Cred Trans Digest.docx

Chee Kiong Yam v. Malik GR No-50550-52 October 31, 1979 Facts: Petitioners filed a petition for certiorari, prohibition and mandamus with preliminary injunction against the respondent Judge Malik who ruled that several cases of estafa filed against the petitioners should be admitted for trial in his sala. It must be noted that all complainants admitted that the money which the petitioners did not return were obtained from them by the latter in a form of loans. Issue: Can there be a crime of estafa for non-payment of a loan? Held: No. In order that a person be convicted of Swindling (Estafa) under Art. 315 of the Revised Penal Code, it must be proven that he has the obligation to deliver or return the same money, goods or personal property that he received. Petitioners had no such obligation to return the same money, i.e., the bills or coins, which they received from private respondents. This is so because as clearly stated in criminal complaints, the related civil complaints and the supporting sworn statements, the sums of money that petitioners received were loans. In U.S. vs. Ibañez, 19 Phil. 559, 560 (1911), the Supreme Court held that it is not estafa for a person to refuse to pay his debt or to deny its existence. It is the opinion of the Court that when the relation is purely that of debtor and creditor, the debtor can not be held liable for the crime of estafa, under said article, by merely refusing to pay or by denying the indebtedness. It appeared that respondent judge failed to appreciate the distinction between the two types of loan, mutuum and commodatum, when he performed the questioned acts. He mistook the transaction between petitioners and private respondents to be commodatum wherein the borrower does not acquire ownership over the thing borrowed and has the duty to return the same thing to the lender.

Producers Bank of the Phil v. CA

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” for brevity). 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 month’s time. With this, Mrs. Vivies, Sanchez and a certain Estrella Dumagpi, 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 client’s money. Doronilla issued another check for P212,000.00 in private respondent’s 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: WON THE TRANSACTION BETWEEN THE DORONILLA AND RESPONDENT VIVES WAS ONE OF SIMPLE LOAN. HELD: 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.

Tolentino v. Chiam Tolentino purchased land from Luzon Rice Mills for Php25,000 payable in three installments. Tolentino defaulted on the balance so the owner sent a letter of demand to him. To pay, Tolentino applied for loan from Gonzalez on condition that he would execute a pacto de retro sale on the property in favor of Gonzalez. Upon maturation of loan, Tolentino defaulted so Gonzalez is demanding recovery of the land. Tolentino contends that the pacto de retro sale is a mortgage and not an absolute sale. Issue: WoN the contract between Gonzales and Tolentino is a pacto de retro sale or a mortgage.

Held: It has been the uniform theory of this court, due to the severity of a contract of pacto de retro, to declare the same to be a mortgage and not a sale whenever the interpretation of such a contract justifies that conclusion. There must be something, however, in the language of the contract or in the conduct of the parties which shows clearly and beyond doubt that they intended the contract to be a "mortgage" and not a pacto de retro. There is not a word, a phrase, a sentence or a paragraph in the entire record, which justifies this court in holding that the said contract of pacto de retro is a mortgage and not a sale with the right to repurchase. Article 1281 of the Civil Code provides: "If the terms of a contract are clear and leave no doubt as to the intention of the contracting parties, the literal sense of its stipulations shall be followed." Article 1282 provides: "in order to judge as to the intention of the contracting parties, attention must be paid principally to their conduct at the time of making the contract and subsequently thereto.

LIWANAG v. CA G.R. No. 114398; October 24, 1997

FACTS: Petitioner Carmen Liwanag and a certain Thelma Tabligan went to the house of complainant Isidora Rosales (Rosales) and asked her to join them in the business of buying and selling cigarettes. Convinced of the feasibility of the venture, Rosales readily agreed. Under their agreement, Rosales would give the money needed to buy the cigarettes while Liwanag and Tabligan would act as her agents, with a corresponding 40% commission to her if the goods are sold; otherwise the money would be returned to Rosales. Consequently, Rosales gave several cash advances to Liwanag and Tabligan amounting to P633,650.00 Alarmed that Liwanag was no longer visiting her regarding their business and believing that the amounts she advanced were being misappropriated, Rosales filed a case of estafa against Liwanag. Liwanag advances the theory that the intention of the parties was to enter into a contract of partnership, wherein Rosales would contribute the funds while she would buy and sell the cigarettes, and later divide the profits between them. She also argues that the transaction can also be interpreted as a simple loan, with Rosales lending to her the amount stated on an installment basis. RTC found Liwanag guilty for the crime of estafa. The Court of Appeals affirmed the lower court’s decision

