Sebastian Siga-an, petitioner, vs. Alicia Villanueva, respondent.
Issue: (1) Whether or not interest was due to petitioner; and (2) whether
Facts: Respondent filed a complaint for sum of money against petitioner.
Respondent claimed that petitioner approached her inside the PNO and
offered to loan her the amount of P540,000.00 of which the loan
agreement was not reduced in writing and there was no stipulation as to
the payment of interest for the loan. Respondent issued a check worth
P500,000.00 to petitioner as partial payment of the loan. She then issued
another check in the amount of P200,000.00 to petitioner as payment of
the remaining balance of the loan of which the excess amount of
P160,000.00 would be applied as interest for the loan. Not satisfied with
the amount applied as interest, petitioner pestered her to pay additional
interest and threatened to block or disapprove her transactions with the
PNO if she would not comply with his demand. Thus, she paid additional
amounts in cash and checks as interests for the loan. She asked petitioner
for receipt for the payments but was told that it was not necessary as
there was mutual trust and confidence between them. According to her
computation, the total amount she paid to petitioner for the loan and
interest accumulated to P1,200,000.00.
The RTC rendered a Decision holding that respondent made an
overpayment of her loan obligation to petitioner and that the latter should
refund the excess amount to the former. It ratiocinated that respondent’s
obligation was only to pay the loaned amount of P540,000.00, and that the
alleged interests due should not be included in the computation of
respondent’s total monetary debt because there was no agreement
between them regarding payment of interest. It concluded that since
respondent made an excess payment to petitioner in the amount of
P660,000.00 through mistake, petitioner should return the said amount to
respondent pursuant to the principle of solutio indebiti. Also, petitioner
should pay moral damages for the sleepless nights and wounded feelings
experienced by respondent. Further, petitioner should pay exemplary
damages by way of example or correction for the public good, plus
attorney’s fees and costs of suit.
the principle of solutio indebiti applies to the case at bar.
Ruling: (1) No. Compensatory interest is not chargeable in the instant case
because it was not duly proven that respondent defaulted in paying the
loan and no interest was due on the loan because there was no written
agreement as regards payment of interest. Article 1956 of the Civil Code,
which refers to monetary interest, specifically mandates that no interest
shall be due unless it has been expressly stipulated in writing. As can be
gleaned from the foregoing provision, payment of 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. Thus, we have held that collection of
interest without any stipulation therefor in writing is prohibited by law.
(2) Petitioner cannot be compelled to return the alleged excess amount
paid by respondent as interest. Under Article 1960 of the Civil Code, if the
borrower of loan pays interest when there has been no stipulation
therefor, the provisions of the Civil Code concerning solutio indebiti shall
be applied. Article 2154 of the Civil Code explains the principle of solutio
indebiti. Said provision provides that if something is received when there
is no right to demand it, and it was unduly delivered through mistake, the
obligation to return it arises. In such a case, a creditor-debtor relationship
is created under a quasi-contract whereby the payor becomes the creditor
who then has the right to demand the return of payment made by mistake,
and the person who has no right to receive such payment becomes
obligated to return the same. The quasi-contract of solutio indebiti harks
back to the ancient principle that no one shall enrich himself unjustly at
the expense of another. The principle of solutio indebiti applies where (1)
a payment is made when there exists no binding relation between the
payor, who has no duty to pay, and the person who received the payment;
and (2) the payment is made through mistake, and not through liberality or
some other cause. We have held that the principle of solutio indebiti
applies in case of erroneous payment of undue interest.
Article 2232 of the Civil Code states that in a quasi-contract, such as solutio
indebiti, exemplary damages may be imposed if the defendant acted in an
oppressive manner. Petitioner acted oppressively when he pestered
respondent to pay interest and threatened to block her transactions with
the PNO if she would not pay interest. This forced respondent to pay
interest despite lack of agreement thereto. Thus, the award of exemplary
damages is appropriate so as to deter petitioner and other lenders from
committing similar and other serious wrongdoings.
