclosed and after compliance with the
requirements of the law the mortgaged
property was sold at public auction. On 31 January 1989, a
certificate of sale was issued to
respondent Eugenio D. Trinidad as the highest bidder.
On 28 November 1989, the spouses Lipat filed before the Quezon
City RTC a complaint
for annulment of the real estate mortgage, extrajudicial
foreclosure and the certificate of sale
issued over the property against Pacific Bank and Eugenio D.
Trinidad. The complaint alleged,
among others, that the promissory notes, trust receipt, and
export bills were all ultra vires acts of
Teresita as they were executed without the requisite board
resolution of the Board of Directors
of BEC. The Lipats also averred that assuming said acts were
valid and binding on BEC, the
same were the corporation's sole obligation, it having a
personality distinct and separate from
spouses Lipat. It was likewise pointed out that Teresita's
authority to secure a loan from Pacific
Bank was specifically limited to Mrs.Lipat's sole use and
benefit and that the real estate
mortgage was executed to secure the Lipats' and BET's
P583,854.00 loan only. In their
respective answers, Pacific Bank and Trinidad alleged in common
that petitioners Lipat cannot
evade payments of the value of the promissory notes, trust
receipt, and export bills with their
property because they and the BEC are one and the same, the
latter being a family corporation.
Trinidad further claimed that he was a buyer in good faith and
for value and that the Lipat
spouses are estopped from denying BEC's existence after holding
themselves out as a
corporation. After trial on the merits, the RTC dismissed the
complaint. The Lipats timely
appealed the RTC decision to the Court of Appeals in CA-G.R. CV
41536. Said appeal,
however, was dismissed by the appellate court for lack of merit.
The Lipats then moved for
reconsideration, but this was denied by the appellate court in
its Resolution of 23 February
2000. The Lipat spouses filed the petition for review on
certiorari.
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ISSUE:
Whether BEC and BET are separate business entities, and thus the
Lipt spouses can
isolate themselves behind the corporate personality of BEC.
RULING:
When the corporation is the mere alter ego or business conduit
of a person, the separate
personality of the corporation may be disregarded. This is
commonly referred to as the
"instrumentality rule" or the alter ego doctrine, which the
courts have applied in disregarding the
separate juridical personality of corporations. As held in one
case, where one corporation is so
organized and controlled and its affairs are conducted so that
it is, in fact, a mere instrumentality
or adjunct of the other, the fiction of the corporate entity of
the 'instrumentality' may be
disregarded. The control necessary to invoke the rule is not
majority or even complete stock
control but such domination of finances, policies and practices
that the controlled corporation
has, so to speak, no separate mind, will or existence of its
own, and is but a conduit for its
principal. The evidence on record shows BET and BEC are not
separate business entities. (1)
Estelita and Alfredo Lipat are the owners and majority
shareholders of BET and BEC,
respectively; (2) both firms were managed by their daughter,
Teresita, 19 years of age; (3) both
firms were engaged in the garment business, supplying products
to "Mystical Fashion," a U.S.
firm established by EstelitaLipat; (4) both firms held office in
the same building owned by the
Lipats; (5) BEC is a family corporation with the Lipats as its
majority stockholders; (6) the
business operations of the BEC were so merged with those of
Mrs.Lipat such that they were
practically indistinguishable; (7) the corporate funds were held
by EstelitaLipat and the
corporation itself had no visible assets; (8) the board of
directors of BEC was composed of the
Burgos and Lipat family members; (9) Estelita had full control
over the activities of and decided
business matters of the corporation; and that (10) EstelitaLipat
had benefited from the loans
secured from Pacific Bank to finance her business abroad and
from the export bills secured by
BEC for the account of "Mystical Fashion." It could not have
been coincidental that BET and
BEC are so intertwined with each other in terms of ownership,
business purpose, and
management.
Apparently, BET and BEC are one and the same and the latter is a
conduit of and
merely succeeded the former. The spouses' attempt to isolate
themselves from and hide behind
the corporate personality of BEC so as to evade their
liabilities to Pacific Bank is precisely what
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35
the classical doctrine of piercing the veil of corporate entity
seeks to prevent and remedy. BEC
is a mere continuation and successor of BET, and the Lipat
spouses cannot evade their
obligations in the mortgage contract secured under the name of
BEC on the pretext that it was
signed for the benefit and under the name of BET.
