CREDIT TRANSACTIONS

GALANZA, Frances Ann I.

2014-0241
1. Almeda v. Court of Appeals, G.R 113412, April 17, 1996, 256 SCRA 292, 3022.
DOCTRINE :
-

INTEREST ARE REQUIRED TO BE EXPRESSLY STIPULATED IN

WRITING. 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.

While the Usury Law ceiling on interest rates was lifted by C.B. Circular 905,
nothing in the said circular could possibly be read as granting respondent bank
carte blanche authority to raise interest rates to levels which would either enslave
its borrowers or lead to a hemorrhaging of their assets. Borrowing represents a
transfusion of capital from lending institutions to industries and businesses in
order to stimulate growth. This would not, obviously, be the effect of PNBs
unilateral and lopsided policy regarding the interest rates of petitioners
borrowings in the instant case.

FACTS :
Philippine National Bank granted to the spouses Almeda several loan/credit
accommodations totaling P18.0 Million pesos payable in six years at an interest rate of 21
% per annum. The spouses Almeda executed a Real Estate Mortgage Contract covering a
3,500 square meter parcel of land, together with the building erected thereon to secure the
loan. A credit agreement embodying the terms and conditions of the loan was executed
between the parties.
Between 1981 and 1984, petitioners made several partial payments on the loan totaling
P7,735,004.66, a substantial portion of which was applied to accrued interest. On March
31, 1984, respondent bank, over petitioners protestations, raised the interest rate to 28%,
allegedly pursuant to Section III-c (1) of its credit agreement. Said interest rate thereupon
increased from an initial 21% to a high of 68% between March of 1984 to September,
1986.
Invoking the Law on Mandatory Foreclosure the PNB countered by ordering the

extrajudicial foreclosure of petitioners mortgaged properties and scheduled an auction

sale for March 14, 1989. Upon motion by petitioners, however, the lower court, on April
5, 1989, granted a supplemental writ of preliminary injunction, staying the public auction
of the mortgaged property.
ISSUE : Whether or not respondent bank was authorized to raise its interest rates from
21% to as high as 68% under the credit agreement
HELD :
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.
Respondent banks reliance on C.B. Circular No. 905, Series of 1982 did not
authorize the bank, or any lending institution for that matter, to progressively increase
interest rates on borrowings to an extent which would have made it virtually impossible
for debtors to comply with their own obligations. True, escalation clauses in credit
agreements are perfectly valid and do not contravene public policy. Such clauses,
however, (as are stipulations in other contracts) are nonetheless still subject to laws and
provisions governing agreements between parties, which agreements - while they may be
the law between the contracting parties - implicitly incorporate provisions of existing law.
Consequently, while the Usury Law ceiling on interest rates was lifted by C.B. Circular
905, nothing in the said circular could possibly be read as granting respondent bank carte
blanche authority to raise interest rates to levels which would either enslave its borrowers
or lead to a hemorrhaging of their assets. Borrowing represents a transfusion of capital
from lending institutions to industries and businesses in order to stimulate growth. This
would not, obviously, be the effect of PNBs unilateral and lopsided policy regarding the
interest rates of petitioners borrowings in the instant case.

