People v.

Concepcion
FACTS:
Defendant authorized an extension of credit in favor of Concepcion, a co-partnership. Defendant’s wife was a director of this co-
partnership. Defendant was found guilty of violating Sec. 35 of Act No. 2747 which says that “The National Bank shall not, directly or
indirectly, grant loans to any of the members of the Board of Directors of the bank nor to agents of the branch banks.” This Section was
in effect in 1919 but was repealed in Act No. 2938 approved on January 30, 1921.

ISSUE: W/N Defendant can be convicted of violating Sections of Act No. 2747, which were repealed by Act No. 2938.

HELD:
In the interpretation and construction, the primary rule is to ascertain and give effect to the intention of the Legislature. Section 49 in
relation to Sec. 25 of Act No. 2747 provides a punishment for any person who shall violate any provisions of the Act. Defendant
contends that the repeal of these Sections by Act No. 2938 has served to take away basis for criminal prosecution. The Court holds
that where an act of the Legislature which penalizes an offense repeals a former act which penalized the same offense, such
repeal does not have the effect of thereafter depriving the Courts of jurisdiction to try, convict and sentence offenders charged with
violations of the old law.

Republic v. Bagtas
Facts: Bagtas borrowed three bulls from the Bureau of Animal Industry for one year for breeding purposes subject to payment of
breeding fee of 10% of book value of the bull. Upon expiration, Bagtas asked for renewal. The renewal was granted only to one bull.
Bagtas offered to buy the bulls at its book value less depreciation but the Bureau refused. The Bureau said that Bagtas should either
return or buy it at book value. Bagtas proved that he already returned two of the bulls, and the other bull died during a Huk raid, hence,
obligation already extinguished. He claims that the contract is a commodatum hence, loss through fortuitous event should be borne by
the owner.

Issue: WON Bagtas is liable for the death of the bull.

Held: Yes. Commodatum is essentially gratuitous. However, in this case, there is a 10% charge. If this is considered compensation,
then the case at bar is a lease. Lessee is liable as possessor in bad faith because the period already lapsed.

Even if this is a commodatum, Bagtas is still liable because the fortuitous event happened when he held the bull and the period
stipulated already expired and he is liable because the thing loaned was delivered with appraisal of value and there was no contrary
stipulation regarding his liability in case there is a fortuitous event.

SAURA IMPORT and EXPERT CO., INC., vs DBP

FACTS:
In July 1952, Saura, Inc., applied to Rehabilitation Finance Corp., now DBP, for an industrial loan of P500,000 to be used for the
construction of a factory building, to pay the balance of the jute mill machinery and equipment and as additional working capital. In
Resolution No.145, the loan application was approved to be secured first by mortgage on the factory buildings, the land site, and
machinery and equipment to be installed.

The mortgage was registered and documents for the promissory note were executed. But then, later on, was cancelled to make way
for the registration of a mortgage contract over the same property in favor of Prudential Bank and Trust Co., the latter having issued
Saura letter of credit for the release of the jute machinery. As security, Saura execute a trust receipt in favor of the Prudential. For
failure of Saura to pay said obligation, Prudential sued Saura.

After almost 9 years, Saura Inc, commenced an action against RFC, alleging failure on the latter to comply with its obligations to
release the loan applied for and approved, thereby preventing the plaintiff from completing or paying contractual commitments it had
entered into, in connection with its jute mill project.

The trial court ruled in favor of Saura, ruling that there was a perfected contract between the parties and that the RFC was guilty of
breach thereof.

ISSUE: Whether or not there was a perfected contract between the parties. YES. There was indeed a perfected consensual
contract.

HELD:
Article 1934 provides: An accepted promise to deliver something by way of commodatum or simple loan is binding upon the parties, but
the commodatum or simple loan itself shall not be perfected until delivery of the object of the contract.

There was undoubtedly offer and acceptance in the case. The application of Saura, Inc. for a loan of P500,000.00 was approved by
resolution of the defendant, and the corresponding mortgage was executed and registered. The defendant failed to fulfill its obligation
and the plaintiff is therefore entitled to recover damages.

When an application for a loan of money was approved by resolution of the respondent corporation and the responding mortgage was
executed and registered, there arises a perfected consensual contract.

However, it should be noted that RFC imposed two conditions (availability of raw materials and increased production) when it restored
the loan to the original amount of P500,000.00.
Saura, Inc. obviously was in no position to comply with RFC’s conditions. So instead of doing so and insisting that the loan be released
as agreed upon, Saura, Inc. asked that the mortgage be cancelled.The action thus taken by both parties was in the nature of
mutual desistance which is a mode of extinguishing obligations. It is a concept that derives from the principle that since
mutual agreement can create a contract, mutual disagreement by the parties can cause its extinguishment.