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CA-Agro Industrial Development Corporation v. Court of
Appeals
G.R. No. 90027. March 3, 1993
Davide, JR., J:
FACTS:
Petitioner and the spouses Ramon and Paula Pugao entered into an
agreement
whereby the former purchased from the latter two (2) parcels of
land. Among the terms and
conditions of the agreement were that the titles to the lots
shall be transferred to the petitioner
upon full payment of the purchase price and that the owner's
copies of the certificates of titles
thereto and that title shall be deposited shall be deposited in
a safety deposit box of any bank.
Petitioner and the Pugaos then rented Safety Deposit Box of
private respondent Security Bank
and Trust Company.Thereafter, a certain Mrs. Margarita Ramos
offered to buy from the
petitioner the two (2) lots. Mrs. Ramos demanded the execution
of a deed of sale which
necessarily entailed the production of the certificates of
title. In view thereof, Aguirre,
accompanied by the Pugaos, then proceeded to the respondent Bank
to open the safety deposit
box and get the certificates of title. However, when opened in
the presence of the Bank's
representative, the box yielded no such certificates.
ISSUE: Whether or not the contractual relation between a
commercial bank and another party is
one of a contract of rent of a safety deposit box with respect
to its contents placed by the latter
one of bailor and bailee or one of lessor and lessee?
RULING:
The contract for the rent of the safety deposit box is not an
ordinary contract of lease as
defined in Article 1643 of the Civil Code. However, We do not
fully subscribe to its view that the
same is a contract of deposit that is to be strictly governed by
the provisions in the Civil Code on
deposit; the contract in the case at bar is a special kind of
deposit. It cannot be characterized as
an ordinary contract of lease under Article 1643 because the
full and absolute possession and
control of the safety deposit box was not given to the joint
renters the petitioner and the
Pugaos. The guard key of the box remained with the respondent
Bank; without this key, neither
of the renters could open the box. On the other hand, the
respondent Bank could not likewise
open the box without the renter's key. In this case, the said
key had a duplicate which was
made so that both renters could have access to the box.
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BARTOLOME ORTIZ v. HON. UNION C. KAYANAN, in his capacity as
Judge of the Court
of First Instance of Quezon, Branch IV; ELEUTERIO ZAMORA,
QUIRINO COMINTAN,
VICENTE FERRO, AND GREGORIO PAMISARAN
G.R. No.L-32974. July 30, 1979.
FACTS:
(1) The lot in controversy was formerly the subject of Homestead
Application of Martin Dolorico
II, plaintiffs ward who died; that since then it was plaintiff
who continued the cultivation and
possession of the property, without however filing any
application to acquire title thereon;
(2) That in the Homestead Application, Martin Dolorico II named
his uncle, Martin Dolorico I as
his heir and successor in interest, so that in 1951 Martin
Dolorico I executed an affidavit
relinquishing his rights over the property in favor of
defendants QuirinoComintan and Eleuterio
Zamora, his grandson and son-in-law, respectively, and requested
the Director of Lands to
cancel the homestead application;
(3) That on the strength of the affidavit, Homestead Application
was cancelled and thereafter,
defendants Comintan and Zamora filed their respective sales
applications; that plaintiff filed his
protest on alleging that he should be given preference to
purchase the lot inasmuch as he is the
actual occupant and has been in continuous possession of the
same since 1931; and inspite of
plaintiffs opposition,
(4) Portion A of the property was sold at public auction wherein
defendant Comintan was the
only bidder; that an investigation was conducted on plaintiffs
protest by Assistant Public Lands
Inspector SerapionBauzon who submitted his report to the
Regional Land Officer, and who in
turn rendered a decision, dismissing plaintiffs claim and giving
due course to defendants sales
applications on the ground that the relinquishment of the
homestead rights of Martin Dolorico I
in favor of Comintan and Zamora is proper, the former having
been designated as successor in
interest of the original homestead applicant and that because
plaintiff failed to participate in the
public auction, he is forever barred to claim the property;
(5) That plaintiff filed a motion for reconsideration of this
decision which was denied by the
Director of Lands in his oreder dated June 10, 1959; that
finally, on appeal to the Secretary of
Agriculture and Natural Resources, the decision rendered by the
Regional Land Officer was
affirmed in toto.
