Cu Un Jing Hijos vs. Mabalacat Sugar Co.

GR 97412

Facts:

Mabalacat was indebted to Hijos, with mortgage and interest. Hijos now seeks payment.
He imposed compounded interest charges in estimating the amount of indebtedness.

Argument:

Hijos: In the mortgage, there had been a stipulation that, Interest, to be computed upon
the still unpaid capital of the loan, shall be paid monthly, at the end of each month.
Thus, this justifies the imposition of compounded interest charges.

Issue: WON the imposition of compounded interest charges is justified.

Held:

No. The provision in the mortgage quoted by Hijos merely requires the debtor to pay
interest monthly at the end of each month, such interest to be computed upon the capital
of the loan not already paid.

In the absence of express stipulation for the accumulation of compound interest, no

interest can be collected upon interest until the debt is judicially claimed, and then the
rate at which interest upon accrued interest must be computed is fixed at 6 per cent per
annum.

**************

Where interest is improperly charged, at an unlawful rate, the mere voluntary payment of
it to the creditor by the debtor is not binding. Such payment, in the case before us, was
usurious, being in excess of 12 per cent which is allowed to be charged, under section 2
of the Usury Law, when a debt is secured by mortgage upon real property.

NATURE, PURPOSE AND CHARACTERISTICS

Simple Loan (Mutuum) Defined

Art. 1933: By a contract of loan, one of the parties delivers to another xxx 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.

Tolentino vs. Gonzalez Sy Chiam 50 Phil 558

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.
The Supreme Court held that upon its terms, the deed of pacto de retro sale is an absolute
sale with right of repurchase and not a mortgage. Thus, Gonzalez is the owner of the land
and Tolentino is only holding it as a tenant by virtue of a contract of lease.

**LOAN: A contract of loan signifies the giving of a sum of money, goods or credits to
another, with a promise to repay, but not a promise to return the same thing. It has been
defined as an advancement of money, goods, or credits upon a contract or stipulation to
repay, not to return, the thing loaned at some future day in accordance with the terms of
the contract. The moment the contract is completed, the money, goods or chattels given
cease to be the property of the former owner and become the property of the obligor to be
used according to his own will, unless the contract itself expressly provides for a special
or specific use of the same. At all events, the money, goods or chattels, the moment the
contract is executed, cease to be the property of the former owner and become the sole
property of the obligor.

REPUBLIC vs GRIJALDO, GR L-20240

Facts
Appellant Jose Grijaldo obtained five loans from the branch office of the Bank of
Taiwan
These loans are evidenced by five promissory notes executed by the appellant in
favor of the Bank of Taiwan
To secure the payment of the loans the appellant executed a chattel mortgage on
the standing crops on his land
the assets in the Philippines of the Bank of Taiwan, Ltd. were vested in the
Government of the United States
Pursuant to the Philippine Property Act of 1946 of the United States, these assets,
including the loans in question, were subsequently transferred to the Republic of
the Philippines by the Government of the United States under Transfer Agreement
dated July 20, 1954
the appellee, Republic of the Philippines, represented by the Chairman of the
Board of Liquidators, made a written extrajudicial demand upon the appellant for
the payment of the account in question.
the appellee filed a complaint in the Justice of the Peace Court of Hinigaran,
Negros Occidental, to collect from the appellant the unpaid account in question
the court a quo rendered a decision ordering the appellant to pay the appellee the
sum of P2,377.23 as of December 31, 1959, plus interest at the rate of 6% per
annum compounded quarterly
Issue:
In the present appeal the appellant contends: (1) that the appellee has no cause of
action against the appellant; (2) that if the appellee has a cause of action at all,
that action had prescribed; and (3) that the lower court erred in ordering the
appellant to pay the amount of P2,377.23.

Held:
This contention has no merit. It is true that the Bank of Taiwan, Ltd. was the
original creditor and the transaction between the appellant and the Bank of
Taiwan was a private contract of loan.
 The successive transfer of the rights over the loans in question from the Bank of
Taiwan, Ltd. to the United States Government, and from the United States
Government to the government of the Republic of the Philippines, made the
Republic of the Philippines the successor of the rights, title and interest in said
loans, thereby creating a privity of contract between the appellee and the
appellant.