2. Medel v. CA, G.R 131622, Nov. 27, 1998. 299 SCRA 4813.
DOCTRINE : A CB Circular cannot repeal a law. Only a law can repeal another
law.
FACTS:
Defendants obtained a loan from Plaintiff in the amount P50, 000.00, payable in 2
months and executed a promissory note. Plaintiff gave only the amount of P47, 000.00 to
the borrowers and retained P3, 000.00 as advance interest for 1 month at 6% per month.
Defendants obtained another loan from plaintiff in the amount of P90, 000.00,
payable in 2 months, at 6% interest per month. They executed a promissory note to
evidence the loan and received only P84, 000.00 out of the proceeds of the loan.
For the third time, Defendants secured from Plaintiff another loan in the amount of P300,
000.00, maturing in 1 month, and secured by a real estate mortgage. They executed a
promissory note in favor of the Plaintiff. However, only the sum of P275, 000.00, was
given to them out of the proceeds of the loan.
Upon maturity of the three promissory notes, Defendants failed to pay the indebtedness.
Defendants with all their previous unpaid loans totalling P440, 000.00, sought from
Plaintiff another loan in the amount of P60, 000.00, bringing their indebtedness to a total
of P500,000.00. They executed another promissory note in favor of Plaintiff to pay the
sum of P500, 000.00 with a 5.5% interest per month plus 2% service charge per annum,
with an additional amount of 1% per month as penalty charges.
The Defendants failed to pay the indebtedness which prompted the Plaintiffs to file with
the RTC a complaint for collection of the full amount of the loan including interests and
other charges.
Issue: WON the stipulated 5.5% interest rate per month on the loan in the sum of P500,
000.00 is usurious.
Held: No.
A stipulated rate of interest at 5.5% per month on the P500, 000.00 loan is excessive,
iniquitous, unconscionable and exorbitant, but it cannot be considered usurious because
Central Bank Circular No. 905 has expressly removed the interest ceilings prescribed by
the Usury Law and that the Usury Law is now legally inexistent.
Jurisprudence provides that CB Circular did not repeal nor in a way amend the Usury
Law but simply suspended the latters effectivity (Security Bank and Trust Co vs RTC).
Usury has been legally non-existent in our jurisdiction. Interest can now be charged as
lender and borrower may agree upon.

3. Solangon v. Salazar, G.R 125944, June 29, 2001, 360 SCRA 379, 384-385
DOCTRINE : While the Usury Law ceiling on interest rates was lifted by C.B. Circular
No. 905, nothing in the said circular grants lenders carte blanche authority to raise
interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging
of their assets.
FACTS :
Plaintiffs-appellants executed a deed or real estate mortgage in which they mortgaged a
parcel of land situated in Sta. Maria, Bulacan, in favor of the defendant-appellee, to
secure payment of a loan of P60,000.00 payable within a period of four (4) months, with
interest thereon at the rate of 6% per month.
The plaintiffs-appellants executed a deed of real estate mortgage in which they
mortgaged the same parcel of land to the defendant-appellee, to secure payment of a loan
of P136,512.00, payable within a period of one (1) year, with interest thereon at the legal
rate.
The plaintiffs-appellants executed a deed of real estate mortgage in which they
mortgaged the same parcel of land in favor of defendant-appellee, to secure payment of a
loan in the amount of P230,000.00 payable within a period of four (4) months, with
interest thereon at the legal rate.
This action was initiated by the plaintiffs-appellants to prevent the foreclosure of the
mortgaged property, alleging that they obtained only one loan form the defendantappellee, and that was for the amount of P60,000.00, the payment of which was secured
by the first of the above-mentioned mortgages. The subsequent mortgages were merely
continuations of the first one, which is null and void because it provided for
unconscionable rate of interest. Moreover, the defendant-appellee assured them that he
will not foreclose the mortgage as long as they pay the stipulated interest upon maturity
or within a reasonable time thereafter. They have already paid the defendant-appellee
P78,000.00 and tendered P47,000.00 more, but the latter has initiated foreclosure
proceedings for their alleged failure to pay the loan P230,000.00 plus interest.
On the other hand, the defendant-appellee Jose Avelino Salazar claimed that the abovedescribed mortgages were executed to secure three separate loans of P60,000.00
P136,512.00 and P230,000.00, and that the first two loans were paid, but the last one was
not. He denied having represented that he will not foreclose the mortgage as long as the
plaintiffs-appellants pay interest.
ISSUE : Whether or not the stipulated interest of 6% per month is Unconscionable.
RULING : Yes.
In Medel v. Court of Appeals this court had the occasion to rule on this question whether or not the stipulated rate of interest at 5.5% per month on a loan amounting to

P500,000.00 is usurious. While decreeing that the aforementioned interest was not
usurious, this Court held that the same must be equitably reduced for being iniquitous,
unconscionable and exorbitant, thus:
We agree with petitioners that the stipulated rate of interest at 5.5% per month on
the P500,000.00 loan is excessive, iniquitous, unconscionable and exorbitant.
However, we can not consider the rate usurious because this Court has consistently held
that Circular No. 905 of the Central Bank, adopted on December 22, 1982, has expressly
removed the interest ceilings prescribed by the Usury Law and that the Usury Law is now
legally inexistent.
In Security Bank and Trust Company vs. Regional Trial Court of Makati, Branch 61 the
Court held that CB Circular No. 905 did not repeal nor in any way amend the Usury Law
but simply suspended the latters effectivity. Indeed, we have held that a Central Bank
Circular can not repeal a law. Only a law can repeal another law
That they are required to pay the stipulated interest rate of 6% per month or 72% per
annum which is definitely outrageous and inordinate. It is more consonant with justice
that the said interest rate be reduced equitably. An interest of 12% per annum is deemed
fair and reasonable

4.