(6) The CFI rendered judgment awarding one-half portion of the
property in litigation in favor of
defendant QUIRINO COMINTAN, being the successful bidder in the
public auction conducted
by the Bureau of Lands and hereby giving due course to the Sales
Application of defendant
Eleuterio Zamora over the other half.
(7) The Appellate Court affirmed the decision of the trial
court.
ISSUE:
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Whether or not petitioner is still entitled to retain for his
own exclusive benefit all the fruits of the
property for being a possessor in good faith.
RULING:
The Supreme Court held that even after his good faith ceases,
the possessor in fact can
still retain the property, pursuant to Article 546 of the New
Civil Code, until he has been fully
reimbursed for all the necessary and useful expenses made by him
on the property. This right of
retention has been considered as one of the conglomerate of
measures devised by the law for
the protection of the possessor in good faith. Its object is to
guarantee the reimbursement of the
expenses, such as those for the preservation of the property, or
for the enhancement of its utility
or productivity. It permits the actual possessor to remain in
possession while he has not been
reimbursed by the person who defeated him in the possession for
those necessary expenses
and useful improvements made by him on the thing possessed. The
principal characteristic of
the right of retention is its accessory character. It is
accessory to a principal obligation.
Considering that the right of the possessor to receive the
fruits terminates when his good faith
ceases, it is necessary in order that this right to retain may
be useful, to concede to the creditor
the right to secure reimbursement from the fruits of the
property by utilizing its proceeds for the
payment of the interest as well as the principal of the debt
while he remains in possession. This
right of retention of the property by the creditor, according to
Scaevola, in the light of the
provisions of Article 502 of the Spanish Civil Code, is
considered not a coercive measure to
oblige the debtor to pay, depriving him temporarily of the
enjoyment of the fruits of his property,
but as a means of obtaining compensation for the debt.
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YHT Realty, Lainez, Payamvs CA and McLoughlin
G.R. No. 126780. February 17, 2007
FACTS:
McLoughlin was an Australian businessman-philanthropist who met
a certain Bhrunilda
Mata Tan and befriended him. Tan convinced McLoughlin to
transfer from Sheraton Hotel and
stay at Tropicana Hotel during trips to thePhilippines.
Petitioners Lainez, as manager, Payam
and Danilo Lopez, had the custody of the keys for the safety
deposit boxes, were all employees
at Tropicana.
McLoughlin started staying at said Tropicana Hotel and
registered therein from
December 1984 to 1987. On October 30, 1987, McLoughlin arrived
from Australia and
registered with Tropicana. He rented safety deposit box which
could only be opened through the
use of 2 keys, one of which is given to the registered guest,
and the other remaining in the
possession of the management of the hotel.
When a registered guest wished to open his safety deposit box,
he alone could
personally request the management who then would assign one of
its employees to accompany
the guest and assist him in opening the safety deposit box with
the two keys. When McLoughlin
went for a trip in Hong Kong and without checking out the hotel,
he left some US and Australian
dollars in the safety deposit box.
Upon his return, he went back to Australia; there he noticed
that some USD 5000 and
jewellery he bought from Hong Kong were missing. When he came
back to the Philippines,
again registered and rented a safety deposit box with Tropicana,
placing therein some USD
15000, AUD 10000 and some important documents. He requested to
open the safety deposit
box, but he found out that USD 2000, and AUD 4500 were missing.
He confronted Lainez and
Payam; they told him that Tan was able to open the safety
deposit box. Tan admitted to the said
actuation and added that she was assisted by Lainez, Lopez and
Payam. Lopez wrote a PN and
requested Tan to sign it, which the latter did. Despite the
execution of the PN, McLoughlin
insisted that it must be the hotel who must assume
responsibility for the loss he suffered.