WHEREFORE, the judgment appealed from is reversed and the complaint dismissed.

GSIS vs CA
Government Service Insurance System v. Court of Appeals
170 SCRA 533,
February 23, 1989

Facts:

Private respondents, Mr. and Mrs. Isabelo R. Racho, together with spouses Mr. and Mrs Flaviano Lagasca, executed a deed of
mortgage, dated November 13, 1957, in favor of petitioner GSIS and subsequently, another deed of mortgage, dated April 14, 1958, in
connection with two loans granted by the latter in the sums of P 11,500.00 and P 3,000.00, respectively. A parcel of land covered by
Transfer Certificate of Title No. 38989 of the Register of Deed of Quezon City, co-owned by said mortgagor spouses, was given as
security under the two deeds. They also executed a 'promissory note".

On July 11, 1961, the Lagasca spouses executed an instrument denominated "Assumption of Mortgage," obligating themselves to
assume the said obligation to the GSIS and to secure the release of the mortgage covering that portion of the land belonging to
spouses Racho and which was mortgaged to the GSIS. This undertaking was not fulfilled. Upon failure of the mortgagors to comply with
the conditions of the mortgage, particularly the payment of the amortizations due, GSIS extrajudicially foreclosed the mortgage and
caused the mortgaged property to be sold at public auction on December 3, 1962.

For more than two years, the spouses Racho filed a complaint against the spouses Lagasca praying that the extrajudicial foreclosure
"made on, their property and all other documents executed in relation thereto in favor of the Government Service Insurance System" be
declared null and void.

The trial court rendered judgment on February 25, 1968 dismissing the complaint for failure to establish a cause of action. However,
said decision was reversed by the respondent Court of Appeals, stating that, although formally they are co-mortgagors, the GSIS
required their consent to the mortgage of the entire parcel of land which was covered with only one certificate of title, with full
knowledge that the loans secured were solely for the benefit of the appellant Lagasca spouses who alone applied for the loan.

Issues:

Whether the respondent court erred in annulling the mortgage as it affected the share of private respondents in the reconveyance of
their property?

Whether private respondents benefited from the loan, the mortgage and the extrajudicial foreclosure proceedings are valid?

Held:

Both parties relied on the provisions of Section 29 of Act No. 2031, otherwise known as the Negotiable Instruments Law, which provide
that an accommodation party is one who has signed an instrument as maker, drawer, acceptor of indorser without receiving value
therefor, but is held liable on the instrument to a holder for value although the latter knew him to be only an accommodation party.

The promissory note, as well as the mortgage deeds subject of this case, are clearly not negotiable instruments. These documents do
not comply with the fourth requisite to be considered as such under Section 1 of Act No. 2031 because they are neither payable to
order nor to bearer. The note is payable to a specified party, the GSIS. Absent the aforesaid requisite, the provisions of Act No. 2031
would not apply; governance shall be afforded, instead, by the provisions of the Civil Code and special laws on mortgages.

As earlier indicated, the factual findings of respondent court are that private respondents signed the documents "only to give their
consent to the mortgage as required by GSIS", with the latter having full knowledge that the loans secured thereby were solely for the
benefit of the Lagasca spouses.

Contrary to the holding of the respondent court, it cannot be said that private respondents are without liability under the aforesaid
mortgage contracts. The factual context of this case is precisely what is contemplated in the last paragraph of Article 2085 of the Civil
Code to the effect that third persons who are not parties to the principal obligation may secure the latter by pledging or mortgaging their
own property. So long as valid consent was given, the fact that the loans were solely for the benefit of the Lagasca spouses would not
invalidate the mortgage with respect to private respondents' share in the property.

The respondent court, erred in annulling the mortgage insofar as it affected the share of private respondents or in directing
reconveyance of their property or the payment of the value.
Ligutan v CA
Facts:
On November 3, 1982 the Security Bank and Trust Company filed a complaint in Regional Trial Court of Makati against Tolomeo
Ligutan and Leonidas dela Llana for obtaining a loan in the amount of P120,000.00 which they executed a promissory note binding
themselves, jointly and severally to pay the sum borrowed with an interest of 15.189% per annum upon maturity and to pay a penalty of
5% every month on the outstanding principal and interest in case of default but the petitioners defaulted on their obligation. Two years
later petitioners filed a motion for reconsideration but the court denied the motion. Then the petitioners interposed an appeal with the
Court of Appeals, questioning the rejection by the trial court of their motion to present evidence and assailing the imposition of the 2%
service charge, the 5% per month penalty charge and 10% attorney’s fees. In its decision on March 7, 1996, the appellate court
affirmed the judgment of the trial court.