ISSUE: Whether Liwanag can be acquitted from the crime of estafa because she and Rosales formed a partnership

HELD: No, Liwanag could not be acquitted from the crime of estafa. The Supreme Court held that Estafa is a crime committed by a person who defrauds another causing him to suffer damages, by means of unfaithfulness or abuse of confidence, or of false pretenses or fraudulent acts. In the case at hand, even assuming that a contract of partnership was indeed entered into by and between the parties, we have ruled that when money or property have been received by a partner for a specific purpose (such as that obtaining in the instant case) and he later misappropriated it, such partner is guilty of estafa.

SAURA IMPORT & EXPORT CO., INC., plaintiff-appellee, vs. DEVELOPMENT BANK OF THE PHILIPPINES, defendant-appellant. G.R. No. L-24968 | 1972-04-27 DOCTRINE: An accepted promise to deliver something, by way of commodatum or simple loan is binding upon the parties, but the commodatum or simple loan itself shall not be perfected until the delivery of the object of the contract. FACTS: Saura, Inc. applied to the RFC, for an industrial loan of P500,000.00 which approved by the latter and to be secured by a mortgage. Loan documents were executed: the promissory note and the corresponding deed of mortgage, which was duly registered. Subsequently in a meeting of RFC board to which the President of Saura, Inc. was present, the loan was reduced to 300,000. Saura Inc. however that the loan of 500,000 be approved. RFC accepted and approved the loan application subject to some conditions which Saura admitted it could not comply with. Correspondence and negotiations came to a halt and Saura, Inc. did not pursue further and instead requested the cancellation of mortgage and was delivered to the President of Saura, Inc. Almost nine years after the mortgage in favor of RFC was cancelled at the request of Saura, Inc., the latter commenced the present suit for damages, alleging failure of RFC (DBP) to comply with its obligation to release the proceeds of the loan applied for and approved, thereby preventing the plaintiff from completing or paying contractual commitments it had entered into, in connection with its jute mill project. ISSUES 1. Whether there was there a perfected consensual contract? 2. Whether there was a real contract of loan which would warrant recovery of damages arising out of breach of such contract? HELD 1. Yes. There was indeed a perfected consensual contract, as recognized in Article 1934 of the Civil Code, which provides: An accepted promise to deliver something, by way of commodatum or simple loan is binding upon the parties, but the commodatum or simple loan itself shall not be perfected until the delivery of the object of the contract. There was undoubtedly offer and acceptance in this case: the application of Saura, Inc. for a loan of P500,000.00 was approved by resolution of the defendant, and the corresponding mortgage was executed and registered. But this fact alone falls short of resolving the basic claim that the defendant failed to fulfill its obligation and the plaintiff is therefore entitled to recover damages. 2. None. Evidently Saura, Inc. realized that it could not meet the conditions required by RFC, and so wrote its letter asking that out of the loan agreed upon the sum of P67,586.09 be released "for raw materials and labor." This was a deviation from the terms laid down in Resolution No. 145 and embodied in the mortgage contract, implying as it did a diversion of part of the proceeds of the loan to purposes other than those agreed upon. When RFC turned down the request in its letter the negotiations which had been going on for the implementation of the agreement reached an impasse. Saura, Inc. obviously was in no position to comply with RFC's conditions. So instead of doing so and insisting that the loan be released as agreed upon, Saura, Inc. asked that the mortgage be cancelled. The action thus taken by both parties was in the nature of mutual desistance — what Manresa terms "mutuo disenso" — which is a mode of extinguishing obligations. It is a concept that derives from the principle that since mutual agreement can create a contract, mutual disagreement by the parties can cause its extinguishment.