ADVOCATES FOR TRUTH IN LENDING V. BSP [2013]
facts
"Advocates for Truth in Lending, Inc." (AFTIL) is a non-profit, non-stock
corporation organized to engage in pro bono concerns and activities
relating to money lending issues. It was incorporated on July 9, 2010,and a
month later, it filed this petition, joined by its founder and president,
Eduardo B. Olaguer, suing as a taxpayer and a citizen.
HISTORY OF CENTRAL BANK’S POWER TO FIX MAX INTEREST RATES
1. R.A. No. 265, which created the Central Bank on June 15, 1948,
empowered the CB-MB toset the maximum interest rates which banks may
charge for all types of loans and other credit operations.
2. The Usury Law was amended by P.D.1684, giving the CB-MB
authority to prescribe different maximum rates of interest which may be
imposed for a loan or renewal thereof or the forbearance of any money,
goods or credits, provided that the changes are effected gradually and
announced in advance. Section 1-a of Act No. 2655 now reads:
3. In its Resolution No. 2224 dated December 3, 1982, the CB-MB
issued CB Circular No. 905, Series of 1982, effective on January 1, 1983. It
removed the ceilings on interest rates on loans or forbearance of any
money, goods or credits:
Sec. 1. The rate of interest, including commissions, premiums, fees and
other charges, on a loan or forbearance of any money, goods, or credits,
regardless of maturity and whether secured or unsecured, that may be
charged or collected by any person, whether natural or juridical, shall not
be subject to any ceiling prescribed under or pursuant to the Usury Law, as
amended.
4. R.A. No. 7653 establishing the BSP replaced the CB:
Sec. 135. Repealing Clause. — Except as may be provided for in Sections 46
and 132 of this Act, Republic Act No. 265, as amended, the provisions of
any other law, special charters, rule or regulation issued pursuant to said
Republic Act No. 265, as amended, or parts thereof, which may be
inconsistent with the provisions of this Act are hereby repealed.
Presidential Decree No. 1792 is likewise repealed.
Note: R.A. 7653 – the law that created BSP to replace CB – Note: this law
did not retain the same provision as that of Section 109 in RA 265.
PETITIONER’S ARGUMENTS
· To justify their skipping the hierarchy of courts petitioners contend
the transcendental importance of their Petition:
a) CB-MB statutory or constitutional authority to prescribe the
maximum rates of interest for all kinds of credit transactions and
forbearance of money, goods or credit beyond the limits prescribed in the
Usury Law;
b) If so, whether the CB-MB exceeded its authority when it issued CB
Circular No. 905, which removed all interest ceilings and thus suspended
Act No. 2655 as regards usurious interest rates;
c) Whether under R.A. No. 7653, the new BSP-MB may continue to
enforce CB Circular No. 905.
· Petitioners contend that under Section 1-a of Act No. 2655, as
amended by P.D. No. 1684, the CB-MB was authorized only to prescribe or
set the maximum rates of interest for a loan or renewal thereof or for the
forbearance of any money, goods or credits, and to change such rates
whenever warranted by prevailing economic and social conditions, the
changes to be effected gradually and on scheduled dates; that nothing in
P.D. No. 1684 authorized the CB-MB to lift or suspend the limits of interest
on all credit transactions, when it issued CB Circular No. 905. They further
insist that under Section 109 of R.A. No. 265, the authority of the CB-MB
was clearly only to fix the banks’ maximum rates of interest, but always
within the limits prescribed by the Usury Law.
· CB Circular No. 905, which was promulgated without the benefit of
any prior public hearing, is void because it violated NCC 5 which provides
that "Acts executed against the provisions of mandatory or prohibitory
laws shall be void, except when the law itself authorizes their validity."
· weeks after the issuance of CB Circular No. 905, the benchmark 91-
day Treasury bills shot up to 40% PA, as a result. The banks followed suit
and re-priced their loans to rates which were even higher than those of the
"Jobo" bills.
· CB Circular No. 905 is also unconstitutional in light of the Bill of
Rights, which commands that "no person shall be deprived of life, liberty
or property without due process of law, nor shall any person be denied the
equal protection of the laws."