Issue: Whether or not the promissory note executed by the petitioners considered as pure obligation?

Ruling: Yes, it is stated in art. 1179 that a simple promissory note promising to pay a certain amount within a certain period is a pure
obligation which is immediately demandable by the creditors and the debtor cannot be excused from complying with his prestation. If
the debtor does not fulfill his prestation, specially after a valid demand, he is placed in default.

Eastern Shipping Lines v 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 consignee’s 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.

Producers Bank of the Philippines v. CA, 397 SCRA 651

Doronilla is in the process of incorporating his business and to comply with one of the requirements of incorporation, he caused Vives’
to issue a check which was then deposited in Doronilla’s savings account. It was agreed that Vives can withdraw his money in a
month’s time. However, what Doronilla did was to open a current account and instructed the bank to debit from the savings account and
deposit it in his current account. So when Vives checked the savings account, the money was gone. Is the contract a mutuum or
commodatum?

Supreme Court held that the contract is a commodatum. Although in a commodatum, the object is a non-consumable thing, there are
instances where a consumable thing may be the object of a commodatum, such as when the purpose is not for consumption of the
object but merely for exhibition (Art. 1936). Thus, if consumable goods are loaned only for purposes of exhibition, or when the intention
of the parties is to lend consumable goods and to have the very same goods returned at the end of the period agreed upon, the loan is
a commodatum and not a mutuum.
Garcia v Thio
FACTS
Respondent Thio received from petitioner Garcia two crossed checks which amount to US$100,000 and US$500,000, respectively,
payable to the order of Marilou Santiago. According to petitioner, respondent failed to pay the principal amounts of the loans when they
fell due and so she filed a complaint for sum of money and damages with the RTC. Respondent denied that she contracted the two
loans and countered that it was Marilou Satiago to whom petitioner lent the money. She claimed she was merely asked y petitioner to
give the checks to Santiago. She issued the checks for P76,000 and P20,000 not as payment of interest but to accommodate
petitioner’s request that respondent use her own checks instead of Santiago’s.

RTC ruled in favor of petitioner. CA reversed RTC and ruled that there was no contract of loan between the parties.

ISSUE
(1) Whether or not there was a contract of loan between petitioner and respondent.
(2) Who borrowed money from petitioner, the respondent or Marilou Santiago?

HELD
(1) The Court held in the affirmative. A loan is a real contract, not consensual, and as such I perfected only upon the delivery of
the object of the contract. Upon delivery of the contract of loan (in this case the money received by the debtor when the checks were
encashed) the debtor acquires ownership of such money or loan proceeds and is bound to pay the creditor an equal amount. It is
undisputed that the checks were delivered to respondent.

(2) However, the checks were crossed and payable not to the order of the respondent but to the order of a certain Marilou
Santiago. Delivery is the act by which the res or substance is thereof placed within the actual or constructive possession or control of
another. Although respondent did not physically receive the proceeds of the checks, these instruments were placed in her control and
possession under an arrangement whereby she actually re-lent the amount to Santiago.

Petition granted; judgment and resolution reversed and set aside.

Pajuyo v. CA
GR No. 146364 June 3, 2004

Facts: Pajuyo entrusted a house to Guevara for the latter's use provided he should return the same upon demand and with the
condition that Guevara should be responsible of the maintenance of the property. Upon demand Guevara refused to return the property
to Pajuyo. The petitioner then filed an ejectment case against Guevara with the MTC who ruled in favor of the petitioner. On appeal with
the CA, the appellate court reversed the judgment of the lower court on the ground that both parties are illegal settlers on the property
thus have no legal right so that the Court should leave the present situation with respect to possession of the property as it is, and ruling
further that the contractual relationship of Pajuyo and Guevara was that of a commodatum.

Issue: Is the contractual relationship of Pajuyo and Guevara that of a commodatum?

Held: No. The Court of Appeals’ theory that the Kasunduan is one of commodatum is devoid of merit. In a contract of commodatum,
one of the parties delivers to another something not consumable so that the latter may use the same for a certain time and return it. An
essential feature of commodatum is that it is gratuitous. Another feature of commodatum is that the use of the thing belonging to
another is for a certain period. Thus, the bailor cannot demand the return of the thing loaned until after expiration of the period
stipulated, or after accomplishment of the use for which the commodatum is constituted. If the bailor should have urgent need of the
thing, he may demand its return for temporary use. If the use of the thing is merely tolerated by the bailor, he can demand the return of
the thing at will, in which case the contractual relation is called a precarium. Under the Civil Code, precarium is a kind of commodatum.
The Kasunduan reveals that the accommodation accorded by Pajuyo to Guevarra was not essentially gratuitous. While the Kasunduan
did not require Guevarra to pay rent, it obligated him to maintain the property in good condition. The imposition of this obligation makes
the Kasunduan a contract different from a commodatum. The effects of the Kasunduan are also different from that of a commodatum.
Case law on ejectment has treated relationship based on tolerance as one that is akin to a landlord-tenant relationship where the
withdrawal of permission would result in the termination of the lease. The tenant’s withholding of the property would then be unlawful.