Roño v. Gomez Facts: On October 5, 1944, Cristobal Roño received as a loan four thousand pesos in Japanese fiat money from Jose L. Gomez. He informed the later that he would use the money to purchase a jitney; and he agreed to pay that debt one year after date in the currency then prevailing. He signed a promissory note of the following tenor: For value received, I promise to pay one year after date the sum of four thousand pesos (4,000) to Jose L. Gomez. It is agreed that this will not earn any interest and the payment It is agreed that this will not earn any interest and the payment prevailing by the end of the stipulated period of one year. In consideration of this generous loan, I renounce any right that may come to me by reason of any postwar arrangement, of privilege that may come to me by legislation wherein this sum may be devalued. I renounce flatly and absolutely any condition, term right or privilege which in any way will prejudice the right engendered by this agreement wherein Atty. Jose L. Gomez will receive by right his money in the amount of P4,000. I affirm the legal tender, currency or any medium of exchange, or money in this sum of P4,000 will be paid by me to Jose L. Gomez one year after this date, October 5, 1944. On October 15, 1945, i.e., after the liberation, Roño was sued for payment in the Laguna Court of First Instance. His main defense was his liability should not exceed the equivalent of 4,000 pesos "mickey mouse" money — and could not be 4,000 pesos Philippine currency, because the contract would be void as contrary to law, public order and good morals. Issue: WoN Roño will haveto pay four thousand pesos in Philippine currency. Held: Yes. One basic principle of the law on contracts of the Civil Code is that "the contracting parties may establish any pacts, clauses and conditions they may deem advisable, provided they are not contrary to law, morals or public order." (Article 1255.) Another principle is that "obligations arising from contracts shall have the force of law between the contracting parties and must be performed in accordance with their stipulations" (Article 1091). Invoking the above proviso, Roño asserts this contract is contrary to the Usury law, because on the basis of calculations by Government experts he only received the equivalent of one hundred Philippine pesos and now he is required to disgorge four thousand pesos or interest greatly in excess of the lawful rates. But he is not paying interest. Precisely the contract says that the money received "will not earn any interest." Furthermore, he received four thousand pesos; and he is required to pay four thousand pesos exactly. The increased intrinsic value and purchasing power of the current money is consequence of an event (change of currency) which at the time of the contract neither party knew would certainly happen within the period of one year. They both elected to subject their rights and obligations to that contingency. If within one year another kind of currency became legal tender, Gomez would probably get more for his money. If the same Japanese currency continued, he would get less, the value of Japanese money being then on the downgrade.

Nepomuceno v. Narciso Facts: On November 14, 1938, appellant Mariano Nepomuceno executed a mortgage in favor of the appellees on a parcel of land situated in the municipality of Angeles, Province of Pampanga, to secure the payment within the period of seven years from the date of the mortgage of the sum of P24,000 together with interest thereon at the rate of 8 per cent per annum. On September 30, 1943, that is to say, more than two years before the maturity of said mortgage, the parties executed a notarial document entitled "Partial Novation of Contract" whereby they modified the terms of said mortgage as follows: (1) (2) (3) (4)

From December 8, 1941, to January 1, 1944, the interest on the mortgage shall be at 6 per cent per annum, unpaid interest also paying interest also paying interest at the same rate. Xxxxxxx Xxxxxxx While the war goes on, the mortgagor, his administrators or assigns, cannot redeem the property mortgaged.

Appellants contend that the stipulation in the contract of September 30, 1943, that "while the war goes on the mortgagor, his administrators or assigns cannot redeem the property mortgaged," is against public policy and therefore null and void. They argue that "it would certainly be against public policy and a restraint on the freedom of commerce to compel a debtor not to release his property from a lien — even if he wanted to by the payment of the indebtedness — while the war goes on, which was undoubtedly of a very uncertain duration." Issue: WoN the stipulation in their contract that the mortgagor shall not pay off the mortgage while the war went on is against public policy. Held: We find nothing immoral or violative of public order in that stipulation. The mortgagees apparently did not want to have their prewar credit paid with Japanese military notes, and the mortgagor voluntarily agreed not to do so in consideration of the reduction of the rate of interest. It was a perfectly equitable and valid transaction, in conformity with the provision of the Civil Code hereinabove quoted. Appellants were bound by said contract and appellees were not obligated to receive the payment before it was due. Hence the latter had reason not to accept the tender of payment made to them by the former.