· R.A. No. 7653 did not re-enact a provision similar to Section 109 of
RA 265, and therefore, in view of the repealing clause in Section 135 of
R.A. No. 7653, the BSP-MB has been stripped of the power either to
prescribe the maximum rates of interest which banks may charge for
different kinds of loans and credit transactions, or to suspend Act No. 2655
and continue enforcing CB Circular No. 905.
Ruling
CB-MB merely suspended the effectivity of the Usury Law when it issued
CB Circular No. 905.
In Medel v. CA, it was said that the circular did not repeal nor amend the
Usury Law but simply suspended its effectivity; that a Circular cannot
repeal a low; that by virtue of CB the Usury Law has been rendered
ineffective; that the Usury has been legally non-existent in our jurisdiction
and interest can now be charged as lender and borrow may agree upon.
Circular upheld the parties’ freedom of contract to agree freely on the rate
of interest citing Art. 1306 under which the 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.
BSP-MB has authority to enforce CB Circular No. 905.
RA 265 covered only banks while Section 1-a of the Usury Law, empowers
the Monetary Board, BSP for that matter, to prescribe the maximum rate
or rates of interest for all loans or renewals thereof or the forbearance of
any money, good or credits …
The Usury Law is broader in scope than RA 265, now RA 7653, the later
merely supplemented the former as it provided regulation for loans by
banks and other financial institutions. RA 7653 was not unequivocally
repealed by RA 765.
CB Circular 905 is essentially based on Section 1-a of the Usury Law and the
Usury Law being broader in scope than the law that created the Central
Bank was not deemed repealed when the law replacing CB with the
Bangko Sentral was enacted despite the non-reenactment in the BSP Law
of a provision in the CB Law which the petitioners purports to be the basis
of Circular 905. Magulo ba? Hahaha. Basta the present set up is: The power
of the BSP Monetary Board to determine interest rates emanates from the
Usury Law [which was further specified by Circular 905].
Granting that the CB had power to "suspend" the Usury Law, the new BSP-
MB did not retain this power of its predecessor, in view of Section 135 of
R.A. No. 7653, which expressly repealed R.A. No. 265. The petitioners point
out that R.A. No. 7653 did not reenact a provision similar to Section 109 of
R.A. No. 265.
A closer perusal shows that Section 109 of R.A. No. 265 covered only loans
extended by banks, whereas under Section 1-a of the Usury Law, as
amended, the BSP-MB may prescribe the maximum rate or rates of
interest for all loans or renewals thereof or the forbearance of any money,
goods or credits, including those for loans of low priority such as consumer
loans, as well as such loans made by pawnshops, finance companies and
similar credit institutions. It even authorizes the BSP-MB to prescribe
different maximum rate or rates for different types of borrowings,
including deposits and deposit substitutes, or loans of financial
intermediaries.
Act No. 2655, an earlier law, is much broader in scope, whereas R.A. No.
265, now R.A. No. 7653, merely supplemented it as it concerns loans by
banks and other financial institutions. Had R.A. No. 7653 been intended to
repeal Section 1-a of Act No. 2655, it would have so stated in unequivocal
terms.
Moreover, the rule is settled that repeals by implication are not favored,
because laws are presumed to be passed with deliberation and full
knowledge of all laws existing pertaining to the subject.An implied repeal is
predicated upon the condition that a substantial conflict or repugnancy is
found between the new and prior laws. Thus, in the absence of an express
repeal, a subsequent law cannot be construed as repealing a prior law
unless an irreconcilable inconsistency and repugnancy exists in the terms
of the new and old laws. We find no such conflict between the provisions
of Act 2655 and R.A. No. 7653.
#generalia specialibus non derogant
The lifting of the ceilings for interest rates does not authorize stipulations
charging excessive, unconscionable, and iniquitous interest.
In Castro v. Tan, the Court held that the imposition of unconscionable
interest is immoral and unjust. It is tantamount to a repugnant spoliation
and an iniquitous deprivation of property repulsive to the common sense
of man.
They are struck down for being contrary to morals, if not against the law,
therefore deemed inexistent and void ab initio. However this nullity does
not affect the lender’s right to recover the principal of the loan nor affect
the other terms thereof.