The word "privy" denotes the idea of succession ... hence an assignee of a credit,
and one subrogated to it, etc. will be privies
The United States of America acting as a belligerent sovereign power seized the
assets of the Bank of Taiwan, Ltd. which belonged to an enemy country.
the Republic of the Philippines had thereby become a privy to the original
contracts of loan between the Bank of Taiwan, Ltd. and the appellant.
the loans were secured by a chattel mortgage on the standing crops on a land
owned by him and these crops were lost or destroyed through enemy action his
obligation to pay the loans was thereby extinguished. This argument is untenable.
The terms of the promissory notes and the chattel mortgage that the appellant
executed in favor of the Bank of Taiwan, Ltd. do not support the claim of
appellant
The obligation of the appellant under the five promissory notes was not to deliver
a determinate thing namely, the crops to be harvested from his land, or the value
of the crops that would be harvested from his land. Rather, his obligation was to
pay a generic thing the amount of money representing the total sum of the five
loans, with interest.
of simple loan of sums of money. "By a contract of (simple) loan, one of the
parties delivers to another ... money or other consumable thing upon the condition
that the same amount of the same kind and quality shall be paid."
In an obligation to deliver a generic thing, the loss or destruction of anything of
the same kind does not extinguish the obligation.
The chattel mortgage on the crops growing on appellant's land simply stood as a
security for the fulfillment of appellant's obligation covered by the five
promissory notes, and the loss of the crops did not extinguish his obligation to
pay, because the account could still be paid from other sources aside from the
mortgaged crops.
This contention of the appellant is also without merit.
The decision of the court a quo ordered the appellant to pay the sum of P2,377.23
as of December 31, 1959, plus interest rate of 6% per annum compounded
quarterly from the date of the filing of the complaint.
The decision appealed from is affirmed, with costs against the appellant.
His estate must answer in the execution of the judgment in the present case.

Maria Soledad Tomimbang vs Atty. Jose Tomimbang

Facts:

Maria Soledad Tomimbang herein the petitioner was an heir to a certain property, when
repairs and improvements were deemed necessary she opted to borrow money from her
brother Jose Tomimbang the respondent. Their agreement was that her obligation to pay
would become due and demandable upon completion of the renovations. Upon her
failure to pay, respondent filed for suit, the lower courts ruling in his favor. Hence the
petition.
Issues: Whether petitioner's obligation is due and demandable, and was due.
The lower courts did not err in their decision to grant respondent the loan that was owed
him.

The respondent claims that there was in fact a novation on their agreement, and
that the obligation was due and demandable the moment that she became a
hindrance to the obligation, and having lost the benefit of her term upon making
partial payments.

Whether respondent is entitled to attorney's fees; No. The courts found no reason
why the respondent should be allowed the benefit of attorneys fees. Whether
interest should be imposed on petitioner's indebtedness and, if in the affirmative,
at what rate. The answer was in the case above. 12% per annum, computed from
the date of the extrajudicial demand.

Case #2 QUINTOS vs BECK, 69 Phil 108

Facts: Quintos and Beck entered into a contract of lease, whereby the latter occupied the
formers house. On Jan 14, 1936, the contract of lease was novated,wherein the Quintos
gratuitously granted to Beck the use of the furniture, subject to the condition that Beck
should return the furnitures to Quintos upon demand. Thereafter, Quintos sold the
property to Maria and Rosario Lopez. Beck was notifedof the conveyance and given him
60 days to vacate the premises. In addition,Quintos required Beck to return all the
furniture. Beck refused to return 3 gas heaters and 4 electric lamps since he would use
them until the lease was due toe expire. Quintos refused to get the furniture since Beck
had declined to return all of them. Beck deposited all the furniture belonging to Quintos
to the sheriff.
ISSUE: WON Beck complied with his obligation of returning the furnitures to Quintos
when it deposited the furnitures to the sheriff.
RULING:
The contract entered into between the parties is one of commdatum,because under it the
plaintiff gratuitously granted the use of the furniture to the defendant, reserving for
herself the ownership thereof; by this contract the defendant bound himself to return the
furniture to the plaintiff, upon the latters demand (clause 7 of the contract, exhibit A
articles 1740, paragraph 1, and 1741 of the Civil Code).