However, Lopez refused to accept the responsibility relying on
the conditions for renting the
deposit box, which held free and blameless Tropicana for any
loss in the contents of the safety
deposit box.
ISSUE: WON a hotel may evade liability for the loss of items
left with it for safekeeping by its
guests, by having these guests execute written waivers holding
the establishment or its
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employees free from blame for such loss in light of Article 2003
of the Civil Code which voids
such waivers?
RULING:
No. Petitioners were directed, jointly and severally, to pay
private respondent.
Article 2003 provides that the hotel-keeper cannot free himself
from responsibility by
posting notices to the effect that he is not liable for the
articles brought by the guest. Any
stipulation between the hotel-keeper and the guest whereby the
reasonability of the former as
set for the in articles 1998 to 2001 is suppressed or diminished
shall be void. The hotel business
like the common carrier's business is imbued with public
interest. Catering to the public,
hotelkeepers are bound to provide not only lodging for hotel
guests and security to their persons
and belongings. The twin duty constitutes the essence of the
business. The law in turn does not
allow such duty to the public to be negated or diluted by any
contrary stipulation in so-called
"undertakings" that ordinarily appear in prepared forms imposed
by hotel keepers on guests
for their signature.
In an early case, to hold hotel-keepers or innkeepers liable for
the effects of their guests,
it is not necessary that they be actually delivered to the
innkeepers or their employees. It is
enough that such effects are within the hotel or inn. With
greater reason should the liability of
the hotelkeeper be enforced when the missing items are taken
without the guests knowledge
and consent from a safety deposit box provided by the hotel
itself.
The undertaking manifestly contravened Article 2003 of the Civil
Code it allowed
Tropicana to be released from liability arising from any loss in
the contents of the safety deposit
box for any cause whatsoever. Evidently, the undertaking was
intended to bar any claim against
Tropicana for any loss of the contents of the safety deposit box
whether or not negligence was
incurred by Tropicana or its employees.
The New Civil Code is explicit that the responsibility of the
hotel-keeper shall extend to
loss of, or injury to, the personal property of the guests even
if caused by servants or employees
of the keepers of hotels or inns as well as by strangers, except
as it may proceed from any force
majeure. It is the loss through force majeure that may spare the
hotel-keeper from liability. In the
case at bar, there is no showing that the act of the thief or
robber was done with the use of arms
or through an irresistible force to qualify the same as force
majeure.
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GUARANTY
Dio vs. Court of Appeals (1992)
G.R. No. 89775. November 26, 1992
FACTS:
In 1977, UyTiam Enterprises and Freight Services (UTEFS), thru
its representative
UyTiam, applied for and obtained credit accommodations from
Metrobank in the sum of
Php700,000. This was secured by Continuing Suretyships
separately executed by petitioners
Norberto Uy (who agreed to pay Php300,000) and Jacinto Dio (who
bound himself liable up to
Php800,000). UyTiam paid the obligation under this letter of
credit in 1977. UTEFS obtained
another credit accommodation in 1978, which was likewise settled
before he applied and
obtained another in 1979 in the sum of Php815,600. This sum
covered UTEFS purchase of
fertilizers from Planters Producst. Uy and Dio did not sign the
application for this credit and
were not asked to execute suretyship or guarantee. UTEFS
executed a trust receipt whereby it
agreed to deliver to Metrobank the goods in the event of
non-sale, and if sold, the proceeds will
be delivered to Metrobank. However, UTEFS did not comply with
its obligation. As a result,
Metrobank demanded payment from UTEFS and the sureties,
Uy&Dio. The sureties refused to
pay on the ground that the obligation for which they executed
the continuing suretyship
agreement has been paid. RTC ruled in favor of the petitioners,
CA affirmed.
ISSUE: Whether or not the petitioners are liable for payment of
the 1979 transaction under the
continuing suretyship agreement they executed in 1977. Assuming
that they are, what is the
extent of their liability.