BPI-Family Savings Bank, Inc. v CA GR No 122480, April 12, 2000

FACTS:
The case involves a claim for tax refund on the amount of P112,491 representing BPI’s tax withheld for 1989. This was initially filed with
the CIR alleging that the company did not apply the 1989 refundable amount to its 1990 Annual Income Tax Return or other tax
liabilities due to the alleged business losses it incurred for the same year. But, without waiting for CIR, it filed a petition for review with
the CTA which dismissed the petition. Hence, this petition.

ISSUE:
Whether BPI is entitled to the refund

RULING:
Yes. In the present case, the return attached to the company’s motion for reconsideration clearly showed that it suffered a net loss in
1990. Contrary to the holding of the CA and CTA, BPI could not have applied the amount as a tax credit.
When it is undisputed that a taxpayer is entitled to a refund, the State should not invoke technicalities to keep money not belonging to
it.
People v. Puig & Porras
Facts:
Rrespondents were conspiring, confederating, and helping one another, with grave abuse of confidence, being the Cashier and
Bookkeeper of the Rural Bank of Pototan, Inc., Pototan, Iloilo, without the knowledge and/or consent of the management of the Bank
and with intent of gain, did then and there willfully, unlawfully and feloniously take, steal and carry away the sum of P15,000.00,
Philippine Currency, to the damage and prejudice of the said bank in the aforesaid amount.

However, the trial court did not find the existence of probable cause because (1) the element of ‘taking without the consent of the
owners’ was missing on the ground that it is the depositors-clients, and not the Bank, which filed the complaint in these cases, who are
the owners of the money allegedly taken by respondents and hence, are the real parties-in-interest; and (2) the Informations are bereft
of the phrase alleging "dependence, guardianship or vigilance between the respondents and the offended party that would have
created a high degree of confidence between them which the respondents could have abused.".

Issue:
Whether or not the 112 informations for qualified theft sufficiently allege the element of taking without the consent of the owner, and the
qualifying circumstance of grave abuse of confidence.

Held:
Yes.

The dismissal by the RTC of the criminal cases was allegedly due to insufficiency of the Informations and, therefore, because of this
defect, there is no basis for the existence of probable cause which will justify the issuance of the warrant of arrest. Petitioner assails the
dismissal contending that the Informations for Qualified Theft sufficiently state facts which constitute (a) the qualifying circumstance of
grave abuse of confidence; and (b) the element of taking, with intent to gain and without the consent of the owner, which is the Bank.

The RTC Judge based his conclusion that there was no probable cause simply on the insufficiency of the allegations in the Informations
concerning the facts constitutive of the elements of the offense charged.

The relationship between banks and depositors has been held to be that of creditor and debtor. Articles 1953 and 1980 of the New Civil
Code, as appropriately pointed out by petitioner, provide as follows:
Article 1953. A person who receives a loan of money or any other fungible thing acquires the ownership thereof, and is bound to pay to
the creditor an equal amount of the same kind and quality.
Article 1980. Fixed, savings, and current deposits of money in banks and similar institutions shall be governed by the provisions
concerning loan.

In a long line of cases involving Qualified Theft, this Court has firmly established the nature of possession by the Bank of the money
deposits therein, and the duties being performed by its employees who have custody of the money or have come into possession of it.
The Court has consistently considered the allegations in the Information that such employees acted with grave abuse of confidence, to
the damage and prejudice of the Bank, without particularly referring to it as owner of the money deposits, as sufficient to make out a
case of Qualified Theft.

Nacar v Gallery Frames

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 court’s 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 Arbiter’s 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 court’s
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.

G.R. No. L-52478 October 30, 1986

THE GOVERNMENT SERVICE INSURANCE SYSTEM, petitioner-appellant,

vs.
HONORABLE COURT OF APPEALS, NEMENCIO R. MEDINA and JOSEFINA G. MEDINA, respondents-appellants.