Ruiz v. CA, G.R 146942, April 22, 2003, 401 SCRA 410, 421

DOCTRINE :
While the Usury Law has been suspended by Central Bank Circular No. 905, s. 1982,
effective on January 1, 1983, and parties to a loan agreement have been given wide
latitude to agree on any interest rate, still stipulated interest rates are illegal if they are
unconscionable.
FACTS :
Petitioner Corazon G. Ruiz is engaged in the business of buying and selling jewelry.4 She
obtained loans from private respondent Consuelo Torres on different occasions, in the
following amounts: P100,000.00; P200,000.00; P300,000.00; and P150,000.00.5 Prior to
their maturity, the loans were consolidated under one (1) promissory note. The
consolidated loan of P750,000.00 was secured by a real estate mortgage and the lot was
registered in the name of petitioner.
Thereafter, petitioner obtained three (3) more loans from private respondent, and it
was secured by three promissory notes in the amount of 100,000 each. These combined
loans of P300,000.00 were secured by P571,000.00 worth of jewelry pledged by
petitioner to private respondent.
Petitioner paid the stipulated 3% monthly interest on the P750,000.00 loan,
amounting to P270,000.00. After that, petitioner was unable to make interest payments as
she had difficulties collecting from her clients in her jewelry business.
Due to petitioners failure to pay the principal loan of P750,000.00, as well as the interest
payment, private respondent demanded payment not only of the P750,000.00 loan, but
also of the P300,000.00 loan. When petitioner failed to pay, private respondent sought the
extra-judicial foreclosure of the aforementioned real estate mortgage.
Acting Clerk of Court and Ex-Officio Sheriff Perlita V. Ele, Deputy Sheriff In-Charge
Rolando G. Acal and Supervising Sheriff Silverio P. Bernas issued a Notice of Sheriffs
Sale of subject lot. One (1) day before the scheduled auction sale, petitioner filed a
complaint with the RTC, with a prayer for the issuance of a TRO to enjoin the sheriff
from proceeding with the foreclosure sale and to fix her indebtedness to private
respondent to P706,000.00. The computed amount of P706,000.00 was based on the
aggregate loan of P750,000.00, plus the other loans of P300,000.00, covered by separate
promissory notes, plus interest, minus P571,000.00 representing the amount of jewelry
pledged in favor of private respondent.
The trial court further held that the promissory note in question is a unilateral contract of
adhesion drafted by private respondent. It struck down the contract as repugnant to public
policy because it was imposed by a dominant bargaining party (private respondent) on a
weaker party (petitioner).
ISSUE : Whether the rates of interests and surcharges on the obligation of petitioner to
private respondent are valid

RULING :
We affirm the ruling of the appellate court, striking down as invalid the 10% compounded
monthly interest, the 10% surcharge per month stipulated in the promissory notes dated
May 23, 1995 and December 1, 1995, and the 1% compounded monthly interest
stipulated in the promissory note dated April 21, 1995. The legal rate of interest of 12%
per annum shall apply after the maturity dates of the notes until full payment of the entire
amount due. Also, the only permissible rate of surcharge is 1% per month, without
compounding. We also uphold the award of the appellate court of attorneys fees, the
amount of which having been reasonably reduced from the stipulated 25% (in the March
22, 1995 promissory note) and 10% (in the other three promissory notes) of the entire
amount due, to a fixed amount of P50,000.00. However, we equitably reduce the 3% per
month or 36% per annum interest present in all four (4) promissory notes to 1% per
month or 12% per annum interest.
The 1% surcharge on the principal loan for every month of default is valid. This
surcharge or penalty stipulated in a loan agreement in case of default partakes of the
nature of liquidated damages under Art. 2227 of the New Civil Code, and is separate and
distinct from interest payment. Also referred to as a penalty clause, it is expressly
recognized by law. It is an accessory undertaking to assume greater liability on the part
of an obligor in case of breach of an obligation. The obligor would then be bound to pay
the stipulated amount of indemnity without the necessity of proof on the existence and on
the measure of damages caused by the breach. Although the courts may not at liberty
ignore the freedom of the parties to agree on such terms and conditions as they see fit that
contravene neither law nor morals, good customs, public order or public policy, a
stipulated penalty, nevertheless, may be equitably reduced if it is iniquitous or
unconscionable. In the instant case, the 10% surcharge per month stipulated in the
promissory notes dated May 23, 1995 and December 1, 1995 was properly reduced by the
appellate court.