RULING:
The Supreme Court held that Uy&Dio are liable. The agreement
they executed in
1977 is a continuing surety-ship, one which is not limited to a
single transaction but which
contemplates a succession of liabilities, for which, as they
accrue, the guarantor becomes liable.
The agreement that petitioners signed expressly provided that it
is a continuing guaranty and
shall be in full force and effect until written notice to the
bank that it has been revoked by the
surety. As to the 2nd issue, petitioners are only liable up to
the maximum limit fixed in the
continuing suretyship agreements (Php800,000 for Dio and
Php300,000 for Uy). The law is
clear that a guarantor may bind himself for less, but not for
more than the principal debtor, both
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42
as regards the amount and the onerous nature of the conditions
(Art. 2054). CA decision
ordering petitioners to pay P2,397,883.68 which represents the
amount due inclusive of interest
and charges, is modified.
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Escano vs. Ortigas
G.R. no. 151953, June 29, 2007
FACTS:
On 28 April 1980, Private Development Corporation of the
Philippines (PDCP) entered
into a loan agreement with Falcon Minerals, Inc., whereby PDCP
agreed to make available and
lend to Falcon the amount of US$320,000.00, for specific
purposes and subject to certain terms
and conditions. On the same day, three stockholders-officers of
Falcon, namely: respondent
Rafael Ortigas, Jr., George A. Scholey and George T. Scholey
executed an Assumption of
Solidary Liability whereby they agreed to assume in their
individual capacity, solidary liability
with Falcon for the due and punctual payment of the loan
contracted by Falcon with PDCP. In
the meantime, two separate guaranties were executed to guarantee
the payment of the same
loan by other stockholders and officers of Falcon, acting in
their personal and individual
capacities. One Guaranty was executed by petitioner Salvador
Escao, while the other by
petitioner Mario M. Silos, Ricardo C. Silverio, Carlos L.
Inductivo and Joaquin J. Rodriguez.
ISSUE:
Whether or not the obligation to repay is solidary
RULING:
When there is a concurrence of two or more creditors or of two
or more debtors in one
and the same obligation, art. 1207 of the NCC states that among
them, there is a solidary
liability only when the obligation expressly so states, or when
the law or the nature of the
obligation requires solidarity. Art.1210 supplies further
caution against the broad interpretation
of solidarity by providing the indivisibility of an obligation
does not necessarily give rise to
solidarity. Nor does solidarity of itself imply indivisibility.
This provision established that in the
case of concurrence of two or more creditors or of two or more
debtors in one and the same
obligation, and in the absence of express and indubitable terms
characterizing the obligation as
solidary, the presumption is that the obligation is only join.
It thus becomes incumbent upon the
party alleging that the obligation is indeed solidary in
character to prove such fact with a
preponderance of evidence. Note that art. 2047 itself
specifically calls for the application of the
provision on joint and solidary obligation to surety-ship
contracts. Art.1217 of the NCC thus
comes into play, recognizing the right of reimbursement from a
co-debtor in favor of the one
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44
who paid. However, a significant distinction still lies between
a joint and several debtors, on one
hand, and a surety on the other hand. Solidarity signifies that
the creditor can compel anyone of
the joint and several debtors or the surety alone to answer for
entirety of the principal debt. The
difference lies in the respective faculties of the joint and
several debtors and the surety to seek
reimbursement for the sums they paid out to the creditor.
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JOSE C. TUPAZ IV and PETRONILA C. TUPAZ v. THE COURT OF APPEALS
and BANK
OF THE PHILIPPINE ISLANDS
G.R. No. 145578. November 18, 2005
CARPIO, J.:
FACTS:
Jose Tupaz and PetronilaTupaz were Vice-President for Operations
and Vice-
President/Treasurer, respectively, of El Oro Corporation. El Oro
Corporation had a contract with
the PH Army to supply the latter with survival bolos. To finance
the purchases of the raw
materials for the bolos, the petitioners (on behalf of El Oro)
applied with BPI for 2 commercial
letters of credit.
The letters of credit were in favor of El Oros suppliers,
Tanchaoco Incorporated and
Maresco Corporation. BPI granted the application and issued the
letters of credit for
P564,871.05 and P294,0