PROCEDURAL MATTERS
The Petition is procedurally infirm.
The CB-MB was created to perform executive functions with respect to the
establishment, operation or liquidation of banking and credit institutions.
It does not perform judicial or quasi-judicial functions. Certainly, the
issuance of CB Circular No. 905 was done in the exercise of an executive
function. Certiorari will not lie in the instant case.
Petitioners have no locus standi to file the Petition
Petitioners also do not claim that public funds were being misused in the
enforcement of CB Circular No. 905 which would have made the action a
public one, "and justify relaxation of the requirement that an action must
be prosecuted in the name of the real party-in-interest."
Antonio Tan vs. Court of Appeals/CCP GR No. 116285
TAN OBTAINED 2 LOANS, EACH FOR P2,000,000 FROM CCP.
Executed a promissory note in amount of P3,411,421.32; payable in 5
installments.
TAN failed to pay any installment on the said restructured loa.
In a letter, TAN requested and proposed to respondent CCP a mode of
paying the restructured loan
i. 20% of the principal amount of the loan upon
the respondent giving its conformity to his proposal
ii. Balance on the principal obligation payable
36 monthly installments until fully paid.
TAN 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.
i. No favorable response was made to said
letters.
ii. CCP demanded full payment, within ten (10)
days from receipt of said letter P6,088,735.03.
CCP FILED COMPLAINT collection of a sum of money
TAN interposed the defense that he accommodated a friend who asked for
help to obtain a loan from CCP.
i. Claimed that cannot find the friend.
TAN filed a Manifestation wherein he proposed to settle his indebtedness
to CCP by down payment of P140,000.00 and to issue1 2 checks every
beginning of the year to cover installment payments for one year, and
every year thereafter until the balance is fully paid.
i. CCP did not agree to the petitioner’s
proposals and so the trial of the case ensued.
TRIAL COURT ORDERED TAN TO PAY CCP P7,996,314.67, representing
defendant’s outstanding account as of August 28, 1986, with the
corresponding stipulated interest and charges thereof, until fully paid, plus
attorney’s fees in an amount equivalent to 25% of said outstanding
account, plus P50,000.00, as exemplary damages, plus costs.
REASONS:
i. Reason of loan for accommodation of friend
was not credible.
ii. Assuming, arguendo, that the TAN did not
personally benefit from loan, he should have filed a 3rd-party complaint
against Wilson Lucmen
iii. 3 times the petitioner offered to settle his
loan obligation with CCP.
iv. TAN may not avoid his liability to pay his
obligation under the promissory note which he must comply with in good
faith.
 v. TAN is estopped from denying his liability or TAN- No legal basis for the imposition of interest on the penalty charge for
loan obligation to the private respondent. the reason that the law only allows imposition of interest on monetary
interest but not the charging of interest on penalty. Penalties should not
TAN APPEALED TO CA, asked for the reduction of the penalties and charges earn interest.
on his loan obligation.
WON TAN can file reduction of penalty due to made partial payments.
Judgment appealed from is hereby AFFIRMED.
Petitioner contends that reduction of the penalty is justifiable under ART
1. No alleged partial or irregular performance. 1229: “The judge shall equitably reduce the penalty when the principal
obligation has been partly or irregularly complied with by the debtor. Even
2. However, the appellate court modified the decision of the trial court by
if there has been no performance, the penalty may also be reduced by the
deleting exemplary damages because not proportionate to actual damage
courts if it is iniquitous or unconscionable.”
caused by the non-performance of the contract
HELD
ISSUES:
CA DECISION AFFIRMED with MODIFICATION in that the penalty charge of
WON there are contractual and legal bases for the imposition of the
two percent (2%) per month on the total amount due, compounded
penalty, interest on the penalty and attorney’s fees.
monthly, is hereby reduced to a straight twelve percent (12%) per annum
TAN imputes error on CA in not fully eliminating attorney fees and in not starting from August 28, 1986. With costs against the petitioner.
reducing the penalties considering that he made partial payments on the
loan.
WON there are contractual and legal bases for the imposition of the
And if penalty is to be awarded, TAN asking for non-imposition of interest
penalty, interest on the penalty and attorney’s fees. –YES. WITH LEGAL
on the surcharges because compounding of these are not included in
BASES.
promissory note.