EQUITABLE PCI BANK V. NG SHEUNG NGOR (2007) FACTS: Respondent Ng Sheung Ngor, Ken Appliance Division, Inc and Benjamin E. Go filed an action for annulment and/or reformation of documents and contracts against petitioner Equitable PCI Bank (Equitable) and its employees, Aimee Yu and Bejan Lionel Apas. 1. Respondents claimed that Equitable induced them to avail of its peso and dollar credit facilities by offering low interest rates so they accepted the propodal and signed the bank’s printed promissory notes on various dates beginning 1996. But they were unaware that the documents contain identical escalation clause granting Equitable authority to increase interest rates without their consent 2. Equitable asserted that respondents knowingly accepted all the terms and conditions contained in the promissory notes, also they continuously availed of and benefited from Equitable’s credit facilities for five years. 3. The trial court upheld the validity of the promissory notes however it invalidated the escalation clause for it violated the principle of mutuality of contracts. It also took judicial notice of the steep depreciation of the peso during the intervening period and declared the existence of extraordinary deflation 4. RTC ordered the use of the 1996 dollar exchange rate in computing respondent’s dollar denominated loans and awarded moral and exemplary damages. 5. Equitable filed an MR, while respondents prayed for the issuance of a writ of execution. 6. RTC issued an omnibus order denying MR and ordered the issuance of the motion of a writ of execution in favor of respondents. 7. Three real properties of Equitable were levied upon and were sold in a public auction. Respondents were the highest bidder and certificates of sale were issued. 8. Equitable filed a petition for certiorari with an application for an injunction in the CA to enjoin the implementation and execution of the omnibus order. CA granted Equitable’s application for injunction was granted. 9. Despite the injunction, Equitable’s properties previously levied were sold in a public auction to respondent. Equitable moved to annul the auction sale. CA dismissed the petition for certiorari, hence this petition. ISSUE: What is the relationship between the bank and its depositor? HELD: The relationship between the bank and its depositor is that of creditor and debtor. For this reason, a bank has the right to set off the deposit in its hands for the payment of a depositor’s indebtedness. Respondent indeed defaulted on their obligation. For this reason, Equitable had the option to exercise its legal right to set-off or compensation. However, the RTC mistakenly (or, as it now appears, deliberately) concluded that Equitable acted “fraudulently or in bad faith or in wanton disregard” of its contractual obligations despite the absence of proof. The undeniable fact was that, whatever damage respondents sustained was purely the consequence of their failure to pay their loans. There was therefore absolutely no basis for the award of moral damages to them.