5. Cuaton v. Salud, G.R 158382, Jan. 27, 2004. 421 SCRA 278, 282
DOCTRINE : For an obligation consisting of a loan or forbearance of money, interest
due is that agreed in writing, which same interest due itself earning a legal interest from
the time it is judiciously demanded. In absence of stipulation interest is at 12% per annum
to be computed from default, i.e. from judicial or extrajudicial demand subject to Art.
1169 of the NCC.
When judgment of court awarding a sum of money becomes final and executor, the legal
interest shall be 12% per annum computed from such finality until satisfaction.
FACTS:
On January 5, 1993, respondent Rebecca Salud instituted a suit for foreclosure of
real estate mortgage with damages against petitioners Mansueto Cuaton and his
mother, Conchita Cuaton at the RTC of Gen. Santos City, Br. 35. RTC declared
said mortgage void as executed by Mansueto Cuaton in favour of Rebecca Salud
without expressly stating that he was merely acting as representative of Conchita
Cuaton in whose name the mortgage lot was titled. The court ordered Cuaton to
pay Salud the loan secured by the mortgage in the amount of one million pesos
plus P60,000 interest of 10% and 8% per month from February 1992 to August
1992 or 10% interest for the month of February, March, April, May and June 1992
and 8% interest for the month of July and August1992. In addition, Cuaton was
declared to pay P25,000 as attorneys fees. In total, court ordered Cuaton to pay
Salud a total of P1,635,000. CA affirmed the RTC decision.
.
ISSUE: Is the 10% and 8% imposed interest on the loan valid?
RULING: No, in Medel vs. CA, the court annulled a stipulated 5.5% per month or 66%
per annum interest on a P500,000 loan and in Sps. Solangan vs. Salazar annulled
a 6% per month interest or 72% per annum interest on a P60,000 loan for being
excessive, iniquitous, unconscionable and exorbitant. In both cases the interest
rates were reduced to 12% per annum. In the case at bar, the interest rates are even
higher than those previously invalidated by the High Court and reduction to 12%
per annum is fair and reasonable. Uniquitous or unconscionable interest are
contrary to morals under Art. 1409 of the civil Code and are void from the
beginning.
In Eastern Shipping Lines vs. CA, the following guidelines were laid in the
imposition of interest:
(1) For an obligation consisting of a loan or forbearance of money, interest
due is that agreed in writing, which same interest due itself earning a
legal interest from the time it is judiciously demanded. In absence of
stipulation interest is at 12% per annum to be computed from default,

i.e. from judicial or extrajudicial demand subject to Art. 1169 of the

NCC.
(2) When judgment of court awarding a sum of money becomes final and
executor, the legal interest shall be 12% per annum computed from
such finality until satisfaction.
In the case at bar, the interest rate is hereby reduced to 12% per annum computed
from the dte of execution of loan on Oct. 31, 1991 until finality of this decision
and after judgment becomes final and executor until obligation is satisfaction,
amount due shall further earn an interest of 12% per annum.