ART 1226: In obligations with a penal clause, the penalty shall substitute
No basis in law for the charging of interest on the surcharges for the
the indemnity for damages and the payment of interests in case of non-
reason that the New Civil Code is devoid of any provision allowing the
compliance, if there is no stipulation to the contrary. Nevertheless,
imposition of interest on surcharges.
damages shall be paid if the obligor refuses to pay the penalty or is guilty
WON interest may accrue on the penalty or compensatory interest without of fraud in the fulfillment of the obligation.
violating ART 1959: “Without prejudice to the provisions of Article 2212,
i. The penalty may be enforced only when it is
interest due and unpaid shall not earn interest. However, the contracting
demandable in accordance with the provisions of this Code.
parties may by stipulation capitalize the interest due and unpaid, which as
added principal, shall earn new interest.”
CASE AT BAR: 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.
PENALTY IN MANY FORMS:
i. If the parties stipulate penalty apart
monetary interest, two are different and distinct from each other and may
be demanded separately.
ii. If stipulation about payment of an additional
interest rate partakes of the nature of a penalty clause which is sanctioned
by law:
1. ART 2209: If the obligation consists in the payment of a sum of money,
and the debtor incurs in delay, the indemnity for damages, there 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.
CASE AT BAR: Penalty charge of 2% per month began to accrue from the
time of default by the petitioner.
i. No doubt petitioner is liable for both the
stipulated monetary interest and the stipulated penalty charge.
1. PENALTY CHARGE = penalty or compensatory interest.
WON interest may accrue on the penalty or compensatory interest without
violating ART 1959.
Penalty clauses can be in the form of penalty or compensatory interest.
i. Thus, the compounding of the penalty or
compensatory interest is sanctioned by and allowed pursuant to the
above-quoted provision of Article 1959 of the New Civil Code considering
that:
1. There is an express stipulation in the promissory note (Exhibit “A”)
permitting the compounding of interest.
a. 5th paragraph of the said promissory note provides that: “Any interest
which may be due if not paid shall be added to the total amount when due
and shall become part thereof, the whole amount to bear interest at the
maximum rate allowed by law.”.
2. Therefore, any penalty interest not paid, when due, shall earn the legal
interest of twelve percent (12%) per annum, in the absence of express
stipulation on the specific rate of interest, as in the case at bar.
ART 2212: “Interest due shall earn legal interest from the time it is
judicially demanded, although the obligation may be silent upon this
point.”
CASE AT BAR: interest began to run on the penalty interest upon the filing
of the complaint in court by CCP.
i. Hence, the courts did not err in ruling that
the petitioner is bound to pay the interest on the total amount of the
principal, the monetary interest and the penalty interest.
WON TAN can file reduction of penalty due to made partial payments. –
YES. BUT NOT 10% REDUCTION AS SUGGESTED BY PETITIONER.
REDUCED TO 2% REDUCTION:
i. PARTIAL PAYMENTS showed his good faith
despite difficulty in complying with his loan obligation due to his financial
problems.
1. However, we are not unmindful of the respondent’s long overdue
deprivation of the use of its money collectible.
The petitioner also imputes error on the part of the appellate court for not
declaring the suspension of the running of the interest during period when
the CCP allegedly failed to assist the petitioner in applying for relief from
liability
Alleges that his obligation to pay the interest and surcharge should have
been suspended because the obligation to pay such interest and surcharge
has become conditional
i. Dependent on a future and uncertain event
which consists of whether the petitioner’s request for condonation of
interest and surcharge would be recommended by the Commission on
Audit.
1. Since the condition has not happened due to the private respondent’s
reneging on its promise, his liability to pay the interest and surcharge on
the loan has not arisen.
COURT ANSWER:
i. Running of the interest and surcharge was
not suspended.
ii. CCP correctly asserted that it was the primary
responsibility of petitioner to inform the Commission on Audit of his
application for condonation of interest and surcharge.