PARAS, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals in CA-G.R. No. 62541-R (Nemencio R. Medina and
Josefina G. Medina, Plaintiffs-Appellants vs. The Government Service Insurance System, Defendant-Appellant) affirming the January
21, 1977 Decision of the trial court, and at the same time ordering the GSIS to reimburse the amount of P9,580.00 as over-payment
and to pay the spouses Nemencio R. Medina and Josefina G. Medina P3,000.00 and P1,000.00 as attorney's fees and litigation
expenses.

In 1961, herein private respondents spouses Nemencio R. Medina and Josefina G. Medina (Medinas for short) applied with the herein
petitioner Government Service Insurance System (GSIS for short) for a loan of P600,000.00. The GSIS Board of Trustees, in its
Resolution of December 20, 1961, approved under Resolution No. 5041 only the amount of P350,000.00, subject to the following
conditions: that the rate of interest shall be 9% per annum compounded monthly; repayable in ten (10) years at a monthly amortization
of P4,433.65 including principal and interest, and that any installment or amortization that remains due and unpaid shall bear interest at
the rate of 9%/12% per month. The Office of the Economic Coordinator, in a 2nd Indorsement dated March 26, 1962, further reduced
the approved amount to P295,000.00. On April 4, 1962, the Medinas accepting the reduced amount, executed a promissory note and a
real estate mortgage in favor of GSIS. On May 29, 1962, the GSIS, and on June 6, 1962, the Office of the Economic Coordinator, upon
request of the Medinas, both approved the restoration of the amount of P350,000.00 (P295,000.00 + P55,000.00) originally approved
by the GSIS. This P350,000.00 loan was denominated by the GSIS as Account No. 31055.

On July 6, 1962, the Medinas executed in favor of the GSIS an Amendment of Real Estate Mortgage, the pertinent portion of which
reads:

WHEREAS, on the 4th day of April, 1962, the Mortgagor executed signed and delivered a real estate mortgage to and in favor of
the Mortgagee on real estate properties located in the City of Manila, ... to secure payment to the mortgages of a loan of Two
Hundred Ninety Five Thousand Pesos (P295,000.00) Philippine Currency, granted by the mortgagee to the Mortgagors, ...;

WHEREAS, the parties herein have agreed as they hereby agree to increase the aforementioned loan from Two Hundred Ninety
Five Thousand Pesos (P295,000.00) to Three Hundred Fifty Thousand Pesos (P350,000.00), Philippine Currency;

NOW, THEREFORE, for and in consideration of the foregoing premises, the aforementioned parties have amended and by these
presents do hereby amend the said mortgage dated April 4, 1962, mentioned in the second paragraph hereof by increasing the
loan from Two Hundred Ninety Five Thousand Pesos (P295,000.00) to Three Hundred Fifty Thousand Pesos (P350,000.00)
subject to this additional condition.

(1) That the mortgagor shall pay to the system P4,433.65 monthly including principal and interest.
 It is hereby expressly understood that with the foregoing amendment, all other terms and conditions of the said real estate
mortgage dated April 4, 1962 insofar as they are not inconsistent herewith, are hereby confirmed, ratified and continued in full force
and effect and that the parties thereto agree that this amendment be an integral part of said real estate mortgage. (Rollo, p. 153-
154).

Upon application by the Medinas, the GSIS Board of Trustees adopted Resolution No. 121 on January 18, 1963, as amended by
Resolution No. 348 dated February 25, 1963, approving an additional loan of P230,000.00 in favor of the Medinas on the security of the
same mortgaged properties and the additional properties covered by TCT Nos. 49234, 49235 and 49236, to bear interest at 9% per
annum compounded monthly and repayable in ten years. This additional loan of P230,000.00 was denominated by the GSIS as
Account No. 31442.

On March 18, 1963, the Economic Coordinator thru the Auditor General interposed no objection thereto, subject to the conditions of
Resolution No. 121 as amended by Resolution No. 348 of the GSIS.

Beginning 1965, the Medinas having defaulted in the payment of the monthly amortization on their loan, the GSIS imposed 9%/12%
interest on an installments due and unpaid. In 1967, the Medinas began defaulting in the payment of fire insurance premiums.

On May 3, 1974, the GSIS notified the Medinas that they had arrearages in the aggregate amount of P575,652.42 as of April 18, 1974
(Exhibit 9, p. 149, Joint Record on Appeal, Rollo, p. 79), and demanded payment within seven (7) days from notice thereof, otherwise, it
would foreclose the mortgage.