6. Imperial v. Jaucian, G.R 149004, April 14, 2004. 427 SCRA 517, 525-5267.
DOCTRINE : While the Usury Law ceiling on interest rates was lifted by C.B. Circular
No. 905, nothing in the said circular grants lenders carte blanche authority to raise
interest rates to levels which will either enslave their borrowers or lead to a hemorrhaging
of their assets.
Facts :
Defendant obtained from plaintiff six (6) separate loans for which the former executed in
favor of the latter six (6) separate promissory notes and issued several checks as
guarantee for payment. When the said loans became overdue and unpaid, especially
when the defendants checks were dishonored, plaintiff made repeated oral and written
demands for payment.
The loans were covered by six (6) separate promissory notes executed by defendant. The
face value of each promissory notes is bigger [than] the amount released to defendant
because said face value already include[d] the interest from date of note to date of
maturity. Said promissory notes, which indicate the interest of 16% per month, date of
issue, due date, the corresponding guarantee checks issued by defendant, penalties and
attorneys feesThe arrangement between plaintiff and defendant regarding these
guarantee checks was that each time a check matures the defendant would exchange it
with cash.
ISSUE : Whether or not the charging of interest of twenty-eight (28%) per centum per
annum without any writing is illegal.
RULING :
The trial court, as affirmed by the CA, reduced the interest rate from 16 percent to 1.167
percent per month or 14 percent per annum; and the stipulated penalty charge, from 5
percent to 1.167 percent per month or 14 percent per annum.
Petitioner alleges that absent any written stipulation between the parties, the lower courts
should have imposed the rate of 12 percent per annum only.
The records show that there was a written agreement between the parties for the payment
of interest on the subject loans at the rate of 16 percent per month. As decreed by the
lower courts, this rate must be equitably reduced for being iniquitous, unconscionable and
exorbitant. While the Usury Law ceiling on interest rates was lifted by C.B. Circular No.
905, nothing in the said circular grants lenders carte blanche authority to raise interest
rates to levels which will either enslave their borrowers or lead to a hemorrhaging of their
assets.
In Medel v. CA, the Court found the stipulated interest rate of 5.5 percent per month, or
66 percent per annum, unconscionable. In the present case, the rate is even more
iniquitous and unconscionable, as it amounts to 192 percent per annum. When the agreed
rate is iniquitous or unconscionable, it is considered contrary to morals, if not against the
law. [Such] stipulation is void.

Since the stipulation on the interest rate is void, it is as if there were no express contract
thereon.[ Hence, courts may reduce the interest rate as reason and equity demand. We
find no justification to reverse or modify the rate imposed by the two lower courts.

7. Dio v. Japor, G.R 154129, July 8, 2005. 463 SCRA170, 177

DOCTRINE : Central Bank Circular No. 905, which took effect on January 1, 1983,
effectively removed the ceiling on interest rates for both secured and unsecured loans,
regardless of maturity. However, nothing in said Circular grants lenders carte blanche
authority to impose interest rates which would result in the enslavement of their
borrowers or to the hemorrhaging of their assets.While a stipulated rate of interest may
not technically and necessarily be usurious under Circular No. 905, usury now being
legally non-existent in our jurisdiction, nonetheless, said rate may be equitably reduced
should the same be found to be iniquitous, unconscionable, and exorbitant, and hence,
contrary to morals (contra bonos mores), if not against the law. What is iniquitous,
unconscionable, and exorbitant shall depend upon the factual circumstances of each case.
FACTS :
Respondents Spouses Japor were the owners of a residential lot including its
improvements, situated in Lucena City. Adjacent to the Japors lot is another lot owned
by respondent Marta Japor. The respondents obtained a loan of P90,000 from the Quezon
Development Bank (QDB), and as security therefor, they mortgaged the lots covered by
TCT Nos. T-39514 and T-15018 to QDB, as evidenced by a Deed of Real Estate
Mortgage duly executed by and between the respondents and QDB. Respondents and
QDB amended the Deed of Real Estate Mortgage increasing respondents loan to
P128,000. The respondents failed to pay their aforesaid loans. However, before the bank
could foreclose on the mortgage, respondents, thru their broker, one Lucia G. Orian,
offered to mortgage their properties to petitioner Teresita Dio. Petitioner prepared a Deed
of Real Estate Mortgage, whereby respondents mortgaged anew the two properties
already mortgaged with QDB to secure the timely payment of a P350,000 loan that
respondents had from petitioner Dio. The Deed of Real Estate Mortgage, though dated
January 1989, was actually executed on February 13, 1989 and notarized on February 17,
1989.
Under the terms of the deed, respondents agreed to pay the petitioner interest at the rate
of five percent (5%) a month, within a period of two months or until April 14, 1989. In
the event of default, an additional interest equivalent to five percent (5%) of the amount
then due, for every month of delay, would be charged on them.
The respondents failed to settle their obligation to petitioner on April 14, 1989, the agreed
deadline for settlement. On August 27, 1991, petitioner made written demands upon the
respondents to pay their debt. Despite repeated demands, respondents did not pay, hence
petitioner applied for extrajudicial foreclosure of the mortgage. The auction of the