RCBC v. CA - Insurance Proceeds 289 SCRA 292 (1998)
> GOYU applied for credit facilities and accommodations with RCBC. After
due evaluation, a credit facility in the amount of P30 million was initially
granted. Upon GOYU's application increased GOYU's credit facility to P50
million, then to P90 million, and finally to P117 million
> As security for its credit facilities with RCBC, GOYU executed two REM
and two CM in favor of RCBC, which were registered with the Registry of
Deeds at. Under each of these four mortgage contracts, GOYU committed
itself to insure the mortgaged property with an insurance company
approved by RCBC, and subsequently, to endorse and deliver the insurance
policies to RCBC.
> GOYU obtained in its name a total of 10 insurance policies from MICO. In
February 1992, Alchester Insurance Agency, Inc., the insurance agent
where GOYU obtained the Malayan insurance policies, issued nine
endorsements in favor of RCBC seemingly upon instructions of GOYU
> On April 27, 1992, one of GOYU's factory buildings in Valenzuela was
gutted by fire. Consequently, GOYU submitted its claim for indemnity.
> MICO denied the claim on the ground that the insurance policies were
either attached pursuant to writs of attachments/garnishments issued by
various courts or that the insurance proceeds were also claimed by other
creditors of GOYU alleging better rights to the proceeds than the insured.
> GOYU filed a complaint for specific performance and damages. RCBC,
one of GOYU's creditors, also filed with MICO its formal claim over the
proceeds of the insurance policies, but said claims were also denied for the
same reasons that AGCO denied GOYU's claims.
> However, because the endorsements do not bear the signature of any
officer of GOYU, the trial court, as well as the Court of Appeals, concluded
that the endorsements are defective and held that RCBC has no right over
the insurance proceeds.
Issue: Whether or not RCBC has a right over the insurance proceeds.
Held:
RCBC has a right over the insurance proceeds.
It is settled that a mortgagor and a mortgagee have separate and distinct
insurable interests in the same mortgaged property, such that each one of
them may insure the same property for his own sole benefit. There is no
question that GOYU could insure the mortgaged property for its own
exclusive benefit. In the present case, although it appears that GOYU
obtained the subject insurance policies naming itself as the sole payee, the
intentions of the parties as shown by their contemporaneous acts, must be
given due consideration in order to better serve the interest of justice and
equity.
It is to be noted that 9 endorsement documents were prepared by
Alchester in favor of RCBC. The Court is in a quandary how Alchester could
arrive at the idea of endorsing any specific insurance policy in favor of any
particular beneficiary or payee other than the insured had not such named
payee or beneficiary been specifically disclosed by the insured itself. It is
also significant that GOYU voluntarily and purposely took the insurance
policies from MICO, a sister company of RCBC, and not just from any other
insurance company. Alchester would not have found out that the subject
pieces of property were mortgaged to RCBC had not such information
been voluntarily disclosed by GOYU itself. Had it not been for GOYU,
Alchester would not have known of GOYU's intention of obtaining
insurance coverage in compliance with its undertaking in the mortgage
contracts with RCBC, and verify, Alchester would not have endorsed the
policies to RCBC had it not been so directed by GOYU.
On equitable principles, particularly on the ground of estoppel, the Court is
constrained to rule in favor of mortgagor RCBC. RCBC, in good faith, relied
upon the endorsement documents sent to it as this was only pursuant to
the stipulation in the mortgage contracts. We find such reliance to be
justified under the circumstances of the case. GOYU failed to seasonably
repudiate the authority of the person or persons who prepared such
endorsements. Over and above this, GOYU continued, in the meantime, to
enjoy the benefits of the credit facilities extended to it by RCBC. After the
occurrence of the loss insured against, it was too late for GOYU to disown
the endorsements for any imagined or contrived lack of authority of
Alchester to prepare and issue said endorsements. If there had not been
actually an implied ratification of said endorsements by virtue of GOYU's
inaction in this case, GOYU is at the very least estopped from assailing their
operative effects.
To permit GOYU to capitalize on its non-confirmation of these
endorsements while it continued to enjoy the benefits of the credit
facilities of RCBC which believed in good faith that there was due
endorsement pursuant to their mortgage contracts, is to countenance
grave contravention of public policy, fair dealing, good faith, and justice.