On April 21, 1975, the GSIS filed an Application for Foreclosure of Mortgage with the Sheriff of the City of Manila (Exhibit "22," pp. 63
and 149; Rollo, p. 79). On June 30, 1975, the Medinas filed with the Court of First Instance of Manila a complaint, praying, among other
things, that a restraining order or writ of preliminary injunction be issued to prevent the GSIS and the Sheriff of the City of Manila from
proceeding with the extra-judicial foreclosure of their mortgaged properties (CFI Decision, p. 121; Rollo, p. 79). However, in view of
Section 2 of Presidential Decree No. 385, no restraining order or writ of preliminary injunction was issued by the trial court (CFI
Decision, p. 212; Rollo, p. 79). On April 25, 1975, the Medinas made a last partial payment in the amount of P209,662.80.

Under a Notice of Sale on Extra-Judicial Foreclosure dated June 18, 1975, the real properties of the Medinas covered by Transfer
Certificates of Title Nos. 32231, 43527, 51394, 58626, 60534, 63304, 67550, 67551 and 67552 of the Registry of Property of the City of
Manila were sold at public auction to the GSIS as the highest bidder for the total amount of P440,080.00 on January 12, 1976, and the
corresponding Certificate of Sale was executed by the Sheriff of Manila on January 27, 1976 (CFI Decision, pp. 212-213; Rollo, p. 79).

On January 30, 1976, the Medinas filed an Amended Complaint with the trial court, praying for (a) the declaration of nullity of their two
real estate mortgage contracts with the GSIS as well as of the extra-judicial foreclosure proceedings; and (b) the refund of excess
payments, plus damages and attorney's fees (CFI Decision, p. 213; Rollo, p. 79).

On March 19, 1976, the GSIS filed its Amended Answer (Joint Record on Appeal, pp. 99-105; Rollo, p. 79). After trial, the trial court
rendered a Decision dated January 21, 1977 (Joint Record on Appeal, pp. 210-232), the pertinent dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered declaring the extra-judicial foreclosure conducted by the Sheriff of Manila of real
estate mortgage contracts executed by plaintiffs on April 4, 1962, as amended on July 6, 1962, and February 17, 1963, null and
void and the Sheriff's Certificate of Sale dated January 27, 1976, in favor of the GSIS of no legal force and effect; and directing
plaintiffs to pay the GSIS the sum of P1,611.12 in full payment of their obligation to the latter with interest of 9% per annum from
December 11, 1975, until fully paid.

Dissatisfied with the said judgment, both parties appealed with the Court of Appeals.

The Court of Appeals, in a Decision promulgated on January 18, 1980 (Record, pp. 72-77), ruled in favor of the Medinas —

WHEREFORE, the defendant GSIS is ordered to reimburse the amount of P9,580.00 as overpayment and to pay plaintiffs
P3,000.00 and Pl,000.00 as attorney's fees and litigation expenses, respectively. With these modifications, the judgment appealed
from is AFFIRMED in all other respects, with costs against defendant GSIS."

Hence this petition.

The Second Division of this Court, in a Resolution dated April 25, 1980 (Rollo, p.. 88), resolved to deny the petition for lack of merit.

Petitioner filed on June 26, 1980 a Motion for Reconsideration dated June 17, 1980 (Rollo, pp. 95-103), of the above-stated Resolution
and respondents in a Resolution dated July 9, 1980 (Rollo, p. 105), were required to comment thereon which comment they filed on
August 6, 1980. (Rollo, pp. 106-116).
The petition was given due course in the Resolution dated July 6, 1981 (Rollo, p. 128). Petitioner filed its brief on November 26, 1981
(Rollo, pp. 147-177); while private respondents filed their brief on January 27, 1982 (Rollo, pp. 181-224), and the case was considered
submitted for decision in the Resolution of July 19, 1982 (Rollo, p. 229).

The issues in this case are:

1. WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT THE AMENDMENT OF REAL ESTATE
MORTGAGE DATED JULY 6, 1962 SUPERSEDED THE MORTGAGE CONTRACT DATED APRIL 4, 1962, PARTICULARLY
WITH RESPECT TO COMPOUNDING OF INTEREST;

2. WHETHER OR NOT THE COURT OF APPEALS ERRED IN SUSTAINING THE RESPONDENT-APPELLEE SPOUSES
MEDINA'S CLAIM OR OVERPAYMENT, BY CREDITING THE FIRE INSURANCE PROCEEDS IN THE SUM OF P11,152.02 TO
THE TOTAL PAYMENT MADE BY SAID SPOUSES AS OF DECEMBER 11, 1975;

3. WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT THE INTEREST RATES ON THE LOAN
ACCOUNTS OF RESPONDENT-APPELLEE SPOUSES ARE USURIOUS;

4. WHETHER OR NOT THE COURT OF APPEALS ERRED IN AFFIRMING THE ANNULMENT OF THE SUBJECT
EXTRAJUDICIAL FORECLOSURE AND SHERIFF'S CERTIFICATE OF SALE; AND

5. WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THE GSIS LIABLE FOR ATTORNEY'S FEES,
EXPENSES OF LITIGATION AND COSTS.