The obligation voluntarily assumed by the defendant to return the furniture upon the
plaintiffs demand, means that he should return all of them to the plaintiff at the latters
residence or house. The defendant did not comply with this obligation when he merely
placed them at the disposal of the plaintiff, retaining for his benefit the three gas heaters
and the four electric lamps. As the defendant had voluntarily undertaken to return all the
furniture to the plaintiff, upon the latters demand, the court could not legally compel her
to bear the expenses occasioned by the deposit of the furniture at the defendants behest.
The latter, as bailee, was not entitled to place the furniture on deposit, nor was the
plaintiff under a duty to accept the offer to return the furniture, because the defendant
wanted to retain the three gas heaters and the four electric lamps.

EASTERN SHIPPING LINES, INC. vs CA

FACTS Two fiber drums were shipped owned by Eastern Shipping from Japan. The
shipment as insured with a marine policy. Upon arrival in Manila unto the custody of
metro Port Service, which excepted to one drum, said to be in bad order and which
damage was unknown the Mercantile Insurance Company. Allied Brokerage Corporation
received the shipment from Metro, one drum opened and without seal. Allied delivered
the shipment to the consignees warehouse. The latter excepted to one drum which
contained spillages while the rest of the contents was adulterated/fake. As consequence
of the loss, the insurance company paid the consignee, so that it became subrogated to all
the rights of action of consignee against the defendants Eastern Shipping, Metro Port and
Allied Brokerage. The insurance company filed before the trial court. The trial court
ruled in favor of plaintiff an ordered defendants to pay the former with present legal
interest of 12% per annum from the date of the filing of the complaint. On appeal by
defendants, the appellate court denied the same and affirmed in toto the decision of the
trial court.

ISSUE (1) Whether the applicable rate of legal interest is 12% or 6%.
(2) Whether the payment of legal interest on the award for loss or damage is to be
computed from the time the complaint is filed from the date the decision appealed from
is rendered.

HELD (1) The Court held that the legal interest is 6% computed from the decision of the
court a quo. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damaes awarded may be imposed at the discretion
of the court at the rate of 6% per annum. No interest shall be adjudged on unliquidated
claims or damages except when or until the demand can be established with reasonable
certainty. When the judgment of the court awarding a sum of money becomes final and
executor, the rate of legal interest shall be 12% per annum from such finality until
satisfaction, this interim period being deemed to be by then an equivalent to a
forbearance of money. The interest due shall be 12% PA to be computed fro default, J or
EJD.
(2) From the date the judgment is made. Where the demand is established with
reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or EJ but when such certainty cannot be so reasonably established at the time
the demand is made, the interest shll begin to run only from the date of judgment of the
court is made.
(3) The Court held that it should be computed from the decision rendered by the court a
quo.EASTERN SHIPPING LINES, INC. vs CA

Frias v. San Diego-Sison BOBIE ROSE FRIAS v. FLORA SAN DIEGO-SISON 2007 /
Austria-Martinez

On 7 Dec 1990, Bobie Rose Frias and Dr. Flora San-Diego Sison entered into a MOA
over Friasproperty MOA consideration is 3M 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 + 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 shenotified 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 complaintfor 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: 2M + 32% annual interest
beginning December 7, 1991 until fully paid 70k representing premiums paid by Sison
on the attachment bond with legal interest counted from the date of this decision until
fully paid 100k moral, corrective, exemplary damages [liable for moral damages because
of Frias fraudulent scheme] 100k attorneys fees + cost of litigation 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).