Such an unjust situation, the Court cannot sanction. Under the peculiar
circumstances obtaining in this case, the Court is bound to recognize
RCBC's right to the proceeds of the insurance policies if not for the actual
endorsement of the policies, at least on the basis of the equitable principle
of estoppel.
GOYU cannot seek relief under Section 53 of the Insurance Code which
provides that the proceeds of insurance shall exclusively apply to the
interest of the person in whose name or for whose benefit it is made. The
peculiarity of the circumstances obtaining in the instant case presents a
justification to take exception to the strict application of said provision, it
having been sufficiently established that it was the intention of the parties
to designate RCBC as the party for whose benefit the insurance policies
were taken out. Consider thus the following:
1. It is undisputed that the insured pieces of property were the subject
of mortgage contracts entered into between RCBC and GOYU in
consideration of and for securing GOYU's credit facilities from RCBC. The
mortgage contracts contained common provisions whereby GOYU, as
mortgagor, undertook to have the mortgaged property properly covered
against any loss by an insurance company acceptable to RCBC.
2. GOYU voluntarily procured insurance policies to cover the mortgaged
property from MICO, no less than a sister company of RCBC and definitely
an acceptable insurance company to RCBC.
3. Endorsement documents were prepared by MICO's underwriter,
Alchester Insurance Agency, Inc., and copies thereof were sent to GOYU,
MICO and RCBC. GOYU did not assail, until of late, the validity of said
endorsements.
4. GOYU continued until the occurrence of the fire, to enjoy the
benefits of the credit facilities extended by RCBC which was conditioned
upon the endorsement of the insurance policies to be taken by GOYU to
cover the mortgaged properties.
This Court can not over stress the fact that upon receiving its copies of the
endorsement documents prepared by Alchester, GOYU, despite the
absence written conformity thereto, obviously considered said
endorsement to be sufficient compliance with its obligation under the
mortgage contracts since RCBC accordingly continued to extend the
benefits of its credit facilities and GOYU continued to benefit therefrom.
Just as plain too is the intention of the parties to constitute RCBC as the
beneficiary of the various insurance policies obtained by GOYU. The
intention of the parties will have to be given full force and effect in this
particular case. The insurance proceeds may, therefore, be exclusively
applied to RCBC, which under the factual circumstances of the case, is truly
the person or entity for whose benefit the policies were clearly intended.
Bataan Seedling vs Republic GR No. 141009, 2 July 2002
Petitioner entered into a contract with respondent, represented by
the DENR for the reforestation of a forest land within a period of 3 years.
Petitioner undertook to report to DENR any event or condition which
delays or may delay the project. With the contract was the release of
mobilization fund but the fund was to be returned upon completion or
deducted from periodic release of moneys to petitioner. Believing that
petitioners failed to comply with their obligations, respondent sent a
notice of cancellation. Petitioners failed to respond to the notice, thus,
respondent filed a complaint for damages against petitioners. The RTC held
that respondent had sufficient grounds to cancel the contract but saw no
reason why the mobilization fund and the cash advances should be
refunded or that petitioners are liable for liquidated damages. Both parties
appealed to the CA, which affirmed the trial court and that the balnce of
the fund should be returned with 12% interest.
ISSUE
Whether the order to refund the balance of the fund with 12%
interest pa is proper
HELD
No. Interest at the rate of 12% pa is impossible if there is no
stipulation in the contract. Herein subject contract does not contain any
stipulation as to interest. However, the amount due to respondent does
not represent a loan or forbearance of money. The word “forbearance” is
defined, within, the context of usury law, as a contractual obligation of
lender or creditor to refrain, during given period of time, from requiring
borrower or debtor to repay loan or debt then due and payable. In the
absence of stipulation, the legal interest is 6% pa on the amount finally
adjudged by the Court.