The petition is impressed with merit.

There is no dispute as to the facts of the case. By agreement of the parties the issues in this case are limited to the loan of P350,000.00
denominated as Account No. 31055 (Rollo, p. 79; Joint Record on Appeal, p. 129) subject of the Amendment of Real Mortgage dated
July 6, 1962, the interpretation of which is the major issue in this case.

GSIS claims that the amendment of the real estate mortgage did not supersede the original mortgage contract dated April 4, 1962
which was being amended only with respect to the amount secured thereby, and the amount of monthly amortizations. All other
provisions of aforesaid mortgage contract including that on compounding of interest were deemed rewritten and thus binding on and
enforceable against the respondent spouses. (Rollo, pp. 162-166).

Accordingly, payments made by the Medinas in the total amount of P991,845.53 was applied as follows: the amount of P600,495.51 to
Account No. 31055, P466,965.31 of which to interest and P133,530.20 to principal and P390,845.66 to Account No. 31442,
P230,774.29 to interest and P159,971.37 to principal. (Joint Record on Appeal, p. 216; Rollo, p. 79).

On the other hand the Medinas maintain that there is no express stipulation on compounded interest in the amendment of mortgage
contract of July 6, 1962 so that the compounded interest stipulation in the original mortgage contract of April 4, 1962 which has been
superseded cannot be enforced in the later mortgage. (Rollo, p. 185).

Hence the Medinas claim an overpayment in Account No. 31055. The application of their total payment in the amount of P991,845.53
as computed by the trial court and by the Court of Appeals is as follows:

... It appearing and so the parties admit in their own exhibits that as of December 11, 1975, plaintiffs had paid a total of
P991,241.17 excluding fire insurance, P532,038.00 of said amount should have been applied to the full payment of Acct. No.
31055 and the balance of P459,203.17 applied to the payment of Acct. No. 31442.

According to the computation of the GSIS (Exhibit C, also Exhibit 38) the total amounts, collected on Acct. No. 31442 as of
December 11, 1975 total P390,745.66 thus leaving an unpaid balance of P70,028.63. The total amount plaintiffs should pay on
said account should therefore be P460,774.29. Deduct this amount from P459,163.17 which has been shown to be the difference
between the total payments made by plaintiffs to the G.S.I.S. as of December 11, 1975 and the amount said plaintiffs should pay
under their Acct. No. 31055, there remains an outstanding balance of P1,611.12. This amount represents the balance of the
obligation of the plaintiffs to the G.S.I.S. on Acct. No. 31442 as of December 11, 1975." (Decision, Civil Case No. 98390; Joint
Record on Appeal, pp. 227-228; Rollo, p. 79).

To recapitulate, the difference in the computation lies in the inclusion of the compounded interest as demanded by the GSIS on the one
hand and the exclusion thereof, as insisted by the Medinas on the other.

It is a basic and fundamental rule in the interpretation of contract that if the terms thereof are clear and leave no doubt as to the
intention of the contracting parties, the literal meaning of the stipulations shall control but when the words appear contrary to the evident
intention of the parties, the latter shall prevail over, the former. In order to judge the intention of the parties, their contemporaneous and
subsequent acts shall be principally considered. (Sy v. Court of Appeals, 131 SCRA 116; July 31, 1984).

There appears no ambiguity whatsoever in the terms and conditions of the amendment of the mortgage contract herein quoted earlier.
On the contrary, an opposite conclusion cannot be otherwise but absurd.

As correctly stated by the GSIS in its brief (Rollo, pp. 162166), a careful perusal of the title, preamble and body of the Amendment of
Real Estate Mortgage dated July 6, 1962, taking into account the prior, contemporaneous, and subsequent acts of the parties,
ineluctably shows that said Amendment was never intended to completely supersede the mortgage contract dated April 4, 1962.

First, the title "Amendment of Real Estate Mortgage" recognizes the existence and effectivity of the previous mortgage contract.
Second, nowhere in the aforesaid Amendment did the parties manifest their intention to supersede the original contract. On the contrary
in the WHEREAS clauses, the existence of the previous mortgage contract was fully recognized and the fact that the same was just
being amended as to amount and amortization is fully established as to obviate any doubt. Third, the Amendment of Real Estate
Mortgage dated July 6, 1962 does not embody the act of conveyancing the subject properties by way of mortgage. In fact the intention
of the parties to be bound by the unaffected provisions of the mortgage contract of April 4, 1962 expressed in unmistakable language is
clearly evident in the last provision of the Amendment of Real Estate Mortgage dated July 6, 1962 which reads:

It is hereby expressly understood that with the foregoing amendment, all other terms and conditions of the said real estate
mortgage dated April 4, 1962, insofar as they are not inconsistent herewith, are hereby confirmed, ratified and continued to be in
full force and effect, and that the parties hereto agree that the amendment be an integral part of said real estate
mortgage. (Emphasis supplied).