unredeemed properties was set for February 26, 1992. On February 24, 1992, respondents
filed an action for Fixing of Contractual Obligation with Prayer for Preliminary
Mandatory Injunction/Restraining Order. Respondents prayed that judgment be
rendered fixing the contractual obligations of plaintiffs with the defendant Dio plus legal
or allowable interests thereon
ISSUE :
Whether or not the stipulated interest and penalty are not excessive, iniquitous,
unconscionable, exorbitant and contrary to morals.
RULING :
Central Bank Circular No. 905, which took effect on January 1, 1983, effectively
removed the ceiling on interest rates for both secured and unsecured loans, regardless of
maturity. However, nothing in said Circular grants lenders carte blanche authority to
impose interest rates which would result in the enslavement of their borrowers or to the
hemorrhaging of their assets.While a stipulated rate of interest may not technically and
necessarily be usurious under Circular No. 905, usury now being legally non-existent in
our jurisdiction, nonetheless, said rate may be equitably reduced should the same be
found to be iniquitous, unconscionable, and exorbitant, and hence, contrary to morals
(contra bonos mores), if not against the law. What is iniquitous, unconscionable, and
exorbitant shall depend upon the factual circumstances of each case.
In the instant case, the Court of Appeals found that the 5% interest rate per month and 5%
penalty rate per month for every month of default or delay is in reality interest rate at
120% per annum. This Court has held that a stipulated interest rate of 5.5% per month or
66% per annum is void for being iniquitous or unconscionable. We have likewise ruled
that an interest rate of 6% per month or 72% per annum is outrageous and inordinate.
Conformably to these precedent cases, a combined interest and penalty rate at 10% per
month or 120% per annum, should be deemed iniquitous, unconscionable, and inordinate.
Hence, we sustain the appellate court when it found the interest and penalty rates in the
Deed of Real Estate Mortgage in the present case excessive, hence legally
impermissible. Reduction is legally called for now in rates of interest and penalty stated
in the mortgage contract.
The evidence shows that it was indeed the respondents who proposed the 5% interest rate
per month for two (2) months. Having agreed to said rate, the parties are now estopped
from claiming otherwise. For the succeeding period after the two months, however, the
Court of Appeals correctly reduced the interest rate to 12% per annum and the penalty
rate to 1% per month, in accordance with Article 2227 of the Civil Code.