ISSUES & HOLDING Ratio only discusses topic of INTEREST (as per syllabus)
WON compounded bank interest should be limited to 6 months as contained in the
MOA. NO WON Sison is entitled to moral damages. YES
WON the grant of attorneys fees is proper, even if not mentioned in the body of the
decision. 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. CA DECISION AND RESOLUTION AFFIRMED WITH MODIFICATION
Award of attorneys fees deleted

NACAR vs GALLERY FRAMES

FACTS: Dario Nacar filed a labor case against Gallery Frames and its owner Felipe
Bordey, Jr. Nacar alleged that he was dismissed without cause by Gallery Frames on
January 24, 1997. On October 15, 1998, the Labor Arbiter (LA) found Gallery Frames
guilty of illegal dismissal hence the Arbiter awarded Nacar P158,919.92 in damages
consisting of backwages and separation pay. Gallery Frames appealed all the way to the
Supreme Court (SC). The Supreme Court affirmed the decision of the Labor Arbiter and
the decision became final on May 27, 2002. After the finality of the SC decision, Nacar
filed a motion before the LA for recomputation as he alleged that his backwages should
be computed from the time of his illegal dismissal (January 24, 1997) until the finality of
the SC decision (May 27, 2002) with interest. The LA denied the motion as he ruled that
the reckoning point of the computation should only be from the time Nacar was illegally
dismissed (January 24, 1997) until the decision of the LA (October 15, 1998). The LA
reasoned that the said date should be the reckoning point because Nacar did not appeal
hence as to him, that decision became final and executory.

ISSUE: Whether or not the Labor Arbiter is correct.

HELD: No. There are two parts of a decision when it comes to illegal dismissal cases
(referring to cases where the dismissed employee wins, or loses but wins on appeal). The
first part is the ruling that the employee was illegally dismissed. This is immediately final
even if the employer appeals but will be reversed if employer wins on appeal. The
second part is the ruling on the award of backwages and/or separation pay. For
backwages, it will be computed from the date of illegal dismissal until the date of the
decision of the Labor Arbiter. But if the employer appeals, then the end date shall be
extended until the day when the appellate courts decision shall become final. Hence, as a
consequence, the liability of the employer, if he loses on appeal, will increase this is
just but a risk that the employer cannot avoid when it continued to seek recourses against
the Labor Arbiters decision. This is also in accordance with Article 279 of the Labor
Code. Anent the issue of award of interest in the form of actual or compensatory
damages, the Supreme Court ruled that the old case of Eastern Shipping Lines vs CA is
already modified by the promulgation of the Bangko Sentral ng Pilipinas Monetary
Board Resolution No. 796 which lowered the legal rate of interest from 12% to 6%.

Specifically, the rules on interest are now as follows: 1. Monetary Obligations ex. Loans:
a. If stipulated in writing: a.1. shall run from date of judicial demand (filing of the case)
a.2. rate of interest shall be that amount stipulated b. If not stipulated in writing b.1. shall
run from date of default (either failure to pay upon extra-judicial demand or upon judicial
demand whichever is appropriate and subject to the provisions of Article 1169 of the
Civil Code) b.2. rate of interest shall be 6% per annum 2. Non-Monetary Obligations
(such as the case at bar) a. If already liquidated, rate of interest shall be 6% per annum,
demandable from date of judicial or extra-judicial demand (Art. 1169, Civil Code) b. If
unliquidated, no interest Except: When later on established with certainty. Interest shall
still be 6% per annum demandable from the date of judgment because such on such date,
it is already deemed that the amount of damages is already ascertained. 3. Compounded
Interest This is applicable to both monetary and non-monetary obligations 6% per
annum computed against award of damages (interest) granted by the court. To be
computed from the date when the courts decision becomes final and executory until the
award is fully satisfied by the losing party. 4. The 6% per annum rate of legal interest
shall be applied prospectively: Final and executory judgments awarding damages prior
to July 1, 2013 shall apply the 12% rate; Final and executory judgments awarding
damages on or after July 1, 2013 shall apply the 12% rate for unpaid obligations until
June 30, 2013; unpaid obligations with respect to said judgments on or after July 1, 2013
shall still incur the 6% rate.