Banco Filipino vs CA GR No. 129227, 30 May 2000
Elsa and Calvin Arcilla secured, on 3 occassions, loan from petitioner
as evidenced by promissory note. REM was also executed. Under said
deeds, Banco Filipino may increase rate of interest on said loans, within
the limits allowed by law. at that time, under Usury Law, the maximum
rate of interest for loans secured by REM was 12% pa. later, the Central
bank issued Circular No. 494 provinding for the maximum interest of
19%pa. meanwhile, Skyli Builders, thru President Calvin Arcilla secured
loans from BPI with FGU Insurance as surety. Banco Filipino issued an
account statement with 17% pa as interest. The Arcillas filed for annulment
of the loan contracts because the rate of interests charged were usurious.
ISSUE
Whether or not respondents are entitled to refund of the alleged
interest overpayments.
HELD
Yes. Private respondents aver that they are entitled to the refund
inasmuch as the escalation clause incorporated in the loan contracts do
not have a corresponding de-escalation clause and is therefore, illegal.
In Banco Filipino Savings & Mortgage Bank vs Navarro, the Court
ruled that Central Bank Circular 494, although it has the force and effect of
law, is not a law and is not the law contemplated by the parties which
authorizes the petitioner to unilaterally raise the interest rate of loan. The
reliance on the circular was without any legal basis.
Mendoza vs. Court of Appeals (359 SCRA 438)
Respondent was granted by respondent Philippine National Bank (PNB)
credit line and Letter of Credit/Trust Receipt (LC/TR) line. As security for
the credit accommodations and for those which may thereinafter be
granted, petitioner mortgaged to respondent PNB some of his properties.
Petitioner later requested for loan restructuring and issued promissory
notes, which he failed to comply. Respondent PNB extra-judicially
foreclosed the real and chattel mortgages, and the mortgaged properties
were sold at public auction to respondent PNB, as highest bidder.
Petitioner filed a case in the RTC contending that foreclosure is illegal
invoking promissory estoppel, and secured favorable judgment. The
decision of RTC was reversed by the Court of Appeals.
ISSUE:
Whether or not the foreclosure of petitioner’s real estate and chattel
mortgages were legal and valid as opposed to promissory estoppel.
RULING:
YES. First, there was no promissory estoppel as the promise (of respondent
bank) must be plain and unambiguous and sufficiently specific. Second,
there was no meeting of the minds leading to another contract, hence loan
was not restructured. Third, promissory notes petitioner issued were valid.
Fourth, stipulation in the mortgage, extending its scope and effect to after-
acquired property is valid and binding after the correct and valid process of
extra-judicial foreclosure. Finally, record showed that petitioner did not
even attempt to tender any redemption price during the one-year
redemption period.
First Metro vs Este del Sol GR No. 141811, 15 November 2001
FMIC granted Este del Sol a loan to finance a sports/resort complex
in Montalban, Rizal. Under the agreement, the interest was 16% pa based
on the diminishing balance. In case of default, an acceleration clause was
provided and the amount due is subject to 20% one-time penalty on the
amount due and such amount shall bear interest at the highest rate
permitted by law. respondent executed a REM, individual continuing
suretyship and an underwriting agreement whereby FMIC shall underwrite
the public offering of one P120,000 common shares of respondent’s capital
stock for one-time underwriting fee of P200,000. For failure to pay its
obligation, FMIC caused the foreclosure of the REM. At the public auction,
FIC was the highest bidder. Petitioner filed to collect for alleged deficiency
balance against respondents since it failed to collect from the sureties, plus
interest at 21% pa. the trial court ruled in favor of FMIC. Respondents
appealed before the CA which held that the fees provided for in the
Underwriting and Consultacy Agreements were mere subterfuges to
camouflage the excessively usurious interest charged. The CA ordered
FMIC to reimburse petitioner representing what is ue to petitioner and
what is due to respondent.

ISSUE

Whether or not the interests are lawful

HELD

No. an apparently lawful loan is usurious when it is intended that

additional compensation for the loan be disguised by an ostensibly
unrelated contract for the payment by the borrower for the lender’s
services which re of little value or which are not in fact to be rendered.
Article 1957 clearly provides: contracts and stipulations, under any cloak or
device whatever, intended to circumvent the law agaistn usury shall be
void. The borrower may recover in accordance with the laws on usury.