8. Dino v. Jardines, G.R 145871, Jan. 31, 2006. 481 SCRA 226
DOCTRINE : When the obligation is breached, and it consists in the payment of a
sum of money, i.e., a loan or forbearance of money, the interest due should be that
which may have been stipulated in writing. Furthermore, the interest due shall itself
earn legal interest from the time it is judicially demanded. In the absence of stipulation,
the rate of interest shall be 12% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the
Civil Code.
FACTS :
Leonides Dino filed a petition for consolidation of ownership with the RTC of Baguo
City. She alleged that, Lina Jardines executed a Deed of Sale with Pacto de Retro over a
parcel of land with a consideration of P165,000 in favor of Leonides Dino. It was
stipulated that the period for redemption would expire in six months or on July29, 1987.
The period expired but neither respondent Jardines nor any of her legal representatives
were able to redeem or repurchase the subject property; as consequence, absolute
ownership over the property has been consolidated n favor of Dino.
According to the respondent, the Deed of Sale with Pacto de Retro did not embody the
real intention of the parties and that the transaction actually entered into b the parties was
one of a simple loan and the deed of sale with Pacto e Retro was executed just as a
security for the loan. She further alleged that it was never her intention to sell the
property to the petitioner and that the value of respondent's residential house alone is over
a million pesos and that if the value or the lot is added, it would be around one and a half
million pesos.
The RTC rendered its decision in favor of Dino and declared that the contract entered into
bu the contending parties was one of deed of sale with right to repurchase or Pacto de
Retro sale. The CA on the other hand reversed the decision of the RTC. It held that the
true nature of the contract between herein parties is one of equitable mortgage, as shown
by the fact that (a) respondent is still in actual physical possession of the property; (b)
respondent is the one paying the real property taxes on the property; and (c) the amount
of the supposed sale price, P165,000.00, earns monthly interest.
Issue:
Whether or not the true nature of the contract entered into by the partIes as one equitable
mortgage and not a pacto de retro sale
Held:
The court affirmed the decision of the Court of Appeals. The Court sees no reversible
error with the foregoing findings of fact made by the CA. The CA correctly ruled that the
true nature of the contract entered into by herein parties was one of equitable mortgage.
A close examination of the records of this case reveals that the findings of fact of the CA
are all based on documentary evidence and on admissions and stipulation of facts made
by the parties. The CA's finding that there was no gross inadequacy of the price of

respondent's residential house as stated in the contract, was based on respondent's own
evidence, Tax Declaration No. 44250, which stated that the actual market value of subject
residential house in 1986 was only P93,080.00. The fact that respondent has remained in
actual physical possession of the property in question, and that respondent has been the
one paying the real property taxes on the subject property was established by the
admission made by petitioner during the pre-trial conference and embodied in the PreTrial Order6 dated May 25, 1994. The finding that the purchase price in the amount of
P165,000.00 earns monthly interest was based on petitioner's own testimony and
admission in her appellee's brief that the amount of P165,000.00, if not paid on July 29,
1987, shall bear an interest of 10% per month.

9.

Macalalag v. People, G.R 164358, Dec. 20, 2006. 511 SCRA 400.
DOCTRINE : Only a full payment of the face value of the second check at the time
of its presentment or during the five-day grace period could have exonerated her from
criminal liability. A contrary interpretation would defeat the purpose of Batas
Pambansa Blg. 22, that of safeguarding the interest of the banking system and the
legitimate public checking account user, as the drawer could very well have himself
exonerated by the mere expediency of paying a minimal fraction of the face value of
the check.
FACTS :
Petitioner Theresa Macalalag obtained loans from Grace Estrella on 2 separate
occasions, each in amount of P100,000.00 , bearing an interest of 10% per month.
She consistetntly paid the interest , however finding the interest rates so burdensome,
Macalalag requested Estrella for reduction of the same to which the latter agreed.
Subsequently, Macalalag executed an affirmation receipt promising to pay Estrella the
value of the loans in the amount of P200,000.00 within 2 months from date of its
execution plus 6% interest per month for each loan. As security for the payment of the
aforesaid loans, Macalalag issued 2 PNB checks, each amounting to P100,000.00 in
favor of Estrella. But said check were dishonored , for reason that the account to
which it is drawn was already closed. Estrella sent notice of dishonor and demand to
make good said checks to Macalalag, but the latter failed to do so. Hence Estrella
filed 2 criminal complaint against Macalalag for violation of BP 22. Macalalag
pleaded not guilty and stated that she already made payments over and above the
value of the said checks amounting to P355,837.98. Estrella admitted such payment
but claimed that the same amount was applied to the payment of the interest. Trial
Court found her guilty as well as the Court of Appeals with modification that she is
liable only for 1 count of BP 22.
Issue:
Whether or not Macalalag had already paid her obligations to Estrella.
Held:
In the Instant case, it has been established that Macalalg made a total payment of
P355,837.00( P156,000 paid in 1996 and P199, 837.98 paid in 1997). Hence, the
amount of 156,000 already paid by Macalalag to Estrella could very well be applied
to the face value of the first loan, thus Macalalag can no longer be held liable for
violation of BP 22 in so far as the first check is concerned. With respect to the second
check, there is no doubt that Macalalag is liable under BP 22, since the check he
represented for payment bounced for reason account closed. Hence her obligation
to Estrella was not fully paid.