PAN PACIFIC SERVICE CONTRACTORS, INC. and RICARDO F. DEL ROSARIO, Petitioners, vs. EQUITABLE PCI BANK (formerly THE PHILIPPINE COMMERCIAL INTERNATIONAL BANK), Respondent. Facts: Pan Pacific Service Contractors, Inc. (Pan Pacific) is engaged in contracting mechanical works on airconditioning system. On 24 November 1989, Pan Pacific through its President, Ricardo F. Del Rosario (Del Rosario), entered into a contract of mechanical works (Contract) with respondent for P20,688,800. Pan Pacific and respondent also agreed on nine change orders for P2,622,610.30. Thus, the total consideration for the whole project was P23,311,410.30. The Contract stipulated, among others, that Pan Pacific shall be entitled to a price adjustment in case of increase in labor costs and prices of materials under paragraphs 70.1 and 70.2 of the "General Conditions for the Construction of PCIB Tower II Extension" (the escalation clause). Pursuant to the contract, Pan Pacific commenced the mechanical works in the project site, the PCIB Tower II extension building in Makati City. The project was completed in June 1992. Respondent accepted the project on 9 July 1992. In 1990, labor costs and prices of materials escalated. On 5 April 1991, in accordance with the escalation clause, Pan Pacific claimed a price adjustment of P5,165,945.52. Respondent’s appointed project engineer, TCGI Engineers, asked for a reduction in the price adjustment. To show goodwill, Pan Pacific reduced the price adjustment toP4,858,548.67. On 28 April 1992, TCGI Engineers recommended to respondent that the price adjustment should be pegged atP3,730,957.07. TCGI Engineers based their evaluation of the price adjustment on the following factors: 1. Labor Indices of the Department of Labor and Employment. 2. Price Index of the National Statistics Office. PD 1594 and its Implementing Rules and Regulations as amended, 15 March 1991. Shipping Documents submitted by PPSCI. Sub-clause 70.1 of the General Conditions of the Contract Documents. Pan Pacific contended that with this recommendation, respondent was already estopped from disclaiming liability of at least P3,730,957.07 in accordance with the escalation clause. Due to the extraordinary increases in the costs of labor and materials, Pan Pacific’s operational capital was becoming inadequate for the project. However, respondent withheld the payment of the price adjustment under the escalation clause despite Pan Pacific’s repeated demands. Instead, respondent offered Pan Pacific a loan of P1.8 million. Against its will and on the strength of respondent’s promise that the price adjustment would be released soon, Pan Pacific, through Del Rosario, was constrained to execute a promissory note in the amount of P1.8 million as a requirement for the loan. Pan Pacific also posted a surety bond. The P1.81 million was released directly to laborers and suppliers and not a single centavo was given to Pan Pacific. Pan Pacific made several demands for payment on the price adjustment but respondent merely kept on promising to release the same. Meanwhile, the P1.8 million loan matured and respondent demanded payment plus interest and penalty.

Pan Pacific refused to pay the loan. Pan Pacific insisted that it would not have incurred the loan if respondent released the price adjustment on time. Pan Pacific alleged that the promissory note did not express the true agreement of the parties. Pan Pacific maintained that the P1.8 million was to be considered as an advance payment on the price adjustment. Therefore, there was really no consideration for the promissory note; hence, it is null and void from the beginning. Respondent stood firm that it would not release any amount of the price adjustment to Pan Pacific but it would offset the price adjustment with Pan Pacific’s outstanding balance of P3,226,186.01, representing the loan, interests, penalties and collection charges. Pan Pacific refused the offsetting but agreed to receive the reduced amount of P3,730,957.07 as recommended by the TCGI Engineers for the purpose of extrajudicial settlement, less P1.8 million and P414,942 as advance payments. On 6 May 1994, petitioners filed a complaint for declaration of nullity/annulment of the promissory note, sum of money, and damages against the respondent with the RTC. Issue: Whether the CA, in awarding the unpaid balance of the price adjustment, erred in fixing the interest rate at 12% instead of the 18% bank lending rate. Held: Under Article 2209 of the Civil Code, the appropriate measure for damages in case of delay in discharging an obligation consisting of the payment of a sum of money is the payment of penalty interest at the rate agreed upon in the contract of the parties. In the absence of a stipulation of a particular rate of penalty interest, payment of additional interest at a rate equal to the regular monetary interest becomes due and payable. Finally, if no regular interest had been agreed upon by the contracting parties, then the damages payable will consist of payment of legal interest which is 6%, or in the case of loans or forbearances of money, 12% per annum. It is only when the parties to a contract have failed to fix the rate of interest or when such amount is unwarranted that the Court will apply the 12% interest per annum on a loan or forbearance of money. The written agreement entered into between petitioners and respondent provides for an interest at the current bank lending rate in case of delay in payment and the promissory note charged an interest of 18%. To prove petitioners’ entitlement to the 18% bank lending rate of interest, petitioners presented the promissory note prepared by respondent bank itself. This promissory note, although declared void by the lower courts because it did not express the real intention of the parties, is substantial proof that the bank lending rate at the time of default was 18% per annum. Absent any evidence of fraud, undue influence or any vice of consent exercised by petitioners against the respondent, the interest rate agreed upon is binding on them.