A review of prior, contemporaneous, and subsequent acts supports the conclusion that both contracts are fully subsisting insofar as the
latter is not inconsistent with the former. The fact is the GSIS, as a matter of policy, imposes uniform terms and conditions for all its real
estate loans, particularly with respect to compounding of interest. As shown in the case at bar, the original mortgage contract embodies
the same terms and conditions as in the additional loan denominated as Account No. 31442 while the amendment carries the provision
that it shall be subject to the same terms and conditions as the real estate mortgage of April 4, 1962 except as to amount and
amortization.

Furthermore, it would be contrary to human experience and to ordinary practice for the mortgagee to impose less onerous conditions on
an increased loan by the deletion of compound interest exacted on a lesser loan.

II

There is an obvious error in the ruling of the Court of Appeals in its Decision dated January 18, 1980, which reads:

... We agree that plaintiff should be credited with P11,152.02 of the fire insurance proceeds as the same is admitted in paragraph
(4) of its Answer and should be added to their payments. (par. 13).

Contrary thereto, paragraph 4 of the Answer of the GSIS states:

That they (GSIS) specifically deny the allegations in Paragraph 11, the truth being that plaintiffs are not entitled to a credit of
P19,381.07 as fire insurance proceeds since they were only entitled to, and were credited with, the amount of P11,152.02 as
proceeds of their fire insurance policy. (par. 4, Amended Answer).

As can be gleaned from the foregoing, petitioner-appellant GSIS had already credited the amount of P11,152.02. Thus, when the Court
of Appeals made the aforequoted ruling, it was actually doubly crediting the amount of P11,152.02 which had been previously credited
by petitioner-appellant GSIS (Rollo, pp. 170-171).

III.

As to whether or not the interest rates on the loan accounts of the Medinas are usurious, it has already been settled that the Usury Law
applies only to interest by way of compensation for the use or forbearance of money (Lopez v. Hernaez, 32 Phil. 631; Bachrach Motor
Co. v. Espiritu, 52 Phil. 346; Equitable Banking Corporation v. Liwanag, 32 SCRA 293, March 30, 1970). Interest by way of damages is
governed by Article 2209 of the Civil Code of the Philippines which provides:

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,...

In the Bachrach case (supra) the Supreme Court ruled that the Civil Code permits the agreement upon a penalty apart from the interest.
Should there be such an agreement, the penalty does not include the interest, and as such the two are different and distinct things
which may be demanded separately. Reiterating the same principle in the later case of Equitable Banking Corp. (supra), where this
Court held that the stipulation about payment of such additional rate partakes of the nature of a penalty clause, which is sanctioned by
law.

IV.

Based on the finding that the GSIS had the legal right to impose an interest 9% per annum, compounded monthly, on the loans of the
Medinas and an interest of 9%/12% per annum on all due and unpaid amortizations or installments, there is no question that the
Medinas failed to settle their accounts with the GSIS which as computed by the latter reached an outstanding balance of P630,130.55
as of April 12, 1975 and that the GSIS had a perfect right to foreclose the mortgage.

In the same manner, there is obvious error in invalidating the extra-judicial foreclosure on the basis of a typographical error in the
Sheriff's Certificate of Sale which stated that the mortgage was foreclosed on May 17, 1963 instead of February 17, 1963.

There is merit in GSIS' contention that the Sheriff's Certificate of Sale is merely provisional in character and is not intended to operate
as an absolute transfer of the subject property, but merely to Identify the property, to show the price paid and the date when the right of
redemption expires (Section 27, Rule 39, Rules of Court, Francisco, The Revised Rules of Court, 1972 Vol., IV-B, Part I, p. 681). Hence
the date of the foreclosed mortgage is not even a material content of the said Certificate. (Rollo, p. 174).

V.

PREMISES CONSIDERED, the decision of the Court of Appeals, in CA-G.R. No. 62541-R Medina, et al. v. Government Service
Insurance System et al., is hereby REVERSED and SET ASIDE, and a new one is hereby RENDERED, affirming the validity of the
extra-judicial foreclosure of the real estate mortgages of the respondent-appellee spouses Medina dated April 4, 1962, as amended on
July 6, 1962, and February 17, 1963.

SO ORDERED.